SkinBioTherapeutics Annual Report 2021

Plain-text annual report

262369 SkinBio Therapeutics plc Cover Spread (3mm Spine).qxp 29/11/2021 10:37 Page 1 Annual Report and Financial Statements For the Year Ended 30 June 2021 SkinBioTherapeutics plc Company Registration Number: 09632164 1 2 0 2 e n u J 0 3 d e d n E r a e Y e h t r o F s t n e m e t a t S l i a i c n a n F d n a t r o p e R l a u n n A c l p s c i t u e p a r e h T o B n k S i i SkinBio THERAPEUTICS 15 Silk House, Park Green, Macclesﬁeld, SK11 7QJ SkinBio THERAPEUTICS 262369 SkinBio Therapeutics plc Cover Spread (3mm Spine).qxp 29/11/2021 10:37 Page 2 Contents Statutory and Other Information Chairman’s Statement Strategic and Financial Review Directors’ Report Corporate Governance Report Independent Auditor’s Report to the Members of SkinBioTherapeutics Plc Consolidated Statement of Comprehensive Income 1 2 3 10 13 23 28 Consolidated Statement of Financial Position 29 Consolidated Statement of Cash Flows 30 Consolidated Statement of Changes in Equity 31 Company Statement of Financial Position Company Statement of Cash Flows Company Statement of Changes in Equity Notes to the Financial Statements Notice of Annual General Meeting 32 33 34 35 53 Notes to the Annual General Meeting Notice 55 Perivan 262369 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 1 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 1 Non-Executive Chairman Chief Executive Ofﬁcer Chief Financial Ofﬁcer Non-Executive Director Statutory and Other Information Directors Martin Hunt Stuart J. Ashman Doug Quinn Dr Cathy Prescott Secretary Doug Quinn Registered ofﬁce 15 Silk House Park Green Macclesﬁeld SK11 7QJ Auditor Registrars Nominated adviser and broker Bankers Public relations Jeffreys Henry LLP Finsgate 5-7 Cranwood Street London EC1V 9EE Share Registrars Limited The Courtyard 17 West Street Farnham GU9 7DR Cenkos Securities plc 6-8 Tokenhouse Yard London EC2R 7AS Barclays Bank PLC 1 Churchill Place London E14 5HP Instinctif Partners Limited 65 Gresham Street London EC2V 7NQ 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 2 2 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Chairman’s Statement At an incredibly challenging time for everyone, 2021 was the year SkinBioTherapeutics demonstrated its resourcefulness by successfully executing a consumer study for AxisBiotix, paving the way for its commercial launch. Alongside this the Group continued to progress its core SkinBiotix technology through its partners Croda and Sederma. The placing and open offer completed in November 2020 provided the working capital to support the AxisBiotix consumer study, initiate new programmes of work with the University of Manchester and strengthen the Group’s physical infrastructure. In 2019 SkinBioTherapeutics’ strategy identiﬁed ﬁve channels within which to progress its two core elements of technology – SkinBiotix and an emerging area of science focusing on the relationship between the gut and skin. To support this multi-channel approach and offer greater corporate ﬂexibility, separate legal entities were established for each channel. With the progress made in AxisBiotix during the course of this year, SkinBioTherapeutics is presenting group results for the ﬁrst time. Consolidated ﬁnancial statements are presented along with Company (SkinBioTherapeutics plc) statements of ﬁnancial position, cash ﬂows and changes in equity. AxisBiotix has been the Group’s key focus as it sought to capitalise on the area of research exploring the relationship between the gut and skin. In the course of 12 months, from having identiﬁed a blend of bacterial strains aligned to the disease pathways of psoriasis, the Group designed, initiated and completed a ‘self-managed’ consumer study, reporting impressive results with c. 72% of participants who completed the study reporting improvements against the key indications. To have made such progress in the course of the ﬁnancial year is testament to the pragmatic approach and hard work of everyone on the team. Since year end, the Group has reached the signiﬁcant milestone of becoming a commercial business, with the launch of the AxisBiotix product on 29 October 2021, World Psoriasis Day. Development of the Group’s core technology, SkinBiotix, has continued through Sederma, the specialist ingredient manufacturer within Croda Plc. Sederma has progressed the scale-up of lysate manufacture through the various stepped increases and is currently preparing to manufacture at the commercial scale of 20,000 litres, in anticipation of sales in 2022. In November 2020 the Group completed a placing and open offer raising a total of £4.45m (before expenses). The fundraise provided headroom to execute the consumer study for AxisBiotix and prepare for its subsequent commercialisation, as well as to provide funds to initiate new scientiﬁc development programmes with the University of Manchester and to support the transition of the Group from a virtual operation to one with an in-house scientiﬁc capability. The Group ended the ﬁnancial year with a cash balance of £4.6m (2020: £2.2m). On behalf of the Board, I would like to take the opportunity to thank everyone at SkinBioTherapeutics for the considerable progress achieved by the Group over the course of the year. Martin Hunt Chairman 29 November 2021 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 3 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 3 Strategic and Financial Review Company background and strategy SkinBioTherapeutics is a life sciences business focused on harnessing the microbiome, the bacteria that live on and in our bodies, for human health. The Group has two core areas of technology that form ﬁve strategic pillars addressing opportunities in cosmetics, food supplements, medical devices and longer term, the potential for therapeutics. − SkinBiotix®, the Group’s proprietary technology, is designed to promote skin health by harnessing the beneﬁcial properties of probiotic bacteria and the active components derived from them. SkinBioTherapeutics’ approach is to use a ‘lysate’ of probiotic bacteria cells as a topical agent. The use of a lysate rather than live bacteria circumvents the possible safety considerations associated with applying live bacteria to the skin and the potential formulation difﬁculties of keeping bacteria alive in a cream. This form also stabilises the bacteria, making it easier to handle and store. − AxisBiotix™ technology is based on the rapidly emerging area of science that is focused on the gut-skin axis and how the constitution of the gut microbiome plays a role in various diseases, such as psoriasis. SkinBioTherapeutics has been exploring the relationship between the gut and the skin and the potential to introduce probiotic bacteria into the gut and effect a direct improvement on human skin. AxisBiotix-Ps™ is the ﬁrst product developed by the Group that leverages the gut-skin relationship and is designed to alleviate the symptoms associated with psoriasis. Operational review SkinBiotix® Pillar (skincare/cosmetics) In November 2019, an agreement was signed with Croda Plc, a world leader in the ﬁeld of active skincare ingredients for the cosmetic industry, which sells ingredients for skin and hair care products to major cosmetic brands across the world. SkinBioTherapeutics is working directly with Sederma, part of Croda and a specialist manufacturer of bioactive ingredients for the cosmetic industry. Sederma is responsible for the development, manufacturing and commercialisation of the SkinBiotix® technology. During the course of the year Sederma updated SkinBioTherapeutics that it had made signiﬁcant progress against the key collaboration milestones. Lysate production had been optimised and analytical sample screening and formulation work had been completed. Manufacturing scale-up from 1 litre to 600 litres had been completed successfully and with the formal handover of the project from Sederma in Paris to Croda’s manufacturing facility at Ditton, near Widnes, the ﬁnal scale-up to 20,000 litres is now being progressed. This is the capacity required to mass produce the SkinBiotix® product at industrial levels to market to Sederma’s portfolio of 12,000+ global cosmetic customers. Throughout this collaboration, Sederma has identiﬁed additional potential scientiﬁc and marketing claims for the end ingredient. The eventual claims will be an important component of the launch and long-term commercial success of the ingredient. To this end, Sederma is continuing its lab work to further substantiate these additional potential claims. This work is not impacting the manufacturing scale-up. The Group continues to anticipate 2022 as the period for initial royalty revenues. Sales and distribution rights are for the cosmetic sector in “active skincare” alone, leaving SkinBioTherapeutics to focus on further applications of its technology in other sectors. A key component of the Croda agreement is to provide access to a reliable supply of material to SkinBioTherapeutics, whereby Croda will supply SkinBiotix® for the Company to be able to use in other sectors outside of those covered by this agreement. AxisBiotix™ Pillar (gut/skin axis) In February 2020 SkinBioTherapeutics signed an agreement with Winclove Probiotics B.V. for the development of a probiotic blend of ‘good’ bacterial strains based on the modifying properties of speciﬁc bacterial species in known psoriasis pathways. Psoriasis is a chronic relapsing inﬂammatory condition of the skin with a prevalence of c.2-3% in the western world. The worldwide market for psoriasis treatments was valued at approximately $20bn in 2019 and is expected to grow to $41bn in 2027 with a CAGR of 9.2%. Current treatments include moisturising treatments or emollients to soothe and hydrate the skin for relatively mild disease, through to biologic therapies in severe cases. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 4 4 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Strategic and Financial Review (continued) For the group with mild-to-moderate psoriasis, the mainstay therapies tend to be steroid-based, which cannot be used long term and have side effects. In the management’s opinion, there is a clear unmet clinical need for new, safer ways of treating patients with mild to moderate psoriasis. In addition, anecdotal evidence from sufferers suggests that many have turned to oral probiotics as an ‘alternative’ therapy as a result of preferring more ‘natural’ treatments and have reported success in control of their disease. Having successfully formulated a bacterial blend as a probiotic food supplement, branded as AxisBiotix-Ps™, the Group intended to initiate a study in a clinical environment. Prevented from doing so by the COVID-19 pandemic, the Group redesigned the study as a ‘self-managed’ consumer study that could be managed remotely, without the need for participants to attend clinics. Of the 265 participants that enrolled onto the study, 177 identiﬁed themselves as suffering from mild to moderate psoriasis. The participants that self-identiﬁed as suffering from psoriasis and completed the study reported the following results: l 76% reported that their skin felt less itchy; l 75% reported that their skin appeared less red; l 73% reported that their skin felt less irritable; and l 65% reported that they had fewer ‘ﬂaky patches’ of skin. Participants who responded positively about their skin health, also reported positive changes to their lifestyle. On average, at day 56: l 62% reported having more energy; l 64% reported better sleep; and l 66% reported positive changes to their general mood. In addition, participants in the study who self-identiﬁed as suffering from psoriasis and at least one other condition – 80% reported a reduction in itchiness and 85% reported their skin felt less irritable. Beneﬁts were also experienced by participants who self-identiﬁed as having either eczema, acne or rosacea. The Group is pursuing a ‘direct to consumer’ commercialisation model for AxisBiotix-Ps™, selling the product through the website AxisBiotix.com. The psoriatic community is highly communicative regarding the condition and its treatment, therefore, management considers that engagement with sufferers both directly through social media and via the national psoriasis associations in the target country markets is an efﬁcient and cost-effective way of penetrating the market. Post year end, SkinBioTherapeutics launched AxisBiotix-Ps™ on 29 October 2021 - World Psoriasis Day. AxisBiotix-Ps™ is targeted to be sold on a subscription basis with sufferers subscribing on a four or eight-week cycle. The product is sold in boxes containing 28 daily sachets and is priced per sachet at £1.50 in the UK and $2.00 in the US and in due course in Europe at €1.80 (prices include sales tax and exclude duty and shipping costs). As demonstrated in the consumer study, it can take three to four weeks for the beneﬁts of AxisBiotix-Ps to be achieved and consequently new customers receive their second month’s supply of the product free. Management therefore expects it to be 3-4 months post launch for an indication of customer retention levels and will update the market on initial product sales in March 2022 when the Company releases its half year ﬁnancial results. The product has initially been launched in the UK and US with Europe expected to follow in the ﬁrst half of 2022. There are country speciﬁc requirements for food supplements in Europe, including labelling instructions and languages. The product is manufactured in the Netherlands by Winclove, and ﬁnished goods are held at a third party logistics company, also in the Netherlands, from where they are onward shipped directly to consumers. Longer term and subject to demand, SkinBioTherapeutics will consider bulk shipping ﬁnished goods to the US and UK and then onward shipping locally to consumers. Outside of these markets, for example, Asia, the Group is considering partnering opportunities for distribution and, having begun engagement with potential partners, will look to make progress in this regard in 2022. Having initially targeted psoriasis as the ﬁrst opportunity to leverage the gut-skin axis, the Group is now assessing other skin conditions that may beneﬁt from a food supplement. As demonstrated in the consumer study, suffers of eczema, rosacea and acne beneﬁted from taking AxisBiotix-Ps™. The Group believes that a number of the bacterial strains within AxisBiotix-Ps™ could form the basis of a core blend to target symptoms of other skin conditions beyond psoriasis. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 5 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 5 SkinBioTherapeutics is now targeting acne as the next opportunity and anticipates being able to develop a bacterial blend and initiate a consumer study during the course of 2022. MediBiotix™ Pillar (medtech applications e.g. woundcare) The MediBiotix channel is focused on medical device applications incorporating the SkinBiotix® technology. To date, the initial target has been eczema and generating a data pack to support the mode of action claims for a medical device application. Work is continuing in this regard and in parallel, recognising the progress made with AxisBiotix, management is considering developing a food supplement that addresses the symptoms of eczema through the gut-skin axis. Management also believes there is signiﬁcant utility for the technology in the treatment of various classes of skin wounds and is in discussion with a number of global advanced woundcare companies in this regard. The Group is targeting a commercial agreement to develop and test the SkinBiotix® technology in these advanced indications. CleanBiotix™ Pillar (anti-infection) The area of healthcare acquired infections (HAI) and bacterial resistance remains an area of critical concern for healthcare providers and has been brought into sharp focus through the pandemic. The growing resistance of certain infection strains, the lack of new antibiotics, and the rise of the “superbug” is driving the need to discover and develop new methods of controlling bacterial growth and infection. Staphylococcus aureus (SA) is the most common and one of the most aggressive skin pathogens and is one of the major causes of HAI. The Group’s SkinBiotix® technology has been shown to have signiﬁcant capabilities in preventing SA from adhering to and growing on the skin and thus offers a potential route of protection from SA-induced healthcare acquired infections. The Group has been in discussions with leading companies in the domestic and commercial hygiene sectors as to the utility of the SkinBiotix® technology within these environments. This is a challenging area both from a technology and regulatory perspective but equally offers signiﬁcant opportunities. SkinBioTherapeutics will continue discussions targeted at identifying a partner to work with to develop all aspects of this market channel. Other Research Programmes In April 2021 SkinBioTherapeutics extended its collaboration with the University of Manchester for two new research programmes. The ﬁrst programme, which will run for two years, will focus on how the microbiome can inﬂuence and rebalance the body’s response to inﬂammation in skin health and skin disease. The aim is for SkinBioTherapeutics to develop immune-supporting microbiome formulations to market through everyday products such as skin lotions and creams where there is an increasing consumer preference for natural ingredients. The second programme addresses oral health and will explore the use of different bacteria, including SkinBioTherapeutics’ proprietary lysate SkinBiotix, for oral health and wellbeing. The 12-month programme will develop, and test formulations designed to support the health of skin surfaces in the oral cavity targeting disease prevention, oral care and hygiene. These formulations could be positioned as standalone products or work alongside traditional oral health and wellbeing products. Financial review In support of its strategy to develop its technology in a number of channels, SkinBioTherapeutics established separate legal entities for each channel. Activity commenced in AxisBiotix Limited during the course of the year and consequently SkinBioTherapeutics is presenting group results for the ﬁnancial year. Separately presented are Company (SkinBioTherapeutics plc) statements of ﬁnancial position, cash ﬂows and changes in equity. Expenditure for the ﬁnancial year was lower than management’s expectations as a consequence of pivoting to a self-managed consumer study for AxisBiotix-Ps and reduced activity at the University of Manchester due to COVID-19. Research and development expenditure was £506k (2020: £635k) and other operating expenses were £991k (2020: £985k). Overall, the Group made a loss before tax of £1,498k (2020: £1,620k). In November 2020, SkinBioTherapeutics completed a placing and open offer raising a total of £4.45m gross proceeds. The funding enabled the Group to expand its technology pipeline with two additional programmes of work with the University of Manchester and secure lab space at the Biosphere complex in Newcastle. Cash used in operating activities was £1,555k (2020: £892k) and the Group had a cash balance of £4,610k (2020: £2,159k) at year-end. