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DYNAMIC
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Who we are and what we do
TISSUE REGENIX GROUP PLC IS
A PIONEERING, INTERNATIONAL
MEDICAL TECHNOLOGY COMPANY.
LEADING IN THE DEVELOPMENT
OF REGENERATIVE PRODUCTS TO
CREATE REPLACEMENT NATIVE
TISSUE USING BIOLOGICAL
(HUMAN AND ANIMAL) MATERIALS.
WITH ITS INNOVATIVE PLATFORM
TECHNOLOGY dCELL® IT IS
REVOLUTIONISING THE TREATMENT
OF PATIENTS WITH WOUND CARE,
ORTHOPAEDIC AND CARDIAC
APPLICATIONS.
dCELL® technology
The unique dCELL® technology allows Tissue Regenix to process
both human and animal tissues, removing DNA and cellular material
but leaving intact an acellular matrix within which the patient’s own
cells can repopulate and regenerate, creating like for like tissue.
This patented dCELL® technology platform allows us to address
complex and varying clinical needs.
OUR TISSUE STRATEGY
Learn more about dCELL® on page 2
Our Strengths
{ A proven regenerative technology, producing outstanding
clinical results
{ A dedicated and skilled management and scientific team
{ Global reach with offices in both Europe and North America
WOUND CARE
ORTHOPAEDIC
CARDIAC
Porcine (X)
in pipeline
{ Strong business–academia relationships, including The University
of Leeds,UK and Pontifical Catholic University of Paraná, Brazil
Human (H)
[THICKER DERMIS]
More information is available in the
strategic report on pages 4 to 17
NAVIGATING THE REPORT
FOR FURTHER INFORMATION WITHIN THIS
DOCUMENT AND RELEVANT PAGE NUMBERS
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{ Office headquartered in San
Antonio, Texas. Commercialising
DermaPure in the US.
{ Two ‘Innovative Technology’
Contracts awarded.
OVERVIEW
Our Corporate Structure
Our Technology
Product Portfolio
{ Application for CE Mark for
OrthoPure XT submitted,
approval expected 2017.
{ US Clinical Advisory Board
appointed.
{ Entry into EU market through
controlled joint venture GBM-V,
first approvals expected
H2 2017, with commercial
availability in H1 2018.
Highlights
Z £1,322K REVENUE FROM DERMAPURE®,
A 64% INCREASE IN SALES
Z FIRST REVENUES FROM GBM-V
Z SUBMISSION OF INITIAL CLINICAL DATA FOR
ORTHOPURE™ XT CE MARK
Z ESTABLISHMENT OF US ORTHOPAEDIC SUBSIDIARY
Z APPOINTMENT OF A US CLINICAL ADVISORY BOARD
Z STRENGTHENED CORPORATE BOARD WITH
CLINICAL EXPERTISE
Z FURTHER MEDICARE COVERAGE
Z INITIAL GPO AGREEMENTS SIGNED
STRATEGIC REPORT
Chairman’s Statement
Marketplace
CEO Statement
Operational Review
Wound Care
Orthopaedics
CFO Statement
Risks
GOVERNANCE
Board of Directors
Governance Framework
Corporate Governance Statement
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
FINANCIALS
Independent Auditor’s Report to the
members of Tissue Regenix Group plc
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Changes in Equity 31
Consolidated Statement of Financial Position 32
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Company Statement of Changes in Equity
Company Statement of Financial Position
Company Statement of Cash Flows
Notes to the Company Information
Notice of Annual General Meeting
Directors and Officers
33
34
51
52
53
54
56
IBC
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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TICKER AIM: TRX www.tissueregenix.com225380.02 1 June 2017 1:37 PM Proof 7Our Corporate StructureThis structure ensures that the correct research and commercial expertise for each operational division, allowing it to be treated as an individual entity, and having the flexibility to meet the requirements of patients and clinicians within this space, whilst also maintaining the values and corporate leadership of the Tissue Regenix Group plc. The Corporate structure also allows for the isolation of one operational division should there be the opportunity for M&A activity. In January 2016, GBM-V gmbh was established as a controlled joint venture in Germany to facilitate the commercialisation of our human tissue applications throughout Europe. The power of dCELL® technology.dCELL® technology offers a unique approach to regenerative medicine.The dCELL® process is gentle, efficient, effective – and powerful. It can be applied to both donated human tissues (allografts), or animal tissues (xenografts). It results in allograft and xenograft tissue matrices that retain the tissues’ native structure to allow repopulation and regeneration of the patients own tissue.The dCELL® difference is clear. The dCELL® process removes DNA and cellular material from biological tissues, through a series of gentle washes, leaving an intact acellular matrix upon which the