25 August 2010 - Final Results - by pengxiuhui

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									    African Medical Investments plc / Index: AIM / Epic: AMEI / Sector: Healthcare
25 August 2010
        African Medical Investments plc (‘African Medical’ or ‘the Group’)
                                    Final Results

African Medical Investments plc, the AIM listed company operating in the African
healthcare sector, announces its results for the year ended 28 February 2010.

CHAIRMAN’S STATEMENT

During the year, the Group continued its strategy of developing international standard
private medical care across Africa, and, as such, our current portfolio of medical facilities
now includes a hospital and Well Woman Clinic in both Dar es Salaam and Maputo and a
hospital in Harare, which is being upgraded and refurbished and is scheduled to be
operational by the end of the 2011 financial year.

The primary focus during the year was on the development of our newest facilities,
including the 35 bed hospital and Well Woman Clinic in Maputo, which commenced
operations in May 2010, as well as improving the operational efficiencies at our other sites.
The board is now committed to consolidating its current portfolio, the development of its
new 20-bed hospital in Harare and evaluating additional sites in which to continue the
hospital roll out programme across Africa. The board remains convinced that the strategy
of the Group is robust and can be implemented with the correct structure and roll out
programme. The demand for private quality healthcare is growing rapidly and the board is
positioning African Medical to take advantage of this.

In line with the Group‟s focus on its boutique hospital offering and following the discovery
of financial and administrative irregularities outlined below, the board, post year end, has
terminated the Group‟s management agreement relating to the Airport Medical & Travel
Vaccination Centre at Johannesburg International Airport. The termination of this
relationship will enable management to focus on the core business model of constructing
and operating private hospitals with integrated Well Woman clinics. As a consequence, the
relationship with the Airport Medical & Travel Vaccination Centre at Cape Town
International Airport has also been terminated.

Corporate

As shareholders will be acutely aware, in July 2010 the board was forced to suspend Chief
Executive Officer Dr. Vivek Solanki, pending the outcome of an investigation into potential
financial and administrative irregularities at its Johannesburg and Harare clinics. This was
a huge shock to the board and has been highly distractive from advancing the Group‟s
growth strategy. We have had to implement an immediate strategic review in order to
ensure that we have the right foundation in which to properly manage African Medical‟s
strategy. Indeed, I would suggest that we have had to take a step back to ensure we are
correctly positioned to generate the returns expected by our investors.

Following his suspension Dr. Solanki then formally resigned as Chief Executive Officer
and stepped down from the board. In the interim period, Brett Winstone, the Group‟s
Finance Director who was appointed in June 2010, has taken responsibility for the day-to-
day running of the Group‟s operations.

Subsequent to the discovery of the financial and administrative irregularities, we appointed
a team of independent forensic auditors to investigate, with preliminary findings indicating
that the Company has a very strong case against Dr. Solanki. As a result of the ongoing
investigation commissioned by the board, criminal charges for fraud and theft have now
been laid in South Africa against Dr. Vivek Solanki and his appointed manager, Wessel
Roets, and separately in Zimbabwe against his appointed manager there, Zarina Dudhia.

The board is now focussed on putting together a structure and team capable of managing
the business and its development. The board is actively recruiting a new Chief Executive
Officer to lead African Medical in its next period of growth, and is in discussions with a
number of international leading experts. It is also examining the potential to establish an
advisory committee aimed at supporting the development of the business and the private
healthcare concept.

Financial Performance

During the year to 28 February 2010, the Group was involved in the construction and
development of the Maputo hospital and Well Woman clinic and the hospital in Harare, and
in addition, undertook other operational costs related to the identification of prospective
sites for additional facilities. As such, and as a result of the financial irregularities
discovered post year end, the Group is reporting a pre-tax loss of $16.2 million on revenues
of $4.6 million.

In October 2009, African Medical secured an equity line agreement with US based fund
Harbinger Capital Partners Master Fund I, Ltd. This agreement will provide the Group
with a total of $47.2 million to be drawn down quarterly until Q1 2013. African Medical
has completed the first four draw downs of this equity line agreement, which has provided
the Group with a total of $28.4 million (after expenses).

Outlook

In spite of the recent issues, we are highly committed to fulfilling our objectives of
providing international standard private healthcare in Africa through private boutique
hospitals. The demand from the emerging African middle classes, non-governmental
organisations („NGO‟), embassies, international businesses with employees based in Africa
and medical insurance companies is clearly evident, and an opportunity remains for a group
such as ours to fulfil an increasing void in the provision of quality private healthcare.
Africa is developing rapidly, attracting huge investment and associated healthcare is
definitely needed.

We want to move forward quickly and overcome our recent challenges in order to ensure
the future long term success of the Group and fulfil our objectives. To do this, the board
has reviewed the Group‟s current operations in order to focus on the areas of the business
which have the most potential for growth. In line with this, the board intends to focus
specifically on the roll out of our boutique hospital offering with the objective of
establishing additional sites in East Africa, replicating the facilities at our Dar es Salaam
and Maputo hospitals. In addition, we are also committed to extending our medical
evacuation initiative, utilising the latest specially designed aircraft to broaden the reach of
our individual hospitals, enabling us to reach patients who would otherwise be out of our
catchment area. We have already acquired one aircraft, a Falcon 20 plane, and it is
expected that it will be operational from September 2010.

Our finance provider, US based fund Harbinger Capital Partners, remain supportive in spite
of the recent disruption, and we are working closely with them to execute our strategy. We
are particularly grateful to the whole team for their hard work, in particular Brett Winstone,
our Finance Director and interim CEO, who has galvanised the team and assisted greatly in
navigating the Group through this uncertain period.

Phil Edmonds
Chairman

24 August 2010

OPERATIONS REVIEW
The past few months have been challenging for the Group, however I am pleased to report
that the decisions that we have made and positive initiatives we have implemented are
beginning to bear fruit for our operations. Since commencing the investigation into alleged
financial and administrative irregularities in early July, management procedures and teams
at our facilities in Maputo, Dar es Salaam and Harare have been reviewed, and necessary
dismissals have been made. Throughout this period of transition we continued to provide
high quality healthcare services to our target market in addition to regaining control over
the business, with a particular emphasis on improving the Group‟s budget and cash position.
Day to day management has been supplemented by a combination of interim managers with
many years experience of local operating conditions and carefully selected health industry
professionals. We have embarked upon a recruitment programme to source suitably
qualified professionals including clinical staff for our hospitals and executive management.
The outcomes from this extensive but necessary management overhaul include reduced
central overhead, delegated decision making and significant operating efficiencies in our
core operating business.

