UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-36402

LOMBARD MEDICAL, INC.
(Exact name of Registrant as specified in its charter)

Cayman Islands(Jurisdiction of incorporation or organization)

4 Trident Park

Didcot

Oxfordshire OX11 7HJ

United Kingdom

(Address of principal executive offices)

Kurt Lemvigh, Chief Executive Officer
Lombard Medical, Inc.
4 Trident Park

Didcot

Oxfordshire OX11 7HJ

United Kingdom

Telephone No +44 (0) 1235 750800

E-Mail: globalinfo@lombardmedical.com

Facsimile: +44 (0) 1235 750879
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
Ordinary shares, $0.01 par value per share	The Nasdaq Global Market

 Securities registered or to be registered pursuant to Section 12(g) of the Act: None

          Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

          Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 27,950,785 ordinary shares, par value $0.01 per share.

          Indicate by check mark if the registrant is a well-known seasoned issuer’s, as defined in Rule 405 of the Securities Act. Yes ☐    No x

          If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐    No x

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’‘‘accelerated filer,’’and ‘‘emerging growth company’’in Rule 12b–2 of the Exchange Act.:

Large accelerated filer  o	Non-accelerated filer            o
Accelerated filer            o	Emerging growth company x

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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards†provided pursuant to Section 13(a) of the Exchange Act. :

†The term ‘‘new or revised financial accounting standard’’refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.         

 Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP   ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board  x Other   ☐

          If “Other”has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  ☐    Item 18 ☐

          If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐   No x

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 TABLE OF CONTENTS

Description		Page Nos.
GENERAL INFORMATION		5
PRESENTATION OF FINANCIAL AND OTHER DATA		5
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS		5
PART I		7
Item 1	Identity of Directors, Senior Management and Advisers	7
Item 2	Offer Statistics and Expected Timetable	7
Item 3	Key Information	7
	A. Selected Consolidated Financial Data	7
	B. Capitalization and Indebtedness	7
	C. Reasons for the offer and use of proceeds	7
	D. Risk Factors	8
Item 4	Information On The Company	26
	A. History and Development of the Company	26
	B. Business Overview	28
	C. Organizational Structure	45
	D. Property Plant and Equipment	46
Item 4A.	Unresolved Staff Comments	46
Item 5	Operating and Financial Review and Prospects	46
	A. Results of Operations	49
	B. Liquidity & Capital Resources	52
	C. Research and development, patents and licenses, etc.	54
	D. Trend information	54
	E. Off Balance Sheet Arrangements	54
	F. Contractual Obligations and Commitments	54
	G. Safe Harbor	55
Item 6	Directors, Senior Management and Employees	55
	A. Directors and Senior Management	55
	B. Compensation	57
	C. Board Practices	58
	D. Employees	60
	E. Share Ownership	60
Item 7	Major Shareholders and Related Party Transactions	61
	A. Major Shareholders	61
	B. Related Party Transactions	63
	C. Interests of experts and counsel	65
Item 8	Financial Information	65
	A. Consolidated Statements and Other Financial Information	65
	B. Significant Changes	65
Item 9	The Offer and Listing	66
	A. Offer and Listing Details	66
	B. Plan of Distribution	67
	C. Markets	67
	D. Selling Shareholders	67
	E. Dilution	67
	F. Expenses of the Issue	67
Item 10	Additional Information	67
	A. Share Capital	67
	B. Memorandum and articles of association	67
	C. Material Contracts	67
	D. Exchange controls	68
	E. Taxation	68
	F. Dividends and paying agents	71
	G. Statement by experts	71
	H. Documents on Display	72
	I. Subsidiary information	72

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Item 11	Quantitative & Qualitative Disclosures About Market Risk	72
Item 12	Description of Securities Other Than Equity Securities	72
	A. Debt Securities	72
	B. Warrant and Rights	72
	C. Other Securities	72
	D. American Depositary Shares	72
PART II		72
Item 13	Defaults, Dividend Arrearages and Delinquencies	72
Item 14	Material Modifications To The Rights of Security Holders and Use of Proceeds	72
	A. Material Modifications to the Rights of Security Holders	72
	B. Use of Proceeds	72
Item 15	Controls & Procedures	73
Item 16A.	Audit Committee Financial Expert	73
Item 16B.	Code of Ethics	73
Item 16C.	Principal Accountant Fees and Services	74
Item 16D.	Exemptions From The Listing Standards For Audit Committees	74
Item 16E.	Purchases of Equity Securities by the Issuer band Affiliated Purchasers	74
Item 16F.	Change in the Registrants Certifying Accountant	74
Item 16G.	Corporate Governance	75
Item 16H.	Mine Safety Disclosure	76
PART III		76
Item 17	Financial Statements	76
Item 18	Financial Statements	76
Item 19	Exhibits	77

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GENERAL INFORMATION

In this annual report on Form 20-F (“Annual Report”), “Lombard Medical,” the “Group,” the “Company,” “we,” “us” and “our” refer to Lombard Medical, Inc. and its consolidated subsidiaries, except where the context otherwise requires.

PRESENTATION OF FINANCIAL AND OTHER DATA

The consolidated financial statement data as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014 have been derived from our consolidated financial statements, as presented elsewhere in this Annual Report, which have been prepared in accordance with International Financial Reporting Standards, (“IFRS”), as issued by the International Accounting Standards Board, (“IASB”), and as adopted by the European Union and audited in accordance with the standards of the Public Company Accounting Oversight Board, (“PCAOB”), in the United States.

We have historically conducted our business through Lombard Medical Technologies plc, and its subsidiaries. On April 30, 2014, we effected the change of domicile pursuant to which Lombard Medical Technologies plc became a wholly-owned subsidiary of Lombard Medical, Inc., a newly formed Cayman Islands exempted company with limited liability. Following this change of domicile our financial statements present the results of operations of Lombard Medical, Inc. and its consolidated subsidiaries. Our loss per share numbers reflect the new capital structure of Lombard Medical, Inc.

All references in this Annual Report on Form 20-F to “$” are to U.S. dollars, all references to “£” are to pounds sterling and all references to “€”are to Euros. Solely for the convenience of the reader, unless otherwise indicated, all pounds sterling amounts as at and for the year ended December 31, 2016 have been translated into U.S. dollars at the rate as of December 31, 2016, the last business day of our year ended December 31, 2016, of $1.23 to £1.00. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as at that or any other date.

TRADEMARKS

We own or have rights to trademarks or trade names that we use in conjunction with the operation of our business. In addition, our name, logo and website name and address are our service marks or trademarks. Each trademark, trade name or service mark by any other company appearing in this Annual Report on Form 20-F belongs to its holder. Our principal trademarks or trade names that we use are Aorfix™, Aorflex™, IntelliFlex™, and Altura™.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F contains forward-looking statements that involve risks and uncertainties. These statements relate to future events, or our future performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from any future results, levels of activity, performance, or achievements expressed, or implied by these forward looking statements. Words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” “may”, “predict,” “potential” or other words that convey judgments about future events or outcomes indicate such forward-looking statements. Forward-looking statements in this Annual Report on Form 20-F may include statements about:

■ continued market acceptance of our products;

■ our ability to continue as a going concern, achieve and maintain profitability;

■ our ability to effectively manage our cost reduction program;

■ our ability to raise additional funds for our operations;

■ Our ability to manage risks associated with our acquisition of Altura Medical, Inc. (“Altura”), including but not limited to the failure to realize anticipated revenue, and other potential benefits of the acquisition; costs, fees, expenses and charges associated with the integration which may negatively impact our financial condition and operating results; and business disruption, including adverse effects on business relationships with suppliers, customers and other business partners;

■ our ability to effectively compete with the products offered by our competitors;

■ our ability to maintain adequate liquidity to fund our operational needs and research and developments expenses

■ our ability to effectively manage our business and keep pace with our anticipated growth;

■ our ability to efficiently source components and raw materials for our manufacturing processes;

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■ Our ability to maintain the quality of our products;

■ continued growth in the number of patients qualifying for treatment of Abdominal Aortic Aneurysms, (“AAAs”), through our products;

■ our ability to maintain strong relationships with physicians for research , development, marketing and sales of our products;

■ our ability to successfully commercialize our products in Europe and Asia;

■ our ability to effectively develop new or complementary technologies;

■ our ability to manufacture our products to meet demand;

■ our ability to retain and further develop our direct sales force in the United Kingdom;

■ the level and availability of third party payor coverage and reimbursement for our products;

■ the nature of and any changes to legislative, regulatory and other legal requirements that apply to us, our products, our suppliers and our competitors;

■ the timing of and our ability to obtain and maintain any required regulatory clearances and approvals;

■ our ability to protect our intellectual property rights and proprietary technologies;

■ our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties;

■ product liability claims and litigation expenses;

■ reputational damage to our products caused by misuse or off-label use or government or voluntary product recalls;

■ our ability to attract, retain, and motivate qualified personnel;

■ our ability to make future acquisitions and successfully integrate any such future-acquired businesses; and

■ general macroeconomic and world-wide business conditions.

The forward-looking statements included in this Annual Report on Form 20-F are subject to risks, uncertainties and assumptions. Our actual results of operations may differ materially from those stated in or implied by such forward-looking statements as a result of a variety of factors, including those described under “Risk Factors” and elsewhere in this Annual Report on Form 20-F.

We operate in an evolving environment. New risks emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I

Item 1   Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2   Offer Statistics and Expected Timetable

Not applicable.

Item 3   Key Information

A. Selected Consolidated Financial Data

The following selected consolidated financial data as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015, and 2014 have been derived from our consolidated financial statements included elsewhere in this Annual Report on Form 20-F. The selected income statement and cash flow statement data for the fiscal years ended December 31, 2013 and 2012 and the selected balance sheet data as of December 31, 2014, 2013 and 2012 have been derived from our consolidated financial statements not included herein. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period. The information set forth below should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Annual Report on Form 20-F and with our consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 20-F. We have not declared or paid any dividends in the periods presented. All our operations are continuing. As described elsewhere in this Annual Report on Form 20-F, subsequent to the effectiveness of the registration statement and the listing of our ordinary shares on the Nasdaq Global Market, holders of ordinary shares of Lombard Medical Technologies plc received one ordinary share of Lombard Medical, Inc. for every four shares previously held in Lombard Medical Technologies plc. Our loss per share numbers have been retrospectively adjusted to reflect the issuance of one ordinary share in Lombard Medical, Inc. for four ordinary shares in Lombard Medical Technologies plc as if it had occurred at January 1, 2013. Our loss per share numbers have been adjusted to give effect to the issuance and sale by us of 5,000,000 ordinary shares in the U.S. Initial Public Offering (“IPO”).  Shares issued in December 2016 have not been reflected below.

	AS OF AND FOR THE YEAR ENDED DECEMBER 31,
	2016	2015	2014	2013	2012
	($ in thousands, except per share data)
Statement of income data–continuing:
Revenue	12,169	15,114	13,277	6,960	6,175
Operating loss	(31,711)	(39,293)	(36,143)	(20,034)	(13,086)
Net loss	(31,035)	(37,804)	(34,752)	(19,204)	(13,162)
Basic and diluted loss per ordinary share	(1.54)	(2.13)	(2.39)	(2.14)	(2.61)
Weighted average number of ordinary shares - basic and diluted	20,172	17,757	14,556	8,972	5,041
Balance sheet data:
Cash and cash equivalents	20,797	32,332	53,334	40,866	4,450
Total assets	67,767	85,740	72,899	58,470	14,965
Total equity	13,973	43,115	64,833	49,333	6,729
Share capital	280	199	162	52,406	44,800

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the offer and use of proceeds

Not applicable.

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D. Risk Factors

Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our ordinary shares could decline. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors.

Risks Related to Our Business

Our revenue is currently generated from a limited number of products, and any decline in the sales of these products or failure to gain market acceptance of these products will negatively impact our business.

To date, we have focused extensively on the development and commercialization of Aorfix for the treatment of AAA. Following our acquisition of Altura, we launched the Altura Endovascular Stent Graft in CE Mark countries in January 2016. If we are unable to continue to achieve and maintain greater market acceptance of these products and do not achieve sustained positive cash flow from operations, we will be constrained in our ability to fund development and commercialization of improvements in our products and other product lines. In addition, if we are unable to market our products as a result of a quality problem, or failure to maintain regulatory approvals, we would lose our primary source of revenue and our business would be negatively affected.

We may not succeed in commercializing our products for several reasons, including:

■ physicians and hospitals may continue relying on open surgical repair, or use the other approved EVAR devices available for patients;

■ our direct sales force may not be large enough, or effective enough to sufficiently train and educate physicians and hospitals about the benefits of our products;

■ coverage and reimbursement for our products may not be sufficient for customers to choose our device when in need of an EVAR device;

■ new technologies, or improved products by competitors; and

■ negative publicity about, or actual or perceived problems with our products could discourage physician and hospital adoption of our products.

If we are unable to educate physicians and hospitals about the advantages of our products, do not achieve significantly greater market acceptance of our products, do not gain momentum in our sales activities, or fail to significantly grow our market share, we will not be able to grow our revenue and our business and financial condition will be adversely affected.

We have a history of operating losses. If we do not achieve and maintain profitability, our financial condition and stock price could suffer.

We have incurred significant losses and negative cash flows from operations since inception. The Group incurred a net loss for the year ended December 31, 2016 of $31.0 million (2015: $37.8 million), and as of December 31, 2016 had an accumulated deficit of $257.8 million (2015: $227.9 million) and cash and cash equivalents of $20.8 million (2015: $32.3 million). Our prior losses, combined with expected future losses, have had and will continue to have, for the foreseeable future, an adverse effect on our stockholders’ equity and working capital. We have never achieved profitability, and do not anticipate being profitable in the near future. If our revenue grows more slowly than we anticipate, or if our operating expenses are higher than we expect, we may not be able to achieve profitability, our financial condition will suffer and our stock price could decline. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

Our independent registered public accountants have expressed substantial doubt regarding our ability to continue as a going concern.

Our auditors have expressed their opinion that there is substantial doubt about the Company’s ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of these uncertainties. Our ability to continue as a going concern is dependent upon our ability to successfully raise adequate additional financing and our ability to successfully develop our sales and marketing programs and commence our planned operations. We cannot assure you that we will be able to obtain additional financing or achieve profitability in our operations. Our failure to obtain additional financing or achieve profitability in our operations could require the Company to liquidate our business interests, and could result in the loss of your entire investment.

We are currently implementing a cost reduction program which may be unsuccessful in its execution, and, even if successful, may lead to undesirable outcomes.

We are currently implementing a cost reduction program that affects the structure and operation of our business and we have substantially reduced our operations in the United States. Such plan reflects assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments as well as other factors that we consider appropriate under the circumstances. Whether our cost reduction program will prove successful depends on a number of factors, including but not limited to (i) our ability to substantially raise additional funding and to obtain adequate liquidity; (ii) our ability to maintain suppliers’, hospitals’, medical facilities’ and practitioners’ confidence; (iii) our ability to efficiently reduce our operational expenditures, while retaining key employees; and (iv) the overall success of our business. In addition, as long as these cost reduction measurements last, and for a substantial time afterwards, our employees may face considerable distraction and uncertainty and we may experience increased levels of employee attrition. The pursuit of additional funding and the application of the cost reduction program has occupied and will continue to occupy a substantial portion of the time and attention of our management and will impact how our business is conducted.

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We will be required to obtain additional funds in the future, and these funds may not be available on acceptable terms, or at all.

Based on forecasts revised in December 2016, we expect to use up our current cash resources between Q1 2018 and Q2 2018, we may require additional capital or incur indebtedness to continue to fund our future operations, which may come from one or a number of public or private sources.

Our ability to raise additional funds will depend on the results of our continued marketing of our Aorfix product line, including the commercial launch of the IntelliFlex LP Delivery System, our commercialization efforts for the Altura Endovascular Stent Graft, as well as clinical and regulatory events. It may also be impacted by adverse financial, economic, and market conditions, many of which are beyond our control. We cannot be certain that sufficient funds will be available when required or on satisfactory terms.

To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in ownership dilution to existing stockholders. There are no assurances that we will be able to raise additional financing for the amounts required to execute our business plans and on terms acceptable to us. If adequate funds are not available on terms that are acceptable when required by us, we may be required to significantly reduce or refocus our operations, which could have a material adverse effect on our business, financial condition and results of operations, which could result in insolvency. In addition, we may have to delay, reduce the scope or eliminate some of our research and development or sales activities, which could delay the time to market for any of our product candidates or reduce our revenue growth potential, if such adequate funds are not available.

Our cash requirements in the future may be significantly different from our current estimates and depend on many factors, including:

■ the results of our commercialization efforts for our products;

■ the need for additional capital to fund future development programs;

■ the costs involved in obtaining and enforcing patents or any litigation by third parties regarding intellectual property;

■ the establishment and maintenance of high volume manufacturing and increased sales and marketing capabilities; and

■ our success in entering into collaborative relationships with other parties.

To finance these activities, we will seek funds through borrowings or through additional rounds of financing, including private or public equity or debt offerings and collaborative arrangements with corporate partners. We may be unable to raise funds on favorable terms, or at all.

During the recent economic instability, it has been difficult for many companies to obtain financing in the public markets or to obtain debt financing on commercially reasonable terms, if at all. If we borrow additional funds, or issue debt securities, these securities could have rights superior to holders of our common stock, and could contain covenants that will restrict our operations. We might have to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to our technologies, product candidates, or products that we otherwise would not relinquish. If we do not obtain additional resources, our ability to capitalize on business opportunities will be limited, and the growth of our business will be harmed.

We may not realize all of the anticipated benefits of the acquisition of Altura.

The success of the acquisition will depend, in part, on our ability to realize the anticipated growth opportunities and synergies from integrating Altura’s business into our existing business operations. Our ability to realize these benefits, and the timing of this realization, depend upon a number of factors and future events, many of which we cannot control. These factors and events include:

■ the results of future clinical trials of Altura’s products, consisting of any endovascular stent-graft that comprises or incorporates (i) a braided stent frame with a ribbed graft, (ii) a substantially “D”or semi-circular cross-section, or (iii) reverse or retrograde deployment capability, which we refer to as the Altura Endovascular Stent Graft;

■ the receipt of approval from the FDA to sell the Altura Endovascular Stent Graft in the United States;

■ obtaining and maintaining patent rights relating to the Altura technology;

■ effectively consolidating research and development operations;

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■ retaining and attracting key employees;

■ consolidating corporate and administrative functions;

■ continuing to develop an effective direct sales and marketing organization in Europe;

■ preserving our and Altura’s important business relationships; and

■ minimizing the diversion of management’s attention from ongoing business concerns.

We are in a highly competitive market segment, which is subject to rapid technological change. If our competitors are better able to develop and market products that are safer, more effective, less costly, easier to use, or otherwise more attractive than any products that we may develop, our ability to generate revenue will be reduced.

Our industry is highly competitive and subject to rapid and profound technological change. Our success depends, in part, upon our ability to maintain a competitive position in the development of technologies and products for use in the treatment of AAA and other aortic disorders.

We face competition from both established and development stage companies. Several of the companies developing or marketing competing products enjoy several advantages, including:

■ greater financial and human resources for product development, sales and marketing and patent litigation;

■ significantly greater name recognition;

■ established relationships with physicians, customers and third-party payors;

■ additional lines of products, and the ability to offer rebates or bundle products to offer greater discounts or incentives to gain a competitive advantage;

■ established sales and marketing, and distribution networks; and

■ greater experience in conducting research and development, manufacturing, clinical trials, preparing regulatory submissions and obtaining regulatory clearance or approval for products and marketing approved products.

Our competitors may develop and patent processes or products earlier than us, obtain regulatory clearance or approvals for competing products more rapidly than us, and develop more effective or less expensive products or technologies that render our technology or products obsolete or noncompetitive. We also compete with our competitors in recruiting and retaining qualified scientific, sales, and management personnel, establishing clinical trial sites and patient enrollment in clinical trials, as well as in acquiring technologies and technology licenses complementary to our products or advantageous to our business. If our competitors are more successful than us in these matters, our business may be harmed.

We have limited resources to invest in research and development and to grow our business and we will need to raise additional funds in the future for these activities.

We believe that our growth will depend, in significant part, on our ability to commercialize our products, as well as to develop new, or improved technologies for the treatment of AAA and other aortic disorders, and technology complementary to our existing products. Our existing resources may not allow us to conduct all of the sales and marketing and research and development activities that we believe would be beneficial for our future growth. As a result, we will need to seek funds in the future to finance these activities. If we are unable to raise funds on favorable terms, or at all, we may not be able to increase our research and development activities and the growth of our business may be negatively impacted.

Our success depends on our ability to manage our business as we increase the scale of our operations.

It may be difficult for us to control costs if we significantly expand our sales, marketing and manufacturing capacities. Changes in manufacturing and rapid expansion of personnel may mean that less experienced people are producing and selling our products, which could result in unanticipated costs and disruptions to our operations. Our success in growing our business will depend upon our ability to implement improvements in our operational systems, including information technology systems and financial internal control procedures, realize economies of scale, manage multiple development projects, and continue to expand, train and manage our personnel and distributors worldwide. If we cannot scale and manage our business to expand sales of our products, we may not achieve our desired growth and our financial results may suffer.

Reduction or interruption in supply, and an inability to develop alternative sources for supply could adversely affect our manufacturing operations and related product sales.

We manufacture all of our Aorfix and Altura products at our UK facility in Didcot. In 2015, we acquired Altura and transitioned the Altura manufacturing process to our UK facility which was completed in 2016. We purchase many of the components and raw materials used in manufacturing these products from numerous suppliers in various countries. Generally, we have been able to obtain adequate supplies of such raw materials and components. However, for reasons of quality assurance, cost effectiveness, or availability, we procure certain components and raw materials from single-source suppliers. Our use of these single-source suppliers of raw materials and components exposes us to several risks, including disruptions in supply, price increases, late deliveries and an inability to meet customer demand. Finding alternative sources for these raw materials and components could be difficult and in many cases could entail a significant amount of time, disruption and cost. We work closely with our suppliers to try to ensure continuity of supply while maintaining high quality and reliability. However, we cannot guarantee that these efforts will be successful. In addition, due to the stringent regulations and requirements of the FDA regarding the manufacture of our products, we may not be able to quickly establish additional or replacement sources for certain components or materials. A reduction or interruption in supply, and an inability to develop alternative sources for such supply, could adversely affect our ability to manufacture our products in a timely or cost-effective manner and to make our related product sales. In addition, as discussed below, we expect to require significantly more supply of the raw materials and components necessary to manufacture our products as we further expand sales.

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Quality problems with our products could harm our reputation and erode our competitive position, sales, and market share.

Quality is extremely important to us and our customers due to the serious and costly consequences of product failure. Our quality certifications are critical to the marketing success of our products. If we fail to meet these standards, our reputation could be harmed, we could lose customers, we may have to conduct a public recall, our continued sales could be hindered, and our revenue and results of operations could decline. Aside from specific customer standards, our success depends generally on our ability to manufacture precision-engineered components, subassemblies, and finished devices from multiple materials. If our components fail to meet these standards or fail to adapt to evolving standards, our reputation will be harmed, our competitive position could be damaged, and we could lose customers and market share. Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

If we experience decreasing prices for our products and we are unable to reduce our expenses, our results of operations will suffer.

We may experience decreasing prices for our products due to pricing pressure experienced by our customers from managed care organizations and other third-party payors, increased market power of hospitals, and increased competition among medical engineering and manufacturing services providers. If the prices for our products decrease and we are unable to reduce our expenses, our results of operations will be adversely affected.

Our growth and success depends the growth of the EVAR market.

According to Medtech Ventures, it is estimated that more than 500,000 AAA patients are diagnosed annually in the developed world, with 200,000 of such patients receiving treatment. Our growth will depend upon an increasing percentage of patients with AAA being diagnosed, and an increasing percentage of those diagnosed receiving EVAR, as opposed to an open surgical procedure. The failure of physicians to diagnose more patients with AAA could negatively impact our revenue growth.

Our success depends on educating physicians so that they will use, and continue to use, our products in endovascular AAA procedures.

Aorfix has a broader label than any approved EVAR product in the United States and Japan, as well as a broader label than all but one approved EVAR product in the European Union. However, many of our competitors with EVAR products not approved for angles above 60 degrees in the United States and Japan and 75 degrees, and one product at 90 degrees, in the European Union, are well known by physicians and their products may be chosen by physicians over Aorfix despite the absence of regulatory approval for use in these high angle anatomies. Below angles of 60 degrees in the United States and Japan, and 75 degrees in the European Union, there are several approved products in all jurisdictions where we compete and many are supported by competitors who have greater resources than we do. If we are unable to educate physicians with regard to the use of Aorfix both in high angle neck anatomies as well as for less challenging anatomies, our business could be negatively impacted. The Altura Endovascular Stent Graft is currently CE marked, but is not yet approved for use in the United States. However, once the product obtains this approval, physicians will need to be educated in order for the product to be competitive in the marketplace. We completed FDA submission for IntelliFlex LP Delivery System for its Aorfix product line in December 2015 and are seeking clearance to market the device in 2018. We are received regulatory clearance to market the device in the EU and Japan in 2017 as well. Once the product obtains this approval, physicians will need to be educated in order for the product to be competitive in the marketplace.

The continuing development of our products depends upon us maintaining strong relationships with physicians.

If we fail to maintain our working relationships with physicians and build relationships with new physicians, our products may not be marketed in line with the needs and expectations of the professionals who use and support them, which could cause a decline in our revenues. The research, development, marketing, and sales of our products are dependent upon our maintaining working relationships with physicians. We rely on these professionals to provide us with considerable knowledge and experience regarding the development, marketing, and sale of our products. Physicians assist us as researchers, marketing and product consultants, inventors, and public speakers. If we are unable to maintain our strong relationships with these professionals and continue to receive their advice and input, the development and marketing of our products could suffer, which could have a material adverse effect on our consolidated earnings, financial condition, and cash flows.

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If we fail to further develop and maintain our direct sales forces in the United Kingdom and Germany, our business could suffer.

We have direct sales forces for our products in the United Kingdom and Germany, two of our four largest markets. We utilize a network of third-party distributors for other jurisdictions. As we continue to sell our products in our direct markets and increase our marketing efforts in Europe, we will need to maintain our current sales representatives and also likely increase the size of our sales force in Europe, primarily. There is significant competition for sales personnel experienced in relevant medical device sales. If we are unable to attract, motivate, develop, and retain qualified sales personnel and thereby grow our sales forces in Germany and the United Kingdom, we may not be able to maintain or increase our revenues.

Our third-party distributors may not effectively distribute our approved products.

We depend in part on medical device distributors and strategic relationships for the marketing and selling of our approved products as well as the training of physicians in the proper use of our approved products in the European Union, outside of the United Kingdom and Germany, in Asia and in Latin America. For example, since we have obtained regulatory approval for Aorfix in Japan, we depend on Medico’s Hirata to distribute Aorfix in Japan and to train physicians in Japan in how to properly use Aorfix. On April 3, 2017, we entered into distribution agreements with MicroPort Scientific Corporation with respect to exclusively marketing our products in China and Brazil. If MicroPort is unable to successfully maximize sales of our products in these geographies, our operating results and business may suffer.We depend on these distributors’ efforts to market our approved products and train physicians, yet we are unable to control their efforts completely. In addition, we are unable to ensure that our distributors comply with all applicable laws regarding the sale of our approved products. If our distributors fail to effectively market and sell our approved products, and to train physicians in full compliance with applicable laws, our operating results and business may suffer.

If clinical trials of our current or future products do not produce results necessary to support regulatory clearance or approval, we will be unable to continue to commercialize these products.

To market a medical device in the United States, we must obtain approval of a premarket approval application, (“PMA”), or clearance from the FDA under Section 510(k) of the Federal Food, Drug and Cosmetic Act, (the “FDCA”), unless an exemption from pre-market review applies. In order to obtain premarket approval and, in some cases, a 510(k) clearance, a product sponsor must conduct well controlled clinical trials designed to test the safety and effectiveness of the product. We will likely need to conduct additional clinical trials in the future to support new product approvals, or for the approval of new indications for the use of our products. Clinical testing is expensive, and typically takes many years, which carries an uncertain outcome. The data obtained from clinical trials may be inadequate to support approval or clearance of a submission. In addition, the occurrence of unexpected findings in connection with clinical trials may prevent or delay obtaining approval or clearance. The initiation and completion of any of our clinical trials may be prevented, delayed, or halted for numerous reasons, including, but not limited to, the following:

■ the FDA, institutional review boards, (“IRBs”), or other regulatory authorities do not approve a clinical study protocol, force us to modify a previously approved protocol, or place a clinical study on hold;

■ subjects do not enroll in, or enroll at the expected rate, or complete a clinical study;

■ subjects, or investigators do not comply with study protocols;

■ subjects do not return for post-treatment follow-up at the expected rate;

■ subjects experience serious, or unexpected adverse side effects for a variety of reasons that may or may not be related to our products such as the advanced stage of co-morbidities that may exist at the time of treatment, causing a clinical study to be put on hold;

■ sites participating in an ongoing clinical study may withdraw, requiring us to engage new sites;

■ difficulties, or delays associated with establishing additional clinical sites;

■ third-party clinical investigators decline to participate in our clinical studies, do not perform the clinical studies on the anticipated schedule, or are inconsistent with the investigator agreement, clinical study protocol, good clinical practices, and other FDA and IRB requirements;

■ third-party organizations do not perform data collection and analysis in a timely or accurate manner;

■ regulatory inspections of our clinical studies require us to undertake corrective action or suspend or terminate our clinical studies;

■ changes in federal, state, or foreign governmental statutes, regulations or policies;

■ interim results are inconclusive or unfavorable as to immediate and long-term safety or efficacy;

■ the study design is inadequate to demonstrate safety or efficacy; or

■ the clinical trials do not meet the study endpoints.

Failure can occur at any stage of clinical testing. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or non-clinical testing in addition to those we have planned. Our failure to adequately demonstrate the efficacy and safety of any of our devices would prevent receipt of regulatory clearance or approval and, ultimately, the commercialization of that device, or indication for use.

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If we are unable to protect our intellectual property, our business may be negatively affected.

Our success depends in large part on our ability to secure effective intellectual property protection for our products and processes in the United States, and internationally. We attempt to protect our intellectual property rights through a combination of patent, trade secret, trademark, and copyright laws, as well as licensing agreements and third-party confidentiality and invention assignment agreements. Because of the differences in foreign trademark, patent and other laws concerning proprietary rights, our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition.

We have filed and intend to continue to file patent applications for various aspects of our technology to cover our products and processes. While we generally apply for patents in those countries where we intend to make, have made, use, or sell patented products, we may not accurately predict all of the countries where patent protection will ultimately be desirable. If we fail to timely file a patent application in any such country, we may be precluded from doing so at a later date. Additionally, we may fail to secure necessary patents prior to or after obtaining regulatory clearances, thereby permitting competitors to market competing products. Moreover, we cannot assure that any of our patent applications will be approved. We also cannot assure that the patents issued as a result of our foreign patent applications will have the same scope of coverage as our U.S. patents. Further, we cannot be certain that we will be the first creator of inventions covered by any patent application because some patent applications are maintained in secrecy for a period of time. Thus, we could adopt technology without knowledge of a pending patent application. In addition, the patents we already own could be challenged, re-examined, invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Further, we cannot assure that competitors will not infringe our patents, or that we will have adequate resources to enforce our patents.

We also own trade secrets and confidential information that we try to protect by entering into confidentiality agreements with consultants, key employees and other relevant parties. However, the confidentiality agreements may not be honored or, if breached, we may not have sufficient remedies to protect our confidential information. Further, our competitors may independently learn our trade secrets or develop similar or superior technologies. To the extent that our consultants, key employees or others apply technological information to our projects that they develop independently or others develop, disputes may arise regarding the ownership of proprietary rights to such information, and such disputes may not be resolved in our favor. If we are unable to protect our intellectual property adequately, our business and commercial prospects will likely suffer.

We rely on our trademarks, trade names, and brand names to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks. We cannot assure that our trademark applications will be approved. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources advertising and marketing new brands. Further, we cannot assure you that competitors will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks.

On April 3, 2017, we entered into component manufacturing agreement with MicroPort Scientific Corporation for certain components for the Aorfix and Altura products. Additionally, we also entered into a technology licensing and manufacturing agreement agreements with MicroPort to exclusively manufacture our products for the China market. Pursuant to these agreements, MicroPort has a license to use our intellectual property and technical knowledge. If MicroPort fails to adequately safeguard our intellectual property, we may need to engage in expensive and prolonged litigation to assert or defend any of our intellectual property rights or to determine the scope and validity of rights claimed by other parties

If our products or processes infringe upon the intellectual property of third parties, the sale of our products may be challenged and we may have to defend costly and time-consuming infringement claims.

The market for medical devices is subject to frequent litigation regarding patent and other intellectual property rights. We face the risk of claims that we have infringed third parties’ intellectual property rights. Any claim of intellectual property infringement, even those without merit, could be expensive and time consuming to defend and with no certainty as to the outcome, litigation could be too expensive for us to pursue. Our failure to prevail in such litigation, or our failure to pursue litigation could result in the loss of our rights that could substantially harm our business. Our competitors, many of which have substantially greater resources and have made substantial investments in competing technologies, may have applied for or obtained, or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make and sell our products. We have not conducted an independent review of patents issued to third parties. The large number of patents, the rapid rate of new patent issuances, the complexities of the technology involved and uncertainty of litigation increase the risk of business assets and management’s attention being diverted to patent litigation. In addition, because of our developmental stage, claims that our products infringe on the patent rights of others are more likely to be asserted after commencement of commercial sales of new products incorporating our technology.

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Our failure to obtain rights to intellectual property of third parties, or the potential for intellectual property litigation, could divert management’s attention and force us to do one or more of the following things:

■ stop selling, making, or using products that use the disputed intellectual property;

■ obtain a license from the intellectual property owner to continue selling, making, licensing, or using products, which license may not be available on reasonable terms, or at all;

■ redesign our products, processes or services; or

■ pay significant damages.

Any of these outcomes could have a negative impact on our operating profits and harm our future prospects. If any of the foregoing occurs, we may be unable to manufacture and sell our products and may suffer severe financial harm. Whether or not an intellectual property claim is valid, the cost of responding to it, in terms of legal fees and expenses and the diversion of management resources, could harm our business.

We may face product liability claims that could result in costly litigation and significant liabilities.

Manufacturing and marketing our commercial products, and clinical testing of our products and product candidates, may expose us to product liability claims. Although we have, and intend to maintain, product liability insurance, the coverage limits of our insurance policies may not be adequate and one or more successful claims brought against us may have a material adverse effect on our business and results of operations. Additionally, adverse product liability actions could negatively affect our reputation, continued product sales, and our ability to obtain and maintain regulatory approval for our products.

Our ability to maintain our competitive position depends on our ability to attract and retain highly qualified personnel.

We believe that our continued success depends to a significant extent upon the efforts and abilities of our executive officers,

particularly Kurt Lemvigh, our Chief Executive Officer, William J. Kullback, our Chief Financial Officer, and

Peter Phillips, our Chief Technology Officer. Kurt Lemvigh, our Chief Executive Officer assumed his position as of April 20, 2017 and is new to Lombard Medical. Should any members of senior management, including our new Chief Executive Officer, fail to perform as expected, or should they or other new key managerial appointees fail to acquire the requisite knowledge and skills in a timely manner, or should they decide to leave the Company on their own initiative, our operations may be disrupted and this might materially adversely affect the results of our operations. The reduction in personnel the Company underwent in the past year, and may carry out in the future, may result in our not having adequate personnel resources to maximize our operations. Such reduction in force may also have adverse effects on the morale of our employees, which may induce employees to leave the Company. The loss of any of the foregoing individuals would harm our business. Our ability to retain our executive officers and other key employees, and our success in attracting and hiring additional skilled employees, will be critical to our future success.

If any future acquisitions or business development efforts are unsuccessful, our business may be harmed.

As part of our business strategy to be an innovative leader in the treatment of aortic disorders, we may need to acquire other companies, technologies, and product lines in the future. Acquisitions involve numerous risks, including the following:

■ the possibility that we will pay more than the value we derive from the acquisition, which could result in future non-cash impairment charges;

■ difficulties in integration of the operations, technologies, and products of the acquired companies, which may require significant attention of our management that otherwise would be available for the ongoing development of our business;

■ the assumption of certain known and unknown liabilities of the acquired companies; and

■ difficulties in retaining key relationships with employees, customers, partners, and suppliers of the acquired company.

In addition, we may invest in new technologies that may not succeed in the marketplace. If they are not successful, we may be unable to recover our initial investment, which could include the cost of acquiring the license, funding development efforts, acquiring products, or purchasing inventory. Any of these would negatively impact our future growth and cash reserves.

We are increasingly dependent on sophisticated information technology and if we fail to properly maintain the integrity of our data or if our products do not operate as intended, our business could be materially affected.

We are increasingly dependent on sophisticated information technology for our products and infrastructure. Our information systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards, the increasing need to protect patient and customer information, and changing customer patterns. In addition, third parties may attempt to illegally access our products or systems and may obtain data relating to patients with our products or our proprietary information. If we fail to maintain or protect our information systems and data integrity effectively, we could lose existing customers, have difficulty attracting new customers, have problems in determining product cost estimates and establishing appropriate pricing, have difficulty preventing, detecting, and controlling fraud, have disputes with customers, physicians, and other healthcare professionals, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach, or suffer other adverse consequences. There can be no assurance that our process of consolidating the number of systems we operate, upgrading and expanding our information systems capabilities, protecting and enhancing our systems and developing new systems to keep pace with continuing changes in information processing technology will be successful or that additional systems issues will not arise in the future. Any significant breakdown, intrusion, interruption, corruption, or destruction of these systems, as well as any data breaches, could have a material adverse effect on our business.

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Discovery of previously undisclosed, or unknown liabilities held by Altura could have an adverse effect on our business, operating results and financial condition.

Acquisitions involve risks, including inaccurate assessment of undisclosed, contingent or other liabilities or problems. Following the completion of the acquisition, the surviving corporation, which is now a wholly-owned subsidiary of ours, possesses not only all of the assets, but also all of the liabilities of Altura. Although we conducted a due diligence investigation of Altura and its known and potential liabilities and obligations, it is possible that undisclosed, contingent or other liabilities or problems may arise which we were previously unaware of. These undisclosed liabilities could have an adverse effect on our business, operating results and financial condition. The amount of such liabilities may be in excess of the value of our ordinary shares that were placed into the escrow fund for twelve months following the closing of the acquisition to secure our rights to indemnification under the Acquisition Agreement, or such liabilities may not be uncovered until after our ordinary shares that were placed into the escrow fund have been released from the escrow fund.

Risks Related to the Regulation of Our Industry

If third party payors do not provide reimbursement for the use of our products, our revenues may be negatively impacted.