patient’s cells can repopulate and regenerate, creating new, native tissue, which is recognised and accepted by the body, significantly reducing the risk of rejection.dCELL® technology provides an enhanced healing environment, in terms of both natural, tissue-specific physical structure and bio-mechanical properties.Tissue treated with dCELL® technology gives the patient a receptive scaffold that supports cell migration following implantation, while maintaining appropriate tissue strength. Once repopulation is complete, the regenerated tissue is effectively a natural part of the patient’s own body.The potential applications of dCELL® are diverse and currently Tissue Regenix is focusing on addressing complex and unmet needs in three core clinical areas:Wound care, orthopaedics and cardiac.Our Technology:Long term regenerative careImplanted using the same techniquesPatent protected ‘Know how’REGENERATIONPROCESSAttract patients stem cells in to matrixNo special transportation or storage needsAnimal or human tissueTissue Regenix AR2017-Proof 7.indd 201/06/2017 13:38:29 TISSUE REGENIX GROUP PLC ANNUAL REPORT AND ACCOUNTS FOR THE 11 MONTHS UP TO 31 DECEMBER 2016OVERVIEW325380.02 1 June 2017 1:37 PM Proof 7dCELL® tissue Due to the diversity of the dCELL® technology platform it can be applied to different biological tissues (animal or human) for the current applications in wound care, orthopaedics and cardiac. Tissue Regenix employs a dual tissue strategy, and currently has a portfolio of human tissue applications under the core focus areas, whilst the xenograft product portfolio continues to expand. There is the scope to apply dCELL® to different biological tissues beyond human and porcine in the future.Where does this tissue come from? The xenograft tissue is sourced from approved UK abattoirs as a by-product from selected animals that are entering the food chain. Breeds and tissue are carefully selected to strict specifications and enable Tissue Regenix to utilise tissue that would otherwise be wasted. The tissue is then processed using the patented dCELL® Technology which eliminates the risk of infection and is then packaged and distributed through the manufacturing facility in Leeds, ensuring that the whole development chain is carefully controlled.Why porcine? Although the dCELL® Technology process can be used to treat soft tissue from multiple sources, it is currently applied to porcine tissue. Porcine tissue is commonly used in medical procedures due to the genetic similarities between pigs and humans. For example, a pig tendon can offer the appropriate tensile strength, length and diameter to be used in ACL reconstruction. What about human? Human tissue is sourced from cadavers who have volunteered to leave their body for medical purposes after death. This means that it is not just the organs that are utilised, but also the corneas, skin and even bones. TISSUE REGENIX HAVE A PORTFOLIO OF PRODUCTS UTILISING PATENTED PLATFORM TECHNOLOGY dCELL® IN ALL THREE CORE FOCUS AREAS. THE NATURE OF THIS TECHNOLOGY PLATFORM ALLOWS A SERIES OF LINE EXTENSIONS FROM PRIMARY APPLICATIONS, TO CREATE AN EXCITING DEVELOPMENT PIPELINE. Development Timeline1998FUTURE1998 Research begins into dCELL® technology at the University of Leeds, led by Professor Eileen Ingham 2014 Commercial launch of DermaPure® in the US 2017 Launch of OrthoPure™ XT in the EU2010 The Group receives CE mark approval for the dCELL® vascular patch 2019 – 2021* Launch of OrthoPure™ XT in the US Launch of OrthoPure™ XM in the US2015 Medicare ‘Q’ Code granted for outpatient reimbursement 2006 Partnership with Pontifical Catholic University of Parana (PUCPR) to expand research into the application of dCELL® to Human Heart Valves2017 DermaPure® available under the FSS and Premier Inc and Vizient Inc GPOs2006 Tissue Regenix Group is spun out of the University of Leeds to commercialise upon the research2016 DermaPure® breaks through $1M sales mark2011 Enters commercialisation and IP agreement with the Pontifical Catholic University of Parana (PUCPR) for exclusive world rights (excluding Brazil) to the data collected for the dCELL®Human Heart Valves2012 Tissue Regenix Wound Care Inc established in San Antonio, Texas 2013 Meniscus pre- clinical study delivers positive results for clinical studies to progress in the EU*Currently unfundedProduct PortfolioTissue Regenix AR2017-Proof 7.indd 301/06/2017 13:38:30 Chairman’s Statement
“ACROSS THE 11 MONTHS TO 31 DECEMBER 2016
TISSUE REGENIX EXECUTED SEVERAL STEPS OF
ITS EVOLVING COMMERCIALISATION STRATEGY AS
OPERATIONS IN BOTH THE US AND EU CONTINUE
TO EXPAND.”