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 6 6 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Strategic and Financial Review (continued) Key performance indicators The Board recognises the importance of KPIs and their appropriateness to the stage of development of the business. The Group is focused on the development of its technology programmes all of which are cash consuming. The KPIs are therefore chosen to monitor the progress of the individual programmes, the external market environment and the cash requirements of the Group. Financial The cash position of the Group is monitored on a continual basis with reference to both the ongoing operational costs of the business and more particularly the cash requirements to support its scientiﬁc development programmes. The Group maintains a low operating cost base such that the majority of its funding is deployed on its development programmes. Non-ﬁnancial The Group actively monitors the progress of its development programmes. Timelines exist for each programme with key milestones detailed and these are regularly reviewed and updated accordingly. In addition, the Group monitors the life science market for; competitive products and technologies, licensing deals within the cosmetic industry, scientiﬁc research related to the microbiome and regulatory and policy matters in the major markets. Principal risks and uncertainties Ultimate responsibility for the process by which risk in the business is managed rests with the Board. The principal risks and uncertainties facing the Group, as well as mitigating actions, are set out below. While the list is not exhaustive, it is derived from the Group’s detailed risk register. These risks are reviewed by the Audit Committee at least biannually, which reports its ﬁndings to the Board. The Group’s internal risk identiﬁcation and management process is as follows: l The Executive Team prepares and reviews on a periodic basis, by function, the risk register for the Group. The risk register details speciﬁc risks to the Group, the quantiﬁcation of those risks in terms of probability and impact, and mitigating actions required to manage these risks. l The risk register assigns responsibility for each risk and mitigation plan to one or more members of the Executive Team. l The risk register is circulated to the Board in advance of each board meeting and speciﬁc risk items may be discussed at board meetings or otherwise as appropriate. l The risk register is reported to the Audit Committee at least biannually. COVID-19 To date the Group has been able to progress its core development programmes with its partners with no material impact caused by COVID-19, including commencing and completing a consumer study for AxisBiotix-Ps. Both Croda and Winclove have been able to continue operating throughout the pandemic. Development work at the University of Manchester was temporarily suspended because of the closure of the lab facilities, with work recommencing in September 2020. Brexit Following the United Kingdom’s exit from the EU on 31 January 2020 (“Brexit”) and the end of the transition period the Group has experienced additional complexities and administration as it prepares its AxisBiotix-Ps product for commercial launch. AxisBiotix-Ps is manufactured in the Netherlands and also shipped from the Netherlands to customers. Brexit has placed additional demands on the shipping and importing of the product to customers in the UK. Other than incurring additional shipping and administrative costs, there has been no additional impact for the initial launch of the product in November 2021. The Group is currently assessing the impact of Brexit on the requirements for it to sell product within Europe, including the appointment of a food business operator (FBO). It could potentially make it more difﬁcult for the Group to operate its business in the EU as a result of any increase in tariffs and/or more burdensome regulations being imposed on UK companies (such as changes in applicable legislation affecting the regulatory pathway of the Group’s products, both in Europe and in the UK). This could restrict the Group’s future prospects and adversely impact its ﬁnancial condition. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 7 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 7 Stage of operations SkinBioTherapeutics is at an early stage of development and post year end, entering into its ﬁrst phase of revenue generation. The extent to which it can generate material revenue in the near term will be dependent on the market penetration of AxisBiotix-Ps and the successful completion of the technical and commercial development of its SkinBiotix® platform. The business will incur losses for the immediate future. Clinical development risk The commercialisation of the Group’s intellectual property and the potential applications of its technologies requires ongoing preclinical development, formulation, process development and human consumer/clinical studies that exemplify platform claims. There is a risk that one or more of the business’s technologies does not perform as expected and fails to perform in the applications identiﬁed by the Group. Furthermore, clinical development and human studies can result in unexpected costs. Agreeing study designs, study endpoints and study recruitment timelines without unforeseen delays with regulatory agencies is key. Regulatory body guidelines leading to market authorisation may be subject to alteration and are divergent in different jurisdictions. Product development timelines Development programme delays, inconclusive results, identiﬁcation of safety issues, manufacture and formulation failures or regulatory challenges may require additional follow-up studies that are not currently envisaged with a consequential impact on development timelines and cash resources. Dependence of key personnel The Group operates with a small team and success is highly dependent on the expertise and experience of its board, management and employees. Retention and incentivisation of these individuals is critical to the Group. Formulation The Group has developed formulations for its initial indications and will need to repeat this process for other indications. There are risks associated with the means and timeline in developing formulations and establishing their long-term stability. It may require a number of iterations before suitable formulations are able to be produced. Human studies SkinBioTherapeutics has invested effort and resources in the development of its technologies. Success in human studies in part hinges on this continuing development activity. It is however possible that the results of these studies may not be predictive of those obtained in more advanced, later-stage, expensive, time consuming and difﬁcult to design human studies. Intellectual property and proprietary technology SkinBioTherapeutics is focused on maintaining and expanding its intellectual property portfolio. The portfolio includes patent applications, trademarks and know-how. Success of the Group will depend in part on its ability to obtain and maintain effective patent rights. These rights need to be sufﬁciently broad to protect SkinBioTherapeutics’ technology in its chosen markets. The application process is expensive and time-consuming and SkinBioTherapeutics may not be able to ﬁle all its patent applications in all jurisdictions. Some of the Group’s patent applications remain pending and have not been given notice of allowance. National patent ofﬁces may raise objections in relation to the on-going patent applications. These may result in revised applications or prevent patent applications from being granted. Competitive risk The Directors believe the skin microbiome to be an innovative area of development and scientiﬁc focus. As such this area is subject to signiﬁcant and rapid technological and consumer change. It is an area of interest to academic institutions, government agencies and private and public companies. Competition from existing companies and new entrants has emerged and maintaining an IP and technology advantage over the competition will require a sustained development focus. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 8 8 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Strategic and Financial Review (continued) The need for safe and supportive skin health and well-being products is acknowledged by consumers and healthcare providers around the globe. Large multinationals have divisions dedicated to the sector and many have established brands or approved products on the market. These brand owners have greater ﬁnancial and human resources which can be deployed to build and maintain a brand position. Many also have dedicated R&D units and could therefore choose to develop technologies that compete with those of the Group. Regulatory environment The Group operates in a regulated environment that varies dependent upon the jurisdiction and technology. These regulations are subject to change at short notice and differ according to any proposed product claims, intended use or marketing route. While the Group will take every effort to ensure that it and its partners comply with all applicable regulations, there can be no guarantee of this. Failure to comply with applicable regulations could result in the Group being unable to successfully commercialise its technology or any products that incorporates it and/or result in legal action being taken against the Group which could have a material adverse effect. S172 Statement The Directors acknowledge their duty under s.172 of the Companies Act 2006 and consider that they have, both individually and together, acted in the way that, in good faith, would be most likely to promote the success of the Company for the beneﬁt of its members as a whole. In doing so, they have had regard (amongst other matters) to: l The likely consequences of any decision in the long term The Group’s strategic objectives and the progress made against these during the year, together with the principal risks, are detailed in the Strategic and Financial Review on pages 3-9. l The interests of the Group’s employees SkinBioTherapeutics is a very small company in terms of its number of employees and recognises these employees are key to its business success. Members of the Board maintain frequent contact with employees and the executive team engage with employees with regards current performance and future plans and ambitions for the Group. l The need to foster the Group’s business relationships with suppliers, customers and others A consideration of the relationship with wider stakeholders and their impact on our long-term strategic objectives is disclosed in Principle 3 of the Corporate Governance Report on pages 13-22. l The impact of the Company’s operations on the community and the environment The Group is committed to operating with a high level of corporate social responsibility and environmental sustainability. Principle 8 of the Corporate Governance Report provides further disclosure on how we promote a corporate culture that is based on ethical values and behaviour. l The desirability of the Company maintaining a reputation for high standards of business conduct Our intention is to behave in a responsible manner, operating with a high standard of business conduct and corporate governance, as detailed in the Corporate Governance Report. l The need to act fairly as between members of the Company The Board is fully committed to open and transparent dialogues with all shareholders. A supportive base of investors interested in a long-term holding in the Company provides the stability to allow us to execute our strategy and deliver long term value for all shareholders. We strive to engage with our investor base with meetings and updates to institutional and retail investors through a variety of channels. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 9 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 9 Outlook In the space of 12 months, SkinBioTherapeutics has managed to conduct and report on a ‘self-managed’ consumer study and prepare for the launch of its ﬁrst product for sale. A key focus for the Group during the ﬁnancial year 2022 will be raising awareness of AxisBiotix-Ps™ amongst the psoriatic communities and building market share, following its launch at the end of October. With the initial focus on the UK & US markets, attention will then turn to Europe and Asian markets, such as China and India. Building on the gut-skin axis research, the Group will look to ﬁnalise a similarly blended bacterial formulation to address acne, generate human data and push towards the commercial launch of a second AxisBiotix product. With the Croda/Sederma partnership, the focus for 2022 will be to conﬁrm the cosmetic claims for the SkinBiotix® technology as a cosmetic active ingredient and generate traction with Sederma’s key clients, with the aim of future potential revenue streams for SkinBioTherapeutics. 2021 has been a transformational year for SkinBioTherapeutics despite a challenging environment, which is very much down to the expertise and dedication of the Group’s team and partners. We look forward to another exciting year in 2022. Stuart J. Ashman Chief Executive Ofﬁcer 29 November 2021 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 10 10 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Directors’ Report The Directors present their report and the audited ﬁnancial statements of the Group for the year ended 30 June 2021. Principal activity The principal activity of the Group is that of research and development focused on harnessing the microbiome for human health. Directors The directors who served the Company during the year were: Stuart J. Ashman Doug Quinn Martin Hunt Dr Cathy Prescott The Directors of the Company held the following beneﬁcial interests in the share and share options of SkinBioTherapeutics plc at the date of this report: Issued share capital Share options Ordinary shares Percentage of £0.01 each Ordinary Options shares of exercise held £0.01 each price Martin Hunt Stuart J. Ashman Doug Quinn Dr Cathy Prescott 466,667 0.3% 3,892,082 £0.09 125,000 0.1% 5,189,444 £0.09 & £0.18 439,474 0.3% 2,594,721 £0.09 118,612 0.1% – – Martin Hunt’s shareholding is held through Invictus Management Limited, a company controlled by Mr Hunt. Of the 466,667 shares held by Invictus Management Limited 11,112 are held in trust for Louise Hunt and 11,111 are held in trust for Oliver Hunt. Substantial shareholdings As at 15 November 2021, the following interests in 3% or more of the issued share capital appear in the register: Percentage of issued share capital OptiBiotix Health Plc 20.7% Seneca Partners Limited 8.8% Tyndall Investment Management 6.1% University of Manchester 5.1% Prof Catherine O’Neill 3.3% 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 11 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 11 Directors remuneration The Directors received the following remuneration during the year: Executive Salaries Share based Pension Total Fees payments contributions remuneration Stuart Ashman £323,296 – £43,899 £5,523 £372,718 Doug Quinn £12,851 £116,600 £4,340 £3,198 £136,989 Non-executive Martin Hunt £12,000 £58,000 £6,509 – £76,509 Dr Cathy Prescott £6,000 £29,000 – – £35,000 £354,147 £203,600 £54,748 £8,721 £621,216 Financial instruments The Group’s exposure to ﬁnancial risk is set out in note 2p) of the ﬁnancial statements. Research and development The Strategic and Financial Review on pages 3-9 gives information of the Group’s research and development activities. Events after the reporting date Refer to note 21 to the ﬁnancial statements for further details. Going concern The ﬁnancial statements have been prepared on the assumption that the Group is a going concern. When assessing the foreseeable future, the Directors have considered the budget for the next 12 months from the date of this report and the cash at bank available as at the date of approval of this report and are satisﬁed that the Group should be able to meet its ﬁnancial obligations. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and ﬁnancial statements. Statement of directors’ responsibilities The Directors are responsible for preparing the Strategic Report and Directors’ Report and the ﬁnancial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare ﬁnancial statements for each ﬁnancial year. Under that law the Directors have elected to prepare the ﬁnancial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the ﬁnancial statements unless they are satisﬁed that they give a true and fair view of the state of affairs and proﬁt or loss of the Group for that period. In preparing these ﬁnancial statements, the Directors are required to: l select suitable accounting policies and then apply them consistently l make judgements and accounting estimates that are reasonable and prudent l state whether the Group and Parent Company ﬁnancial statements have been prepared in accordance with applicable IFRSs as adopted by the European Union subject to any material departures disclosed and explained in the ﬁnancial statements; and l prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 12 12 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Directors’ Report (continued) The Directors are responsible for keeping adequate accounting records that are sufﬁcient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the ﬁnancial position of the Group and the Company and enable them to ensure that the ﬁnancial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors conﬁrm that: l so far as each director is aware, there is no relevant audit information of which the Group’s auditor is unaware; and l the Directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Group’s auditor is aware of that information The Directors are responsible for the maintenance and integrity of the corporate and ﬁnancial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of ﬁnancial statements may differ from legislation in other jurisdictions. Auditors Jeffrey’s Henry LLP has expressed their willingness to continue in ofﬁce and a resolution to re-appoint them will be proposed at the forthcoming Annual General Meeting. This report was approved by the Board of Directors on 29 November 2021 and signed on its behalf by: Stuart J. Ashman Chief Executive Ofﬁcer 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 13 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 13 Corporate Governance Report As Chairman of SkinBioTherapeutics I have overall responsibility for corporate governance and in promoting high standards throughout the Group. As well as leading and chairing the Board my responsibilities are to ensure; l Committees are properly structured and operate with appropriate terms of reference l The performance of individual directors, the Board and its committees are reviewed on a regular basis l The Company has a coherent strategy and sets objectives against this l There is effective communication between the Company and its shareholders All the directors of SkinBioTherapeutics believe strongly in the importance of good corporate governance for the creation of shareholder value over the medium to long-term and to engender trust and support amongst the Company’s wider stakeholders. The Board adopted the QCA code in September 2018 and considers that it does not depart from any of the principles of the QCA code. The QCA code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures. The Directors have considered how they apply each principle to the extent the Board judges these to be appropriate in the circumstances and below we provide an explanation of the approach taken in relation to each. There were no key governance related matters that occurred during the year. Martin Hunt, Chairman. Principle Application Establish a strategy and business model which promotes long-term value for shareholders SkinBioTherapeutics seeks to harness the microbiome for human health and has a particular focus on skin. The Group’s proprietary technologies are targeted at a number of health indications and the Company is progressing applications of both its SkinBiotix® and AxisBiotix™ technologies as a route to initial value creation. The Group’s programme of research and development is intended to build long-term shareholder value through a reliance on proven, rigorous science and the Group utilises its public listing as a means to source capital to support its R&D programme. The Group has an ongoing research agreement with the University of Manchester to identify and develop technologies. The Group has also leased laboratory space at the Biosphere in Newcastle upon Tyne to develop its own in-house scientiﬁc capability. In doing so the Group intends to avoid a reliance on a single technology and ensure that it has an ongoing pipeline of technologies, all related to the human microbiome, at different stages of development. The Group will seek to licence technologies to large corporates once human proof of principle has been established and intends to generate licence revenue through this route. Where it considers it appropriate, the Company will also look to develop and market products. This is the case with AxisBiotix-Ps where the Directors believe the market opportunities in the UK, US and Europe are best developed by selling to consumers directly. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 14 14 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Corporate Governance Report (continued) Principle Application Seek to understand and meet shareholder needs and expectations The Board is committed to communicating openly with shareholders to ensure that its strategy and performance are clearly understood. Between the Chairman and the executive directors an open and the Company’s major regular dialogue shareholders which comprise; is maintained with Shareholder Holding 15 November 2021 OptiBiotix Health Plc 20.7% Seneca Partners Limited 8.8% Tyndall Investment Management 6.1% University of Manchester 5.1% Prof Cath O’Neill 3.3% In November 2020, as part of share placing, Seneca Partners Limited and Tyndall Investment Management acquired 3.1m and 2.3m shares respectively. More generally the Board communicates with shareholders through the Annual Report and the Interim Statement, trading and other announcements made on RNS and at the Annual General Meeting where the Board encourages investors to participate. The Company also maintains a website, www.skinbiotherapeutics.com, which contains information on the Group’s business and corporate information. Following the announcement of the Group’s half year and full year results the Chief Executive & CFO make presentations to institutional shareholders, private client brokers and investment analysts. Existing and prospective shareholders are able to separately contact the Chairman and Chief Executive via email as detailed on the Company’s website. Periodic meetings are held with existing and prospective institutional and other investors and the Company presents at private investor investment events during the course of the year. The Company’s broker also produces periodic research notes on the Group. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 15 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 15 Principle Application Take into account wider stakeholder and social responsibilities and their implications for long- term success As a small company engaged in the early stages of technology development the Group has a limited but important number of stakeholders. Robust science is at the core of the Group’s strategy and the Group has a number of key stakeholders, including its employees, involved in the different stages from research, through manufacture, formulation and testing. The Group assesses each of the companies it works with to ensure the requisite standards and values are in place. Ultimately the Group’s technology will be used by consumers and ensuring the appropriate development, manufacture and marketing of products will be key to the long-term success of the Group. Throughout the various stages from initial technology identiﬁcation to eventual product sales the Group is engaged in a continual process of feedback and improvement with its stakeholders, including eventual end users. In addition, the eventual licensees of aspects of its technology will be important stakeholders in the interface with consumers and the longer-term success of the Group. Embed effective risk management, considering both opportunities and threats, throughout the organisation Ultimate responsibility for the process by which risk in the business is managed rests with the Board. The Group’s internal risk identiﬁcation and management process is as follows: l The Executive Team prepares and reviews on a periodic basis the risk register for the Company. The risk register details speciﬁc risks to the Group, the quantiﬁcation of those risks in terms of probability and impact, mitigating actions required to manage these risks and the control mechanisms that are in place to monitor the risks. l The risk register assigns responsibility for each risk and the mitigation plan to one or more members of the Executive Team. l The risk register is circulated to the Board in advance of each board meeting and speciﬁc risk items may be discussed at board meetings or otherwise as appropriate. l The risk register is reported to the Audit Committee at least biannually. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 16 16 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Corporate Governance Report (continued) Principle Application Maintain the Board as a well-functioning, balanced team led by the chair The Board’s primary role is to enhance shareholders’ long-term interests by: l determining the Group’s overall strategy and direction l establishing and maintaining controls, audit processes and risk management policies to ensure they counter identiﬁed risks and that the Group operates efﬁciently l ensuring effective corporate governance l approving budgets and reviewing performance relative to those budgets l approving ﬁnancial statements l approving material agreements and non-recurring projects l approving senior and Board appointments Martin Hunt and Dr Cathy Prescott, both non-executive directors, are considered to be independent of the management and are free to exercise independence of judgement. The Non-Executive Directors are required to commit sufﬁcient time as is necessary, approximately two days per month, to fulﬁl their obligations. Routine commitments include preparation for and attendance at board and committee meetings. In addition, the Non-Executive Directors engage in ad-hoc dialogues with members of the Executive Team, shareholders and other stakeholders as required. All directors are subject to reappointment by shareholders at the ﬁrst Annual General Meeting following their appointment and at each AGM thereafter. The table on page 22 details the attendance record of each director at board and committee meetings during the course of the year. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 17 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 17 Principle Application Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities As at 1 November 2021 the board comprised an independent non-executive chairman, two executive directors and one independent non-executive director. One director is female and three are male. Martin Hunt, Independent Non-Executive Chairman Appointed as a director & Chairman in October 2016; Chair of the Remuneration Committee and member of the Audit and Insider Committees. Martin has had a long executive career in the medtech and life science sectors including sales and general management roles with large corporations in Europe and the US. He was previously CEO of biomaterials company Tissue Science Laboratories plc taking it from start-up through an AIM listing and eventual sale to Covidien. More recently he has held a number of non-executive roles with both private and public companies. Martin is well versed in the early and growth stages of companies in the life science sector as well as bringing experience of corporate governance and shareholder communications. Martin is the Medtech Industry Engagement Advisor to the National Institute for Health Research (HIHR) and a member of the NIHR strategy board. Martin is currently Non-Executive Chairman of Videregen Limited. Time commitment of at least two days per month. Stuart Ashman, CEO Appointed as a director in April 2019 and CEO in July 2019. Stuart is an experienced commercial chief executive with considerable experience in the medtech and life science sectors. Prior to joining the Company, Stuart served as CEO of Onbone Oy (“Onbone”), a Finnish private equity-backed medical device company. In this role, he successfully established a global sales force and distribution network and led the growth of a multi-million pound business. Prior to Onbone, Stuart was President/CEO of Andover Healthcare Inc., a US-based wound management manufacturer, and before then, was President/CEO of TI Group, a UK-based medical/engineering company. Stuart also served as Senior VP, Global Sales & Strategic Marketing, BSN Medical (Biersdorf, Smith and Nephew) and was Director of Sales & Marketing at Smith & Nephew Plc, in its Woundcare, Casting & Bandaging division. In these roles, Stuart gained extensive experience of both direct sales management across multiple geographies, and of business to business selling. He has also been involved in M&A transactions and has achieved considerable commercial success in both small and large companies. Stuart is a full-time employee of the Company. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 18 18 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Corporate Governance Report (continued) Principle Application Doug Quinn, CFO Appointed as a director and CFO in December 2016 and Company Secretary in January 2017; Member of the Audit Committee and Chair of the Insider Committee. Doug has been involved in early stage companies through a combination of investor, executive and non-executive director and CFO roles for over 18 years. He was CFO of Arthro Kinetics Limited, an early stage tissue engineering company and part of the team that ﬂoated the Company on AIM in 2006. A chartered management accountant, with a number of years of experience in the life science sector, he brings ﬁnancial expertise gained through executive roles and corporate ﬁnance transactions. Doug is a director and part-time CFO with the life science company Videregen Limited. Time commitment of approximately 3 days per week. Dr Catherine Prescott, Independent Non-Executive Director Appointed as a director in March 2017; Chair of the Audit Committee and member of the Remuneration Committee. Cathy has over two decades of experience in research and management in the biotech, pharmaceutical and venture capital sectors. Cathy is a visiting professor at Kings College London, teaching on the MSc programme ‘Cellular Therapies from bench to market’. Cathy brings a broad range of scientiﬁc and strategic sector expertise and experience. Cathy is a non-executive director of Videregen Limited. Time commitment of two days per month. The Board has not, at this stage in its development, established a Nominations Committee. The Board as a whole continues to review its structure in order to provide what it considers to be an appropriate balance of executive and non-executive experience and skills. The Board believes that its blend of relevant experience, skills, personal qualities and capabilities is sufﬁcient to enable it to successfully execute its strategy. The Board is additionally cognisant that with the recent changes to the Board and as the Company seeks to commercialise its technology, this may require additions to the Executive Team and wider Board. Directors attend seminars and other trade events to ensure that their knowledge remains current. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 19 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 19 Principle Application Evaluate board performance based on clear and relevant objectives, continuous improvement seeking Promote a corporate culture that is based on ethical values and behaviours On the formation of the Board, the Directors considered the composition of the Audit Committee. Doug Quinn is an executive director and CFO but a member of the Committee due to his experience in this area. Both independent directors have direct access to the auditors with the exclusion of Doug and vice versa and he is excused from any discussions where there is a potential conﬂict of interest. From time to time the Board may require third party advice on various matters pertaining to its business, for example in relation to the competitive landscape. Appropriate relationships to source such advice have been established. The Directors also receive regular brieﬁngs from the Company’s NOMAD in respect of continuing compliance with the AIM Rules. included The Board designed and implemented an internal board evaluation exercise in 2020. The exercise was led by the Chairman and topics covered the balance of skills, experience and independence, understanding of the business and its strategy together with engagement with shareholders. Each director completed a questionnaire, and this formed the basis for a subsequent discussion by the Board as a whole. Having repeated the process in 2021, the Board considers an internal evaluation appropriate and intends to repeat this process annually, acting on its ﬁndings as appropriate. The Board’s approach to succession planning is based upon identifying the medium to long term objectives of the Group and matching these against the competence of directors and senior managers. The Board will seek to identify potential gaps and recruit to ﬁll these allowing a sufﬁcient lead time. The Board believes that the promotion of a corporate culture based on sound ethical values and behaviours is essential to maximise shareholder value. The Board considers this particularly relevant to the Group in light of the partners with which it works, for example the University of Manchester, Croda Plc and Winclove Probiotics B.V., and recognising the intended end use of its technology in products to be marketed to and purchased by consumers. The Executive team engenders open and positive interactions with a key focus on; scientiﬁc rigour, innovation, creative solutions and collective responsibility. As the Group expands its human capability it will look to formalise its culture through an agreed set of values and standards. The Group’s policies set out its zero-tolerance approach towards any form of modern slavery, discrimination or unethical behaviour relating to bribery, corruption or business conduct. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 20 20 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Corporate Governance Report (continued) Principle Application Maintain governance structures and processes that are ﬁt for purpose and support good decision-making by the Board Alongside setting the vision and strategy for the Group the Board is responsible to ensure that the business is managed for the long-term beneﬁt of all shareholders whilst having regard for internal and external stakeholders, including employees, customers and suppliers. The Board deﬁnes a series of matters reserved for its decision and has approved terms of reference for its Audit, Remuneration and Insiders Committees to which certain responsibilities are delegated. The chair of each committee reports to the Board on the activities of that committee. The Audit Committee is responsible for: l reviewing the annual ﬁnancial statements and interim reports prior to approval l reviewing and considering reports on internal ﬁnancial controls, including reports from the auditors l considering the appointment of and reviewing the relationship with the auditors, including reviewing and monitoring of independence and objectivity l reviewing the consistency of accounting policies l considering any proposed related party transaction The Audit Committee can call for information from the Executive Team and consults with the external auditors directly when appropriate or when they are required to do so. The Remuneration Committee reviews and determines on behalf of the Board the pay, beneﬁts and other terms of service of the Executive Directors of the Company. In addition, the Committee oversees the creation and implementation of all employee share plans. The Insider Committee is responsible for: l monitoring and ensuring compliance with the Company’s MAR dealing policy l reviewing the classiﬁcation of employees, directors and key consultants as regards clearance requirements l reviewing and approving or rejecting as appropriate all requests for dealings in shares in the Company Matters reserved for the Board are; l determining the Group’s overall strategy and direction l establishing and maintaining controls, audit processes and risk management policies to ensure they counter identiﬁed risks and that the Group operates efﬁciently l ensuring effective corporate governance l approving budgets and reviewing performance relative to those budgets l approving ﬁnancial statements l approving material agreements and non-recurring projects l approving senior and Board appointments 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 21 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 21 Principle Application The Chairman has overall responsibility for corporate governance and in promoting high standards throughout the Group. As well as leading and chairing the Board, the Chairman’s responsibilities are to ensure; l committees are properly structured and operate with appropriate terms of reference l the performance of individual directors, the Board and its committees are reviewed on a regular basis l the Company has a coherent strategy and sets objectives against this l there is effective communication between the Company and its shareholders The CEO provides coherent leadership and management of the Group, leads the development of objectives, strategies and performance standards as agreed by the Board, ensures that the assets of the Group are maintained and safeguarded, leads on investor relations activities to ensure communications and the Company’s standing with shareholders and ﬁnancial institutions is maintained. The Non-Executive Directors contribute independent thinking and judgement through the application of their external experience and knowledge, scrutinise the performance of management, provide constructive challenge to the executive directors and ensure that the Group is operating within the governance and risk framework approved by the Board. The Company Secretary is responsible for providing clear and timely information ﬂow to the Board and its committees and supports the Board on matters of corporate governance and risk. This role is currently ﬁlled by the Group’s CFO. The Board acknowledges the QCA guidelines on this matter and consider the joint roles appropriate for the Company’s size. The Company Secretary has direct access to the Chairman on matters of corporate governance. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 22 22 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Corporate Governance Report (continued) Principle Application Communicate how the Company is governed and is performing by maintaining a dialogue with relevant stakeholders shareholders and other In addition to the investor relations activities described above the following committee reports are provided; The Audit Committee, which comprises Dr Cathy Prescott (Chair), Martin Hunt and Doug Quinn, met three times during the course of the year. The Committee met with the external auditors prior to the approval of the annual accounts. Consideration was given to the auditors’ pre and post audit reports and these provided opportunities to review the accounting policies, internal controls and the ﬁnancial information contained within both the annual and interim reports. The Committee engaged the external auditors for a review of the interim statement prior to its release. The Remuneration Committee, which comprises Martin Hunt (Chair) and Dr Cathy Prescott met three times during the course of the year. Remuneration packages for the executive directors comprise a basic salary and performance related bonus. There is a deﬁned pension contribution scheme in place for all directors and employees. In addition, executive directors and senior employees participate in a share option long term incentive plan. The Committee reviewed the structure of remuneration packages for the executive directors and agreed they remained appropriate. In setting remuneration, the committee took into consideration the compensation packages of comparable AIM listed companies. The Insiders Committee, comprised of Doug Quinn (Chair) and Martin Hunt, met twice during the course of the year to review the Company’s insider lists and review and approve requests for dealing in shares in the Company. For information regarding the voting of shareholders at general meetings of the Company please see the Shareholder Information section of the website. PLC board meetings Committee meetings Audit Remuneration Insider Eligible to Attended Eligible to Attended Eligible to Attended Eligible to Attended Director attend attend attend attend Stuart Ashman 10 10 – – – – – – Martin Hunt 10 10 3 3 3 3 2 2 Dr Cathy Prescott 10 10 3 3 3 3 – – Doug Quinn 10 10 3 3 – – 2 2 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 23 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 23 Independent Auditor’s Report to the Members of SkinBioTherapeutics Plc Opinion We have audited the ﬁnancial statements of SkinBioTherapeutics Plc for the year ended 30 June 2021 which comprise the consolidated statement of comprehensive income, the consolidated statement of ﬁnancial position, the consolidated statement of cash ﬂows, the consolidated statement of changes in equity, the company statement of ﬁnancial position, the company statement of cash ﬂows and the company statement of changes in equity and notes to the ﬁnancial statements, including a summary of signiﬁcant accounting policies. The ﬁnancial reporting framework that has been applied in the preparation of the ﬁnancial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. In our opinion: l the ﬁnancial statements give a true and fair view of the state of the Group’s and Parent Company’s affairs as at 30 June 2021 and of the Group’s loss for the year then ended; l the ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; l the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the ﬁnancial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the ﬁnancial statements in the UK, including the FRC’s Ethical Standard, and we have fulﬁlled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the ﬁnancial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the ﬁnancial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting included reviews of expected cash ﬂows for a period of 12 months, to determine expected cash outﬂow, which was compared to the liquid assets held in the entity. Based on the work we have performed, we have not identiﬁed any material uncertainties relating to events or conditions that, individually or collectively, may cast signiﬁcant doubt on the group's ability to continue as a going concern for a period of at least twelve months from when the ﬁnancial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most signiﬁcance in our audit of the ﬁnancial statements of the current period and include the most signiﬁcant assessed risks of material misstatement (whether or not due to fraud) we identiﬁed, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the ﬁnancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identiﬁed by our audit. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 24 24 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Independent Auditor’s Report to the Members of SkinBioTherapeutics Plc (continued) Key audit matter Intangible assets The Group and Company had capitalised intellectual property costs amounting to £420,538 at 01 July 2020. During the year, the Group and Company capitalised a further £108,403 (2020: £73,668) relating to intellectual property costs. These capitalised costs are not yet being amortised as the products are in development stage. The Directors have assessed whether the costs meet the criteria for capitalisation and whether there are any indicators of impairment. The risk is that the costs may not qualify for capitalisation or technological advancements may render the market value of the capitalised costs below its carrying value. Proﬁt after tax, which is considered by management to be a key metric, is directly impacted by the amount of costs capitalised. How our audit addressed the key audit matter We have performed the following audit procedures: l considered whether the nature of the costs met the necessary criteria under IAS 38 for the costs to be allowed for capitalisation; l vouched a sample of the costs capitalised to invoices, to conﬁrm that they relate to intellectual property and have been accurately recorded; l considered whether the Directors’ policy for the treatment of such costs was reasonable and assessed whether the costs included in the reconciliation were in line with the Directors’ policy; l conﬁrmed the directors’ assessment that no amortisation is necessary is accurate; and l reviewed cash ﬂow forecasts for the foreseeable future to assess the potential future economic beneﬁt from ownership of the intangible assets. Based on the audit work performed we are satisﬁed, that although there are inherent uncertainties associated with the forecast and estimation of useful economic life of intangible assets, the directors have made reasonable assumptions about the valuation and useful economic life of intangible assets, based on past experience and expected future revenues. We are also satisﬁed that all necessary disclosures have been made in the ﬁnancial statements. Our application of materiality The scope of our audit was inﬂuenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual ﬁnancial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the ﬁnancial statements as a whole. Based on our professional judgment, we determined materiality for the ﬁnancial statements as a whole as follows: Overall materiality Group Financial Statements £87,000 (2020: £75,000). Company Financial Statements £86,000 (2020, £75,000) How we determined it Based on 1.5% of gross assets Based on 1.5% of gross assets Rationale for benchmark applied We believe that gross assets is the primary We believe that gross assets is the primary measure used by the shareholders in assessing the performance of the Company as revenue is yet to be generated. measure used by the shareholders in assessing the performance of the Company as revenue is yet to be generated. We agreed with the Audit Committee that we would report to them misstatements identiﬁed during our audit for the Group £4,350 (2020: £3,750) and for the Company above £4,300 (2020: £3,750) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 25 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 25 An overview of the scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the ﬁnancial statements. In particular, we looked at where the Directors made subjective judgments, for example in respect of signiﬁcant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud. How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the ﬁnancial statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate. The Group ﬁnancial statements are a consolidation of 2 reporting units, comprising the Group’s operating businesses and holding companies. We performed audits of the complete ﬁnancial information of SkinbioTherapeutics Plc and AxisBiotix Limited reporting units, which were individually ﬁnancially signiﬁcant and accounted for 100% of the Group’s absolute loss before tax (i.e. the sum of the numerical values without regard to whether they were proﬁts or losses for the relevant reporting units) and 100% of the Group’s assets and liabilities. We also performed speciﬁed audit procedures over certain account balances and transaction classes that we regarded as material to the Group at the 2 reporting units. We have audited all components within the Group, and no unaudited components remain. Other information The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the ﬁnancial statements and our auditor’s report thereon. Our opinion on the ﬁnancial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the ﬁnancial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the ﬁnancial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the ﬁnancial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: l the information given in the strategic report and the Directors’ report for the ﬁnancial year for which the ﬁnancial statements are prepared is