Our success in marketing our products depends in large part on whether U.S., Japan, European Economic Area, (“EEA”), and other government health administrative authorities, private health insurers and other organizations will reimburse customers for the cost of our products. Reimbursement for EVAR has been in place for a considerable period of time. Reimbursement codes for EVAR are in place in the United States, Japan, United Kingdom, Italy, Germany, Spain and other countries with developed healthcare systems. Our Company does not obtain specific or special reimbursement codes other than those codes which cover products in the EVAR market. Reimbursement systems in international markets vary significantly by country and by region within some countries, and reimbursement approvals must be obtained on a country-by-country basis. Further, many international markets have government managed healthcare systems that control reimbursement for new devices and procedures. In most markets there are private insurance systems as well as government-managed systems. If sufficient reimbursement is not available for our current or future products, in either the United States, Japan, the EEA or elsewhere, the demand for our products will be adversely affected.

We may be subject to, or otherwise affected by federal and state healthcare laws, including anti-kickback, fraud and abuse and health information privacy and security laws, and could face substantial penalties if we are unable to fully comply with such laws and such penalties could adversely impact our reputation and business operations.

Our business operations and activities may be directly, or indirectly, subject to various federal, state and local fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act. In addition, we may be subject to patient privacy regulation by the federal government, state governments and foreign jurisdictions in which we conduct our business.

Healthcare fraud and abuse and health information privacy and security laws potentially applicable to our operations include:

■ the federal Anti-Kickback Statute, which applies to our marketing practices, educational programs, pricing policies and relationships with healthcare providers, by prohibiting, among other things, soliciting, offering, receiving, or providing compensation, directly or indirectly, intended to induce the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare, or Medicaid programs;

■ federal false claims laws that prohibit, among other things, knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other governmental healthcare programs that are false or fraudulent;

■ the federal “Stark Law,”which prohibits a physician from referring Medicare, or Medicaid patients to an entity providing “designated health services,”in which the physician has an ownership or investment interest or with which the physician has entered into a financial arrangement;

■ the federal Health Insurance Portability and Accountability Act of 1996, (“HIPAA”), and its implementing regulations (all as amended by the Health Information Technology for Economic and Clinical Health Act), which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of individually identifiable health information;

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■ federal “sunshine”requirements imposed by the Affordable Care Act, (“ACA”), on device and pharmaceutical manufacturers regarding any payment or “transfer of value”made or distributed to physicians and teaching hospitals. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for “knowing failures”, for all payments, transfers of value or ownership or investment interests) that are not timely, accurately, and completely reported in an annual submission. Manufacturers were required to begin collecting data on August 1, 2013 and were required to submit reports to the CMS by March 31, 2014 (and the 90th day of each subsequent calendar year); and

■ state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers, state transparency requirements and state laws governing the privacy and security of certain health information, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

In addition, certain states mandate implementation of corporate compliance programs (and/or the maintenance of databases to ensure compliance with these laws) and/or impose additional restrictions on our financial relationships with physicians and other healthcare providers.

Another development affecting fraud and abuse risks is the increased use of the whistleblower or qui tam provisions of the False Claims Act. The False Claims Act imposes liability on any person or entity who, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The qui tam provisions of the False Claims Act allow a private individual to bring civil actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery. In recent years, the number of suits brought by private individuals has increased dramatically. In addition, various states have enacted false claim laws analogous to the False Claims Act. Many of these state laws apply where a claim is submitted to any third-party payor and not merely a federal healthcare program.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under the federal Anti-Kickback Statute, it is possible that some of our business activities, including our relationships with physicians or customers, could be subject to challenge under one or more of such laws. If our past or present operations are found to be in violation of any of such laws or any other governmental regulations that may apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from government healthcare programs and the curtailment or restructuring of our operations. Similarly, if the healthcare providers or entities with whom we do business are found to be non-compliant with applicable laws, they may be subject to sanctions, which could also have an adverse impact on us. Any penalties, damages, fines, curtailment or restructuring of our agreements with physicians as well as of our operations could adversely affect our ability to operate our business and our financial results. The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against them, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, we expect there will continue to be federal and state laws and regulations, proposed and implemented, that could impact our operations and business. The extent to which future legislation or regulations, if any, relating to healthcare fraud and abuse laws or enforcement, may be enacted or what effect such legislation or regulation would have on our business remains uncertain.

Our business is indirectly subject to health care industry cost-containment measures that could result in reduced sales of our products.

Most of our customers, and the health care providers to whom our customers supply, rely on third-party payors, including governmental healthcare programs and private health insurance plans, to reimburse some or all of the cost of the procedures in which our products are used. The continuing efforts of governmental authorities, insurance companies, and other third-party payors of healthcare costs to contain or reduce these costs could lead to patients or customers being unable to obtain coverage and reimbursement from these third-party payors. If coverage and reimbursement cannot be obtained by patients or customers, sales may decline significantly and our customers may reduce or eliminate purchases of our products. The cost-containment measures that health care providers are instituting, in the United States, Japan, the EEA and elsewhere, could harm the results of our operations and prospects. For example, managed care organizations have successfully negotiated volume discounts for pharmaceuticals. While this type of discount pricing has not been commonly used for medical devices, if managed care or other organizations were able to affect discount pricing for devices, it could result in lower prices to our customers from their customers and, in turn, reduce the amounts we can charge our customers for our medical devices.

Healthcare policy changes, including recent federal legislation to reform the U.S. healthcare system, may have a material adverse effect on us.

In response to perceived increases in health care costs in recent years, there have been and continue to be proposals by the federal government, state governments, regulators and third-party payors to control these costs and, more generally, to reform the U.S. healthcare system. Certain of these proposals could limit the prices we are able to charge for our products or the amounts of reimbursement available for our products and could limit the acceptance and availability of our products. Moreover, as discussed below, the ACA imposes significant new taxes on medical device makers such as us. The tax on medical devices and the adoption of proposals to control costs could have a material adverse effect on our financial position and results of operations.

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The ACA includes, among other things, a deductible 2.3% excise tax on any entity that manufactures or imports medical devices offered for sale in the United States. This excise tax, which became effective on January 1, 2013, resulted in a significant increase in the tax burden on our industry, and if any efforts we undertake to offset the excise tax are unsuccessful, the increased tax burden could have an adverse effect on our results of operations and cash flows. The total cost imposed on the medical device industry by the ACA may be up to approximately $20 billion over ten years.

In December 2015, President Obama signed the Consolidated Appropriations Act of 2016, which imposed a two-year moratorium on the 2.3% excise tax beginning on January 1, 2016 and ending on December 31, 2017. Upon the end of this period we believe the medical device excise tax could continue to have an adverse effect on our results of operations and cash flows.

Other elements of the ACA, including (1) a new Patient-Centered Outcomes Research Institute to oversee, identify research priorities and conduct comparative clinical effectiveness research, (2) an independent payment advisory board that will submit recommendations to Congress to reduce Medicare spending if projected Medicare spending exceeds a specified growth rate, (3) payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models and other provisions may significantly affect the payment for, and the availability of, healthcare services and result in fundamental changes to federal health care reimbursement programs, any of which may materially affect numerous aspects of our business.

Regulatory policy changes, including recent proposals in the EEA to reform the legislation governing medical devices, may have a material adverse effect on us.

In September 2012, the European Commission published proposals for the revision of the European Union (“EU”) regulatory framework for medical devices. The proposal would replace the Medical Devices Directive and two related directives concerning active implantable medical devices and in vitro diagnostic medical devices respectively with a new regulation concerning medical devices and another concerning in vitro diagnostic medical devices. Unlike Directives that must be implemented into national laws, the Regulations would be directly applicable in all EEA Member States and so are intended to eliminate current national differences in regulation of medical devices.

On October 22, 2013, the European Parliament approved a package of reforms to the European Commission’s proposals. Under the revised proposals, only designated “special notified bodies” would be entitled to conduct conformity assessments of high-risk devices. These special notified bodies will need to notify the European Commission when they receive an application for a conformity assessment for a new high-risk device. The Commission will then forward the notification and the accompanying documents on the device to the Medical Devices Coordination Group (“MDCG”) for an opinion. These new procedures may result in the reassessment of our existing medical devices, or a longer or more burdensome assessment of our new products.

On April 5, 2017, the European Parliament adopted the Medical Device Regulations and In Vitro Diagnostics Regulations, both of which are expected to be formally published in the Official Journal of the European Union in May 2017. Once published, the Medical Device Regulations will enter into force in three years and the In Vitro Diagnostic Regulations will enter into force in five years.

Our future success depends on our ability to develop, receive regulatory clearance or approval for, and introduce new products or product enhancements that will be accepted by the market in a timely manner.

It is important to our business that we continue to build a more complete product offering for treatment of AAA and other aortic disorders. As such, our success will depend in part on our ability to develop and introduce new products. Before we can market or sell a new regulated product or a significant modification to an existing product in the United States, we must obtain either clearance from the FDA under Section 510(k) of the FDCA or approval of a PMA application from the FDA, unless an exemption from pre-market review applies. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labelling data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. Products that are approved through a PMA application generally need FDA approval before they can be modified. Both the 510(k) and PMA processes can be expensive and lengthy and require the payment of significant fees, unless an exemption applies. The process of obtaining a PMA is much costlier and uncertain than the 510(k) clearance process and generally takes from one to three years, or longer, from the time the application is submitted to the FDA until an approval is obtained. In the United States, our currently commercialized products have received PMA approval. The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

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■ we may not be able to demonstrate to the FDA’s satisfaction that our products are safe and effective for their intended users;

■ the data from our preclinical studies and clinical trials may be insufficient to support clearance or approval, where required; and

■ the manufacturing process or facilities we use may not meet applicable requirements.

In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis. Any delay in, or failure to receive or maintain, clearance or approval for our products could prevent us from generating revenue from these products and adversely affect our business operations and financial results.

Additionally, the FDA and other regulatory authorities have broad enforcement powers. Regulatory enforcement or inquiries, or other increased scrutiny on us, could affect the perceived safety and efficacy of our products and dissuade our customers from using our products. We may not be able to successfully develop and obtain regulatory clearance or approval for product enhancements, or new products, or these products may not be accepted by physicians or the payors who financially support many of the procedures performed with our products. The success of any new product offering or enhancement to an existing product will depend on several factors, including our ability to:

■ properly identify and anticipate physician and patient needs;

■ develop and introduce new products or product enhancements in a timely manner;

■ avoid infringing upon the intellectual property rights of third parties;

■ demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials;

■ obtain the necessary regulatory clearances or approvals for new products or product enhancements;

■ be fully compliant with regulatory requirements for marketing new devices or modified products;

■ provide adequate training to potential users of our products;

■ receive adequate coverage and reimbursement for procedures performed with our products; and

■ develop an effective and compliant, dedicated marketing and distribution network.

If we do not develop new products or product enhancements in time to meet market demand or if there is insufficient demand for these products or enhancements, our results of operations will suffer.

Our business is subject to extensive governmental regulation that could make it more expensive and time consuming for us to introduce new or improved products.

Our medical devices are subject to regulation by numerous government agencies, including the FDA, the Ministry of Health, Labour and Welfare in Japan, the EU Commission, EEA Competent Authorities, and comparable foreign agencies. The FDA and other U.S. agencies, Japan’s Ministry of Health, Labour and Welfare, the European Commission, EEA Competent Authorities, and foreign governmental agencies regulate, among other things, with respect to medical devices:

■ design, development and manufacturing;

■ testing, labelling, content and language of instructions for use and storage;

■ clinical trials;

■ product safety;

■ marketing, sales and distribution;

■ pre-market clearance and approval;

■ record keeping procedures;

■ advertising and promotion;

■ recalls and field safety corrective actions;

■ post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury;

■ medical device tracking;

■ post-market approval studies; and

■ product import and export.

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We also are subject to numerous additional licensing and regulatory requirements relating to safe working conditions, manufacturing practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances. Some of the most important requirements we face include:

■ FDA Regulations (Title 21 CFR 820);

■ Japanese Regulations including: Japan Pharmaceutical Affairs Law (e.g. Law No.145 Established as of August 10, 1960, Law No. 87 Revised as of July 26, 2005); Regulations for Buildings and Facilities (e.g. MHLW Ministerial Ordinance No. 2, 1961); and, Manufacturing and Quality Control (MHLW Ministerial Ordinance No. 169, 2004);

■ European Union and EEA Member State legislation (e.g., the EU Medical Devices Directive 93/42/EEC) and CE mark requirements;

■ Medical Device Quality Management System Requirements (ISO 13485);

■ Occupational Safety and Health Administration requirements; and

■ California Department of Health Services requirements.

Government regulation may impede our ability to conduct continuing clinical trials, to obtain necessary premarket approvals or clearance, to obtain export approvals, and to manufacture our existing and future products. Government regulation also could delay our marketing of new products for a considerable period of time and impose costly procedures on our activities. The FDA, Japan’s Ministry of Health, Labour and Welfare, EEA Notified Bodies, and other regulatory agencies may not approve or certify any of our future products on a timely basis, if at all. Any delay in obtaining, or failure to obtain, such approvals or certifications could negatively impact our marketing of any proposed products and reduce our product revenues. The regulations to which we are subject are complex and have become more stringent over time.

Even after we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA regulations, Japan’s Ministry of Health, Labour and Welfare, the EEA Member State laws implementing the EU Medical Devices Directive, and other foreign laws and regulations. Our products remain subject to strict regulatory controls on manufacturing, marketing and use. We received FDA approval for Aorfix in February 2013 and continue to further develop our regulatory compliance program as we continue to prepare for our roll-out the product in the United States. We may be forced to modify or recall our product after release in response to regulatory action or unanticipated difficulties encountered in general use. Any such action could have a material effect on the reputation of our products and on our business and financial position.

Further, regulations may change, and any different or additional regulation could limit or restrict our ability to use any of our technologies, which could harm our business. We could also be subject to new international, federal, state or local regulations that could affect our research and development programs and harm our business in unforeseen ways. If this happens, we may have to incur significant costs to comply with such laws and regulations, which will harm our results of operations.

The failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as:

■ warning letters;

■ fines;

■ injunctions;

■ civil penalties;

■ termination of distribution;

■ recalls or seizures of products;

■ delays in the introduction of products into the market;

■ total or partial suspension of production;

■ refusal to grant future clearances, approvals or certificates;

■ withdrawals or suspensions of current clearances, approvals or certificates, resulting in prohibitions on sales of our products; and

■ in the most serious cases, criminal penalties.

The medical device industry is the subject of numerous governmental investigations into marketing and other business practices. These investigations could result in the commencement of civil and/or criminal proceedings, substantial fines, penalties, and/or administrative remedies, divert the attention of our management, and have an adverse effect on our financial condition and results of operations.

We are subject to rigorous regulation by the FDA, the U.S. Department of Justice and the U.S. Department of Health and Human Services (“HHS”), Office of Inspector General and numerous other federal, state, and foreign governmental authorities. These authorities have been increasing their scrutiny of our industry. An adverse outcome in one or more of these investigations could include the commencement of civil and/or criminal proceedings, substantial fines, penalties, and/or administrative remedies, including exclusion from government reimbursement programs and entry into Corporate Integrity Agreements, (“CIAs”), with governmental agencies. In addition, resolution of any of these matters could involve the imposition of additional and costly compliance obligations. Finally, if these investigations continue over a long period of time, they could divert the attention of management from the day-to-day operations of our business and impose significant administrative burdens, including cost, on us. These potential consequences, as well as any adverse outcome from these investigations or other investigations initiated by the government at any time, could have a material adverse effect on our financial condition and results of operations.

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The misuse or use of our products beyond the scope of their approval may harm our image in the marketplace; result in injuries that lead to product liability suits, which could be costly to our business; or result in FDA sanctions if we are deemed to have engaged in promotion of such use.

The products we market currently or in the future must be approved by the FDA, Japan’s Ministry of Health, Labour and Welfare, or have been certified by EEA Notified Bodies with a specific indication for use on the approved product labelling. Our promotional materials and training methods must comply with FDA, Japan’s Ministry of Health, Labour and Welfare, EEA Member State legislation implementing the EU Medical Devices Directive, and other applicable laws and regulations, including in many cases the prohibition of the promotion of a medical device for a use that has not been cleared or approved by the FDA in the United States, the Ministry of Health, Labour and Welfare in Japan, or is not CE marked in the EU. We cannot, however, prevent a physician from using our products outside of those approved indications, as the FDA and EU and EEA Member State legislation do not generally restrict or regulate a physician’s choice of treatment within the practice of medicine. Although we train our sales force to not promote our products for off-label uses, if the FDA or Japan’s Ministry of Health, Labour and Welfare or an EEA Competent Authority determines that our promotional materials or training constitutes promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, which could have an adverse impact on our reputation and financial results. We could also be subject to investigations or prosecutions by United States Attorneys or state attorneys general, or similar foreign authorities, which could lead to substantial fines or other penalties. The imposition of these sanctions could also affect our reputation and position within the industry. Furthermore, the use of our products for indications other than those approved by the FDA in the United States, the Ministry of Health, Labour and Welfare in Japan or covered by the CE mark in the EEA, may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients or could potentially lead to patient injury.

Physicians may also misuse our products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability. If our products are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients. Product liability claims could divert management’s attention from our core business, be expensive to defend, and result in sizable damage awards against us that may not be covered by insurance. Any of these events could harm our business and results of operations and cause our stock price to decline.

Our products may in the future be subject to product recalls or voluntary market withdrawals that could harm our reputation, business and financial results.

Based on information that we might receive or learn in connection with our marketed products, we might determine to initiate a voluntary recall or other corrective action. We could undertake a removal or correction if we determine that a marketed product is in violation of law or could potentially cause serious adverse health consequences. In addition, the FDA, Japan’s Ministry of Health, Labour and Welfare, EEA Competent Authorities, and similar foreign governmental authorities have the authority to require the recall of commercialized products in certain situations, for example, in the event of material deficiencies or defects in design or manufacture that could affect patient safety. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious adverse health consequences or death. A government mandated recall or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labelling defects or other issues. Depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new approvals or clearances for the device before we may market or distribute the corrected device. Seeking such approvals or clearances may delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties, or civil or criminal fines. We may also be required to bear other costs or take other actions that may have a negative impact on our sales as well as face significant adverse publicity or regulatory consequences, which could harm our business, including our ability to market our products in the future. Recalls, which include corrections as well as removals, of any of our products would divert managerial and financial resources and could have an adverse effect on our financial condition, harm our reputation with customers, and reduce our ability to achieve expected revenues. In addition, we may become subject to costly litigation by our customers or their patients.

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We are required to comply with medical device reporting, (“MDR”), requirements and vigilance requirements, and must report certain malfunctions, deaths, and serious injuries associated with our products, which can result in voluntary corrective actions or agency enforcement actions.

Under the FDA’s MDR regulations, medical device manufacturers are required to submit information to the FDA when they receive a report or become aware that a device has or may have caused or contributed to a death or serious injury or malfunctioned, and would likely cause or contribute to death or serious injury if the malfunction were to recur. All manufacturers placing medical devices on the market in the EEA are legally bound to report any incidents involving devices they produce or sell to the Competent Authority in whose jurisdiction the incident occurred if the incident led or might have led to the death or serious injury to a patient, user or other person. Manufacturers are also required to report incidents that occur outside the EEA if they result in corrective action being taken within the EEA. Were we to submit an incident report, the relevant Competent Authority would file an initial report, and there would then be a further inspection or assessment if there are particular issues. Malfunction of our products could result in future voluntary corrective actions, such as recalls, including corrections, or customer notifications, or agency action, such as inspection or enforcement actions. If malfunctions do occur, we may be unable to correct the malfunctions adequately or prevent further malfunctions, in which case we may need to cease manufacture and distribution of the affected products, initiate voluntary recalls, and redesign the products. Regulatory authorities may also take actions against us, such as ordering recalls, imposing fines, or seizing the affected products. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results. In addition, we may become subject to costly litigation by our customers or their patients.

If we, or our suppliers, fail to comply with the FDA’s good manufacturing practice regulations, this could impair our ability to market our products in a cost-effective and timely manner.

We and our third-party suppliers are required to comply with the FDA’s Quality System Regulation, (“QSR”), which covers the methods and documentation of the design, testing, production, control, quality assurance, labelling, packaging, sterilization, storage and shipping of our products. The FDA audits compliance with the QSR through periodic announced and unannounced inspections of manufacturing and other facilities. The FDA may impose inspections or audits at any time. If we or our suppliers have significant non-compliance issues or if any corrective action plan that we or our suppliers propose in response to observed deficiencies is not sufficient, the FDA could take enforcement action, including any of the following sanctions:

■ untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;

■ customer notifications or repair, replacement, refunds, recall, detention, or seizure of our products;

■ operating restrictions, partial suspension, or total shutdown of production;

■ refusing or delaying our requests for 510(k) clearance or pre-market approval of new products or modified products;

■ withdrawing 510(k) clearances or pre-market approvals that have already been granted;

■ refusal to grant export approval for our products; or

■ criminal prosecution.

Any of these sanctions could have a material adverse effect on our reputation, business, results of operations and financial condition. Outside the United States, our products and operations are also often required to comply with standards set by industrial standards bodies, such as the International Organization for Standardization. Foreign regulatory bodies may evaluate our products or the testing that our products undergo against these standards. The specific standards, types of evaluation and scope of review differ among foreign regulatory bodies. If we fail to adequately comply with any of these standards, a foreign regulatory body may take adverse actions similar to those within the power of the FDA. Any such action may harm our reputation and could have an adverse effect on our business, results of operations and financial condition.

Failure to comply with the U.S. Foreign Corrupt Practices Act, the UK Bribery Act or other anti-corruption laws could result in fines, criminal penalties, contract terminations and an adverse effect on our business.

We operate in the medical device industry in several countries throughout the world, many of which pose elevated risks of anti-corruption violations. We sell our products through our direct sales force and through distributors to our end customers, including state-or-government-owned hospitals. This puts us and our distributors in contact with persons who may be considered “foreign officials” or “foreign public officials” under the U.S. Foreign Corrupt Practices Act of 1977, (the “FCPA”), and the Bribery Act 2010 of the Parliament of the United Kingdom, or the UK Bribery Act, respectively. In March 2013, we adopted an Anti-Bribery Policy, and we are committed to doing business in accordance with all applicable anti-corruption laws. We are subject, however, to the risk that we, our affiliated entities, or our or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the FCPA and the UK Bribery Act. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of our operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations, as well as any investigation thereof, could damage our reputation and have an adverse impact on our business.

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Risks Related to Our Ordinary Shares

Our ordinary share price may be highly volatile and, as a result, you could lose a significant portion or all of your investment or we could become subject to securities class action litigation.

The market price of the ordinary shares on the Nasdaq Global Market has and may continue to fluctuate as a result of several factors, including the following:

■ variations in our quarterly operating results;

■ volatility in our industry, the industries of our customers and the global securities markets;

■ risks relating to our business and industry, including those discussed above;

■ strategic actions by us or our competitors;

■ adverse judgments or settlements obligating us to pay damages;

■ actual or expected changes in our growth rates or our competitors’ growth rates;

■ investor perception of us, the industry in which we operate, the investment opportunity associated with the ordinary shares and our future performance;

■ adverse media reports about us or our directors and officers;

■ addition or departure of our executive officers;

■ changes in financial estimates or publication of research reports by analysts regarding our ordinary shares, other comparable companies or our industry generally;

■ trading volume of our ordinary shares;

■ sales of our ordinary shares by us or our shareholders;

■ domestic and international economic, legal and regulatory factors unrelated to our performance; or

■ the release or expiration of lock-up or other transfer restrictions on our outstanding ordinary shares.

Furthermore, the stock markets recently have experienced significant price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions or interest rate changes may cause the market price of ordinary shares to decline. If the market price of our ordinary shares does not exceed the price you bought your ordinary shares for, you may not realize any return on your investment in us and may lose some or all of your investment.

In addition, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may become the target of this type of litigation. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

If we fail to maintain Nasdaq’s continued listing requirement of a minimum bid price of at least $1.00 per share for a period of 30 consecutive business days, our shares may be delisted from the Nasdaq Global Market.

Our ordinary shares are listed on the Nasdaq Global Market under the symbol “EVAR.”  To continue to be listed on Nasdaq, we need to satisfy a number of requirements, including a minimum bid price for our ordinary shares of $1.00 per share for a period of 30 consecutive business days.   If we fail to comply with such requirement, we would have a period of 180 calendar days to achieve compliance by meeting the applicable standard for a minimum of ten consecutive business days.  If we are not deemed in compliance before the expiration of the 180-day compliance period, Nasdaq may afford us an additional 180-day compliance period, provided that on the 180th day of the first compliance period we have demonstrated that we meet all applicable standards for initial listing on the Nasdaq Global Market (except the bid price requirement) based on our most recent public filings and market information.

On November 9, 2016, we received a Nasdaq Staff Deficiency Letter indicating that the Company is not in compliance with the minimum bid price requirement for continued listing. According to the letter from Nasdaq, the Company had a grace period of 180 calendar days, starting November 9, 2016, to regain compliance with the minimum bid price requirement.  

The purchase price of our ordinary shares might not reflect their value, and you may experience dilution as a result of future equity issuances.

The purchase price of our ordinary shares might not reflect their value, and you may experience dilution as a result of future equity issuances. The exercise of outstanding options and future equity issuances, including future public offerings or future private placements of equity securities and any additional ordinary shares issued in connection with acquisitions, will result in further dilution to investors.

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Insiders will continue to have substantial control over us and will be able to influence corporate matters.

As at the date of this Annual Report, we believe that our directors and executive officers and shareholders holding more than 5% of our capital stock and their affiliates will beneficially own, in the aggregate, approximately 63.9% of our outstanding ordinary shares. Two of the shareholders holding more than 5% of our capital stock are affiliated with two of our directors. As a result, it is likely that certain of our largest shareholders, either individually or if acting in concert, would be able to exercise influence over most if not all matters requiring shareholders’ approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.

Additional equity issuances will dilute your holdings, and sales by certain of our large shareholders, directors, executive officers or a large number of other shareholders could adversely affect the market price of our ordinary shares.

As at the date of this Annual Report, we have 27,950,785 ordinary shares outstanding. With the exception of 575,000 ordinary shares held in escrow as a result of the Altura acquisition, all ordinary shares are freely transferable without restriction or additional registration under the Securities Act.

Sales of a large number of our ordinary shares by certain of our large shareholders, directors, executive officers or in the aggregate by smaller previous shareholders of Lombard Medical Technologies plc could adversely affect the market price of our ordinary shares. Similarly, the perception that any primary or secondary sales may occur could adversely affect the market price of our ordinary shares. Any future issuance of our ordinary shares by us may dilute your shareholdings as well as the holdings of our existing shareholders, causing the market price of our ordinary shares to decline. In addition, any perception by potential investors that such issuances or sales might occur could also affect the trading price of our ordinary shares.

We incur increased costs as a result of being a U.S. listed company.

As a U.S. listed company, we incur significant legal, accounting and other expenses that we did not incur previously. These costs will further increase after we no longer qualify as an “emerging growth company.” We will continue to incur costs associated with our U.S. public company reporting requirements. We also will continue to incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as new rules implemented by the Securities and Exchange Commission, or the SEC, and the Nasdaq Global Market. We expect these rules and regulations to continue to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

As a foreign private issuer, we are subject to different U.S. securities laws and Nasdaq governance standards than domestic U.S. issuers. This may afford less protection to holders of our ordinary shares, and you may not receive corporate and company information and disclosure that you are accustomed to receiving or in a manner in which you are accustomed to receiving it.

As a foreign private issuer, the rules governing the information that we disclose differ from those governing U.S. corporations pursuant to the Securities Exchange Act of 1934, as amended, or the Exchange Act. Although we report certain material events, we are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days of their occurrence and our quarterly or current reports may contain less or different information than required under U.S. filings. In addition, we are exempt from the Section 14 proxy rules, and proxy statements that we distribute will not be subject to review by the SEC. Our exemption from Section 16 rules regarding sales of ordinary shares by directors and officers means that you will have less data in this regard than shareholders of U.S. companies that are subject to the Exchange Act. As a result, you may not have all the data that you are accustomed to having when making investment decisions. Also, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder with respect to their purchases and sales of our ordinary shares. The periodic disclosure required of foreign private issuers is more limited than that required of domestic U.S. issuers and there may therefore be less publicly available information about us than is regularly published by or about U.S. public companies.

As a foreign private issuer, we will be exempt from complying with certain corporate governance requirements of the Nasdaq Global Market applicable to a U.S. issuer, including the requirement that a majority of our board of directors consist of independent directors. For example, we follow Cayman Islands law with respect to the requirements for meetings of our shareholders, which are different from the requirements of Nasdaq Rule 5620. Among other things, Nasdaq Rule 5620 requires a company to hold an annual meeting of shareholders no later than one year after the end of a company’s fiscal year-end. Our amended and restated memorandum and articles of association require that we hold an annual general meeting of shareholders. We are not obliged to do so under the laws of the Cayman Islands. Additionally, the minimum quorum requirement under Nasdaq Rule 5620 is 33 1/3% of the outstanding ordinary shares. However, pursuant to the laws of the Cayman Islands and our amended and restated memorandum and articles of association, the quorum required for a general meeting of shareholders consists of at least two shareholders present in person or by proxy at a meeting and entitled to vote on the business to be dealt with, who represent not less than one-third of the total par value of our issued and outstanding voting shares. As a further example, under Cayman Islands law, there is no statutory requirement for equity compensation plans to be approved by way of shareholder resolution, which is different than the requirements of Nasdaq Rule 5635(c). As such, while we may choose to seek shareholder approval for any equity compensation plans, we do not intend to adopt any requirements for shareholder approval of such plans in our amended and restated memorandum and articles of association. As the corporate governance standards applicable to us are different than those applicable to domestic U.S. issuers, you may not have the same protections afforded under U.S. law and the Nasdaq rules as shareholders of companies that do not have such exemptions.  See “Item 16G. Corporate Governance” for the rules of the Nasdaq Global Market that we rely on these exemptions for.

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We are an “emerging growth company,” and if we comply only with reduced disclosure requirements applicable to emerging growth companies, our ordinary shares could be less attractive to investors and our share price may be more volatile.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Start-ups (“JOBS”) Act, and, for as long as we continue to be an “emerging growth company,” we may continue to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. We will cease to be an “emerging growth company” upon the earliest of (1) the first fiscal year following the fifth anniversary of the IPO, (2) the first fiscal year after our annual gross revenue is $1 billion or more, (3) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities or (4) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our ordinary shares less attractive if we choose to rely on these exemptions. If some investors find our ordinary shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our ordinary shares and our share price may be more volatile.

We may become subject to taxation in the Cayman Islands which would negatively affect our results.

We have received an undertaking from the Governor-in-Cabinet of the Cayman Islands that, in accordance with section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands, until the date falling 20 years after February 24, 2014, being the date of such undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (i) on or in respect of the shares, debentures or other obligations of our Company or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by our Company to its members or a payment of principal or interest or other sums due under a debenture or other obligation of our Company. If we otherwise were to become subject to taxation in the Cayman Islands, our financial condition and results of operations could be materially and adversely affected.

There may be a risk of us being subject to tax in jurisdictions in which we do not currently consider ourselves to have any tax resident subsidiaries or permanent establishments.

Our tax treatment is dependent, among other things, on the jurisdiction of our residence, including the residence of our subsidiaries, for tax purposes. We are a Cayman Islands exempted company with limited liability, resident in the United Kingdom for tax purposes. We attempt to manage our business such that each of our subsidiaries is resident for tax purposes solely in its jurisdiction of incorporation, and does not unintentionally create a taxable permanent establishment or other taxable presence in any other jurisdiction.

We cannot assure you that we will not be classified as a passive foreign investment company for any taxable year, which may result in adverse U.S. federal income tax consequence to U.S. Holders.

Based on our operations, composition of assets and market capitalization in 2016, we believe that we were not a passive foreign investment company, (“PFIC”), for U.S. federal income tax purposes in 2016. In general, a non-U.S. corporation will be classified as a PFIC for any taxable year if at least (i) 75% of its gross income is classified as “passive income” or (ii) 50% of its assets (determined on the basis of a quarterly average) produce or are held for the production of passive income. For these purposes, cash is considered a passive asset. In making this determination, the non-U.S. corporation is treated as earning its proportionate share of any income and owning its proportionate share of any assets of any corporation in which it holds 25% or more (by value) of the stock. The determination of whether we are a PFIC is made annually, after the close of the relevant taxable year. Therefore, it is possible that we could be classified as a PFIC for the current taxable year or in future years due to changes in the composition of our assets or income, as well as changes to our market capitalization. The market value of our assets may be determined in large part by reference to the market price of our ordinary shares, and may fluctuate considerably given that market prices of medical technology companies have been especially volatile. If we were to be treated as a PFIC for any taxable year during which a U.S. Holder held our ordinary shares, however, certain adverse U.S. federal income tax consequences could apply to the U.S. Holder. For example, if we were classified as a PFIC, U.S. Holders would not be eligible to make an election to treat us as a qualified electing fund, (“QEF”) election, because we do not anticipate providing U.S. Holders with the information required to permit a QEF election to be made. Such a QEF election, if available, could mitigate adverse consequences should we be classified as a PFIC.

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Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal courts may be limited.

We are a Cayman Islands exempted company with limited liability, resident in the United Kingdom for tax purposes, and substantially all of our assets will be located outside the United States. In addition, half of our directors and officers are nationals or residents of jurisdictions other than the United States and all or a substantial portion of their assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or our directors or executive officers, or enforce judgments obtained in the United States courts against us or our directors or officers.

Further, mail addressed to us and received at our registered office will be forwarded unopened to the forwarding address supplied by our directors. Our directors will only receive, open or deal directly with mail which is addressed to them personally (as opposed to mail which is only addressed to us). We, our directors, officers, advisors or service providers (including the organization which provides registered office services in the Cayman Islands) will not bear any responsibility for any delay, howsoever caused, in mail reaching this forwarding address.

Our corporate affairs will be governed by our amended and restated memorandum and articles of association, the Companies Law (2013 Revision) (as the same may be supplemented or amended from time to time) and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not technically binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and certain states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law. As a result, there may be significantly less protection for investors than is available to investors in companies organized in the United States, particularly Delaware. In addition, Cayman Islands companies may not have standing to initiate a shareholder’s derivative action in a Federal court of the United States. The Cayman Islands courts are also unlikely:

■ to recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of United States securities laws; and

■ to impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of United States securities laws that are penal in nature.

There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. The Grand Court of the Cayman Islands may stay proceedings if concurrent proceedings are being brought elsewhere.

Like many jurisdictions in the United States, Cayman Islands law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies and any such company may be the surviving entity for the purposes of mergers or the consolidated company for the purposes of consolidations. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must, in most instances, then be authorized by a special resolution of the shareholders of each constituent company and such other authorization, if any, as may be specified in such constituent company’s articles of association. A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders. For this purpose, a subsidiary is a company of which at least 90% of the votes cast at its general meeting are held by the parent company. The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands. The plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

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In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not be approved, the court can be expected to approve the arrangement if it determines that:

■ the statutory provisions as to the required majority vote have been met;

■ the shareholders have been fairly represented at the meeting in question, the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class and that the meeting was properly constituted;

■ the arrangement is such that it may reasonably be approved by an intelligent and honest man of that share class acting in respect of his interest; and

■ the arrangement is not one which would be more properly sanctioned under some other provision of the Companies Law.

If the arrangement and reconstruction is approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of U.S. corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

In addition, there are further statutory provisions to the effect that, when a takeover offer is made and approved by holders of 90.0% in value of the shares affected (within four months after the making of the offer), the offeror may, within two months following the expiry of such period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands, but this is unlikely to succeed unless there is evidence of fraud, bad faith, collusion or inequitable treatment of shareholders.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.

Provisions of our charter documents or Cayman law could delay or prevent an acquisition of our Company, even if the acquisition may be beneficial to our shareholders, could make it more difficult for you to change management, and could have an adverse effect on the market price of our ordinary shares.

Provisions in our amended and restated memorandum and articles of association may discourage, delay or prevent a merger, acquisition or other change in control that shareholders may consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our shareholders to replace or remove our current management by making it more difficult to replace or remove our board of directors.

Such provisions may reduce the price that investors may be willing to pay for our ordinary shares in the future, which could reduce the market price of our ordinary shares. These provisions include:

■ a prohibition on shareholder action through written consent;

■ a requirement that extraordinary general meetings of shareholders be called only by a majority of the board of directors or, in limited circumstances, by the board upon shareholder requisition;

■ an advance notice requirement for shareholder proposals and nominations to be brought before an annual general meeting;

■ provisions relating to the multiple classes and three-year terms of our directors, the manner of election of directors, removal of directors and the appointment of directors as an addition to the existing board or to fill a vacancy;

■ the authority of our board of directors to issue preferred shares with such terms as our board of directors may determine; and

■ a requirement of approval of not less than 66 2/3% of the votes cast by shareholders entitled to vote thereon in order to amend any provisions of our memorandum and articles of association.

Item 4   Information On The Company

A. History and Development of the Company

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We are a Cayman Islands exempted company with limited liability incorporated on January 16, 2014 and resident in the United Kingdom for tax purposes. Exempted companies are Cayman Islands companies whose operations are conducted mainly outside the Cayman Islands. Our business was founded on January 14, 2003 as Advanced Medical Technologies Limited (subsequently Advanced Medical Technologies plc and then Lombard Medical Technologies plc), a company incorporated under the laws of England and Wales. On April 30, 2014 we effected a change of domicile pursuant to which Lombard Medical Technologies plc became a wholly-owned subsidiary of Lombard Medical, Inc.

From December 13, 2005 until April 30, 2014, Lombard Medical Technologies plc’s ordinary shares were listed on the Alternative Investment Market, (“AIM”), a market operated by London Stock Exchange plc, under the symbol LMT. On April 25, 2014, we completed our initial public offering of ordinary shares on the Nasdaq Global Market. Our ordinary shares are traded under the symbol EVAR.

On July 30, 2015, we completed the merger of Merger Sub with and into Altura Medical, Inc., pursuant to the terms of the merger agreement. As a result of the merger, Altura is a wholly-owned subsidiary of ours. Upon the closing of the Merger (herein referred to as the “Acquisition”), and in accordance with the terms of the merger agreement, we issued an aggregate of 3,700,000 unregistered ordinary shares to the former stockholders and certain former executive officers of Altura in exchange for the shares of Altura preferred stock outstanding immediately prior to the closing of the Acquisition. This included the delivery of an aggregate of 575,000 unregistered ordinary shares to Computershare Trust Company, N.A., in its capacity as escrow agent, to secure our rights, and the rights of certain of our affiliates and representatives, to indemnification as provided in the merger agreement.

In connection with the Acquisition, we modified our $26 million secured term loan facility with Oxford Finance LLC to accelerate the draw of approximately $5.5 million from our optional $10 million near-term revenue milestone in order to finance the acquisition of Altura. The proceeds of the debt drawdown were used to refinance existing indebtedness of Altura. In October 2015, we achieved the revenue milestone for the optional $10 million second tranche of the loan facility with Oxford Finance LLC. As such, we drew the remaining $4.5 million from this tranche on October 8, 2015. As of December 31, 2016 we had received $21.0 million loan funding as part of the $26 million secured loan facility with Oxford Finance LLC. The final $5 million will only become available to us when and if additional revenue targets of $25.0 million trailing revenues.

