Report & 20 Accounts 11

Transcription

1 2011 Report & Accounts

2 CardioQ-ODM Goba Initiatives UK NHS decision to adopt CardioQ- ODM at pace and at scae currenty in impementation phase NICE medica technoogy guidance reeased on CardioQ-ODM: - Recommended for use on over 800,000 patients - In comparisons with other technoogies, CardioQ-ODM is found to be dominant Nationa Confidentia Enquiry into Patient Outcome and Death: - Ca for the impementation of NICE guidance on CardioQ-ODM Freeman Hospita, Newcaste: - Positive tria of CardioQ-ODM in uroogica surgery NHS Innovation Review 2011: - CardioQ-ODM prioritised as part of impementation NHS Suppy Chain: - Tender awarded for CardioQ-ODM and new product, CardioQ-ODM + USA Duke University Hospita, North Caroina: - Resuts announced showing circa 40% reduction in ength of stay when using CardioQ-ODM as part of Enhanced Recovery programme British Consuate, Chicago: - Enhanced Recovery using CardioQ-ODM aunched to a number of infuentia US cinicians Premier Inc.: - CardioQ-ODM seected for study under QUEST as part of system ro out project with financia and cinica anaysts, Premier Inc. Reimbursement - Nationa coverage for ODM, foowing AHRQ Technoogy Assessment Spain Spanish Government Heath Technoogy Assessment: - Recommended CardioQ-ODM in coorecta surgery Spanish Government, Entrago agency: - Conducting word s argest randomised muti-centre tria using CardioQ-ODM in uroogica, gynaecoogica, abdomina, and trauma surgery France APHP Hospita, Paris: - System award tender for CardioQ-ODM, foowing cinica evauation against other technoogies Cinica guideines: - Cinica guideines for fuid management currenty in deveopement by professiona bodies Canada First whoe hospita system impementation underway, assessing impact of CardioQ-EDM Peru Resuts from first randomised controed tria to be presented at Word Anaesthesia Congress in March

3 Report and Accounts Highights Financia Saes of 6.3m 83% of revenue from disposabe probes (2010: 76%) Gross margins 72% Operating oss 1.4m Cash of 0.8m Operating cash neutra in second haf Additiona 0.6m investment in inventory and R&D Operating ODM one of six high impact innovations mandated for impementation by NHS CardioQ-ODM the ony haemodynamic monitor recommended by NICE NHS moving into impementation mode Think Dopper campaign aunched in the UK First whoe hospita system impementation underway in Canada Substantia investment in R&D Current deveopments CardioQ-ODM+ aunched in UK Partnership agreement with Premier, Inc. in USA opens a route to system wide uptake In the UK, surgica probe saes growth over 40% for three consecutive months (December 2011, January and February 2012) Contents Highights 1 Chairman s Statement 2 Operating Review 4 Financia Review 8 Directors 13 Secretary and Advisers 14 Directors Report 15 Independent Auditors Report 22 Consoidated Statement of Comprehensive Income 23 Baance Sheet 24 Consoidated Statement of Changes in Equity 25 Consoidated Statement of Cash Fows 26 Notes to the Financia Statements 27 Independent Auditors Report 58 Company Baance Sheet 59 Notes to the Company Financia Statements 60

4 2 Report and Accounts 2011 Chairman s Statement Detex Medica made significanty greater progress in a its key markets during 2011 than indicated by the 0.4% increase in headine revenues to 6,303,000 as the underying growth in the use of probes in surgery, the major market opportunity that we seek to address has been very substantia. The most significant eements of this growth came from probe saes in the UK and probe saes to our internationa distributors, which were ahead of 2010 by 259,000 and 159,000 respectivey. These increases were driven by increased surgica use and the growth rates for surgica probes in the UK and in our major distributed markets remain at around the estabished 20% per annum eve. Strong growth in surgica probe saes meant December was a record month for probe saes in the UK and surgica probes since the year end have continued to be we ahead of In the UK, compared to the corresponding month a year previousy, surgica probe growth has been over 40% for three consecutive months (December 2011, January and February 2012) and March has started strongy. Monitor saes voumes in the UK in 2012 to date are aso we ahead of 2011 and incude an order of ten CardioQ-ODMs from one of the NHS Scotand heath board to enabe impementation of enhanced recovery in bowe surgery in its region. Gross margins were 72% overa and over 80% in our direct saes markets. Operating expenses were 55,000 ower than in 2010 at 5,940,000. The operating oss was 1,402,000 (2010: 1,353,000). Cash used in operations increased by 546,000 to 1,337,000 after 430,000 additiona investment in inventory in anticipation of more rapid growth and increased investment in research and deveopment to expand our product range. Operating cash outfow before movements in working capita was 822,000 (2010: 687,000). Cash at 31 December was 752,000 and the Company was operating cash neutra in the second haf. We maintained our underying cash cost base at a simiar eve to 2010 whie increasing investment in research and deveopment and in our UK Think Dopper marketing campaign which was aunched to coincide with the December announcement that the NHS is to prioritise fu impementation of ODM. Ony a few carefuy targeted and modest increases in the cost base are panned for The momentum driving our saes growth means the Company is on track towards consistent generation of cash and profitabiity. Probe saes in the USA in 2011 were 125,000 ower than in 2010 despite us maintaining our share of the potentia market in a our major accounts and opening important new accounts. The voume of major eective operations in the USA fe sharpy in the midde part of 2011 as fears over the economy grew and this ed in turn to hospitas reducing stocks of probes. Restricted capita budgets in many of our markets have hed back our reported growth rates. Cash saes of monitors in 2011 were 438,000 (44%) ower than in 2010 with a major fa ( 350,000) in revenues from the Midde East which suffered from poitica voatiity. The trend away from capita saes since 2009 supports our strategic focus on increasing probe revenues which are both higher quaity and more visibe. Important deveopments in the UK market, our argest and most deveoped market, during 2011 have reinforced the NHS s approach to estabishing system wide adoption of a new medica technoogy. In March 2011 the Nationa Institute for Heath and Cinica Exceence ( NICE ) recommended CardioQ- ODM be considered for use in a patients undergoing major and high risk surgery in the NHS with average savings of 1,100 per patient. Across the whoe UK this equates to an opportunity to save 1 biion of taxpayers money through better and faster patient recoveries. CardioQ-ODM is the ony fuid management monitoring technoogy recommended by NICE, which found CardioQ-ODM to be dominant over aternative cardiac output monitoring technoogies during surgery, as it deivers both better outcomes and ower costs. In December 2011 the chief executive of the NHS announced that ODM was one of six high impact innovations seected for fu impementation. Financia penaties for insufficient progress on impementing

5 Report and Accounts these six innovations by March 2013 coud exceed 15 miion per annum in the argest NHS Trusts. The Department of Heath and NHS have formed a Task and Finish group to deveop and aunch the pan for the impementation of fuid management monitoring in surgery and this is expected to report in the coming weeks. A number of reated actions are aready cear: Intra-operative fuid management has been seected as one of three technoogies to be pushed nationay by the Department of Heath s Innovative Technoogy Adoption Procurement Programme ( ITAPP ) in 2012/13. ITAPP has authority through incusion in the NHS operating framework for 2012/13: ITAPP identifies innovative technoogies that can be adopted by oca organisations. A sma number of evidence-based technoogies, incuding the Oesophagea Dopper Monitoring, are suggested for wide adoption by oca heath economies. NICE has pubished a case study on ODM impementation on the NHS Evidence website within its recommendations to support the NHS s drive to improve Quaity, Innovation, Productivity and Prevention ( QIPP ). NICE s most recent cost savings guidance eague tabe shows CardioQ-ODM as the singe highest impact technoogy it has recommended since 2005, accounting for over 40% of tota identified cost savings by NICE. In March 2012 we aunched the CardioQ-ODM+, a premium version of our monitors which aows cinicians to pursue an additiona fuid management strategy, minimisation of respiratory swing, to that normay driven by ODM, stroke voume optimisation. Whie the evidence base for this approach suggests ony modest benefits over traditiona care when compared to stroke voume optimisation, we expect it to broaden our products appea to cinicians. Our goa is to make oesophagea Dopper monitoring (ODM) a standard of care for patients undergoing major surgery and in intensive care. We beieve that, in most modern heath systems, it is essentia to have a robust evidence base of both cinica benefit and cost effectiveness in order to achieve system-wide adoption of a new medica technoogy. Detex Medica is one of the very first medica technoogy companies to have competed the investment necessary to buid such an evidence base: as a resut, use of ODM during surgery has the proven potentia to deiver both cinica and economic benefits that are materia at each of patient, hospita and system eve. Having succeeded in creating an opportunity for potentiay transformationa growth in the UK, our key priorities in 2012 are to support the NHS deiver its impementation pan and to create simiar opportunities for system wide adoption of CardioQ- ODM in other heathcare systems. In France probe consumption increased 20% during the year foowing award of a major tender covering Paris hospitas ate in 2010: forthcoming cinica guideines from the French professiona association of anaesthetists are expected to emphasise the importance of fuid management and monitoring during surgery. Doctors in Spain are making good progress with the word s argest randomised tria of fuid management in surgery to date and preiminary resuts may become avaiabe in the coming months. In Canada the Interior Heath hospita system has competed satisfactoriy the first phase of its CardioQ-ODM impementation programme and the resuts of the project, which is aready generating considerabe interest in the broader Canadian heathcare system, are due to be announced shorty. In the USA, foowing the presentation of data by Duke University Hospita showing the impact of an enhanced recovery surgica programme using CardioQ-ODM in October 2011, we have embarked on a number of projects aimed at acceerating cinica acceptance and uptake of ODM guided fuid management: the recenty announced partnership with Premier Inc is the most advanced of these. Meanwhie doctors are continuing to pubish research showing the benefits of CardioQ-ODM in different types of surgery, enabing us to expand our areas of focus to additiona surgica speciaties. Detex Medica is in an exciting and unique position. The NHS, the word s argest heathcare provider, is activey pursuing the rapid and wide-scae impementation of our products. We are making significant advances in creating simiar opportunities in other major heathcare systems around the word. Nige Keen Chairman 7 March 2012

6 4 Report and Accounts 2011 Operating Review During 2011 Detex Medica strengthened its position as the goba market eader in oesophagea Dopper monitoring (ODM) Overview During 2011 Detex Medica strengthened significanty its position as the goba market eader in oesophagea Dopper monitoring (ODM). ODM benefits substantia numbers of patients, the argest group being patients undergoing major or high risk surgery. ODM s potentia is being recognised increasingy by each of cinicians, heath poicy makers and heathcare administrators. ODM during surgery can be impemented successfuy into routine cinica practice on a wide scae because it is a simpe procedure that is easy to earn, quick to perform and appicabe in a very wide range of patients. In the UK, our argest and most deveoped market, we competed the proof of concept phase of our deveopment with a recommendation in March 2011 from the Nationa Institute for Heath and Cinica Exceence ( NICE ) that CardioQ-ODM be considered for use in a patients undergoing major and high risk surgery. The announcement in December 2011 that the NHS is to prioritise fu impementation of ODM or simiar fuid management monitoring technoogy confirmed the potentia for Detex Medica to move into a proonged phase of acceerated growth. Internationay, we are making good progress in deveoping export markets for CardioQ-ODM. The robust evidence base showing CardioQ-ODM to both improve patient outcomes and reduce costs gives Detex Medica a substantia competitive advantage. CardioQ-ODM is the ony fuid management monitoring technoogy recommended by NICE and, to date, NICE has chosen not to evauate any of the three other haemodynamic monitoring technoogies submitted to it by their manufacturers. NICE found CardioQ-ODM to be dominant (both better outcome and ower cost) over the most commony avaiabe competitive approaches. Probe revenues in 2011 amounted to 83% of tota cash saes (which excude cinica research revenues under barter arrangements), compared to 76% in Probe growth was strongest in the UK surgica market and in those internationa distributor markets where we focused most resource. As our business has deveoped we have increasingy focused on generating probe revenues and taking a pragmatic approach to increasing the instaed base of monitors. This transition towards higher quaity recurring revenue streams is timey as macro-economic conditions have meant capita budgets have become severey restricted in many of our markets. In arge part the drive behind the NHS decision to impement CardioQ-ODM comes because modern heathcare systems need to deiver higher quaity care at ower costs in order to meet changing demographic needs. NICE estimates that CardioQ- ODM can save circa 1,100 per patient on average: this is equivaent to 1 biion saving each year across the whoe UK. This emphasis on quaity and efficiency has become more urgent as a resut of fisca deficits and heathcare infation in many deveoped countries and we beieve that adoption in one system is ikey to acceerate success in other systems. Rather than et the shortage of capita budgets sow down our progress in the UK towards CardioQ-ODM being widey adopted for use in surgery, we continued to expand the instaed base through ending machines and introducing managed care service contracts. Overa the UK surgica instaed

7 Report and Accounts base increased by 66 units to 519. In addition the critica care instaed base increased by nine units to 284. Going into the new NHS financia year and aunch of the NHS impementation pan for ODM our priority is to expand the surgica instaed base rapidy through a combination of monitor price reductions, oan programmes and managed care service contracts. For those export markets where we work with distributor partners and we see opportunities for acceerated growth through overcoming capita budgetary restrictions hoding back monitor instaations, we are activey considering new business modes which wi hep rapid growth in the current environment through faciitating wider avaiabiity of monitors in operating theatres. Overa, the modest 5% growth in monitor revenues in the first haf turned into a 29% fa in the second haf compared to Where we had anticipated difficuties in repeating monitor revenues from 2010, for exampe from the Midde East due to poitica instabiity, we were abe to redepoy resources and repace some of the ost revenue with higher quaity probe revenues backed by exciting growth opportunities in markets such as Canada, Scandinavia, Austria and Austraia. In the UK, monitor saes voumes fe sharpy from the Apri start of the NHS financia year and ony started to recover towards the end of the year. Markets The CardioQ-ODM has two distinct estabished cinica appications: firsty, to guide fuid management during surgery and secondy, to monitor cardiac output in critica care settings. Surgica market In March 2011, the Nationa Institute for Heath & Cinica Exceence ( NICE ) recommended that CardioQ-ODM be considered for use in patients undergoing major and high risk surgery and in high risk patients undergoing major surgery. NICE estimated the appicabe number of such patients in the NHS in Engand aone to be over 800,000 each year. Cinica evidence to date specificay supports the use of CardioQ-ODM in each of cardiac, orthopaedic, coorecta, rena, uroogica, other abdomina, gynaecoogica, pastic, vascuar and transpant surgery: furthermore, CardioQ-ODM has been shown to be effective in both eective and emergency surgery and with both genera and regiona anaesthetics. The NICE evauation and recommendation confirms that the potentia goba market for CardioQ-ODM in surgery incudes tens of miions of patients, even if confined to deveoped heath economies: the most conservative estimate of the potentia vaue of the market opportunity Detex Medica has created is in excess of 1 biion per annum. The Company s core focus is on buiding market eading positions in this surgica market, both geographicay and by type of surgery. Critica care market In critica care settings, we-equipped hospitas wi often have more than one cardiac output monitoring technoogy avaiabe. In this environment, ODM s strengths are that it is quick to set up, easy to use, safe, ow cost and the idea technoogy for a patient in crisis requiring rapid or frequent intervention. The potentia market for cardiac output monitoring in critica care is a fraction of the size of that for intraoperative fuid management. Through the recent aunch of the CardioQ-ODM+, Detex Medica has incorporated puse pressure variation, the best vaidated parameter from the Puse Pressure Waveform Anaysis ( PPWA ) approach to monitoring cardiac output. Note that, in surgery, athough adding PPWA parameters does not expand per se the market potentia of ODM, the Company s cinica and market research indicates that it may hep acceerate some cinicians acceptance of the vaue of ODM measured fow variabes. NICE s assessment of the evidence supporting CardioQ-ODM and PPWA concuded that CardioQ- ODM was dominant (i.e. deivering both better outcomes and ower costs) over PPWA in both surgica and critica care appications. However, in the critica care setting ony, there was not sufficient evidence for NICE to recommend CardioQ-ODM ahead of PPWA. ODM s being dominant does not mean no potentia vaue in PPWA: the Company beieves that future iterations of the CardioQ-ODM+ wi deiver cear and substantia competitive advantages over current PPWA soutions for monitoring appications in critica care settings by combining a best in cass monitoring modaity with the best too for guiding intervention. United Kingdom Detex Medica has estabished a cear market eading position in the UK surgica market as we as a strong presence in the smaer critica care market. In tota UK saes grew by 443,000 (13%) over 2010.