Ongoing difficulties with exercising control of our managed clinics in Johannesburg and
Cape Town international airports have forced a review of these operations. This has
resulted in the termination of the management agreement relating to the Airport Medical &
Travel Vaccination Centre at Johannesburg International Airport. This will enable
management to focus on the core business model of constructing and operating private
hospitals. As a consequence, the relationship with the Airport Medical & Travel
Vaccination Centre at Cape Town International Airport has also been terminated.
Operations at the Harare Trauma Centre ceased in early July due to construction of the new
hospital facility, which is scheduled to open by the end of the 2011 financial year.

Having identified and removed the non-core elements of the business, we are now in a
position to build upon our model of healthcare provision through private boutique hospitals,
to create a more successful and profitable company. We are committed to recruiting
quality medical professionals from the areas in which we operate, investing not only in the
bricks and mortar of our facilities, but also in the wider community which we believe will
bring far reaching and long term benefits.

This process has also enabled us to re-engage with the communities in which we operate,
which is of paramount importance to the Group as healthcare is driven by reputation and
trust. In rebuilding these relationships, we have amassed a greater understanding of the
requirements and needs of our potential patients, be they individuals or corporate entities
requiring exclusive patronage for their clients and employees, allowing us to develop a
more tailored and successful healthcare service.
Another recent initiative which will drive the growth of our business and link our hospital
operations is our soon to commence Aero-Medical service. Utilising a customised Falcon
20 jet aircraft fitted with two Lifeport aircraft medical station beds, based at Lanseria
Airport near Johannesburg, we expect to begin operations in September 2010. With greater
range, two patient capacity and lower operating costs, the Group‟s first class Aero-Medical
service will be unique in Africa providing patient transfers to existing African Medical
facilities and other service providers. Potential customers include mining companies,
medical insurers and other foreign companies operating in Africa. Additional opportunities
exist in the emergency patient transfer market with hospital groups and medical service
providers (where an African Medical facility is not available).

The identification and evaluation of new business opportunities is ongoing. There are
presently two sites for new hospital developments in East Africa under consideration and
the board will evaluate these in greater detail over the coming months. In addition,
acquisitions of existing facilities that can be rebranded and fit the African Medical business
model will be considered. Expansion into West Africa is highly likely within the next year.

The challenges that we have been forced to face over the past few months are being
successfully overcome. Our refocused business model is sound, the market remains very
attractive and I am confident that African Medical will emerge as a leaner, more focussed
and profitable group.

I would like to take this opportunity to acknowledge the contribution of clinical and
operational staff, particularly over this recent period of change and uncertainty. Their
professionalism and dedication to deliver high quality healthcare services has been a
highlight during an otherwise dark period in the history of the Group. We remain
committed to providing the calibre of leadership and management deserving of our staff,
facilities and investors.

AMI Harare Hospital
Formerly known as the Trauma Centre, AMI Harare Hospital is fast approaching the final
stages of building completion and commissioning. It will offer a comprehensive range of
world-class services within an integrated healthcare development.

The redevelopment of the original Accident & Emergency Section and the establishment of
an expanded healthcare facility resulted in the decision in early July 2010 to suspend
clinical operations of the Trauma Centre to expedite the final building works and ensure
public and our patients‟ safety.
Once the renovations and expansion are complete, the AMI Harare Hospital will offer
patients a wider range of services and even higher standards of healthcare than previously
available. The upgraded facilities will include five private consulting rooms, an on-site
pharmacy and dental surgery. The on-site Well Woman Centre will offer bone
densitometry, colposcopy and mammography. An occupational health care unit, will
specialise in stress echocardiograms, spirometry, audiology and vision screening. State-of-
the art equipment exists for video gastro-enterology, minimally invasive access surgery and
orthopaedics. There will be on-site clinical laboratories and two state of the art operating
theatres capable of handling the most complicated of procedures, which will be the newest
and most advanced in Zimbabwe. The two bed haemodialysis unit and renovated original
Accident and Emergency unit complete the hospital service offering.

Far from being exclusively a medical service centre of excellence, the AMI Harare Hospital
could best be described as a boutique offering, with outstanding facilities available on site.
These facilities also include a two-bed intensive care unit („ICU‟) and a two-bed neo-natal
ICU, six two-bed wards with an en-suite shower, basin and toilet. There are also two single
bed VIP wards with a visitor‟s couch, an en-suite bath, shower, basin and toilet. Specific
attention to detail in the quality of design and finishes will result in placing visitors and
patients at ease in a comforting and nurturing environment. A coffee shop is available to
ensure that visitors and relatives of trauma patients are kept comfortable and refreshed.

In order to ensure uninterrupted services at the hospital, the Group has made considerable
investment into continuity and quality of the utilities supply. UPS backup, ensuring voltage
stabilisation and on-site power generation, will secure the supply of power, water and gases
to all critical areas in the event of power outages.

The AMI Harare Hospital is guaranteed to raise the bar in terms of the standard of
healthcare available in Zimbabwe and will determine the future expectations of the local
consumer.

AMI Dar es Salaam Hospital
In recent months we have focussed on improving our level of service in all departments and
significant results have already been achieved. On the medical side we have appointed Dr.
Rajiv Rao as the new Clinical Manager and Sister Rachel Garcia as the Nursing Manager.
Both Dr. Rao and Sister Garcia have a wealth of knowledge and experience and have been
busy implementing new systems which have had a huge impact on raising the already high
clinical standards that we have set. A new Chief Accountant has been appointed and we
have assembled around him a strong administrative team to implement new procedures for
preparing accounts, purchasing, stock control and general administration.

In early June 2010 the kidney dialysis centre was opened, featuring four of the latest
Fresenius 4008S haemodialysis machines, the latest Aqua W tu 250 reverse osmosis plant
for producing clean water, a portable reverse osmosis system for private home use, and
three massage chairs. The centre can see up to three patients at a time, and each of the
haemodialysis machines will be allocated for HIV, hepatitis B, and non infected diseases
management.