On December 18, 2016, we entered into an investment agreement with MicroPort NeuroTech Corp. (“MP NeuroTech”) and MicroPort NeuroTech CHINA Corp. Limited (“MP NeuroTech China” and together with MP NeuroTech, “MicroPort”) to purchase $5 million in shares. In accordance with the terms of the investment agreement on April 3, 2017, we entered into definitive agreements for the strategic partnership whereby we have granted MicroPort a technology license to manufacture our products for the China market and exclusive marketing rights for our products in China and Brazil.

Based on forecasts revised in December 2016, we expect to use up our current cash resources between Q1 2018 and Q2 2018, depending on the effectiveness of the cost savings programs being implemented by management. We therefore need to raise additional capital or incur indebtedness to continue to fund our future operations, which may come from one or a number of public or private sources.

Our ability to raise additional funds will depend on the results of our commercialization efforts for the Altura Endovascular Stent Graft, and the next generation of the Aorfix delivery system, as well as clinical and regulatory events, and may also be impacted by adverse financial, economic, and market conditions, many of which are beyond our control. We cannot be certain that sufficient funds will be available when required, or on satisfactory terms.

To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in ownership dilution to existing stockholders. There are no assurances that we will be able to raise additional financing for the amounts required to execute our business plan and on terms acceptable to us. If adequate funds are not available on terms that are acceptable when required by us, we may be required to significantly reduce or refocus our operations, which could have a material adverse effect on our business, financial condition and results of operations, which could result in insolvency. In addition, we may have to delay, reduce the scope or eliminate some of our research and development or sales activities, which could delay the time to market for any of our product candidates or reduce our revenue growth potential, if such adequate funds are not available. These factors raise substantial doubt about our ability to continue as a going concern. We will therefore need to raise additional capital or incur indebtedness to continue to fund our future operations, which may come from one or a number of public or private sources.

Since incorporation in 2003, we have traded solvently and have not been subject to any bankruptcy proceedings. For information about our capital expenditures, please see “Capital Expenditures” in Item 5 of this Annual Report on Form 20-F.

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Our head office is located at 4 Trident Park, Didcot, Oxfordshire OX11 7HJ United Kingdom, and our phone number is +44 (0) 1235-50800. More comprehensive information about our products and company is available on our website at www.lombardmedical.com. Our website and the information contained on, or accessible through, our website are not part or otherwise incorporated into this Annual Report on Form 20-F.

B. Business Overview

Overview

We are a medical technology company specializing in developing, manufacturing, and marketing endovascular stent-grafts that address significant unmet needs in the repair of aortic aneurysms. Our highest revenue product, currently Aorfix, is the only AAA stent-graft approved by the FDA and Japanese Ministry for Labor, Health and Welfare for the treatment of AAAs with angulation at the neck of the aneurysm of up to 90 degrees.

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AAA	Aorfix in Situ	Altura in Situ

An AAA is a balloon-like enlargement of the aorta in the abdominal cavity which, if left untreated, may rupture. Most ruptured AAAs are fatal. According to iData Research, Inc. AAAs are the thirteenth leading cause of death in the United States and the tenth leading cause of death in U.S. men aged 65 years and older. AAAs are currently treated either through invasive and traumatic open surgical repair or through less invasive endovascular aortic repair, or EVAR. According to data produced by Medtech Ventures, the worldwide EVAR market was estimated to be approximately $1.6 billion in 2015, with the U.S. market estimated at approximately $800 million according to iData Research, Inc. According to Medtech Ventures, it is estimated that more than 500,000 AAA patients are diagnosed annually in the developed world, with 200,000 of such patients receiving treatment.

According to Medtech Ventures, approximately 20% of all AAA patients have aneurysms with neck angulation greater than 60 degrees, which we refer to as high angle neck anatomy. There are no EVAR devices other than Aorfix approved by the FDA to treat AAAs with high angle neck anatomy. Our U.S. Pythagoras study data suggests that an additional approximately 10% of AAA patients with neck angulation less than 60 degrees have moderate or severe tortuosity, which is an abnormality of shape or path, in the iliac arteries, which branch off the aorta into the legs. Our data indicates that Aorfix can substantially reduce complication and reintervention rates in this AAA patient group. The marketing of Aorfix has initially focused on these two groups, the 20% of all AAA patients for which we have the only FDA-approved product, and the additional 10% of all AAA patients where we believe Aorfix will demonstrate superior performance to other FDA-approved EVAR devices

We also believe we may in the future successfully penetrate the broader AAA market with Aorfix. We believe on Aorfix show complication rates in patients whose aneurysms have neck angulation of 60 degrees or less, which we refer to as low angle neck anatomy, that are comparable to those of other FDA-approved EVAR devices in such patients. Clinicians in the United States may prefer to use only one device, to treat a broad range of AAA patients. Our new product, the Altura Endovascular Stent Graft will aim to target this market segment.

Unlike all other commercially approved stent-grafts in the United States, most of which use z-shaped, multi-linked stents to support the graft, Aorfix’s self-expanding stent is formed from a single, continuous wire made of nitinol, an alloy of nickel and titanium, attached to a proprietary woven polyester graft. This design makes Aorfix highly flexible, which we believe gives Aorfix an advantage over other FDA-approved EVAR devices, particularly in the treatment of the AAA patients with high angle neck anatomy and iliac tortuosity. We supply Aorfix pre-loaded into a delivery system, Aorflex, which is designed for accurate placement of Aorfix in the abdominal aorta. Once Aorfix is properly placed within the abdominal aorta, it provides a conduit for blood flow, thereby relieving pressure within the weakened or “aneurysmal” section of the vessel walls, which greatly reduces the potential for the AAA to rupture.

We formally launched Aorfix in November 2013 in the United States through our direct sales force. We announced on August 22, 2016, that we temporarily discontinued commercial operations in the US as a consequence of extensions to the testing of a new delivery device for Aorfix, “Intelliflex” that were required by FDA.  These extensions included collecting limited amounts of clinical data.

Outside of the United States, we market Aorfix in the United Kingdom and through a number of country-exclusive distribution agreements with partners in European Union countries, Latin America and Asia. We provide direct clinical support for cases in Germany and currently have no direct sales force in that territory.

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We continue to make progress in the area of new product development and our next generation delivery system, which includes a reduced device profile and an integrated sheath to reduce vessel trauma has received regulatory approval in Europe in June 2016 and in Japan in January 2017 where we believe it has been well received by physicians.

We plan to market and sell the Altura Endovascular Stent Graft, an ultra-low profile (14f) AAA stent graft system indicated for standard anatomies which received CE Mark in 2015. We launched the product in Europe in January 2016 and in June 2016 announced the creation of the Altitude registry to gather substantive data on the commercial performance of the device.  In the U.S., the Altura Endovascular Stent Graft is not yet approved; however, we intend to file for an Investigational Device Exemption (“IDE”) from the U.S. FDA in late 2017 with the intent to begin recruitment for a U.S. clinical study later in 2018.

Like Aorfix, the Altura stent-graft is used to treat abdominal aortic aneurysms by the procedure known as EndoVascular Aneurysm Repair (EVAR).  Stent-grafts are a combination of a vascular graft, which is usually a tube made from woven polyester or from expanded PTFE, and a stent, which is usually a lightweight metallic structure formed into a cylinder. The Altura stent-graft supplies blood to both iliac arteries but instead of bifurcating, it is made from two separate components.  These two components lie side by side in the aorta and blood flows directly into each of the iliac arteries.  In order to fit with a blood-tight seal in the aorta, the aortic ends of the Altura stent-graft are ‘D’ shaped in cross section so that when the pair of components are arranged to lie with the flat parts of the ‘D’ cross section back to back, they form a circular cross section that fits and seals into the aorta.  This arrangement avoids performing the technically advanced maneuvers required to implant a ‘Y’ shaped device.  The objective of the Altura graft is to make most of the steps in EVAR procedures easier.  The stent-graft uses a braided stent, instead of Z, diamond or ring stents, and this structure allows the stent-graft to be stretched out longitudinally so that it becomes long and narrow.  This feature, when combined with the smaller size of the ‘D’ shaped stent, allows the Altura delivery system to be particularly narrow (14 French, <5mm).  A narrower delivery system makes percutaneous access easier to achieve and allows the stent-graft to be advanced through arteries that are diseased and therefore narrower than normal.

The braided stent design of Altura can be expanded or contracted at will by using the delivery system to compress or to stretch the stent-graft along its axis.  When expanded, the stent-graft can be made to be a tight fit in the artery so that it can seal and fix in place.  However, if the physician expands the graft but decides to adjust its position, the stent-grafts and be stretch out again to be long and narrow so that the stent-graft can be re-positioned.  This feature allows Altura to be placed very accurately next to branch vessels or specific lesions in the arteries whereas many other stent-grafts cannot be repositioned once deployed.  Axially compressing the braid of the Altura stent-graft can also be used to increase the radial strength of the graft in areas of challenging anatomy, such as narrowing (stenosis) or tortuosity.

In order to see the anatomy of arteries under X-rays, a liquid contrast material that shows strongly on X-rays must be injected into the artery.  A thin tube (catheter) is usually placed inside the artery alongside the stent-graft and small quantities of contrast liquid can be injected.  The contrast then briefly fills the artery and its branches before flowing away in the blood-stream.  Arteries are usually soft and sometimes move considerably when delivery catheters are pushed into them.  This means that it is sometimes necessary to keep checking the positions of arteries and branches by using multiple injections of contrast.  It is not always convenient to place a catheter before deploying a stent-graft or at every stage throughout its deployment and to make this issue easier, the Altura delivery systems allows liquid contrast to be injected into the patient directly through the delivery system without the need for a separate catheter.  This feature increases the accuracy of stent-graft placement in both the aorta and in the iliac arteries and it avoids the need to introduce a catheter until the very end of the procedure.

Stent-grafts usually have aortic components and iliac components which plug into the aortic component.  These components are usually deployed from the delivery system by holding the stent-graft component in one position while the physician slides back the delivery catheter to allow the stent-graft component to be released without moving its position.  Universally, by pulling the delivery catheter back, the stent-graft is deployed first at the end furthest away from the physician and therefore deepest in the patient.  This arrangement is ideal for accurate placement at the renal arteries where the top of the stent-graft must be aligned accurately with the point in the aorta where the renal artery branches away.  In the iliac artery, however, the bottom end of the stent-graft must be aligned with the hypogastric artery and this end usually emerges last from the delivery system.  This can make it harder to align the graft accurately with the branch.  The Altura delivery system is unique among stent-grafts in having a catheter which deploys the iliac component in the reverse direction, allowing placement of the component first at the hypogastric artery, which makes it easier to position accurately.  The feature of being able to inject contrast liquid is also available in this delivery system, allowing the precise location of the hypogastric artery to be visualized at the time of deployment.

Stent-grafts need to fit a wide range of sizes of anatomy; most manufacturers have a selection of tens to more than a hundred components of different sizes of stent-graft to allow this variety to be treated. Altura uses four separate components (two aortic and two iliac parts) allowing many different sizes to be constructed from a small selection of parts.  The adjustability of the braided stent allows each size of stent-graft to fit a wide range of vessel diameters and lengths.  The majority of EVARs can be completed with Altura from a choice of just 3 aortic sizes and 3 iliac sizes, making it easy to plan cases and to keep a small stock in hospitals for emergent treatments.

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The combination of Altura’s technology with our flagship Aorfix product creates a patient driven platform that we believe will allow us to capture market share from our competitors. The Altura Endovascular Stent Graft offers a simple, safe, and efficient treatment option for standard AAA anatomy and will allow physicians to treat a large number of patients more efficiently in the future, while Aorfix offers the only on-label solution for patients with Aortic neck angulation up to 90 degrees.

Market Overview

Abdominal Aortic Aneurysms

Arterial aneurysms occur most commonly in the aorta, which extends from the chest to the abdomen. The abdominal aorta is the segment between the renal (kidney) arteries and the two iliac arteries. AAAs occur when a portion of the abdominal aorta bulges into an aneurysm because of a weakening of the vessel wall, which may result in life threatening internal bleeding upon rupture. The causes of AAA are not fully understood but AAAs often occur in patients who also have coronary artery disease, or poor circulation in their lower limbs that is associated with atherosclerosis.

Risk factors for AAAs generally include family history, smoking, high blood pressure, high cholesterol and gender (with higher incidence in men). This disease generally progresses with age.

According to Medtech Ventures, approximately 4,500,000 people are living with AAAs in the developed world, at least 1,500,000 of which are in the United States, and each year approximately 500,000 new patients are diagnosed in the developed world, according to iData Research, Inc. According to iData Research, Inc., the overall patient mortality rate for ruptured AAAs is approximately 80%, making them among the leading causes of death in the United States

Aortic aneurysms can vary in the amount of bending, or angulation, with higher angulation generally being more difficult to treat. Aortic aneurysms with angulations greater than 60 degrees are often referred to as having high angle neck anatomy. Aortic aneurysm patients may also exhibit arterial tortuosity, which creates additional challenges in affixing a device to exclude the aneurysm. According to Medtech Ventures, approximately 20% of all AAA patients have high angle neck anatomy. Our U.S. Pythagoras study data suggest that an additional approximately 10% of AAA patients with neck angulation less than 60 degrees have moderate or severe tortuosity in the iliac arteries.

Diagnosis of and Current Treatment Options for AAAs

Although AAA is one of the most serious cardiovascular diseases, many AAAs are never detected. Most AAA patients do not have symptoms at the time of their initial diagnosis. AAAs generally are detected during procedures to diagnose unrelated medical conditions. Because AAAs generally arise in people over the age of 65 and can rupture with little warning, initiatives have been undertaken to increase AAA-specific screening.

The most prominent of these initiatives is the SAAAVE Act, which was signed into law in the United States on February 8, 2006 as part of the Deficit Reduction Act of 2005, and began providing coverage on January 1, 2007. For people who meet certain eligibility criteria, and as implemented by CMS, SAAAVE provides for a one-time free of charge AAA screening for certain men who have smoked cigarettes sometime in their lives, and men or women who have a family history of the disease. This screening is provided as part of the “Welcome to Medicare” physical.

According to the U.S. Census Bureau, the population of the United States aged 65 and over was approximately 47,800,000 in 2015, or 14.9% of the total U.S. population. This section of the population is forecasted to grow, both in absolute terms and by percentage of the population, to 56,000,000 (16.8% of the population) by 2020, according to the U.S. Census Bureau. Accordingly, given this demographic trend towards an aging population, the number of AAAs in the United States is expected to increase naturally over time. In addition, the percentage of cases diagnosed may also to grow due to an increasing prevalence of screening for AAAs, such as that conducted under the SAAAVE initiative.

Once diagnosed, the current standard of care for AAAs that are below 5.5 centimeters in diameter is to continue monitoring, but not to make any surgical intervention to repair the aneurysm. For AAAs with diameters greater than 5.5 centimeters, there are two methods of treatment, open surgery and EVAR.

An article published in the New England Journal of Medicine on January 31, 2008 compared the results of open surgical repair versus EVAR for the treatment of AAAs on more than 45,000 patients over a three-year period. Among the findings discussed in the article were:

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■ the 30-day mortality rate of all patients in the study undergoing EVAR was approximately 1.2%, as compared to 4.8% for open surgical repair;

■ patients treated by EVAR were three times less likely to be discharged to a rehabilitation facility or nursing home rather than their own homes as compared to patients treated with open repair; and

■ the average hospital stay for patients in the study after EVAR was 3.4 days versus 9.3 days for patients after open surgical repair.

Until the approval of Aorfix in the United States, no FDA-approved EVAR device was available to treat patients with high angle neck anatomy.

Open surgery has historically been standard of care for treating AAAs. However, due to generally a lower mortality rate, lower morbidity rate, shorter hospital stays and shorter recovery periods, we estimate that EVAR is currently used to treat approximately 75% of all AAA patients receiving treatment in the United States.

EVAR Market

According to Medtech Ventures, the current annual worldwide EVAR market size is estimated to be approximately $1.6 billion and is expected to grow at a compound annual growth rate of 6% to approximately $1.9 billion in 2018. It is estimated that more than 500,000 AAA patients worldwide are diagnosed annually in the developed world, with approximately 200,000 of such patients receiving treatment. Based upon this information, we expect the underlying market for Aorfix is expected to continue to expand. See Item 5. Operating and Financial Review and Prospects and the financial statements included elsewhere in this Annual Report for a breakdown of our revenues by geographic location.

U.S. Market

AAAs are the thirteenth leading cause of death in the United States and the tenth leading cause of death in U.S. men aged 65 years and older. According to iData Research, Inc. the U.S. EVAR market was estimated to be approximately $800 million in 2015 and each year, 200,000 patients are diagnosed with AAA. At present, other than Aorfix, there are five FDA-approved AAA stent-grafts available in the U.S. EVAR market. Each of these other FDA-approved AAA stent-grafts is approved only to treat AAAs with a neck angulation of 0 to 60 degrees.

Japanese Market

According to Medtech Ventures, Japan represents the second-largest standalone EVAR market, estimated at $140 million in 2013 and growing at an average rate of 18% over the last five years. The first commercial AAA stent-graft was approved in Japan in 2006, nine and seven years after their launch in Europe and the United States respectively. Because the procedure had an established international track record with favorable long term follow-up data, acceptance of EVAR in Japan has been relatively rapid. According to Medtech Ventures, in Japan, there are approximately 400 physicians at 200 clinics performing EVAR and it is estimated that approximately 55% of Japanese AAA patients are treated using this method.

European Union Market

According to Medtech Ventures, the European EVAR market was estimated to be $450 million in 2013 and growing at an average annual growth rate of 6% over the last five years. We believe the EVAR market is expected to continue to grow due in part to the availability of favorable, long-term data on stent-grafts and evidence of lower mortality emerging from patient registries, as well as aging populations and increased screening. Italy, Germany and the United Kingdom are the three largest and most developed European EVAR markets.

Limitations of Current AAA Treatments

In the U.S. EVAR market, there has historically been no stent-graft approved to treat AAAs with neck angles above 60 degrees; all approved devices have explicit limitations printed in their instructions for use, which limit use of the devices to neck angles no greater than 60 degrees. Other than the use of stent grafts beyond the scope of their approvals, open surgery is the only other treatment for such anatomies. The five FDA-approved AAA stent-grafts currently available in the United States other than Aorfix are not approved for use where the AAA neck angle is greater than 60 degrees. AAA patients with high angle neck anatomy have historically been treated with existing EVAR stent-grafts not approved by the FDA for such use. Use of devices that are not FDA-approved to treat high angle neck anatomy has been shown in clinical studies to lead to serious complications, including significant increase in proximal endoleak, which occurs when the stent-graft fails to seal properly against the artery wall at its top end, as well as stent migration, which occurs when a stent-graft moves down inside the aorta after it has been implanted.

A study published by the American Heart Association showed that up to 58% of EVAR procedures carried out using stent-grafts outside the scope of their approved angulation range resulted in aneurysm sac expansion. The use of stent-grafts outside approved angulation ranges is discouraged but has become fairly widespread practice because of the absence of FDA-approved stent-grafts capable of accommodating higher neck angulation such as Aorfix.

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Open surgical repair requires a large incision in the patient’s abdomen, the cross clamping of the aorta to stop blood flow and implantation of a graft which is sutured to the aorta, connecting one end above the aneurysm to the other end below the aneurysm. This highly invasive surgical procedure generally lasts between two and four hours. After receiving open surgical repair, the patient usually requires a few days in the hospital’s surgical intensive care unit, and the total hospital stay may be four to ten days. Post-procedure convalescence may take another four to six weeks due to the invasiveness of the operation and the procedure carries a 5-6%, 30-day mortality rate.

Our AAA Solutions

Aorfix

To date, Aorfix has been used to treat over 75,000 patients worldwide. Aorfix is the only device in the United States and one of only two devices in the European Union with a label indication for the treatment of AAA patients with aortic neck angulations of up to and including 90 degrees. The procedure typically takes less than two hours and involves catheter-based delivery using the Intelliflex system to deploy the Aorfix stent-graft through a small incision in the groin into the femoral artery.

Aorfix	Intelliflex Delivery System

As a result, Aorfix offers physicians an approved device to treat patients with high angle neck anatomy, who would otherwise need to be treated through open surgery or with a stent-graft that is not approved for use in such neck anatomy. While we have not conducted any direct head-to-head studies comparing Aorfix to other stent-graft devices in patients with high angle neck anatomy, several clinical studies have been published on AAA EVAR devices. Based on a review of these clinical studies, we believe Aorfix provides more favorable outcomes in high angle neck anatomy patients and results in fewer complications than AAA EVAR devices that have not been approved for use in such patients. As compared to treatment through open surgery, Aorfix carries lower risk and requires a significantly shorter period of hospital stay and postoperative recovery. We have initially focused our marketing efforts on approximately 30% of all AAA patients comprised of AAA patients with high angle neck anatomy (approximately 20%) and low angle neck anatomy AAA patients with iliac arterial tortuosity (approximately 10%). We believe this patient population can be uniquely, or better treated by using Aorfix.

Moreover, we believe that by offering physicians an approved AAA stent-graft that is clinically proven to treat patients from 0 to 90 degrees, we can also penetrate and gain share of the low angle AAA market. Using Aorfix to treat AAA patients with low angle as well as high angle neck anatomy allows physicians to treat the broadest range of patients with one stent-graft, reducing costs and training time through rationalization of suppliers.

We are continuing our application to the FDA for an acute IDE study of the IntelliFlex LP, the new delivery system technology created for Aorfix. IntelliFlex features a low profile, intuitive, compact and ergonomic design that enhances the precision and control of Aorfix deployment and placement. In addition, the system incorporates an integrated exchange sheath designed to reduce the possibility of vessel trauma during the procedure. The delivery system has been approved in the European and Japanese markets and we will be continuing work in 2017 to secure commercial approval in the USA in 2018.

Altura Endovascular Stent Graft System

The Altura Endovascular Stent Graft system received CE Mark approval in 2015. It features an innovative ultra-low profile endovascular stent graft technology that offers a simple and predictable solution to the treatment of standard AAA anatomies.

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Altura Endovascular Stent Graft	Altura Delivery System

We completed a live case at the Leipzig Interventional Course (“LINC”) in late January 2016, which demonstrated the products’ effectiveness. We launched into key select centers in the UK & Germany shortly thereafter, with the first commercial procedures in the UK and Germany completed at University Hospital of South Manchester and the Saarland University Medical Centre-Clinic for Diagnostic and Interventional Radiology, respectively. Both hospitals are major EVAR centers in their countries. We have since had a full release of the Altura Endovascular Stent Graft in the UK and Germany and we anticipate a broader launch across the EU during the remainder of 2016 and intend to subsequently seek regulatory approval in the U.S., Japan, and other international markets in the future to further expand our sales.

Our Strategy

We are pursuing the following strategies:

■ Launch and continue marketing the Altura Endovascular Stent Graft in Europe principally through the expansion of our existing sales and marketing infrastructure. We completed our sales team training at the end of January 2016. In addition, we performed a live case at LINC in late January 2016 which demonstrated the product’s effectiveness. We launched into key select centers in the UK & Germany shortly thereafter. We anticipate a broader launch across the EU during the remainder of 2016 and intend to subsequently seek regulatory approval in the U.S., Japan, and other international markets in the future to further expand our sales.

■ Develop and launch enhancements to the Aorflex delivery system and increase size range of Aorfix stent-graft. We are continuing to develop new versions of our Aorflex & IntelliFlex delivery systems to allow physicians to use Aorfix to treat patients with narrow access vessels through a lower profile design that may reduce vessel trauma and allow re-positioning of the top end of the Aorfix graft to further enhance deployment accuracy. Development work is at an advanced stage, however, final testing and regulatory approval is required before commercial launch. In addition, we are developing and testing size range extensions for Aorfix that, if approved, would allow Aorfix to be used to treat patients with anatomy that falls outside of our current size range. Non-standard, larger Aorfix devices have already had limited clinical use in Europe as custom implants.

■ Increase commercial revenues in Europe principally through the expansion of our sales and marketing infrastructure. We intend to increase the size of our direct sales force to support our launch of the Altura Endovascular Stent Graft and continuing Aorfix penetration. We also intend to leverage the data from our U.S. Pythagoras study and our ARCHYTAS Global Clinical Registry to demonstrate to hospitals and physicians throughout the European Union the strengths of Aorfix.

■ Continue marketing Aorfix in the United States with our direct sales force. In total, approximately 1,500 U.S. centers conduct AAA procedures. We are targeting the highest volume U.S. EVAR centers where approximately 50% of annual EVAR procedures in the United States are conducted. We are also focusing on treating AAA patients exhibiting high angle neck anatomy or tortuosity of the iliac arteries. We estimate that these patients represent approximately 30% of all AAA patients.

■ Continue marketing Aorfix in Japan through our partner. We have partnered with Medico’s Hirata, a leading supplier of vascular products in Japan, to exclusively distribute Aorfix in Japan. We received Japanese regulatory approval for Aorfix to treat angulation from 0 to 90 degrees in August 2014. Medico’s Hirata has significant prior experience in the Japanese AAA market through its work in obtaining regulatory approval and gaining market share through a previous relationship with another AAA stent-graft company. Through Medico’s Hirata’s existing and established sales force, we believe we will be able to continue to maximize the potential of Aorfix in this important market.

■ Continue marketing Aorfix in the rest of the world through our distribution network. We intend to continue to expand our marketing efforts in the rest of the world through various third-party distributors, who have prior experience in the markets which we intend to further expand our sales. Through the existing and established sales forces of these distributors, we believe we will be able to maximize the potential of Aorfix in these markets.

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Our Products

Aorfix

Overview

Aorfix is an endovascular stent-graft with an approved indication that includes the repair of AAAs in patients with aortic neck angulations from 0 to 90 degrees. Although we have not conducted any head-to-head clinical studies comparing Aorfix to other FDA-approved EVAR stent-grafts, based on a review of published clinical studies of other AAA EVAR stent-grafts, Aorfix’s flexible design has shown advantages over other FDA-approved EVAR devices in the treatment of AAA patients who exhibit iliac arterial tortuosity. Currently, there are no other stent-grafts approved to treat high-angle AAA anatomies over 60 degrees in the United States or Japan. Medtech Ventures data and our U.S. Pythagoras study data suggests that approximately 20% of all AAA patients have high angle neck anatomy and 10% of the patient population with low angle neck anatomy have moderate or severe tortuosity in the iliac arteries. This means that approximately 30% of all AAA patients can be uniquely or better treated by using Aorfix.

Aorfix sales constituted a significant portion of our historical revenue. We generated total revenue of $12.2 million, $15.1 million and $13.3 million, in the years ended December 31, 2016, 2015 and 2014, respectively.

Aorfix is a two-part modular implant comprising a bifurcated main body section and a (contralateral) plug-in leg. The main body section bifurcates into a full-length (ipsilateral) leg section and a short leg mating section on the plug in side (the socket). The plug-in leg is joined during the procedure to the socket to form the complete bifurcated system. We also supply accessories that allow extension of the stent-graft. Each component is supplied pre-loaded into a delivery system comprising a catheter with built-in deployment handle. The self-expanding implant is formed from a single, continuous nitinol wire and a woven polyester fabric (synthetic textile). Proximal hooks, also fabricated from nitinol, are provided in the main body section to assist fixation. Aorfix was approved by the FDA for treatment of patients with abdominal aortic and aortoiliac aneurysms having vascular morphology suitable for endovascular repair.

IntelliFlex

IntelliFlex LP is a new delivery system created for Lombard’s flagship Aorfix™ AAA stent graft. IntelliFlex features a low profile, intuitive, compact and ergonomic design that enhances the precision and control of Aorfix deployment and placement. In addition, the system incorporates an integrated exchange sheath designed to reduce the possibility of vessel trauma during the procedure. The delivery system is already approved in the EU, Japan and in Brazil.

Altura Endovascular Stent Graft System

The Altura system received CE Mark approval in 2015. It features an innovative ultra-low profile endovascular stent graft technology that offers a simple and predictable solution to the treatment of standard AAA anatomies. We completed a live case at LINC in late January 2016, which demonstrated the product’s effectiveness. We launched into key select centers in the UK & Germany shortly thereafter. We have launched into selective countries across the EU during 2016 and intend to seek regulatory approval in the U.S., Japan, and other international markets in the future to further expand our sales.

Product Development Pipeline

Altura Endovascular Stent Graft System

We will continue to market Altura throughout the European market, and seek regulatory approval in additional markets in order to reach a broader international market. We will continue to train our sales force to ensure physicians understand all the benefits associated with using the product in the future.  Detailed improvements to the utility of the stent graft and delivery system are planned during 2017 and 2018.

Sales and Marketing

With the acquisition of Altura in July 2015, we plan to market and sell the Altura Endovascular Stent Graft, an ultra-low profile (14f) AAA stent graft system indicated for standard anatomies which received CE Mark in 2015.  Lombard launched the product in Europe in January 2016 with a plan for a broader international roll-out later in 2016.  In the U.S., the Altura Endovascular Stent Graft is not yet approved.  In the U.S., the Altura Endovascular Stent Graft is not yet approved; however, Lombard intends to apply for an IDE from the U.S. FDA in 2017 with the intent to begin recruitment for a U.S. clinical study in 2018.

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The combination of Altura’s technology with our flagship Aorfix product creates a patient driven platform that we believe will allow us to capture market share from our competitors. The Altura Endovascular Stent Graft offers a simple, safe, and efficient treatment option for standard AAA anatomy and will allow physicians to treat a large number of patients more efficiently in the future, while Aorfix offers the only on-label solution for patients in the United States with Aortic neck angulation up to 90 degrees.

Suppliers

We utilize a network of raw material, component and service suppliers to manufacture components of our products and to provide services such as sterilization and logistics. The majority of our raw material, component and service suppliers are located in the United Kingdom with the rest based in continental Europe and the United States. We manage our supply base with a mixture of longer term supply agreements and individual purchase orders. We have had long-term relationships with the majority of our suppliers. We regularly review our forecasted capacity needs against our current and anticipated supplies.  We are currently implementing a program for certain sub-assemblies to be manufactured by MicroPort Corp in Shanghai, China in order to provide improvements in gross margins.

We have developed our quality system and requirements for our suppliers to meet the regulatory requirements of the markets we operate in or intend to operate in, including, FDA requirements in the United States, Pharmaceutical and Medical Devices Agency requirements in Japan and International Organization for Standardization requirements recognized in Europe and other countries around the world. Many of our suppliers are dedicated medical device suppliers, or are part of medical device divisions of larger companies. As experienced medical device suppliers, they are familiar with the global quality system requirements, many have ISO 13485 certification, and most of the remaining have ISO 9001 certification.

Manufacturing

We manufacture Aorfix at our UK facility in Didcot. We assemble and test the complete the devices on our own, using custom designed equipment and processes. Our UK manufacturing facility has been inspected by the FDA and PMDA as well as the European Notified Body, DQS. To meet growing demand for Aorfix and Altura, we expanded our manufacturing facilities in Didcot in 2014 by approximately 10,000 square feet. This expansion involved the construction of a new cleanroom and materials handling space from which we have been manufacturing clinical product since the fourth quarter of 2014. We believe this expansion will allow us to meet Aorfix and Altura demand for the foreseeable future.

The manufacture of Altura was successfully transferred from California to our Didcot facility in 2016 and all clinical product supplied by Lombard is now made in the UK. Beginning in the 2^nd half of 2017, certain of our components will be manufactured at MicroPort facilities located in Shanghai, China.

Reimbursement

Inside the United States

The Medicare program is a federal health benefit program administered by the CMS, that covers and pays for certain medical care items and services for eligible elderly (age > 65), blind and disabled individuals, and individuals with end stage renal disease. The Medicaid program is a federal-state partnership under which states receive matching federal payments to fund healthcare services for the poor.

Hospitals are the primary purchasers of our products in the United States. Third-party payors, such as Medicare, Medicaid and private health insurance plans, are subsequently billed for the health care services used to treat a patient’s AAA. Coverage for a particular procedure and reimbursement to hospitals for medical treatment is determined by government agencies, private insurers and other payors. This reimbursement is based on the procedure performed and is generally unrelated to the specific medical device used. It is at a fixed rate based on the diagnosis-related group, (“DRG”), established by CMS.

Procedures utilizing our products are currently reimbursed in the United States under specific DRG codes. CMS has issued ICD-9 procedure code 39.71, “Endovascular implantation of other graft in abdominal aorta” for the proper procedure coding of EVAR for billing purposes. For hospital reimbursement, patients treated with Aorfix are classified under DRG codes 237 or 238, “Major Cardiovascular Procedures with Major Complications” and “Major Cardiovascular Procedures without Major Complications,” respectively.

Outside the United States

Outside the United States, pricing and reimbursement can vary significantly. Market acceptance of medical devices, including EVAR devices, primarily depends on the availability of reimbursement within the prevailing healthcare payment system. Government sponsored healthcare and private health insurance plans are among the variety of sources used to obtain reimbursement. Some jurisdictions operate positive and/or negative list systems under which products may only be marketed once a reimbursement price has been agreed.

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To obtain pricing and reimbursement status in countries in the European Union, a company must generally submit pricing and reimbursement dossiers to the relevant competent authorities in each country. Pricing and reimbursement decisions are made on a country-by-country basis in the European Union and no country is under the obligation to follow another country’s pricing nor its reimbursement status, though prices in one country can influence the price level in other countries.

In Germany, separate pricing and reimbursement processes are in place for products used in physician office settings and in hospitals. For products used in a hospital setting, hospitals are reimbursed on the DRG basis. For products used outside of hospitals, pricing and reimbursement status can only be obtained after submitting the pricing and reimbursement dossier to the German competent authority, (the “G-BA”), and achieving a positive assessment.

In the United Kingdom, the National Institute for Health and Care Excellence, (“NICE”), provides independent, authoritative and evidence-based guidance on the most effective ways to prevent, diagnose and treat disease to guide the National Health Service, (“NHS”), and others with responsibilities for commissioning or providing health care. NICE has issued technology appraisal guidance entitled “Endovascular stent–grafts for the treatment of abdominal aortic aneurysms” (TA167, issued in February 2009) in which it concludes that endovascular stent-grafts are recommended as a treatment option for patients with unruptured infrarenal abdominal aortic aneurysms, for whom surgical intervention (open surgical repair or endovascular aneurysm repair) is considered appropriate. Aorfix was specifically included in this appraisal.

In Japan, medical devices are reimbursed by Japan’s National Health Insurance system and it is illegal in almost all cases for Japanese customers to buy devices without reimbursement coverage. In order to obtain reimbursement coverage, an insurance coverage request form must be submitted after receiving ‘pre-market approval’ or ‘pre-market certification’. Medical devices are classified into four main reimbursement categories, A, B, C and D; A and B are for already categorized devices, and C and D are for new medical device reimbursement categories. In Japan, the AAA Stent Graft, regardless of the manufacturer, has been approved and win our registration approval, we believe Aorfix has automatically been admitted into this reimbursement system. In Japan, reimbursement prices are revised every two years based on pricing surveys and the purchasing price cannot be more than 1.5 times higher than the average price in major foreign countries.

Competition

In February 2013, the FDA approved Aorfix to treat AAA patients with high angle neck anatomy. Aorfix is currently the only FDA-approved AAA stent-graft for patients with high angle neck anatomy. There is one other EVAR device, manufactured by Vascutek-Terumo that is only approved in the European Union for treatment of AAA neck angulation up to and including 90 degrees.

The EVAR market for treatment of AAA with neck angulation below 60 degrees is highly competitive, subject to technological change and significantly affected by new product introductions and market activities of other participants. Our currently marketed products are, and any future products we commercialize will be, subject to competition. In the United States we believe that our significant competitors in this market include Medtronic, Inc., Cook Medical, W.L. Gore & Associates, Inc., and Endologix, Inc. In Europe we believe that our significant competitors in this market are those four companies and, in addition to Vascutek-Terumo and Jotec. In the EVAR market in Japan, we are in competition with Medtronic, Inc., Cook Medical, W.L. Gore & Associates, Inc., and Endologix, Inc.

Because of the size and the high growth profile of the AAA market, we anticipate that companies could dedicate significant resources to developing competing products. We believe that the principal competitive factors in our markets include:

■ improved outcomes for AAA patients;

■ ease of use;

■ quality;

■ product price;

■ scope of regulatory approval for EVAR of AAA angulations; and

■ qualification for and availability of coverage and reimbursement.

Intellectual Property

Our success depends upon our ability to protect our proprietary technology and intellectual property. To protect our proprietary technologies and intellectual property, we rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, as well as customary confidentiality and other contractual protections. As of the date of this filing, we own 134 issued patents globally, of which 22 are issued U.S. patents. As of the date of this filing we own 33 patent applications pending globally, of which 5 patent applications are pending in the United States.

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Our issued stent-graft patents expire between 2016 and 2027, subject to payment of required maintenance fees, annuities and other charges. While our Reinforced Graft patents that solely relate to the Aorfix device expire on January 26, 2019, we own 2 other families of patents that provide protection related to the Aorfix device, the last of which expires on October 15, 2022, subject to payment of required maintenance fees, annuities and other charges. In addition, we have further patent applications planned that we expect will provide ongoing protection related to the Aorfix device past 2022.

As of the date of this filing, we also own 5 U.S. trademark registrations and 23 foreign trademark registrations, as well as 1 pending U.S. trademark registrations.

In October 2013, we entered into a patent licensing agreement with Medtronic, Inc. Under the terms of the agreement, Medtronic granted us a nonexclusive license under its U.S. patent No. 6,306,141 to make, have made, use, have used, import, have imported, export, have exported, offer to sell, sell and have sold our endovascular stent-graft systems and ancillary products related thereto in exchange for a one-time payment and a royalty related to our net sales on such products sold in or from the United States, depending on the sales threshold we meet. The patent license agreement will remain in effect until the expiration of the covered patent or until it is found unenforceable.

In April 2017, we entered into a technology licensing agreement with MicroPort. Under the terms of the agreement, MicroPort

will manufacture the product for the China market.  MicroPort expects to launch Aorfix in China after gaining China Food and Drug Administration approval which is anticipated in the second half of 2018.

We also rely upon trade secrets, know-how, continuing technological innovation, and may in the future rely upon additional licensing opportunities, to develop and maintain our competitive position. We protect our proprietary trade secrets through a variety of methods, including confidentiality agreements and proprietary information agreements with suppliers, employees, consultants and others who may have access to proprietary information.

Government Regulation

Our business is subject to extensive federal, state, local and foreign statutes and regulations, such as FDA and International Standards Organization (“ISO”) 13485. These organizations govern all phases of the product development and approval process including but not limited to Good Manufacturing Practices, Premarket reviews, Quality Systems, Postmarket reporting and surveillance programs, and other requirements and restrictions. While some laws and regulations are clear, some of the pertinent laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of subjective interpretations. In some cases, there are industry guidelines or draft guidelines; however, these too are subject to interpretation. In addition, these laws and their interpretations are subject to change.

Competent authorities in the EEA countries and U.S. federal as well as state governmental agencies continue to subject the healthcare industry to intense regulatory scrutiny, including heightened civil and criminal enforcement efforts. We believe that we have structured our business operations and relationships with our customers to comply with all applicable legal and regulatory requirements. However, it is possible that governmental entities or other third parties could interpret these laws differently and assert otherwise. We discuss below the statutes and regulations that are most relevant to our business.