JOHN SAMUEL CHAIRMAN
OrthoPure™ XT, a decellularised porcine
ligament for ACL reconstruction,
successfully completed the clinical trial
enrolment and it is expected that CE Mark
approval and commercial roll-out will
be achieved during 2017. This will be a
significant step for both the Orthopaedics
division and also the Company as a whole
as it signifies commercialisation under
each of the core business divisions. Having
signed the first EU distribution agreements
for OrthoPure™ XT we are confident
that the implementation of the distributor
led commercialisation strategy will be
successful throughout the coming year.
Governance
As the Company enters a phase of
accelerated growth, necessary steps
have been taken to ensure that the
Company is aligned with the best corporate
compliance and governance standards.
This included the addition of Shervanthi
Homer-Vanniansinkim who brings clinical
expertise to the Board, complementing
the commercial experience vested in the
Non-Executive Directors. In January we
also welcomed a new Chief Financial
Officer, Paul Devlin. Paul brings with him
significant experience of guiding companies
through a period of rapid growth, mergers,
acquisitions and joint ventures. It is
expected that he will play a fundamental role
in the strategic direction of the Company in
the future.
Accounting
Reference Date
As previously announced the Company has
changed the accounting reference date to
31 December. These accounts are therefore
reporting an 11 month period.
Finance
I draw your attention to the going concern
statement in the Corporate Governance
Statement and Note 1 to the financial
accounts. The Directors are confident that
additional funds will be made available to
continue to fund the business.
Outlook
Significant progress has been made
in the transition from development to
commercialisation and we expect each
division to reach a significant inflection point
over the next year. The advances that have
been made during the reported period are
a reflection of the ongoing commitment and
enthusiasm of the staff, and I would like
to personally thank all for their continuing
efforts. As we enter a phase of accelerated
growth we anticipate to see our focus on
commercialisation come to fruition.
JOHN SAMUEL
CHAIRMAN
2 June 2017
The Group delivered combined revenues
of £1,443k, which was bolstered by the
first revenues from controlled joint venture
GBM-V. Wound care delivered revenue
of £1,322k, a 64% increase on the
figures reported last year, and in line with
expectations.
Strategy
Strategically, the Group has continued to
evolve its commercialisation efforts spanning
both the US and EU. The creation of
controlled joint venture GBM-V has allowed
the submission for regulatory approval to
commence for allograft products within
the EU, and we expect to be in a position
to report positive newsflow throughout the
year. Not only is this relevant for the joint
venture in the EU, but also validates the
commercial viability of this model for other
potential partnerships.
The wound care division achieved significant
success in executing the commercial
strategy for DermaPure®, accessing the
hospital setting. Of particular relevance was
the award of GPO Agreements, especially
Premier and post year end, Vizient, both of
which were granted under their respective
“Innovative Technology” programmes,
providing an independent review and
endorsement of the dCELL® technology.
Under these agreements DermaPure is now
accessible to over 1 million hospital beds in
the US, complementing the comprehensive
Medicare reimbursement covering 93% of
Medicare beneficiaries. These agreements
will be pivotal in the commercial traction and
success over the coming year.
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TISSUE REGENIX GROUP PLC ANNUAL REPORT AND ACCOUNTS FOR THE 11 MONTHS UP TO 31 DECEMBER 2016STRATEGIC REPORT525380.02 1 June 2017 1:37 PM Proof 7The Diabetes Epidemic It is estimated that 415 million people worldwide are suffering from diabetes, with 46% of this population remaining undiagnosed1. With the industrialised world suffering from the highest prevalence of diabetes, China, India and the USA top the list with an estimated combined 207 million sufferers. Often underestimated are the serious complications associated with diabetes which can include: damage to the nerve and blood supply, particularly in the lower extremities (neuropathy and peripheral vascular disease), retinopathy (eyes), cardiovascular disease and nephropathy (kidneys). The US currently spends more treating diabetes and its associated side effects than any other disease, with $101.4bn spent in 20132. Within the UK, the NHS will spend 9% of its annual budget on the treatment of type II diabetes, expected to be around £8.8bn per year3.. Diabetes is the most common cause of non-traumatic limb amputation4 with a diabetic amputation taking place somewhere in the world every 60 seconds5. With such shocking statistics, the need for education and new novel treatments to address these side effects is more critical than ever. With 6% of diabetic patients suffering a diabetic foot ulcer, or wound, proper wound management is crucial6. The difficulty faced by physicians treating these wounds is how to advance them to a state of healing. Therefore, one of the challenges faced when healing chronic wounds is enabling the body to progress through the healing stages and naturally regenerate, allowing wound closure.Clearly, using a new technology such as DermaPure® to aid this progress becomes the optimum solution. DermaPure® provides the extra-cellular matrix for the patient’s cells to repopulate, encouraging the body to progress through the stages of healing and establish a blood supply through angiogenesis, (the formation of new blood vessels) allowing for complete wound closure. 1. http://www.diabetes.co.uk/diabetes-prevalence.html 2. http://www.cnbc.com/2016/12/27/diabetes-costing-americans-more-than-any-other-disease.html 3. https://www.england.nhs.uk/ourwork/qual-clin-lead/diabetes-prevention/ 4. https://www.nice.org.uk/guidance/ng19/chapter/introduction 5. https://www.idf.org/webdata/docs/background_info_AFR.pdf 6. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4825895 MarketplaceTIME (DAYS)% OF MAXIMUN RESPONSE0.3103103010010080604020INFLAMMATIONPROLIFERATIONMATURATIONWound ContractionCollagenAccumulationAngiogenesisTissue Regenix AR2017-Proof 7.indd 501/06/2017 13:38:32 Marketplace
CONTINUED
GROUP PURCHASING ORGANISATION
Hospital
Hospital
Hospital
INTEGRATED DELIVERY NETWORK
Hospital
Doctor
Doctor
Doctor
Doctor
1. http://www.commonwealthfund.org/publications/issue-briefs/2015/oct/us-health-care-from-a-
global-perspective
2. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
NationalHealthExpendData/NHE-Fact-Sheet.html
US Healthcare
Reimbursement
The US spends more on healthcare per
capita than any other nation with spending
per person equivalent to $9,086 per year.