Our marketing has focussed on strengthening our links into the local medical fraternity and
improving our services to the ever-expanding local medical insurance industry. We have
recently recruited two specialist physicians: Dr. Tosiri (Urologist) and Dr. Faya
(Orthopaedic Surgeon) who are both well respected in the local medical fraternity and have
been instrumental in forming relationships with other referring hospitals.

Our new consultant Chief Medical Officer, Dr. Amit Thakker, has been working in the East
African medical insurance industry for several years and is assisting us in strengthening our
position with local medical aid companies. A few notable successes on the marketing front
have occurred recently with AMI Tanzania Limited signing up several large corporate
companies as their preferred hospital and medical provider. These include: the US Peace
Corps with over 1,000 members, Sony Ericsson, VSO (a major NGO working in Tanzania)
and Helix, the medical insurance company dealing with all British diplomatic staff.

In line with policy set by the Tanzanian government, AMI Dar es Salaam Hospital has over
the past year been actively training its Tanzanian staff. We are very proud of the results of
our in-house training programmes, which have seen the promotion of seven Tanzanian
members of staff to take over positions previously held by expatriates. This has been a
huge success in both improving our standing as a community investor with the Tanzanian
government and local businesses.

AMI Maputo Hospital
The AMI Maputo Hospital was officially opened by His Excellency Armando Guebuza, the
President of Mozambique on 9 June 2010. The event was also attended by a number of
ministers from other African nations, in addition to numerous NGOs, insurance company
representatives, tourism consultants and local business delegates.
The Maputo Trauma Centre has 35 beds, a delivery room, heamodialysis unit, paediatrics
department, 24-hour accident and emergency centre, X-ray department, CT scan centre, 4D
ultrasound, three ICU beds, two neonatal ICU beds and two theatres.

The Well Woman Clinic is the first of its kind in Mozambique and provides a variety of
services for women and ancillary services for pregnant women such as anti-natal care, post-
natal care and a Well Baby Clinic. The opening of this clinic gives Mozambican mothers
and mothers-to-be a viable alternative to travelling to South Africa for anti-natal and post-
natal care, which many women have opted for until now due to the lack of suitable facilities
in Mozambique.

The new facility, which opened to patients on 10 May 2010, has been well received by
local residents, businesses, embassies and tourists during its first three months of operation
and has experienced extremely encouraging patient numbers.

Brett Winstone
Interim Chief Executive Officer

24 August 2010

                                        ** ENDS **

For further information please visit www.amiplc.com or contact:
 Brett Winstone       African Medical Investments Plc Tel: +44 (0) 20 7408 9200
 Jonathan Wright      Seymour Pierce Ltd               Tel: +44 (0) 20 7107 8000
 David Foreman        Seymour Pierce Ltd               Tel: +44 (0) 20 7107 8000
 Alastair Stratton    Matrix Corporate Capital         Tel: +44 (0) 20 3206 7000
 Hugo de Salis        St Brides Media & Finance Ltd    Tel: +44 (0) 20 7236 1177
 Susie Callear        St Brides Media & Finance Ltd    Tel: +44 (0) 20 7236 1177

African Medical announces that its Annual Report for the period ended 28 February 2010
has been posted to shareholders today. Copies are also available on the Group's website at
www.amiplc.com.

CONSOLIDATED INCOME STATEMENT
For the year ended 28 February 2010

                                                                  Year ended       10 months ended
                                                                 28 February           28 February
                                                                        2010                  2009
                                                   Note          $‟000        $‟000

Revenue                                                          4,560            502
Cost of sales                                                  (3,266)           (88)

Gross profit                                                     1,294           414

Operating expenses                                             (7,063)       (1,688)
Loss of power to control entities                   7            (490)             -
Loss from financial irregularities                  5          (1,042)             -
Impairment of intangible asset                      6          (4,324)             -
Impairment of property, plant and equipment         6          (4,742)

Operating loss                                                (16,367)       (1,274)

Other gains and losses                                             169       (1,748)

Net finance income                                                   3            75

Loss before taxation                                          (16,195)       (2,947)

Income tax expense                                                   -             -
Loss for the year                                             (16,195)       (2,947)

Loss for the year attributable to equity holders
of the parent company                                         (16,195)       (2,934)
Loss for the year attributable to minority                           -          (13)
interests
Loss for the year                                             (16,195)       (2,947)

Loss per share

- Basic and diluted (cents)                         8      (12.4 cents)   (5.5 cents)


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 28 February 2010
                                             2010                              2009
                                            $‟000                             $‟000

Foreign exchange translation differences                            203         (14)
Other comprehensive income for the year                             203         (14)
Loss for the year                                              (16,195)      (2,947)
Total comprehensive income for the year                        (15,992)      (2,961)

Total comprehensive income attributable to the owners of       (15,992)      (2,948)
the parent company
Total comprehensive income attributable to minority                   -         (13)
interests
Total comprehensive income for the year                 (15,992)   (2,961)


CONSOLIDATED BALANCE SHEET
As at 28 February 2010

                                                           2010      2009
                                                 Note     $‟000     $‟000

ASSETS
Non-current assets
Intangible assets                                             -     7,174
Property, plant and equipment                            17,656     3,861
Financial asset investment                                    -       196
Total non-current assets                                 17,656    11,231

Current assets
Inventories                                                 134       207
Trade and other receivables                               2,575       750
Cash and cash equivalents                                 6,078     2,378
Total current assets                                      8,787     3,335

TOTAL ASSETS                                             26,443    14,566

LIABILITIES

Current liabilities
Trade and other payables                                 (2,839)    (509)
Deferred consideration                                     (224)        -
Total current liabilities                                (3,063)    (509)

NET ASSETS                                               23,380    14,057

EQUITY
Issued capital                                    9       41,607   13,932
Other reserves                                                 -    2,850
Share based payment reserve                                   59       27
Warrant reserve                                              647         -
Translation reserve                                          189      (14)
Retained earnings                                       (19,129)   (2,934)
Total equity attributable to the owners of the
parent company                                           23,373    13,861
Minority interests                                            7       196