consistent with the ﬁnancial statements; and l the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identiﬁed material misstatements in the Strategic report nor the Directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: l adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 26 26 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Independent Auditor’s Report to the Members of SkinBioTherapeutics Plc (continued) l the ﬁnancial statements are not in agreement with the accounting records and returns; or l certain disclosures of Directors’ remuneration speciﬁed by law are not made; or l we have not received all the information and explanations we require for our audit. Responsibilities of Directors As explained more fully in the Directors’ responsibilities statement set out on page 11, the Directors are responsible for the preparation of the ﬁnancial statements and for being satisﬁed that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due to fraud or error. In preparing the ﬁnancial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the ﬁnancial statements Our objectives are to obtain reasonable assurance about whether the ﬁnancial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of these ﬁnancial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud The objectives of our audit, in respect to fraud are; to identify and assess the risks of material misstatement of the ﬁnancial statements due to fraud; to obtain sufﬁcient appropriate audit evidence regarding the assessed risks of material misstatements due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identiﬁed during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows: l the senior statutory auditor ensured the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations; l we identiﬁed the laws and regulations applicable to the company through discussions with directors and other management, and from our knowledge and experience of the entity's activities. l we focused on speciﬁc laws and regulations which we considered may have a direct material effect on the ﬁnancial statements or the operations of the company, including Companies Act 2006, taxation legislation, data protection, employment and health and safety legislation. l we assessed the extent of compliance with the laws and regulations identiﬁed above through making enquiries of management and reviewing legal expenditure; and l identiﬁed laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit. 262369 SkinBio Therapeutics plc pp01-pp027.qxp 29/11/2021 10:19 Page 27 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 27 We assessed the susceptibility of the group’s ﬁnancial statements to material misstatement, including obtaining an understanding of how fraud might occur, by: l making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and l considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations. To address the risk of fraud through management bias and override of controls, we: l performed analytical procedures to identify any unusual or unexpected relationships; l tested journal entries to identify unusual transactions; l assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and l investigated the rationale behind signiﬁcant or unusual transactions. In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to: l agreeing ﬁnancial statement disclosures to underlying supporting documentation; l reading the minutes of meetings of those charged with governance; and l enquiring of management as to actual and potential litigation and claims There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from ﬁnancial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify noncompliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion. A further description of our responsibilities for the audit of the ﬁnancial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of this report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Sudhir Rawal (Senior Statutory Auditor) For and on behalf of Jeffreys Henry LLP, Statutory Auditor Finsgate 5-7 Cranwood Street London EC1V 9EE 29 November 2021 262369 SkinBio Therapeutics plc pp28-pp34.qxp 29/11/2021 10:20 Page 28 28 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Consolidated Statement of Comprehensive Income For the Year Ended 30 June 2021 Continuing operations Research and development Operating expenses Loss from operations Finance costs Loss before taxation Taxation Loss for the year Other comprehensive income Total comprehensive loss for the year Basic and diluted loss per share (pence) The notes on pages 35 to 52 form part of these ﬁnancial statements. Notes 2021 £ 2020 £ (505,627) (991,481) (1,497,108) (926) (1,498,034) 65,065 (1,432,969) – (635,226) (984,816) (1,620,042) – (1,620,042) 119,956 (1,500,086) – (1,432,969) (1,500,086) (0.98) (1.17) 3 4 6 7 262369 SkinBio Therapeutics plc pp28-pp34.qxp 29/11/2021 10:20 Page 29 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 29 Consolidated Statement of Financial Position As at 30 June 2021 ASSETS Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Total non-current assets Current assets Other receivables Corporation tax receivable Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Capital and reserves Called up share capital Share premium Other reserves Accumulated deﬁcit Total equity Liabilities Non-current liabilities Lease liabilities Total non-current liabilities Current liabilities Trade and other payables Lease liabilities Total current liabilities Total liabilities Total equity and liabilities Notes 2021 £ 2020 £ 9 10 11 13 6, 13 – 143,328 528,941 672,269 1,700 – 420,538 422,238 268,946 183,828 4,609,889 70,622 118,763 2,159,054 5,062,663 2,348,439 5,734,932 2,770,677 17 17 1,567,802 8,758,037 384,612 (5,495,193) 1,280,835 4,923,890 403,483 (4,142,352) 5,215,258 2,465,856 15 114,780 14 15 114,780 379,820 25,074 404,894 519,674 – – 304,821 – 304,821 304,821 5,734,932 2,770,677 These ﬁnancial statements were approved and authorised for issue by the Board of Directors on 29 November 2021 and were signed on its behalf by: Doug Quinn Director Company Registration No. 09632164 The notes on pages 35 to 52 form part of these ﬁnancial statements. 262369 SkinBio Therapeutics plc pp28-pp34.qxp 29/11/2021 10:20 Page 30 30 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Consolidated Statement of Cash Flows For the Year Ended 30 June 2021 Cash ﬂows from operating activities Loss before tax for the period Depreciation of property, plant and equipment Right-of-use assets depreciation and interest Share based payments charge Changes in working capital (lncrease)/decrease in trade and other receivables Increase in trade and other payables Cash generated by/(used in) operations Taxation received Net cash used in operating activities Investing activities Purchase of IP Purchase of Right-of-Use Assets Net cash used in investing activities Cash ﬂows from ﬁnancing activities Net proceeds from issue of shares Lease payments made Net cash generated by ﬁnancing activities 2021 £ 2020 £ (1,498,034) 1,700 3,355 61,257 (1,620,042) 5,100 – 155,811 (1,431,722) (1,459,131) (198,324) 74,999 171,958 183,487 (123,325) 355,445 – 211,544 (1,555,047) (892,142) (108,403) (3,902) (73,668) – (112,305) (73,668) 4,121,114 (2,927) 4,118,187 – – – Net (decrease)/increase in cash and cash equivalents 2,450,835 (965,810) Cash and cash equivalents at the beginning of the period 2,159,054 3,124,864 Cash and cash equivalents at the end of the period 4,609,889 2,159,054 The notes on pages 35 to 52 form part of these ﬁnancial statements. 262369 SkinBio Therapeutics plc pp28-pp34.qxp 29/11/2021 10:20 Page 31 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 31 Consolidated Statement of Changes in Equity For the Year Ended 30 June 2021 As at 1 July 2019 Loss for the period Share-based payments As at 30 June 2020 Loss for the period Issue of shares Costs of share issue Exercise of share warrants Share-based payments As at 30 June 2021 Share capital £ Share premium £ 1,280,835 – – 1,280,835 – 286,967 – – – 4,923,890 – – 4,923,890 – 4,242,189 (408,042) – – Other reserves £ 247,672 – 155,811 403,483 – – – (80,128) 61,257 Retained earnings £ Total £ (2,642,266) (1,500,086) – 3,810,131 (1,500,086) 155,811 (4,142,352) (1,432,969) – – 80,128 – 2,465,856 (1,432,969) 4,529,156 (408,042) – 61,257 1,567,802 8,758,037 384,612 (5,495,193) 5,215,258 Share capital is the amount subscribed for shares at nominal value. Share premium is the amount subscribed for share capital in excess of nominal value. Other reserves arise from the equity element of a convertible loan issued and converted in the period to 30 June 2017, and from share options granted. Retained earnings represents accumulated proﬁt or losses to date. The notes on pages 35 to 52 form part of these ﬁnancial statements. 262369 SkinBio Therapeutics plc pp28-pp34.qxp 29/11/2021 10:20 Page 32 32 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Company Statement of Financial Position As at 30 June 2021 ASSETS Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Investments Other receivables Total non-current assets Current assets Other receivables Corporation tax receivable Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Capital and reserves Called up share capital Share premium Other reserves Accumulated deﬁcit Total equity Liabilities Non-current liabilities Lease liabilities Total non-current liabilities Current liabilities Trade and other payables Lease liabilities Total current liabilities Total liabilities Total equity and liabilities Notes 2021 £ 2020 £ 9 10 11 12 13 13 6, 13 17 17 15 14 15 – 143,328 528,941 113,733 623,688 1,409,690 1,700 – 420,538 5 – 422,243 59,888 183,828 4,264,690 70,622 118,763 2,159,054 4,508,406 2,348,439 5,918,096 2,770,682 1,567,802 8,758,037 384,612 (5,284,889) 1,280,835 4,923,890 403,483 (4,142,352) 5,425,562 2,465,856 114,780 114,780 352,680 25,074 377,754 492,534 – – 304,826 – 304,826 304,826 5,918,096 2,770,682 No Statement of Comprehensive Income is presented in these ﬁnancial statements for the Parent Company as provided by Section 408 of the Companies Act 2006. The loss for the ﬁnancial year dealt with in the ﬁnancial statements of the Parent Company was £1,222,665 (2020: £1,500,086). These ﬁnancial statements were approved and authorised for issue by the Board of Directors on 29 November 2021 and were signed on its behalf by: Doug Quinn Director Company Registration No. 09632164 The notes on pages 35 to 52 form part of these ﬁnancial statements. 262369 SkinBio Therapeutics plc pp28-pp34.qxp 29/11/2021 10:20 Page 33 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 33 Company Statement of Cash Flows For the Year Ended 30 June 2021 Cash ﬂows from operating activities Loss before tax for the period Depreciation of property, plant and equipment Right-of-use assets depreciation and interest Impairment of ﬁnancial assets Share based payments charge Changes in working capital Decrease in trade and other receivables Increase in trade and other payables Cash generated by operations Taxation received Net cash used in operating activities Investing activities Purchase of IP Investment in subsidiaries Purchase of Right-of-Use Assets Net cash used in investing activities Financing activities Net proceeds from issue of shares Lease payments made Net cash generated by ﬁnancing activities 2021 £ 2020 £ (1,287,730) 1,700 3,355 34,124 61,257 (1,620,042) 5,100 – – 155,811 (1,187,294) (1,459,131) 10,734 47,859 58,593 171,958 183,492 355,450 – 211,544 (1,128,701) (892,137) (108,403) (771,545) (3,902) (73,668) (5) – (883,850) (73,673) 4,121,114 (2,927) 4,118,187 – – – Net (decrease)/increase in cash and cash equivalents 2,105,636 (965,810) Cash and cash equivalents at the beginning of the period 2,159,054 3,124,864 Cash and cash equivalents at the end of the period 4,264,690 2,159,054 The notes on pages 35 to 52 form part of these ﬁnancial statements. 262369 SkinBio Therapeutics plc pp28-pp34.qxp 29/11/2021 10:20 Page 34 34 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Company Statement of Changes in Equity For the Year Ended 30 June 2021 As at 1 July 2019 Loss for the period Share-based payments As at 30 June 2020 Loss for the period Issue of shares Costs of share issue Exercise of share warrants Share-based payments As at 30 June 2021 Share capital £ Share premium £ 1,280,835 – – 1,280,835 – 286,967 – – – 4,923,890 – – 4,923,890 – 4,242,189 (408,042) – – Other reserves £ 247,672 – 155,811 403,483 – – – (80,128) 61,257 Retained earnings £ Total £ (2,642,266) (1,500,086) – 3,810,131 (1,500,086) 155,811 (4,142,352) (1,222,665) – – 80,128 – 2,465,856 (1,222,665) 4,529,156 (408,042) – 61,257 1,567,802 8,758,037 384,612 (5,284,889) 5,425,562 Share capital is the amount subscribed for shares at nominal value. Share premium is the amount subscribed for share capital in excess of nominal value. Other reserves arise from the equity element of a convertible loan issued and converted in the period to 30 June 2017, and from share options granted. Retained earnings represents accumulated proﬁt or losses to date. The notes on pages 35 to 52 form part of these ﬁnancial statements. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 35 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 35 Notes to the Financial Statements For the Year Ended 30 June 2021 1 General information SkinBioTherapeutics plc (‘the Company’) is a public limited company incorporated in England under the Companies Act and quoted on the AIM market of the London Stock Exchange (AIM: SBTX). The address of its registered ofﬁce is given on page 1. The principal activity of the Group is the identiﬁcation and development of technology that harnesses the human microbiome to improve health. Signiﬁcant accounting policies and basis of preparation 2 a) Statement of compliance The consolidated and company ﬁnancial statements of SkinBioTherapeutics plc have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union, IFRS Interpretations Committee (IFRIC) and the Companies Act 2006 applicable to companies reporting under IFRS. b) Basis of preparation The consolidated and company ﬁnancial statements have been prepared under the historical cost convention modiﬁed by the revaluation of certain ﬁnancial instruments. The accounting policies have been applied consistently in all material respects. The consolidated and company ﬁnancial statements are presented in Sterling (£) as this is the predominant functional currency of the Group and Company, and is the currency of the primary economic environment in which it operates. Foreign transactions are accounted in accordance with the policies set out below. c) Basis of consolidation The consolidated ﬁnancial statements incorporate the ﬁnancial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 June each year. Control is achieved where the Company has the power to govern the ﬁnancial and operating policies of an investee entity so as to obtain beneﬁts from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation. d) Going concern These ﬁnancial statements have been prepared on a going concern basis. In considering the appropriateness of this assumption, the Board has considered the Group’s projections for the twelve months from the date of approval of this ﬁnancial information, including cash ﬂow forecasts. The Directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future and therefore adopt the going concern basis of accounting in preparing these ﬁnancial statements. e) Estimates and judgements The preparation of ﬁnancial statements requires the Board to make judgements, estimates and assumptions that may affect the application of accounting policies and reported amounts of assets and liabilities as at each balance sheet date and the reported amounts of revenues and expenses during each reporting period. Any estimates and assumptions are based on experience and any other factors that are believed to be relevant under the circumstances and which the Board considers to be reasonable. Actual outcomes may differ from these estimates. Any revisions to accounting estimates will be recognised in the period in which the estimate is revised if the revision affects only that period. If the revision affects both current and future periods, the change will be recognised over those periods. The following are the critical judgements that the Directors have made in the process of applying the Group’s accounting policies and that have the most signiﬁcant effect on the amounts recognised in the consolidated ﬁnancial statements. Estimation of the lifetime of intangible assets Intangible assets recognised are reviewed against the criteria for capitalisation with useful life determined by reference to the underlying product being developed. Management believes that the assigned values and useful lives, as well as the underlying assumptions, are reasonable, though different assumptions and assigned lives could have a signiﬁcant impact on the reported amounts. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 36 36 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notes to the Financial Statements (continued) For the Year Ended 30 June 2021 Signiﬁcant accounting policies and basis of preparation (continued) 2 e) Estimates and judgements (continued) Capitalisation of development costs During the year £108,403 (2020: £73,668) of development costs were capitalised, bringing the total amount of development costs capitalised, as intangible assets, as at 30 June 2021, to £528,941 (2020: £420,538), net of amortisation. Management has reviewed the balances by project, compared the carrying amount to expected future revenues and is satisﬁed that no impairment exists and that the costs capitalised will be fully recovered as the products are launched to market. New product projects are monitored regularly and should the technical or market feasibility of a new product be in question, the project would be cancelled and capitalised costs to date will be removed from the balance sheet and charged to the statement of comprehensive income. Share based payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact proﬁt or loss and equity. The judgments made and the model used are further speciﬁed in note 19. Estimate of incremental borrowing rate in accounting for leases under IFRS16 In recognising a lease liability and right-of-use asset under IFRS 16 the Group has used an estimated incremental borrowing rate of 8%. The Group does not have any borrowings, so in order to apply IFRS 16 it was necessary to estimate the incremental borrowing rate that would be faced by the Group. The rate of 8% was determined by looking at a range of loans available on the market. If the interest rate used in the calculation were higher, this would have the effect of reducing the size of both the lease liability and right-of-use asset, reducing the depreciation charge and increasing the interest charge in the consolidated income statement. The overall change to the Consolidated Statement of Comprehensive Income and the Consolidated and Company Statement of Financial Position would be immaterial. There would be no change to operating cash ﬂows or lease payments as a result of a change in the estimate of the incremental interest rate. f) Application of new and revised International Financial Reporting Standards (IFRSs) No new standards or interpretations issued by the International Accounting Standards Board (‘IASB’) or the IFRS Interpretations Committee (‘IFRIC’) have led to any material changes in the Group’s accounting policies or disclosures during each reporting period. New and revised IFRSs in issue but not yet effective There are a number of new and revised IFRSs that have been issued but are not yet effective that the Group has decided not to adopt early. The most signiﬁcant of these are as follows: Reference Title Summary IFRS3 Business Combinations Amendments updating a reference to the Conceptual Framework IFRS17 Insurance contracts Principles for the recognition, measurement, presentation and disclosure of insurance contracts Amendments to address concerns and implementation challenges that were identiﬁed after IFRS 17 was published Application date of standard (Periods commencing on or after) 1 January 2022 1 January 2023 1 January 2023 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 37 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 37 Reference Title Summary IAS1 Presentation of Amendments regarding the classiﬁcation of Financial Statements liabilities Amendment to defer the effective date of the January 2020 amendments Amendments regarding the disclosure of accounting policies IAS8 Accounting Policies, Amendments regarding the deﬁnition of Changes in Accounting accounting estimates Estimates and Errors Application date of standard (Periods commencing on or after) 1 January 2023 1 January 2023 1 January 2023 1 January 2023 The adoption of these Standards and Interpretations is not expected to have a material impact on the ﬁnancial information of the Group in the period of initial application when they come into effect. g) Foreign currencies Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rate ruling at that date. Foreign exchange differences on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates ruling at the dates the fair value was determined. h) Research and development Research expenditure is written off to the statement of comprehensive income in the year in which it is incurred. Development expenditure is written off in the same way unless the directors are satisﬁed as to the technical, commercial and ﬁnancial viability of individual projects. In this situation, the expenditure is deferred and amortised over the period during which the Group is expected to beneﬁt. i) Property, plant and equipment Property, plant and equipment are stated at historical cost less subsequent accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁts associated with the item will ﬂow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to proﬁt or loss during the ﬁnancial period in which they are incurred. Depreciation on property, plant and equipment is calculated using the straight-line method to write off their cost over their estimated useful lives at the following annual rates: Plant & machinery 50% Useful lives and depreciation method are reviewed and adjusted if appropriate, at the end of each reporting period. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 38 38 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notes to the Financial Statements (continued) For the Year Ended 30 June 2021 Signiﬁcant accounting policies and basis of preparation (continued) 2 i) Property, plant and equipment (continued) An item of property, plant and equipment is derecognised upon disposal or when no future economic beneﬁts are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the relevant asset, and is recognised in proﬁt or loss in the year in which the asset is derecognised. Impairment testing of intangible assets j) At the end of each reporting period, the Group reviews the carrying amounts of its 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 to determine the extent of the impairment loss (if any). Intangible assets with indeﬁnite useful lives are tested for impairment at least annually, and whenever there is an indication that the assets may be impaired. k) Leasing At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A lease is deﬁned as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this deﬁnition the Group assesses whether each of the following criteria apply: l the contract contains an identiﬁed asset, which is either explicitly identiﬁed in the contract or implicitly speciﬁed by being identiﬁed at the time the asset is made available to the Group; l the Group has the right to obtain substantially all of the economic beneﬁts from use of the identiﬁed asset throughout the period of use, considering its rights within the deﬁned scope of the contract; and l the Group has the right to direct the use of the identiﬁed asset throughout the period of use. The Group assesses whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use. Measurement and recognition of leases as a lessee At the commencement date of a lease, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date, net of any incentives received. The Group depreciates right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when indicators of impairment exist. At the commencement date of a lease, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available, or the Group’s incremental borrowing rate. Details of this borrowing rate are given in note 2e. Lease payments included in the measurement of the lease liability are made up of ﬁxed payments (including in substance ﬁxed), variable payments based on an index or rate, amounts expected to be payable under any residual value guarantees and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability is reduced for payments made and increased for interest. It is remeasured to reﬂect any reassessment or modiﬁcation, or if there are changes in in-substance ﬁxed payments. If a lease liability is remeasured, a corresponding adjustment is reﬂected in the value of the right-of-use asset, or, if the carrying value of the right-of-use asset is already reduced to zero, the income statement. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 39 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 39 The Group has elected to account for short-term leases (with a term of up to 12 months) and leases of low-value assets using the practical expedients available in IFRS 16. Instead of recognising a right-of-use asset and lease liability, the payments in relation to such leases are recognised as an expense in the income statement on a straight-line basis over the lease term. l) Tax Current tax The tax currently payable is based on taxable proﬁt for the period. Taxable proﬁt differs from ‘proﬁt before tax’ as reported in the income statement because of items of income or expense that are taxable or deductible in other periods and items that are never taxable or deductible. The Group’s current tax is calculated using rates that have been enacted during the reporting period. Deferred tax Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for ﬁnancial reporting purposes and the amounts used for tax purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only if it can be regarded as more likely than not that there will be suitable taxable proﬁts from which the future reversal of the underlying temporary differences can be deducted. m) Payroll expense and related contributions Wages, salaries, payroll tax, paid annual leave and sick leave, bonuses, and non-monetary beneﬁts are accrued in the period in which the associated services are rendered. n) Share-based compensation The Group issues share based payments to certain directors and others providing similar services. The fair value of the employee and suppliers services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting year is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, proﬁtability and sales growth targets). Nonmarket vesting conditions are included in assumptions about the number of options that are expected to vest. At each statement of ﬁnancial position date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. The fair value of share-based payments recognised in the income statement is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management’s best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in the industry. o) Financial assets and liabilities Financial assets and liabilities are recognised when the Group unconditionally becomes a party to the contractual terms of the instrument. Unless otherwise indicated, the carrying amounts of ﬁnancial assets and liabilities are considered by the directors to be a reasonable estimate of their fair values at each balance sheet date. Financial assets include trade and other receivable; these are classiﬁed as loans and receivables. Financial liabilities include trade and other payables, convertible loan notes and borrowings; these are classiﬁed as other ﬁnancial liabilities carried at amortised cost. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 40 40 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notes to the Financial Statements (continued) For the Year Ended 30 June 2021 Signiﬁcant accounting policies and basis of preparation (continued) 2 o) Financial assets and liabilities (continued) Classiﬁcation as debt or equity Debt and equity instruments issued by the Group are classiﬁed as either ﬁnancial liabilities or as equity in accordance with the substance of the contractual arrangements and the deﬁnitions of a ﬁnancial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised as the proceeds received, net of direct issue costs. Derecognition Financial assets are derecognised when rights to receive cash ﬂows from the assets expire or, the ﬁnancial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the ﬁnancial assets. On derecognition of a ﬁnancial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in proﬁt or loss. Financial liabilities are derecognised when the obligation speciﬁed in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the ﬁnancial liability derecognised and the consideration paid and payable is recognised in proﬁt or loss. When the terms of a ﬁnancial liability are renegotiated and result in the Group issuing equity instruments to a creditor of the Group to extinguish all or part of the ﬁnancial liability, the Group recognises the issue of equity instruments at their fair values. Any difference between the fair value of the equity instruments and the carrying amount of the ﬁnancial liability to be extinguished is recognised in the income statement. Trade and other receivables Trade and other receivables are recognised initially at their fair value and subsequently at their amortised cost using the effective interest method, less provision for impairment. If there is objective evidence that the recoverability of the asset is at risk, appropriate allowances for any estimated irrecoverably amounts are recognised in the income statement. Intercompany receivables Amounts owed by subsidiary undertakings represent loans made to the Company’s main subsidiary on an interest-free basis. No repayment terms have been mandated. IFRS 9’s impairment requirements use forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. The Group considers a broad range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash ﬂows of the instrument. In applying this forward-looking approach, a distinction is made between: l ﬁnancial instruments that have not deteriorated signiﬁcantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’) l ﬁnancial instruments that have deteriorated signiﬁcantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’) l ﬁnancial assets that have objective evidence of impairment at the reporting date (‘Stage 3’) ‘12-month expected credit losses’ are recognised for ‘Stage 1’ ﬁnancial instruments, while ‘lifetime expected credit losses’ are recognised for ‘Stage 2’ ﬁnancial instruments. Measurement of the expected credit losses is determined by a probability weighted estimate of credit losses over the expected life of the ﬁnancial instrument. The Group considers that the current intercompany loan should be recognised as Stage 1, and 12-month expected credit losses have been calculated. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 41 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 41 Cash and cash equivalents Cash and cash equivalents comprise cash in hand. Trade and other payables Trade and other payables are recognised initially at their fair value, net of transaction costs, and subsequently at their amortised cost using the effective interest method. p) Financial risk management Risk management objectives Management identify and evaluate ﬁnancial risks on an on-going basis. The principal risks to which the Group is exposed are market risk (including interest rate risk, and cash ﬂow risk), credit risk, and liquidity risk. Market risk Market risk is defined as the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group’s market risks arise from open positions in (a) interest-bearing assets and liabilities, and (b) foreign currencies; to the extent that these are exposed to general and specific market movements (see details below). Interest rate risk The Group’s interest-bearing assets comprise of only cash and cash equivalents. As the Group’s interest-bearing assets do not generate signiﬁcant amounts of interest; changes in market interest rates do not have any signiﬁcant direct effect on the Group’s income. Currency risk The Group is exposed to movement in foreign currency exchange rates arising from normal trading transactions that are denominated in currencies other than the respective functional currencies of the Group. The Group does not have a policy to hedge its exposure to foreign currency exchange risk as currently overseas transactions are only a small percentage of total transactions and ﬂuctuations in foreign currencies are not expected to signiﬁcantly affect the Group’s total transactions. In future the Group may consider hedging its exposure to foreign currency exchange risk. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in ﬁnancial loss to the Group. Credit risk arises from cash balances (including bank deposits, cash and cash equivalents) and credit exposures to trade receivables. The Group’s maximum exposure to credit risk is represented by the carrying value of cash and cash equivalents and trade receivables. Credit risk is managed by monitoring clients and performing credit checks before accepting any customers. Liquidity risk Liquidity risk is the risk that the Group may encounter difﬁculty in meeting its obligations associated with ﬁnancial liabilities that are settled by delivering cash or other ﬁnancial assets. The Group seeks to manage its liquidity risk by ensuring that sufﬁcient liquidity is available to meet its foreseeable needs. q) Capital management The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders. The Group’s overall strategy remained unchanged during the period. The capital structure of the Group consists of cash and cash equivalents, issued capital, the share premium account, the share-based compensation reserve resulting from the grant of equity-settled share options to selected directors and others providing similar services, and retained earnings. The Group is not subject to any externally imposed capital requirements. As part of the Group’s management of capital structure, consideration is given to the cost of capital. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 42 42 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notes to the Financial Statements (continued) For the Year Ended 30 June 2021 3 Operating loss An analysis of the Group’s operating loss has been arrived at after charging/(crediting): Other income Research and development Directors’ remuneration (including share-based compensation and excluding share issue costs) Auditor’s remuneration – audit fees – other services Foreign exchange differences Impairment of other receivables Other operating costs 2021 £ (137) 505,627 577,216 17,000 3,200 2,755 – 391,447 Group 2020 £ (52) 635,226 507,467 11,100 1,850 (3) – 464,454 Total operating expenses 1,497,108 1,620,042 The Group has one reportable segment, namely that of identifying and developing formulations that harness the human microbiome, all within the United Kingdom. 4 Finance costs Interest payable Interest payable represents amounts arising on leases accounted for under IFRS 16. Employees and Directors 5 Group and company The average monthly number of employees and senior management was: Executive directors Non-executive directors Employees Average total persons employed As at 30 June 2021 the Company had 7 employees (2020: 7). Group 2021 £ 926 926 2020 £ – – 2021 Number 2020 Number 2 2 3 7 2 2 3 7 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 43 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 43 Group and company Staff costs in respect of these employees were: Wages and salaries Social security costs Deﬁned contribution pensions Share-based payments (see note 19) Total remuneration 2021 £ 561,762 65,408 12,218 61,257 700,645 2020 £ 450,863 52,250 6,140 155,811 665,064 All staff were directly employed by SkinBioTherapeutics Plc. Some of these staff costs are included within research and development and some in share issue costs. All the directors above can be considered to be key management and have the responsibility for planning, directing and controlling, directly or indirectly, the activities of the Group. The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. The Group operates a deﬁned contribution pension scheme for employees and directors. The assets of the scheme are held separately from those of the Group in independently administered funds. The amounts outstanding at 30 June 2021 are £1,650 (2020: £3,559). Group and company Directors’ remuneration: Stuart J. Ashman Doug Quinn Martin Hunt Dr Cathy Prescott Total remuneration Which is made up of: Remuneration Amounts receivable under long term incentive schemes Company contributions to pension schemes Total remuneration 2021 £ 372,718 136,989 76,509 35,000 621,216 557,747 54,748 8,721 621,216 2020 £ 276,294 130,986 72,537 27,650 507,467 424,112 80,598 2,757 507,467 The number of directors to whom retirement beneﬁts are accruing in respect of qualifying services under deﬁned contribution pension schemes is 2 (2020: 2). The highest paid director received total emoluments of £372,718 (2020: £276,294) during the year. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 44 44 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notes to the Financial Statements (continued) For the Year Ended 30 June 2021 Taxation 6 Income taxes recognised in proﬁt or loss Current tax Current period – UK corporation tax R&D tax credit R&D tax credit – prior year Tax credit for the year Group 2021 £ 2020 £ – 67,294 (2,229) – 118,763 1,193 65,065 119,956 The tax charge for each period can be reconciled to the loss per the statement of comprehensive income as follows: Loss on ordinary activities before tax Normal applicable rate of tax Loss on ordinary activities multiplied by normal rate of tax Effects of: Depreciation Disallowables R&D enhanced deductions R&D tax credit Losses surrendered Unused tax losses carried forward UK tax charge/(credit) (1,498,034) 19.00% (284,626) (1,620,042) 19.00% 307,808 323 12,015 (67,899) (65,065) 88,179 252,008 – 30,231 (87,959) (119,956) 155,621 209,915 (65,065) (119,956) The Group has an unrecognised deferred tax asset of £759,472 (2020: £507,162) at the period end, which has not been recognised in the ﬁnancial statements due to uncertainty of future proﬁts. The Group has an estimated tax loss of £3,997,223 (2020: £2,669,276) available to be carried forward against future proﬁts. 7 Loss per share Basic and diluted loss per share Loss after tax (£) Weighted average number of shares Basic and diluted loss per share (pence) Group 2021 £ 2020 £ (1,432,969) 146,697,033 (1,500,086) 128,083,494 (0.98) (1.17) As the Group is reporting a loss from continuing operations for the year then, in accordance with IAS 33, the share options are not considered dilutive because the exercise of the share options would have an anti-dilutive effect. The basic and diluted earnings per share as presented on the face of the income statement are therefore identical. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 45 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 45 Company’s result for the period 8 The Group has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company income statement account. The loss for the Parent Company for the period was £1,222,665 (2020: £1,500,086). 9 Property, plant and equipment Cost At 1 July 2019 Additions At 30 June 2020 Additions At 30 June 2021 Accumulated amortisation At 1 July 2019 Charge for the period At 30 June 2020 Charge for the period At 30 June 2021 Net book value At 1 July 2019 At 30 June 2020 At 30 June 2021 10 Right-of-use assets Cost At 1 July 2019 Additions At 30 June 2020 Additions At 30 June 2021 Accumulated amortisation At 1 July 2019 Charge for the period At 30 June 2020 Charge for the period At 30 June 2021 Net book value At 1 July 2019 At 30 June 2020 At 30 June 2021 Group £ 10,200 – 10,200 – 10,200 3,400 5,100 8,500 1,700 Company £ 10,200 – 10,200 – 10,200 3,400 5,100 8,500 1,700 10,200 10,200 6,800 1,700 – 6,800 1,700 – Group £ Company £ – – – – – 145,757 – 145,757 145,757 145,757 – – – 2,429 2,429 – – – – – 2,429 2,429 – – 143,328 143,328 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 46 46 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notes to the Financial Statements (continued) For the Year Ended 30 June 2021 11 Intangible assets Cost At 1 July 2019 Additions At 30 June 2020 Additions At 30 June 2021 Accumulated amortisation At 1 July 2019 Charge for the period At 30 June 2020 Charge for the period At 30 June 2021 Net book value At 1 July 2019 At 30 June 2020 At 30 June 2021 Group £ Company £ 346,870 73,668 420,538 108,403 346,870 73,668 420,538 108,403 528,941 528,941 – – – – – – – – – – 346,870 420,538 346,870 420,538 528,941 528,941 Intellectual property is to be amortised over the expected period that the asset generates income and is expected to commence in the year ending 30 June 2022. 12 Investments Company: Investments in subsidiary undertakings Cost At 1 July 2019 Additions At 30 June 2020 Additions At 30 June 2021 £ – 5 5 113,728 113,733 As at 30 June 2021, the Company directly owned the following subsidiaries: Name of company Country of incorporation Proportion of equity interest SkinBiotix Limited United Kingdom 100% of ordinary shares AxisBiotix Limited United Kingdom 100% of ordinary shares CleanBiotix Limited United Kingdom 100% of ordinary shares MediBiotix Limited United Kingdom 100% of ordinary shares PharmaBiotix Limited United Kingdom 100% of ordinary shares 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 47 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 47 13 Trade and other receivables Current Corporation tax VAT recoverable Other receivables Prepayments Non-current Amounts due from group undertakings Group 2021 £ Company 2020 £ 2021 £ 2020 £ 183,828 19,597 10,000 239,349 118,763 22,462 150 48,010 183,828 7,793 10,000 42,095 118,763 22,462 150 48,010 452,774 189,385 243,716 189,385 – – – – 623,688 623,688 – – The fair values of the Company’s current trade and other receivables are considered to equate to their carrying amounts. The maximum exposure to credit risk for trade receivables is represented by their carrying amount. There are no ﬁnancial assets which are past due but not impaired. No current ﬁnancial assets are impaired. The amounts owed by subsidiary undertakings include a loan to AxisBiotix Limited for £771,544 (2020: £nil) which was discounted to £657,812 and then impaired by £34,124 to £623,688 under IFRS 9, as set out in note 2. There is no interest payable on this loan which is assumed to be payable in 2023. The Parent Company has conﬁrmed that it does not intend to seek repayment of the loan balance for at least twelve months from the date of these ﬁnancial statements. 14 Trade and other payables Current Trade creditors Accruals Other taxes Amounts due to group undertakings Other payables Group 2021 £ Company 2020 £ 2021 £ 2020 £ 78,842 279,922 17,726 – 3,330 138,571 147,019 15,548 – 3,683 71,352 260,272 17,726 – 3,330 138,571 147,019 15,548 5 3,683 379,820 304,821 352,680 304,826 Trade and other payables principally consist of amounts outstanding for trade purchases and ongoing costs. They are non- interest bearing and are normally settled on 30-day terms. The directors consider that the carrying value of trade and other payables approximates to their fair value. All trade and other payables are denominated in Sterling. The Company has ﬁnancial risk management policies in place to ensure that all payables are paid within the credit timeframe and no interest has been charged by any suppliers as a result of late payment of invoices during the period. The fair value of trade and other payables approximates their current book values. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 48 48 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notes to the Financial Statements (continued) For the Year Ended 30 June 2021 15 Lease liabilities Group and company Maturity analysis Year 1 Year 2 Year 3 Year 4 Year 5 Less future interest charges Analysed as Current Non-current 2021 £ 2020 £ 35,122 32,195 33,989 35,122 32,195 168,623 (28,769) 139,854 25,074 114,780 139,854 – – – – – – – – – – – 16 Financial instruments Maturity analysis A summary table with maturity of ﬁnancial assets and liabilities presented below is used by management to manage liquidity risks. The amounts disclosed in the following tables are the contractual undiscounted cash ﬂows. Undiscounted cash ﬂows in respect of balances due within 12 months generally equal their carrying amounts in the statement of ﬁnancial position, as the impact of discounting is not material. The maturity analysis of ﬁnancial instruments at 30 June 2021 is as follows: Group Assets Cash and cash equivalents Trade and other receivables Liabilities Trade and other payables Lease Liabilities On demand Carrying and less than 3 months amount £ £ 3 to 12 months 1 to 2 years £ £ 2 to 5 years £ 4,609,889 213,425 4,609,889 213,425 4,823,314 4,823,314 – – – – – – – – – 362,094 168,623 362,094 8,781 530,717 370,875 – 26,341 26,341 – 32,195 – 101,306 32,195 101,306 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 49 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 49 Company Assets Cash and cash equivalents Trade and other receivables Liabilities Trade and other payables Lease Liabilities On demand Carrying and less than 3 months amount £ £ 3 to 12 months 1 to 2 years £ £ 2 to 5 years £ 4,264,690 973,165 4,264,690 201,621 5,237,855 4,466,311 – – – – 771,544 771,544 – – – 334,954 168,623 334,954 8,781 503,577 343,735 – 26,341 26,341 – 32,195 – 101,306 32,195 101,306 The maturity analysis of ﬁnancial instruments at 30 June 2020 is as follows: Group Assets Cash and cash equivalents Trade and other receivables Liabilities Trade and other payables Company Assets Cash and cash equivalents Trade and other receivables Liabilities Trade and other payables On demand Carrying and less than 3 months amount £ £ 2,159,054 141,375 2,159,054 141,375 2,300,429 2,300,429 289,273 289,273 289,273 289,273 On demand Carrying and less than 3 months amount £ £ 2,159,054 141,375 2,159,054 141,375 2,300,429 2,300,429 289,278 289,278 289,278 289,278 3 to 12 months 1 to 2 years £ £ 2 to 5 years £ – – – – – – – – – – – – – – – 3 to 12 months 1 to 2 years £ £ 2 to 5 years £ – – – – – – – – – – – – – – – 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 50 50 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notes to the Financial Statements (continued) For the Year Ended 30 June 2021 17 Share capital Company – Issued and fully paid As at 30 June 2019 As at 30 June 2020 Ordinary shares issued at 16p per share Costs related to shares issued Warrants issued at 9p per share As at 30 June 2021 Number of shares Share capital Share premium £ £ 128,083,494 1,280,835 4,923,890 128,083,494 1,280,835 4,923,890 27,806,428 278,064 890,314 8,903 4,170,964 (408,042) 71,225 156,780,236 1,567,802 8,758,037 On 2 November 2020 27,806,428 ordinary shares were issued by way of a placing at a price of 16p per share to raise ﬁnance. On 19 March 2021 890,314 ordinary shares were issued in connection with the exercise of share warrants at an exercise price of 9p per share payable in cash. Share capital is the amount subscribed for shares at nominal value, issued and fully paid. Share premium is the amount subscribed for share capital in excess of nominal value. 18 Share-based payments Share Options The Group operates share-based payment arrangements to remunerate directors and others providing similar services in the form of a share option scheme. The exercise price of the option is normally equal to the market price of an ordinary share in the Group at the date of grant. Each share option converts into one ordinary share of the Group on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Movements in the number of share options outstanding and their related weighted average exercise prices are as follows: 2021 2020 Group and company Outstanding at 1 July Granted during the year Forfeited/cancelled during the year Number of options 16,729,343 – – Weighted average exercise Number of options price £ Weighted average exercise price £ 0.11 14,919,648 1,809,695 – – – 0.11 0.09 – 0.11 Outstanding at 30 June 16,729,343 0.11 16,729,343 On 3 March 2020, 512,334 options were granted at an exercise price of £0.095 per share and are exercisable based upon achieving either of two market conditions. These market conditions are based on the signing of a joint development agreement between the Company and Winclove Probiotics B.V. or a qualifying exit with a share price of not less than 18p. The ﬁrst condition has been met so the share options are exercisable immediately, although none have yet been exercised. The fair value of these share options have been estimated at cost as the share options are available immediately. The total charge recognised for the year ended 30 June 2021 for these share options is the entire fair value of £nil (2020: £48,672). 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 51 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 51 On 8 April 2020, 1,297,361 options were granted at an exercise price of £0.09 per share and are exercisable based upon achieving one of three performance conditions. The performance conditions are based on the commercial viability of developed products, or the entering into of joint ventures, partnerships, collaborations or agreements for the sale or licensing of products. The total charge recognised for the year ended 30 June 2021 for these share options is £5,632 (2020: £1,296). The fair values of the share options issued in the year were derived using the Black Scholes model. The total charge recognised for the year ended 30 June 2021 for share options is £61,257 (2020: £155,811). The following assumptions were used in the calculations: Deed pool Grant date Exercise price Share price at grant date Risk-free rate Volatility Expected life Fair value Deed pool Grant date Exercise price Share price at grant date Risk-free rate Volatility Expected life Fair value 1 05/04/17 9p 9p 0.24% 60% 3.5 years 2.58p 4 18/04/19 18p 18p 0.75% 60% 3.5 years 2.85p 2 05/04/17 9p 9p 0.24% 60% 3.5 years 1.85p 5 18/04/19 18p 18p 0.75% 60% 3.5 years 3.99p 3a 05/04/17 9p 9p 0.16% 60% 2.75 years 2.30p 6 18/04/19 18p 18p 0.75% 60% 3.5 years 3.48p 3b 05/04/17 9p 9p 0.16% 60% 2.75 years 2.30p 7 03/03/20 9.5p 9.5p 0.29% 80% 0 years 9.50p 3c 05/04/17 9p 9p 0.16% 60% 2.75 years 2.30p 8 08/04/20 9p 7p 0.12% 80% 2 years 0.87p The closing share price per share at 30 June 2021 was 63.50p (30 June 2020: 17.13p). Expected volatility is based on a conservative estimate for an AIM listed entity. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. 