European Economic Area

In the EEA, our devices are required to comply with the Essential Requirements laid down in Annex I to Directive 93/42/EEC concerning medical devices, or the Medical Devices Directive. The most fundamental essential requirement is that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others. In addition, the device must achieve the performances intended by the manufacturer and be designed, manufactured and packaged in a suitable manner. The European Commission has adopted various standards applicable to medical devices. These include standards governing common requirements, such as sterilization and safety of medical electrical equipment, and product standards for certain types of medical devices. There are also harmonized standards relating to design and manufacture. Compliance with these standards is viewed as the easiest way to satisfy the essential requirements as a practical matter. Compliance with a standard developed to implement an essential requirement also creates a rebuttable presumption that the device satisfies that essential requirement.

Compliance with these requirements entitles us to affix the CE mark of conformity to our medical devices, without which they cannot be commercialized in the EEA. To demonstrate compliance with the Essential Requirements laid down in Annex I to the Medical Devices Directive and obtain the right to affix a CE mark of conformity to medical devices, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. Manufacturers usually have some flexibility to select conformity assessment procedures for a particular class of device and to reflect their circumstances, such as the likelihood that the manufacturer will make frequent modifications to its products. Conformity assessment procedures require an assessment of available clinical evidence, literature data for the product and post-market experience in respect of similar products already marketed. Except for low risk medical devices (Class I with no measuring function and which are not sterile), where the manufacturer can issue an EC Declaration of Conformity based on a self-assessment of the conformity of its products with the Essential Requirements laid down in the Medical Devices Directive, a conformity assessment procedure requires the intervention of a Notified Body, which is an organization designated by the competent authorities of a EEA country to conduct conformity assessments. The Notified Body would typically audit and examine products’ Technical Files and the quality system for the manufacture, design and final inspection of our devices before issuing a CE Certificate of Conformity demonstrating compliance with the relevant Essential Requirements laid down in Annex I to the Medical Devices Directive. Following the issuance of this CE Certificate of Conformity, we can draw up an EC Declaration of Conformity and affix the CE mark to the products covered by this CE Certificate of Conformity and the EC Declaration of Conformity. We have now successfully passed several Notified Body audits since our original certification in August 2001. Following these audits, our Notified Body issued ISO Certificates and CE Certificates of Conformity allowing us to draw up an EC Declaration of Conformity and affix the CE mark of conformity to certain of our devices. CE-marked devices may be placed on the market throughout the EEA. Once the product has been placed on the market in the EEA, the manufacturers must comply with requirements for reporting incidents and field safety corrective actions associated with the medical device.

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In order to demonstrate safety and efficacy for their medical devices, manufacturers must conduct clinical investigations in accordance with the requirements of Annex X to the Medical Devices Directive and applicable European and ISO standards, as implemented or adopted in the EEA member states. The resulting data are introduced into the product development cycle for next-generation or new products and considered as part of design controls and risk management practices in place. Clinical trials for medical devices usually require the approval of an ethics review board and approval by or notification to the national regulatory authorities. Both regulators and ethics committees also require the submission of adverse event reports during a study and may request a copy of the final study report.

In September 2012, the European Commission adopted a Proposal for a Regulation of the European Parliament and of the Council on medical devices which will, if adopted by the European Parliament and by the Council, replace the existing Medical Devices Directive. If adopted, the Regulation is expected to enter into force in the first half of 2017 and become applicable three years thereafter. In its current form it would, among other things, impose additional reporting requirements on manufacturers of high risk medical devices, impose an obligation on manufacturers to appoint a “qualified person” responsible for regulatory compliance, and provide for stricter clinical evidence requirements.

Further, the advertising and promotion of our products in the EEA is subject to the provisions of the Medical Devices Directive, Directive 2006/114/EC concerning misleading and comparative advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other national legislation in the EEA countries governing the advertising and promotion of medical devices. These laws may limit or restrict the advertising and promotion of our products to the general public and may impose limitations on our promotional activities with healthcare professionals.

U.S. Food and Drug Administration Regulation

Our Aorfix product is a medical device subject to extensive regulation by the FDA and other federal, state, and local regulatory bodies. FDA regulations govern, among other things, the following activities that we or our partners perform and will continue to perform:

■ establishment registration and device product listing;

■ product design and development;

■ product testing and clinical trials;

■ product manufacturing;

■ product safety;

■ post-market adverse event reporting, including reporting of deaths, serious injuries, and device malfunctions;

■ post-market surveillance;

■ device tracking;

■ complaint handling;

■ repair or recall of products and field safety corrective actions;

■ product storage;

■ record keeping;

■ premarket clearance or approval;

■ post-approval studies;

■ labeling, advertising and promotion;

■ product import and export; and

■ product marketing sales and distribution.

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The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales.

FDA’s Premarket Clearance and Approval Requirements

Unless an exemption applies, each medical device we wish to distribute commercially in the United States, including our Altura product offering, will require either prior 510(k) clearance or prior approval of a PMA application from the FDA. The FDA classifies medical devices into one of three classes. Devices deemed to pose the lowest risk are placed in Class I, and most Class I devices are exempt from premarket notification requirements. Class I devices are subject to statutory general controls, including establishment registration, device listing, and reporting. Moderate risk devices are placed in Class II, which requires the manufacturer to submit to the FDA a premarket notification requesting permission for commercial distribution. This process is known as 510(k) clearance. Some low risk devices are exempt from this 510(k) requirement. Class II devices are subject to general controls and also to special controls, such as product standards, guidelines, or post-market surveillance and in some cases clinical data. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously cleared 510(k) device, are placed in Class III, requiring approval of a PMA application. The FDA can impose post-approval requirements, such as requiring post-approval studies or patient registries. Our currently marketed products are Class III devices requiring approval of a PMA. Both 510(k) notification submissions and PMA applications are subject to the payment of user fees, paid at the time of submission for FDA review. The FDA can also impose restrictions on the sale, distribution or use of devices at the time of their clearance or approval, or subsequent to marketing.

510(k) Clearance Pathway

To obtain 510(k) clearance, we must submit a premarket notification demonstrating that the proposed device is substantially equivalent to a “predicate device,” which is a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of PMA applications. To demonstrate substantial equivalence, we must show that the device has the same intended use as a predicate device and the same technological characteristics, or the same intended use and different technological characteristics and does not raise new questions of safety and effectiveness than the predicate device.

The FDA’s 510(k) clearance pathway usually takes from three to 12 months from the date the application is submitted and filed with the FDA, but it can take significantly longer and clearance is never assured. Devices that have different technological characteristics than a predicate device must include scientific or clinical data to establish substantial equivalence. Although many 510(k) premarket notifications are cleared without clinical data, in some cases, the FDA requires significant clinical data to support substantial equivalence. In reviewing a premarket notification, the FDA may request additional information, including clinical data, which may significantly prolong the review process.

If the FDA determines that the device is not substantially equivalent to a predicate device, or if the manufacturer determines that there is no predicate device for purposes of submitting a 510(k) notification, the new device is automatically classified into Class III. The manufacturer would therefore be required to submit a PMA application to seek FDA approval for marketing. However, for certain low to moderate risk devices, the device might be eligible for the “de novo” reclassification process, under which the FDA might reclassify the device into class II with special controls. The manufacturer is required to submit a de novo petition containing scientific or clinical data to provide reasonable assurance of the safety and effectiveness of the device. The manufacturer can submit a de novo petition within 30 days of receiving a not substantially equivalent determination, or in lieu of submitting a 510(k) notification. If the FDA issues an order reclassifying the device, that device will become a predicate device for future device submissions.

After a device receives 510(k) clearance, or is reclassified by order under the de novo process, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, might require approval of a PMA. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination. If a manufacturer determines not to submit a 510(k) notification for certain modifications to its 510(k) cleared device, the manufacturer must maintain documentation of that decision not to submit. If the FDA disagrees with a manufacturer’s determination regarding whether a new premarket submission is required for the modification of an existing device, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or approval of a PMA application is obtained. In addition, the FDA is currently evaluating the 510(k) process and may make substantial changes to industry requirements.

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Premarket Approval Pathway

A PMA application, which will apply to our Altura United States FDA approval process, must be submitted for Class III devices or if the device cannot be cleared through the 510(k) process, or de novo process. The PMA application process is generally costlier and time consuming than the 510(k) process and requires proof of the safety and effectiveness of the device to the FDA’s satisfaction. Accordingly, a PMA application must be supported by extensive data including, but not limited to, technical information regarding device design and development, preclinical studies, clinical trials, manufacturing information, and labeling to support the FDA’s determination that the device is safe and effective for its intended use. When a PMA is submitted, the FDA will make an administrative determination whether to accept the application for filing. If the FDA determines that it is not complete, the agency will issue a refuse to file, or RTF, letter. If the FDA accepts the application for filing, the agency will begin an in-depth substantive review of the application. By statute, the FDA has 180 days to review the application although, generally, review of the application often takes between one and three years, and may take significantly longer. During this review period, the FDA may request additional information or clarification of information already provided. Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. In addition, the FDA will conduct a preapproval inspection of the manufacturing facility to ensure compliance with the QSR, which imposes extensive requirements for design control and validation, testing, documentation, labeling, management review, and other quality assurance procedures in the design and manufacturing process.

The FDA may approve a PMA application with post-approval conditions intended to ensure the safety and effectiveness of the device including, among other things, restrictions on labeling, user training requirements, restrictions on promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical study that supported approval. Failure to comply with the conditions of approval can result in materially adverse enforcement action, including the loss or withdrawal of the approval. New PMA applications or PMA supplements are required for significant modifications to the manufacturing process, labeling and design of a device that is approved through the PMA process, including, for example, certain types of modifications to the device’s indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type of information as a PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA application, and may not require as extensive clinical data or the convening of an advisory panel. The time for review of a PMA supplement may vary depending on the type of change, but it can be lengthy. In addition, in some cases the FDA might require additional clinical data.

Clinical Trials

A clinical trial is almost always required to support a PMA application and may be required for a 510(k) premarket notification or de novo petition. In the United States, absent certain limited exceptions, human clinical trials intended to support product clearance or approval require FDA approval of an IDE application. Some types of studies of “non-significant risk” devices are deemed to have an approved IDE once certain requirements are addressed and IRB approval is obtained. The IRB must make a determination that the study qualifies as a non-significant risk device study. After obtaining IRB approval and consent of the study subjects, the clinical trial can proceed. The clinical investigators and the study sponsor must comply with certain FDA regulations governing the conduct of and reporting for non-significant risk device studies.

If the device presents a “significant risk” to human health, as defined by the FDA regulations or as determined by the IRB, the Sponsor must submit an IDE application to the FDA and obtain IDE approval prior to commencing the human clinical trials. The IDE application must be supported by appropriate data, such as preclinical and laboratory testing results, showing that it is safe to evaluate the device in humans and that the testing protocol is scientifically sound. During review of the IDE, the FDA can request the submission of additional information or data. FDA approval of an IDE might take six months to a year. The IDE application must be approved in advance by the FDA for a specified number of subjects and number of study sites. Clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the responsible IRBs at the clinical trial sites. There can be no assurance that submission of an IDE will result in the ability to commence clinical trials.

Additionally, after a clinical trial begins, the FDA may place it on hold or terminate it if, among other reasons, it concludes that the clinical subjects are exposed to unacceptable health risks that outweigh the benefits of participation in the study. During a study, we are required to comply with the FDA’s IDE requirements for investigator selection, trial monitoring, reporting, recordkeeping and prohibitions on the promotion of investigational devices or making safety or efficacy claims for them. We are also responsible for the appropriate labeling, distribution and control of investigational devices. Our clinical trials must be conducted in accordance with FDA regulations and federal and state regulations concerning human subject protection, including informed consent and healthcare privacy. The investigators must also obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of investigational devices, and comply with all reporting and recordkeeping requirements. The FDA’s grant of permission to proceed with clinical testing does not constitute a binding commitment that the FDA will consider the study design adequate to support clearance or approval. In addition, there can be no assurance that the data generated during a clinical study will meet chosen safety and effectiveness endpoints or otherwise produce results that will lead the FDA to grant marketing clearance or approval.

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Pervasive and Continuing FDA Regulation

After a device is placed on the market, regardless of its classification or premarket pathway, numerous regulatory requirements apply. These include, but are not limited to:

■ submitting and updating establishment registration and device listings with the FDA;

■ compliance with the QSR, which requires manufacturers, including third-party manufacturers, to follow requirements applicable to design controls, testing, record keeping, documentation, manufacturing standards, labeling, complaint handling, management review, and other quality assurance procedures;

■ unannounced routine or for-cause device inspections by the FDA, which may include our suppliers’ facilities;

■ labeling regulations, which prohibit the promotion of products for uncleared or unapproved, or off-label, uses and impose other restrictions on labeling;

■ clearance or approval of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use;

■ medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur;

■ corrections and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the U.S. Federal Food, Drug, and Cosmetic Act, or FDCA, that may present a risk to health. In addition, FDA may order a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; and

■ post-approval restrictions or conditions, including requirements to conduct post-market surveillance studies to establish continued safety data.

The FDA may conduct unannounced inspections to determine compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of subcontractors. Failure by us or our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other regulatory authorities, which may result in sanctions and related consequences, including:

■ untitled letters or warning letters;

■ cease and desist orders;

■ injunctions, or consent decrees;

■ civil monetary penalties;

■ recall, detention or seizure of our products;

■ operating restrictions, partial suspension or total shutdown of production;

■ refusal of or delay in granting our requests for 510(k) clearance or PMA approval of new products or modified products;

■ withdrawing 510(k) clearance or PMA approvals that are already granted;

■ refusal to grant export approval or export certificates for our products;

■ criminal prosecution; and

■ unanticipated expenditures to address or defend such actions.

Federal Trade Commission

In addition to the FDA, the Federal Trade Commission, (“FTC”), regulates the advertising of medical devices. FDA directly regulates the advertising of “restricted devices,” which are devices that have been restricted by PMA approval order or by a regulation for certain 510(k)-cleared devices. Otherwise the FTC regulates advertising of devices. The FTC has regulations and guidelines applicable to substantiation of claims and testimonials used in promotion of devices. State laws may also regulate advertising and promotion of medical devices.

Third-Party Coverage and Reimbursement

Healthcare providers in the United States generally rely on third-party payors, principally private insurers and governmental payors such as Medicare and Medicaid, to cover and reimburse all or part of the cost of an aortic surgery in which our products are used. We expect that sales volumes and prices of our products will continue to depend in large part on the availability of reimbursement from such third-party payors to our customers. The manner in which reimbursement is sought and obtained varies based upon the type of payor involved and the setting in which the product is furnished and utilized. Third party payors generally perform analyses on new technologies to determine if they are medically necessary, before determining whether to provide coverage or reimbursement for them. These third-party payors may still deny reimbursement of covered technologies if they determine that a device used in a procedure was not used in accordance with the payor’s coverage policy.

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Particularly in the United States, third-party payors continue to carefully review, and increasingly challenge, the prices charged for procedures and medical products. Medicare coverage and reimbursement policies are developed by the CMS, the federal agency responsible for administering the Medicare program, and its contractors. CMS and its contractors establish Medicare coverage and reimbursement policies for medical products and procedures and such policies are periodically reviewed and updated. While private payors vary in their coverage and payment policies, many look upon the coverage and payment by Medicare as a benchmark by which to make their own coverage decisions. Medicare reimbursement rates for the same or similar procedures vary due to geographic location, nature of the facility in which the procedure is performed (i.e., teaching or community hospital) and other factors. A key component in ensuring that the appropriate payment amount is received for physician and other services, including those procedures using our products, is the existence of a currency procedural technology (“CPT”) code. To receive payment, health care practitioners must submit claims to insurers using these codes for payment for medical services. CPT codes are assigned, maintained and annually updated by the American Medical Association and its CPT Editorial Board. The lack of a CPT code that describes procedures performed using our products, or a change to an existing code that describes such procedures, may adversely affect reimbursement for these procedures.

In the United States, a large number of insured individuals receive their medical care through managed care programs, which monitor and often require pre-approval of the services that a member will receive. Some managed care programs pay their providers on a per capita basis, which puts the providers at financial risk for the services provided to their patients by paying these providers a predetermined payment per member per month and, consequently, may limit the willingness of these providers to use our products.

We believe that the overall escalating cost of medical products and services has led to, and will continue to lead to, increased pressures on the healthcare industry to reduce the costs of products and services. We cannot assure you that government or private third-party payors will cover and reimburse the procedures using our products in whole or in part in the future or that payment rates will be adequate. In addition, it is possible that future legislation, regulation or reimbursement policies of third-party payors will adversely affect the demand for procedures using our products or our ability to sell them on a profitable basis. The unavailability or inadequacy of third-party payor coverage or reimbursement could have a material adverse effect on our business, operating results and financial condition.

Internationally, reimbursement and healthcare payment systems vary substantially from country to country and include single-payor, government-managed systems as well as systems in which private payors and government managed systems exist side-by-side. Our ability to achieve market acceptance or significant sales volume in international markets we enter will be dependent in large part on the availability of reimbursement for procedures performed using our products under the healthcare payment systems in such markets. A small number of countries may require us to gather additional clinical data before recognizing coverage and reimbursement for our products. It is our intent to complete the requisite clinical studies and obtain coverage and reimbursement approval in countries where it makes economic sense to do so.

Healthcare Fraud and Abuse

Because of the significant federal funding involved in Medicare and Medicaid, Congress and individual U.S. states have enacted, and actively enforce, a number of laws whose purpose is to eliminate fraud and abuse in federal healthcare programs. Our business is subject to compliance with these laws.

Anti-Kickback Statutes and Federal False Claims Act

Federal healthcare fraud and abuse laws apply to our business when a customer submits a claim for an item or service that is reimbursed under Medicare, Medicaid or most other federally funded healthcare programs. The federal Anti-Kickback Statute prohibits persons from soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program such as Medicare or Medicaid. The definition of “remuneration” has been broadly interpreted to include anything of value, including for example gifts, certain discounts, the furnishing of free supplies, equipment or services, credit arrangements, payments of cash and waivers of payments. For example, the Anti-Kickback Statute prohibits remuneration provided to physicians to induce them to use certain medical devices reimbursable by Medicare or Medicaid. The Anti-Kickback Statute is subject to evolving interpretations and application to various practices. For example, the government has enforced the Anti-Kickback Statute to reach large settlements with healthcare companies based on allegations of sham consultant arrangements with physicians. Further, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the ACA, among other things, amends the intent requirements of the Anti-Kickback Statute and of other federal statutes that criminalize healthcare fraud. Proof of violation of these statutes no longer requires proof that a person or entity had actual knowledge of these statutes or specific intent to violate them. Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. In addition, the ACA provides that, if a violation of the federal Anti-Kickback Statute has occurred, any claim that includes items or services related to that violation constitutes a false or fraudulent claim for purposes of the federal False Claims Act. Many states also have anti-kickback laws which establish similar prohibitions and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers.

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The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements, Congress authorized the Office of Inspector General of the U.S. Department of Health and Human Services, (“OIG”), to issue a series of regulations, known as “safe harbors.” These safe harbors, issued by the OIG beginning in July 1991, set forth provisions that, if all their applicable requirements are met, will assure healthcare providers and other parties that they will not be prosecuted under the Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy each applicable safe harbor may result in increased scrutiny by government enforcement authorities such as the OIG.

The False Claims Act prohibits, among other things, knowingly presenting, or causing to be presented, claims for payment to a federal healthcare program (e.g., to Medicare or Medicaid) that are false or fraudulent. In addition, state false claims acts may prohibit presenting false or fraudulent claims to third-party payors. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties of between $5,500 to $11,000 for each separate false claim. There are many potential bases for liability under the False Claims Act. Liability arises, primarily, when an entity knowingly submits, or causes another to submit, a false claim for reimbursement to the federal government. The False Claims Act has been used to assert liability on the basis of inadequate care, kickbacks and other improper referrals, and improper use of Medicare numbers when detailing the provider of services, in addition to the more predictable allegations as to misrepresentations with respect to the services rendered. In addition, companies have been prosecuted under the False Claims Act in connection with alleged off-label promotion of products. Our future activities relating to the reporting of wholesale or estimated retail prices for our products, the reporting of discount and rebate information and other information affecting federal, state and third-party reimbursement of our products, and the sale and marketing of our products, may be subject to scrutiny under these laws.

If a governmental authority were to conclude that we are not in compliance with applicable laws and regulations, we and our officers and employees could be subject to severe criminal and civil penalties, including exclusion from participation as a supplier of product to beneficiaries covered by Medicare or Medicaid. The federal government is using the False Claims Act, and the accompanying threat of significant liability, in its investigations of healthcare providers and suppliers throughout the country for a wide variety of Medicare billing practices, and has obtained multi-million and multi-billion dollar settlements under the False Claims Act in addition to individual criminal convictions under applicable criminal statutes. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ and suppliers’ compliance with the healthcare reimbursement rules and fraud and abuse laws.

Additionally, several bills have been passed or are pending, at both the state and federal levels that require, among other things, extensive tracking, reporting and maintenance of databases regarding certain financial relationships with physicians and other healthcare providers. For example, the Physician Payment Sunshine Act, enacted as part of the ACA, requires medical device and pharmaceutical manufacturers to report payments or other transfers of value made to physicians and teaching hospitals. The first reports, which are due to CMS by March 31, 2014, cover payments or transfers of value provided from August 1 to December 31, 2013; subsequent reports must be submitted annually and will cover the preceding calendar year. Reports submitted under these new requirements will be placed in a public database Manufacturers are also subject to similar state reporting laws, as well as state laws that prohibit certain gifts to healthcare providers, require manufacturers to establish compliance programs, and/or require promotional activity to comply with a code of ethics. The implementation of the infrastructure needed to comply with these bills and regulations could be costly, and any failure to provide the required information may result in civil monetary penalties.

HIPAA and Other Privacy Regulations

The Privacy Standards and Security Standards under HIPAA, establish a set of basic national privacy and security standards for the protection of certain individually identifiable health information by health plans, healthcare clearinghouses and healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services. The Health Information Technology for Economic and Clinical Health Act of 2009, (“HITECH”), makes certain of HIPAA’s privacy and security standards also directly applicable to covered entities’ business associates. A business associate is a person or entity that performs certain functions or activities on behalf of a covered entity that involve the use or disclosure of protected health information in connection with recognized health care operations activities. As a result, business associates are now subject to significant civil and criminal penalties for failure to comply with applicable privacy and security rule requirements. Moreover, HITECH creates a new requirement to report certain breaches of unsecured, individually identifiable health information and imposes penalties on entities that fail to do so. Additionally, certain states have adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA. HIPAA and HITECH will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our customers. If our data practices do not comply with the requirements of HIPAA, or HITECH, we may be directly subject to liability under HIPAA, or HITECH. Any liability from failure to comply with the requirements of HIPAA, or HITECH, to the extent such requirements are deemed to apply to our operations, or contractual obligations, could adversely affect our financial condition. The costs of complying with privacy and security related legal and regulatory requirements are burdensome and could have a material adverse effect on our results or operations.

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Foreign Government Regulation

Sales of medical devices in countries outside the EEA and United States are subject to foreign government regulations, which vary substantially from country to country. In order to market our products outside the EEA and the United States, we must obtain regulatory approvals and comply with extensive safety and quality regulations. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval or a CE Certificate of Conformity in the EEA, and the requirements may differ. Many other countries, such as Australia, India, New Zealand, Pakistan and Sri Lanka, accept CE Certificates of Conformity, or FDA clearance, or approval although others, such as Brazil, Canada and Japan require separate regulatory filings.

Employees

As of December 31, 2016 we had 113 employees, 13 of whom were primarily engaged in sales and marketing, 9 of whom were primarily engaged in product development and research, 82 of whom were primarily involved in manufacturing and quality activities and 9 of whom were primarily engaged in administration and finance. A majority of these employees are located outside the United States, with 104 employees located in the United Kingdom, 4 employees located in mainland Europe and 1 employee located in Asia. Our remaining 4 employees reside in the US. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Legal Proceedings

We are not aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or financial condition. The medical device industry is characterized by frequent claims and litigation, including claims regarding patent and other intellectual property rights as well as improper hiring practices. As a result, we may be involved in various additional legal proceedings from time to time.

C. Organizational Structure

Organization

We are a Cayman Islands exempted company with limited liability incorporated on January 16, 2014 and resident in the United Kingdom for tax purposes. Exempted companies are Cayman Islands companies whose operations are conducted mainly outside the Cayman Islands. Our business was founded on January 14, 2003 as Advanced Medical Technologies Limited (subsequently Advanced Medical Technologies plc, Lombard Medical Technologies plc and then Lombard Medical Technologies Limited), a corporation organized in England and Wales. Our principal executive offices are located at 4 Trident Park, Didcot, Oxfordshire OX11 7HJ United Kingdom.

Prior to the completion of the Initial Public Offering on Nasdaq, our business was conducted solely through Lombard Medical Technologies plc and its subsidiaries. Subsequent to the effectiveness of the registration statement and the listing of our ordinary shares on the Nasdaq Global Market and prior to completion of this offering, and in accordance with and as contemplated by the scheme of arrangement relating to our change of domicile to the Cayman Islands, all holders of our ordinary shares had their shares in Lombard Medical Technologies plc cancelled and were issued one ordinary share of Lombard Medical, Inc. for every four ordinary shares previously held in Lombard Medical Technologies plc. These ordinary shares have substantially the same rights as the shares previously held in the capital of Lombard Medical Technologies plc. The purpose of the scheme of arrangement was to facilitate a listing of our ordinary shares on the Nasdaq Global Market. In addition, as contemplated by the scheme of arrangement, Lombard Medical Technologies plc was re-registered as a private limited company with the name Lombard Medical Technologies Limited.

The following is a list of our subsidiaries:

Name of undertaking	Country of  registration	Activity	%  holding
Lombard Medical Technologies Limited	England and Wales	Investment holding company	100 1
Lombard Medical Limited	England and Wales	Medical implants	100 2
LionMedical Limited	England and Wales	Investment holding company	100 2
PolyBioMed Limited.	England and Wales	Dormant	100 2
Lombard Medical (Scotland) Limited	Scotland	Medical fabrics	100 2
Lombard Medical Technologies, Inc.	United States	Medical implants	100 2
Lombard Medical Technologies GmbH	Germany	Medical implants	100 2
Altura Medical, Inc.	United States	Medical implants	100 1
(1)Direct subsidiary of Lombard Medical, Inc.
(2)Indirect subsidiary of Lombard Medical, Inc.

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D. Property Plant and Equipment.

We lease facilities in Didcot, Oxfordshire, England. These 31,827 square-foot facilities house our headquarters, research and development operations, manufacturing operations and storage of Aorfix raw materials and finished goods. The lease for these facilities terminates in July 2022.

We presently lease a facility in Irvine, California. This 17,014 square-foot location housed our U.S. global headquarters until it was announced on August 22, 2016 that the Company will delay its operations in the U.S.  The lease for this facility terminates in April, 2021.

We do not own any real property. We are not aware of any environmental issues that may affect our utilization of our property. Further details of our Plant and Equipment are given in Note 4 to our consolidated financial statements.

Item 4A   Unresolved Staff Comments

There are no written comments from the staff of the U.S. Securities and Exchange Commission which remain unresolved before the end of the fiscal year to which the Annual Report relates.

Item 5     Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations should be read in conjunction with "Selected Financial Data," and our consolidated financial statements included elsewhere in this Annual Report. We present our consolidated financial statements in U.S. dollars to the nearest ($000), except where otherwise indicated, and in accordance IFRS, as issued by the IASB.

The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in "Risk Factors" and "Forward-Looking Statements" in this Annual Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

The consolidated financial statements included elsewhere in this Annual Report, which are the subject of the following discussion and analysis, are those of Lombard Medical, Inc. and its consolidated subsidiaries from April 30, 2014 and those of Lombard Medical Technologies plc and its consolidated subsidiaries before the April 30, 2014. Prior to April 30, 2014 we conducted our business through Lombard Medical Technologies plc and its subsidiaries, and upon consummation of the change of domicile, Lombard Medical Technologies plc became our wholly-owned subsidiary. Prior to the change of domicile and the completion of the Initial Public Offering, Lombard Medical, Inc. held no material assets and did not engage in any operations. The consolidated financial statements of Lombard Medical, Inc. and Lombard Medical Technologies plc have been prepared in accordance with IFRS as issued by IASB, which may differ in material respects from generally accepted accounting principles in other jurisdictions, including the United States. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in “Risk Factors.”

Overview

We are a medical technology company specializing in developing, manufacturing, and marketing endovascular stent-grafts that address significant unmet needs in the repair of aortic aneurysms.  Our lead product, Aorfix, is the only AAA stent-graft approved by the FDA for the treatment of AAAs with angulation at the neck of the aneurysm of up to 90 degrees.

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We formally launched the U.S. roll-out of Aorfix in November 2013 and currently market Aorfix outside of the United States, we market Aorfix through our direct sales forces in the United Kingdom and through a number of country-exclusive distribution agreements with partners in other European Union countries and Latin America. We received regulatory approval to market Aorfix in Japan in August 2014. We acquired Altura in July 2015, and formally launched the Altura Endovascular Stent Graft in January 2016.

We have historically generated revenue primarily from sales of Aorfix. We generated revenue of $12.2 million, $15.1 million, and $13.3 million in the years ended December 31, 2016, 2015, and 2014, respectively. While we have historically derived revenue predominantly from sales of Aorfix in the European Union, and in Japan, we believe revenue from our acquisition of Altura in 2015 will begin to be a significant contributor to our future results of operations. We had operating losses of $25.5 million, $39.3 million, and $36.1 million in the years ended December 31, 2016, 2015, and 2014, respectively.

As of December 31, 2016, we had cash and cash equivalents of $20.8 million.

We are engaged in a single business activity of cardiovascular devices and we do not have multiple operating segments. Our cardiovascular devices business consists of the development and commercialization of these products. Our historical financial statements contain five geographic locations where revenue is earned, the United Kingdom, Germany, the United States, Japan and Rest of World. The table below sets forth our revenue results by geographic destination for the periods covered by this Annual Report on Form 20-F:

	YEAR ENDED DECEMBER 31,
	2016	2015	2014
	($ in thousands)
Revenue by Destination:
United Kingdom	1,783	1,696	1,926
Germany	1,249	977	1,506
United States of America	1,736	4,616	3,258
Japan	4,516	5,035	3,551
Rest of World	2,885	2,790	3,037
Total	12,169	15,114	13,277

In addition to the information in the table above, we analyze our business based on the categories and information in the table below.

	YEAR ENDED DECEMBER 31,
	2016	2015	2014
	($ in thousands)
Aorfix Commercial Revenue
United States market	1,736	4,616	3,248
Western Europe direct markets	1,750	2,673	3,431
Japan distributor market	4,516	5,035	3,550
Rest of World distributor markets	2,514	2,790	3,038
Total Aorfix commercial revenue	10,516	15,114	13,267
Other commercial revenue	1,653	—	10
Total revenue	12,169	15,114	13,277

Key Factors Affecting Our Results of Operations

Exchange rate fluctuation

Our operations expose us to risks related to fluctuations in the value of various currencies. We currently market Aorfix in Japan, throughout the European Union, including in Germany, Italy and Spain, and in Latin America, including in Mexico. MicroPort has exclusive marketing rights for our product portfolio in China and Brazil.  These sales are either conducted by our employees, whom we compensate in the currency of the jurisdiction in which they are based, or by third-party distributors whom we pay in U.S. Dollars or Euro. We purchase the supplies we need to manufacture Aorfix from suppliers around the world.

The average rates of exchange used for $/£ for the years ended December 31, 2016, December 31, 2015 and December 31 2014 were 1.35, 1.53, and 1.64, respectively. The spot rates used for $/£ as at December 31, 2016 and December 31, 2015 were 1.23 and 1.48, respectively.

The average rates of exchange used for $/€ for the years ended December 31, 2016, December 31, 2015, and December 31, 2014 were 1.11, 1.38, and 1.32, respectively. The spot rates used for $/ € as at December 31, 2016 and December 31, 2015 were 1.05 and 1.36, respectively.

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Research and development expenditure

Research and development expenditure was $7.7 million, $11.3 million, and $9.2 million in the years ended December 31, 2016, 2015, and 2014, respectively. We expect to continue to incur research and development expenses as we develop new products to expand our product pipeline, and undertake clinical activities, including clinical studies to gain additional regulatory clearances.

Reimbursement and other regulatory factors

Our ability to generate revenue from sales of our products is highly dependent upon the level of reimbursement that hospitals can receive from government regulators in the jurisdictions in which they seek to use our products to treat AAAs. Reductions in available reimbursement for our products or other regulatory hurdles that could arise would significantly hinder our ability to compete with other EVAR device providers.

Direct sales forces

We have direct sales forces for Aorfix in United Kingdom. We also intend to increase the size of our direct sales force in the United Kingdom based on our ongoing evaluation of the growth potential of our products in each market. Adding a sales representative to one of our direct sales forces results in an increase in selling, marketing and distribution expenses. It generally takes several months to sufficiently train and integrate a new sales representative before such representative can generate revenue for us.

Components of Our Results of Operations

Revenue

We generate revenue primarily from the sale of our lead product, Aorfix. We and our distributors sell Aorfix to hospitals for EVAR for AAA. Product sales to direct customers and sales through a distributor of products provided for a particular procedure are recognized when goods are delivered to customers and are net of any provision for estimated returns. Sales made through a distributor that are not for a particular procedure are recognized on delivery to the distributor, as returns are not generally accepted under our distribution agreements.

We expect to increase revenue following the commercial launch of the Altura Endovascular Stent Graft in Europe in 2017. We expect the European market to be characterized by increased volumes and higher average selling prices. Going forward we expect European Altura product sales to become a large revenue contributor as we continue to focus significant resources on the roll-out of this product in Europe in 2018. We continue to expect Aorfix sales to be a significant contributor to our revenues in the future through both our direct sales force in the United Kingdom and distribution partners in 2017.

Cost of sales

Our cost of sales primarily consists of raw materials, components and services we purchase to manufacture our products, in addition to compensation and benefits of production personnel and production support personnel. Cost of sales also includes depreciation expense for production equipment, indirect production consumables and allocated facilities-related expenses. Any yield loss in the manufacture of the product is included within cost of sales.

Selling, marketing and distribution expenses

Selling, marketing and distribution expenses primarily consist of compensation, benefits and other related costs, for personnel employed in sales, marketing, medical education and training and sales distribution departments. These expenses also include costs attributable to marketing our products to customers, including attending medical device events, the training of physicians and the proctoring of medical procedures.

Research and development expenses

Our research and development expenses primarily consist of compensation, benefits and other related costs for research and development personnel and clinical and regulatory personnel as well as amortization of intellectual property and patent fees. Research and development expenses also include materials and consultancy expenses in addition to allocated facilities-related costs. For clinical and regulatory activities, such expenses also include trial costs such as payments to trial centers, materials and consultancy expenses and allocated facilities-related costs. Our research and development activities primarily relate to the development, testing and regulatory work for medical devices to treat conditions of the Aorta. Research and development expenses have historically been expensed as incurred.

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Administrative expenses

Administrative expenses primarily consist of compensation, benefits and associated costs for personnel supporting administrative operations including executive management, finance and human resources. Administrative expenses also include legal and professional fees, financial audit fees, insurance, information technology support costs, stock-based accounting charges and allocated facilities related costs.

Taxation

We are currently in a loss making position and have tax losses brought forward from prior years. Taxation losses carried forward at the end of December, 31, 2016 amounted to approximately $131.5 million compared to approximately $138.1 million for the year ended December, 31, 2015. We claim repayable UK research and development tax credits each year relating to the surrender of UK current year tax losses from research and development expenditure. The remaining tax losses are carried forward for surrender against future taxable profits. In addition, we pay overseas tax on taxable profits arising in our subsidiary companies in the United States and Germany.

A. Results of Operations

The following table sets forth, for the periods indicated, our results of operations:

	YEAR ENDED DECEMBER 31,
	2016	2015	2014
	($ in thousands)
Revenue	12,169	15,114	13,277
Cost of sales	(11,027)	(8,296)	(7,541)
Gross profit	1,142	6,818	5,736
Selling, marketing and distribution expenses	(12,022)	(23,125)	(21,363)
Research and development expenses	(7,669)	(11,279)	(9,213)
Administrative expenses	(6,972)	(11,707)	(9,800)
Initial Public Offering expenses	—	—	(1,503)
Change in fair value of contingent liabilities	(2,830)	—	—
Impairment of Goodwill and long-lived assets	(3,360)	—	—
Total operating expenses	(32,853)	(46,111)	(41,879)
Operating loss	(31,711)	(39,293)	(36,143)
Change in fair value of financial instruments	1,412	—	—
Finance income - interest receivable	93	134	247
Finance costs	(2,310)	(860)	(83)
Loss before taxation	(32,516)	(40,019)	(35,979)
Taxation	1,481	2,215	1,227
Loss for the period	(31,035)	(37,804)	(34,752)

Year ended December 31, 2016 Compared to the Year Ended December 31, 2015

Revenue

Revenue decreased by $2.9 million, or 19.5%, to $12.2 million for the year ended December 31, 2016 from $15.1 million for the year ended December 31, 2015.

In the Japanese market, revenue decreased by $0.5 million, or 10.3%, to $4.5 million for the year ended December 31, 2016 from $5.0 million for the year ended December 31, 2015.

In the US market, our Aorfix revenue decreased by $2.9 million, or 62.4% to $1.7 million for the year ended December 31, 2016 from $4.6 million in December 31, 2015, as adoption of Aorfix in the US has increased since we initiated sales of Aorfix in the US in 2013.

In our Western Europe direct markets, the United Kingdom and Germany, revenue increased $0.3 million, or 11.1%, to $3.0 million for the year ended December 31, 2016 from $2.7 million for the year ended December 31, 2015.

Cost of sales

	YEAR ENDED DECEMBER 31,		VARIANCE
	2016	2015	$’000	%
	($ in thousands)
Cost of sales	(11,027)	(8,296)	(2,731)	32.9%
Gross profit	1,142	6,818	(5,676)	83.3%
Gross profit margin	9.4%	45.1%	(35.7%)

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Cost of sales increased $2.7 million, or 32.9% to $11.0 million for the year ended December 31, 2016 compared to $8.3 million for the year ended December 31, 2015. This was due primarily to the increased costs associated with the temporary use of third party manufacturer during the transition of manufacturing from the USA to our in-house facility in the UK. Gross profit margin decreased to 9.4% for the year ended December 31, 2016 compared to 45.1% for the year ended December 31, 2015, due to impact of the reduction in sales in the U.S. market which yields the highest margin, and from the changeover from Gen III to Gen IV delivery system

Operating expenses

	YEAR ENDED DECEMBER 31,		VARIANCE
	2016	2015	$’000	%
	($’000)
Selling, marketing and distribution expenses	(12,022)	(23,125)	11,103	48.0%
Research and development expenses	(7,669)	(11,279)	3,610	32.0%
Administrative expenses	(6,972)	(11,707)	4,735	40.4%
Change in fair value of contingent consideration	(2,830)	—	(2,830)	N/M
Impairment - goodwill and long-lived intangibles	(3,360)	—	(3,360)	N/M

Selling, marketing and distribution expenses decreased by $11.1 million, or 48.0%, to $12.0 million for the year ended December 31, 2016 from $23.1 million for the year ended December 31, 2015.  This decrease was primarily attributable to a reduction in force which eliminated our entire US sales force.