The US is also the largest spender as a
percentage of its GDP at 17.1%, almost 50%
higher than the next largest payor1.
So who funds these
medical bills?
In 2015, the largest shares of total health
care spending were sponsored by the
federal government (28.7%) and households
(27.7%). The private business share of health
spending accounted for 19.9% of the total,
state and local governments accounted
for 17.1%, and other private revenues
accounted for 6.7%2.
What is a GPO?
Group Purchasing Organisations (GPOs)
are conglomerates of businesses providing
similar services, allowing for them to leverage
purchasing power and streamline efficiencies.
A healthcare GPO can include members from
both inpatient and outpatient settings, and
can range from very large hospital groups to
individual physician offices.
GPOs negotiate preferential pricing with
vendors and establish a contract for the
products that their members can access.
Members typically prefer products that are
included on their GPO contract. Therefore,
securing GPO contracts is one of the keys to
commercial success in the inpatient sector.
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CEO Statement
“WE HAVE MADE SIGNIFICANT PROGRESS FROM
DEVELOPMENT TO COMMERCIALISATION AND
EXPECT TO REACH A SIGNIFICANT INFLECTION
POINT FOR EACH DIVISION IN THE COMING YEAR”
ANTONY ODELL CHIEF EXECUTIVE OFFICER
The changing macro environment presented
both challenges and opportunities this year.
The Group has steadily progressed with
programmes as we continue to evolve as
a commercial company, seeking creative
solutions to the challenges faced. The
Group continues to pursue new business
opportunities whilst maintaining focus on
executing the long term strategy, creating
shareholder value and, over time, generating
financial returns.
Throughout the year the Group consolidated
its presence in the US wound care market
and is positioned for future entry into the
European sports medicine and heart valve
markets, both of which represent growth
opportunities.
Business Developments
After establishing the controlled joint venture
GBM-V in Germany in January 2016,
significant progress has been made with
regulatory submissions and barring any
delays with this process, it is expected that
commercialisation for both DermaPure®
and CardioPure™ human heart valves
will commence throughout Europe during
2018. GBM-V is the first German multi-
tissue bank, the objective being to process
different human tissues at one facility.
As demonstrated by the results, the first
revenues were generated from this tissue
bank which was achieved by the distribution
of cryo-preserved corneas. The substantial
progress made here validates the strategy
employed and this business model paves
the way for future alliances to be built.
Divisional Overviews
Our corporate structure vests the IP,
finances and knowledge in the individual
business divisions. This allows each division
to remain focused, employing experts
in each field for the development and
commercialisation of products within these
clinical areas. This model also allows the
business to stay responsive and flexible to
relevant business opportunities.
Wound Care
The US wound care division had a strong
start to the year with further Medicare
coverage cementing DermaPure® within the
outpatient setting. However, it was the latter
part of the year in which significant traction
was gained, with approval of the first Group
Purchasing Organisation (GPO) agreement
in July, followed in December by Premier,
the second largest GPO in the country. As
illustrated in the marketplace section on
page 6, these GPO approvals are pivotal to
commercial success in the hospital setting,
in which, there are significant benefits for
DermaPure®. It was also announced after
the year end that approval under Vizient, the
largest GPO in the US, had been secured
meaning that 75% of the hospital beds
under GPO agreements in the US are now
covered, complementing the 93% Medicare
coverage held for outpatient settings. In
conjunction to this, DermaPure® was also
added to the Federal Supply Schedule
in February 2017 allowing access to the
152 hospitals and 800 community based
outpatient clinics under their jurisdiction,
covering an additional 9 million patients.