8 6 Report and Accounts 2011 Operating Review continued The biggest driver of UK saes growth came from saes of surgica probes which increased by 272,000 (16%) over After adjusting for the sma numbers of hospita buk orders of surgica probes in both 2010 and 2011, growth in surgica probe saes in the UK has remained broady in ine with the compound annua growth rate of 20% estabished since Whie this growth rate puts ODM amongst the fastest growing broad appication new medica technoogies in the NHS, the NHS s rate of adoption, and consequenty the Company s saes, wi need to acceerate significanty to meet the NHS s objective of fu impementation. Saes of intensive care probes stabiised, eveing off after severa years of a trend towards ower usage of cardiac output monitoring in UK intensive care units as cinica practice has evoved: whereas in the past most patients were sedated to the point of unconsciousness whie in intensive care, the preference now is to keep them awake and mobie where possibe, thus reducing the need for cardiac output monitoring. United States of America Saes in the USA were 154,000 (18%) behind 2010, with a 125,000 (15%) fa in probe saes: probe saes comprised over 99% of tota saes in the USA where our norma mode is to pace monitors free of charge in return for higher probe prices. The biggest decines in probe saes compared to 2010 came from our two argest accounts in the USA and were as a resut of sharp fas in voumes of eective surgery in the midde part of the year, compounded by hospita de-stocking. Nevertheess, in both accounts we maintained or improved our penetration rates and in 2012 we are pursuing pans aimed at generating substantia growth both in these accounts and in the systems of which they are members. Recognition of the important impact of haemodynamic management on surgica outcomes in the USA has for many years agged this recognition in the UK and Europe, however, there are cear signs of this changing with haemodynamic management featuring more prominenty on the agendas of cinica meetings for both anaesthetists and surgeons. Our objective in the USA is to achieve system-wide adoption of the CardioQ-ODM to guide fuid management during major surgery. Our strategy is to work with a sma number of reputabe hospitas to achieve broad penetration within them and to demonstrate the cinica and economic benefits of this impementation. At the annua American Society of Anesthesiooogists meeting in Chicago in October 2011 doctors from Duke University Hospita in North Caroina presented the resuts of their initia impementation of CardioQ- ODM within a surgica enhanced recovery programme. These showed substantia improvements in patient outcomes as we as good reductions in engths of hospita stay of up to 40%. We have been abe to use this first contemporary data from a major US hospita to buid a pipeine of projects for both CardioQ-ODM as a stand-aone improvement in practice and as a cornerstone of impementing modern approaches to surgery. Such projects are designed both to increase saes and to generate compeing evidence for more rapid adoption and ro-out of CardioQ-ODM. In February 2012 Premier Inc announced that it had seected Detex Medica and the CardioQ-ODM to participate in its QCEIP ( QUEST Comparative Effectiveness & Innovation Programme ) programme. This project incudes conducting a study and subsquenty producng a peer reviewed abstract, correating heath outcomes to product performance. This abstract is pubicised through a variety of Premier s Communication channes. We expect successfu outcomes from this project to generate opportunities for us to work in a partnership with Premier and a eading teaching hospita to promote the benefits of CardioQ-ODM to Premier s member hospitas. Premier s members account for approximatey 30% of US hospita discharges. Internationa Distributors service export markets, with the exceptions of those in the USA and Spain, with support from a sma team of our own staff.

9 Report and Accounts Saes to distributors in 2011 totaed 1,795,000, a decrease of 142,000 (7%) from This decrease mainy comprises the net effect of a 159,000 (16%) increase in probe revenues and a 305,000 (34%) decrease in monitor saes. Changes in the saes mix meant average seing prices for probes were 55 compared to 51 in The average seing price of monitors to distributors was 3,700 compared to 4,235 in Probe growth was generay strongest in our best estabished distributor markets in France, Scandinavia, Austria and Peru. In addition we generated substantia growth in Canada as our distributor acquired monitors and probes to support our first Canadian impementation project in a medium sized hospita system in British Coumbia: feedback to date from this project has been overwhemingy positive and we expect to be abe to announce shorty the resuts and consequent activity. Probe saes in France were approximatey 20% higher at the end of the year than the start, primariy as a resut of growth in the Paris area where CardioQ- ODM was successfu in a major tender announced ate in The atest generation of professiona practice guideines for anaesthetists in France are due to be pubished in the next few months and are expected to favour the fuid management strategies enabed by ODM: this woud constitute a major deveopment in France where the adoption of innovative medica practice is more heaviy weighted towards cinicians than in many other deveoped heath economies. Saes to the Midde East were circa 350,000 ower than in 2010, due to ower monitor saes. Eary in 2011, as signs of poitica unrest in the region grew, we chose to redirect resource towards supporting growth in higher quaity probe revenues in more deveoped heathcare economies. In recent years the Midde East had been the easiest market into which to se monitors as capita budgets were argey unaffected by the goba economic sowdown. Looking forward, we expect capita budgets to remain constrained in most of our markets in the Midde East and therefore to continue to focus more on higher quaity recurring probe revenue streams. In the first project eading coorecta surgeons are introducing surgica enhanced recovery: as a resut of its benefits having aready been estabished within the programme in Spain, use of CardioQ-ODM is one of four mandatory interventions out of the 14 in tota. We are aso supporting a government sponsored muti-centre tria. The tria incudes patients undergoing major abdomina, gynaecoogica, uroogica and trauma surgery and is the word s argest randomised controed cinica tria of fuid management during surgery. The cinica eads have indicated that preiminary data may be avaiabe in the next few months. Positive resuts wi represent a major miestone towards system-wide adoption of our products in Spain. Research and Deveopment Our research and deveopment ( R&D ) activities are focused in two areas: firsty, the further deveopment of our CardioQ-ODM monitors and probes with a particuar objective of making them sti easier to use in broader cinica settings and appications; secondy research into and deveopment of compementary and new products. In 2011 we increased substantiay our investment in R&D and in March 2012 we have aunched the CardioQ-ODM+ incorporating additiona haemodynamic monitoring parameters giving us the most comprehensive technoogica offer on the market. Prospects We have started 2012 with confidence. Our products are independenty vaidated as deivering better care, better heath and ower costs which puts them in the sweet spot of evoving heath poicy in many deveoped heath economies. In the UK our technoogy has been prioritised by the NHS as a high impact innovation and we are making good progress towards creating simiar opportunities in a growing number of major export markets. Ewan Phiips Chief Executive 7 March 2012 We have a sma direct saes team in Spain whose efforts are focused entirey on two projects aimed at estabishing the drivers necessary for system-wide adoption of CardioQ-ODM. Saes in 2011 tota 65,000, 123,000 ess than in 2010 which benefited from a sma number of one-off orders reated to these projects which are not expected to be repeated unti after competion of the projects.

10 8 Report and Accounts 2011 Financia Review Revenues from surgica probes in the UK were 16% ahead over the whoe of Trading performance Revenues for the year grew by 24,000 to 6,303,000 (2010: 6,279,000). Revenues from surgica probes in the UK were 16% ahead over the whoe of 2010, continuing a compound annua growth increase of 20% since aunch of the probes in Gross margins were 72% (2010: 74%). Gross margins were affected by changes to margins achieved on monitors as the resut of a decision to aggressivey discount monitors in response to constrained hospita capita budgets. Probe pricing was maintained or increased in a significant markets. This, combined with no increase in the unit cost of production of probes resuted in gross margins of over 80% in each of the Company s direct saes markets of UK, USA and Spain. Administrative expenses reduced by 334,000 to 2,012,000 (2010: 2,346,000). This incudes a reduction in share-based payments charges of approximatey 58,000 and cinica tria costs of 164,000. Saes and distribution costs have increased by 165,000 to 3,532,000 (2010: 3,367,000). In the eary part of the year, marketing costs were increased in order to promote the NICE recommendation to the NHS. In the second haf of the year, additiona investment has been made in marketing, with the support of an outside agency. This is to ensure that the Company is we positioned to take advantage in 2012 and beyond of the NHS Chief Executive review as described within the Chief Executive s report. Further detai on the increase in Research and Deveopment expenditure (R&D) charge by 114,000 from 282,000 to 396,000 foows. Operating osses increased 49,000 to 1,402,000 (2010: 1,353,000). Operating expenses reduced by 55,000 to 5,940,000 (2010: 5,995,000). Of the 5,940,000 operating costs, 670,000 (2010: 1,053,000) reates to non-cash items incuding accounting charges for share-based payment, depreciation and amortisation of fixed assets and intangibe assets, amortisation of cinica tria prepayments and changes to provisions. Cash operating expenses were kept under tight contro in 2011 with a view to acceerating profitabiity without affecting the potentia ong-term market penetration of CardioQ-ODM: as expained above towards the end of the year we aunched a targeted marketing campaign on CardioQ-ODM in the UK to coincide with the announcement of the actions arising from the NHS Chief Executive s report Innovation: Heath & Weath. Actua cash expenditure has remained within the Company s cost pans, which incuded a sma increase for additiona investment activities. Research and deveopment During the year, additiona personne were recruited into the research and deveopment department. This, together with the engagement of outside consutancies has enabed the Company to acceerate the deveopment of a number of projects. It is broady intended, that whist continuing to improve the current product range, a new product wi be reeased each year for the next three years. The first of these products, the CardioQ-ODM+ was aunched in March 2012 and is described in more detai within the Chief Executive s review. Tota costs, before capitaisation for research and deveopment in the year were 683,000 (2010: 456,000). A reconciiation between tota costs and

11 Report and Accounts the amount charged to the Consoidated Statement of Comprehensive Income, in accordance with Internationa Accounting Standard 38 is given beow: Tota charge for research and deveopment Less: amount capitaised (347) (213) Add: amortisation of amounts previousy capitaised Research and deveopment charged to Statement of Comprehensive Income The increase in investment (before capitaisation) of R&D over the past five years is shown beow: 800, , , , , , , , The net book vaue of capitaised R&D at the end of the financia year was 724,000 (2010: 437,000). On reease of the product, the capitaised costs are charged to the Consoidated Statement of Income over the ife of the product in accordance with our accounting poicies. Non-cash revenue and costs In order for the reader to better understand the effect of non-cash items on the Company s profitabiity and cash fow, aternative performance measures are provided on the Consoidated Statement of Comprehensive Income and note 24, Notes to the Cash fow Statement. The arger non-cash items are expained in more detai beow. Non-cash revenue In recent years the Company has competed a number of transactions on a non-cash basis aimed specificay at opening new market opportunities through focused research aimed at generating cinica and/or economic evidence of the benefits of the Company s products in specific circumstances. In 2010, the tota non-cash revenue associated with these projects was 319,000. During 2011, a specific project was started to enabe the acceeration of the deveopment of a new ICU focused product. This product is intended to offer features that are substantiay ahead of the current technoogy avaiabe within the ICU and is due to be reeased in Twenty-five deveopment versions of this monitor were sod under barter arrangements to twenty key sites around the word. These sites have committed to providing essentia data for the further deveopment of this product to the Company in return for ownership rights of the monitors. A project manager was recruited for this important project eary in The non-cash revenue associated with this project in 2011 was 500,000. The vaue of the projects that are being carried out at twenty different sites, athough difficut to quantify is considered to be substantiay more than the 500,000 recognised. The spit of revenue between cash and non-cash over the past five years is as foows: 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, Non cash Cash

12 10 Report and Accounts 2011 Financia Review continued Non-cash costs Cinica tria and other costs The costs associated with these projects are initiay capitaised and subsequenty amortised over the ength of the cinica trias or projects with regard to the amount of progress that has been carried out as specified contractuay between the other party and the Company. Tota costs amortised during the year with respect to cinica trias amount to 270,000 (2010: 389,000). Share-based payments Share based payments are charged to the Consoidated Statement of Comprehensive Income in accordance with IFRS2, where the vaue of the award (as cacuated using the Back-Schoes method) is charged over the vesting period of the option. Share based payments arise as a resut of: Grant of options to empoyees Grant of options to distributors or consutants The Company has two Empoyee Share Option Pans. The origina pan was set up in March 2000, but has now expired with regard to the issue of new awards. A new scheme, for which authority was obtained at the AGM hed in Apri 2011, was approved by HM Revenue & Customs in September 2011 and awards made from it shorty thereafter. In addition to these schemes, share options are aso granted to empoyees under the Company s Enterprise Management Incentive Scheme ( EMI ). The EMI scheme aows the Company to make tax efficient awards to certain empoyees, whist preserving its cash resources. For the years ended 31 December 2010 and 31 December 2011, saes bonuses to UK based empoyees were satisfied using options awarded under the EMI scheme. The tota share based payment charges for 2011, incuding bonus awards, was 386,000 (2010: 522,000). Financia income and expenditure Financia income in the year remained in ine with 2010 at 1,000 primariy as a resut of the continued ow interest received on cash baances. Finance costs decreased by 38,000 to 123,000 (2010: 161,000) primariy due to a decrease in the interest rate charged on the convertibe oan note and a one-off charge in 2010 of 16,000 reating to arrangement expenses of both the increase in the invoice discounting faciity and the addition of the US receivabes within the faciity. Taxation Under the UK Government s Research and Deveopment tax credit scheme, the Company wi caim approximatey 102,000 reating to R&D in 2011 (2010: 50,000). This increase is directy reated to research and deveopment activity during the year. Earnings per share The reported net oss for the year was 1,421,000 (2010: 1,468,000). With a weighted average number of shares of 136,698,498 (2010: 129,563,192), the basic oss per share was 1.0p (2010: 1.1p). Cash fow and iquidity Cash at 31 December 2011 was 752,000 (2010: 699,000). Reported net cash used in operating activities increased by 562,000 to 1,352,000 (2010: 790,000). This increase incudes an additiona investment in R&D and inventory of 339,000 when compared to The reported net cash in operating activities incudes a number of non cash items. Restated to excude non-cash items, the net cash used before movements in working capita increased by 432,000 to 732,000 (2010: 300,000). In Apri 2011, the Company paced 3,684,211 shares to raise approximatey 1,000,000 after expenses. This money was used to enabe the Company to acceerate funding on research and deveopment activities, buid inventory in anticipation of growth in the UK and to commence a sustained investment in direct marketing within the UK market. Saes are normay higher in the second haf of the year than the first haf both because of underying growth trends and because of higher than usua orders from internationa distributors as they agree their marketing programmes for the foowing year: in both 2011 and 2010 the Company achieved circa 20% of the year s saes in December. Saes of probes in the first two months of 2012 have encouraged the

13 Report and Accounts Board that the Company is on track to deiver the eves of saes growth required to become consistenty cash positive throughout the financia year. The chart beow shows the contribution in cash saes and cash expenditure comparing the first haf of 2011 with the second haf. a further 64,000 drawn down on the Company s invoice discounting faciity. Non-current iabiities increased by 83,000 to 1,526,000 (2010: 1,443,000). The majority of this increase is as a resut of the movement in the Nationa Insurance provision for share options. 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 0 Saes vs expenditure ( ) H H Saes Expenditure The cosing share price at the end of the financia year was 24.55p, compared with 19.5p at the beginning of the year. The highest and owest prices recorded in the financia year were 31.50p and 15.00p respectivey. At 31 December 2011, sharehoders funds stood at 1,856,000 an increase of 847,000 over 2010 ( 1,009,000). The Company continues to empoy an invoice discounting faciity in its management of cash and working capita. At 31 December 2011, the amount of funds drawn down under the faciity totaed 723,000 (2010: 659,000). Baance Sheet The Group s non-current assets at 31 December 2011 totaed 1,041,000 (2010: 1,004,000) consisting principay of pant and equipment incuding CardioQ-ODM monitors on contracted oan to customers 250,000 (2010: 177,000) and capitaised deveopment costs 724,000 (2010: 437,000). The increase in capitaised deveopment costs reates to the investment in new products which are aimed to be reeased over the coming years. The first of these, the CardioQ-ODM+ was reeased in March Net current assets increased by 893,000 to 2,341,000 (2010: 1,448,000). In anticipation of the expected demand from the NHS, where affordabe, the Company has decided to increase inventory eves to ensure that such demand can be met at reativey short notice. This has ed to a direct impact on the year-end inventory, which has increased, by 339,000 to 912,000 (2010: 573,000). Trade and other receivabes have increased by 822,000 to 2,818,000 (2010: 1,996,000). Approximatey 150,000 of this increase was due to the growing UK business at the end of the year and a further 160,000 from Internationa business in December. 324,000 of this movement reates to the recassification from non-current to current of a cinica tria which is expected to be competed in Current iabiities increased by 328,000 to 2,243,000 (2010: 1,915,000) primariy as a resut of the increase at the year end of stock creditors and Key performance indicators At this stage of its deveopment, the Group s two key performance indicators are probe saes and the underying cash burn rate (i.e. the difference between normaised run-rates for cash fows and outfows). The directors reguary monitor the Group s progress by reference to these two key performance indicators. A summary of the progress made against these indicators during the year ended 31 December 2011 is set out beow. Probe saes Probe saes increased by 205,000 in 2011 from 4,595,000 to 4,800,000. Rates of reguar probe consumption at hospitas at the end of 2011 were higher than at the start of the year in the majority of our key target markets incuding the UK and France. Athough decreasing during the year, the USA is aso showing signs of recovery within its core areas of focus coming into Further detais of probe saes are given in the Operating Review on pages 4 to 7. Underying cash burn rate The underying cash burn rate is based around management s estimate of the normaised eves of saes and costs: it increases if the Group increases its cost base or saes fa and decreases as the Group s saes grow or costs fa. During 2011, the Company decided to increase its cost base for investment purposes ony, investing in both research and deveopment and marketing activities. Excuding these investment activities, the underying cost base has been kept at the ow eves that were initiated in The underying cash burn at the end of 2010 was cacuated at approximatey 46,000 per month.