Research and development expenses decreased by $3.6 million, or 32.0%, to $7.7 million for the year ended December 31, 2016 from $11.3 million for the year ended December 31, 2015.  This decrease was primarily driven by the decrease in Gen IV delivery system development that was substantially completed in 2015 which was partially offset by development work occurring on the Altura product line.

Administrative expenses decreased by $4.7 million, or 40.4%, to $7.0 million for the year ended December 31, 2016 from $11.7 million for the year ended December 31, 2015. This decrease resulted primarily from a $1.0 million decrease in legal and professional fees associated with the acquisition of Altura in 2015, effects of our cost reduction program, as well as a decrease in non-cash share-based compensation costs of $1.7 million.

Change in fair value of financial instruments was $1.4 million in the year ended December 31, 2016. The adjustments recorded in 2016 consisted of $1.3 million decline in the fair value of the conversion liability on the MicroPort Convertible loan and a $0.1 million decline in the warrant fair value.

Change if fair value of contingent consideration increases $2.8 million in the year ended December 31, 2016. The adjustments recorded in 2016 resulted from increases of the fair value that were re-measured in 2016 based on actual performance versus targets.

Impairment of goodwill and long-lived assets was $3.4 million for the year ended December 31, 2016.  In the fourth quarter of 2016, we performed our annual impairment test.  The Company recorded an impairment expense of $3.4 million based on the declines in current market conditions.

Financing costs increased by $1.4 million, or 168.6% for the year ended December 31, 2016 from $0.9 million for the year ended December 31, 2015.  This increase resulted primarily from the full year effect of the debt financing agreement entered into during the year ended December 31, 2015.

Taxation

The tax credit of $1.5 million in the year ended December 31, 2016, compared to a credit of $2.2 million for the year ended December 31, 2015, represents a decrease of $0.7 million attributable to a $1.4 million lower estimated research and development credit offset by a benefit of $0.7 million due to change in fair values of acquired intangibles.

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Year ended December 31, 2015 Compared to the Year Ended December 31, 2014

Revenue

Revenue increased by $1.8 million, or 13.8%, to $15.1 million for the year ended December 31, 2015 from $13.3 million for the year ended December 31, 2014.

In the Japanese market, revenue increased by $1.4 million, or 38.9%, to $5.0 million for the year ended December 31, 2015 from $3.6 million for the year ended December 31, 2014, primarily due to the fact that a full year of revenue has been recorded in this market for the current year, which was partially offset by a large non-recurring distribution stocking shipment for Medico’s Hirata of almost $2.0 million recorded in late 2014.

In the US market, our Aorfix revenue increased by $1.4 million, or 43.8% to $4.6 million for the year ended December 31, 2015 from $3.2 million in December 31, 2014, as adoption of Aorfix in the US has increased since we initiated sales of Aorfix in the US in 2013.

In our Western Europe direct markets, the United Kingdom and Germany, revenue decreased $0.7 million, or 20.6%, to $2.7 million for the year ended December 31, 2015 from $3.4 million for the year ended December 31, 2014, primarily due to the turnover in our sales force.

Cost of sales

	YEAR ENDED DECEMBER 31,		VARIANCE
	2015	2014	$’000	%
	($ in thousands)
Cost of sales	(8,296)	(7,541)	755	10.0%
Gross profit	6,818	5,736	1,082	18.9%
Gross profit margin	45%	43%	2%	—

Cost of sales increased to $8.3 million for the year ended December 31, 2015 compared to $7.5 million for the year ended December 31, 2014. This was due primarily to the increase in the volume of units sold over the same period. Gross profit margin increased to 45% for the year ended December 31, 2015 compared to 43% for the year ended December 31, 2014, due to the effect of higher average U.S. selling prices and the spreading of fixed manufacturing costs over increased production volumes.

Operating expenses

	YEAR ENDED DECEMBER 31,		VARIANCE
	2015	2014	$’000	%
	($’000)
Selling, marketing and distribution expenses	(23,125)	(21,363)	1,762	8.2%
Research and development expenses	(11,279)	(9,213)	2,066	22.4%
Administrative expenses	(11,707)	(9,800)	1,907	19.4%
Initial Public Offering expenses	—	(1,503)	(1,503)	-100.0%

Selling, marketing and distribution expenses increased by $1.7 million, or 7.9%, to $23.1 million for the year ended December 31, 2015 from $21.4 million for the year ended December 31, 2014.  This increase was primarily attributable to an increase in marketing activities to support our worldwide market expansion, including support to our Japanese distributor for the launch of the Aorflex delivery system in Japan in 2015.

Research and development expenses increased by $2.1 million, or 22.8%, to $11.3 million for the year ended December 31, 2015 from $9.2 million for the year ended December 31, 2014.  This increase was primarily driven by increased personnel and product development costs related to our IntelliFlex LP delivery system, as well as $1.5 million in development costs associated with the Altura product line.

Administrative expenses increased by $1.9 million, or 19.4%, to $11.7 million for the year ended December 31, 2015 from $9.8 million for the year ended December 31, 2014. This increase resulted primarily from a $1.0 million increase in legal and professional fees associated with the acquisition of Altura, as well as an increase in non-cash share-based compensation costs of $0.3 million.  Additionally, our property and related expenses increased by $0.2 million in the year ended December 31, 2015 reflecting the increased costs associated with moving our global headquarters to our expanded facility in Irvine, California.

$1.5 million of public offering expenses were recognized in the year ended December 31, 2014 reflecting the costs of our Nasdaq IPO in April 2014 which reflect the element of the total Initial Public Offering expenses not directly attributable to the issue of new ordinary shares. These costs were not incurred in the year ended December 31, 2015.

Taxation

The tax credit of $2.2 million in the year ended December 31, 2015, compared to a credit of $1.2 million for the year ended December 31, 2014, represents an estimate of $1.7 million for the research and development tax credit arising in the current period, as well as $0.5 million for an adjustment to the research and development tax credit related to the prior year.

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B. Liquidity and Capital Resources

The Company has incurred significant losses and negative cash flows from operations since inception. We incurred a net loss for the year ended December 31, 2016 of $31.0 million (2015: $37.8 million), and as at December 31, 2016 had an accumulated deficit of $257.8 million (2015: $227.9 million) and cash and cash equivalents of $20.8 million (2015: $32.3 million).

Based on forecasts revised in December 2016, we expect to use up our current cash resources between Q1 2018 and Q2 2018, depending on the effectiveness of the cost savings programs being implemented by management. We therefore need to raise additional capital, or incur indebtedness to continue to fund its future operations, which may come from one or a number of public or private sources.

Our ability to raise additional funds will depend on the results of our continued marketing of our Aorfix product line, including the commercial launch of the IntelliFlex LP Delivery System, our commercialization efforts for the Altura Endovascular Stent Graft, as well as clinical and regulatory events. It may also be impacted by adverse financial, economic, and market conditions, many of which are beyond our control. We cannot be certain that sufficient funds will be available when required or on satisfactory terms.

To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in ownership dilution to existing stockholders. There are no assurances that we will be able to raise additional financing for the amounts required to execute our business plans and on the terms acceptable to us. If adequate funds are not available on terms that are acceptable or at all when required by us, we may be required to significantly reduce or refocus our operations, which could have a material adverse effect on our business, financial condition and results of operations, which could result in insolvency. In addition, we may have to delay, reduce the scope or eliminate some of its research and development or sales activities, which could delay the time to market for any of our product candidates or reduce its revenue growth potential, if such adequate funds are not available. These factors raise substantial doubt about our ability to continue as a going concern.

Cash and cash equivalents of $20.8 million were held as of December 31, 2016. All cash and cash equivalents are held with institutions with a minimum credit rating of A- as defined by at least one of the three main credit rating agencies. As of December 31, 2016, all cash and cash equivalents were held in accounts with banks or financial institutions such that the funds are immediately available or in fixed term deposits with a maximum maturity of three months.

On November 9, 2016, we received a Nasdaq Staff Deficiency Letter indicating that the Company is not in compliance with the minimum bid price requirement for continued listing. According to the letter from Nasdaq, the Company had a grace period of 180 calendar days, starting November 9, 2016, to regain compliance with the minimum bid price requirement.

Cash Flows

	YEAR ENDED DECEMBER 31,
	2016	2015	2014
	($ in thousands)
Cash outflow from operating activities	(25,195)	(33,796)	(34,373)
Cash flows used in investing activities	(94)	(1,367)	(1,580)
Cash flows from financing activities	15,807	14,543	49,658
Net increase/(decrease) in cash and cash equivalents	(9,482)	(20,620)	13,705

Cash outflow from operating activities

Net cash outflow from operating activities decreased $8.6 million or 25.6% to $25.2 million for the year ended December 31, 2016 from $33.8 million for the year ended December 31, 2015. This was principally due to an overall $12.8 million decrease in Net Loss (exclusive of non-cash items) offset by a decrease of $2.6 million in research and development tax credits and a $2.1 million decrease in accounts payable.

Net cash outflow from operating activities decreased $0.6 million or 1.7% to $33.8 million for the year ended December 31, 2015 from $34.4 million for the year ended December 31, 2014. This was principally due to an increase of $1.4 million in research and development tax credits which were offset by an increase of $0.6 million in depreciation and amortization of licenses, software, and property, plant, and equipment and an increase of $0.2 million in share based compensation expense.

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Cash flows from investing activities

Net cash used in investing activities decreased to $0.1 million for the year ended December 31, 2016 from $1.4 million for the year ended December 31, 2015 principally due to a reduction in the purchases of capital equipment.

Net cash used in investing activities decreased to $1.4 million for the year ended December 31, 2015 from $1.6 million for the year ended December 31, 2014 principally due to a reduction in the interest received during the year, a reduction in the purchases of capital equipment purchases and intangible assets, which was then offset by the $0.2 million cash paid for the acquisition of Altura.

Cash flows from financing activities

Net cash inflow from financing activities increased $1.3 million, or 8.7% to $15.8 million for the year ended December 31, 2016 compared to $14.5 million for the year ended December 31, 2015 primarily due to the $5.0 million in funds received from the issuance of common shares in 2016 and $5.3 million of debt repayment in 2015 offset by $8.7 million of additional debt proceeds in 2016.

Net cash inflow from financing activities decreased $35.2 million, or 70.8% to $14.5 million for the year ended December 31, 2015 compared to $49.7 million for the year ended December 31, 2014 primarily due to the funds received from the Initial Public Offering on April 25, 2014, which raised $49.7 million (net of expenses) through an offer, subscription and placing of new shares in the prior year, which did not reoccur in the current year. In addition, during the year, the Company issued loan notes of $21.0 million, and repaid $5.3 million in loan notes.

Indebtedness

MicroPort NeuroTech Convertible Loan

In connection with the MicroPort investment agreement on December 18, 2016, MP NeuroTech China was issued a $10 million unsecured promissory note bearing interest at a rate of six-month LIBOR plus 4.0% from the Company which is convertible at any time prior to maturity by MP NeuroTech China into the Company’s shares at a price of $0.90 per share. Such note is expected to mature in 5 years, unless automatically extended pursuant to the terms of such note. The Company will also nominate two representatives of MicroPort for election to the board so long as MicroPort owns at least 10% of the outstanding shares of the Company as of the date of the Investment Agreement (but in any event through the 3rd anniversary of the closing of the Transaction).

Medico’s Hirata Convertible Loan

In connection with our entry into a distribution agreement with Medico’s Hirata for sales of Aorfix in Japan, we entered into a loan agreement with Medico’s Hirata, or the Convertible Loan Agreement. Under the Convertible Loan Agreement, Medico’s Hirata granted us a $2.5 million convertible loan primarily to assist in funding the development by us of endovascular thoracic stent-grafts for the treatment of TAAs. Subject to the extension option described below, the initial convertible loan is repayable seven years from the date of the receipt of regulatory approval for Aorfix in Japan, which was granted in August 2014.

Per the agreement, within two years of receiving Japanese regulatory approval for Aorfix, Medico’s Hirata may grant us an additional $2.5 million convertible loan, which additional loan would provide Medico’s Hirata with the right to extend the term of our distribution agreement with them for an additional seven years. On August 3, 2016, Medico’s Hirata granted to us the additional $2.5 million. If Medico’s Hirata exercises its option to extend the term of our distribution agreement, all loan balances will be forgiven at the end of the extended term. Should all criteria be met and the outstanding balances are forgiven by Medico’s Hirata, we would recognize a gain on extinguishment of debt.  Interest on all covered convertible loans is 3% per annum.

All loans under the Convertible Loan Agreement must be repaid, at Medico’s Hirata’s discretion, in cash or by issuing Medico’s Hirata a number of ordinary shares not to exceed 29.9% of our issued share capital. The conversion price for ordinary shares is determined by the average of the market price of such ordinary shares during the five business days preceding the repayment date.

In the event that we terminate our distribution agreement with Medico’s Hirata’s due to a failure to order the required minimum quantities of Aorfix, all convertible loans under the Convertible Loan Agreement will become immediately due in full and repayable at the option of Medico’s Hirata in ordinary shares or cash.

In the event we succeed in developing endovascular thoracic stent-grafts for the treatment of thoracic aortic aneurysms, we are required by the Convertible Loan Agreement and the related distribution agreement to offer Medico’s Hirata a right of first refusal for the right to exclusive distribution in Japan.

Oxford Loan

As of December 31, 2016 the Company has received $21 million (including $11 million, $5.5 million and $4.5 million received on April 24, July 30, and October 8, 2015, respectively) of borrowings as part of a $26 million secured loan facility with Oxford Finance LLC (Oxford). The Company has the option of drawing a final $5 million becoming available after reaching additional revenue targets of $25.0 million. The interest on the loan is three month US LIBOR + 7.24% fixed at each advance. The interest rate on the first $11 million, second $5.5 million and third $4.5 million is 7.52%, 7.53%, and 7.56%, respectively. The term of the $26 million facility is 60 months from April 24, 2015, with a maximum interest-only period of 36 months, depending if all tranches are drawn.

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Pursuant to the Loan Agreement, we are required to make interest only payments through April 1, 2017. However, if subsequent tranches are drawn, the interest only period can be extended to a maximum of 36 months. At maturity (April 1, 2020), or earlier repayment in full, the Company is required to make a final payment fee to Oxford which is included in the effective interest rate of the loan. The current final payment fee associated with the loan is approximately $1.0 million.

Capital Expenditures

We incurred capital expenditures in relation to property, plant and equipment of $0.3 million, $1.2 million and $1.5 million in the years ended December 31, 2016, 2015 and 2014, respectively.

In the year ended December 31, 2016, $0.2 million was spent in the United Kingdom on manufacturing and development equipment.   For the year ended December 31, 2015, $0.2 million was spent in the United States and $0.4 million in the United Kingdom on manufacturing and development equipment and $0.5 million in the United States on office fixtures and fittings and IT equipment.  For the year ended December 31, 2014, $0.5 million was spent in the United States on training and IT equipment and $0.6 million in the United Kingdom on manufacturing and development equipment and $0.4 million in the United Kingdom on office fixtures and fittings and IT equipment.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies, significant judgments and estimates are set forth in note 1 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 20-F.

Recent Accounting Pronouncements

Recent accounting pronouncements that may affect our business are set forth in note 1 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 20-F.

C. Research and development, patents and licenses, etc.

Full details of our research and development activities and expenditures are given in the Business section and Operating and financial review sections above.

D. Trend information.

Discussed in “Key Factors Affecting Our Results of Operations”

E. Off-Balance Sheet Arrangements

As of the date of this Annual Report, we do not have any, and during the periods presented we did not have any, off-balance sheet arrangements.

F. Contractual Obligations and Commitments

The table below sets forth our contractual obligations and commercial commitments as of December 31, 2016 that are expected to have an impact on liquidity and cash flow in future periods.

	PAYMENTS DUE BY PERIOD
	LESS THAN 1 YEAR	BETWEEN 1 AND 3 YEARS	BETWEEN 3 AND 5 YEARS	MORE THAN 5 YEARS	TOTAL
	($ in thousands)
License maintenance obligations (1)	40	80	80	200	400
Debt obligations (2)(3)(4)(5)	5,755	15,685	22,833	-	44,273
Operating lease obligations	508	697	482	-	1,687
Total	6,303	16,462	23,395	200	46,360
(1)License maintenance obligations for royalty payments to a supplier.
(2) Debt obligations consist of principal and interest payments related to our outstanding loan facilities.
(3) In March 2013 we received $2.5 million from a convertible loan facility from our distribution partner in Japan, paying interest at 3% per annum. The loan is repayable seven years from the receipt of regulatory approval for Aorfix in Japan, which was granted in August 2014. Total interest payable on this loan is estimated to be $0.6 million.
(4)In April 2015 we entered into a $26 million secured loan facility with Oxford Finance LLC.  To date, we have drawn $21 million under this facility.  The loan is repayable in April 2020.
(5)In December 2016 we entered into a $10 million convertible debt facility with MicroPort NeuroTech China.  The debt facility matures in December 2021.

We have contractual obligations for contingent consideration payments related to the Altura acquisition. The timing of the payments and amount payable in cash is not determinable as of December 31, 2016.  See Note 3 of our Consolidated Financial Statements.

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G. Safe Harbor

See the section entitled "Information Regarding Forward-Looking Statements" at the beginning of this Annual Report.

Item 6   Directors, Senior Management and Employees

A. Directors and Senior Management

The following table sets forth certain information with respect to our directors and executive officers as of December 31, 2016.

NAME	AGE	POSITION
Raymond Cohen(1)(2)(3)	57	Chairman of the Board of Directors
Kurt Lemvigh	49	Chief Executive Officer
William J. Kullback	57	Chief Financial Officer
Peter Phillips	58	Chief Technology Officer
Michael H. Carrel(1)(2)(3)	46	Director
Jonathan Chen	42	Director
HongBin Sun	46	Director
John Rush(1)(2)(3)	58	Director
(1)Member of the Audit Committee as of December 31, 2016
(2)Member of the Nomination Committee as of December 31, 2016
(3)Member of the Compensation Committee as of December 31, 2016

Mr. Raymond Cohen joined Lombard on July 9, 2013 as non-executive Chairman. Mr. Cohen has extensive international medical device experience having held several Chairman and Chief Executive Officer positions on the boards of both publicly listed and private life sciences companies in the United States and Europe. Mr. Cohen currently serves as the Chief Executive Officer and member of the board of directors of Irvine, CA based Axonics Modulation Technologies, Inc., a venture backed developer of neuromodulation devices. Mr. Cohen also currently serves as the non-executive Chairman of Jenavalve Technology, Inc., a private Munich-based developer, manufacturer and marketer of transcatheter aortic valve systems; non-executive Chairman of BioLife Solutions, Inc. (OTC:BLFS), a manufacturer and marketer of biopreservation media for human cells; non-executive Chairman of Syncroness, Inc., a contract engineering firm and also serves as a non-executive director of Spectrum Pharmaceuticals, Inc. (Nasdaq:SPPI), a developer and marketer of oncology and hematology drugs. From mid-2010 to late 2012, Mr. Cohen served as Chief Executive Officer of Vessix Vascular, Inc., a developer of a novel percutaneous radiofrequency balloon catheter renal denervation system used to treat uncontrolled hypertension. In November 2012, during his tenure as Chief Executive Officer, the company was acquired by Boston Scientific Corporation (NYSE: BSX) in a structured transaction valued at up to $425 million.

Mr. Kurt Lemvigh is our Chief Executive Officer and has held that position since April 20, 2017. Mr. Lemvigh is a veteran medical device executive with over 30 years of experience creating profitable growth. He currently resides in the U.K. and has held senior sales, marketing and operational positions at various public and private companies including Spacelabs, Cardiac Science, GE and Marquette-Hellige. In addition to Europe and the United States, Mr. Lemvigh has conducted business in numerous international markets around the world including the Middle East, Japan, China, India and Latin America. Mr. Lemvigh received a B.A. in sales and marketing from Neils Brock Business University in Denmark.

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Mr. William J. Kullback is our Chief Financial Officer, having joined the company in December 2014 and brings more than 30 years of broad corporate finance and accounting experience to Lombard Medical, including more than 20 years in chief financial officer roles ranging from large, publicly traded to privately held growth companies. His deep industry experience includes CFO positions at medical technology companies ActivStyle, Inc., Angeion Corporation, IntriCon Corporation and MedSource Technologies, Inc. Most recently, he served as partner, chief financial officer and chief compliance officer of Integris, LLC, a SEC-registered wealth management firm with more than $300 million in assets under management. Mr. Kullback received a B.A. in economics and English, as well as an MBA with a concentration in accounting, from the State University of New York at Buffalo.

Mr. Peter Phillips is our Chief Technology Officer. Dr. Phillips has a PhD from Guy’s Hospital in London. Dr. Phillips co-developed the Aorfix stent graft and led the development and commercialization of Aorfix from 1995. He is the Company’s leading expert on the technology and its clinical application. In 2006, Dr. Phillips moved to the United States to become President of Lombard’s U.S. Subsidiary, which was set up to support the Aorfix clinical trial. Upon returning to the United Kingdom in 2009, he took up the position of Chief Technology Officer. Dr. Phillips was a director of Surgicraft Ltd., a UK orthopedics company.

Mr. Jonathan Chen joined the Board on December 18, 2016. He has served as Senior Vice President of International Operations and Investor Relations of MicroPort Scientific since July, 2012 and the Chairperson of IEC since September, 2015. Mr. Chen’s primary responsibilities include growing the company’s International business in markets outside of China, primarily in the markets of the U.S, Europe and South America. Mr. Chen has over 17 years of experience in the medical device industry. Prior to joining the Company, Mr. Chen worked for Angiotech Pharmaceuticals, Inc. for 6 years, where he was Senior Vice President of Business Development. He led the management team to build a $300 million medical products business through various acquisitions and licensing transactions. Prior to joining Angiotech, Mr. Chen was a life sciences investment banker for Credit Suisse and Alex. Brown & Sons. He helped his clients raise in excess of $2 billion in equity and debt capital and advised on over $3 billion in Mergers & Acquisitions transactions. Mr. Chen has a Bachelor of Arts degree in Economics and a Bachelor of Sciences degree with honors in Biological Sciences from Stanford University.

Mr. HongBin Sun joined the Board on December 18, 2016. He serves as the Chief Financial Officer of MicroPort Scientific, the Co-Chairperson of CEC and a member of IEC. Mr. Sun is currently holding the executive directorship in Shanghai MicroPort Orthopedics Co., Ltd., a subsidiary of the MicroPort Scientific. Mr. Sun has over 16 years of finance experience. Mr. Sun was the Director and General Manager of Otsuka China from 2006 to July 2010. From 2004 to 2006, he served as a Financial Director of Otsuka China. From 1998 to 2003, Mr. Sun was an Assistant Manager of the Shanghai office of KPMG. Mr. Sun is a member of the Chinese Institute of Certified Public Accountants and is also a Chartered Financial Analyst. Mr. Sun received his bachelor’s degree in Economics from Shanghai Jiao Tong University in China in 1998.

Mr. Michael H. Carrel is a director, having joined the Board in February 2015. He brings more than two decades of leadership experience and presently serves as the President and Chief Executive Officer of AtriCure, Inc., (Nasdaq: ATRC) a leading medical device company focused on surgical treatments for atrial fibrillation and left atrial appendage management. Since joining AtriCure in November 2012, Mr. Carrel has led the company through significant revenue growth including an increase of 31 percent over 2013. Prior to joining AtriCure, Mr. Carrel was the President and Chief Executive Officer of Vital Images, a publicly-traded medical imaging software company (Nasdaq: VTAL) from 2008 until it was sold to Toshiba in 2011. He stayed on as Chief Executive Officer of the new business unit within Toshiba until the integration was successfully completed in 2012. Mr. Carrel originally joined Vital Images in 2005 as Chief Operating and Financial Officer. During his time at Vital, Mr. Carrel worked extensively with leading physicians in numerous specialties to bring new products to market. Under his leadership, the company raised approximately $100 million in equity financing, grew revenue and profitability, increased global market share and expanded its presence to over 90 countries.

Mr. John Rush is a director and has 30 years of experience in the medical device sector, and currently serves as Chief Executive Officer of Inova Labs based in Austin, TX. Previously, Mr. Rush served as Chief Executive Officer of Lombard Medical Technologies PLC from 2009 to early 2011. During his tenure at Lombard, the Company successfully navigated through an IDE PMA trial in the United States which led to FDA approval for its AAA stent-graft in early 2013. Before joining Lombard, Mr. Rush was President and CEO of North American Scientific, Inc. (Nasdaq: NASM) and he also served as President and CEO of Micro Therapeutics, Inc. (Nasdaq: MTIX), an interventional neuroradiology company with operations in the United States and Europe. MTIX was purchased by ev3 and subsequent to that became a part of the Covidien Healthcare portfolio. Prior to MTIX, Mr. Rush spent 10 years with Scimed Life Systems/Boston Scientific in various management roles, including General Manager of Boston Scientific’s Asia Pacific business based in Singapore.

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B. Compensation

The following discussion provides the amount of compensation paid, payable, and benefits in kind granted, by us and our subsidiaries to our directors and executive officers for services in all capacities to us and our subsidiaries for the year ended December 31, 2016, as well as the amount contributed by us or our subsidiaries into money purchase plans for the year ended December 31, 2016 to provide pension, retirement or similar benefits to, our directors and executive officers.

Name	Salary/ Fees(1)	Annual Bonus	Allowances (2)	Pension Benefit(3)	Share based benefits(4)	Total
	$	$	$	$	$	$
Non-Executive Directors
Raymond Cohen	120,000	—	—	—	26,232	146,232
Michael H. Carrel	57,336	—	—	—	13,116	70,452
Timothy Haines(5)	53,470	—	—	—	13,116	66,586
Simon Neathercoat(6)	24,792	—	—	—	—	24,792
Craig Rennie(6)	12,500	—	—	—	—	12,500
Jonathan Chen(7)	—	—	—	—	—	—
HongBin Sun(7)	—	—	—	—	—	—
John Rush	53,500	—		—	13,116	66,616
David Milne(5)	57,336	—	—	—	6,557	63,893
Executive Officers
Simon Hubbert(8)	338,750	106,706	16,260	33,870	—	495,586
William J. Kullback	300,000	93,750	—	13,750	—	407,500
Michael Gioffredi(9)	248,101	34,734	—	—	—	282,835
Linda D'Abate(10)	89,489	33,671	—	—	—	123,160
Peter Phillips	168,001	93,750	13,550	16,800	—	292,101
	1,469,805	362,611	29,810	64,420	72,137	2,052,253
(1)  For the year ended December 31, 2016, the compensation of all Directors and Executive Officers was set, and paid, in U.S. dollars, except for Mr. Hubbert and Mr. Phillips where the currency was Pound Sterling. The pounds sterling values have been translated into U.S. dollars at the 2016 average exchange rate of 1.36.
(2)  For our Executive Officers, these amounts represent the value of the personal benefits granted to our senior management for the year ended December 31, 2016, which include housing, car allowance and medical and life insurance.
(3)  These amounts represent our contribution into money purchase plans.
(4)  The amounts shown are the grant date fair value of option awards granted in the year.  For a discussion of valuation assumptions used to determine grant date fair values, see Note 20 to our consolidated financial statements.
(5)  Mr. Haines and Mr. Milne resigned from the board on December 18, 2016.
(6)  Mr. Neathercoat and Mr. Rennie resigned from the Board of Directors on January 15, 2016.
(7) Mr. Chen and Mr. Sun joined the Board in December 2016.
(8) Mr. Hubbert resigned as an executive officer of the Company on April 18, 2017.
(9) Mr. Gioffredi resigned as an executive officer of the Company in August 2016
(10)  Mrs. D’Abate resigned as an executive officer of the company in April 2016

Director Compensation

Directors’ fees are paid in line with market practice and are reviewed periodically. In 2016, Mr. Cohen, as Chairman, was paid an annual fee of $120,000, Mr. Carrell was paid an annual fee of $57,336 and Mr. Rush was paid an annual fee of $53,500. Timothy Haines, was the director appointed by Abingworth LLP, Mr. Chen and Mr. Sun as the directors appointed by MP NeuroTech China each received no fees. For details on the share option grants to our executive officers and directors, see Item 7B.

The Board believes that the issue of share options to directors is important to attract and retain the right caliber of directors. After careful consideration, the Board has determined that the holding of share options by its directors has no impact on their independence in character and judgment. The share options held by the directors are all subject to performance criteria, the achievement of which are believed to add value to the Company and to be in all shareholders’ interests. The Company consulted with its major shareholder in advance of the awards of share options to the directors.

The share options held by the directors are subject to the same criteria as those for the executive officers.

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Executive Officer Compensation and Employment Agreements

The Company’s policy is to have employment agreements with executive officers with an indefinite term providing for a maximum of one year’s notice. Kurt Lemvigh was appointed on April 20, 2017 and has a one-year notice period. William J. Kullback was appointed on December 8, 2014 and has a one-year notice period. Peter Phillips was appointed on July 1, 2009 and has a one-year notice period.

The principal components of executive officers’ compensation packages are basic salary, a performance-related bonus, medium- and long-term incentives in the form of share options, pension contributions and other benefits. Executive officers are eligible for a performance related bonus based on achievement of various group and individual objectives during the year. In 2016, these awards were limited to a maximum of 60% of basic salary in respect of Simon Hubbert (CEO), 50% of basic salary in respect of William J. Kullback (CFO), and 40% of basic salary in respect of Peter Phillips (CTO).  In the event of a change in control, Mr. Kullback would receive a prorated portion of his total anticipated annual bonus for the year in which the change in control occurred. In addition, the Compensation Committee maintains the right to make one-off bonus award for exceptional performance. In 2016, no such awards were made.

All UK employees, including executive officers are invited to participate in a Group Personal Pension Plan, or GPPP, which is money-purchase in nature. The only pensionable element of compensation is basic salary. The Company contributes 10% of salary to the pension arrangements of the executive officers. In addition, the Company contributes 4% of salary and bonus to the 401(k) pension plans of any participating U.S. executive officers.

Benefits in kind for executive officers include life assurance, permanent health insurance and private medical insurance (including dental and optical insurance for U.S. executive officers). UK executive officers also receive a car allowance.

Details of the compensation paid to our executive officers in 2016 are shown in the table above.

For details on the share option grants to our executive officers and directors, see Item 7B.

C. Board Practices

Board of Directors

The Board currently comprises three independent directors these terms are used in the Nasdaq corporate governance rules.

Under an investment agreement with us, MicroPort has the right to nominate two persons to a Board position as long as MicroPort holds at least 10% of the issued share capital of the Company. Currently, Jonathan Chen and HongBin Sun are MicroPort’s representatives on the Board of Directors

Board Committees

The Board has established audit, nomination and compensation committees and has adopted a charter for each of the committees. Each committee’s members and functions are described below.

Audit Committee

Our Audit Committee for the year ended December 31, 2016 consisted of three directors, namely Raymond Cohen, Michael H. Carrel and John Rush. Each of Messrs. Cohen, Carrel and Rush satisfies the “independence” requirements of the Nasdaq Listing Rules and the SEC regulations. In addition, our Board has determined that Michael H. Carrel is qualified as an audit committee financial expert within the meaning of SEC regulations.

Our Audit Committee assists the Board in fulfilling its oversight responsibility in respect of the integrity of the Company’s financial statements risk management and internal control arrangements, compliance with legal and regulatory requirements and the performance, qualifications and independence of external auditors. Any non-audit services that are to be provided by the external auditors are reviewed in order to safeguard auditor objectivity and independence.

The written charter for our Audit Committee is available on our website.

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Nomination Committee

Our Nomination Committee for the year ended December 31, 2016 consists of three directors, namely Michael H. Carrel, Raymond Cohen, and John Rush. Each of Messrs. Carrel, Cohen and Rush satisfies the “independence” requirements of the Nasdaq Listing Rules and the SEC regulations.

Our Nomination Committee has responsibility for considering size, structure and composition of the Board, retirements and appointments of additional and replacement directors, and making appropriate recommendations to the Board.

 The written charter for our Nomination Committee is available on our website.

Compensation Committee

Our Compensation Committee consists of three directors, namely John Rush, Raymond Cohen, and Michael H. Carrel.  Each of Messrs. Carrel, Cohen and Rush satisfies the “independence” requirements of the Nasdaq Listing Rules and the SEC regulations.

Our Compensation Committee determines the terms and conditions of service of directors and the total individual compensation of each executive officer including, where appropriate, bonuses, incentive payments and share option grants. It also reviews and approves the performance criteria for performance-related pay schemes and share option plans operated by the Company.

The written charter for our Compensation Committee is available on our website.

Family Relationships

There are no family relationships between any directors and executive officers.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics that applies to our directors, officers and employees. A current copy of the code is available on our website.

Duties of Directors and Conflicts of Interest

Under Cayman Islands law, our directors have a duty of loyalty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must, inter alia, ensure compliance with our amended and restated memorandum and articles of association. In certain limited circumstances, a shareholder has the right to seek damages if a duty owed by our directors is breached.

Pursuant to our amended and restated memorandum and articles of association, a director who is in any way interested in a contract or transaction with the company will declare the nature of his interest at the relevant meeting of the board of directors (or give a general declaration prior thereto). Subject to having made such declaration, a director may vote in respect of any such contract or transaction notwithstanding that he may be interested therein and if he does so his vote will be counted and he may be counted in the quorum at any meeting of the board of directors at which any such contract or transaction shall come before the meeting for consideration.

Indemnification

We have customary directors’ and officers’ indemnity insurance in place for our directors and executive officers.

Cayman Islands law provides that a company may indemnify its directors and officers as well as its other employees and agents against judgments, fines, and amounts paid in settlement and expenses, including attorney’s fees, in connection with any negligence, default, breach of duty or breach of trust in relation to us, other than in the case of fraud or dishonesty.

Terms of Directors’ Service

Directors are engaged on letters of appointment that set out their duties and responsibilities. Each director is appointed for an initial period of 12 months that is then terminable by either party on three or six months’ written notice. All directors are subject to re-election at an Annual General Meeting at intervals of no more than three years.

Raymond Cohen was appointed on July 9, 2013 and has a three-month notice period. Michael H. Carrel was appointed on February 11, 2015 and has a three-month notice period. John Rush was appointed on October 12, 2009, originally as Chief Executive Officer, before becoming Non-Executive Chairman on January 1, 2011 and then a Non-Executive Director on July 9, 2013, and has a three-month notice period. Jonathan Chen and HongBin Sun were appointed on December 18, 2016 and do not have a notice period.

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D. Employees

The average number of employees by function and geographic location in the years ended December 31, 2016, 2015, and 2014 was as follows:

	2016	2015	2014
By Function:
Manufacture	82	93	65
Selling, marketing and distribution	13	59	65
Research and development	9	19	26
Administration	9	18	16
Total	113	189	172
By Geography:
United Kingdom	104	119	115
North America	4	62	49
Europe	4	7	7
Rest of the World	1	1	1
Total	113	189	172

We have never had a work stoppage and none of our employees are covered by collective bargaining agreements or represented by a labor union. We believe our employee relations are good.

E. Share Ownership

Share ownership by the directors and executive officers as at the date of this Annual Report is shown in the following table:

	Ordinary Shares Beneficially Owned(1)
Name of Beneficial Owner	Number	Percent
Raymond Cohen	147,840	*
Michael H. Carrel	38,083	*
John Rush	113,310	*
Kurt Lemvigh(2)	500,000	2.0%
William Kullback	213,438	*
Peter Phillips	278,598	1.0%
(1) The voting rights of the shares owned by the directors and executive officers are the same as the other shareholders. (2) Represents 500,000 shares granted to Mr. Lemvigh upon the date of his hire.

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Share options held by the directors and executive officers as at the date of this Annual Report are shown in the following table:

	Ordinary Shares Underlying Options Awarded	Exercise Price (£/share)	Exercise Price ($/share)	Date of Grant	Date of Expiration
Raymond Cohen	83,893	2.50		9/25/2013	9/24/2023
	37,500		3.90	4/23/2014	4/22/2024
	28,000		1.28	1/4/2016	1/3/2026
	115,270		0.66	1/26/17	1/25/27
	264,663
Michael H. Carrel	40,464		3.90	2/17/2015	2/16/2025
	14,000		1.28	1/4/2016	1/3/2026
	42,024		0.66	1/26/17	1/24/27
	96,488
John Rush	7,656	2.50		2/5/2010	2/4/2020
	46,711	2.50		9/8/2011	9/7/2021
	30,225	2.50		6/13/2013	6/12/2023
	12,500		3.90	4/23/2014	4/22/2024
	14,000		1.28	1/4/2016	1/3/2026
	85,717		0.66	1/26/17	1/25/27
	196,809
Kurt Lemvigh	2,000,000		0.60	04/20/17	04/19/27
William J. Kullback	161,859		3.90	12/8/2014	12/7/2024
	135,000		1.30	12/31/2015	12/30/2025
	229,053		0.66	1/26/17	1/25/27
	525,912
Peter Phillips	14,395	2.50		2/5/2010	2/4/2020
	25,939	2.50		8/26/2011	8/25/2021
	10,069	2.50		9/8/2011	9/7/2021
	117,382	2.50		6/13/2013	6/12/2023
	75,001		3.90	4/23/2014	4/22/2024
	56,000		1.30	12/31/2015	12/30/2025
	230,540		0.62	1/26/17	1/25/27
	529,326

Item 7      Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of December 31, 2016 by:

■ each of our executive officers and directors; and

■ each person, or group of affiliated persons, who is known by us to beneficially own 5% or more of our ordinary shares.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our ordinary shares. Ordinary shares subject to options that are currently exercisable or exercisable within 60 days of December 31, 2016 are considered outstanding and beneficially owned by the person holding the options for the purpose of calculating the percentage ownership of that person but not for the purpose of calculating the percentage ownership of any other person.

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Except as otherwise noted, the persons and entities in this table have sole voting and investing power with respect to all of our ordinary shares beneficially owned by them, subject to community property laws, where applicable. Except as otherwise set forth below, the address of the beneficial owner is c/o Lombard Medical House, 4 Trident Park, Didcot, Oxfordshire OX11 7HJ, UK.

	Ordinary Shares Beneficially Owned1
Name of Beneficial Owner	Number	Percent
5% Beneficial Owners
MicroPort NeuroTech Corp.	8,064,516	28.9%
Invesco Asset Management Limited	6,317,851	22.6%
Abingworth LLP	3,473,452	12.4%
Our Directors
Raymond Cohen²	146,799	*
Michael H. Carrel3	33,587	*
John Rush4	112,963	*
Jonathan Chen	—	*
HongBin Sun	—	*
Our Executive Officers
Kurt Lemvigh5	562,500	2.0%
William J. Kullback6	184,203	*
Peter Phillips7	271,848	1.0%
* Represents beneficial ownership of less than one percent of our outstanding ordinary shares.
1 The number of shares owned as shown both in this table and the accompanying footnotes and percentage ownership is based on 27,950,785 ordinary shares outstanding on December 31, 2016.
2 Consists of 13,225 ordinary shares and options over 133,574 ordinary shares.
3 Consists of options over 33,587 ordinary shares.
4 Consists of 9,607 ordinary shares and options over 103,356 ordinary shares.
5 Consists of options over 562,500 ordinary shares.
6 Consists of 14,805 ordinary shares and options over 169,398 ordinary shares.
7 Consists of 9,368 ordinary shares and options over 262,480 ordinary shares.