This successful reimbursement structure
allows for increasingly expansive
commercial penetration into the wound care
market in the current year.
The intention to launch SurgiPure™ XD,
a porcine dermis application for hernia
repair, into the US market following the
510k approval was postponed as staff
members were redeployed to accelerate
the OrthoPure™ XT timeline for Europe.
However, it is expected that we will add
SurgiPure™ XD to the US wound care
portfolio in early 2018.
Orthopaedics
Orthopaedic progression has been driven
largely by OrthoPure™ XT, a porcine tissue
application to address ACL reconstruction,
which completed the necessary EU clinical
trial enrolment and is currently progressing
through the regulatory process for CE mark
approval.
Due to the changes implemented by the
introduction of the revised Medical Device
Regulations, the timeline for approval was
delayed. However, it is still expected that
approval and launch will commence during
2017. The initial commitment of European
distributors has been encouraging, having
entered a number of agreements in
preparation for a timely roll-out.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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CEO Statement
CONTINUED
For launch, the initial focus will be on our
key European markets which will include
Germany, Spain and Poland. The Group
envisages a roll-out plan over 12-18 months
as the reimbursement strategy for each
region is established, and engagement
with appropriate distribution partners
undertaken.
The US commercialisation strategy
continues to evolve and it is expected
that, given a suitable tissue bank partner
is identified, the transfer of the technology
process for OrthoPure™ HT, the human
tissue version of our ACL product,
will commence later this year with
commercialisation to follow soon after,
paving the way into the US sports medicine
market. To aid in negotiating the complex
US marketplace a prestigious Board of
Clinical Advisers was appointed with
whom we will work closely throughout this
process, including:
{ Steven Arnoczky, DVM, Michigan State
University, East Lansing, MI
{ David Caborn, MD, University of
Louisville, Louisville, KY
{ Thomas Carter, MD, Team Physician for
the Phoenix Suns, Phoenix, AZ
{ Philip Davidson, MD, Davidson
Orthopedics, Salt Lake City, UT
{ Jack Farr II, MD, Orthoindy,
Indianapolis, IN
Cardiac
Commercial progress this year was primarily
focused on the GBM-V work, and the
ongoing regulatory submissions to allow
launch of the CardioPure™ HAV/HPV in
Germany. The results being returned from
Francisco da Costa’s pioneering work in
Brazil, which has now entered its 11th
year, remain impressive and encouraging
and was recognised by the Jefferey Borer
Abstract Award in March 2016. The results
have been displayed worldwide and interest
in the decellularised human heart valves is
ever increasing.
Our 2017 Milestones
and Objectives
As the Group continues to expand its
commercial product portfolio and presence
within relevant clinical application areas
throughout different territories, the key
milestones for 2017 are listed below.
Associated to the successful execution of
each are various risks, the main ones of
which are listed below. More information on
how the Group intend to mitigate some of
these risks can be found on pages 16 to 17.
MILESTONE
RISKS
European launch of OrthoPure™ XT
Due to the change of Medical Device Regulations there is a risk of further regulatory delay.
Once approval is granted it will be manufactured at our in-house manufacturing facility in
Leeds relying on a successful ramp-up of processing.
European approval of DermaPure®
and Human Heart Valves
We are currently working through the regulatory process for both products and there are
therefore risks to the timelines for regulatory approval. As both are human tissue products
there could be a risk to the supply of suitable materials.
Launch of thicker and larger
DermaPure® sizes in the US
Reliance on partner to produce suitable amounts of product within the distribution timeline
in order to meet demand.
US launch of OrthoPure™ HT
Finding a suitable tissue bank partner to source and process the donated tissue. Potential
limitation of suitable donated tissue.
Establishment of OrthoPure™ XT
clinical trial requirements for the US
Delay in regulatory requirements. Financial implications due to the cost associated with the
clinical trials.
OBJECTIVE
HOW WE WILL ACHIEVE THIS:
Increase DermaPure® sales and
market penetration
Now that we have achieved three GPO agreements, and 93% Medicare coverage we are
in a position to translate this into commercial traction and increase our presence within the
inpatient setting, where DermaPure® offers an effective clinical and economic solution.
Retain key staff and minimise
employee turnover
We value the personal and professional development of our employees, actively encourage
relevant training and qualifications and have a number of employee benefit opportunities in
place to aid employee loyalty and satisfaction.
Engage Key Opinion Leaders and
drive advocacy for the dCELL®
Technology product portfolio
We already have a number of KOLs engaged for DermaPure®. Having appointed a clinical
advisory board for Orthopaedics in the US we will look to leverage their expertise to educate
and inform the wider clinical community.