14 12 Report and Accounts 2011 Financia Review continued During 2011, the underying cash burn was cacuated as being approximatey 50,000 per month. The difference between underying and actua cash burn is aso affected by changes in the Group s working capita profie. In addition to these key performance indicators, the foowing areas are aso reguary monitored and where necessary appropriate action is taken; actua cash fows, working capita baances (incuding inventory eves and receivabe coections), saes and other transactions invoving monitors and progress with research and deveopment projects and with cinica studies. Pau Mitche Finance Director 7 March 2012

15 Report and Accounts Directors Non-executive directors Nige Keen MA FCA Chairman Nige has been invoved with Detex Medica since 1988, and Chairman since He is aso the Non-executive Chairman of Bioque pc, Laird pc and Oxford Instruments pc. Nige is the Chairman of the Remuneration Committee and the Audit Committee. Dr Edwin Snape MSc PhD Vice-Chairman Ed has been connected with Detex Medica for over ten years and Vice-Chairman since He is currenty a Director of Sutan Scientific Limited, Myoscience Inc., Spectra Anaysis Instruments, Inc. and Lab 21 Limited. He has over 30 years experience investing in medica devices and ife sciences businesses in the USA and Europe. Executive directors Ewan Phiips MA ACA Chief Executive Ewan joined Detex Medica as Group Finance Director in August 2001 with a background in corporate finance. He took on responsibiity for UK saes in October 2002 and was appointed managing director of the UK subsidiary in November 2005 before being appointed Chief Executive in September Pau Mitche BSc FCA Finance Director Pau joined Detex Medica in August 2002 as Financia Controer, after quaifying as a Chartered Accountant with PricewaterhouseCoopers. In November 2004 he was appointed Company Secretary and was appointed Finance Director in September Juian Cazaet MA FCA Juian joined the Board in Apri He was unti 2007 a Managing Director Corporate Finance of JPMorgan Cazenove. After graduating in Economics from Cambridge, he quaified as a Chartered Accountant before joining Cazenove in He became a Partner in From 1989 he worked in Corporate Finance, firsty in Equity Capita Markets and subsequenty advising isted companies. He is Chairman of Herad Investment Trust pc and a Director of Chares Tayor Consuting pc and of The White Ensign Association Limited. Professor Sir Duncan Nicho Duncan has been an infuentia figure in the provision of acute heath services in the UK throughout his career. He worked for the NHS for neary 30 years in a number of senior management roes and was Chief Executive from 1989 to Duncan has been the Deputy Chairman of the Christie NHS Foundation Trust since Duncan is aso currenty a Non-executive Director of Synergy Heathcare pc, a provider of heathcare support services to the NHS and the first Chairman of the UK Academy for Heathcare Science.

16 14 Report and Accounts 2011 Secretary and Advisers Company secretary and registered office Pau Mitche BSc FCA Terminus Road Chichester West Sussex PO19 8TX Te: +44 (0) Fax: +44 (0) Company registered number: Nominated adviser and broker Arden Partners 125 Od Broad Street London EC2N 1AR Independent auditors PricewaterhouseCoopers LLP 9 Greyfriars Road Reading Berkshire RG1 1JG Principa bankers The Roya Bank of Scotand pc Threadneede Street PO Box 412 London EC2R 8LA Financia PR advisers Kreab Gavin Anderson 85 Strand London WC2R 0DW Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Soicitors Laytons 2 More London Riverside London SE1 2AP

17 Report and Accounts Directors Report For the year ended 31 December 2011 The directors present their report and the audited financia statements for the year ended 31 December Business review and principa activities The Company is the utimate hoding company of a group of subsidiary undertakings ( the Group ) engaged in the research, deveopment, manufacture and sae of oesophagea Dopper haemodynamic monitoring systems ( ODM ). The Company is required to set out in this report a fair view of the business of the Group during the financia year ended 31 December 2011, the position of the Group at the end of the financia year and a description of the principa risks and uncertainties facing the Group. This information, together with the Group s research and deveopment activities and ikey future prospects are reviewed in the Chairman s Statement on pages 2 to 3, the Operating Review on pages 4 to 7, and the Financia Review on pages 8 to 12. Resuts and dividends The resuts for the year are shown in the Consoidated Statement of Income on page 23. The directors do not recommend payment of a dividend (2010: Ni). Principa risks and uncertainties The Group s strategy has been and continues to be the estabishment of ODM-guided fuid management using the CardioQ-ODM as a standard of care firsty in the Group s home market of the UK, then secondy in the USA and other major markets for medica technoogy both through direct saes and marketing and, where appropriate, through distribution partnerships. The Group reguary reviews its strategic options and financing arrangements to refect circumstances encountered from time to time. The directors have, therefore, identified the foowing as being the principa risks and uncertainties facing the Group: Changes in the rates of adoption of the Group s products in key markets. The avaiabiity to the Group of resources, incuding cash, to pursue its strategy. The credit risk in reation to the invoice discounting faciity is borne by the Company. Exposure to poitica risks in certain territories. The Group has estabished interna contros to assess the impact or potentia impact of actua deveopments affecting these risks. The Group has deveoped interna forecasting and reporting toos that are used to manage carefuy cash fow, production scheduing and stock hodings. A faster, or sower than expected change in the adoption of the Group s products coud expose the Group to suppy chain and production capacity risks. In addition, suppy chain disruptions such as deays or osses of inventory aso present a potentia risk to the Group s abiity to progress its strategic aims. The Group mitigates these risks through effective suppier seection, management and procurement practices. Key performance indicators At this stage of its deveopment, the Group s two key performance indicators are probe saes and the underying cash burn rate (i.e. the difference between normaised run-rates for revenues and costs). Research and deveopment The Group has an active research and deveopment programme aimed at reguary updating and further improving existing products and, in the onger term, broadening the range of the Group s products. The amount charged to the Consoidated Statement of Comprehensive Income in 2011 was 396,000 (2010: 282,000). The amount capitaised as an intangibe asset during 2011 was 347,000 (2010: 213,000), see note 12. Further information is given in the Operating Review on pages 4 to 7 and the Financia Review on pages 8 to 12. Financia risk management The Group s financia instruments comprise some cash and various items, such as trade receivabes, trade payabes and borrowings, that arise directy from its operations. It is, and has been throughout

18 16 Report and Accounts 2011 Directors Report continued the year under review, the Group s poicy that it does not undertake any trading in financia instruments. The Board reviews and agrees poicies for managing iquidity, interest rate, exchange rate risks, credit risks and capita risks. The poicies have remained unchanged throughout the year and are summarised beow: Liquidity risk The Group is principay managed to ensure that sufficient cash reserves and credit faciities are avaiabe to meet iquidity requirements. The Group has avaiabe to it an invoice discounting faciity with the Group s bankers to suppement working capita needs. From time to time, additiona funding is raised to aow the Group to invest in its strategic projects to deveop the business in its chosen markets. Management monitors roing forecasts of the Group s iquidity reserves which comprises undrawn invoice discounting faciities and cash and cash equivaents on the basis of expected cash fows. Currency risk The Group has overseas subsidiaries in the USA, Spain and Germany and as a resut the Group s stering baance sheet can be affected by movements in the US doar/euro/stering exchange rates. The Group aso has transactiona currency exposures. Such exposures arise from saes and purchases by operating units in currencies other than the unit s functiona currency. However, given the size of the Group s operations, the costs of managing exposure to currency risk exceed any potentia benefits and therefore the Group does not engage in any hedging in respect of currency risks. The directors wi revisit the appropriateness of this poicy shoud the Group s operations change in size or nature. Credit risk The Group is exposed to credit reated osses in the event of non-performance by counterparties in connection with financia instruments. The Group takes actions to mitigate this exposure by ensuring adequate background on credit risk is known about counterparties prior to contracting with them and through seection of counterparties with suitabe credit ratings and monitors its exposure to credit risk on an ongoing basis. The Group is aso exposed to credit reated osses and territory specific credit risk in the event of nonperformance by counterparties in connection with financia instruments. The maximum credit risk exposure at the baance sheet date is represented by the carrying vaue of financia assets and there are no significant concentrations of credit risk. For banks and financia institutions, ony independenty rated parties with a minimum rating of A are accepted. As at the date of signing the financia statements a cash and cash equivaents are hed with institutions with an A rating as per Standard & Poor s. Interest Rate Risk The Group has both interest-bearing assets and interest-bearing iabiities. The Group s poicy is to seek the highest possibe return on interest-bearing assets without bearing significant credit risk, and to minimise the rate payabe on interest-bearing iabiities. The Group paces its cash baances on deposit at foating rates of interest. Surpus cash baances are paced on short-term deposit (ess than three months). No interest rate swaps are used. Interest rate risk comprises both the interest rate price risk that resuts from borrowing at fixed rates of interest and aso the interest cash fow risk that resuts from borrowing at variabe rates. At this time, the majority of the Group s borrowings attract foating rates of interest and therefore the Group s principa interest rate risk is a cash fow risk. Capita risk The Group s objectives when managing capita are to safeguard the Group s abiity to continue as a going concern in order to provide future returns to sharehoders and benefits for other stakehoders and to maintain optima capita structure.

19 Report and Accounts Ordinary shares are cassified as equity. Incrementa costs directy attributabe to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. The Board s poicy is to maintain a strong capita base so as to maintain investor, creditor and market confidence and to sustain future deveopment of the business. The Board of directors monitors the demographic spread of sharehoders. The Board encourages empoyees to hod shares in the Company. This has been carried out through the Company s various executive share option pans. Fu detais of these schemes are given in note 22. Directors interests Nige Keen 5,759,660 5,633,804 Dr Edwin Snape 1,116,338 4,392,724 Sir Duncan Nicho 647, ,107 Ewan Phiips 1,309,773 1,159,773 Juian Cazaet 3,527,882 3,455,388 Pau Mitche 148, ,501 12,509,773 15,374, % 11.64% Amounts in itaics reate to percentage of issued share capita at 31 December 2011 and 31 December Dr Edwin Snape is a principa of Nexus Medica Partners II, L.P. On 19 Apri 2011, the Company was informed that Nexus Medica Partners had disposed of its entire hoding of 3,367,004 ordinary shares in the Company. In addition, Nexus oaned approximatey $518,518 to the Company s US subsidiary in 2008 by way of an unsecured oan note repayabe after five years. Interest on the oan note is to be charged at 4% per annum with a interest roing up for settement on redemption. Directors remuneration Detais of the share options of those directors who served during the year are as foows: At Granted At 1 January during Exercised Expired31 December Exercise Exercise Exercise price period period No. No. No. No. No. from to Ewan Phiips 2000 Executive Share 100,000 (100,000) Nov Nov-11 Option Scheme 60,000 60, Nov Nov , , Oct Oct , , Oct Oct , , Mar Mar , , Jun Jun , , Jun Jun , , Jun Jun Executive Share Option Scheme 1,000,000 1,000, Sep Sep-21 EMI Scheme* 583, , Mar Oct ,739 (104,656) 52, Mar Oct ,225 (45,344) 213, Mar May , , Mar Jun , , Apr Jun , , Jun Jun-19 43,478 43, Dec Dec-19 31,250 31, Mar Mar-20 34,884 34, Jun Jun , , Oct Oct-20 20,270 20, Dec Dec-20 13,636 13, Apr Apr , , Sep Sep ,388,740 1,521,328 (150,000) (100,000) 6,660,

20 18 Report and Accounts 2011 Directors Report continued At Granted At 1 January during Exercised Expired31 December Exercise Exercise Exercise price period period No. No. No. No. No. from to Pau Mitche 2000 Executive Share 12,000 12, Nov Nov-12 Option Scheme 28,000 28, Oct Oct , , Oct Oct , , Mar Mar , , Jun Jun , , Jun Jun , , Jun Jun Executive Share Option Scheme 300, , Sep Sep-21 EMI Scheme* 55,556 (55,556) Oct Oct ,231 (133,231) Sep Sep , ,231 (188,787) 915, A shares and options at 31 December 2011 and 31 December 2010 reated to ordinary 1p shares. * Enterprise Management Incentive Scheme Directors remuneration The remuneration paid to the directors was: Saary Saary 2011 fees and 2010 and fees Bonus Benefits Pension Tota benefits Bonus Pension Tota Juian Cazaet 24,000 24,000 24,000 24,000 Nige Keen 33,333 33,333 33,333 33,333 Pau Mitche 86,520 7,500 3,461 97,481 91,317 15,000 3, ,598 Duncan Nicho 24,000 24,000 24,000 24,000 Ewan Phiips 185,000 7,500 7, , ,500 7, ,900 Ed Snape 24,000 24,000 24,000 24, ,853 15,000 10, , ,150 15,000 10, , Throughout the year ended 31 December 2011, a amounts in respect of fees payabe regarding Nige Keen s services as director were made to Imperiaise Limited, a company of which Mr Keen is the soe director and the majority sharehoder. Directors bonus Discretionary bonuses have been awarded retrospectivey to executive directors, in respect of work carried out in the year ended 31 December 2010, through an Enterprise Management Incentive Scheme which aowed the directors concerned to sacrifice an eement of their entitement to cash bonuses in return for share options exercisabe at the nomina vaue of 1p per ordinary share. Exercise price Period covered Number of options Ewan Phiips January 2010 to January , Pau Mitche January 2010 to January , In addition to the amounts charged above, Ewan Phiips has eected to sacrifice his entitement to a cash increase in saary in return for share options exercisabe at 1p per shares as foows: Exercise price Period covered Number of options Ewan Phiips January 2011 to September , These have been charged to the Consoidated Statement of Comprehensive Income in accordance with IFRS Share based payments.

21 Report and Accounts Detais of the service contracts of the executive directors at 31 December 2011 are set out in the tabe beow: Ewan Phiips Commencement date 11 September 2001 Notice period Aggregate remuneration Compensation on eary termination Non-competition Six months 200,000 saary, car aowance, discretionary bonus, pension contribution of 4% of saary None Standard restrictions on soiciting customers or suppiers or working for competing businesses for 12 months Pau Mitche Commencement date 3 September 2009 Notice period Aggregate remuneration Compensation on eary termination Non-competition Six months 86,520 saary, car aowance, discretionary bonus, pension contribution of 4% of saary None Standard restrictions on soiciting customers or suppiers or working for competing businesses for 12 months Ewan Phiips has eected to sacrifice 15,000 (2010: 15,000) of the aggregate remuneration reported above in ieu of share options. Pau Mitche aso eected for 8,112 (2009: 8,112) of the aggregate remuneration reported above, to be setted through equity issue during the year. Directors indemnities As permitted by the Companies Act 2006, the Company has indemnified the directors in respect of proceedings brought by third parties and indemnity insurance was in pace throughout the year. Major interests in shares The foowing are beneficia interests of 3% or more, of which the directors have been notified in accordance with Chapter 5 of the Discosure and Transparency Rues, of the Company s ordinary share capita, the ony cass of voting capita, at 7 March 2012: Percentage Number of of issued ordinary share shares capit BackRock, Inc. 9,135, % Cazenove Capita Management Limited 6,879, % Henderson Goba Investors 6,983, % Herad Investment Management Limited 9,314, % Nige Keen 5,759, % Charitabe and poitica donations No donations were made by the Company or Group during the year for poitica or charitabe purposes (2010: Ni). Creditor payment poicy The Group seeks to abide by the payment terms agreed with suppiers whenever it is satisfied that the suppier has provided the goods and services in accordance with the agreed terms and conditions. The average time taken to pay purchase invoices by the Company during the year cannot be cacuated as invoices received reating to the Company s activities were setted on its behaf by subsidiaries. The average time taken by feow subsidiaries to satisfy iabiities was 60 days (2010: 60 days). Going concern The Group meets its day-to-day working capita requirements through a combination of operationa cash fows, an invoice discounting faciity and the raising of additiona finance if required. The directors have examined detaied budgets and forecasts for the next fifteen months from the date of approva of these financia statements. This review indicates that the Group is expected to continue trading at current