TOTAL EQUITY                                             23,380    14,057

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
As at 28 February 2010
                                Share      Other    Share-based    Warrant    Translation   Retained    Minority
                               Capital   Reserves      payment      reserve      reserve    earnings    interests       Total
                                $‟000       $‟000       reserve       $‟000        $‟000       $‟000       $‟000        $‟000
                                                          $‟000
Balances at 1 March 2008             -          -             -           -             -           -           -            -
On acquisition                       -          -             -           -             -           -         209          209
Loss for the period                  -          -             -           -             -     (2,934)        (13)      (2,947)
Other comprehensive income
Exchange translation                 -          -             -           -          (14)           -             -       (14)
differences on foreign
operations
Total comprehensive income           -          -             -           -          (14)     (2,934)        196       (2,752)
for the year

Transactions with owners
Deferred consideration              -       2,850            -            -             -           -             -     2,850
Share-based payment charge          -           -           27            -             -           -             -        27
Share and warrant issues       13,932           -            -            -             -           -             -    13,932

Total transactions with        13,932       2,850           27            -             -           -             -    16,809
owners

Balances at 28 February 2009   13,932       2,850           27            -          (14)     (2,934)         196       14,057
On formation of subsidiaries        -           -            -            -             -           -           7            7
Loss for the year                   -           -            -            -             -    (16,195)           -     (16,195)
Loss of power to control            -           -            -            -            34           -       (196)        (162)
entities
Other comprehensive income
Exchange translation                 -          -             -           -          169            -             -       169
differences on foreign
operations
Total comprehensive income           -          -             -           -          203     (16,195)       (189)     (16,181)
for the year

Transactions with owners
Deferred consideration               -    (2,850)             -           -             -           -             -    (2,850)
reversed
Share-based payment charge          -           -           32           -              -           -             -        32
Share and warrant issues       27,675           -            -         647              -           -             -    28,322

Total transactions with        27,675     (2,850)           32         647              -           -             -    25,504
owners
Balance at 28 February 2010    41,607           -           59         647           189     (19,129)             7    23,380


             CONSOLIDATED CASH FLOW STATEMENT
             For the period ended 28 February 2010

                                                                                      2010                2009
                                                            Note                     $‟000               $‟000

             OPERATING ACTIVITIES
             Loss before tax                                                      (16,195)              (2,947)
             Adjustments for:
             - Depreciation of property, plant and                                     756                  61
equipment
- Gain on foreign exchange                             -     (14)
- Loss on financial asset investment                196         -
- Share based payment charge                           -       27
- Other gains and losses                          (169)     1,748
- Net interest income                                (3)     (75)
- Loss of power to control entities         7       490         -
- Impairment of intangible asset            6     4,324         -
- Impairment of property, plant and         6     4,742         -
equipment

Operating cash flow before movements in
working capital                                  (5,859)   (1,200)

Working capital adjustments:
- Decrease/ (Increase) in inventories                 73    (168)
- Increase in receivables                        (2,057)     (29)
- Increase in payables                             2,308      509

Cash used in operations                          (5,535)    (888)
Finance cost                                           -      (1)
Interest received                                      3       76

Net cash used in operating activities            (5,532)    (813)

INVESTING ACTIVITIES
Purchase of property, plant and equipment       (16,616)   (3,752)
Acquisition of subsidiaries                            -     (125)
Loss of power to control entities           7       (18)         -

Net cash used in investing activities           (16,634)   (3,877)

FINANCING ACTIVITIES
Proceeds from issue of share capital              26,460    9,384
Proceeds from issue of warrants                      647        -
Share issue costs                                (1,364)    (568)
Net cash flow from financing activities           25,743    8,816

Net increase in cash and cash equivalents         3,577     4,126

Cash and cash equivalents at start of the         2,378          -
period
Effect of foreign exchange rate changes             123    (1,748)

Cash and cash equivalents at end of the
period                                            6,078     2,378


NOTES TO THE FINANCIAL STATEMENTS
For the period ended 28 February 2010

1.   Basis of Preparation

The financial information set out above for the year ended 28 February 2010 and period
ended 28 February 2009 does not constitute the Group's non statutory accounts within the
meaning of the Isle of Man Companies Act 2006 (as amended) but is derived from those
accounts. The auditors have reported on those accounts (see note 2 for further
information). The results have been prepared using accounting policies consistent with
those used in the preparation of the non statutory accounts.

2.   General Information

African Medical Investments plc is incorporated in the Isle of Man under the Isle of Man
Companies Act 2006. The nature of the Group‟s operations and its principal activities are
set out in the Chairman‟s Statement and Operations Review above.

The financial information herein has been presented in US Dollars because this is the
currency of the primary economic environment in which the Group operates. The full
statutory accounts have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union.

The non statutory financial statements for the year ended 28 February 2010 have been
reported on by African Medical's auditors and contain a qualified opinion arising from a
disagreement about accounting treatment, an emphasis of matter in regard to going concern
and an emphasis of matter in regard to losses and impairments arising from financial
irregularities.

The qualified opinion arising from disagreement about accounting treatment arises as the
Group balance sheet reflects the disposal of three clinics as at 28 February 2010 by the
Group as a result of a loss of power to control as detailed in note 7 to this announcement. In
the auditors opinion the Group has not lost the power to control these clinics until post the
year end. However, impairments at the year-end were, in the auditor‟s opinion, appropriate
for the net assets detailed in note 6 other than trade and other payables. The net impact of
this, in the auditor‟s opinion, is that trade and other payables are understated by $249,000.
The loss for the year is, in the auditor‟s opinion, consequentially understated by $249,000.
The financial statements have been prepared on the Going Concern basis (see note 3
below). This forms the basis on which the emphasis of matter in regard to going concern is
described in the audit report.
In regard to losses and impairments arising from financial irregularities, disclosures made
in Notes 5 and 6 to this announcement detail significant information in this regard. This
forms the basis on which the emphasis of matter in regard to losses and impairments arising
from financial irregularities is described in the audit report.

The full audit report is contained in the company‟s Annual Report, as available on the
company‟s website.

The comparative results for the 10 month period ended 28 February 2009 contained an
unqualified audit report.

3. Significant accounting policies

Going Concern
The board has prepared forecasts covering the period of twelve months from the date of
approval of these financial statements. The forecasts are based on the latest revised budgets
of the entities that comprise the ongoing business of the consolidated Group.