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KPIs
KPIs help us to track and monitor
performance, against a defined set of
financial and non-financial targets allowing
teams to monitor their performance
throughout every level of the business. Our
executive management monitor against
these targets with the Board ensuring that
the KPIs in place accurately reflect the
inflection points of the Group, and advising
on strategy to ensure that these are met.
OUR
ONGOING KPIs
Key Group performance
indicators are set out below:
{ Monthly review of product
development timelines
and costs
{ Monthly review of revenue
progress and forecasts
{ Monitoring of cash balance
and associated working
capital requirements
{ Monthly review of actual
results against budget
Our People
Our talent is a key stakeholder in our
future success and we strengthened
our management team with the addition
of a VP of Orthopaedics for the US, as
well as addressing the growing national
contracting positioning of DermaPure in the
US by strengthening our leadership team to
facilitate these contracts.
We augmented our Board with the
appointment of Shervanthi Homer –
Vanniansinkim who brings extensive clinical
expertise to the table, and has been a clinical
adviser to the Group for a number years.
At the beginning of 2017 we welcomed
a new CFO, Paul Devlin, who brings with
him a wealth of experience in the merger
and acquisition field, as well as joint
ventures and business transformations. His
experience will be key in guiding the Group
through the next stages of development.
Current Trading
and Outlook
Following the award of two major GPO
contracts with Premier and Vizient
in December 2016 and March 2017
respectively, the Group now has 75%
coverage for hospital based wounds in the
US, complementing the 93% Medicare
reimbursement coverage for outpatient
settings. To identify the areas of highest
opportunity and to maximise the sales
potential of these GPO contracts, the
Group undertook a detailed analysis of
its addressable hospital market and has
accordingly restructured its direct sales
force on a regional basis to prioritise high
potential hospitals, whilst continuing to
use distributors to access other areas. To
support this new focus, the Group has
strengthened its US leadership team,
acquiring specific expertise pivotal to the
success of driving performance and pulling
through clinical demand from the GPO
agreements, which the Group expects will
maximise sales execution and ultimately
enhance revenue performance.
These operational changes were
implemented in the first quarter of this year
with the impact of these changes taking
effect progressively throughout H1. Tissue
Regenix achieved wound care revenue of
$0.6m in the 4 months to 30 April 2017,
with 45% of revenue in April secured via
GPO agreements. With the benefits of the
restructured sales force already becoming
evident and as individual hospital approvals
increase, the Group expects sales in wound
care to accelerate significantly in the second
half of the year.
With DermaPure now positioned to
meaningfully increase market penetration, the
Group expects a significant and sustained
acceleration in sales growth over the medium
term based on DermaPure’s superior
patient outcomes, strong clinical support
and increasingly broadly-based hospital
approvals. As hospital-based adoption
increases the Group believes that this will
benefit its distributor channels as well as its
ability to address the out-patient setting.
The one year clinical data for OrthoPure XT
has been submitted to its notified body and
the Group believes this will support the grant
of a CE mark and allow for a commercial
roll out during 2017 despite the added
uncertainty that the new Medical Device
Regulations have brought to the regulatory
approval process.
In addition, GBM-V, the Group's controlled
joint venture in Europe is expected to make
an increased contribution during the first half
of this year with momentum expected to
continue as the year progresses.