Holdings by U.S. Shareholders

Based upon a review of the information provided to us by our transfer agent, as of March 31, 2017, there were 420 holders of record of our shares, of which 37 record holders holding 19,574,827, or approximately 70%, of our outstanding ordinary shares, had registered addresses in the United States. The number of record holders is not representative of the number of beneficial holders of our ordinary shares, nor is it representative of where such beneficial holders reside, since the shares held in the name of Cede & Co. are listed for trading on the Nasdaq and are beneficially owned by a wide range of underlying beneficial shareholders who hold their shares in “street name.”  In particular we are aware, based on public filings, that three of our principal beneficial shareholders, MicroPort Scientific, Invesco Asset Management Limited and Abingworth LLP, who together held 64% of our outstanding ordinary shares, reside outside the United States.

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Changes in Major Shareholdings

To our knowledge, the changes in the percentage ownership held by the major shareholders since December 31, 2013 is as shown in the following table:

Lombard Medical Technologies plc	Lombard Medical, Inc.
Before Nasdaq IPO April 25, 2014	After Nasdaq IPO April 25, 2014	December 31, 2015	December 31, 2016
MicroPort NeuroTech Corp.	—	—	—	28.9%
Invesco Asset Management Limited	39.0%	39.0%	31.8%	22.6%
Abingworth LLP	17.8%	16.8%	17.4%	12.4%
FIL Investments International (Fidelity)	9.5%	7.6%	<5%	<5%
LSP Life Sciences Fund NV	5.7%	5.1%	<5%	<5%
SV Life Sciences Advisers LLP	—	—	5.4%	<5%

Voting Rights

All of our ordinary shares have the same rights, therefore all shareholders have the same voting rights.

B. Related Party Transactions

April 2014 Initial Public Offering

In April 2014, as part of the Company’s Initial Public Offering of shares on the Nasdaq Global market, Lombard Medical, Inc. issued 5,000,000 ordinary shares of $0.01 each at a price of $11.00 to raise $55,000,000 before offering expenses. To facilitate the Nasdaq IPO, Lombard Medical, Inc., a new Cayman Islands domiciled holding company, was created and the existing shares in Lombard Medical Technologies plc were exchanged for new shares in Lombard Medical, Inc. under a UK High Court approved Scheme of Arrangement. Following the Scheme of Arrangement, the trading in shares of Lombard Medical Technologies plc on the London Stock Exchange’s AIM market was cancelled and Lombard Medical Technologies plc reregistered as a private company, Lombard Medical Technologies Limited. 

The following holders of more than ten percent of the Company’s shares subscribed for new ordinary shares of $0.01 pence each, as set forth in the table below:

NAME	NUMBER OF ORDINARY SHARES SUBSCRIBED FOR		SUBSCRIPTION VALUE
Invesco Asset Management Limited	1,951,818	$	21,469,998
Abingworth LLP	727,272	$	7,999,992

Between the April 2014 Initial Public Offering and December 31, 2014

In August and September 2014, Abingworth LLP purchased 629,092 ordinary shares of $0.01 in a number of open market transactions at a weighted average share price of $6.30.

July 2015 Shares Issued in Acquisition of Altura

In July 2015, as part of the consideration for the Company’s acquisition of Altura Medical, Inc., Lombard Medical, Inc. issued an aggregate of 3,125,000 ordinary shares of $0.01 each to certain former shareholders of Altura in exchange for the shares of Altura capital stock held by them immediately prior to the close of the acquisition.  In addition, the Company delivered an aggregate of 575,000 ordinary shares of $0.01 to Computershare Trust Company, N.A., in its capacity as escrow agent, which will be held for a period of twelve months and are subject to any adjustments to the liabilities assumed as part of the acquisition.  SV Life Sciences received 1,077,499 ordinary shares as a result of this transaction and may be entitled to an additional 198,260 ordinary shares held in escrow.

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December 2016

On December 18, 2016, the Company entered into an investment agreement with MicroPort.  MP NeuroTech purchased $5 million in shares at $0.62 per share or 8,064,516 shares representing an approximately 28.9% ownership stake in the Company based on shares currently outstanding.

Share repricing

In August 2015, in an effort to (i) counteract the loss of share value, which caused all outstanding options to have exercise prices in excess of the fair market value of Company common shares and (ii) incentivize management to continue to strive to increase Company value for the benefit of stockholders, the Board of Directors approved a repricing of option awards held by employees and directors. Under the terms of this repricing, the Company repriced certain employee and director stock options having an exercise price of $3.90 or above to an exercise price of $3.90, which represented the closing share price on the day of the repricing. Other than the exercise price, all other terms of the repriced options, such as vesting and contractual life, remained the same. As a result of this repricing, we repriced a total of 1,989,505 outstanding options at a new exercise price of $3.90 per share.

In January 2016, the Board of Directors approved a repricing of all option awards held by Simon Neathercoat and Craig Rennie. Under the terms of this repricing, the Company repriced all outstanding stock options held by Mr. Neathercoat and Mr. Rennie having an exercise price of $0.90 or above to an exercise price of $0.90, which represented the closing share price on the day of the repricing. Other than the exercise price, all other terms of the repriced options, such as vesting and contractual life, remained the same. As a result of this repricing, we repriced a total of 114,149 options at a new exercise price of $0.90 per share.

In January 2017, the Board of Directors approved a repricing of option awards held by employees and directors. Under the terms of this repricing, the Company repriced certain employee and director stock options having an exercise price of $3.90 or above to an exercise price of $0.66, which represented the closing share price on the day of the repricing. Other than the exercise price, all other terms of the repriced options, such as vesting and contractual life, remained the same. As a result of this repricing, we repriced a total of 1,041,809 outstanding options with a range of new exercise prices of $0.62 to $0.90 per share.

Option Awards

Below is a summary of all the option awards to directors, executive officers and key management personnel that we have made in the last three years pursuant to our share option plans.

April 23, 2014 Share Option Grant

On April 23, 2014, we granted 675,086 new share options over ordinary shares of $0.01 each, at an exercise price of $11.00 per share, to our directors and employees. The number of share options granted to each director is shown in the table below:

NAME	SHARE OPTIONS GRANTED	TOTAL SHARE OPTIONS HELD FOLLOWING GRANT
Ian Ardill	50,001	161,857
Raymond Cohen	37,500	121,393
Linda D'Abate	80,928	80,928
Michael Gioffredi	50,000	161,857
Simon Hubbert	150,001	485,573
Simon Neathercoat	12,500	62,360
Peter Phillips	75,001	242,786
Craig Rennie	12,500	51,789
John Rush	12,500	97,092

May 1, 2014 Share Option Grant

On May 1, 2014, we granted 40,464 new share options over ordinary shares of $0.01 each, at an exercise price of $11.00 per share, to Timothy Haines. After the grant, Mr. Haines held 40,464 share options over ordinary shares of $0.01 each. Any gain on exercise will be remitted to Abingworth LLP by Timothy Haines.

September 12, 2014 Share Option Grant

On September 12, 2014, we granted 56,650 new share options over ordinary shares of $0.01 each, at an exercise price of $7.22 per share, to our Vice President, Global Innovation and Development, Kenny Dang. After the grant, Mr. Dang held 56,650 share options over ordinary shares of $0.01 each.

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December 8, 2014 Share Option Grant

On December 8, 2014, we granted 161,859 new share options over ordinary shares of $0.01 each, at an exercise price of $6.25 per share, to our CFO, William J. Kullback. After the grant, Mr. Kullback held 161,859 share options over ordinary shares of $0.01 each.

February 17, 2015 Share Option Grant

On February 17, 2015, we granted 40,464 new share options over ordinary shares of $0.01 each, at an exercise price of $5.50 per share, to Michael Carrel. After the grant, Mr. Carrel held 40,464 share options over ordinary shares of $0.01 each.

August 18, 2015 Share Option Grant

On August 18, 2015, we granted 49,840 new share options over ordinary shares of $0.01 each, at an exercise price of $3.90 per share, to David Milne. After the grant, Mr. Milne held 49,840 share options over ordinary shares of $0.01 each.

December 31, 2015 Share Option Grant

On December 31, 2015, we granted 1,016,000 new share options over ordinary shares of $0.01 each, at an exercise price of $1.30 per share, to our directors and employees.  The number of share options granted to each director is shown in the table below:

NAME	SHARE OPTIONS GRANTED	TOTAL SHARE OPTIONS HELD FOLLOWING GRANT
William Kullback	135,000	296,859
Peter Phillips	56,000	298,786

January 4, 2016 Share Option Grant

On January 4, 2016, we granted 56,000 new share options over ordinary shares of $0.01 each, at an exercise price of $1.28 per share Raymond Cohen received 28,000 options, Michael Carrel and John Rush received each 14,000 options.  After the grant, Mr. Cohen held 149,393 share options, Mr. Carrel held 54,464 share options and Mr. Rush held 111,092 share options.

April 20, 2017 Share Option Grant

On April 20, 2017, we granted 2,000,000 new share options over ordinary shares of $0.01 each at an exercise price of $0.60 per share to Kurt Lemvigh.  After the grant, Mr. Lemvigh held 2,000,000 share options.

Employment Agreements

Each of Kurt Lemvigh, our Chief Executive Officer, William J. Kullback, our Chief Financial Officer, and Peter Phillips, our Chief Technology Officer have employment agreements with us.

Indemnification of Officers and Directors

We have entered into indemnification agreements with each of our directors and some of our executive officers. The indemnification agreements provide the directors and executive officers with contractual rights to indemnification, expense advancement and reimbursement. However, in accordance with Cayman Islands law, indemnity will be provided in relation to any liability attached to the director or executive officer in connection with any negligence, default, breach of duty or breach of trust in relation to us, other than in the case of fraud or dishonesty, although we may provide and maintain insurance for such director or executive officer against any such liability. There is no pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are not aware of any pending or threatened litigation that may result in claims for indemnification by any director or executive officer.

C. Interests of experts and counsel

Not applicable.

Item 8   Financial Information.

A. Consolidated Statements and Other Financial Information.

See “Item 18. Financial Statements.”

B. Significant Changes

Except as disclosed in Note 23 to our consolidated financial statements included as part of this Annual Report, there have been no significant changes since December 31, 2016.

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Item 9   The Offer and Listing.

A. Offer and Listing Details

Lombard Medical, Inc. ordinary shares are currently admitted to the Nasdaq Global Market; the Initial Public Offering occurred on April 25, 2014. From December 13, 2005 until April 30, 2014, the ordinary shares of Lombard Medical Technologies plc, the predecessor company to Lombard Medical, Inc. were admitted to AIM, a market operated by the London Stock Exchange.

Historical Market Prices – Lombard Medical, Inc.

The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on Nasdaq in U.S. dollars.

Price Per Ordinary Share
	$
	High		Low
Annual (Year Ended December 31):
2015		6.50		1.25
2016		1.83		0.55
Quarterly:
First Quarter 2016		1.35		0.55
Second Quarter 2016		1.83		1.07
Third Quarter 2016		1.31		0.81
Fourth Quarter 2016		0.95		0.58
First Quarter 2017		0.88		0.56
Most Recent Six Months:
October 2016		0.95		0.82
November 2016		0.81		0.63
December 2016		0.80		0.58
January 2017		0.69		0.56
February 2017		0.69		0.61
March 2017		0.82		0.58

Historical Market Prices – Lombard Medical Technologies plc

The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on AIM in pounds sterling.

	Price Per Ordinary Share
	$
	High	Low
Annual (Year Ended December 31):
2009	13.0	0.6
2010	3.7	1.5
2011	4.3	1.0
2012	2.7	0.5
2013	2.5	1.6
2014 (January 1, 2014 – April 25, 2014)	2.2	1.6
Quarterly:
First Quarter 2012	2.7	1.1
Second Quarter 2012	1.5	1.2
Third Quarter 2012	1.2	1.1
Fourth Quarter 2012	2.0	0.5
First Quarter 2013	2.5	1.7
Second Quarter 2013	2.1	1.7
Third Quarter 2013	1.7	1.6
Fourth Quarter 2013	2.1	1.7
First Quarter 2014	2.2	1.6
Second Quarter 2014 (April 1, 2014 – April 25, 2014)

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B. Plan of Distribution

Not applicable.

C. Markets

Since April 25, 2014, 19,885,965 ordinary shares of Lombard Medical, Inc. have been listed on the Nasdaq Global Market, under the symbol "EVAR". Until April 30, 2014, 44,743,187 ordinary shares of Lombard Medical Technologies plc were listed on AIM, a market operated by the London Stock Exchange, under the symbol “LMT”.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

Item 10   Additional Information

A. Share Capital

Not applicable.

B. Memorandum and articles of association

The information called for by this item has been reported previously in our Registration Statement on form F-1 (File No. 333-194461), filed with the SEC March 10, 2014, as amended, under the heading "Description of Share Capital" and is incorporated by reference into this Annual Report.

C. Material contracts

Except as otherwise disclosed in this Annual Report on 20-F (including the Exhibits), we are not currently, and have not been in the last two years, party to any material contract, other than contracts entered into in the ordinary course of business. All material contracts are listed on Part III

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D. Exchange controls

There are no governmental laws, decrees, regulations or other legislation in the Cayman Islands or the United Kingdom that may affect the import or export of capital, including the availability of cash and cash equivalents for use by us, or that may affect the remittance of dividends, interest, or other payments by us to non-resident holders of our ordinary shares, other than withholding tax requirements. There is no limitation imposed by Cayman Islands law or our articles of association on the right of non-residents to hold or vote shares.

E. Taxation

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of, the Cayman Islands. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Further, we have received an undertaking from the Governor-in-Cabinet of the Cayman Islands that, in accordance with section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands, until the date falling 20 years after February 24, 2014, being the date of such undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (i) on or in respect of the shares, debentures or other obligations of our Company or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by our Company to its members or a payment of principal or interest or other sums due under a debenture or other obligation of our Company. If we otherwise were to become subject to taxation in the Cayman Islands, our financial condition and results of operations could be materially and adversely affected.

Material U.S. Federal Income Tax Considerations

Subject to the limitations described below, the following are the material U.S. federal income tax consequences of the purchase, ownership and disposition of ordinary shares to a “U.S. Holder.” Non-U.S. Holders are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the purchase, ownership and disposition of ordinary shares to them. For purposes of this discussion, a “U.S. Holder” means a beneficial owner of ordinary shares that is, for U.S. federal income tax purposes:

■ an individual who is a citizen or resident of the United States;

■ a corporation (or other entity taxed as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any of its political subdivisions;

■ an estate, whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

■ a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) it has a valid election to be treated as a U.S. person.

A “non-U.S. Holder” is any individual, corporation, trust or estate that is a beneficial owner of ordinary shares and is not a U.S. Holder.

This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, or the Code, applicable U.S. Treasury Regulations promulgated thereunder, and administrative and judicial decisions as at the date hereof, all of which are subject to change, possibly on a retroactive basis, and any change could affect the continuing accuracy of this discussion.

This summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to each person’s decision to purchase ordinary shares. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular U.S. Holder based on such holder’s particular circumstances, including Medicare tax imposed on certain investment income. In particular, this discussion considers only U.S. Holders that will own ordinary shares as capital assets within the meaning of section 1221 of the Code and does not address the potential application of U.S. federal alternative minimum tax or the U.S. federal income tax consequences to U.S. Holders that are subject to special treatment, including:

■ broker dealers or insurance companies;

■ U.S. Holders who have elected mark-to-market accounting;

■ tax-exempt organizations or pension funds;

■ regulated investment companies, real estate investment trusts, insurance companies, financial institutions or “financial services entities”;

■ U.S. Holders who hold ordinary shares as part of a “straddle,” “ hedge,” “ constructive sale” or “conversion transaction”or other integrated investment;

■ U.S. Holders who own or owned, directly, indirectly or by attribution, at least 10% of the voting power of our ordinary shares;

■ U.S. Holders whose functional currency is not the U.S. Dollar;

■ U.S. Holders who received ordinary shares as compensation;

■ U.S. Holders who are otherwise subject to UK taxation;

■ persons holding ordinary shares in connection with a trade or business outside of the United States; and

■ certain expatriates or former long-term residents of the United States.

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This discussion does not consider the tax treatment of holders that are entities treated as partnerships for U.S. federal income tax purposes or other pass-through entities or persons who hold ordinary shares through a partnership or other pass-through entity. In addition, this discussion does not address any aspect of state, local or non-U.S. tax laws, or the possible application of U.S. federal gift or estate tax.

BECAUSE OF THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY PARTICULAR HOLDER OF ORDINARY SHARES MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN, EACH HOLDER OF ORDINARY SHARES IS URGED TO CONSULT WITH ITS TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE ACQUISITION AND THE OWNERSHIP AND DISPOSITION OF ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND APPLICABLE TAX TREATIES.

Taxation of Dividends Paid on Ordinary Shares

Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us with respect to our ordinary shares generally will be includable in the gross income of U.S. Holders as foreign source passive income. Because we do not determine our earnings and profits for U.S. federal income tax purposes, a U.S. Holder will be required to treat any distribution paid on ordinary shares, including the amount of non-U.S. taxes, if any, withheld from the amount paid, as a dividend on the date the distribution is received. Such distribution generally will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations.

Cash distributions paid in a non-U.S. currency will be included in the income of U.S. Holders at a U.S. Dollar amount equal to the spot rate of exchange in effect on the date the dividends are includible in the income of the U.S. Holders, regardless of whether the payment is in fact converted to U.S. Dollars, and U.S. Holders will have a tax basis in such non-U.S. currency for U.S. federal income tax purposes equal to such U.S. Dollar value. If a U.S. Holder converts a distribution paid in non-U.S. currency into U.S. Dollars on the day the dividend is includible in the income of the U.S. Holder, the U.S. Holder generally should not be required to recognize gain or loss arising from exchange rate fluctuations. If a U.S. Holder subsequently converts the non-U.S. currency, any subsequent gain or loss in respect of such non-U.S. currency arising from exchange rate fluctuations will be U.S.-source ordinary income or loss.

Dividends we pay with respect to our ordinary shares to non-corporate U.S. Holders may be “qualified dividend income,” which is currently taxable at a reduced rate; provided that (i) our ordinary shares are readily tradable on an established securities market in the United States, (ii) we are not a passive foreign investment company (as discussed below) with respect to the U.S. Holder for either our taxable year in which the dividend was paid or the preceding taxable year, (iii) the U.S. Holder has held our ordinary shares for at least 61 days of the 121-day period beginning on the date which is 60 days before the ex-dividend date, and (v) the U.S. Holder is not under an obligation to make related payments on substantially similar or related property. We believe our ordinary shares are considered to be readily tradable on an established securities market in the United States, although there can be no assurance that this will continue to be the case in the future. Any days during which a U.S. Holder has diminished its risk of loss on our ordinary shares are not counted towards meeting the 61-day holding period. U.S. Holders should consult their own tax advisors on their eligibility for reduced rates of taxation with respect to any dividends paid by us.

Distributions paid on ordinary shares generally will be foreign-source passive category income for U.S. foreign tax credit purposes and will not qualify for the dividends received deduction generally available to corporations. Subject to certain conditions and limitations, non-U.S. taxes, if any, withheld from a distribution may be eligible for credit against a U.S. Holder’s U.S. federal income tax liability. In addition, if 50 percent or more of the voting power or value of our shares is owned, or is treated as owned, by U.S. persons (whether or not the Company is a “controlled foreign corporation” for U.S. federal income tax purposes), the portion of our dividends attributable to income which we derive from sources within the United States (whether or not in connection with a trade or business) would generally be U.S.-source income. U.S. Holders would not be able directly to utilize foreign tax credits arising from non U.S. taxes considered to be imposed upon U.S.-source income.

Taxation of the Sale or Other Disposition of Ordinary Shares

Subject to the passive foreign investment company rules discussed below, a U.S. Holder generally will recognize a capital gain or loss on the taxable sale or other disposition of our ordinary shares in an amount equal to the difference between the U.S. Dollar amount realized on such sale or other disposition (determined in the case of consideration in currencies other than the U.S. Dollar by reference to the spot exchange rate in effect on the date of the sale or other disposition or, if the ordinary shares are treated as traded on an established securities market and the U.S. Holder is a cash basis taxpayer or an electing accrual basis taxpayer, the spot exchange rate in effect on the settlement date) and the U.S. Holder’s adjusted tax basis in such ordinary shares determined in U.S. Dollars. The initial tax basis of ordinary shares to a U.S. Holder will be the U.S. Holder’s U.S. Dollar cost for ordinary shares (determined by reference to the spot exchange rate in effect on the date of the purchase or, if the ordinary shares are treated as traded on an established securities market and the U.S. Holder is a cash basis taxpayer or an electing accrual basis taxpayer, the spot exchange rate in effect on the settlement date).

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Capital gain from the sale, exchange or other disposition of ordinary shares held more than one year generally will be treated as long-term capital gain and is eligible for a reduced rate of taxation for non-corporate holders. Gain or loss recognized by a U.S. Holder on a sale or other disposition of ordinary shares generally will be treated as U.S.-source income or loss for U.S. foreign tax credit purposes. The deductibility of a capital loss recognized on the sale or exchange of ordinary shares is subject to limitations. A U.S. Holder that receives currencies other than U.S. Dollars upon disposition of the ordinary shares and converts such currencies into U.S. Dollars subsequent to receipt will have foreign exchange gain or loss based on any appreciation or depreciation in the value of such currencies against the U.S. Dollar, which generally will be U.S.-source ordinary income or loss.

Passive Foreign Investment Company

Based on our operations, composition of assets and market capitalization in 2015, we believe we were not a passive foreign investment company, or a PFIC, for U.S. federal income tax purposes in 2015. The determination of whether we are a PFIC is made annually, after the close of the relevant taxable year. Therefore, it is possible that we could be classified as a PFIC in future years due to changes in the composition of our assets or income, as well as changes to our market capitalization. The market value of our assets may be determined in large part by reference to the market price of our ordinary shares, which is likely to fluctuate after the offering, and may fluctuate considerably given that market prices of medical technology companies have been especially volatile.

In general, a non-U.S. corporation will be classified as a PFIC for any taxable year if at least (i) 75% of its gross income is classified as “passive income” or (ii) 50% of its assets (determined on the basis of a quarterly average) produce or are held for the production of passive income. For these purposes, cash is considered a passive asset. In making this determination, the non-U.S. corporation is treated as earning its proportionate share of any income and owning its proportionate share of any assets of any corporation in which it holds 25% or more (by value) of the stock.

Under the PFIC rules, if we were considered a PFIC at any time that a U.S. Holder holds our shares, we would continue to be treated as a PFIC with respect to such holder’s investment unless (i) we cease to be a PFIC and (ii) the U.S. Holder has made a “deemed sale” election under the PFIC rules.

 If we are considered a PFIC at any time that a U.S. Holder holds our shares, any gain recognized by the U.S. Holder on a sale or other disposition of the shares, as well as the amount of an “excess distribution” (defined below) received by such holder, would be allocated ratably over the U.S. Holder’s holding period for the shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed. For purposes of these rules, an excess distribution is the amount by which any distribution received by a U.S. Holder on its shares exceeds 125% of the average of the annual distributions on the shares received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter. Certain elections may be available that would result in alternative treatments (such as mark-to-market treatment) of the shares.

If we are treated as a PFIC with respect to a U.S. Holder for any taxable year, the U.S. Holder will be deemed to own shares in any of our subsidiaries that are also PFICs. However, an election for mark-to-market treatment would likely not be available with respect to any such subsidiaries. If we are considered a PFIC, a U.S. Holder will also be subject to information reporting requirements on an annual basis. U.S. Holders should consult their own tax advisors about the potential application of the PFIC rules to an investment in our shares.

If we were classified as a PFIC, a U.S. Holder may be able to make a mark-to-market election with respect to our ordinary shares (but not with respect to the shares of any lower-tier PFICs) if the ordinary shares are “regularly traded” on a “qualified exchange”. In general, our ordinary shares issued will be treated as “regularly traded” in any calendar year in which more than a de Minimis quantity of ordinary shares are traded on a qualified exchange on at least 15 days during each calendar quarter. The Company believes the London Stock Exchange and the Nasdaq Global Market are qualified exchanges. However, the Company can make no assurance that the ordinary shares will be listed on a “qualified exchange” or that there will be sufficient trading activity for the ordinary shares to be treated as “regularly traded”. Accordingly, U.S. Holders should consult their own tax advisers as to whether their ordinary shares would qualify for the mark-to-market election.

If a U.S. Holder makes the mark-to-market election, for each year in which the Company is a PFIC, the holder will generally include as ordinary income the excess, if any, of the fair market value of the ordinary shares at the end of the taxable year over their adjusted tax basis, and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted tax basis of the ordinary shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). If a U.S. Holder makes the election, the holder’s tax basis in our ordinary shares will be adjusted to reflect any such income or loss amounts. Any gain recognized on the sale or other disposition of our ordinary shares will be treated as ordinary income, and any loss will be treated as an ordinary loss to the extent of any prior mark-to-market gains.

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If a U.S. Holder makes the mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ordinary shares are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election.

If we were classified as a PFIC, U.S. Holders would not be eligible to make an election to treat us as a “qualified electing fund,” or a QEF election, because we do not anticipate providing U.S. Holders with the information required to permit a QEF election to be made.

U.S. Information Reporting and Backup Withholding

A U.S. Holder is generally subject to information reporting requirements with respect to dividends paid in the United States on ordinary shares and proceeds paid from the sale, exchange, redemption or other disposition of ordinary shares. A U.S. Holder is subject to backup withholding (currently at 28%) on dividends paid in the United States on ordinary shares and proceeds paid from the sale, exchange, redemption or other disposition of our ordinary shares unless the U.S. Holder is a corporation, provides an IRS Form W-9 or otherwise establishes a basis for exemption.

Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a U.S. Holder’s U.S. federal income tax liability, and a U.S. Holder may obtain a refund from the IRS of any excess amount withheld under the backup withholding rules, provided that certain information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of and procedures for obtaining an exemption from backup withholding in their particular circumstances.

 Certain Reporting Obligations

If a U.S. Holder (together with persons considered to be related to the U.S. Holder) subscribes for ordinary shares for a total initial public offering price in excess of $100,000 (or the equivalent in a foreign currency), such holder may be required to file IRS Form 926 for the holder’s taxable year in which the initial public offering price is paid. U.S. Holders should consult their own tax advisors to determine whether they are subject to any Form 926 filing requirements.

Individuals that own “specified foreign financial assets” may be required to file an information report with respect to such assets with their tax returns. Subject to certain exceptions, “specified foreign financial assets” include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non U.S. persons, (ii) financial instruments and contracts held for investment that have non U.S. issuers or counterparties, and (iii) interests in foreign entities. The ordinary shares may be subject to these rules. Persons required to file U.S. tax returns that are individuals are urged to consult their tax advisers regarding the application of this legislation to their ownership of the ordinary shares.

Certain UK Tax Consequences for U.S. Holders

The following statements apply only to U.S. Holders who are not resident nor ordinarily resident in the United Kingdom and who do not carry on a trade, profession or vocation in the United Kingdom through a branch, agency or permanent establishment and have not used, held or acquired their ordinary shares for the purpose of such trade, profession or vocation or such branch, agency or permanent establishment.

Under current UK tax law and published HM Revenue & Customs practice, such U.S. Holders will not be subject to:

■ UK withholding or income tax on dividends paid on the ordinary shares; nor

■ UK capital gains tax on a disposal of ordinary shares.

F. Dividends and paying agents

Not applicable.

G. Statement by experts

Not applicable.

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H. Documents on Display

You may read and copy any reports or information that we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling at the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website that contains reports and other about issuers, like us, that file electronically with the SEC. The address of that site is "www.sec.gov".

We also make available on our website, free of charge, our annual reports on Form 20-F and the text of our reports on Form 6-K, including any amendments to these reports, as well as certain other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our website address is “www.lombardmedical.com”. The information contained on our website is not incorporated by reference in this Annual Report on Form 20-F.

I. Subsidiary information

Not applicable.

Item 11   Quantitative & Qualitative Disclosures About Market Risk

Market risk arises from our exposure to fluctuation in interest rates and currency exchange rates. These risks are managed by maintaining an appropriate mix of cash deposits in various currencies, placed with a variety of financial institutions for varying periods according to expected liquidity requirements. For information about our quantitative and qualitative risks, see Note 11 to the consolidated financial statements.

Item 12   Description of Securities Other Than Equity Securities

A. Debt Securities

Not Applicable.

B. Warrant and Rights

Not Applicable.

C. Other Securities

Not Applicable.

D. American Depositary Shares

Not Applicable.

PART II

Item 13   Defaults, Dividend Arrearages and Delinquencies

None.

Item 14   Material Modifications to The Rights of Security Holders and Use of Proceeds

A. Material Modifications to the Rights of Security Holders

Not applicable.

B. Use of Proceeds

Not applicable.

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Item 15   Controls & Procedures

We have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) under the supervision and the participation of the Executive Management Board, which is responsible for the management of the internal controls, and which includes the Chief Executive Officer and the Chief Financial Officer. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation as of December 31, 2016, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures (i) were effective at a reasonable level of assurance as of the end of the period covered by this Annual Report in ensuring that information required to be recorded, processed, summarized and reported in the reports that are filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) were effective at a reasonable level of assurance as of the end of the period covered by this Annual Report in ensuring that information to be disclosed in the reports that are filed or submitted under the Exchange Act is accumulated and communicated to the management of the Company, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016.  No matter how well designed, because of inherent limitations in all control systems, internal control over financial reporting may not prevent or detect misstatements should they occur. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the control procedures may deteriorate. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on such assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2016.  

This Annual Report does not include an attestation report of the Company’s registered public accounting firm because we qualify as an emerging growth company and, as such, are exempt from such attestation.

During the period covered by this Annual Report, we have not made any changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A Audit Committee Financial Expert

Our board of directors has determined that Michael H. Carrel is a financial expert as contemplated by the rules of the SEC implementing Section 407 of the Sarbanes Oxley Act of 2002. The Audit Committee consists of three directors, namely Michael H. Carrel, Timothy Haines, and David Milne.

Item 16B Code of Ethics

Our Code of Business Conduct and Ethics is applicable to all of our employees, officers and directors and is available on our website at http://www.lombardmedical.com. We expect that any amendment to this code, or any waivers of its requirements, will be disclosed on our website. Information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 20-F, and you should not consider information on our website to be part of this Annual Report on Form 20-F.

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Item 16C Principal Accountant Fees and Services

The aggregate fees billed by our principal accountants, Baker Tilly Virchow Krause LLP or the year ended December 31, 2016 and PricewaterhouseCoopers LLP, for the year ended December 31, 2015 are shown in the table below.

	YEAR ENDED DECEMBER 31,
	2016		2015
		($ in thousands)
Audit fees	$	126	$	145
Audit related services (1)		-		507
Tax fees		67		18
Other Services		-		101
Total fees	$	193	$	771
(1)  Audit related services in 2015 related primarily to the work performed on the Form F-3.

Pre-Approval policies and procedures

The Audit Committee recognizes it is important that the independence of the external auditors, real or perceived, is not impaired through the provision of non-audit services. To ensure the independence and objectivity of the external auditors, all services are pre-approved by the Audit Committee.

Item 16D Exemptions from The Listing Standards for Audit Committees

Not Applicable.

Item 16E Purchases of Equity Securities by the Issuer and Affiliated Purchasers

In 2015, no purchases of our equity securities were made by or on behalf of Lombard Medical, Inc. or any affiliated purchaser.

Item 16F Change in the Registrants Certifying Accountant

In May 2, 2016, PricewaterhouseCoopers LLP, United Kingdom (PwC”) resigned as our independent registered public accounting firm and Baker Tilly Virchow Krause, LLP (“BTVK”) was selected by the Board of Directors to serve as the Company’s new independent registered public accounting firm commencing January 1, 2016.  During the fiscal years ended December 31, 2015 and 2014 there were no (1) disagreements (as defined in the instructions to Item 16F of Form 20-F) with PwC, on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to their satisfaction, would have caused them to make reference thereto in connection with their opinion, or (2) reportable events (as defined in Item 16F of Form 20-F). 

The audit reports of PwC on the Consolidated Financial Statements of Company and its subsidiaries for December 31, 2015 and 2014, did contain a going concern reservation.

During the fiscal years ended December 31, 2015 and 2014 there have been no reportable events as defined under Item 16F(a)(1)(v) of Form 20-F.  We have provided PwC with a copy of this annual report on Form 20-F prior to its filing with the SEC and requested that PwC furnish a letter addressed to the SEC stating whether it agrees with the statements made in this Item 16F.  A copy of PwC letter to the SEC dated April 28, 2017 is included as Exhibit 4.27 to this annual report. 

During the two most recent fiscal years prior to the recommendation by the Board to appoint BTVK as our independent registered accounting firm, neither we nor anyone on our behalf consulted BTVK regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, nor has BTVK provided to us a written report or oral advice that BTVK concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue, or (ii) any matter that was either the subject of a "disagreement" with PwC as that term is defined in Item 16F(a)(1)(iv) of Form 20-F and the related instructions to Item 16F of Form 20-F, or a "reportable event," as that term is described in Item 16F(a)(1)(v) of Form 20-F.

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Item 16G Corporate Governance

Corporate Governance Practices

In general, under Nasdaq rules, foreign private issuers, as defined under the Exchange Act, are permitted to follow home country corporate governance practices instead of the corporate governance requirements of Nasdaq. A foreign private issuer making its initial public offering or first U.S. listing on Nasdaq that follows home country corporate governance practices must disclose in its registration statement or on its website each requirement that it does not follow and must describe the home country practices it follows in lieu of such requirements. We intend to rely on this exemption with respect to following rules:

	Nasdaq Corporate Governance Standards – Section 5600	Lombard Medical Corporate Practices
■	5620(b): Meetings of Shareholders –Proxy Solicitation Each Company that is not a limited partnership shall solicit proxies and provide proxy statements for all meetings of Shareholders and shall provide copies of such proxy solicitation to Nasdaq.	Nasdaq Rule 5620(b), which requires a company, for all meetings of shareholders, to solicit proxies and provide proxy statements. As allowed by the laws of the Cayman Islands, while we may solicit proxies and provide proxy statements, however we do not intend to adopt any such requirements.
■	5620(c): Meetings of Shareholders –Quorum Each Company that is not a limited partnership shall provide for a quorum as specified in its by-laws for any meeting of the holders of common stock; provided, however, that in no case shall such quorum be less than 33 1/3 % of the outstanding shares of the Company’s common voting stock.	As allowed by the laws of the Cayman Islands, our amended and restated memorandum and articles of association will establish a minimum quorum requirement that will be two shareholders present (in person or by proxy) at a meeting and entitled to vote on the business to be dealt with who represent not less than one-third of the total par value of our issued and outstanding voting shares in the company are a quorum. See “Description of Share Capital—Memorandum and Articles of Association—Shareholder Meetings.”
■	5635(a): Shareholder Approval –Acquisition of Stock or Assets of Another Company Shareholder approval is required prior to the issuance of securities in connection with the acquisition of the stock or assets of another company if: (1) where, due to the present or potential issuance of common stock, including shares issued pursuant to an earn-out provision or similar type of provision, or securities convertible into or exercisable for common stock, other than a public offering for cash: (A) the common stock has or will have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance of stock or securities convertible into or exercisable for common stock; or (B) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities; or (2) any director, officer or Substantial Shareholder (as defined by Rule 5635(e)(3)) of the Company has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the Company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more.	As allowed by the laws of the Cayman Islands, our amended and restated memorandum and articles of association allow our board of directors to take all action with respect to the acquisition of stock or assets of another company without shareholder approval. While we may choose to seek shareholder approval of any such acquisitions, we do not intend to adopt any requirements for shareholder approval in our amended and restated memorandum and articles of association.
■	5635(b): Shareholder Approval – Change of Control Shareholder approval is required prior to the issuance of securities when the issuance or potential issuance will result in a change of control of the Company.	As allowed by the laws of the Cayman Islands, our amended and restated memorandum and articles of association allow our board of directors to take all action with respect to allotment and issuance of shares without shareholder approval. While we may choose to seek shareholder approval of any such issuances of securities, we do not intend to adopt any requirements for shareholder approval in our amended and restated memorandum and articles of association.
■	5635(c): Shareholder Approval –Equity Compensation Shareholder approval is required prior to the issuance of securities when a stock option or purchase plan is to be established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which stock may be acquired by officers, directors, employees, or consultants, except for: (1) warrants or rights issued generally to all security holders of the Company or stock purchase plans available on equal terms to all security holders of the Company (such as a typical dividend reinvestment plan); (2) tax qualified, non-discriminatory employee benefit plans (e.g., plans that meet the requirements of Section 401(a) or 423 of the Internal Revenue Code) or parallel nonqualified plans, provided such plans are approved by the Company’s independent compensation committee or a majority of the Company’s Independent Directors; or plans that merely provide a convenient way to purchase shares on the open market or from the Company at Market Value; (3) plans or arrangements relating to an acquisition or merger as permitted under IM-5635-1; or (4) issuances to a person not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to the individual’s entering into employment with the Company, provided such issuances are approved by either the Company’s independent compensation committee or a majority of the Company’s Independent Directors. Promptly following an issuance of any employment inducement grant in reliance on this exception, a Company must disclose in a press release the material terms of the grant, including the recipient(s) of the grant and the number of shares involved.	As allowed by the laws of the Cayman Islands, our amended and restated memorandum and articles of association allow our board of directors to take all action with respect to equity compensation without shareholder approval. Our board of directors has delegated this authority to our independent Compensation Committee to take all action with respect to compensation and we do not intend to adopt any requirements for shareholder approval in our amended and restated memorandum and articles of association.
■	5635(d): Shareholder Approval –Private Placements Shareholder approval is required prior to the issuance of securities in connection with a transaction other than a public offering involving: (1) the sale, issuance or potential issuance by the Company of common stock (or securities convertible into or exercisable for common stock) at a price less than the greater of book or market value which together with sales by officers, directors or Substantial Shareholders of the Company equals 20% or more of common stock or 20% or more of the voting power outstanding before the issuance; or (2) the sale, issuance or potential issuance by the Company of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock.	As allowed by the laws of the Cayman Islands, our amended and restated memorandum and articles of association allow our board of directors to take all action with respect to allotment and issuance of shares without shareholder approval. While we may choose to seek shareholder approval of any such issuances of securities, we do not intend to adopt any requirements for shareholder approval in our amended and restated memorandum and articles of association.

Due to our intent to follow certain home country corporate governance practices, our shareholders will not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.

75

Item 16H Mine Safety Disclosure

Not Applicable.

 PART III

Item 17

Financial Statements

We have elected to provide financial statements pursuant to Item 18.

Item 18

Financial Statements

The financial statements are filed as part of this Annual Report beginning on page F-1.