The forecast shows additional cash outflows over the next six months during which time
expenditure on existing approved capital projects such as the Harare Hospital development,
the Air Evacuation business and replacement operating equipment is incurred. This capital
and project expenditure is necessary to achieve revenue forecasts. In addition, allowances
for working capital have been made on a business by business basis for the period up to
when they each become cash flow positive. Forecast central overheads are based on the
Group‟s revised operating scenario and organisation structure. Revenue forecasts are based
on projections provided by independent health industry experts using benchmark hospital
occupancy rates in conjunction with existing pricing policy, service offering and capacity
for each of our facilities. Operating costs are forecast based on existing cost structures and
are largely fixed at both current and forecast occupancy rates. There is no reliance on
significant productivity improvements or operating cost savings.

Following this period of net cash outflows as each operating business is completed and
stabilised, cash surpluses are forecast. No new projects or developments are included in the
forecast as each investment opportunity would be analysed separately including funding
strategies by the board prior to approval.

The forecasts contain certain assumptions, in addition to those outlined above, regarding
the timing and magnitude of the anticipated shortfall and then increase in working
capital. African Medical has in place a $47m Equity Line Agreement with Harbinger
Capital Partners Masterfund I, Limited (”Harbinger”). To date African Medical has drawn
US$28.4m under this facility. The draw down facility with Harbinger, African Medical‟s
leading shareholder, remains in place and Harbinger continues to be fully supportive of the
Group and its growth objectives. Whilst the board acknowledges that certain details of the
Equity Line Agreement may require renegotiation, it is confident that funding will be
available to meet the anticipated funding shortfall over the next six months.

Should the forecasts not be achieved or renegotiation of the Equity Line Agreement is
otherwise not possible in the required timeframes, the Group will be reliant on support from
shareholders to enable it to meet its liabilities as and when they fall due. The board has
held discussions with shareholders regarding possible future funding requirements. While
no formal commitment has been given by the shareholders to provide additional funding,
the outcome of the discussions was such that the board is of the opinion that this will be
available as necessary and so as such, it is appropriate to prepare the financial statements on
a going concern basis.


4. Critical accounting estimates and judgements

The preparation of financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the
process of applying the Group‟s accounting policies. The estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are discussed below:

Impairments
Impairment reviews on non-current assets are carried out on each cash-generating unit
identified in accordance with IAS 36 “Impairment of Assets”. At each reporting date,
where there are indicators of impairment, the net book value of the cash generating unit is
compared with the associated fair value. The current investigation into alleged financial and
administrative irregularities has identified potential overpayments to certain suppliers for
plant and equipment in the period to 28 February 2010. Independent experts and forensic
auditors were engaged to ascertain the likely extent of any overpayment. In instances
where financial irregularities were quantifiable, the financial impact was taken to the
income statement as „Loss from financial irregularities‟. Where indicators of overpayment
existed, an impairment provision has been made based assessment assisted by the
independent experts as to the extent of the overpayments, based on market values of fit
comparable for purpose equipment purchased. Due to the nature of the alleged financial
irregularities, the precise overpayments cannot be determined, however the directors
believe the provision is materially adequate based on the information currently available.


5. Loss from financial irregularities
In March 2010 the board became aware that officials from the South African Revenue
Service (“SARS”) and the Department of Health had entered the Johannesburg
International Airport („JIA Clinic‟) in February 2010 and that approximately $184,000 of
foreign currency cash and certain accounting records had been seized pending further
investigation. The subsequent investigation, which is yet to be concluded, appears to have
been focused on the inappropriate treatment of foreign currency revenues and irregularities
pertaining to the acquisition of yellow fever vaccines.

Around this time the board had raised concerns with the former Chief Executive Officer
(“former CEO”) regarding perceived weaknesses in project cost controls and significant
cost overruns on capital projects including the Cape Town Clinic, Maputo Hospital
and Harare Hospital Projects which were being carried out under the direct authority and
supervision of the former CEO.

During April 2010, the board made certain enquiries of the former CEO and African
Medical‟s senior finance staff regarding certain of the Group's financial and monetary
practices. Advisors familiar with the Group‟s operations were engaged by the board to
investigate the possible financial irregularities further. Questions regarding duplicate cash
books at the JIA Clinic, favourable supplier terms and inappropriate supplier transactions
were raised with the former CEO in May 2010. The former CEO explained to the board
which at the time satisfied the board that the irregularities identified were minor in value,
attributable to certain members of staff and would cease immediately with the assistance of
the newly appointed Finance Director.

The Finance Director of African Medical was appointed on 1 June 2010 and was tasked by
the board to strengthen internal controls, particularly around cash, and improve the quality
and timeliness of financial reporting including project cost reporting. Additional
accounting irregularities and severe internal control breaches were identified during further
internal reviews in June and reported to the board. On 30 June 2010 on the
recommendation of the Finance Director, independent forensic auditors were appointed to
undertake a thorough investigation into potential financial and administrative
irregularities. On 8 July 2010 the board resolved to suspend the former CEO while the
investigation continued, as permitted under the terms of his service agreement. On 9 July
2010 the former CEO was notified of such suspension. Certain members of the hospital
management teams at AMI‟s Harare, Dar es Salaam and Maputo operations were also
suspended at this time.

On 13 July 2010 the former CEO forwarded to the board his letter of resignation under
which he resigned as Chief Executive Officer and a board member with immediate effect.
The resignation was accepted by the board and an announcement was made by the
Company on 14 July 2010.

To date the forensic investigation has focused on operations at the JIA Clinic, Harare
Trauma Centre and capital project payments administered out of the Johannesburg shared
services office. Criminal charges have been laid against the former manager of the Harare
Trauma Centre for financial irregularities amounting to approximately US$1 million (the
majority of this arose subsequent to balance sheet date). In addition, arrest warrants (for
fraud and/ or theft) have been issued in respect of the former CEO and his appointed
manager in South Africa, Wessel Roets, by the South Africa Police Service.
Notwithstanding this progress, the investigation is ongoing and remains focused on
gathering sufficient evidence to lay criminal and civil charges against all employees and
suppliers involved in alleged irregularities.

Evidence gathered to date pertains to the following alleged irregularities:
   - Understatement of revenue;
   - Excessive profits taken by an intermediary supplier;
   - Supply of goods and services for personal use charged to the company;
   - Supplier payments to employees;
   - Payroll irregularities; and
   - Falsification of supplier invoices.