The Group believes that the refocused
sales approach targeting key markets, its
broad development pipeline of innovative
products offering exciting organic growth
opportunities and its forthcoming entry into
the US orthopaedics market in 2018, means
that it is well placed for future growth.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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25380.02 1 June 2017 1:37 PM Proof 7TICKER AIM: TRX www.tissueregenix.comThroughout the year, our focus has remained on the execution of a successful commercialisation strategy for DermaPure® in the US, and we have concentrated efforts on our long-term strategy to position DermaPure® within the inpatient care setting. We have seen notable progress in the execution of our wound care strategy. The most significant, the approvals by Premier and Magnet Group Purchasing Organisations (GPOs), and Vizient, the largest GPO in the US. These agreements offer contracted access to approximately 75% of inpatient procedure volume in the US, and achieve an important milestone to facilitate access to the inpatient market. These GPO agreements demonstrate the progression of our strategy, moving from an outpatient focus to also encompass the inpatient setting, and further strengthen our market penetration potential by complementing the 93% Medicare coverage we previously gained. Further to the commercial value of these agreements, the approvals by Premier and Vizient were both granted under their respective innovative technology programmes, validating that DermaPure® offers unique attributes beyond current commercially available products, and may positively impact clinical care, safety and operational efficiencies. DermaPure® Commercial Offering As our strategy evolves, we continue to see opportunities for applications within different clinical areas, and will undertake the necessary clinical work in order to explore these potential opportunities. We have identified a number of unmet clinical needs, which we will address with our intention to bring to market thicker and larger sizes of DermaPure® this year, thus allowing us to treat the larger, more complex wounds often associated with a hospital stay. OPERATIONAL REVIEWWound CareDERMAPURE® BENEFITS COST OF CARE IMPACTStreamlined application process {Can by used “off the shelf” and tailor fit to wound size {Requires no thawing; stored at ambient temperature {Comes hydrated; requires only simple rinse prior to use Improved operational efficiencies {Reduces operating room time to prepare product {No specialty refrigeration monitoring {Reduces waste associated with case cancellations for competitive thawed productsSupports efficient discharge to lower cost care setting {Higher level of integration (vessel number and density) continues at day 28 (post-placement) and beyondImproved clinical outcomes {Treated wounds showed characteristics akin to acute (non-chronic) wound healing {Able to discharge patient to lower cost of care setting quickly and safely, reducing total costs to treat woundCan be used to complete wound closure, if desired {Provides epithelialisation over time and does not require a split thickness skin graft to closeImproved patient satisfaction {Reduce the need for additional OR time / visits {Fewer applications to healing, facilitating return to quality of life, and lower out-of-pocket copay costsAddresses foundation issues of chronic wounds {Creates strong foundation of angiogenesisDifferentiation relative to competing technologies {Demonstrated evidence on wounds unresponsive to other modalities {Outcomes based on clinical evidence with less than two applicationsJOEL PICKERING, PRESIDENT, TISSUE REGENIX WOUND CARE, INC“WE HAVE IDENTIFIED A NUMBER OF UNMET CLINICAL NEEDS, WHICH WE WILL ADDRESS WITH OUR INTENTION TO BRING TO MARKET THICKER AND LARGER SIZES OF DERMAPURE® THIS YEAR.”10Tissue Regenix AR2017-Proof 7.indd 1001/06/2017 13:38:43 T
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Business Model
We continue to exploit our hybrid sales
model, utilising both direct sales reps as
well as a number of distributors. Now that
we have improved access to the inpatient
market, via the GPO agreements, we
expect to see an increase in utilisation within
this setting. However, we also continue
to maintain and develop our relationships
within the outpatient setting which has
contributed to our commercialisation
success to date.
We also intend to bring to market
SurgiPure™ XD in the latter part of the year,
after initially pushing back the launch date
to allow for the redeployment of resources.
A decellularised porcine dermis for the
treatment of body wall defects and hernia
repair, SurgiPure™ XD will be positioned
in the complex hernia segment where the
market opportunity is currently valued at
$300m.
MARKET
OPPORTUNITY
In 2015 the US wound biologics
market size was $957m, with
skin/dermal substitutes, such as
DermaPure®, making up approximately
61% of this market, providing a
market segment value of $587.6m. It
has been estimated that the wound
biologics market will grow at a CAGR
of 9.8%, eclipsing a projected value of
$1.5bn by 2020.
Approximately 8% of diabetic
Medicare Beneficiaries will have a foot
ulcer and 1.8% have an amputation.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
DermaPure® continues to offer a cost-
effective solution for health care providers,
and the potential for patients to heal without
the need for multiple treatments. We expect
to unlock the true value of DermaPure® in
multiple care settings throughout this year.
Summary
Throughout the last year, we focused on
facilitating improved access for a number
of our key markets, successfully gaining
further Medicare coverage and GPO
agreements. Having completed much of
this necessary groundwork, we are now in a
strong position to push forward with a more
comprehensive commercialisation effort,
and expect that we will see revenue growth
to justify the efforts invested.