76

Item 19 Exhibits

Exhibit Number			Description of Exhibit
	4.1	(1)	* Loan Agreement between Lombard Medical Technologies plc and Medico’s Hirata Inc.
	4.2	(1)	* Rules of Lombard Medical Technologies plc Share Option Plan as amended by the Board on February 5, 2010 and approved by Shareholders on May 20, 2010
	4.3	(6)	* Contract of Employment between Lombard Medical Technologies plc and Kurt Lemvigh effective as of April 20, 2017
	4.4	(5)	* Contract of Employment between Lombard Medical Technologies plc and Bill Kullback effective as of
	4.5	(5)	* Contract of Employment between Lombard Medical Technologies plc and Peter Phillips effective as of
	4.6	(1)	* Patent License Agreement between Lombard Medical Limited and Medtronic, Inc. dated October 14, 2013
	4.7	(1)	* Lease between The Irvine Company LLC and Lombard Medical Technologies, Inc. dated August 2, 2013 in connection with Suite No. 260, 15420 Laguna Canyon Road, Irvine, CA, 92618
	4.8	(1)	* Lease between Hartberg Investments Limited and Lombard Medical Technologies plc dated November 12, 2013 in connection with Unit 2A, Trident Park, Basil Hill Road, Didcot, UK, OX117HJ
	4.9	(1)	* Lease between Hartberg Investments Limited and Lombard Medical Technologies plc dated December 11, 2012 in connection with Building 3 (formerly known as Paradigm House) and 4, Trident Park, Basil Hill Road, Didcot, UK, OX11 7HJ
	4.10	(1)	* Distribution Agreement between Lombard Medical Technologies plc and Medico’s Hirata Inc.
	4.11	(1)	* Rules of Lombard Medical, Inc. Share Option Plan
	4.12	(3)	* Lease between The Irvine Company LLC and Lombard Medical Technologies, Inc. dated February 9, 2015 in connection with Suite No. 200, 6440 Oak Canyon, Irvine, CA, 92618
	4.13	(2)	*Agreement and Plan of Merger, dated as of July 30, 2015, by and among Lombard Medical, Inc., Delta Merger Sub, Inc., Altura Medical, Inc., certain stockholders of Altura Medical, Inc. and Shareholder Representative Services LLC, as Stockholders’ Representative.
	4.14	(2)	* Consent and First Amendment to Loan Agreement, dated as of July 30, 2015, by and among Oxford Finance LLC, the lenders party thereto, Lombard Medical Technologies, Inc. and Altura Medical, Inc.
	4.15	(2)	* Loan and Security Agreement, dated as of April 24, 2015, by and among Oxford Finance LLC, the lenders party thereto and Lombard Medical Technologies, Inc.
	4.16	(2)	* Form of Amended and Restated Secured Promissory Note 1 (Term A Loan) between Lombard Medical Technologies, Inc. and Oxford Finance LLC.
	4.17	(2)	* Form of Secured Promissory Note 1 (Term A Loan) between Lombard Medical Technologies, Inc. and Oxford Finance LLC.
	4.18	(2)	* Pledge Agreement, dated as of July 30, 2015, between Lombard Medical, Inc. and Oxford Finance LLC.
	4.19	(2)	* Pledge Agreement, dated as of April 24, 2015, between Lombard Medical Technologies Limited and Oxford Finance LLC.
	4.20	(2)	* Guarantee and Indemnity, dated as of April 24, 2015, between Lombard Medical, Inc., Lombard Medical Technologies Limited, Lombard Medical Limited and Oxford Finance LLC.
	4.21	(2)	* Debenture, dated as of April 24, 2015, among Lombard Medical Technologies Limited, Lombard Medical Limited and Oxford Finance LLC.
	4.22	(2)	* Debenture, dated as of April 24, 2015, between Lombard Medical, Inc. and Oxford Finance LLC.
	4.23	(2)	* Charge Over Shares, dated as of April 24, 2015, between Lombard Medical, Inc. and Oxford Finance LLC
	4.24	(2)	* Form of Warrant to Purchase Shares between Lombard Medical, Inc. and Oxford Finance LLC.
	4.25	(4)	* Investment Agreement dated December 18, 2016 by and among Lombard Medical, Inc. and MicroPort NeuroTech Corp. and MicroPort NeuroTech CHINA Corp LIMITED
	4.26	(4)	* Subordination Agreement dated December 18, 2016 by and between MicroPort NeuroTech CHINA Corp. LIMITED and Oxford Finance LLC
	4.27		Brazil Registration and Distribution Agreement dated April 3, 2017
	4.28		China Registration and Distribution Agreement dated April 3, 2017
	4.29		Component Manufacturing Agreement dated April 3, 2017
	4.30		Technology Licensing and Manufacturing Agreement dated April 3, 2017
	8.1		List of subsidiaries
	12.1		Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	12.2		Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	13.1		Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	13.2		Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	15.1		Consent of Baker Tilly Virchow Krause LLP
	15.2		Consent of PricewaterhouseCoopers LLP
	15.3		Letter to SEC from PricewaterhouseCoopers LLP dated April 28, 2017
			*Previously filed.
			†Confidential treatment requested.
			(1) Incorporated by reference to the exhibits to the Registrant’s Registration Statement on Form F-1 (File No. 333-194461), originally filed on March 10, 2014.
			(2) Incorporated by reference to the exhibits to the Registrant’s Registration Statement on Form F-3 (File No. 333-208983), originally filed on January 3, 2016.
			(3) Incorporated by reference to the exhibits to the Registrant’s Annual Report on Form 20-F, filed on April 30, 2015.
			(4)Incorporated by reference to the exhibits to the Registrant’s Form 6-K, filed on December 19, 2016
			(5) Incorporated by reference to the exhibits to the Registrant’s Annual Report on Form 20-F, filed on April 28, 2016
			(6)Incorporated by reference to the exhibits to the Registrant’s Form 6-K, filed on April 20, 2017

77

 Signature

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

	Lombard Medical, Inc.
	By:	/s/ KURT LEMVIGH
		Name: Kurt Lemvigh
		Title: Chief Executive Officer
Date: April 28, 2017

78

LOMBARD MEDICAL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014	PAGE
Reports of Independent Registered Public Accounting Firms	F-2
Consolidated Balance Sheets	F-4
Consolidated Statements of Comprehensive Loss	F-5
Consolidated Statements of Changes in Equity	F-6
Consolidated Cash Flow Statements	F-7
Notes to the Consolidated Financial Statements	F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders, Audit Committee and Board of Directors

Lombard Medical, Inc.

We have audited the accompanying consolidated balance sheet of Lombard Medical, Inc. as of December 31, 2016, and the related consolidated statements of comprehensive loss, changes in equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lombard Medical, Inc. as of December 31, 2016 and the results of its operations and cash flows for the year then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the company has suffered recurring losses from operations and negative cash flows from operations and will require additional financing to fund future operations. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Baker Tilly Virchow Krause, LLP

Minneapolis, Minnesota
April 28, 2017

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the board of directors and shareholders of Lombard Medical, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of comprehensive loss, of changes in equity and of cash flows present fairly, in all material respects, the financial position of Lombard Medical, Inc. and its subsidiaries at December 31, 2015, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses and negative cash flows from operations and will require additional financing to fund future operations. These circumstances raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Reading, United Kingdom
April 29, 2016

F-3

Consolidated Balance Sheets as of December 31, 2016 and 2015
		2016 $’000	2015 $’000
	NOTE
Assets
Goodwill	3,4	14,662	16,052
Intangible assets	3,5	18,148	21,889
Property, plant and equipment	6	1,373	3,043
Trade and other receivables	8	—	176
Non-current assets		34,183	41,160
Inventories	7	6,877	6,462
Trade and other receivables	8	3,821	4,168
Taxation recoverable		2,089	1,618
Cash and cash equivalents		20,797	32,332
Current assets		33,584	44,580
Total assets		67,767	85,740
Liabilities
Trade and other payables	9	(5,805)	(8,236)
Current portion of long-term notes		(4,267)	—
Current liabilities		(10,072)	(8,236)
Borrowings	10	(28,025)	(23,115)
Conversion liability	10	(2,267)	—
Deferred tax liabilities	3, 18	—	(674)
Contingent consideration	3, 11	(13,430)	(10,600)
Non-current liabilities		(43,722)	(34,389)
Total Liabilities		(53,794)	(42,625)
Net assets		13,973	43,115
Equity
Called up share capital	12	280	199
Share premium account	12	68,710	63,853
Capital reorganization reserve	12	205,686	205,686
Translation reserve		(2,885)	1,270
Accumulated loss		(257,818)	(227,893)
Total equity		13,973	43,115
The accompanying notes form part of these consolidated financial statements.

F-4

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016, 2015, and 2014
		2016 $’000	2015 $’000	2014 $’000
	NOTE
Revenue	13	12,169	15,114	13,277
Cost of sales		(11,027)	(8,296)	(7,541)
Gross profit		1,142	6,818	5,736
Selling, marketing and distribution expenses		(12,022)	(23,125)	(21,363)
Research and development expenses		(7,669)	(11,279)	(9,213)
Administrative expenses		(6,972)	(11,707)	(9,800)
Initial Public Offering expenses		—	—	(1,503)
Change in fair value of contingent consideration		(2,830)	—	—
Impairment - goodwill and long-lived intangibles		(3,360)	—	—
Total operating expenses		(32,853)	(46,111)	(41,879)
Operating loss		(31,711)	(39,293)	(36,143)
Change in fair value of financial instruments		1,412	—	—
Finance income		93	134	247
Finance costs	17	(2,310)	(860)	(83)
Loss before taxation		(32,516)	(40,019)	(35,979)
Taxation	18	1,481	2,215	1,227
Loss for the year		(31,035)	(37,804)	(34,752)
Other comprehensive income/(loss):
Items that may subsequently be reclassified to profit or loss
Currency translation differences		(4,155)	(975)	(1,947)
Total comprehensive loss for the year		(35,190)	(38,779)	(36,699)
Basic and diluted loss per ordinary share	19	(1.54)	(2.13)	(2.39)
The accompanying notes form part of these consolidated financial statements.

F-5

Consolidated Statements of Changes in Equity for the years ended December 31, 2016, 2015 and 2014
					CAPITAL REORG RESERVE
		SHARE PREMIUM ACCOUNT		TRANSLATION RESERVE		ACCUM LOSS	TOTAL EQUITY
	SHARE CAPITAL		OTHER RESERVES
	$’000	$’000	$’000	$’000	$’000	$’000	$’000
At January 1, 2014	52,406	134,305	19,087	4,192	—	(160,657)	49,333
Loss for the year	—	—	—	—	—	(34,752)	(34,752)
Share-based compensation	—	—	—	—	—	2,541	2,541
Capital reorganization	(52,294)	(134,305)	(19,087)	—	205,686	—	—
Issue of ordinary shares	50	54,950	—	—	—	—	55,000
Share issue expense	—	(5,342)	—	—	—	—	(5,342)
Currency translation	—	—	—	(1,947)	—	—	(1,947)
At December 31, 2014	162	49,608	—	2,245	205,686	(192,868)	64,833
Loss for the year	—	—	—	—	—	(37,804)	(37,804)
Share-based compensation	—	—	—	—	—	2,779	2,779
Issue of ordinary shares	37	14,245	—	—	—	—	14,282
Currency translation	—	—	—	(975)	—	—	(975)
At December 31, 2015	199	63,853	—	1,270	205,686	(227,893)	43,115
Loss for the year	—	—	—	—	—	(31,035)	(31,035)
Share-based compensation	—	—	—	—	—	1,110	1,110
Issue of ordinary shares	81	4,857	—	—	—	—	4,938
Currency translation	—	—	—	(4,155)	—	—	(4,155)
At December 31, 2016	280	68,710	—	(2,885)	205,686	(257,818)	13,973
The accompanying notes form part of these consolidated financial statements.

F-6

Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014
	2016	2015	2014
	$’000	$’000	$’000
Cash outflow from operating activities
Loss before taxation	(32,516)	(40,019)	(35,979)
Depreciation and amortization of licenses, software and property, plant and equipment	2,138	1,798	1,171
Change in fair value of contingent liabilities	2,830	—	—
Change in derivative liability	(1,412)	—	—
Impairment of intangibles and goodwill	3,360	—	—
Share based compensation expense	1,110	2,779	2,541
Loss on sale of tangible assets	389	66	—
Net finance expense/(income)	2,217	726	(164)
Increase in inventories	(1,481)	(1,779)	(1,841)
(Increase)/decrease in receivables	2	(185)	(483)
Increase/(decrease) in payables	(1,818)	234	(790)
Net cash used in operating activities	(25,181)	(36,380)	(35,545)
Research and development tax credits received / (income tax paid)	(14)	2,584	1,172
Net cash outflow from operating activities	(25,195)	(33,796)	(34,373)
Cash flows from investing activities
Interest received	54	87	167
Purchase of property, plant and equipment	(265)	(1,239)	(1,481)
Proceeds from sale of property plant and equipment	117	—	—
Purchase of intangible assets	—	(15)	(266)
Cash paid for acquisition	—	(200)	—
Net cash flows used in investing activities	(94)	(1,367)	(1,580)
Cash flows from financing activities
Interest paid	(1,450)	(688)	—
Proceeds from issue of loan notes	12,407	21,000	—
Loan notes issuance expenses	(88)	(438)	—
Loan notes repaid	—	(5,331)	—
Proceeds from issue of ordinary shares	5,000	—	55,000
Share issue expenses	(62)	—	(5,342)
Net cash flows from financing activities	15,807	14,543	49,658
(Decrease)/increase in cash and cash equivalents	(9,482)	(20,620)	13,705
Cash and cash equivalents at beginning of year	32,332	53,334	40,866
Effects of exchange rates on cash and cash equivalents	(2,053)	(382)	(1,237)
Cash and cash equivalents at end of year	20,797	32,332	53,334
The accompanying notes form part of these consolidated financial statements.

F-7

Notes to the Consolidated Financial Statements

1 Accounting Policies

Basis of Preparation

Lombard Medical, Inc. (the “Company” or the “Group”) is a medical technology company specializing in developing, manufacturing, and marketing endovascular stent-grafts used in the repair of aortic aneurysms. The Company’s lead product, Aorfix, is used in the treatment of abdominal aortic aneurysms. The financial statements as of December 31, 2016 and 2015 and for the three years ended December 31, 2016 have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”) and the International Financial Reporting Standards Interpretations Committee (“IFRS IC”), collectively IFRS.

The financial statements were approved for issuance by the Board on April 20, 2017.

The financial statements have been prepared on the historical cost basis, revised for use of fair values where required by applicable IFRS. The consolidated financial statements are presented in U.S. dollars to the nearest thousand ($000), except where otherwise indicated. The principal accounting policies adopted are set out below.

Assets and liabilities of foreign operations where the functional currency is other than the U.S. dollar were translated into U.S. dollars at the relevant closing rates of exchange. Non-U.S. dollar trading results were translated into U.S. dollars at the average rates of exchange for those periods. Differences arising from the retranslation of the opening net assets and the results for the year have been taken to other comprehensive income/loss.

The exchange rates relevant for each period were as follows:

	2016	2015	2014
Sterling/U.S. dollar exchange rate
Closing Rate	1.23	1.48	1.55
Average Rate	1.36	1.53	1.64

The accounting policies have been applied consistently throughout the year except where otherwise indicated.

Financing and Going Concern as of December 31, 2016

These financial statements have been prepared on the going concern basis, which assumes that the Company will continue in operational existence for the foreseeable future. The Group has incurred significant losses and negative cash flows from operations since inception. The Group incurred a net loss for the year ended December 31, 2016 of $31.0 million (2015: $37.8 million), and as at December 31, 2016 had an accumulated deficit of $257.8 million (2015: $227.9 million) and cash and cash equivalents of $20.8 million (2015: $32.3 million).

Based on forecasts revised in December 2016, the Company expects to use up its current cash resources between Q1 2018 and Q2 2018, depending on the effectiveness of the cost savings programs being implemented by management. The Company therefore needs to raise additional capital or incur indebtedness to continue to fund its future operations, which may come from one or a number of public or private sources.

The Company’s ability to raise additional funds will depend on the results of its commercialization efforts for the Altura Endovascular Stent Graft, and the next generation of Aorfix, as well as clinical and regulatory events, and may also be impacted by adverse financial, economic, and market conditions, many of which are beyond the Company’s control. The Company cannot be certain that sufficient funds will be available when required or on satisfactory terms.

To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in ownership dilution to existing stockholders. There are no assurances that the Company will be able to raise additional financing for the amounts required to execute the Company’s business plans and on the terms acceptable to the Company. If adequate funds are not available on terms that are acceptable when required by the Company, the Company may be required to significantly reduce or refocus its operations, which could have a material adverse effect on its business, financial condition and results of operations, which could result in insolvency. In addition, the Company may have to delay, reduce the scope or eliminate some of its research and development or sales activities, which could delay the time to market for any of its product candidates or reduce its revenue growth potential, if such adequate funds are not available. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not contain any adjustments that might result from the outcome of this uncertainty.

On February 24, 2016, the Company received a NASDAQ Staff Deficiency Letter indicating that the Company is not in compliance with the minimum bid price requirement for continued listing.  According to the letter from NASDAQ, the Company had a grace period of 180 calendar days, starting February 24, 2016, to regain compliance with the minimum bid price requirement. On April 8, 2016 the Company received a follow-up letter from NASDAQ indicating that the Company had achieved a closing bid price of $1.00 per share or higher for ten consecutive business days, from March 24 to April 7, 2016, and as such, the Company had regained compliance with the minimum bid requirement.

On November 9, 2016, the Company received a NASDAQ Staff Deficiency Letter indicating that the Company is not in compliance with the minimum bid price requirement for continued listing.  According to the letter from NASDAQ, the Company had a grace period of 180 calendar days, starting November 9, 2016, to regain compliance with the minimum bid price requirement

Financing and Going Concern as of December 31, 2015

These financial statements have been prepared on the going concern basis, which assumes that the Company will continue in operational existence for the foreseeable future. The Group has incurred significant losses and negative cash flows from operations since inception. The Group incurred a net loss for the year ended December 31, 2015 of $37.8 million (2014: $34.8 million), and as at December 31, 2015 had an accumulated deficit of $227.9 million (2014: $192.9 million) and cash and cash equivalents of $32.3 million (2014: $53.3 million).

F-8

Based on forecasts revised in December 2015, the Company expects to use up its current cash resources between Q3 2016 and Q1 2017, depending on the effectiveness of the cost savings programs being implemented by management. The Company therefore needs to raise additional capital or incur indebtedness to continue to fund its future operations, which may come from one or a number of public or private sources.

The Company’s ability to raise additional funds will depend on the results of its commercialization efforts for the Altura Endovascular Stent Graft, and the next generation of Aorfix, as well as clinical and regulatory events, and may also be impacted by adverse financial, economic, and market conditions, many of which are beyond the Company’s control. The Company cannot be certain that sufficient funds will be available when required or on satisfactory terms.

To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in ownership dilution to existing stockholders. There are no assurances that the Company will be able to raise additional financing for the amounts required to execute the Company’s business plans and on the terms acceptable to the Company. If adequate funds are not available on terms that are acceptable when required by the Company, the Company may be required to significantly reduce or refocus its operations, which could have a material adverse effect on its business, financial condition and results of operations, which could result in insolvency. In addition, the Company may have to delay, reduce the scope or eliminate some of its research and development or sales activities, which could delay the time to market for any of its product candidates or reduce its revenue growth potential, if such adequate funds are not available. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not contain any adjustments that might result from the outcome of this uncertainty.

Basis of Consolidation

The consolidated annual financial statements comprise the financial statements of the Company and its subsidiaries at December 31 of each year. The purchase method of accounting is used for the acquisition of subsidiaries.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. An investor controls an investee when it has power over the relevant activities, exposure to variable returns from the investee and the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are prepared for the same reporting year as the Company using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealized profits arising from intra-group transactions, have been eliminated in full.

Critical Accounting Estimates and Assumptions

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement and impairment of intangible assets (including goodwill), the contingent consideration relating to the acquisition of Altura Medical, Inc. (“Altura”), the beneficial conversion option related to the MicroPort investment agreement and the estimation of share-based compensation expense.

Intangible Assets (including Goodwill)

The Group determines whether intangible assets (including goodwill) are impaired on an annual basis and this requires the estimation of the higher of fair value less costs of disposal and value in use of the cash generating units to which the intangible assets are allocated which in turn involves estimation of premiums paid for control of public companies and the costs that would be incurred in a sale (see notes 3 & 4).

Contingent Consideration on Acquisition

The estimation of the fair value of the contingent consideration related to the acquisition of Altura requires the selection of an appropriate valuation model, consideration as to the inputs necessary for the valuation model chosen and the estimation of the likelihood that the revenue and regulatory milestones will be achieved (see notes 3 & 11).

Beneficial Conversion Option
The estimation of the fair value of the beneficial conversion option related to the convertible debt with MicroPort requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen.

Share-Based Compensation Expenses

The estimation of share-based compensation expense requires the selection of an appropriate valuation model, consideration as to the inputs necessary for the valuation model chosen, the estimation of the number of awards that will ultimately vest and inputs based on participation of employees (see note 20).

Revenue Recognition

Revenue is generated from the sale of medical devices and the licensing of technology, net of sales-related taxes. Revenue is recognized as follows:

Product Sales

Product sales to direct customers are recognized when goods are delivered to customers and are net of any provision for estimated returns. Products provided for a particular procedure include a range of medical devices that may not all be used; where this is the case an estimation of the number of unused devices to be returned is made and provided for. Where the Company’s sales are made through distributors, such sales are recognized on shipment to the distributor as returns of stocking orders are not generally accepted under the distributor agreements. In the case of products provided for a particular medical procedure and sold through a distributor, an estimate of the returns of unused parts is made and provided for. Sales include products used in clinical trials, provided the supply is under a separate contract and payment arrangements.

Cost of Sales

Cost of sales includes all costs relating to the manufacture of the medical devices, including costs of materials, manufacturing personnel, manufacturing overhead and inventory reserves.

Research & Development Expenditure

The treatment of research and development expenditure requires an assessment of the expenditure in order to determine whether or not it is appropriate to capitalize costs and recognize as an asset on the balance sheet in accordance with IAS 38. The Group considers that the regulatory, technical and market uncertainties inherent in the development and commercialization of new products mean that development costs incurred to date have not yet met the relevant capitalization criteria and so should not be capitalized as intangible assets and consequently expenditure on research and development have been expensed to the statement of comprehensive income/loss as incurred.

F-9

Goodwill

Goodwill was recognized under UK GAAP prior to the adoption of IFRS. Upon adoption of IFRS on January 1, 2006, the Goodwill was carried over and is stated at net book value at that date. Goodwill arising on the acquisition of subsidiary or associate undertakings and businesses subsequent to January 1, 2006, representing any excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is capitalized. Goodwill is not amortized but is reviewed for impairment annually or upon a triggering event.

Intangible Assets—In-Process Research and Development

In-process research and development intangible assets acquired as part of the acquisition of Altura have been recognized at fair value. Once FDA approval of the Altura Endovascular Stent Graft is obtained, in-process research and development will be reclassified to developed technology and amortized over its remaining useful life.

Intangible Assets—Developed Technology

Developed technology intangible assets acquired as part of the acquisition of Altura have been recognized at fair value. Developed technology intangible assets are amortized on a straight-line basis over the expected useful life of the technology. The life used for this purpose is seventeen years.

Intangible Assets—Intellectual Property and Licenses

Separately acquired intellectual property and license fee payments made to third parties are recognized at cost. Intangible assets for intellectual property are amortized on a straight-line basis over the expected useful life of the patents on the related products or processes. The life used for this purpose is ten years.

Intangible assets recognized for license payments are amortized over a straight-line basis over the license agreement period. The carrying value of intangible assets is reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable.

Intangible Assets—Software

Software is recognized at cost and amortized on a straight-line basis over the expected useful life. The economic life used for this purpose is three years.

Property, Plant and Equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost of each asset over its expected useful life as follows:

Production equipment, molds and lab equipment — three to ten years

Office equipment, furniture and fixtures — three to five years

Computer hardware and equipment — three to five years

Impairment of Assets

The carrying values of non-current assets are reviewed for impairment where there is an indication that the assets might be impaired. First-year and annual impairment reviews are conducted for acquired goodwill and for any intangible assets that have not yet been brought into use. Impairment is determined by reference to the higher of fair value less cost of disposal and value in use. Any provision for impairment is charged in the statement of comprehensive income for the year. Non-financial assets other than goodwill which have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand together with short-term, highly liquid investments that are readily convertible to cash.

Foreign Currencies

The functional currency of the parent entity is US dollars. Subsidiary undertakings have functional currencies of Sterling and the Euro that are different to the Group’s presentational currency of US dollars.

Monetary assets and liabilities of subsidiary undertakings in foreign currencies are translated at the closing rates of exchange for the year. Differences on exchange arising from the retranslation of the opening net investment in subsidiary companies, and from the translation of the results of those companies at average rate, are taken to reserves and, where material, are reported in the statement of changes in equity.

Transactions denominated in foreign currencies are translated into functional currencies and recorded at the rate ruling at the date of the transaction. Monetary balances, at the year-end, are translated into functional currencies at the closing rate of exchange. Exchange differences are taken to the income statement in the period in which they arise.

Operating Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Costs in respect of operating leases are charged on a straight line basis over the lease term.

Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined on a first-in, first-out basis and includes transport and handling costs. In the case of manufactured products, cost includes all direct expenditure including production overheads. Where necessary, provision is made for obsolete, slow-moving and defective inventories.

Trade and Other Receivables

Trade and other receivables are recognized and carried at the lower of their original invoiced value and recoverable amount. Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as remote. Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

F-10

Trade and Other Payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within one year or less. If not, they are classified as non-current liabilities. Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

Pensions

The Group operates a defined contribution pension scheme for some of its employees. Contributions payable during the year are charged to the statement of comprehensive loss.

Taxation

Taxation on the profit or loss for the year comprises current and deferred tax including tax on capital gains. Current tax is the expected tax payable, or recoverable, on the taxable profit/loss and any adjustment to tax payable, or receivable in respect of prior years. Research and development tax credits are recognized when it is probable they will be received.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit or loss.

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Their carrying amount is reviewed at each balance sheet date on the same basis. Deferred tax is measured on an undiscounted basis and at the tax rates expected to apply in the period in which the asset or liability is settled. It is recognized in the statement of comprehensive income except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Financial and Capital Debt Instruments

The conversion option of a convertible instrument is assessed to determine if it meets the definition of equity. Where the conversion meets the definition of equity, the fair value of the liability portion is determined using a market interest rate for an equivalent non-convertible instrument. This amount is recorded as a liability on an amortized cost basis until extinguished on conversion or maturity of the instrument. The remainder of the proceeds is allocated to the conversion option; this is recognized and included in shareholders’ equity. Where the conversion option of a convertible instrument is not assessed to meet the definition of equity, the conversion option is a derivative and the residual amount is the liability.

Capital debt instruments are included at fair value and measured at amortized cost. Costs associated with the issue of capital debt instruments offset against the proceeds of the instrument.

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are taken to the share premium account and shown in equity as a deduction from the proceeds.

Share-Based Payments

The Group operates a number of executive share option schemes. In accordance with IFRS 2, the cost of equity-settled transactions is measured by reference to their fair value at the date at which they are granted, with fair value determined using the Black-Scholes model. The cost of equity-settled transactions is recognized over the period until the award vests. No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied. Modified options are measured at fair value on the date of modification and the difference between the fair value of the original option on that date and the modified fair value of the modified option is recognized immediately for vested options and over the remaining vesting period for unvested options. At each reporting date, the cumulative expense recognized for equity-based transactions reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the Directors at that date, will ultimately vest.

Segmental reporting

Operating segments are reported on a basis consistent with the internal reporting used by the chief operating decision makers. These have been identified as the Executive Management team which makes operating decisions. The Company has only one segment for financial reporting purposes.

Standards and Interpretations

In preparing the consolidated financial statements for the current year the Group has adopted the following new IFRS, amendments to IFRS and International Financial Reporting Interpretations Committee (“IFRS IC”) interpretations, which have not had a significant effect on the results or net assets of the Group:

IFRS 14, Regulatory deferral accounts (effective January 1, 2016).

IFRS 11, (Amendment), Joint arrangements on acquisition of an interest in a joint operation (effective January 1, 2016).

Amendments to IAS 16, Property, plant and equipment, and IAS 38, Intangible assets, on depreciation and amortization (effective January 1, 2016).

Amendments to IAS 1, Presentation of financial statements (effective January 1, 2016).

Amendments to IAS 16, Property, plant and equipment, and IAS 41, Agriculture, regarding bearer plants (effective January 1, 2016).

IAS 27, (Amendment), Separate financial statements, on the equity method (effective January 1, 2016).

Amendments to IFRS 10, Consolidated financial statements, and IAS 28, Investments in associates and joint ventures (effective January 1, 2016).

At the date of authorization of these consolidated accounts, the following standards, amendments and interpretations, which have not been applied in these financial statements, were in issue but not yet effective:

IAS 12, (Amendment) Recognition of Deferred Tax Assets for Unrealized Losses (effective January 1, 2017)

IAS 7, (Amendment) Disclosure Initiative (effective January 1, 2017)

IFRS 15, Revenue from contracts with customers (effective January 1, 2018).

IFRS 9, (Amendment), Financial instruments, regarding general hedge accounting (effective January 1, 2018).

IFRS 9, Financial instruments (effective January 1, 2018).

IFRS 16, Leases (effective January 1, 2019).

Under present circumstances, with the exception of IFRS 16 for which the Company is currently assessing the impact it may have on its consolidated financial statements, none of these is expected to have a material impact on the Company’s financial statements.

F-11

2 General Information

The Company is a public limited company listed on the NASDAQ Market since April 24, 2014 and is incorporated and domiciled in the Cayman Islands. The address of the registered office is Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

The following subsidiary undertakings have been included in the Group consolidation. All interests are held directly in the form of ordinary shares.

NAME OF UNDERTAKING	PRINCIPAL AREA OF ACTIVITY	COUNTRY OF INCORPORATION
Lombard Medical Technologies Limited	Investment holding company	Great Britain
Lombard Medical Limited	Medical implants	Great Britain
PolyBioMed Limited	Dormant from December 1, 2009	Great Britain
LionMedical Limited	Investment holding company	Great Britain
Lombard Medical Technologies, Inc.	Medical implants	USA
Lombard Medical (Scotland) Ltd	Medical fabrics	Great Britain
Lombard Medical Technologies GmbH	Medical implants	Germany
Altura Medical, Inc.	Medical implants	USA

Lombard Medical Technologies Limited (formerly Lombard Medical Technologies plc) is a wholly owned subsidiary of Lombard Medical, Inc. following the Scheme of Arrangement effective date of 24 April 2014. Altura Medical, Inc. is a wholly owned subsidiary of Lombard Medical, Inc. following the acquisition on July 30, 2015 (see note 3).

All of the other subsidiaries are wholly owned by Lombard Medical Technologies Limited. The above companies operate principally in their country of incorporation.

3 Acquisition of Altura Medical, Inc.

On July 30, 2015, the Company completed the acquisition of 100% voting equity interest in Altura Medical, Inc. (“Altura”). The Company believes the acquisition of Altura provides an opportunity for near-term revenue, as well as providing an ultra-low-profile AAA stent graft that is expected to provide the Company with an increased share of the AAA market.

For the year ended December 31, 2015, Altura contributed no revenue and operating expenses of $1.8 million to the Company’s results. If the acquisition had occurred on January 1, 2015, it is estimated that the Company’s unaudited combined revenue would remain unchanged, loss from operations and net loss would have been higher by $5.2 million and $5.6 million, respectively.  The unaudited combined results do not include any anticipated cost savings or other effects of the planned integration of Altura. Accordingly, such amounts are not necessarily indicative of the results if the combination had occurred on January 1, 2015 or that may result in the future.

Upon the closing of the acquisition, the Company issued an aggregate of 3,125,000 unregistered shares of common stock to certain former shareholders of Altura in exchange for the shares of Altura capital stock held by them immediately prior to the closing of the acquisition. In addition, the Company delivered an aggregate of 575,000 unregistered shares of common stock to Computershare Trust Company, N.A., in its capacity as escrow agent, which will be held for a period of twelve months and are subject to any adjustments to the liabilities assumed as part of the acquisition. In addition, the Company paid $0.2 million in cash to Shareholder Representative Services LLC, in its capacity as Altura Stockholders’ Representative. The fair value of the initial consideration was $14.3 million of equity which was based on the closing share price of $3.86 on the date of acquisition and cash paid of $0.2 million. In addition, the Company assumed $5.3 million in existing Altura debt and $2.5 million of certain liabilities of Altura.

The Company also agreed to pay Altura shareholders additional consideration in the future if certain sales and regulatory approval milestones are met. The fair value of the contingent consideration payment on the acquisition date was estimated to be $10.6 million. The contingent payment payable will continue to be evaluated at each reporting period, with adjustments made based upon management’s assessment of the probability of meeting performance milestones as set-forth within the acquisition agreement (see note 11).

The revenue-based milestone payment referred to above relates to the Company achieving a trailing twelve-month revenue stream of $10.0 million on the sale of Altura products prior to December 31, 2030. If this were achieved, the Company shall pay to the Altura shareholders, in cash or Company common stock, at the Company’s option, at $4.00 per share if applicable, $15.0 million in no more than 45 days after the end of the month in which the Company achieves this revenue threshold.

The regulatory milestone payment referred to above concerns receiving approval from the US Food and Drug Administration to market and sell Altura’s device in the United States prior to December 31, 2030. If this were achieved, the Company shall pay to the Altura shareholders, in cash or Company common stock, at the Company’s option, at $4.00 per share if applicable, $12.5 million in no more than 45 days after achieving this approval.

F-12

	$’000
Fair value of initial consideration	14,482
Contingent acquisition consideration payable	10,600
Total consideration	25,082

Costs incurred by the Company related to the acquisition totaled $0.2 million and are included in operating expenses in the Consolidated Statement of Comprehensive Income.

The net assets acquired upon acquisition were as follows:

	Book Value $’000	Fair Value $’000
Property, plant and equipment	71	71
Intangible assets	—	20,600
Assumed accrued liabilities	(2,495)	(2,495)
Assumed bank debt	(5,331)	(5,331)
Deferred tax liability	—	(674)
Net (liabilities)/assets acquired	(7,755)	12,171

The resulting goodwill on acquisition is calculated as follows:

	$’000
Fair value of consideration given	25,082
Less: Fair value of net assets acquired	(12,171)
Goodwill	12,911

The Company recorded the excess of the aggregate purchase price over the estimated fair values of the identifiable net assets acquired as goodwill.  Goodwill is primarily attributable to the benefits the Company expects to realize by enhancing its product offering, thereby contributing to an expanded revenue base. None of the goodwill is expected to be deductible for tax purposes.

As the fair value of the intangible assets acquired in the Altura acquisition exceeds the tax bases of such assets, the Company recorded a deferred tax liability of $0.7 million, with a corresponding increase to goodwill.

The above fair values of intangible assets, goodwill and contingent consideration liabilities, differ from the provisional amounts presented previously in the Company’s third quarter financial statements, as new information was obtained about the facts and circumstances regarding the contingent consideration which had an impact on the valuation. If new information obtained within one year of the acquisition date about facts and circumstances that existed as of the acquisition date identifies adjustments to the above amounts, or any additional provisions that existed at the acquisition date, then the acquisition accounting will be revised.

Changes to amounts recorded in these financial statements versus those provisional amounts presented previously in the Company’s third quarter financial statements are as follows:

	Dec 31, 2015 $’000	Sep 30, 2015 $’000
Intangible assets	20,600	22,700
Goodwill	12,911	10,193
Deferred tax liability	(674)	(1,595)
Contingent acquisition consideration payable	(10,600)	(9,060)

4 Goodwill

Goodwill held by the Company consists of the following:

	2016 $’000	2015 $’000
Opening cost	16,052	3,289
Additions	—	12,911
Impairment	(860)	—
Currency translation	(530)	(148)
Closing net book value	14,662	16,052

Impairment of Goodwill

For purposes of impairment testing, as the Company is engaged in a single business activity of cardiovascular devices and the Company does not have multiple operating segments, goodwill has been allocated to the Company as a whole rather than individual cash generating units.  The Company’s impairment testing methodology is in accordance with IAS 36, in which the concluded fair value of invested capital is estimated by utilizing a market approach as well an income approach or value in use using the discounted cash flow method at a 50% weighting.  The higher of the concluded fair value or the value in use is then compared to the carrying value in determining impairment.  The market approach includes the use of financial metrics and ratios of comparable public companies, such as projected revenue, earnings, and transaction multiples. The selection of comparable companies requires management judgment and is based on a number of factors, including comparable companies’ sizes, growth rates, industries, and development stages.  During 2016, the Company utilized this approach to determine valuation multiples that could be used to estimate fair value of the Company.  The Company derived a valuation multiple of 2.6 times revenue the analysis of guideline public companies, which it applied to historic and projected revenue to derive a range of valuations.  A 3% allowance for selling costs was deducted from the valuation range.  The Company corroborated the reasonableness of the range of valuations by comparing to valuation estimates of the Company by securities analysts.  Based on the analysis performed, the Company concluded that a $.9 million impairment charge of goodwill was warranted.  

Although the Company believes that its judgments, assumptions and estimates are appropriate, actual results may differ from these estimates under different assumptions or market or macroeconomic conditions.  

F-13

5 Intangible Assets

Intangible assets held by the Company consist of the following:

	IN-PROCESS R&D $’000	DEVELOPED TECHNOLOGY $’000	IP AND LICENSES $’000
				SOFTWARE $’000	TOTAL $’000
Cost
At January 1, 2015	—	—	2,677	396	3,073
Additions	9,300	11,300	—	15	20,615
Effect of movement in exchange rates	—	—	(121)	(4)	(125)
At December 31, 2015	9,300	11,300	2,556	407	23,563
Additions	—	—	—	—	—
Dispositions	—	—	—	(315)	(315)
Impairments	(2,500)	—	—	—	(2,500)
Effect of movement in exchange rates	—	—	(432)	(12)	(444)
At December 31, 2016	6,800	11,300	2,124	80	20,304
Accumulated Amortization
At January 1, 2015	—	—	968	135	1,103
Amortization	—	228	261	136	625
Effect of movement in exchange rates	—	—	(52)	(2)	(54)
At December 31, 2015	—	228	1,177	269	1,674
Amortization	—	714	187	123	1,024
Dispositions	—	—	—	(291)	(291)
Effect of movement in exchange rates	—	—	(216)	(35)	(251)
At December 31, 2016	—	942	1,148	66	2,156
Net Book Value
At January 1, 2015	—	—	1,709	261	1,970
At December 31, 2015	9,300	11,072	1,379	138	21,889
At December 31, 2016	6,800	10,358	976	14	18,148

License held by the Company is for a non-exclusive license granted by Medtronic for the U.S. patent No. 6,306,141 (“Jervis” patent), which is being amortized over 9 years and has a net book value at December 31, 2016 of $1.0 million (2015: $1.4 million). Developed technology acquired as part of the Altura acquisition is amortized over its estimated useful life of 17 years. In-process research and development acquired as part of the Altura acquisition will be amortized over its useful life once FDA approval of the Altura Endovascular Stent Graft is obtained.  The carrying value of in-process research and development is reviewed for impairment on an annual basis or where there is an indication that the assets might be impaired until the asset is brought into use.