22 20 Report and Accounts 2011 Directors Report continued eves as a going concern on the basis of increasing net cash infows from saes over expenditure of the Group. Further detais of Group s cash fows are given in the Chairman s Statement on pages 2 to 3, the Operating Review on pages 4 to 7, the Financia Review on pages 8 to 12 and the Directors report on page 19 and the Basis of preparation note on page 34. The Board has a reasonabe expectation that the Group wi have adequate resources to continue in operationa existence for the foreseeabe future and accordingy continues to adopt the going concern basis in preparing the financia statements as detaied in note 1. Directors responsibiities The directors are responsibe for preparing the Annua Report and the Group and parent Company financia statements in accordance with appicabe aws and reguations. Company aw requires the directors to prepare financia statements for each financia year. Under that aw the directors have eected to prepare the Group financia statements in accordance with Internationa Financia Reporting Standards (IFRS) as adopted by the European Union and the parent Company financia statements in accordance with United Kingdom Accounting Standards (United Kingdom Generay Accepted Accounting Practice). Under Company aw the directors must not approve the financia statements uness they are satisfied they give a true and fair view of the state of affairs of the Company and the Group and the profit or oss for that period. In preparing those financia statements the directors are required to: Seect suitabe accounting poicies and then appy them consistenty. Make judgements and estimates that are reasonabe and prudent. State that the Group financia statements compy with IFRSs as adopted by the European Union, and with regard to the parent Company financia statements that appicabe UK Accounting Standards have been foowed, subject to any materia departures discosed and expained in the financia statements. Prepare the Group and parent Company financia statements on the going concern basis uness it is inappropriate to presume that the Group and parent Company wi continue as a going concern in business, in which case there shoud be supporting assumptions or quaifications as necessary. The directors are responsibe for keeping adequate accounting records that are sufficient to show and expain the Company and Group s transactions and discose with reasonabe accuracy at any time the financia position of the Company and Group and enabe them to ensure that the financia statements compy with the Companies Act They are aso responsibe for safeguarding the assets of the Company and Group and hence for taking reasonabe steps for the prevention and detection of fraud and other irreguarities. The directors confirm that they have compied with the above requirements in preparing the financia statements. Each of the directors, whose names and functions are isted on page 13 confirm that, to the best of each person s knowedge and beief: The financia statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, iabiities, financia position and oss of the Company and the Group; and The directors report contained in the annua report incudes a fair review of the deveopment and performance of the business and the position of the Company and the Group, together with a description of the principa risks and uncertainties that they face. The directors are responsibe for the maintenance and integrity of the Company and Group website, Legisation in the United

23 Report and Accounts Kingdom governing the preparation and dissemination of financia statements may differ from egisation in other jurisdictions. Discosure of information to auditors In the case of each director in office at the date the Directors Report is approved, that: (a) so far as the director is aware, there is no reevant audit information of which the Company s auditors are unaware; and (b) he has taken a the steps that he ought to have taken as a director in order to make himsef aware of any reevant audit information and to estabish that the Company s auditors are aware of that information. Independent auditors The auditors; PricewaterhouseCoopers LLP have indicated their wiingness to continue in office and a resoution concerning their reappointment wi be proposed at the Annua Genera Meeting. Annua Genera Meeting The notice convening the Annua Genera Meeting, which wi take pace on 2 May 2012 at 11.00am at Laytons, 2 More London Riverside, London SE1 2AP, accompanies this report. By order of the Board Pau Mitche Company Secretary 7 March 2012

24 22 Report and Accounts 2011 Independent Auditors Report to the members of We have audited the Group financia statements of for the year ended 31 December 2011 which comprise the Consoidated Statement of Comprehensive Income, the Consoidated Baance Sheet, the Consoidated Statement of Changes in Equity, the Consoidated Statement of Cash Fows and the reated notes. The financia reporting framework that has been appied in their preparation is appicabe aw and Internationa Financia Reporting Standards (IFRSs) as adopted by the European Union. Respective responsibiities of directors and auditors As expained more fuy in the Directors Responsibiities statement set out on pages 20 and 21, the directors are responsibe for the preparation of the financia statements and for being satisfied that they give a true and fair view. Our responsibiity is to audit and express an opinion on the financia statements in accordance with appicabe aw and Internationa Standards on Auditing (UK and Ireand). Those standards require us to compy with the Auditing Practices Board s Ethica Standards for Auditors. This report, incuding the opinions, has been prepared for and ony for the Company s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibiity for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressy agreed by our prior consent in writing. Scope of the audit of the financia statements An audit invoves obtaining evidence about the amounts and discosures in the financia statements sufficient to give reasonabe assurance that the financia statements are free from materia misstatement, whether caused by fraud or error. This incudes an assessment of: whether the accounting poicies are appropriate to the Group s circumstances and have been consistenty appied and adequatey discosed; the reasonabeness of significant accounting estimates made by the directors; and the overa presentation of the financia statements. Opinion on financia statements In our opinion the Group financia statements: give a true and fair view of the state of the Group s affairs as at 31 December 2011 and of its oss and cash fows for the year then ended; have been propery prepared in accordance with IFRSs as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Chairman s Statement, the Operating Review, the Financia Review and Directors Report for the financia year for which the Group financia statements are prepared is consistent with the Group financia statements. Matters on which we are required to report by exception We have nothing to report in respect of the foowing matters where the Companies Act 2006 requires us to report to you if, in our opinion: certain discosures of directors remuneration specified by aw are not made; or we have not received a the information and expanations we require for our audit. Other matter We have reported separatey on the parent Company financia statements of Detex Medica Group pc for the year ended 31 December Mies Saunders (Senior Statutory Auditor) for and on behaf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Reading 7 March 2012

25 Report and Accounts Consoidated Statement Group Baance of Comprehensive Sheet Income for the year ended 31 December 2011 Note Revenue 2 6,303 6,279 Cost of saes 4 (1,765) (1,637) Gross profit 4,538 4,642 Administrative expenses 4 (2,012) (2,346) Saes and distribution costs 4 (3,532) (3,367) Research and deveopment costs 4 (396) (282) (5,940) (5,995) Operating oss 3, 4 (1,402) (1,353) Anaysed as: Operating oss before exceptiona items (1,402) (1,374) Exceptiona items 5 21 Operating oss (1,402) (1,353) Finance income Finance costs 7 (123) (161) Loss before taxation (1,524) (1,513) Tax credit on oss Loss for the year 23 (1,421) (1,468) Other comprehensive income Exchange differences taken to reserves 23 (14) (6) Other comprehensive income for the year, net of tax (14) (6) Tota comprehensive oss for the year (1,435) (1,474) Loss per share basic and diuted (1.0p) (1.1p) The notes on pages 27 to 57 form an integra part of these consoidated financia statements. Aternative performance measures (note 1) Adjusted operating oss Operating oss incuding non-cash items (1,402) (1,353) Share-based payments Equity setted costs Net non-cash cinica tria (credits)/charges (387) 70 Depreciation and amortisation Net increase in provisions, incuding receivabes Sundry non-cash charges/(credits) (7) 55 Adjusted operating oss before non-cash items (732) (300) These suppementary discosures do not form part of the Consoidated Statement of Comprehensive Income.

26 24 Report and Accounts 2011 Consoidated Baance Sheet at 31 December 2011 Note Assets Non-current assets Property, pant and equipment Intangibe assets Trade and other receivabes Tota non-current assets 1,041 1,004 Current assets Inventories Trade and other receivabes 14 2,818 1,996 Current income tax recoverabe Cash and cash equivaents Tota current assets 4,584 3,363 Tota assets 5,625 4,367 Liabiities Current iabiities Borrowings 16 (743) (689) Trade and other payabes 18 (1,500) (1,226) Tota current iabiities (2,243) (1,915) Non-current iabiities Borrowings 16 (1,359) (1,335) Provisions for other iabiities 19 (167) (108) Tota non-current iabiities (1,526) (1,443) Tota iabiities (3,769) (3,358) Net assets 1,856 1,009 Equity Share capita 21, 23 1,421 1,320 Share premium 23 21,901 20,116 Capita redemption reserve 23 17,476 17,476 Other reserves 23 3,286 2,890 Transation reserve 23 (9) 5 Retained deficit 23 (42,219) (40,798) Tota equity 1,856 1,009 The notes on pages 27 to 57 form an integra part of these consoidated financia statements. The financia statements on pages 23 to 57 were approved by the Board of Directors on 7 March 2012 and were signed on its behaf by: N J Keen Chairman ( ) P J Mitche Finance Director ( )

27 Report and Accounts Consoidated Statement of Changes in Equity for the year ended 31 December 2011 Capita Share Share redemption Other Transation Retained Tota capita premium reserve reserves reserve deficit equity Baance at 1 January ,269 19,974 17,476 2, (39,330) 1,799 Comprehensive income Loss for the year (1,468) (1,468) Other comprehensive income Exchange movements taken to reserves (6) (6) Tota comprehensive income for the year (6) (1,468) (1,474) Shares issued during the year Premium on shares issued during the year Issue expenses Credit in respect of service costs setted by award of options Baance at 31 December ,320 20,116 17,476 2,890 5 (40,798) 1,009 Comprehensive income Loss for the year (1,421) (1,421) Other comprehensive income Exchange movements taken to reserves (14) (14) Tota comprehensive income for the year (14) (1,421) (1,435) Shares issued during the year Premium on shares issued during the year 1,838 1,838 Issue expenses (53) (53) Credit in respect of service costs setted by award of options Baance at 31 December ,421 21,901 17,476 3,286 (9) (42,219) 1,856 The notes on pages 27 to 57 form an integra part of these consoidated financia statements.

28 26 Report and Accounts 2011 Consoidated Statement of Cash Fows for the year ended 31 December 2011 Note Cash fows from operating activities Net cash used in operations 24 (1,337) (791) Interest paid (112) (97) Income taxes received Net cash used in operating activities (1,352) (790) Anaysed as: Net cash used in operating activities before exceptiona items (1,352) (679) Exceptiona items (111) Net cash used in operating activities (1,352) (790) Cash fows from investing activities Purchase of property, pant & equipment 10 (194) (143) Capitaised deveopment expenditure 11 (346) (213) Interest received Net cash used in investing activities (539) (355) Cash fows from financing activitites Issue of ordinary share capita 23 1, Expenses in connection with share issue (53) Proceeds from increase in borrowings Effect of exchange rate fuctuations on borrowings (4) 8 Expenses in connection with new borrowing (16) Repayment of obigations under finance eases (4) (7) Net cash generated from financing activities 1, Net increase/(decrease) in cash and cash equivaents 57 (780) Cash and cash equivaents at beginning of the year 699 1,480 Exchange osses on cash and cash equivaents (4) (1) Cash and cash equivaents at end of the year The notes on pages 27 to 57 form an integra part of these consoidated financia statements.

29 Report and Accounts Notes to the Financia Statements 1 Principa accounting poicies The principa accounting poicies adopted in the preparation of these consoidated financia statements are set out beow. These poicies have been consistenty appied to a the years presented, uness otherwise stated. Genera information These financia statements are the consoidated financia statements of, a pubic imited company registered and domicied in the United Kingdom and its subsidiaries ( the Group ). is isted on the Aternate Investment Market. The address of the registered office is, Terminus Road, Chichester PO19 8TX, registered number Basis of reporting The consoidated financia statements have been prepared in accordance with Internationa Financia Reporting Standards (IFRS) as adopted by the European Union (EU), with interpretations issued by the Internationa Financia Reporting Interpretations Committee (IFRIC) and with those parts of the Companies Act 2006 appicabe to companies reporting under IFRS. The consoidated financia statements have been prepared under the historica cost convention, and on a going concern basis as discussed in more detai under the Basis of Preparation section of this note. The foowing standards, amendments to standards and interpretations which have been endorsed by the EU have been adopted with effect from 1 January 2011 or as stated beow. No changes to previousy pubished accounting poicies or other adjustments were required on their adoption. Revised IAS 24, Reated Party Discosures. Amendment to IFRIC 14, Prepayments of a Minimum Funding Requirement. IFRIC 19, Extinguishing Financia Liabiities with Equity Instruments. Amendment to IFRS 1, Limited Exemption from Comparative IFRS 7 Discosure for First-time Adopters. Amendment to IAS 32, Financia instruments cassification of rights issues. Annua Improvements to IFRSs Accounting standards not yet effective Certain new standards and amendments to existing standards have been pubished that are mandatory for future accounting periods, subject to EU endorsement. Those which the Group has not adopted eary and effective date (periods beginning) are as foows: Amendments to IFRS 7, Financia Instruments: Discosures on Derecognition 1 Juy Amendment to IFRS 1, First time adoption on fixed dates and hyperinfation 1 Juy Amendment to IAS 12, Income taxes on deferred tax 1 January Amendment to IAS 1, Financia statement presentation regarding other comprehensive income 1 Juy IAS 19 (revised 2011), Empoyee benefits, eiminating the corridor approach 1 January IFRS 9, Financia instruments 1 January IFRS 10, Consoidated financia statements 1 January IFRS 11, Joint arrangements 1 January IFRS 12, Discosures of interests in other entities 1 January IFRS 13, Fair vaue measurement 1 January IAS 27 (revised 2011), Separate financia statements 1 January IAS 28 (revised 2011), Associates and joint ventures 1 January None of these are expected to have a materia impact on the Group.

30 28 Report and Accounts 2011 Notes to the Financia Statements continued 1 Principa accounting poicies continued Basis of consoidation The Consoidated Financia Statements incude the financia statements of the parent Company and a of its subsidiaries. A intra-group transactions, baances, income and expenses are eiminated on consoidation. Subsidiaries are fuy consoidated from the date on which contro is transferred to the Group. They are de-consoidated from the date that contro ceases. Revenue recognition Revenue is measured at the fair vaue of the consideration receivabe and represents amounts receivabe for goods and services provided in the norma course of business, net of discounts, VAT and other saes reated taxes and excude intercompany saes. Monitor and probe revenue Revenue on monitors and probes is recognised at the point when substantiay a of the risks and rewards of ownership are transferred to the customer; normay this is on dispatch. Cinica tria data Where goods are exchanged for tria data, the exchange is treated as revenue under a barter transaction. The revenue is measured at fair vaue of the tria data or at the fair vaue of the goods suppied, where the fair vaue of the tria data cannot be reiaby measured. The corresponding asset is recorded as a prepayment (see cinica trias accounting poicy). Operating eases When assets are eased out under an operating ease, the asset is incuded in the baance sheet based on the nature of the asset. Lease income is recognised over the term of the ease on a straight-ine basis. Managed care service contracts Where contracts exist which provide for a specified number of probes over a period of time for a tota contract fee, revenue is recognised on a a per probe basis. Variations between this percentage of competion accounting and the monthy contract fee charged is recognised as deferred or accrued income on the baance sheet. Other service contracts In respect of service contracts and other agreements for ongoing support, revenue is recognised in equa monthy instaments over the period of the contract to match the benefits to the customer. Operating segments An operating segment is a component of an entity that engages in business activities for which discrete financia information is avaiabe. For reporting purposes, the resuts of the Group are aocated between four operating segments which equate to specific geographica areas and are as described in note 2. The Group accounting poicies are appied consistenty across the four segments. Head office and other costs, which cannot be fairy aocated, are shown separatey. The Group has a singe group of reated products and services, being the suppy of monitors and probes and reated services. Segment information is provided on the basis of geographic areas where we have direct operations and distributor markets, which is the basis on which the Group Chief Operating Decision Maker manages its wordwide activities. The Chief Operating Decision Maker is the executive Board. Revenue is attributed to the UK, USA and Spain as being the country where the saes is made through our direct operations. A other revenue, which is derived from saes to distributors, is cassified as Internationa. Whist Spain does not meet the quantitative criteria for discosure as a separate segment, it is expected to become a significant contributor to the Group s performance in future years as the Group expands its opportunities in this country. Consequenty the Group has chosen to incude Spain as a reportabe segment as it is fet that such information woud be usefu to the users of the financia statements.

31 Report and Accounts Notes to the Financia Statements continued 1 Principa accounting poicies continued Operating segments continued Segment operating resut is the measure of segment profit/(oss) and comprises gross profit, seing and genera administrative expenses. Research and non-capitaised deveopment costs, other net operating income/(expense), as we as other net financia income/(expense) are not aocated in cacuating the segment/operating resut. Exceptiona items Exceptiona items reate to materia non-recurring items of income and expense arising from circumstances such as disposas of property, pant and equipment, discontinued operations, disposas of investments, onerous contracts and itigation settements. The separate reporting of exceptiona items heps provide a better understanding of the Group s underying performance during the period. Foreign currency transation The functiona and presentationa currency for the parent Company is UK pounds stering. Group companies use their oca currency as their functiona currency. Transactions denominated in currencies other than the functiona currency are recorded at the rates of exchange prevaiing on the dates of the transactions. At each baance sheet date, monetary assets and iabiities that are denominated in foreign currencies are retransated at the rates prevaiing on the baance sheet date, with any gains or osses being incuded in the net profit or oss of the period. Exchange differences arising on nonmonetary assets and iabiities are recognised directy in equity. On consoidation, the assets and iabiities of the Group s overseas operations are transated at exchange rates prevaiing on the baance sheet date. Income and expense items are transated at the average exchange rates for the period. Exchange differences arising, if any, are deat with through the Group s reserves, unti such a time as the subsidiary is sod whereupon the cumuative exchange differences reating to the net investment in that foreign subsidiary are recognised as part of the profit or oss on disposa in the Consoidated Statement of Comprehensive Income. However, cumuative exchange differences arising prior to 1 January 2006 remain in equity as permitted by IFRS 1. Goodwi and fair vaue adjustments arising on the acquisition of a foreign entity are treated as assets and iabiities of the foreign entity and transated at the cosing rate. The Group has eected to treat goodwi and fair vaue adjustments arising on acquisitions before the date of transition to IFRS as stering denominated assets and iabiities. Compound financia instruments Compound financia instruments issued by the Group comprise convertibe notes that can be converted to share capita at the option of the hoder, or subject to certain conditions at the option of the Group and the number of shares to be issued does not vary with changes in their fair vaue. The iabiity component of a compound financia instrument is recognised initiay at the fair vaue of a simiar iabiity that does not have an equity conversion option. The equity component is recognised initiay as the difference between the fair vaue of the compound financia instrument as a whoe and the fair vaue of the iabiity component. Any directy attributabe transaction costs are aocated to the iabiity and equity components in proportion to their initia carrying amounts. Subsequent to initia recognition, the iabiity component of a compound financia instrument is measured at amortised cost using the effective interest method. The equity component of a compound financia instrument is not re-measured subsequent to initia recognition except on conversion or expiry. Borrowings are cassified as current iabiities uness the Group has an unconditiona right to defer settement of the iabiity for at east 12 months after the end of the reporting period.