19 Related party transactions Key management personnel compensation Group and company Short-term employee beneﬁts including social security costs Post-employment beneﬁts Share-based payments 2021 £ 2020 £ 679,046 10,036 61,257 750,339 537,657 4,072 153,890 695,619 Compensation ﬁgures above include directors and key management personnel. Detailed remuneration disclosures for directors are provided in the employees and directors note on page 43, and in the Directors Report. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 52 52 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notes to the Financial Statements (continued) For the Year Ended 30 June 2021 19 Related party transactions (continued) Transactions with other related parties During the period ended 30 June 2021, the Company was charged fees of £116,600 (2020: £101,652) by Quinn Corporate Services Ltd, a company in which Doug Quinn, a director of the Company, is also a director. These fees relate to Doug Quinn’s consultancy services to the Company. As at 30 June 2021 £9,500 (2020: £8,265) was outstanding. During the period ended 30 June 2021, the Company was charged fees of £58,000 (2020: £38,342) by Invictus Management Ltd, a company in which Martin Hunt, a director of the Company, is also a director. These fees relate to Martin Hunt’s consultancy services to the Company. As at 30 June 2021 £4,800 (2020: £4,800) was outstanding. During the period ended 30 June 2021, the Company was charged fees of £29,000 (2020: £22,400) by Biolatris Ltd, a company in which Dr Cathy Prescott, a director of the Company, is also a director. These fees relate to Dr Cathy Prescott’s consultancy services to the Company. As at 30 June 2021 £nil (2020: £nil) was outstanding. 20 Ultimate controlling party No one shareholder has control of the Company. 21 Events after the reporting date The Company has evaluated all events and transactions that occurred after 30 June 2021 up to the date of signing of the ﬁnancial statements. No material subsequent events have occurred that would require adjustment to or disclosure in the ﬁnancial statements. 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 53 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 53 Notice of Annual General Meeting SKINBIOTHERAPEUTICS PLC (the “Company”) (Registered in England and Wales with company number 09632164) NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the above named Company will be held at The Core, Bath Lane, Newcastle Helix, Newcastle upon Tyne, NE4 5TF on 23 December 2021 at 11:00 AM for the transaction of the following business: Ordinary Resolutions To consider, and if thought ﬁt, to pass the following resolutions 1 to 7 as ordinary resolutions: 1. THAT the Directors’ and Auditors’ reports and the ﬁnancial statements for the ﬁnancial year ended 30 June 2021 be received and adopted. 2. THAT Jeffreys Henry be re-appointed as the auditors of the Company until the next Annual General Meeting and the Directors be authorised to ﬁx their remuneration. 3. THAT Stuart Ashman, be re-elected as a Director of the Company. 4. THAT Martin Hunt, be re-elected as a Director of the Company. 5. THAT Dr Cathy Prescott, be re-elected as a Director of the Company. 6. THAT Doug Quinn, be re-elected as a Director of the Company. 7. THAT in substitution for all existing authorities the Directors be given power under Section 551 of the Companies Act 2006 (“the Act”) to exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for, or to convert any security into, shares in the Company (“Rights”): (i) (ii) up to an aggregate nominal amount of £522,600.79 being equivalent to one-third of the Company’s issued share capital; and, up to a further aggregate nominal amount of £522,600.79 provided that (a) they are equity securities (within the meaning of section 560(1) of the Act) and (b) they are offered by way of a rights issue to holders of ordinary shares in the Company at such record dates as the directors may determine where the equity securities attributable to the interests of the ordinary shareholders are proportionate (as nearly as may be practicable) to the respective numbers of ordinary shares held by them on any such record date, subject to such exclusions or other arrangements as the directors may deem necessary or expedient to deal with fractional entitlements or legal or practical problems arising under the laws of any overseas territory or the requirements of any regulatory body or stock exchange or any other matter whatsoever, provided that this authority shall, unless renewed, varied or revoked by the Company, expire twelve months after the date of passing of this Resolution or, if earlier, the date of the next AGM of the Company unless any offer or agreement is made before the end of that period in which case the Directors may allot shares and grant Rights pursuant to such offer or agreement as if the power granted by this resolution had not expired. Special Resolutions 8. THAT, subject to the passing of Resolution 7 and in accordance with Sections 570 and 573 of the Act, the Directors be and are hereby authorised to allot equity securities (as deﬁned in section 560 of the Act) for cash under the authority conferred by Resolution 7and/or to sell ordinary shares held by the Company as treasury shares as if section 561 of the Act did not apply to any such allotment or sale, provided that such authority shall be limited to: (i) the allotment of equity securities in connection with rights issues, open offers or other pre-emptive offers in favour of holders of equity securities in proportion (as nearly as may be practicable) to their respective holdings or in accordance with the rights attaching thereto (but with such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with fractional entitlements, record dates or other legal or practical problems in or under the laws of, or any requirements of, any recognised regulatory body or stock exchange, in any territory or as regards shares held by an approved depositary or in issue in uncertiﬁed form or otherwise however); and 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 54 54 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notice of Annual General Meeting (continued) (ii) the allotment of equity securities or sale of treasury shares (otherwise than pursuant to sub-paragraph (i) above) to a maximum aggregate nominal value of £78,390.12; such power shall expire at the end of the next Annual General Meeting of the Company or 30 December 2022 (whichever is the sooner) unless any offer or agreement is made which would, or might require equity securities to be allotted (and treasury shares sold) before expiry of this power in which case the Directors may allot securities pursuant to such offer or agreement as if the power granted by this resolution had not expired. 9. THAT, subject to the passing of Resolution 7, and in addition to the power contained in Resolution 8 above, the Directors be and are hereby authorised, pursuant to sections 570 and 573 of the Act to allot equity securities (as deﬁned in section 560 of the Act) for cash, either under the authority conferred by Resolution 7 and/or to sell ordinary shares held by the Company as treasury shares as if section 561(1) of the Act did not apply to any such allotment or sale, provided that such authority shall be limited to: (i) the allotment of equity securities or sale of treasury shares, up to a maximum aggregate of £78,390.12; and (ii) used only for the purposes of ﬁnancing (or reﬁnancing, if the power is to be exercised within six months after the date of the original transaction) a transaction which the Directors determine to be an acquisition or other capital investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights published by the Pre-Emption Group prior to the date of this Notice of Annual General Meeting, such power shall expire at the end of the next Annual General Meeting of the Company or 30 December 2022 (whichever is the sooner) unless any offer or agreement is made which would, or might require equity securities to be allotted (and treasury shares sold) before expiry of this power in which case the Directors may allot securities pursuant to such offer or agreement as if the power granted by this resolution had not expired. By Order of the Board Doug Quinn Company Secretary Dated 30 November 2021 Registered Ofﬁce 15 Silk House Park Green Macclesﬁeld England SK11 7QJ 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 55 SkinBioTherapeutics plc Annual Report & Accounts 2021 | 55 Notes to the AGM notice Resolution 1 – To receive the Annual Report and Financial Statements The Directors are required to present the ﬁnancial statements, Directors’ Report and Auditor’s Report to the meeting. These are contained in the Company’s Annual Report for the year ended 30 June 2021 (the “Annual Report”). A resolution to receive the Annual Report is proposed as an ordinary resolution. Resolution 2 – Re-appointment and remuneration of Auditor At each meeting at which the Company’s ﬁnancial statements are presented to its shareholders, the Company is required to appoint an auditor to serve until the next such meeting. The Board, on the recommendation of the Audit Committee, recommends the re-appointment of Jeffreys Henry. The Resolution also authorises the directors to ﬁx the auditor’s remuneration. Resolutions 3-6 – Re-election of Directors The Company’s Articles of Association require that any director that has not been re-elected at either of the preceding three annual general meetings shall retire and offer themselves for re-election by shareholders. Notwithstanding this requirement, the Directors have determined that each of them will stand for re-election on an annual basis in accordance with recommended best practice and in line with the principles of the UK Corporate Governance Code. Resolution 7 – Authority to allot shares The authority sought by this resolution is for the Directors to be authorised to allot Ordinary Shares up to two-thirds of the Company’s current issued share capital at the date of this notice. Paragraph (i) of the resolution will give the Directors a general authority to allot up to an aggregate nominal value of £522,600.79 being the equivalent of one-third of the Company’s issued ordinary share capital at the date of this notice. This is in accordance with the Investment Association Share Capital Management Guidelines. In addition, the guidelines permit the authority to extend to a further third of the issued share capital, where any such shares allotted using this additional authority are in connection with a rights issue. Paragraph (ii) of the resolution proposes this additional authority be granted to the Directors. The Directors are seeking the annual renewal of this authority in accordance with best practice and to ensure the Company has maximum ﬂexibility in managing its capital resources. The authorities in this Resolution will lapse at the conclusion of the next AGM or twelve months after the passing of the Resolution if earlier save for conditions set out in the Resolution. Resolutions 8 and 9 – Authority to disapply pre-emption rights Resolutions 8 and 9 are special resolutions which, if passed, will enable the Directors to allot shares in the Company, or to sell any shares out of treasury, for cash, without ﬁrst offering those shares to existing shareholders in proportion to their existing shareholdings. In March 2015, the Pre-Emption Group published a revision of its Statement of Principles. In addition to restating the customary 5% limit on the issuance of shares for cash on a non-pre-emptive basis, the 2015 Statement of Principles introduced greater ﬂexibility for companies to undertake non pre-emptive issues for cash in connection with acquisitions and speciﬁed capital investments. This relaxation allows companies the opportunity to ﬁnance expansion opportunities as and when they arise. The 2015 Statement of Principles provides that a company may now seek power to issue on a non-pre-emptive basis for cash equity securities representing: (i) no more than 5% of the Company’s issued ordinary share capital in any one year; and (ii) no more than an additional 5% of the Company’s issued ordinary share capital provided that such additional power is only used in connection with an acquisition of speciﬁed capital investment. In line with best practice, the Company has structured its pre-emption disapplication request as two separate resolutions. If Resolution 8 is passed, it will permit Directors to allot ordinary shares on a non-pre-emptive basis and for cash (otherwise than in connection with a rights issue or similar pre-emptive issue) up to a maximum nominal amount of £78,390.12. This amount represents 5% of the Company’s issued ordinary share capital as at 29 November 2021 (being the latest practicable date prior to publication of this document). This resolution will permit the Directors to allot any such shares for cash in any circumstances (whether or not in connection with an acquisition or speciﬁed capital investment). If Resolution 9 is passed, it will allow the Directors an additional power to allot ordinary shares on a non-pre-emptive basis and for cash up to a further maximum nominal amount of £78,390.12. This amount represents 5% of the Company’s issued ordinary share capital as at 29 November 2021 (being the latest practicable date prior to publication of this document). 262369 SkinBio Therapeutics plc pp35-imp.qxp 29/11/2021 10:21 Page 56 56 | SkinBioTherapeutics plc Annual Report & Accounts 2021 Notes to the AGM notice (continued) The Directors shall use any power conferred by Resolution 9 only in connection with an acquisition or speciﬁed capital investment which is announced contemporaneously with the issue, (or which has taken place in the preceding six-month period and is disclosed in the announcement at the time). 1. As stated above, members will not be entitled to attend the meeting. A member may not appoint a person other than the Chairman of the meeting as his proxy to attend and vote at the meeting. 2. In accordance with Regulation 41 of the Uncertiﬁcated Securities Regulations 2001 and by paragraph 18(c) of The Companies Act (Consequential Amendments) (Uncertiﬁcated Securities) Order 2009, only those members entered on the Company’s register of members not later than 11:00am on 21 December 2021, or if the meeting is adjourned, Shareholders entered on the Company’s register of members not later than 2 days before the time ﬁxed for the adjourned meeting (excluding non-business days) shall be entitled to vote at the meeting. 3. To be effective, the Form of Proxy must be deposited at the ofﬁce of the Company’s registrars, Share Registrars Limited, Molex House, The Millennium Centre, Crosby Way, Farnham, Surrey, GU9 7XX so as to be received not later than 11:00am on 21 December 2021, or if the meeting is adjourned, not later than 48 hours (excluding non-business days) before the time ﬁxed for the adjourned meeting. 4. CREST members who wish to appoint the Chairman as their proxy by utilising the CREST electronic proxy appointment service may do so for the meeting and any adjournment(s) thereof by utilising the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s speciﬁcations and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by our agent Share Registrars Limited (ID 7RA36) no later than 11:00am on 21 December 2021 or, if the meeting is adjourned, 48 hours before the time ﬁxed for the adjourned meeting (excluding any part of a day that is not a working day). For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent, Share Registrars Limited, is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertiﬁcated Securities Regulations 2001. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers arreeferred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. 262369 SkinBio Therapeutics plc Cover Spread (3mm Spine).qxp 29/11/2021 10:37 Page 2 Contents Statutory and Other Information Chairman’s Statement Strategic and Financial Review Directors’ Report Corporate Governance Report Independent Auditor’s Report to the Members of SkinBioTherapeutics Plc Consolidated Statement of Comprehensive Income 1 2 3 10 13 23 28 Consolidated Statement of Financial Position 29 Consolidated Statement of Cash Flows 30 Consolidated Statement of Changes in Equity 31 Company Statement of Financial Position Company Statement of Cash Flows Company Statement of Changes in Equity Notes to the Financial Statements Notice of Annual General Meeting 32 33 34 35 53 Notes to the Annual General Meeting Notice 55 Perivan 262369 262369 SkinBio Therapeutics plc Cover Spread (3mm Spine).qxp 29/11/2021 10:37 Page 1 Annual Report and Financial Statements For the Year Ended 30 June 2021 SkinBioTherapeutics plc Company Registration Number: 09632164 1 2 0 2 e n u J 0 3 d e d n E r a e Y e h t r o F s t n e m e t a t S l i a i c n a n F d n a t r o p e R l a u n n A c l p s c i t u e p a r e h T o B n k S i i SkinBio THERAPEUTICS 15 Silk House, Park Green, Macclesﬁeld, SK11 7QJ SkinBio THERAPEUTICS

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