F-14

6 Property, Plant and Equipment

Property, plant, and equipment held by the Company consists of the following:

	PRODUCTION EQUIPMENT, MOLDS AND LAB EQUIPMENT $’000	OFFICE EQUIPMENT, FURNITURE AND FIXTURES $’000	COMPUTER HARDWARE AND EQUIPMENT $’000
				TOTAL     $’000
Cost
At January 1, 2015	3,253	896	1,688	5,837
Additions	644	421	234	1,299
Disposals	—	(78)	(10)	(88)
Effect of movement in exchange rates	(160)	(34)	(44)	(238)
At December 31, 2015	3,737	1,205	1,868	6,810
Additions	245	9	72	326
Disposals	(214)	(661)	(397)	(1,272)
Effect of movement in exchange rates	(601)	(103)	(159)	(863)
At December 31, 2016	3,167	450	1,384	5,001
Accumulated Depreciation
At January 1, 2015	1,372	463	915	2,750
Depreciation	563	150	460	1,173
Disposals	—	(17)	(5)	(22)
Effect of movement in exchange rates	(79)	(22)	(33)	(134)
At December 31, 2015	1,856	574	1,337	3,767
Depreciation	626	158	330	1,114
Disposals	(113)	(364)	(273)	(750)
Effect of movement in exchange rates	(309)	(64)	(130)	(503)
At December 31, 2016	2,060	304	1,264	3,628
Net Book Value
At January 1, 2015	1,881	433	773	3,087
At December 31, 2015	1,881	631	531	3,043
At December 31, 2016	1,107	146	120	1,373

Depreciation expense for property and equipment was $1.1 million (2015: $1.2 million; 2014: $0.8 million).

F-15

7 Inventories

Inventory held by the Company consists of the following:

	2016 $’000	2015 $’000
Raw materials	4,849	3,822
Finished goods	2,028	2,640
	6,877	6,462

The Company regularly reviews inventory quantities in process and on-hand, and when appropriate, records a provision for obsolete and excess inventory.  The provision for excess and obsolete inventory included in the above at December 31, 2016 was $1.7 million (2015: $1.2 million). Costs of inventories recognized as expenses were cost of sales $7.0 million (2015: $6.9 million; 2014: $6.0 million); selling, marketing and distribution expenses $0.6 million (2015: $0.6 million; 2014: $0.4 million) and research and development expenses $1.4 million (2015: $0.1 million; 2014: $0.2 million).

8 Trade and Other Receivables

Trade and other receivables held by the Company consist of the following:

	2016 $’000	2015 $’000
Trade receivables	3,133	2,243
OEM sale receivable	-	374
Other receivables	171	358
Prepayments and accrued income	517	1,369
Total trade and other receivables	3,821	4,344
Non-current portion – OEM sale receivable	-	(176)
Current trade and other receivables	3,821	4,168

Trade receivables are stated net of an impairment provision of nil (2015: $0.0; 2014: $0.0). Debtor days in 2016 were 97 days (2015: 54 days). Provisions of nil (2015: $0.0; 2014: $0.0) were utilized and nil released (2015: $0.0 released; 2014: $0.0 million released) in the year.

All non-current receivables are due within five years from the end of the reporting period and relate to the deferred consideration from the sale of the OEM business in 2013. The fair value of the OEM sale receivable is based on cash flows discounted using a rate of 12.5%, being an estimate of the Group’s cost of capital. The fair values are within level 3 of the fair value hierarchy.

Trade receivables are individually assessed for impairment. The maximum exposure to credit risk at the reporting date is the carrying value of the receivable. The customer base is split between public sector and distributors and is such that payment terms can be exceeded. It is considered that the majority of past due debt is still likely to be collected.

The aging of trade receivables including past due, but not impaired is:

	2016 $’000	2015 $’000
Not past due	2,181	1,911
Past due	952	332
	3,133	2,243

F-16

9 Trade and Other Payables

Trade and other payables held by the Company consist of the following:

	2016 $’000	2015 $’000
Trade payables	3,301	3,929
Accrued bonus	145	986
Accrued payroll and employee-related expenses	523	805
Accrued commissions	80	696
Accrued professional fees	522	471
Accrued clinical expenses	36	414
Accrued other expenses	834	220
Accrued termination costs	45	186
Accrued travel and expenses	8	144
Accrued production costs	138	143
Accrued royalties	124	122
Accrued warrant liability	49	120
	5,805	8,236

10 Borrowings

	2016		2015
	$'000		$'000
Microport NeuroTech Convertible loan	$	6,377		-
Medico Hirata Convertible loan		4,950		2,707
Oxford Finance Secured loan		20,965		20,408
Total debt		32,292		23,115
Less: Current portion		4,267		-
Long term debt		28,025		23,115

MicroPort NeuroTech Convertible Loan

On December 18, 2016, Lombard Medical, Inc. (the “Company”), entered into an investment agreement (the “Investment Agreement”) with MicroPort NeuroTech Corp. (“MP NeuroTech”) and MicroPort NeuroTech CHINA Corp LIMITED (“MP NeuroTech China” and together with MP NeuroTech, “MicroPort”).  The Company received $10.0 million.  The loan accrues interest of six-month LIBOR plus 4.0% per annum.

The proceeds from the investment agreement were allocated among the instruments based on their relative fair values as follows:

	2016 $’000
Note payable	6,392
Conversion liability(1)	3,608
Total investment	10,000

(1)The fair value of the conversion liability was determined using a Monte Carlo simulation model using the following assumptions: volatility of 65%, risk-free rate of 2.07%, stated conversion price and note maturity.

At December 31, 2016, the amount outstanding was comprised of:

	Note payable $’000	Conversion liability $’000
Beginning balance	6,392	3,608
Unamortized transaction costs	(79)	—
Change in fair value	—	(1,341)
Capitalized interest	19	—
Final payment accretion	45	—
Ending balance	6,377	2,267

Medico’s Hirata convertible loan

On March 28, 2013 the Company received $2.5 million from the total $5 million convertible loan facility granted by its exclusive distribution partner in Japan, Medico’s Hirata Inc. On August 3, 2016 the Company was granted the additional loan of $2.5 million. The loans accrue interest of 3% per annum, payable when the loans are repaid or converted. The loan is repayable in August 2021. Conversion of the loans are at Medico’s Hirata Inc.’s discretion and will be based on the share price at the time of conversion.

As of December 31, 2016, the amount outstanding comprised:

	2016 $’000	2015 $’000
Liability component	4,847	2,632
Interest expense	103	75
	4,950	2,707

The convertible loan note is considered a financial liability with no equity component as there is a contractual obligation to deliver a variable number of shares at the market price if the loan note is converted. The fair value of the loan note is therefore the same whether the settlement of the obligation is made in cash or in shares at the time of repayment.

F-17

Oxford Finance Secured Loan

As at December 31, 2016 the Company had received $21 million (including $11 million, $5.5 million and $4.5 million received on April 24, July 30, and October 8, 2015, respectively) loan funding as part of a $26 million secured loan facility with Oxford Finance LLC (Oxford). The Company has the option of drawing a final $5 million becoming available after reaching additional revenue targets of $25.0 million trailing revenues. The interest on the loan is three month US LIBOR + 7.24% fixed at each advance. The interest rate on the first $11 million, second $5.5 million and third $4.5 million is 7.52%, 7.53%, and 7.56%, respectively. The term of the $26 million facility is 60 months from April 24, 2015, with a maximum interest-only period of 36 months, depending if all tranches are drawn.

Pursuant to the Loan Agreement, the Company is required to make interest only payments through April 1, 2017. However, if subsequent tranches are drawn, the interest only period can be extended to a maximum of 36 months. The maturity date of the loan is April 1, 2020, regardless of the tranches that have been drawn. At maturity, or the earlier repayment in full, the Company is required to make a final payment fee to Oxford which is included in the effective interest rate of the loan. The current final payment fee associated with the loan is approximately $1.6 million.

At December 31, 2016, the amount outstanding was comprised of:

	2016 $’000	2015 $’000
Face value of secured loan	21,000	21,000
Unamortized transaction costs	(276)	(375)
Unamortized discount	(291)	(392)
Final payment accretion	532	175
	20,965	20,408

In connection with the issuance of the secured loan in April 2015, the Company issued warrants to Oxford to purchase up to an aggregate number of the Company’s common stock. For the first, second, and third tranches, Oxford could purchase up to an aggregate of 77,446, 43,994, and 35,212 shares of the Company’s common stock at an exercise price of $4.19, $3.69, $3.77 per share, respectively. These warrants are immediately exercisable and have a contractual term of 10 years. The respective fair value on issuance were $0.2 million, $0.1 million, and $0.1 million, respectively; they were recorded as a current liability and discounted against the secured loan at issuance. The discount is being amortized to finance costs using the effective interest method over the term of the loan. Movements in the fair value of the warrants until the date of exercise will be recognized in the Statement of Comprehensive Income immediately. At December 31, 2016, the decrease in the fair value of the warrant liability of $0.1 million was recognized in finance costs in the Statement of Comprehensive Loss.

11 Financial Instruments

The Company’s activities expose it to a variety of financial risks. The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1 – quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly, such as quoted prices for similar assets or liabilities, or indirectly, such as those derived by quoted prices.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The fair value of the Company’s Level 3 warrants are estimated on the grant date using the Black-Scholes model and they are revalued at the end of each reporting period using the Black-Scholes model. The fair value of the Company’s Level 3 contingent consideration was estimated on the acquisition date of Altura (see Note 3 for further information) and is revalued at the end of each reporting period.

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value:

	2016			2015
	Level 1 $’000	Level 3 $’000	Total $’000	Level 1 $’000	Level 3 $’000	Total $’000
Assets:
U.S. government agencies and securities	9,999	—	9,999	24,709	—	24,709
Total assets	9,999	—	9,999	24,709	—	24,709
Liabilities:
Warrants	—	49	49	—	120	120
Contingent consideration	—	13,430	13,430	—	10,600	10,600
Total liabilities	—	13,479	13,479	—	10,720	10,720

There were no transfers between levels during the period, and there were no changes in the methodologies used to determine the fair value measurements during the year ended December 31, 2016.

F-18

Derivative instruments

Warrants issued by the Company are accounted for as derivative liabilities and re-measured at fair value through earnings under “Finance Costs” at each reporting period until exercised or forfeited. The fair value of these warrants is estimated at each reporting date using the Black-Scholes model subject to changes in stock prices utilizing assumptions of risk-free interest rates, contractual life of origin, expected volatility and dividend yield. Due to the lack of certain observable market quotes, the Company utilizes valuation models that rely on some Level 3 inputs. The Company’s estimate of volatility is based on the Company’s trading history.

The fair value of the Level 3 warrants as of December 31, 2016 is estimated using the Black-Scholes model, including the following assumptions:

	2016 $’000
Risk-free interest rate	2.45	%
Expected life of warrants (years)	8.32 - 8.78
Expected volatility of stock	80.76	%
Dividend yield	0.00	%

The following table represented the Company’s Level 3 fair value measurements using significant other unobservable inputs for warrants:

	2016	2015
	$’000	$’000
Opening balance	120	—
Amounts acquired	—	446
Changes in fair value included in earnings	(71)	(326)
Closing balance	49	120

The estimated fair value of the warrants would increase (decrease) if (a) the risk-free interest rate were higher (lower); (b) the life of the warrants were longer (shorter); (c) the volatility of the stock was higher (lower); or (d) the dividend yield were higher (lower).

Convertible Debt Conversion Feature

Convertible debt conversion feature issued by the Company are accounted for as derivative liabilities and re-measured at fair value through earnings under “Finance Costs” at each reporting period until exercised or forfeited. The fair value of this convertible feature is estimated at each reporting date using a Monte Carlo simulation subject to changes in stock price, assumptions of risk-free interest rates, contractual life of origin, expected volatility and straight debt yield. Due to the lack of certain observable market quotes, the Company utilizes valuation models that rely on some Level 3 inputs. The Company’s estimate of volatility is based on the Company’s trading history.

The fair value of the Level 3 conversion feature as of December 31, 2016 is estimated using a Monte Carlo simulation model, including the following assumptions:

	2016 $’000
Risk-free interest rate	1.34% - 1.93	%
Expected life of conversion feature (years)	5.0
Expected volatility of stock	65.00	%
Straight debt yield	12.0	%

The following table represented the Company’s Level 3 fair value measurements using significant other unobservable inputs for warrants:

	2016
	$’000
Opening balance	—
Amounts acquired	3,608
Changes in fair value included in earnings	(1,341)
Closing balance	2,267

The estimated fair value of the conversion feature would increase (decrease) if (a) the risk-free interest rate were higher (lower); (b) the life of the conversion feature were longer (shorter); (c) the volatility of the stock was higher (lower); or (d) the debt yield were higher (lower).

Acquisition-Related Contingent Consideration

The Company acquired Altura on July 30, 2015. The aggregate consideration paid to Altura shareholders includes up to $27.5 million of contingent consideration to be paid based on the achievement of certain performance-based milestones. The fair value of the contingent consideration was measured using an expected present value approach to estimate an expected value. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. Using this valuation technique, the fair value of the contingent consideration was determined to be $13.4 million as of December 31, 2016, respectively.

The fair value of the Level 3 acquisition-related revenue milestone contingent consideration at December 31, 2016 is estimated using a Monte Carlo simulation model including the following assumptions and sensitivities:

	2016	Sensitivities
Risk-adjusted discount rate	11.49%	A 1.0% increase in the risk-adjusted discount rate would result in an decrease in the fair value of the contingent payment of $460
Counterparty Risk Premium	8.24%	A 1.0% increase in the counter-party risk premium would result in an decrease in the fair value of the contingent payment of $460
Time to Achievement	5.2 years	A one year increase in the time to achievement of the revenue milestone would result in an decrease in the fair value of the first contingent payment of $890

The fair value of the Level 3 acquisition-related regulatory milestone contingent consideration at December 31, 2016 is estimated using a probability-weighted model including the following assumptions and sensitivities:

Risk-adjusted discount rate	11.49%	A 1.0% increase in the risk-adjusted discount rate would result in a decrease in the fair value of the contingent payment of $140
Counterparty Risk Premium	8.24%	A 1.0% increase in the counter-party risk premium would result in an decrease in the fair value of the contingent payment of $140
Weighted Time to Achievement	5.0 years	A one year increase in the time to achievement of the regulatory milestone would result in an decrease in the fair value of the second contingent payment of $570

The following table represents the company’s Level 3 fair value measurements using significant other unobservable inputs for the acquisition-related contingent consideration:

	2016 $’000	2015 $’000
Opening balance	10,600	—
Amounts acquired	—	10,600
Fair value adjustment	2,830	—
Closing balance	13,430	10,600

The carrying value of all other financial instruments is a reasonable approximation of fair value.

F-19

Capital Management

The Group considers capital to comprise the total equity and reserves of the group and long term debt financing, including convertible loans issued. The Group’s objectives are to manage capital as a primary source of funding in conjunction with the ability to remain as a going concern.

Treasury Policy

The Group has financed its operations by a mixture of shareholders’ funds, bank and other borrowings and loan notes, as required. The Group’s objective has been to obtain sufficient funding to meet development activities and initial commercialization costs until the Group becomes profitable. During 2016, and for the foreseeable future, the Group’s objective in using financial instruments is to safeguard the principal for funds held on deposit and to minimize exchange-rate risk where appropriate.

Interest Rate Risk

The Group currently has outstanding fixed-rate loan notes with a principal of $25.8 million (2015: $23.5 million) and invests its surplus funds in money market and short-term bank deposits. In the past, the Group has used a variety of fixed rate loans and floating rate debt as funding sources. The Group would review the balance between fixed and floating rate debt if it takes on any future debt.

Liquidity Risk

The Group prepares periodic working capital forecasts for the foreseeable future, allowing an assessment of the cash requirements of the Group, to manage liquidity risk. The Group also ensures that sufficient funds are available on 24 hours’ notice to fund the Group’s immediate needs (see note 1).

The following table provides an analysis of the remaining contractually agreed cash flows including interest payable for the group’s non-derivative financial liabilities on an undiscounted basis, which therefore differs from both the carrying value and fair value:

	2016
		Between 3 months and 1 year $’000
	Less than 3 months $’000		Between 1 and 5 years $’000	Over 5 years $’000
Borrowings	395	5,360	38,518	-
Trade and other payables	5,756	-	49	-
	6,151	5,360	38,567	-

In addition to the above, the $25 million in milestone payments associated with the Altura acquisition are payable in cash or Company common stock, at the Company’s option, if the milestones are achieved prior to December 31, 2030 (see note 3).

Currency Risk

The Group is currently exposed to currency risk through foreign currency transactions. As the Group’s level of foreign currency transactions increases the currency risk will be managed by holding foreign currency deposits and seeking to hedge significant transactional exposures.

At December 31, 2016, if the GB Pound had weakened by 5% against the U.S. Dollar with all other variables held constant, post-tax loss for the year, in the primary functional currency used in the group, would have been approximately $0.4 million lower (2015: $0.3 million lower), as a net result of foreign exchange gains/losses on translation of U.S. Dollar-denominated cash and cash equivalents, foreign exchange gains/losses on translation of U.S. Dollar-denominated trade receivables, foreign exchange losses/gains on translation of U.S. Dollar-denominated trade payables and increased/decreased losses from the translation of the U.S. subsidiary’s post-tax loss.

At December 31, 2016, if the GB Pound had weakened by 5% against the Euro with all other variables held constant, post-tax loss for the year, in the primary functional currency used in the group, would have been approximately $nil million higher (2015: $0.1 million higher), as a net result of foreign exchange gains/losses on translation of Euro-denominated cash and cash equivalents, foreign exchange gains/losses on translation of Euro-denominated trade receivables, foreign exchange losses/gains on translation of Euro-denominated trade payables and increased/decreased losses from the translation of the German subsidiary’s post-tax loss.

Credit Risk

The Group is exposed to credit risk from two sources: its cash investments, and its customers. The Group minimizes the former risk by placing its cash deposits only with established financial institutions with a minimum credit rating of A- as defined by the three major credit rating agencies. It minimizes the latter risk by reviewing available information on the customer and closely monitoring the payment history and the age of the debts.

Interest Rate Risk of Financial Assets

The following cash was held in the following currencies at December 31, 2016:

	2016 $’000	2015 $’000
Floating rate—USD	18,657	26,776
Floating rate—EUR	601	284
Floating rate—GBP	1,539	5,272
	20,797	32,332

The cash and bank balances earn interest at the prevailing short-term market interest rates. The majority of the cash holdings are with two institutions which have a minimum short-term credit rating of A-, as defined by the three major credit rating agencies.

Fair Values of Financial Assets and Financial Liabilities

The fair value of financial assets and liabilities is the same as the carrying value at the period end.

F-20

12 Equity

Shares issued in the current year by Lombard Medical, Inc.

On December 18, 2016, the Company entered into an investment agreement with MicroPort NeuroTech Corp. (“MP NeuroTech”) and MicroPort NeuroTech CHINA Corp LIMITED (“MP NeuroTech China” and together with MP NeuroTech, “MicroPort”). MP NeuroTech purchased $5 million in shares at $0.62 per share or 8,064,516 shares representing an approximately 29% ownership stake in the Company based on shares currently outstanding.

Shares issued in the prior year by Lombard Medical, Inc.

On July 30, 2015, the Company completed the acquisition of 100% of the voting equity interest in Altura. Upon the closing of the acquisition, the Company issued an aggregate of 3,125,000 unregistered shares of common stock to certain former shareholders of Altura in exchange for the shares of Altura capital stock held by them immediately prior to the closing of the acquisition. In addition, the Company delivered an aggregate of 575,000 unregistered shares of common stock to Computershare Trust Company, N.A., in its capacity as escrow agent, which will be held for a period of twelve months and are subject to any adjustments to the liabilities assumed as part of the acquisition (see note 3).

i)Share Capital

	2016		2015
	NUMBER OF SHARES	NOMINAL VALUE	NUMBER OF SHARES	NOMINAL VALUE
Ordinary shares of $0.01 each	27,950,785	279,510	19,885,965	198,860
	27,950,785	279,510	19,885,965	198,860

Each ordinary share has one vote in a show of hands, and in a poll each share has one vote. Each ordinary shares have the right to receive dividends. Each ordinary share has the right to share in a liquidation of the Company’s assets.

ii) Share Premium Account

This consists of the proceeds from the issue of shares in excess of their par value less associated issue costs.

iii) Capital Reorganization Reserve

The group restructure, which occurred in 2014, has been accounted for as a capital reorganization, under which the balances on share capital, share premium and other reserve relating to Lombard Medical Technologies plc have been transferred to a capital reorganization reserve at the time of the restructure. This reserve is not considered distributable for the purpose of dividends.

iv) Other Reserves

This arose on the conversion of convertible preference shares to ordinary shares.

v) Dividends

Dividends would be declared and paid in Sterling. None are currently expected to be declared or paid.

13 Geographic Revenue Information

The Company is engaged in a single business activity of cardiovascular devices and the Company does not have multiple operating segments. The Company’s cardiovascular devices business consists of the development and commercialization of these products. The Executive Management team is the Company’s chief operating decision-making body, as defined by IFRS 8, and all significant operating decisions are taken by the Executive Management team. In assessing performance, the Executive Management team reviews financial information on an integrated basis for the Company as a whole, substantially in the form of, and on the same basis as, the Company’s IFRS financial statements.

The table below sets forth the Company’s revenue results by geographic location for the periods stated below:

	2016 $’000	2015 $’000	2014 $’000
Aorfix Commercial Revenue
United States direct market	1,736	4,616	3,248
Western Europe direct markets	1,750	2,673	3,431
Japan distributor market	4,516	5,035	3,550
International distributor markets excluding Japan	2,514	2,790	3,038
Total Aorfix commercial revenue	10,516	15,114	13,267
Other commercial revenue	1,653	—	10
Total Revenue	12,169	15,114	13,277
Revenue by destination:
United Kingdom	1,783	1,696	1,926
Germany	1,249	977	1,506
United States of America	1,736	4,616	3,258
Japan	4,516	5,035	3,551
Rest of World	2,885	2,790	3,037
Total	12,169	15,114	13,277

The table below sets forth non-current assets results by geographic location for the periods stated below:

	2016 $’000	2015 $’000
United States	29,284	34,285
United Kingdom	4,899	6,873
Germany	-	2
Total	34,183	41,160

Non-current assets for this purpose consist of property plant and equipment, intangible assets including goodwill, and other non-current receivables.

F-21

14 Operating Loss

	2016 $’000	2015 $’000	2014 $’000
Operating loss is stated after charging/(crediting):
Depreciation of property, plant and equipment (note 6)	1,114	1,173	773
Amortization of licenses and software (note 5)	1,024	625	398
Research and development expenditure	7,669	11,279	9,213
Foreign exchange loss	(3,814)	(174)	92
Operating lease rentals
—Motor vehicles	146	145	114
—Land and buildings	910	785	484
—Other assets	46	52	150
Share-based compensation expense/(credit)	1,110	2,779	2,541
Initial Public Offering expenses (note 11)	—	—	1,503

Total expenses of the 2014 Initial Public Offering were $6.8 million, of which $5.3 million were directly attributable to the issue of the new shares and have been charged to the Share Premium account (see note 12).  The balance of $1.5 million was charged to the Income Statement in the period ended December 31, 2014.

On December 20, 2013 the company sold the trade and assets of its OEM business, which resulted in a gain on disposal of $653,000. Deferred consideration totaled $990,000, which falls due in four equal annual instalments starting on the anniversary of the sale until December 20, 2017. The consideration has been discounted (see note 8).

15 Directors’ Compensation

	2016 $’000	2015 $’000	2014 $’000
Fees	325	417	447
Salaries	339	394	577
Bonuses	107	120	231
Benefits	75	77	94
Pension costs	34	40	58
	880	1,048	1,407

16 Employee Information

The number of employees by function in the years ended December 31, 2016, 2015, and 2014 was as follows:

	2016	2015	2014
Manufacture	82	93	65
Selling, marketing and distribution	13	59	65
Research and development	9	19	26
Administration	9	18	16
Total	113	189	172

Compensation-costs for the above employees were:

	2016 $’000	2015 $’000	2014 $’000
Wages and salaries	12,116	21,686	19,416
Social security costs	1,160	1,699	1,707
Pension costs	430	672	588
Termination cost	(22)	50	631
Share-based compensation expense	1,110	2,779	2,541
	14,794	26,886	24,883

Compensation-costs for key management personnel were:

	2016 $’000	2015 $’000	2014 $’000
Salaries and short-term benefits	1,537	2,106	1,810
Post-employment benefits	64	73	72
Compensation for loss of office	-	115	174
Share-based compensation expense	-	403	1,063
	1,601	2,697	3,119

F-22

Key Management during 2016 consists of the Chief Executive Officer, Chief Financial Officer, Chief Technology Officer, President, North America, Vice President, Global Clinical & Regulatory Affairs, Vice President, Global Innovation and Development.

Key Management during 2015 consists of the Chief Executive Officer, Chief Financial Officer, Chief Technology Officer, President, North America, Vice President, Global Clinical & Regulatory Affairs, Vice President, Global Innovation and Development.

Key Management during 2014 consists of the Chief Executive Officer, Chief Financial Officer, President, North America, Vice President, Global Clinical & Regulatory Affairs, Vice President, Global Innovation and Development.

17 Finance Costs

Finance costs consists of the following:

	2016 $’000	2015 $’000	2014 $’000
Convertible loan notes – coupon interest	1,749	895	74
Amortization of debt discounts	201	116	—
Accretion of final payment	403	175	—
Decrease in FV of warrant liability	—	(326)	—
Foreign exchange loss	(43)
Other interest payable	—	—	9
	2,310	860	83

18 Taxation on Loss on Ordinary Activities

The tax credit consists of the following:

	2016 $’000	2015 $’000	2014 $’000
UK research and development claim:
For the current year	660	1,674	1,150
For prior years	149	552	60
	809	2,226	1,210
Overseas taxation (charge)/credit	(2)	(11)	17
Asset impairment	674	-	-
Total tax credit	1,481	2,215	1,227

The UK research and development claim relates to the utilization of UK tax losses from research and development expenditure.

The UK tax credit of $1.5 million (2015: $2.2 million; 2014: $1.2 million) is higher than the standard UK corporation rate of 20.0% (2015: 20.0%; 2014: 21.5%) applied to the loss for the year. The differences are explained below: 

	2016 $’000	2015 $’000	2014 $’000
Loss before tax for the period at 20.0% (2015: 20.0%; 2014: 21.5%)	(6,503)	(8,004)	(7,728)
Additional deduction for research and development expenditure	(582)	(1,437)	(1,473)
Amounts not deductible for tax purposes	370	365	686
R&D credit recoverable at a lower effective rate of 14.5% (2015: 14.5%; 2014: 11%)	369	878	1,150
Losses not recognized	5,686	6,524	6,215
Overseas taxation (credit) / charge	2	11	(17)
Adjustments in respect of prior years	(149)	(552)	(60)
Asset impairment	(674)	-	-
	(1,481)	(2,215)	(1,227)

Taxation losses carried forward at the end of the year amounted to approximately $131.5 million (2015: $138.1 million) in the UK and $51.7 million in the US.  The unrecognized deferred tax asset at 20% in the UK and 34% in the US is approximately $43.9 million. No deferred tax asset has been recognized in respect of these losses as the Directors consider it is, as yet, uncertain whether the losses will be utilized. Tax losses would be utilized in future periods against trading profits, although utilization of a portion of the US loss carryforwards would be limited under the provisions of IRC Section 382. The unrecognized deferred tax asset in respect to other temporary differences is $1.5 million (2015: $1.5 million). During 2014 there was a change in the UK main corporation tax rate from 21% to 20% which was effective from April 1, 2015. 

The following table represents deferred tax balances recognized on the balance sheet:

	As at December, 31 2016 $’000	As at December, 31 2015 $’000
Deferred tax assets	—	—
Deferred tax liabilities	—	(674)
Net balances	—	(674)

F-23

During the year ended December 31, 2015, the Company recorded a deferred tax liability of $0.7 million as a result of the fair value of intangible assets acquired in the Altura exceeds the tax bases of such assets (see note 3).  The deferred tax liability will be released on the amortization and/or impairment of the intangibles acquired in the transaction. The following table represents movement of deferred tax balances:

	2016 $’000	2015 $’000
Opening balance	(674)	—
Deferred tax liability arising from acquisition	—	(674)
Tax (charge)/credit	674	—
Closing balance	—	(674)

19 Loss per Share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares. A, B and C deferred shares are not included in the calculation as holders have no right to receive any dividend or other distribution. The diluted earnings per ordinary share are identical to those used for the basic earnings per ordinary share as the exercise of share options and warrants or conversion of convertible loan would have the effect of reducing the loss per ordinary share and are therefore not dilutive. The calculations for Loss per Share are set out below: 

	2016 $’000	2015 $’000	2014 $’000
Loss for the financial year $’000	(31,035)	(37,804)	(34,752)
Weighted average number of shares (‘000)	20,172	17,757	14,556
Basic and diluted loss per share	(1.54)	(2.13)	(2.39)

The weighted average number of shares figure for 2016 reflects the issuance of 8,064,516 shares of stock as a part of the investment agreement with MicroPort.  The weighted average number of shares figure for 2015 reflects the issuance of 3,700,000 shares as a part of the acquisition of Altura (see note 3). The weighted average number of shares figure for 2014 reflects the 2014 share for share exchange of one new ordinary share of $0.01 each of Lombard Medical, Inc. for every four existing ordinary shares of 20 pence each of Lombard Medical Technologies plc.

20 Share Options

Options

The Company’s Directors, officers, employees and certain former employees and former Directors hold options under the Lombard Medical, Inc. Global Share Option Plan 2014 and Lombard Medical, Inc. Share Option Plan 2014, together known as the “LM Option Plans”, to subscribe for ordinary shares in the Company as shown below:

	2016			2015			2014
	WEIGHTED AVERAGE EXERCISE PRICE (PENCE/$)			WEIGHTED AVERAGE EXERCISE PRICE (PENCE/$)			WEIGHTED AVERAGE EXERCISE PRICE (PENCE/$)
			SHARES UNDER OPTION			SHARES UNDER OPTION			SHARES UNDER OPTION
At beginning of year			3,022,272			2,403,022		170p	5,895,706
Options granted (20p ordinary shares)		—	—		—	—		—	—
Options lapsed (20p ordinary shares)		598p	(46,078)		609p	(249,310)		366p	(208,518)
Options consolidated (20p ordinary shares)		—	—		—	—		—	(4,315,337)
Options granted ($0.01 ordinary shares)	$	1.32	102,000	$	1.66	1,130,579	$	9.60	1,031,171
Options lapsed ($0.01 ordinary shares)	$	2.39	(343,919)	$	8.28	(262,019)		—	—
At end of year			2,734,275			3,022,272			2,403,022
At end of year GBP denominated		253p	1,079,415		279p	1,122,541		674p	1,371,851
At end of year USD denominated	$	2.53	1,654,860	$	2.58	1,899,731	$	9.60	1,031,171

F-24

The outstanding options at December 31, 2016 were granted as follows:

	EXERCISE PRICE (PENCE/$)			2016 NUMBERS	2015 NUMBERS	2014 NUMBERS
DATE OF GRANT			EXERCISE PERIOD
2009
January 28		250p	2012–2019	6,257	6,506	6,629
2010
February 5		250p	2012–2020	25,903	25,903	33,559
June 21		250p	2012–2020	13,591	13,591	13,591
2011
August 26		250p	2012–2021	189,165	215,305	215,305
		86p	2012–2021	26,140	—	—
September 8		250p	2012–2021	56,780	77,984	96,176
		86p	2012–2021	21,204	—	—
October 3		250p	2012–2021	—	—	6,300
2012
April 5		580p	2012–2022	19,602	36,403	50,404
2013
June 13		250p	2013-2023	583,890	651,771	742.952
		86p	2013-2023	41,805	—	—
September 25		250p	2013-2023	83,893	83,893	195,750
November 6		250p	2013-2023	11,185	11,185	11,185
2014
April 23	$	3.90	2014-2024	482,878	502,879	675,086
May 1	$	3.90	2014-2024	40,464	40,464	40,464
September 12	$	3.90	2014-2024	—	23,604	56,650
December 8	$	3.90	2014-2024	161,859	210,415	258,971
2015
February 17	$	3.90	2015-2025	46,819	56,529	—
August 18	$	3.90	2015-2025	49,840	49,840	—
December 31	$	1.30	2016 -2026	796,000	1,016,000	—
2016
January 4	$	1.28	2016-2026	77,000	—	—
WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE				7.3 years	8.4 years	8.6 years

F-25

Following the NASDAQ IPO, options held under the Lombard Medical Technologies PLC Share Option Plan (2005), were exchanged in a 4 for 1 exchange for options in Lombard Medical, Inc. The exercise price of these options remains in pence. The name of this plan is Lombard Medical, Inc. Share Option Plan 2014.

All options issued post NASDAQ IPO are under the Lombard Medical, Inc. Global Share Option Plan 2014 with an exercise price in US$.  

During 2014, the vesting conditions of all share options was moved from a performance based criteria to a time based criteria, reflecting the normal practices of companies on NASDAQ. Options vest over a period of 3 years from grant, with one third vesting at 12 months and two thirds vesting in 24 equal tranches over the remaining 2 years.

As of December 31, 2016, 1,079,415 (2015: 1,006,812; 2014: 762,139) of the pence-denominated outstanding options were exercisable at a weighted average exercise price of 253 pence (2015: 282 pence; 2014: 674 pence). At December 31, 2016, 624,352 (2015: 334,102, 2014: nil) of the dollar-denominated outstanding options were exercisable at a weighted-average exercise price of $3.90 (2015: $4.31, 2014: nil).

The Board has discretion to amend the performance conditions if events occur which cause the Board to consider that any of the terms of the Exercise Condition have become unfair or impractical, provided such discretion is exercised fairly and reasonably and provided that any terms which are so amended or relaxed are not more difficult to satisfy than the existing terms. In August 2015, in an effort to (i) counteract the loss of share value, which caused all outstanding options to have exercise prices in excess of the fair market value of Company common shares and (ii) incentivize management to continue to strive to increase Company value for the benefit of stockholders, the Board of Directors approved a repricing of option awards held by employees and directors. Under the terms of this repricing, the Company repriced certain employee and director stock options having an exercise price of $3.90 or above to an exercise price of $3.90, which represented the closing share price on the day of the repricing. Other than the exercise price, all other terms of the repriced options, such as vesting and contractual life, remained the same. As a result of this repricing, the Company repriced 1,083,377 vested options and 1,989,505 unvested options at a new exercise price of $3.90 per share.

The excess of the aggregate grant date fair value of the repriced vested options over the fair value of the original stock options of $1.1 million was recognized into operating expenses immediately. The excess of the aggregate grant date fair value of the repriced unvested options over the fair value of the original stock options of $0.7 million will be amortized over the remaining vesting period.

The fair value of the options was determined using the Black-Scholes pricing model in 2016, 2015, and 2014. The share-based compensation expense for the year is $1.1 million (2015: $2.8 million; 2014: $2.5 million).

The main assumptions used in the fair value calculations for the 2005 Plan are noted in the tables below:

	YEAR OF GRANT
	2016 $’000	2015 $’000	2014 $’000
Weighted average share price of grants during the year	$1.32	$1.66	$9.60
Expected volatility	68-80%	50-68%	11-23%
Option life	10 years	10 years	10 years
Expected dividends	None	None	None
Risk-free interest rate	1.0%-1.7%	1.6-1.8%	1.6-1.8%
Estimated life of option	2.33 - 5 years	5 years	0 to 3 years
Weighted average fair value of grants during the year	$0.73	$0.91	$2.12

F-26

Expected volatility has been calculated by reference to the Company’s historic share price and industry norms. For options granted prior to the NASDAQ IPO in April 2014, volatility was calculated based on the Company’s historic share price on the AIM exchange.  The Company’s shares were thinly traded on the AIM exchange, thus skewing comparisons between historic volatility to volatility subsequent to the NASDAQ IPO. The risk-free interest rate for options granted post NASDAQ IPO is calculated by reference to US treasury yields and for options granted pre NASDAQ IPO by reference to UK government bonds. Expectation of the cancellation of options has been considered in determining the fair value expense charge in the statement of comprehensive income.

21 Related Party Disclosures

Fundraising

MicroPort NeuroTech Corp. is a shareholder of the Company.  MicroPort holds 8,064,516 shares, which equates to 28.9% of the Company’s shares, at December 31, 2016.

Abingworth LLP, a life science and healthcare investment firm which manages investment funds of the Company’s shares immediately before the NASDAQ Initial Public Offering. On April 25, 2014, the Abingworth funds subscribed for 727,272 ordinary shares of $0.01 pence each, as part of the Initial Public Offering. The shares were priced at $11.00 each, being the Initial Public Offering price. The Abingworth funds held 16.8% of the Company’s shares following the Initial Public Offering. Abingworth holds 3,473,452 shares, which equates to 12.4% of the Company’s shares, at December 31, 2016.

SV Life Sciences, a life sciences and healthcare investment firm which manages investment funds received 1,077,499 of the Company’s shares pursuant to the acquisition of Altura. The shares were priced at $4.00 each, per the acquisition agreement. SV Life Sciences holds 1,240,618 shares, which equates to 4.4% of the Company’s shares, at December 31, 2016.

Invesco Asset Management Limited is a shareholder of the Company and held 39.0% of the Company’s shares immediately before the NASDAQ Initial Public Offering. On April 25, 2014, Invesco subscribed for 1,951,818 ordinary shares of $0.01 pence each, as part of the Initial Public Offering. The shares were priced at $11.00 each, being the Initial Public Offering price. Invesco Asset Management Limited held 39.0% of the Company’s shares following the Initial Public Offering and on December 31, 2014. Invesco Asset Management Limited held 6,317,851 shares, which equates to 22.6% of the Company’s shares, at December 31, 2016

Since the NASDAQ Initial Public Offering, directors have purchased shares of the Company in open market transactions as follows: Raymond W. Cohen has purchased a total of 13,225 shares at an average price of $4.92 and John B. Rush has purchased a total of 9,607 shares at an average price of $7.34.

22 Financial Commitments and Contingent Liabilities

At December 31, 2016, the Group was committed to make the following aggregate minimum payments in respect of non-cancellable operating leases:

	2016		2015		2014
	LAND AND BUILDINGS	OTHER	LAND AND BUILDINGS	OTHER	LAND AND BUILDINGS	OTHER
	$’000	$’000	$’000	$’000	$’000	$’000
No later than one year	447	61	697	118	298	121
1-5 years	1,146	34	1,923	46	195	155
	1,593	95	2,620	164	493	276

We lease facilities in Didcot, Oxfordshire, England. These 31,827 square-foot facilities house our headquarters, research and development operations, manufacturing operations and storage of Aorfix raw materials and finished goods. The lease for these facilities terminates in July 2022.

On February 9, 2015, Lombard Medical Technologies, Inc. executed a lease for its new global headquarters in Irvine, California. The lease for this facility terminates in April, 2021. The total commitment under this lease is $1.8 million.

23 Capital Commitments

At December 31, 2016, the Group had capital commitments of nil (2015: nil; 2014: nil).

24 Post Balance Sheet Events

None noted

F-27