32 30 Report and Accounts 2011 Notes to the Financia Statements continued 1 Principa accounting poicies continued Trade receivabes Trade receivabes are recognised initiay at fair vaue and subsequenty measured at amortised cost using the effective interest method ess provision for impairment. A provision for impairment of trade receivabes is estabished when there is objective evidence that the Group wi not be abe to coect a amounts due according to the origina terms of the receivabes. Significant financia difficuties of the debtor, probabiity that the debtor wi enter bankruptcy or financia reorganisation, and defaut or deinquency in payments (more than 60 days overdue) are considered indicators that the trade receivabe may be impaired. The amount of the provision is the difference between the asset s carrying amount and the present vaue of estimated future cash fows, discounted at the origina effective interest rate. The carrying amount of the asset is reduced through the use of an aowance account, and the amount of the oss is recognised in the Consoidated Statement of Comprehensive Income within saes and distribution costs. When a trade receivabe is uncoectabe, it is written off against the aowance account for trade receivabes. Subsequent recoveries of amounts previousy written off are credited against saes and distribution costs in the Consoidated Statement of Comprehensive Income. Provisions Provisions are recognised when the Group has a present ega or constructive obigation in respect of a past event and it is probabe that settement wi be required of an amount that can be reiaby estimated. Provisions are measured at the present vaue of the expenditures expected to be required to sette the obigation using a pre-tax rate that refects current market assessments of the time vaue of money and the risks specific to the obigation. The increase in the provision due to passage of time is recognised as interest expense. A provision for nationa insurance that may become payabe on share option gains is cacuated based on the cosing share price. Property, pant and equipment Property, pant and equipment are stated at cost, net of depreciation and any provision for impairment. The cost of purchased assets incudes the origina purchase price together with any incidenta expenses of acquisition. Depreciation is cacuated so as to write down property, pant and equipment to their estimated reaisabe vaues, by equa annua instaments over their expected usefu economic ives at the foowing rates: Leasehod property and improvements Pant and machinery Machines oaned to customers Fixtures, fittings and equipment five years or to the end of the ease period if ess three to five years five years three to five years Estimated residua vaues and usefu ives are reviewed annuay and adjusted where necessary. Machines oaned to customers In order to support key accounts and increased probe usage, CardioQ-ODM monitors may be paced on ong-term oan with customers. Where these monitors are expected to be paced for a period onger than 12 months, the monitors are transferred at book vaue to property, pant and equipment and amortised over five years. Where monitors are paced on a short-term oan of ess than 12 months and it is expected that the monitors wi be sod thereafter, the monitors are incuded within inventories and a provision for refurbishment cost is charged to the Consoidated Statement of Comprehensive Income. Intangibe fixed assets Research and deveopment expenditure internay generated Costs for sef-initiated research and deveopment activities are assessed as to whether they quaify for recognition as internay generated intangibe assets. Apart from compying with the genera recognition requirements and initia measurement of an intangibe asset, quaification criteria are met ony when technica as we as commercia feasibiity can be demonstrated and cost can be measured reiaby. It must aso be probabe that the intangibe asset wi generate future economic benefits and that it is ceary identifiabe and aocatabe to a specific product.

33 Report and Accounts Notes to the Financia Statements continued 1 Principa accounting poicies continued Research and deveopment expenditure internay generated continued Further to meeting these criteria, ony such costs that reate soey to the deveopment phase of a sef-initiated project are capitaised. Any costs that are cassified as part of the research phase of a sef-initiated project are expensed as incurred. If the research phase cannot be ceary distinguished from the deveopment phase, the respective project reated costs are treated as if they were incurred in the research phase ony. Amortisation is cacuated so as to write down the vaue of the intangibe assets by equa annua instaments over their expected usefu economic ives at the foowing rates: Monitors Probes five years five years The costs in respect of triaing for cinica, economic and other purposes is not considered to be research and deveopment expenditure. The accounting poicy for this is detaied beow. Loans and receivabes Loans and receivabes are non-derivative financia assets with fixed or determinabe payments that are not quoted in an active market. They are incuded in current assets except for maturities greater than 12 months after the baance sheet date. Such assets are carried at amortised cost using the effective interest method. Gains and osses are recognised in the statement of comprehensive income when the oans and receivabes are derecognised or impaired, as we as through the amortisation process. Loans and borrowings A oans and borrowings are initiay recognised at the fair vaue of the consideration received ess directy attributabe transaction costs. After initia recognition, interest-bearing oans and borrowings are subsequenty measured at amortised cost using the effective interest method. Gains and osses are recognised in net profit or oss when the iabiities are derecognised as we as through the amortisation process. Borrowing costs are recognised as an expense when incurred. Impairment of property, pant and equipment and intangibe assets excuding goodwi At each Baance Sheet date the Group reviews the carrying amounts of its property, pant and equipment and intangibe assets to determine whether there is any indication that those assets have suffered an impairment oss. If any such indication exists, the recoverabe amount of the asset is estimated to determine the extent of any impairment oss. The recoverabe amount is the higher of the asset s vaue in use and its fair vaue ess costs to se. Vaue in use is cacuated using cash fow projections for the asset (or group of assets where cash fows are not identifiabe for specific assets) discounted at the Group s cost of capita. If the recoverabe amount of an asset (or cash generating unit) is estimated to be ess than its carrying amount, the carrying amount of the asset (cash generating unit) is reduced to its recoverabe amount. Retirement benefit costs Retirement benefit costs are accounted for in accordance with IAS 19 (amended). The Group provides pension arrangements to the majority of fu-time UK empoyees through a money purchase (defined contribution) scheme. Contributions and pension costs are based on pensionabe saary and are charged as an expense as they fa due. The Group has no further payment obigations once the contributions have been paid. The Group maintains a deferred contribution Saary Reduction Simpified Empoyee Pension Pan ( SARSEP ) for US empoyees which aows eigibe empoyees to have a percentage of their before tax compensation contributed to an Individua Retirement Account. Under the terms of SARSEP, the Group may make discretionary contributions on behaf of the empoyees that are charged to the Consoidated Statement of Comprehensive Income in the year in which they are payabe. There are no post-retirement obigations in respect of this scheme payabe by the Group.

34 32 Report and Accounts 2011 Notes to the Financia Statements continued 1 Principa accounting poicies continued Investments Investments are stated at cost ess any provisions for impairment. Inventories Inventories are stated at the ower of cost and net reaisabe vaue. Cost is determined on a first in, first out basis. Work in progress and finished goods are incuded on a basis appropriate to the state of competion of the various individua items taking account of production materias and components together with an appropriate share of directy attributabe abour and overheads. Net reaisabe vaue represents the estimated seing price ess a estimated costs of competion and costs to be incurred in marketing, seing and distribution. Provision is made for obsoete, sow-moving or defective items where appropriate. Finance and operating eases Costs in respect of operating eases are charged to the Consoidated Statement of Comprehensive Income on a straightine basis over the ease term. Where property, pant and equipment are financed by finance ease agreements, which transfer to the Group substantiay a the benefits and risks of ownership, the assets are treated as if they had been purchased outright and are incuded in property, pant and equipment. Such amounts are written off over the period of the ease. The capita eement of the finance ease commitment is shown as obigations under finance eases within borrowings. The finance ease payments are treated as consisting of capita and interest eements. The capita eement is appied to reduce the outstanding obigations and the interest eement is charged to the Consoidated Statement of Comprehensive Income on a straight-ine basis over the ease term. Cinica and other trias The cost of triaing for cinica, economic and other purposes to support the Group s saes and promotiona activity, or the cost of purchasing the rights to the use of the data arising from such trias, is written off as the tria is deivered. At each Baance Sheet date any asset reating to prepaid cinica and other trias, or prepayments recognised from barter transactions, are assessed for impairment and where necessary an impairment oss is recognised as an expense in the Consoidated Statement of Comprehensive Income. Current and deferred taxation The tax expense represents the sum of current tax and deferred tax. Tax is recognised in the Consoidated Statement of Comprehensive Income except to the extent that it reates to items recognised in equity, in which case it is recognised in equity. The current tax is based on taxabe resuts for the year cacuated using tax rates that have been enacted or substantiay enacted by the Baance Sheet date. Deferred tax is provided using the Baance Sheet date iabiity method on temporary differences between the carrying amounts of assets and iabiities in the financia statements and the corresponding tax bases used in the computation of taxabe profit. In principe, deferred tax iabiities are recognised for a taxabe temporary differences and deferred tax assets are recognised to the extent that it is probabe that taxabe profits wi be avaiabe against which deductibe temporary differences can be utiised. Such assets and iabiities are not recognised if the temporary difference arises from goodwi or from the initia recognition (other than in a business combination) of other assets or iabiities in a transaction that affects neither the tax profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each Baance Sheet date and reduced to the extent that it is not probabe that sufficient taxabe profits wi be avaiabe to aow a or part of the asset to be recovered. Deferred tax is cacuated at the tax rates that are expected to appy in the period when the iabiity is setted or the asset is reaised. Tax assets and iabiities are offset when there is a egay enforceabe right to offset current tax assets against current iabiities and when the deferred income taxes reate to the same fisca authority.

35 Report and Accounts Notes to the Financia Statements continued 1 Principa accounting poicies continued Share-based payments The Group awards directors, empoyees and certain of the Company s distributors and advisers equity-setted share-based payments, from time to time, on a discretionary basis. In accordance with IFRS 2 Share-based payments, equity-setted share-based payments are measured at fair vaue at the time of grant. Fair vaue is measured by use of a Back-Schoes mode. The fair vaue determined at the grant date of the equity-setted share-based payments is expensed on a straight-ine basis over the vesting period, based on the Group s estimate of the number of shares that wi eventuay vest. The options are subject to vesting conditions of up to six years, and their fair vaue is recognised as an expense with a corresponding increase in other reserves equity over the vesting period. The proceeds received net of any directy attributabe transaction costs are credited to share capita (nomina vaue) and share premium when the options are exercised. The fair vaue of the equity-setted share-based payment is recharged by the Group company to the subsidiary operating company at fair vaue. The expense is, therefore, recognised in the subsidiary operating company, with the equity reserve being recognised in the Group company. The grant by the company of options over its equity instruments to the empoyees of subsidiary undertakings in the Group is treated as a capita contribution. The fair vaue of empoyee services received, measured by reference to the grant date fair vaue is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity. Cash and cash equivaents Cash and cash equivaents incudes cash in hand and deposits hed with banks with a maturity of ess than three months. Share capita Ordinary shares are cassified as equity. Incrementa costs directy attributabe to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Trade payabes Trade payabes are recognised initiay at fair vaue and subsequenty measured at amortised cost using the effective interest method. Borrowings Borrowings are recognised initiay at fair vaue, net of transaction costs incurred. Borrowings are subsequenty stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption vaue is recognised in the Consoidated Statement of Comprehensive Income over the period of the borrowing using the effective interest method. Borrowings are cassified as current iabiities uness the Group has an unconditiona right to defer settement of the iabiity for at east 12 months after the baance sheet date. Significant judgements, assumptions and estimates In the process of appying the Group s accounting poicies, the directors have made a number of judgements. In addition, the preparation of financia statements in conformity with generay accepted accounting principes requires the use of estimates and assumptions that affect the reported amounts of assets and iabiities at the date of the financia statements and the reported amounts of revenues and expenses during the reporting period. Athough these estimates are based on the directors best knowedge of the amount, event or actions, actua resuts utimatey may differ from those estimates. The key assumptions at the baance sheet date that have a significant risk of causing a materia adjustment to the carrying amounts of assets and iabiities within the next financia year are discussed beow. Cinica tria data The Group exchanges goods for tria data and this exchange is treated as revenue under a barter transaction. These represent non-cash transactions. Where the fair vaue of the tria data cannot be reiaby measured, the cinica tria cost is measured at the fair vaue of the goods being suppied. The determination of this fair vaue invoves some judgement of what is an appropriate comparabe saes vaue. The timing of competion of the trias is estimated at the start of the tria, and the prepaid costs spit accordingy between non-current and current assets. However, unforeseen future events may adversey impact on the vaue and timing of the trias which woud resut in potentia impairments or changes in baance sheet cassification of the assets.

36 34 Report and Accounts 2011 Notes to the Financia Statements continued 1 Principa accounting poicies continued Vauation of share-based payments In order to determine the vaue of share-based payments, management are required to make an estimation of the effects of non-transferabiity, exercise restrictions and behavioura considerations. Fair vaue is measured by use of a Back-Schoes mode and the inputs are set out in note 22. Trade receivabes recoverabiity Judgements have been made in respect of various overseas territories in which the Company operates in order to assess the recoverabiity of receivabes from these territories. Research and deveopment Costs for research and deveopment activities are ony capitaised as intangibe assets if the quaification criteria are met. These criteria are met ony when the technica as we as commercia feasibiity can be demonstrated and cost can be measured reiaby. The amounts capitaised represents the Group s estimate of what costs have met this criteria. There is a risk that the intangibe asset wi not generate the required future economic benefits and therefore coud resut in potentia impairments. Aternative financia measures The Group uses a number of aternative (non-generay Accepted Accounting Practice (non-gaap)) financia measures, which are not defined by IFRS. The directors use these measures in order to assess the underying operationa performance of the Group and as such these measures are important and shoud be considered aongside the IFRS measures. The foowing non-gaap measures are referred to in these Financia Statements. (a) (b) Adjusted operating oss beneath the Consoidated Statement of Comprehensive Income This is defined as operating oss before non-cash charges to the Consoidated Statement of Comprehensive Income. A reconciiation of the operating oss to the adjusted operating oss is shown beneath the Consoidated Statement of Comprehensive Income. Adjusted operating cash fow before movement in working capita This is defined as the operating cash fow before movement in working capita which reates to cash transactions ony. Therefore any non-cash working capita eements have been removed. A reconciiation of the adjusted operating cash fow before movement in working capita to the operating cash fow before movement in working capita is shown beneath the Notes to the Cash Fow Statement (note 24). Basis of preparation In common with many companies of its size and which are at its stage of deveopment, the directors manage carefuy the Group s imited resources to deveop the opportunities open to it without overstretching the funding capabiities of the business. The funds the Group has avaiabe to it are provided both by the resuts of its commercia activities and through the new funding provided to it by the capita markets and secured ending and the Group drives its deveopment of the market in keeping with this eve of funding, having sufficient fexibiity in its cost structure to taior expenditure to accord with income eves. As noted in the Directors Report, in preparing these financia statements the directors have reviewed detaied budgets and cash fow forecasts for the next 15 months from the date of approva of these financia statements. This review indicates that the Group is expected to continue trading at current eves as a going concern on the basis of increasing net cash infows from saes over expenditure of the Group. The directors beieve it is appropriate to prepare the financia statements on the going concern basis.