The directors are committed to prosecuting all Group employees and suppliers who
participated in and benefitted from any of the alleged financial irregularities. Furthermore
the board has resolved to take civil action to seek compensation for the losses suffered, not
only in relation to fraud and/ or theft but also in relation to losses suffered as a result of the
misstatement of the business at the time of the acquisition of VIP Healthcare Solutions
Limited by the Company. Where the Company has been able to quantify the impact of the
financial irregularities on the financial performance of the business in the year ended 28
February 2010, this has been taken to the income statement as Loss from financial
irregularities. Where evidence from the forensic investigation has been used to estimate the
extent of the loss but suggests overpayment to suppliers on capital projects, the Company
has taken these to the income statement as an impairment loss.

Based on the above principles and on the information currently available to the board, the
total financial impact of the Loss from financial irregularities charged to the Income
Statement for the year ended 28 February 2010 is US$1,042,000. Note 6 below details the
financial impact of the impairment for the year ended 28 February 2010.

6.   Asset Impairment
At each balance sheet date, the Group reviews the carrying amounts of its property, plant
and equipment and intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss, if
any. Where the asset does not generate cash flows that are independent from other assets,
the Group estimates the recoverable amount of the cash generating unit (“CGU”) to which
the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value
using an after tax discount rate that reflects the current market assessments of the time
value of money and risks specific to the assets for which estimates of future cash flows
have not been adjusted.

If the recoverable amount of an asset or CGU is estimated to be less than the carrying
amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An
impairment is recognised as an expense in the income statement.

Where an impairment subsequently reverses, the carrying amount of the asset or CGU is
increased to the revised estimate of its recoverable amount, but so that the increased
carrying value does not exceed the carrying amount that would have been determined had
no impairment been recognised for the asset or the CGU in prior years. A reversal of an
impairment is recognised as a gain in the income statement.

The current investigation into alleged financial and administrative irregularities has
identified potential overpayments to certain suppliers for plant and equipment in the year
ended 28 February 2010. Independent experts and forensic auditors were engaged to
ascertain the likely extent of overpayment. Where indicators of overpayment exist an
impairment provision has been raised based on an assessment by independent experts of the
extent of overpayment, based on market values of fit for purpose equipment
acquired. Impairment arising from potential overpayment has been recognised not
withstanding that the recoverable amount based on value in use may be in excess of
amounts actually paid. Accordingly the impairment provision at the balance sheet date
reflects only estimates of overpayments to suppliers complicit in the alleged financial
irregularities and carrying values of property, plant and equipment are based on amounts
that would have otherwise been paid in arms length transactions or at fair value at the date
of acquisition.
    The review of carrying amounts of property, plant and equipment and intangible assets at
    28 February 2010 indicated actual impairment write downs on the following assets:

                                                                             Impairment
  Asset or                                       Basis of    Valuation       write down
      CGU                                    recoverable    undertaken              2009
  (project)   Asset Class           Segment      amount             by             $‟000 Note
Maputo      Assets under      Hospitals and Fair value    Independent              2,281 (a)
            construction      clinics                     expert
Harare      Assets under      Hospitals and Fair value    Independent              1,755 (a)
            construction      clinics                     expert
Nairobi     Assets under      Hospitals and Fair value    Internal                   706 (b)
            construction      clinics                     assessment
Tangible assets Sub-
total                                                                              4,742

Goodwill   Goodwill           Hospital       Fair value      Internal              4,324 (c)
                              Management                     assessment
Intangible assets Sub-total                                                        4,324

Total impairment                                                                   9,066


       (a) Based on the preliminary findings of the forensic investigation and the analysis of
           independent experts, payments to Dansk Hospital Supplies and Medical Equipment
           Limited, Higgins Technical Solutions Limited, Marlene Interiors CC and LM
           Kitchens and Paint Contractors CC appear to be significantly inflated. Using a
           sample of invoices and comparable costs from original equipment manufacturers the
           extent of overpayment has been estimated and raised as a provision for
           impairment. In certain instances, goods and services from these suppliers have been
           invoiced to the Group but for the benefit of employees who may be complicit in the
           alleged financial irregularities. An estimate of such goods and services has also
           been raised as a provision for impairment. Equipment not fit for purpose or
           identified as to be replaced has also been fully provided.

       (b) In August 2010, following a review of operations, the board decided to focus on the
           core business of hospitals. Accordingly the Nairobi clinic project was abandoned
           and the carrying value of the project at the balance sheet date is fully impaired.

       (c) In the prior period, the acquisition of the entire issued share capital of VIP
           Healthcare Solutions Limited (“VIP”) gave rise to goodwill, attributed to the quality
           of the management team and their proven strength of their project management
           skills in building first class health service facilities in Africa. Subsequent to balance
       sheet date and as a result of the investigation into alleged financial and
       administrative irregularities, the entire management team of VIP has either resigned
       or their employment with the Group has otherwise ceased. Further, significant
       project budget overruns due to the alleged financial irregularities amongst other
       things and poor financial performance of the operating businesses has raised serious
       questions about the consideration paid for VIP and the possible misrepresentations
       on the part of the former shareholders of VIP. As a consequence, an internal
       assessment of the carrying value of goodwill has concluded that this balance is fully
       impaired at the balance sheet date. In light of the above the board is considering its
       remedies against Minerva Trust Company Limited, the seller of VIP.


7.   Loss of power to control entities

IFRS 3 requires the consolidation of entities where there is the power to control or govern the
financial and operating policies of such entities so as to obtain benefits from their activities. In
the prior period the directors considered such power to control was in existence in respect of
Airport Clinic Johannesburg International (Proprietary) Limited (“JIA Clinic”) and Autoband
Investments (Proprietary) Limited (“Harare Trauma Centre”) as a consequence of Management
Agreements with VIP Healthcare Solutions Limited (“VIP”). During the current financial
period, JIA Clinic established a new wholly owned subsidiary, Airport Clinic and Travel
Vaccination Centre Cape Town International Airport (Proprietary) Limited (“CT Clinic”).