37 Report and Accounts Notes to the Financia Statements continued 2 Operating segments For management purposes, the Group is currenty organised into four operating segments: UK, USA, Spain and Internationa. These segments are the basis on which the Group reports its segment information. The principa activities of each segment are as foows: the UK segment empoys a direct saes team in the marketing, saes and support of the Group s CardioQ monitor and associated probes within the UK territory; the USA segment empoys a direct saes team in the marketing, saes and support of the Group s CardioQ monitor and associated probes within the USA territory; the Spanish segment empoys a direct saes team in the marketing, saes and support of the Group s CardioQ-ODM monitor and associated probes within the USA territory; the Internationa segment supports distributors in seected territories to promote the marketing, saes and support of the CardioQ-ODM and its associated probes within these territories. The reportabe segment resuts for the year ended 31 December 2011 are as foows: UK USA Internationa Spain Unaocated Tota Tota segment revenue 3, , ,480 Inter segment revenue (177) (177) Revenue from externa customers 3, , ,303 Segment operating resut 1,143 (556) 309 (153) (2,145) (1,402) Finance income 1 Finance costs (123) Loss before taxation (1,524) Tax credit on oss 103 Loss for the financia year (1,421) Incuded within the segment operating resuts are the foowing significant non-cash items: UK USA Internationa Spain Unaocated Tota Depreciation and amortisation Equity-setted transactions 143 (2) Receivabes provision Amortisation of cinica tria costs Capitaisation of cinica tria costs (340) (140) (20) (500) Tota (151) (4)

38 36 Report and Accounts 2011 Notes to the Financia Statements continued 2 Operating segments continued The reportabe segment resuts for the year ended 31 December 2010 are as foows: UK USA Internationa Spain Unaocated Tota Tota segment revenue 3, , ,551 Inter-segment revenue (272) (272) Revenue from externa customers 3, , ,279 Segment operating resut 996 (509) 568 (48) (2,360) (1,353) Finance income 1 Finance costs (161) Loss before taxation (1,513) Tax credit on oss 45 Loss for the financia year (1,468) Incuded within the segment operating resuts are the foowing significant non-cash items: UK USA Internationa Spain Unaocated Tota Depreciation and amortisation Equity-setted transactions Receivabes provision Amortisation of cinica tria costs Capitaisation of cinica tria costs (99) (102) (118) (319) Tota (115) Unaocated costs incude those costs that cannot be spit between segments, incuding expenditure on research and deveopment and cinica trias. Inter-segment transfers or transactions are entered into under the norma commercia terms and conditions that woud aso be avaiabe to unreated third parties. The reportabe segment assets and iabiities at 31 December 2011 and capita expenditure are as foows: UK USA Internationa Spain Unaocated Tota Assets 1, , ,394 5,625 Liabiities ,139 3,769 Assets Liabiities Segment assets/iabiities 3, Unaocated: Intangibe assets 724 Property, pant and equipment 57 Taxation receivabe 102 Prepayments and accrued income 802 Other debtors 1 Cash and cash equivaents 708 Borrowings 1,983 Trade and other payabes 866 Provisions 290 5,625 3,769

39 Report and Accounts Notes to the Financia Statements continued 2 Operating segments continued The reportabe segment assets and iabiities at 31 December 2010 and capita expenditure are as foows: UK USA Internationa Spain Unaocated Tota Assets 1, , ,764 4,367 Liabiities ,850 3,358 Assets Liabiities Segment assets/iabiities 2, Unaocated: Intangibe assets 437 Property, pant and equipment 60 Taxation receivabe 95 Prepayments and accrued income 518 Other debtors 1 Cash and cash equivaents 653 Borrowings 1,911 Trade and other payabes 848 Provisions 91 4,367 3,358 Segment assets consist primariy of inventories and trade and other receivabes. Unaocated assets comprise primariy of intangibe assets, property, pant and equipment, prepayments and accrued income, cash and cash equivaents and taxation receivabe. Segment iabiities primariy comprise deferred income and accrued empoyee costs. Unaocated iabiities comprise trade and other payabes, provisions and other borrowings. The foowing tabe provides an anaysis of the Group s saes by revenue stream Probes Monitors Other Tota Probes Monitors Other Tota Direct markets UK 2, ,733 2, ,290 USA Spain Distributor markets Rest of Europe Rest of the Word ,004 4,800 1, ,303 4,595 1, ,279 It is not practica to spit the assets and iabiities between the different revenue streams.

40 38 Report and Accounts 2011 Notes to the Financia Statements continued 3 Auditor remuneration Services provided by the Group s auditors and network firms. During the year the Group (incuding its overseas subsidiaries) obtained the foowing services from the Group s auditors at costs as detaied beow: Audit services Fees payabe to Company auditors for the audit of the parent Company and the consoidated financia statements Other services Fees payabe to the Company s auditors and associates for other services The audit of the Company s subsidiaries pursuant to egisation Other services pursuant to egisation 3 Taxation advice Expenses by nature Changes in inventories of finished goods and work in progress Raw materias and consumabes used 1,338 1,320 Empoyee benefit costs 3,737 3,531 Other empoyee costs Depreciation and amortisation charges Net research and deveopment expenditure (excuding empoyee costs) Net cinica tria costs Operating ease commitments and and buidings Foreign exchange oss/(gain) 54 (1) Charge in respect of service costs 2 17 Audit and accountancy Meeting and other PR costs Professiona and consutancy fees Loss on disposa of property, pant and equipment 26 Other ,705 7,632 5 Exceptiona items Charges reating to exceptiona items totaed ni (2010: (21,000)) in the year. In the prior year these were with respect to the settement for the eary termination of a contract.

41 Report and Accounts Notes to the Financia Statements continued 6 Empoyees The average monthy number of persons, incuding executive directors, by function was as foows: Number Number By activity Saes and marketing Production Office and management Research and deveopment Empoyee benefit expense Wages and saaries 3,170 2,913 Socia security costs Other pension costs defined contribution pans Share-based payments Other post-empoyment benefits 11 3,757 3,531 Directors emouments Aggregate emouments 358, ,817 Sums paid to third parties for directors services 33,333 33,333 Contributions to directors persona pension schemes 10,861 10, , ,831 Benefits are accruing to two (2010: two) directors under persona pension pans. Incuded in the above figure is an amount paid to the empoying company, Imperiaise Limited, of a Non-executive director for the services of that director of 33,333 (2010: 33,333). Highest paid director Aggregate emouments 192, ,500 Contributions to directors persona pension schemes 7,400 7, , ,900 Director share saes during the period reate to shares in ieu of 21,650 bonus and saary entitement sacrifice, resuting in a net gain of 16,657. Exercisabe at 1p per share, the gross gain was 44,259. No shares were sod by the highest paid director during the period.

42 40 Report and Accounts 2011 Notes to the Financia Statements continued 7 Finance income and costs Finance income Bank interest receivabe Finance costs Finance ease interest payabe 1 2 Interest payabe Faciity and oan arrangement fees Taxation Current tax: Research and deveopment tax credit (102) (50) Adjustment in respect of prior years (1) 5 Tota current tax and tax on oss on ordinary activities (103) (45) The taxabe receipt for the year is ower than the effective rate of corporation tax in the UK of 26.5% (2010: 28%) appied to the Group s oss on ordinary activities before tax. The tax differences are expained beow: Loss on ordinary activities before tax (1,524) (1,513) Loss on ordinary actiitis mutipied by the standard rate in the UK 26.5% ( 2010: 28%) (404) (424) Effects of: Expenses not deductibe for tax purposes Difference between depreciation charges and capita aowance caims Losses carried forward Tax rate on difference on receivabe research and deveopment tax credit (83) (43) Higher rates of overseas osses (90) (89) Adjustments in respect of prior years (1) 5 (103) (50) The standard rate of corporation tax in the UK changed from 28% to 26% with effect from 1 Apri Accordingy, the company s profits for this accounting period are taxed at an effective rate of 26.5% and wi be taxed at 26% in the future. Deferred tax At 31 December 2011, the Group had an unrecognised potentia deferred tax asset of 12,343,000 (2010: 12,005,000) representing accumuated trading osses carried forward which are avaiabe against future profits, depreciation in excess of capita aowances of 54,000 (2010: 24,000) and share option charges of 371,000 (2010: 404,000). Finance (No. 2) Act 2010 was substantivey enacted on 21 Juy 2010 and incuded egisation to reduce the main rate of corporation tax from 28% to 27%. A further reduction to 26% with effect from 1 Apri 2011 was enacted via a resoution passed by Pariament on 29 March On 5 Juy 2011, Finance Act 2011 was substantivey enacted, reducing the main rate of corporation tax to 25% with effect from 1 Apri Cosing deferred tax baances have, therefore, been vaued at 25% (2010: 27%) as this is the tax rate that wi appy on reversa. The June 2010 and March 2011, Budget Statements aso incuded proposas for further reductions of the main rate of corporation tax by 1% per annum to 23% on 1 Apri These changes had not been substantivey enacted at the baance sheet date and, therefore, the effects of these are not incuded in these financia statements. Loss reief is avaiabe indefinitey.

43 Report and Accounts Notes to the Financia Statements continued 9 Basic and diuted oss per share The oss per share cacuation is based on the oss of 1,421,000 and weighted average number of shares in issue of 136,698,498. For 2010 the oss per share cacuation was based upon the oss of 1,468,000 and weighted average number of shares in issue of 129,563,192. Whist the company is oss-making the diuted oss per share and the oss per share are the same. 10 Property, pant and equipment Machines Pant and Fixtures oaned to equipment and fittings customers Tota Cost At 1 January ,155 Exchange Additions Disposas (45) (45) At 31 December ,262 Exchange (4) (4) Additions Disposas At 31 December ,452 Accumuated Depreciation At 1 January Exchange Charge for the year Disposas (18) (18) At 31 December ,023 Exchange (11) (11) Charge for the year Disposas At 31 December ,143 Net book vaue At 1 January At 31 December At 31 December Depreciation expense of 107,000 (2010: 9,000) has been charged in cost of saes, 4,000 ( 2010: 4,000) in research and deveopment, ni (2010: 81,000) in saes and distribution and 20,000 (2010: 20,000) in administrative expenses. The net book vaue of property, pant and equipment incudes amounts of 7,000 (2010: 11,000) in respect of assets hed under finance eases. The depreciation charge for the year reating to assets hed under finance eases was 4,000 (2010: 4,000).

44 42 Report and Accounts 2011 Notes to the Financia Statements continued 11 Intangibe assets Deveopment Expenditure 000 Cost At 1 January Additions 213 At 31 December Additions 347 At 31 December Accumuated amortisation At 1 January Charge for the year 39 At 31 December Charge for the year 60 At 31 December Net book vaue At 1 January At 31 December At 31 December Amortisation of 60,000 (2010: 39,000) has been incuded in research and deveopment in the Consoidated Statement of Comprehensive Income. Amortisation is charged on a straight-ine basis over five years. 12 Subsidiary undertakings Detais of the Group s principa trading subsidiaries are set out beow. In a cases the direct hoding is 100% of the ordinary shares: Detex Medica Limited, incorporated and operating in the United Kingdom (UK), manufactures and markets medica devices. Detex Medica (Chichester) Limited, incorporated in the United Kingdom UK, provided empoyee services, unti 1 Apri 2010, now considered to be dormant. Detex Medica SC Inc, incorporated and operating in the United States of America, markets and ses medica devices in the USA which are manufactured by the Group in the UK. Detex Medica, Espana, incorporated and operating in Spain, markets and ses medica devices in Spain which are manufactured by the Group in the UK. Detex Medica, GmbH, incorporated and operating in Germany, markets medica devices in Germany which are manufactured by the Group in the UK. Detex Medica GmbH is itsef a 100% owned subsidiary of Detex Medica Limited.

45 Report and Accounts Notes to the Financia Statements continued 13 Inventories Raw materias and consumabes Work in progress Finished goods There is no materia difference between the book vaue and the repacement cost of the inventories shown. Based on inventory hodings and saes history, no specific or genera provisions for obsoete or sow-moving inventory (2010: ni) are considered necessary. 14 Trade and other receivabes Amounts faing due within one year: Trade receivabes 2,143 1,931 Less: provision for impairment of trade receivabes (297) (241) 1,846 1,690 Other receivabes 1 Prepayments and accrued income ,818 1,996 Amounts faing due after more than one year: Trade receivabes 8 4 Prepayments and accrued income ,826 2,324 A non-current receivabes are due within two to five years (2010: two to five years) from the Consoidated Baance Sheet date. Incuded within current prepayments and accrued income is 324,000 which represents cinica tria costs arising from barter saes (2010: 324,000 in non-current prepayments and accrued income). The amount is fuy expected to be recovered through the successfu competion of the reated trias. Trade receivabes that are ess than two months past due are not considered impaired. As at 31 December 2011, trade receivabes of 143,000 (2010: 108,000) were more than two months past due but not impaired. These reated to a number of independent customers for whom there is no recent history of defaut. The ageing anaysis of these trade receivabes is as foows: Up to two months 47 3 Two to six months More than six months At 31 December

46 44 Report and Accounts 2011 Notes to the Financia Statements continued 14 Trade and other receivabes continued As of 31 December 2011, specific trade receviabes of 297,000 (2010: 241,000) were impaired and provided for. The ageing of these receivabes was as foows: Over six months Incuded in the 297,000 provision above is approximatey 200,000 provided against receivabes from the Midde East. The carrying amounts of the Group s trade receviabes are denominated in the foowing currencies: Pounds Euros US doars At 31 December 1,854 1,694 Movements on the Group provision for impairment of trade receivabes are as foows: At 1 January Provision for receivabes impairment Receivabes written off during the year as uncoectibe (97) (5) At 31 December The creation and reease of provision for impaired receivabes have been incuded in saes and distribution costs in the Consoidated Statement of Comprehensive Income. Amounts charged to the aowance account are generay written off, when there is no expectation of recovering additiona cash. The other casses within trade and other receivabes do not contain impaired assets. The directors consider that the carrying amounts of trade and other receivabes approximate their fair vaue. The maximum exposure to credit risk at the reporting date is the carrying vaue of each cass or receivabe mentioned above. The Group does not hod any coatera as security. 15 Cash and cash equivaents Cash and cash equivaents comprise soey of cash in hand hed by the Group.

47 Report and Accounts Notes to the Financia Statements continued 16 Borrowings Current borrowings Invoice discounting faciity Other oans Finance ease Non-current borrowings Other oans 1,359 1,335 2,102 2,024 Invoice discounting faciity The amount shown represents the cash drawn down under an invoice discounting faciity; 1,000 remained undrawn (2010: Ni). The amount outstanding under this faciity is secured by way of a fixed charge over the Group s UK and a proportion of the internationa trade debtors. Amounts drawn down under the faciity are repayabe from the end of the month of invoice. This is an ongoing faciity and is separated into three accounts being Stering, US$ and Euro currencies. The faciity is subject to six months notice on either side and is not subject to annua review. Other oans 1,001,000 of the amount shown reates to Loan Notes, of which 981,000 are repayabe in fu on 27 February 2014 being five years from the date of issue athough they may be repaid in whoe or in part at the Company s discretion in certain circmstances. If such repayment is made the Company wi issue the Loan Notes hoder with warrants over 8 miion 1p ordinary shares each at a price of 12.5p. The Loan Notes are convertibe into 8 miion 1p ordinary shares in the Company ( Ordinary Shares ) at the effective price of 12.5p, being a premium of 26.6% over the share price at cose of business on 26 February The Company can aso enforce conversion if the ordinary share price is equa to or exceeds 37.5p for any period of 90 consecutive days. The Loan Notes are unsecured and interest is payabe at 10.5% per annum for the first two years and at 5.5% above LIBOR thereafter. This oan note represents a compound financia instrument under the discosure requirements of IAS 32 Financia Instruments Presentation. The directors have assessed the portion which woud be cassified as equity, rather than debt and have concuded that the amount is not materia to cause the instrument to be discosed seperatey between its equity and debt components. Incuded within the 1,001,000 is an amount of 16,000 reating to capitaised transaction costs in setting up the oan note. This is being amortised over the ife of the oan. The remaining 378,000 of the amount shown reates to a US doar oan made in the US to the Group s US subsidiary. It is repayabe on 31 May 2013 and bears interest cacuated on the simpe method at 4% per annum. The interest is repayabe on the maturity date. The oan is not secured on the assets of the Group. The directors consider the carrying vaue of the fixed rate borrowings approximate to market rate and the foating rate borrowings are at market rate and therefore these borrowings approximate to their fair vaue. Borrowings in foreign currencies The carrying amounts of the Group s borrowings are denominated in the foowing currencies: Pounds 1,453 1,346 US doars Euros ,102 2,024

48 46 Report and Accounts 2011 Notes to the Financia Statements continued 16 Borrowings continued The average effective interest rates paid, after taking into account the impact of hedging, were as foows: % % Invoice discouting faciity Stering Euro Doar Other oans US Doar oan Loan note Finance eases n/a Borrowings are hed under both fixed and foating rates as foows: Fixed rates Finance eases and hire purchase agreements 4 Other oans 378 1,361 Foating rates Invoice discounting faciity Other oans 1,001 2,102 2, Obigations under finance eases Within one year 5 In the second to fifth years incusive 5 Less future finance charges (1) Present vaue of ease obigations 4 Less: amounts due for settement within 12 months (shown under current iabiities) (4) Amount due for settement after 12 months, but ess than five years Lease obigations are denominated in UK stering. 18 Trade and other payabes Current iabiities Trade payabes Tax and socia security payabe Other payabes Accruas and deferred income ,500 1,226 Trade payabes are non-interest bearing and on average have 30 to 60 day settement terms. The directors consider that the carrying amount of trade payabes approximates to their fair vaue.

49 Report and Accounts Notes to the Financia Statements continued 19 Provision for other iabiities At 1 January Charged to the Consoidated Statement of Comprehensive Income Provision utiised (35) (29) At 31 December The above provision incudes nationa insurance that may become payabe on share option gains on share share options that are exercisabe over the next one to ten years and is therefore incuded as a non-current iabiity. 20 Pension obigations The Group operates a defined contribution pension scheme for its UK empoyees. The assets of the scheme are hed separatey from those of the Group in independenty administered funds. The Group aso maintains a defined contribution Saary Reduction Simpified Empoyee Pension Pan ( SARSEP ) for US empoyees. Under the terms of the SARSEP, the Group may make discretionary contributions on behaf of the empoyees. The pension cost represents the contributions paid and payabe by the Group to these schemes and in aggregate amounted to 58,000 (2010: 58,000). 21 Share capita ,568,546,210 authorised ordinary shares of 1 pence each 65,685 65, ,099,365 Caed up, aotted and fuy paid (2010: 132,025,866) 1,421 1,320 The movement in the Company s issued share capita during the year is as foows: During the year, the Company issued 3,731,027 1p ordinary shares pursuant to the exercise of options. The Company paced 3,684,211 1p ordinary shares with institutiona and other investors. In addition, a tota of 176,509 1p ordinary shares at an average price of 18.62p were issued to certain of the Company s advisers who eected to take shares in ieu of cash payment for their services to the Company. Aso 1,785,000 1p ordinary shares at an average price of 17.89p per share were issued to certain of the Company s distributors as a resut of option exercises. A further 696,752 1p ordinary shares at an average price of 10.69p per share were issued to certain of the Company s directors who eected to take shares in ieu of cash payment for their services to the Company. Empoyee options Current and former empoyees of the Group hod options to subscribe for shares in the Company. The foowing tabe sets out movements in share options during the year:

50 48 Report and Accounts 2011 Notes to the Financia Statements continued 21 Caed up share capita continued Empoyee share options Executive EMI Summary Scheme Scheme Tota No. No. No. At 1 January ,602,300 4,435,477 13,037,777 Additions 3,095,000 1,934,753 5,029,753 Exercised (2,450,000) (1,495,796) (3,945,796) Lapsed (105,000) (105,000) Expired (221,000) (221,000) At 31 December ,921,300 4,874,434 13,795,734 A options reate to one 1p ordinary share. Further detais of the above pans are given in note 23. As at 31 December 2011 the foowing options to subscribe for ordinary shares of 1p each were outstanding under empoyee share schemes: Exercise Exercise Exercise Number of price period period options from to Current empoyees 4, Mar Mar , Nov Nov , Oct Oct , Mar Oct , Oct Oct , Mar Oct , Mar Mar , May May , Mar Jun-17 1,085, Jun Jun-17 1,214, Ju Jun , Mar Jun-18 1,249, Jun Jun , Jun Jun , Mar Mar-19 43, Dec Dec-19 31, Mar Mar-20 34, Jun Jun , Oct Oct-20 20, Dec Dec-20 16, Mar Mar-21 23, Apr Apr , Sep Sep-21 46, Sep Sep-21 2,845, Sep Sep-21 13,795,734 Notes: (a) Options exercisabe subject to criterion set by the Board that the shares of shoud have outperformed the FTSE Medica Equipment Suppies Sector between the date of grant and the date of exercise of the option. (b) Enterprise Management Incentive Scheme.

51 Report and Accounts Notes to the Financia Statements continued 21 Caed up share capita continued Other options At 31 December Exercise Exercise Exercise 2011 price period period No. from to Company contractor (1) 20, Mar Mar-12 Company distributors (2) 60, Jan Jan-12 Company contractors (2) 252, Mar Feb-18 Company contractor (1) 250, Nov Oct-17 Company contractor (2) 100, Apr Apr ,000 (1) Options are exercisabe in whoe on any one occasion during the exercise period. (2) Options are exercisabe in part or in whoe at any time due during the exercise period. A options reate to one 1p ordinary share. 22 Share-based payments The Group has three share option schemes; the 2000 Approved Share Option Scheme, the 2011 Approved Share Option Scheme and the Enterprise Management Incentive pan ( EMI ) Options granted under the Approved Share Option Schemes are vaued at the market price on the date of grant. Options are conditiona on the empoyee competing three years service (the vesting period). The options are exercisabe starting three years from the grant date, subject to the Group achieving certain performance conditions; the options have a contractua term of ten years. The Group has no ega or constructive obigation to repurchase or sette the options in cash. Options granted under the EMI scheme are granted at 1p per option. Options are granted in ieu of cash for bonuses or saary obigations reating to past achievement; therefore there is no vesting period. The options have a contractua term of ten years. The Group has no ega or constructive obigation to repurchase or sette the options in cash. Detais of share options outstanding during the year for the Approved Share Options Schemes are as foows: 2011 Weighted 2010 Weighted Number of average Number of average share exercise share exercise options price options price No. (in ) No. (in ) Outstanding at beginning of the period 8,602, ,066, Granted during the period 3,095, Lapsed during the period (105,000) 0.21 (421,000) 0.20 Exercised during the period (2,450,000) 0.21 Expired during the period (221,000) 0.47 (43,043) 2.70 Outstanding at the end of the period 8,921, ,602, Exercisabe at end of period 4,827, ,102, The options outstanding at 31 December 2011 had a weighted average exercise price of 19.5p (2010: 21.3p), and a weighted average remaining contractua ife of 78 months (2010: 57 months). On 27 September 2011, 3,095,000 options were granted with an estimated fair vaue of 7.7p per share and 237,077 in aggregate.

52 50 Report and Accounts 2011 Notes to the Financia Statements continued 22 Share-based payments continued The inputs into the Back-Schoes mode are as foows: September 2011 Fair vaue at measurement date 7.66p Share price 17.25p Exercise price 17.25p Expected voatiity 59.10% Expected option ife (expressed as weighted average ife used in modeing) 3.74 years Risk-free interest rate 1.13% Detais of share options outstanding during the year for the EMI Scheme are as foows: 2011 Weighted 2010 Weighted Number of average Number of average share exercise share exercise options price options price No. (in ) No. (in ) Outstanding at beginning of the period 4,435, ,062, Granted during the period 1,934, ,472, Lapsed during the period (61, Exercised during the period (1,495,796) 0.01 (4,039,039) 0.01 Outstanding at the end of the period 4,874, ,435, Exercisabe at end of period 4,874, ,435, The options outstanding at 31 December 2011 had a weighted average exercise price of 1p (2010: 1p), and a weighted average remaining contractua ife of 83 months (2010: 88 months). On 15 March 2011, 402,265 options were granted with an estimated fair vaue of 17.50p per share and 70,432 in aggregate. On 15 Apri 2011, 32,559 options were granted with an estimated fair vaue of 27.50p per share and 8,957 in aggregate. On 27 September 2011, 1,421,753 options were granted with an estimated fair vaue of 16.3p per share and 231,113 in aggregate. Aso on 27 September 2011, 78,177 options were granted with an estimated fair vaue of 16.3p per share and 12,708 in aggregate. Enterprise Management Incentive Scheme The inputs into the Back-Schoes mode are as foows: September Apri March Fair vaue at measurement date 16.30p 27.50p 17.50p Share price 17.25p 28.50p 18.50p Exercise price 1.0p 1.0p 1.0p Expected voatiity 59.60% 55.00% 54.80% Expected option ife 1 year 1 year 1 year (expressed as weighted average ife used in modeing) Risk-free interest rate 0.55% 0.88% 0.88%

53 Report and Accounts Notes to the Financia Statements continued 22 Share-based payments continued December October June March Fair vaue at measurement date 18.50p 16.00p 10.75p 12.00p Share price 19.50p 17.00p 11.75p 13.00p Exercise price 1.0p 1.0p 1.0p 1.0p Expected voatiity 54.80% 64.40% 51.00% 56.50% Expected option ife (expressed as weighted average ife used in modeing) 1 year 1 year 1 year 1 year Risk-free interest rate 0.88% 0.68% 0.71% 1.01% Where appropriate, for both schemes, the expected voatiity has been based on historica voatiity over a period of the same ength as the expected option ife and ending on the grant date. Where the historic period is shorter than the expected option ife, voatiity has been measured over the maximum amount of time historic information can be obtained. The fair vaue of the equity-setted share-based payment is recharged by the Group company to the subsidiary operating company at fair vaue. The expense is therefore recognised in the subsidiary operating company, with the equity reserve being recognised in the Group company. 23 Share capita and other reserves Capita Share Share redemption Other Transation Retained capita premium reserve reserve reserve deficit At 1 January ,269 19,974 17,476 2, (39,330) Share issued during the year 51 Premium on shares issued during the year 142 Loss for the financia year (1,468) Credit in respect of service cost setted by award of options 491 Exchange movements taken to reserves (6) At 31 December ,320 20,116 17,476 2,890 5 (40,798) Share issued during the year 101 Premium on shares issued during the year 1,838 Issue expenses (53) Loss for the financia year (1,421) Credit in respect of service cost setted by award of options 396 Exchange movements taken to reserves (14) At 31 December ,421 21,901 17,476 3,286 (9) (42,219) The Capita redemption reserve represents the nomina vaue of shares repurchased and then canceed during the year ended 31 December The Other reserve represents the reserve for cumuative share-based payment charges since 1 November The transation reserve comprises a foreign exchange differences arising since 1 January 2006 from the transation of the Group s net investments in foreign subsidiaries into stering. The cumuative goodwi reating to acquisitions made prior to 1998, which has been eiminated against reserves, is 6,400,000 (2010: 6,400,000).

54 52 Report and Accounts 2011 Notes to the Financia Statements continued 24 Notes to the Consoidated Statement of Cash Fows Operating oss (1,402) (1,353) Adjustments for: Depreciation of property, pant and equipment Amortisation of intangibe assets Exchange oss/(gain) on property, pant and equipment (5) (Gain)/oss on disposa of property, pant and equipment (7) 27 Share-based payments Operating cash fows before movement in working capita (822) (687) Increase in inventories (339) (81) Increase in trade and other receivabes (509) (6) Increase/(decrease) in trade and other payabes 274 (38) Increase in provisions Net cash used in operations (1,337) (791) Operating cash fows before movement in working capita Aternative performance measures Adjusted operating cash fow before movement in working capita Operating cash fow before movement in working capita (822) (687) Equity setted costs Net increase in provisions, incuding receivabes Net non-cash cinica tria (credits)/charges (387) 70 Sundry non-cash charges 8 34 Adjusted operating cash fow before movement in working capita (732) (300) These suppementary discosures do not form part of the note to the Consoidated Statement of Cash Fows and these tabes are not incuded in the notes to the financia statements. 25 Commitments Operating ease commitments The Group eases and and buidings and various pant and machinery under non-canceabe operating ease agreements. The ease terms are between five and seven years and the majority of ease agreements are renewabe at the end of the ease period at the market rate. The ease expenditure charged to the Consoidated Statement of Comprehensive Income during the year is discosed in note 4. The future aggregate minimum ease payments under non-canceabe operating eases are as foows: No ater than one year Later than one year and no ater than five years

55 Report and Accounts Notes to the Financia Statements continued 26 Financia Instruments The Group s financia instruments comprise some cash and various items, such as trade receivabes and trade payabes that arise directy from its operations. It is, and has been throughout the period under review, the Group s poicy that no trading in financia instruments sha be undertaken. The Board reviews and agrees poicies for managing iquidity, interest rate, exchange rate risks, credit risk and capita risk. The poicies have remained unchanged throughout the year and are summarised beow: Liquidity risk The Group is principay managed to ensure that sufficient cash reserves and credit faciities are avaiabe to meet iquidity requirements. The Group has avaiabe to it an invoice discounting faciity with the Group s bankers to suppement working capita needs. From time to time, additiona funding is raised to aow the Group to invest in its strategic projects to deveop the business in its chosen markets. Management monitors roing forecasts of the Group s iquidity reserves which comprises undrawn invoice discounting faciities and cash and cash equivaents on the basis of expected cash fows. Currency risk The Group has overseas subsidiaries in the USA, Spain and Germany and as a resut the Group s stering baance sheet can be affected by movements in the US doar and euro exchange rates. The Group aso has transactiona currency exposures. Such exposures arise from saes and purchases by operating units in currencies other than the unit s functiona currency. In genera a overseas operating units trade and hod assets and iabiities in their functiona currency. The Group does not engage in any hedging in respect of currency risks. Credit risk The Group is exposed to credit reated osses in the event of non-performance by counterparties in connection with financia instruments. The Group takes actions to mitigate this exposure by ensuring adequate background on credit risk is known about counterparties prior to contracting with them and through seection of counterparties with suitabe credit ratings and monitors its exposure to credit risk on an ongoing basis. The Group is aso exposed to credit reated osses and territory specific credit risk in the event of non-performance by counterparties in connection with financia instruments. The maximum credit risk exposure at the baance sheet date is represented by the carrying vaue of financia assets and there are no significant concentrations of credit risk. For banks and financia institutions ony independenty reated parties with a minimum rating of A are accepted. As at the date of signing the financia statements a cash and cash equivaents are hed with institutions with an A rating as per Standard & Poors. Interest Rate Risk The Group has both interest-bearing assets and interest-bearing iabiities. The Group s poicy is to seek the highest possibe return on interest-bearing assets without bearing significant credit risk, and to minimise the rate payabe on interest-bearing iabiities. The Group paces its cash baances on deposit at foating rates of interest. Surpus cash baances are paced on shortterm deposit (ess than three months). No interest rate swaps are used. Interest rate risk comprises both the interest rate price risk that resuts from borrowing at fixed rates of interest and aso the interest cash fow risk that resuts from borrowing at variabe rates. At this time, the majority of the Group s borrowings attract foating rates of interest and therefore the Group s principa interest rate risk is a cash fow risk.

56 54 Report and Accounts 2011 Notes to the Financia Statements continued 26 Financia Instruments continued Capita risk The Group s objectives when managing capita are to safeguard the Group s abiity to continue as a going concern in order to provide future returns to sharehoders and benefits for other stakehoders and to maintain optima capita structure. Ordinary shares are cassified as equity. Incrementa costs directy attributabe to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. The Board s poicy is to maintain a strong capita base so as to maintain investor, creditor and market confidence and to sustain future deveopment of the business. The Board of directors monitors the demographic spread of sharehoders. The Board encourages empoyees to hod shares in the Company. This has been carried out through the Company s various executive share option pans. Fu detais of these schemes are given in note 23. The Board seeks to maintain a baance between the higher returns that might be possibe with higher eves of borrowings and the advantages and security afforded by a sound capita position. There were no changes to the Group s approach to capita management during the year. Neither the Company nor any of its subsidiaries are subject to externay imposed capita requirements. Liabiities by maturity Financia Instruments principay comprise the Group s borrowings under an invoice discounting faciity with the Roya Bank of Scotand, net obigations under finance eases and ong-term oans. In February 2009, the Group raised 1,001,000 before expenses by the issue of a convertibe oan notes to Amati Goba Investors, a venture capita trust managed by Amati Goba Partners LLP. The Loan Notes are repayabe in fu on 27 February 2014 being five years from the date of issue athough they may be repaid earier at the Company s discretion in certain circumstances. If such repayment is made the Company wi issue the Loan Notes hoder with warrants over 8 miion 1p ordinary shares at a price of 12.5p per share. The Loan Notes are convertibe into 8 miion ordinary shares in the Company ( Ordinary Shares ) at the effective price of 12.5p, being a premium of 26.6% over the share price at cose of business on 26 February The Company can aso enforce conversion if the ordinary share price is equa to or exceeds 37.5p for any period of 90 consecutive days. The Loan Notes are unsecured and interest is payabe at 10.5% per annum for the first two years and at 7.5% above LIBOR thereafter. Interest on the invoice discounting faciity is payabe at foating rate of 2.5% to 3.25% above LIBOR and on the ong-term US subsidiary oan at a rate of 4% per annum. The tabe beow summarises the Group s financia iabiities into the reevant maturity groupings based upon the remaining period at the baance sheet to the contractua maturity date. The amounts discosed are the undiscounted cash fows. Year ended 31 December 2011 Less than Between 1 Between 2 Over 1 year and 2 years and 5 years 5 years Borrowings Invoice discounting faciity 723 Other oans Trade and other payabes 1,500 2,

57 Report and Accounts Notes to the Financia Statements continued 26 Financia Instruments continued Year ended 31 December 2010 Less than Between 1 Between 2 Over 1 year and 2 years and 5 years 5 years Borrowings Invoice discounting faciity 659 Other oans 26 1,335 Finance ease iabiities 4 Trade and other payabes 1,238 1,927 1,335 Fair vaue of financia assets and iabiites There is a cose approximation between the book vaues and the fair vaues of the Group s financia assets and iabiities. Fair vaue is the amount at which a financia instrument coud be exchanged in an arm s ength transaction between wiing parties, other than a forced or iquidation sae, and excudes accrued interest. Year ended 31 December 2011 Fair vaue Loans through Tota and profit Amortised carrying receivabes and oss cost amount Financia assets Trade and other receivabes 1,846 1,846 Cash and cash equivaents ,598 2,598 Financia iabiities Trade payabes 1,397 1,397 Invoice discounting faciity Other oans 1,379 1,379 Finance ease iabiities 3,499 3,499 Year ended 31 December 2010 Fair vaue Loans through Tota and profit Amortised carrying receivabes and oss cost amount Financia assets Trade and other receivabes 1,690 1,690 Cash and cash equivaents ,389 2,389 Financia iabiities Trade payabes Invoice discounting faciity Other oans 1,361 1,361 Finance ease iabiities 4 4 3,021 3,021

58 56 Report and Accounts 2011 Notes to the Financia Statements continued 26 Financia Instruments continued Financia Instruments discosure Financia assets and iabiities are measured at fair vaue according to the foowing three eves of fair vaue hierarchy. The eves of the fair vaue hierarchy and its appication to our financia assets and iabiities are described beow: Leve 1: quoted prices in active markets for identica assets or iabiities; Leve 2: inputs other than quoted prices that are observabe for the asset or iabiity, either directy (i.e. as prices) or indirecty (i.e. derived from prices); and Leve 3: inputs for the asset or iabiity that are not based on observabe market data. A financia assets and iabiities are considered to be Leve 3. The directors beieve that there is no materia difference between book vaue and fair vaue as at 31 December Sensitivities The foowing tabe detais the Group s sensitivities to changes in stering against the respective foreign currencies. The sensitivities represent management s assessment of the effect on monetary assets of the possibe changes in foreign exchange rates. The sensitivity anaysis of the Group s exposure to foreign currency risk at the year end has been determined based upon the assumpion that the increase in Euro and US doar exchange rates is effective throughout the financia year and a other variabes remain constant. Sensitivity Profit Equity Profit Equity Euros 10% (85) (85) (78) (78) US doar 10% The foowing tabe detais the Group s sensitivity to an increase of 1% in interest rates throughout the year, with a other variabes remaining constant. Profit Equity Profit Equity Stering (10) (10) 2 2 Euros (1) (1) (2) (2) US doar (1) (1) (1) (1) Transactions within the Group are carried out on an arm s ength basis and not discosed as a such transactions have been eiminated on consoidation. Directors interests in the share capita of the Company are discosed on page 17.