As described in note 5, in March 2010 the board became aware of possible accounting and
administrative irregularities due to an investigation by the South African Revenue Services and
the Department of Health which included the seizing of $184,000 of foreign currency cash and
certain accounting records. Subsequently forensic auditors were appointed to undertake a
thorough investigation into potential financial and administrative irregularities. To date the
forensic investigation has focused on operations at JIA Clinic and Harare Trauma Centre and
criminal charges for fraud have been laid against the former manager of the Harare Trauma
Centre.

Subsequent to the year end, the Company has experienced ongoing difficulties exercising
control over the JIA Clinic and CT Clinic resulting in the decision to terminate the
Management Agreement relating to the JIA Clinic. As a consequence, the relationship with the
CT Clinic has also been terminated.

These events and the evidence gathered to date by the forensic auditors have prompted a review
of the requirements of IFRS 3 and in particular the existence of power to control. The terms of
the Management Agreement are of particular relevance and confer no power to VIP to govern
the financial and operating policies of JIA Clinic or Harare Trauma Centre. These entities
carried on their own business and the VIP had no rights to change the financial or operating
policies, resulting in an administrative responsibility rather than conferring power.

After careful consideration of the evidence and the requirements of IFRS 3, the board has
concluded that loss of power to control occurred on 28 February 2010 and the results, assets
and liabilities of JIA Clinic, CT Clinic and Harare Trauma Centre are excluded from the
consolidated financial statements from that date.

Details of the net assets of these entities at 28 February 2010 are as follows:

                              CT Clinic          JIA Clinic    Harare Trauma
                                                                       Centre       Total
                                  $‟000               $‟000             $‟000       $‟000
Property, plant and                 418                 202                48         668
equipment
Inventories                           6                  25                 48         79
Receivables                          40                  27                 69        136
Cash and cash                         1                   3                 14         18
equivalents
Trade and other                    (16)               (207)               (26)      (249)
payables
Foreign currency
translation reserve                  19                  15                  -         34
Minority interests                    -                (47)              (149)      (196)
Loss of power to                    468                  18                  4        490
control entities

Total consideration                    -                   -                 -           -
Net cash outflow
arising on disposal:
Cash consideration                     -                   -                 -           -
Cash and cash
equivalents disposed of              (1)                 (3)              (14)        (18)
Net cash outflow to the
Group                                (1)                 (3)              (14)        (18)

The net assets of the companies at 28 February 2009 were as follows:

                              CT Clinic          JIA Clinic    Harare Trauma
                                                                       Centre       Total
                                  $‟000               $‟000             $‟000       $‟000
Property, plant and
equipment                              -                 45               100         145
Inventories                            -                 17                45          62
Receivables                            -                 16                 4          20
Cash and cash
equivalents                             -                  47                  -               47
Trade and other                         -                (80)                  -             (80)
payables
Loans                                   -                   -                  -                 -
Foreign currency
translation reserve                     -                   -                  -                -
Minority interests                      -                (45)              (149)            (194)

                                        -                   -                  -                 -


8.   Loss per share

The calculation of the basic and diluted loss per share is based on the following data:

                                                                   2010                 2009
                                                                  $‟000                $‟000

Loss for the purposes of basic earnings per share
(loss for the period attributable to equity holders of
the parent)                                                     (16,195)              (2,934)

Number of shares

Weighted average number of ordinary shares for the
purposes of basic and diluted loss per share       131,044,775                 53,343,972

Loss per share                                             (12.4 cents)            (5.5 cents)

Due to the loss incurred in the year and prior period, there is no dilutive effect of share
options.

9.   Share capital

                                                                 Ordinary shares of no par
                                                                                     value
                                                 Number            Allotted and fully paid
                                                                                    $‟000

At 19 May 2008                                         1                                   -
Issue of shares to fund group activities      79,999,999                              13,932
(a)
At 1 March 2009                               80,000,000                              13,932
Issue of shares to fund group activities      30,000,000                               4,791
(b)
Acquisition of EMP Services Limitada          10,000,000                                3,300
(c)
Issue of shares to fund group activities 74,001,000                                19,584
(d)
At 28 February 2010                      194,001,000                               41,607

(a) On incorporation on 19 May 2008 one Ordinary Share was subscribed by the subscriber
in accordance with the memorandum of association,

On 20 June 2008 by written special resolution of the subscriber it was resolved to disapply
pre-emption in respect of the issue of 4,999,999 Ordinary Shares to founder shareholders
and the issue of 51,000,000 Ordinary Shares pursuant to a placing (as described below) and
50% of the total issued share capital following such issues.

On 20 June 2008 4,999,999 Ordinary Shares were issued fully paid for cash at a price of
0.1p per Ordinary Share.

On 27 June 2008 51,000,000 Ordinary Shares were issued fully paid for cash at a price of
10p per share.

At an Extraordinary General Meeting held on 9 December 2008, shareholders disapplied
pre-emption rights in respect of 200,000,000 Ordinary Shares of no par value (such
authority to expire at the first Annual General Meeting of the Company) and 16,000,000
shares were issued at a price of 12.5p per share as the initial tranche of consideration for the
acquisition of the entire issued share capital of VIP Healthcare Solutions Limited.

On 20 February 2009, following the opening of the Hospital and Well Woman clinic in Dar
Es Salaam, a further 8,000,000 Ordinary Shares were issued at a value of 12.5p per share in
accordance with the terms of the agreement to acquire the entire issued share capital of VIP
Healthcare Solutions Limited.

(b) On 5 June 2009 30,000,000 ordinary shares plus warrants were issued and fully paid for
cash at a price of 10p per share and related warrant.

(c) On 30 September 2009 the Company purchased 100% of EMP Services Limitada, a
Mozambican company whose sole asset is the site of the Company's second boutique
hospital, trauma centre and Well Woman Clinic. The purchase consideration was a cash
payment of US$2.2 million and the issue of 10 million new ordinary shares in the
Company.