59 Report and Accounts Notes to the Financia Statements continued 27 Reated party transactions The foowing transactions were carried out with reated parties: Key management compensation Key management personne comprise members of the management team as defined by IAS 24 Reated Party Discosures Aggregate emouments Sums paid to third parties for directors services Contributions to key management s persona pension schemes Equity issue Dr Edwin Snape, a director of the Company, is principa of Nexus Medica Partners II, L.P In Apri 2008, Nexus Medica Partners II, L.P. oaned $518,518 to the Company s US subsidiary by way of an unsecured oan note repayabe after five years. Interest on the oan note is to be charged at 4% per annum with a interest roing up for settement on redemption. In addition to the above, there is an amount of 236,000 (2010: 269,000) charged to the Consoidated Statement of Comprehensive Income with respect to IFRS 2 Share-based payments for key management. Further detais of directors interest in the Company are given in the Directors Report on page 17.

60 58 Report and Accounts 2011 Independent Auditors Report to the members of We have audited the parent company financia statements of for the year ended 31 December 2011 which comprise the Company Baance Sheet, the Accounting Poicies and the reated notes. The financia reporting framework that has been appied in their preparation is appicabe aw and United Kingdom Accounting Standards (United Kingdom Generay Accepted Accounting Practice). Respective responsibiities of directors and auditors As expained more fuy in the Directors Responsibiities Statement set out on pages 20 and 21, the directors are responsibe for the preparation of the parent company financia statements and for being satisfied that they give a true and fair view. Our responsibiity is to audit and express an opinion on the parent company financia statements in accordance with appicabe aw and Internationa Standards on Auditing (UK and Ireand). Those standards require us to compy with the Auditing Practices Board s Ethica Standards for Auditors. This report, incuding the opinions, has been prepared for and ony for the company s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibiity for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressy agreed by our prior consent in writing. Scope of the audit of the financia statements An audit invoves obtaining evidence about the amounts and discosures in the financia statements sufficient to give reasonabe assurance that the financia statements are free from materia misstatement, whether caused by fraud or error. This incudes an assessment of: whether the accounting poicies are appropriate to the parent company s circumstances and have been consistenty appied and adequatey discosed; the reasonabeness of significant accounting estimates made by the directors; and the overa presentation of the financia statements. In addition, we read a the financia and non-financia information in the annua report to identify materia inconsistencies with the audited financia statements. If we become aware of any apparent materia misstatements or inconsistencies we consider the impications for our report. Opinion on financia statements In our opinion the parent company financia statements: give a true and fair view of the state of the company s affairs as at 31 December 2011; have been propery prepared in accordance with United Kingdom Generay Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors Report for the financia year for which the parent company financia statements are prepared is consistent with the parent company financia statements. Matters on which we are required to report by exception We have nothing to report in respect of the foowing matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financia statements are not in agreement with the accounting records and returns; or certain discosures of directors remuneration specified by aw are not made; or we have not received a the information and expanations we require for our audit. Other matter We have reported separatey on the group financia statements of for the year ended 31 December Mies Saunders (Senior Statutory Auditor) for and on behaf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Reading 7 March 2012

61 Report and Accounts Company Baance Sheet at 31 December 2011 Note Fixed assets Investments 4 37,001 35,202 Current assets Debtors: Amounts faing due within one year Cash at bank and in hand Creditors: Amounts faing due within one year 6 (134) (103) Net current assets Tota assets ess current iabiities 37,437 35,570 Creditors: Amounts faing due after more than one year 9 (980) (972) Net assets 36,457 34,598 Capita and reserves Caed up share capita 7 1,421 1,320 Share premium account 10 21,901 20,116 Capita redemption reserve 10 17,476 17,476 Other reserves 10 3,286 2,890 Profit and oss account 10 (7,627) (7,204) Tota sharehoders funds 11 36,457 34,598 The notes on pages 60 to 64 form an integra part of these financia statements. These financia statements were approved by the Board of Directors on 7 March 2012 and were signed on its behaf by: N J Keen Chairman ( ) P J Mitche Finance Director ( )

62 60 Report and Accounts 2011 Notes to the Financia Statements 1 Principa accounting poicies These financia statements have been prepared on the going concern basis under the historica cost convention and in accordance with the Companies Act 2006, and the accounting poicies set out beow, a of which have been appied consistenty throughout the year and in accordance with appicabe United Kingdom accounting standards. Investments Investments are stated at cost ess any provisions for diminution in vaue. At each baance sheet date the Company reviews the carrying amount of the investments to determine whether there is any indication that those assets have suffered an impairment oss. If any such indication exists, the recoverabe amount of the asset is estimated to determine the extent of any impairment oss. The recoverabe amount is the higher of the investments vaue in use and its fair vaue ess costs to se. Vaue in use is cacuated using cash fow projections for the investments discounted at the Company s cost of capita. If the recoverabe amount of the investment is estimated to be ess than its carrying amount, the carrying amount of the investment is reduced to its recoverabe amount. An impairment oss is recognised as a charge to the profit and oss account, uness the reevant investment is carried at a revaued amount, in which case the impairment oss is treated as a revauation decrease. Deferred taxation Deferred tax is recognised in respect of a timing differences that have originated but not reversed at the baance sheet date. Where transactions or events that resut in an obigation to pay more tax in the future or a right to pay ess tax in the future have occurred at the baance sheet date. A net deferred tax asset is recognised as recoverabe and therefore recognised ony when, on the basis of a avaiabe evidence, it can be regarded as more ikey than not that there wi be suitabe taxabe profits against which to recover carried forward tax osses and from which the future reversa of underying timing differences can be deducted. Deferred tax is measured at the average tax rates that are expected to appy in the periods in which the timing differences are expected to reverse, based on tax rates and aws that have been enacted or substantivey enacted by the baance sheet date. Deferred tax is measured on a non-discounted basis. Foreign currency transation Foreign currency monetary assets and iabiities are transated into stering at the rate of exchange ruing at the baance sheet date. Transactions in overseas currencies are transated at the rate of exchange ruing on the date of the transaction or at a contracted rate if appicabe. Any gains or osses arising during the year have been deat with through the profit and oss account. Share-based payments The Company awards directors, empoyees and certain of the Group s distributors and advisers equity-setted sharebased payments, from time to time, on a discretionary basis. In accordance with FRS 20 Share-based payments, equitysetted share-based payments are measured at fair vaue at the time of grant. Fair vaue is measured by use of a Back-Schoes mode. The fair vaue determined at the grant date of the equity-setted share-based payments is expensed on a straight-ine basis over the vesting period, based on the Company s estimate of the number of shares that wi eventuay vest. The options are subject to vesting conditions of up to six years, and their fair vaue is recognised as an expense with a corresponding increase in other reserves equity over the vesting period. The proceeds received net of any directy attributabe transaction costs are credited to share capita (nomina vaue) and share premium when the options are exercised. Provision for Nationa Insurance payabe on such gains is recognised in accordance with UITF 25. The fair vaue of the equity-setted share-based payment is recharged by the Company to the subsidiary operating company at fair vaue. The expense is therefore recognised in the subsidiary operating company, with the equity reserve being recognised in the Group company. Reated party transactions and cash fow statement The Company is the utimate parent undertaking of the Detex Medica Group and is therefore incuded in the consoidated financia statements of that Group, which are on page 26 of the consoidated financia statements. The Company has taken advantage of the exemptions under FRS 8 Reated Party Discosures reating to the discosure of transactions with other Group companies.

63 Report and Accounts Notes to the Financia Statements continued 1 Principa accounting poicies continued Cash and cash equivaents Cash and cash equivaents incudes cash in hand and deposits hed with banks with a maturity of ess then three months. Share capita Ordinary shares are cassified as equity. Incrementa costs directy attributabe to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Terms of oans to subsidiaries The Company uses its cash to fund the operations of its subsidiaries unti such a time that the subsidiaries are in a position to return the monies to Group. These oans are interest free and have no fixed repayment date. Compound financia instruments Compound financia instruments issued by the Group comprise convertibe notes that can be converted to share capita at the option of the hoder, or subject to certain conditions at the option of the Group and the number of shares to be issued does not vary with changes in their fair vaue. The iabiity component of a compound financia instrument is recognised initiay at the fair vaue of a simiar iabiity that does not have an equity conversion option. The equity component is recognised initiay as the difference between the fair vaue of the compound financia instrument as a whoe and the fair vaue of the iabiity component. Any directy attributabe transaction costs are aocated to the iabiity and equity components in proportion to their initia carrying amounts. Subsequent to initia recognition, the iabiity component of a compound financia instrument is measured at amortised cost using the effective interest method. The equity component of a compound financia instrument is not re-measured subsequent to initia recognition except on conversion or expiry. Borrowings are cassified as current iabiities uness the Group has an unconditiona right to defer settement of the iabiity for at east 12 months after the end of the reporting period. 2 Loss for the year As permitted by Section 408 of the Companies Act 2006 the Company has eected not to present its own profit and oss account for the year. reported a oss for the financia year ended 31 December 2011 of 423,000 (2010: 421,000). 3 Directors emouments The remuneration of the Non-executive directors was as foows: Aggregate emouments 72,000 72,000 Sums paid to third parties for directors services 33,333 33, , ,333 There are Ni (2010: Ni) benefits accruing to directors under persona pension pans. Incuded in the above figure is an amount paid to the empoying company, Imperiaise Limited, of a Non-executive director for the services of that director of 33,333 (2010: 33,333). A Executive directors in office at the year end receive their emouments from Detex Medica Limited, a subsidiary undertaking of the Group. Except for financing activities, their services to the Company are incidenta to their services to the Group as a whoe. The average number of Non-executive diretors by function was as foows: No. No. Administration 4 4 The Company had no additiona empoyees other than the directors (2010: None).

64 62 Report and Accounts 2011 Notes to the Financia Statements continued 4 Investments Investments Loans Investments Loans in subsidiary to subsidiary in subsidiary to subsidiary undertakings undertakings Tota undertakings undertakings Tota At 1 January ,356 35, ,191 34,037 Additions 1,799 1,799 1,165 1,165 At 31 December ,155 37, ,356 35,202 The directors beieve that the carrying vaue of the investments is supported by their underying net assets. Loans to subsidiary undertakings in the amount of 36,155,000 reate to ong-term baances with Detex Medica Limited and Detex Medica Hodings, Inc. The directors consider that these baances are intended to be, for a practica purposes, permanent equity and do not expect them to be repayabe in the forseeabe future. These oans have therefore been treated as part of net investment in these subsidiaries, with exchange difference arising on the ong-term baance with Detex Medica Hodings, Inc. being deat with as adjustments to reserves. During the year additiona ong-term debtor baances have been recassified as ong-term investments as this foows the substance of the transactions. Detais of the Company s principa trading subsidiary undertakings are set out beow. In a cases the hoding is a direct hoding of 100% of the ordinary shares: Detex Medica Limited, incorporated and operating in the United Kingdom (UK), manufactures and markets medica devices. Detex Medica (Chichester) Limited, incorporated in the UK, provided empoyee services unti 1 Apri 2010, now considered to be dormant. Detex Medica SC, Inc. incorporated and operating in the United States of America, markets and ses medica devices in the USA which are manufactured by the Group in the UK. Detex Medica, Espana, incorporated and operating in Spain, markets and ses medica devices in Spain which are manufactured by the Group in the UK. Detex Medica, GmbH, incorporated and operating in Germany, markets and ses medica devices in Germany which are manufactured by the Group in the UK. Detex Meica GmbH is itsef a 100% owned subsidiary of Detex Medica Limited. 5 Debtors Amounts faing due within one year: Other debtors 5 6 Prepayments and accrued income Creditors: Amounts faing due within one year Other creditors Accruas and deferred income

65 Report and Accounts Notes to the Financia Statements continued 7 Caed up share capita See note 21 of the Consoidated Financia Statements on pages 47 to 49 for fu detais of the share capita and share schemes hed. 8 Share-based payments See note 22 of the Consoidated Financia Statements on pages 49 to 51 for fu detais of the Company s share-based payments. 9 Creditors: Amounts faing due after more than one year The amount of 980,000 (2010: 972,000) reates to Loan Notes that are repayabe in fu on 27 February 2014 being five years from the date of issue athough they may be repaid earier at the Company s discretion in certain circumstances. If such repayment is made the Company wi issue the Loan Notes hoder with warrants over 8 miion 1p ordinary shares at a price of 12.5p per share. The Loan Notes are convertibe into 8 miion 1p ordinary shares in the Company ( Ordinary Shares ) at the effective price of 12.5p, being a premium of 26.6% over the share price at cose of business on 26 February The Company can aso enforce conversion if the ordinary share price is equa to or exceeds 37.5p for any period of 90 consecutive days. The Loan Notes are unsecured and interest is payabe at 10.5% per annum for the first two years and at 7.5% above LIBOR thereafter. 10 Reserves Share Capita Profit Other premium redemption and oss reserves account reserve account At 1 January ,890 20,116 17,476 (7,204) Premium on shares issued during the year 1,785 Loss for the financia year (423) Credit in respect of service cost setted by award of share options 396 At 31 December ,286 21,901 17,476 (7,627) 11 Reconciiation of movements in sharehoders funds Opening sharehoders funds 34,598 34,335 Increase in share capita during the year Premium on shares issued during the year 1, Issue expenses (53) Loss for the financia year (423) (421) Credit in respect of service cost setted by award of share options ,457 34,598

66 64 Report and Accounts 2011 Notes to the Financia Statements continued 12 Utimate controing party There are no sharehoders with overa contro of the Company as at 31 December 2011 or 31 December Reated party transactions Exemption has been taken under FRS 8 from discosing reated party transaction between the Company and its subsidiary undertakings. Dr Edwin Snape, a director of the Company, is principa of Nexus Medica Partners II, L.P. In Apri 2008, Nexus Medica Partners II, L.P. oaned US$518,518 to the Company s US subsidiary by way of an unsecured oan note repayabe after five years. Interest on the oan note is to be charged at 4% per annum with a interest roing up for settement on redemption. The directors of had no other materia transaction with the Company during the year, other than as a resut of service agreements. Detais of the directors remuneration are discosed in the Directors Report in the Consoidated Financia Statements on pages 17 to 19.

67 When fuid management reay matters, there s ony one choice. Thames Barrier: The decision to cose the Barrier is based on a combination of factors, incuding the measurement of f uvia river fow entering the tida Thames. Hydroogica and meteoroogica data is fed into the contro room at reguar intervas and a mathematica matrix guides the cosing regime. The end decision to cose ies with the duty controer. We provide the precision technoogy. You provide the expertise. The infinite chaenge of controing fuid is universay recognised. Engineers continue to devise ever more inventive and unique fuid management soutions, designed to inform decision makers, minimise risk and protect against preventabe damage. However, technoogy aone cannot negate the benefits of insight and experience. During the intraoperative period, the effective management of intravascuar f uid is guided by the insight of the experienced anaesthetist, made easier by the avaiabiity of accurate and reiabe patient data. Oesophagea Dopper monitoring using the CardioQ-ODM is the ony therapy to directy measure bood f ow in the centra circuation. Minimay invasive, easy to set up and quick to focus, the device generates a ow-frequency utrasound signa, which is highy sensitive to changes in f ow and measures them immediatey. Pacing a singe-use probe in the oesophagus, the ODM technoogy precisey measures 10% changes in stroke voume, enabing cinicians to effectivey intervene eary during surgery, and contro the management of f uid. Randomised, controed trias using Dopper have demonstrated that eary f uid management intervention wi reduce post-operative compications, reduce intensive care admissions, and reduce the ength of hospita stay. And whist interventions requiring arteria access can ony be appied to a imited number of surgica procedures, the ODM technoogy can benefi t the wider surgica popuation.

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