(d) On the 4 November 2009 74,001,000 ordinary shares were issued to Harbinger Capital
Partners Master Fund I, Limited, (”Harbinger”) in terms of a £28.7 million (US$47.2
million) equity line agreement with Harbinger. Further shares were issues pursuant to the
Equity Line Agreement (“ELA”) with Harbinger. The ELA sets out the terms for future
draw downs by the Company as per the table below:



Date of Draw Down          Number of Subscription       $US fixed Price $US Subscription
Notice                        Shares to be issued per Subscription Share        Amount
Quarter 4 2010                         5,000,000                    0.48      2,400,000
Quarter 1 2011                         4,500,000                    0.53      2,385,000
Quarter 2 2011                         4,000,000                    0.58      2,320,000
Quarter 3 2011                         3,500,000                    0.64      2,240,000
Quarter 4 2011                         3,000,000                    0.70      2,100,000
Quarter 1 2012                         2,500,000                    0.77      1,925,000
Quarter 2 2012                         2,000,000                    0.85      1,700,000
Quarter 3 2012                         1,500,000                    0.93      1,395,000
Quarter 4 2012                         1,000,000                    1.03      1,030,000
Quarter 1 2013                         1,000,000                    1.13      1,130,000

In the event that the Company's volume weighted average share price for the 20 trading
days prior to the date of a draw down notice served by the Company on Harbinger ("20 day
VWAP") is less than the fixed price per subscription share as set out above (the "Fixed
Price") the ELA provides that the subscription price per share shall be reduced to the higher
of the 20 day VWAP and 90% of the Fixed Price. In these circumstances, the subscription
amount will remain as per the table above but the number of subscription shares to be
issued to Harbinger will be increased accordingly.


10. Related party disclosures

   1) PH Edmonds and AS Groves, directors of the Company, are also directors of
      African Management Services Limited ("AMS") and Agriterra Limited
      ("Agriterra"). Related party transactions are entered into at an arm‟s length basis.
      No provisions have been made in respect of amounts owed by or to related parties.

       During the year, AMS provided accounting and treasury services to the Group for a
       management fee of US$207,000 (2009: US$ nil). As at 28 February 2010, the
       Group owed AMS US$132,000 (2009: US$ nil).

       During the year, the Group incurred certain expenditures which were settled by
       Agriterra. As at 28 February 2010, the Group owed Agriterra US$30,000 (2009:
       US$ nil).
   2) During the year a consulting fee of £135,000 (US$211,000) was paid to Ocelot
      Investment Group Limited, a company in which AS Groves has an interest.

   3) Dansk Hospital Supplies and Medical Equipment Limited, Higgins Technical
      Solutions Limited and Envirosafe Building Systems and Solutions Limited are
      considered to be related parties by virtue of the following:
          Control exercised over the companies by the former Chief Executive
             Officer, Dr Vivek Solanki; and
          Manon Thamothiram is a director of all of the above entities and the Group
             company VIP Healthcare Solutions Limited. He is also a director of Minerva
             Fiduciary Services (Mauritius) Limited, a company that provided
             professional services to the Group during the year.

The amounts paid to these companies during the year was:

                                                                                2010
                                                                               $‟000
Dansk Hospital Supplies and Medical Equipment Limited                          4,414
Higgins Technical Solutions Limited                                              818
Envirosafe Building Systems and Solutions Limited                                473
                                                                               5,705

At balance sheet date, the following amounts were owing to these companies:
                                                                                2010
                                                                               $‟000
Dansk Hospital Supplies and Medical Equipment Limited                          1,250
Higgins Technical Solutions Limited                                                -
Envirosafe Building Systems and Solutions Limited                                  8
                                                                               1,258

The board does not believe these transactions were conducted on an arm‟s length basis and
as a result the assets purchased from these suppliers have been impaired or taken to the
income statement as Loss from financial irregularities (see note 6).

Envirosafe Building Systems and Solutions Limited also owed US$1.4 million to the Group
as at 28 February 2010, which has been received post year end.

The board has been unable to ascertain the shareholdings in the companies as at the time of
issuing these financial statements.

4) Remuneration of key management personnel
      The remuneration of the directors, who are the key management personnel of the
      Group, is set out below in aggregate for each of the categories specified in IAS 24
      ‘Related Party Disclosures’.

                                                                   2010             2009
                                                                  $‟000            $‟000

         Short-term employee benefits                               400              191
         Post-employment benefits                                     -                -
         Other long-term benefits                                     -                -
         Termination benefits                                         -                -
         Share-based payment                                          -               27
                                                                    400              218

11.     Post balance sheet events

On 30 April 2010, the Company issued 6,500,000 shares in the Company at 23 pence
(US$0.36) per share; and 6,000,000 shares in the Company at 25 pence (US$0.40) per
share, raising US$4,739,991. These were the second and third draw downs in terms of the
equity line agreement with Harbinger Capital Master Fund I, Limited.

On 10 May 2010 AMI Mozambique opened its boutique hospital in Maputo.

On 9 July 2010 the Company's Chief Executive Officer, Dr VS Solanki, was suspended by
the board pending an investigation into potential financial and administrative irregularities
at the Company's Harare and Johannesburg medical facilities. On 13 July 2010, Dr Solanki
resigned as Chief Executive Officer and a member of the board.

On 22 July 2010, the Company issued 6,111,111 shares in the Company at 25 pence
(US$0.40) per share, raising US$2,420,000. This was the fourth draw down in terms of the
equity line agreement with Harbinger Capital Master Fund I, Limited.

On 17 August 2010, the Company terminated its management agreement relating to the
Airport Clinic Johannesburg International (Proprietary) Limited. As a consequence, the
relationship with the Airport Clinic and Travel Vaccination Centre Cape Town
International Airport (Proprietary) Limited has also been terminated.

As discussed in note 5, the board has resolved to take civil action to seek compensation for
the losses suffered, not only in relation to fraud and/ or theft but also in relation to losses
suffered as a result of the misstatement of the business at the time of the acquisition of VIP
Healthcare Solutions Limited (“VIP”) by the Company. In this regard, the board has
resolved to take steps to freeze the 24 million shares in the Company (the "Relevant
Shares") which are owned by Minerva Trust Company Limited ("Minerva") and were
issued in connection with, and as consideration for the acquisition of VIP pursuant to the
share purchase agreement dated 3 October 2008 (Minerva being trustee of the Pusan Trust).
The decision to take steps to freeze the Relevant Shares has been taken by the board as a
result of the initial findings of the ongoing investigation, the issuance of a warrant for the
former CEO‟s arrest by the South African Police Service and with a view to protecting the
Company's interests pending the resolution of any civil action(s) which may be
taken against the former CEO and/or other beneficiaries of the Pusan Trust.

								
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