US Wound Biologics Market
Forecast 2015-2020E
CAGR 9.8%
1.52bn
1.41bn
1.29bn
1.19bn
1.09bn
0.9bn
5
1
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2
E
6
1
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2
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7
1
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2
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8
1
0
2
E
9
1
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2
E
0
2
0
2
Collagen/Active Dressings
S/D Amniotic Tissue/Allografts
S/D Dermal Allografts
S/D Xenographs & Other
S/D Cell-based Bioengineering
Topical Delivery/Drug
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25380.02 1 June 2017 1:37 PM Proof 7TICKER AIM: TRX www.tissueregenix.comSince the last set of results we have seen progress in both the EU and the US with our Orthopaedic product portfolio. EU OrthoPure™ XM We were encouraged by the initial results seen in the clinical trial for OrthoPure™ XM; proving the implant to be biocompatible, and showing integration into the patient’s own tissue. However, OrthoPure™ XM is currently undergoing an optimisation study to allow a single version to be marketed in both the EU and US. Further clarity around the steps needed to gain regulatory approval in the US was also established throughout this period. OrthoPure™ XT Prominent progress has been made with OrthoPure™ XT. We completed the clinical trial enrolment which allowed us to submit the encouraging initial six month clinical data for regulatory approval. It was expected that this approval would be granted by the end of CY16, a full six months ahead of schedule. However, the introduction of new Medical Device Regulations has resulted in an increased scrutiny of clinical results by the European Regulators and continues to make the precise timing of the CE mark approval for OrthoPure™ XT difficult to predict. A further submission of twelve month clinical data for OrthoPure™ XT was made, together with a revised packing format providing a shelf life increase from 6 months to 12 months. The product launch will follow shortly after CE mark approval is granted. It is currently expected that this will be achieved during 2017, with initial distributor agreements signed we expect to have a smooth commercial roll out in our key European markets. US We significantly increased our market presence in the US throughout the year. In addition to the appointment of a VP Orthopaedics in March 2016, we have since appointed a prestigious clinical advisory board, and begun discussions with a number of potential tissue bank partners for our human tissue (allograft) applications. As illustrated in the strategic report, we employ a dual tissue strategy and the commercialisation plan for our Orthopaedic products in the US is to lead with our allograft applications. The development of the OrthoPure™ HT decellularisation process has been completed and we are now in a position to transfer to a US tissue bank processing and distribution partner once identified.We have also been encouraged by initial conversations with the FDA, which are currently ongoing, to potentially accelerate a first in human US clinical study for OrthoPure™ XT. This study will facilitate a better understanding of milestones needed to enable market approval for OrthoPure™ XT in the USA.Potential Line Extensions Additional intra and extra articular indications are already in the late stages of development, as product line extensions. It is expected that regulatory submissions for these will also be made during 2017 and into 2018.OPERATIONAL REVIEWOrthopaedicsPETER HAMER, COMMERCIAL DIRECTOR,TISSUE REGENIX ORTHOPAEDICS LIMITED MARKET OPPORTUNITY ORTHOPURE™ XTACL RECONSTRUCTIONPCL, MCL. LCL, PLC MPFLFOOT, ANKLE, SHOULDER, ELBOWThe gold standard treatment for an ACL reconstruction is currently an autograft procedure. This involves “harvesting” tendon or ligament tissue from the patient’s body. Autografts have been associated with an increase in operation time, complications and morbidity of second surgical site, increased rehabilitation time and a decrease in function at the harvest site.Anterior Cruciate Ligament injury is very frequent, not only in professional athletes but also in anyone who practises sports regularly and increasingly in the elderly active populations. Conservative treatment usually fails and patients may show an accelerated onset of degenerative joint changes. ACL reconstruction aims to eliminate knee instability and prevent such degenerative changes and are amongst the most common sports medicine procedures performed globally each year at an estimated 720,000, creating a potential market of approximately $2bn.“THROUGHOUT THE YEAR WE ACHIEVED SIGNIFICANT MILESTONES FOR THE COMMERCIALISATION OF ORTHOPURE™ XT IN EUROPE.”12Tissue Regenix AR2017-Proof 7.indd 1201/06/2017 13:38:55 T
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Summary
Throughout the year we achieved significant
milestones for the commercialisation
of OrthoPure™ XT in Europe. We were
encouraged by the initial clinical results
returned from the trial and feel we are
positioned to have a successful commercial
launch into key European markets once CE
mark approval is gained. Line extensions
into additional application areas are being
researched and it is expected that regulatory
submission for these will quickly follow
allowing for an early 2018 launch.
In the US, we have begun to establish the
necessary regulatory work required to launch
our porcine products into this market. In
the meantime, we have been focused on
establishing a foothold with the allograft
derived version of our products and expect
that we will have identified relevant partners,
to allow for a technology transfer and launch
towards the back end of the year.
Anatomy of the knee
Quadriceps
Femur
Femur
Articular
cartilage
Meniscus
Lateral collateral
ligament
Anterior cruciate
ligament
Fibula
Articular
cartilage
Medial collateral
ligament
Meniscus
Tibia
Posterior cruciate
ligament
What is sports medicine?
Sports medicine focuses on helping people
recover from injury and prevent future injuries.
Tissue Regenix focuses on soft tissue injuries
which can affect ligaments and tendons.
OrthoPure™ XT will initially address Anterior
Cruciate Ligament (ACL) injuries, one of the
most common injuries sustained through
physical activity. The ACL is a fibrous band
which runs diagonally in the middle of the
front of the knee. Its primary function is
stability, preventing the tibia (shin bone)
sliding in front of the femur (thigh bone).
The main causes of injury to the ACL are
activities which involve a quick acceleration/
deceleration, change of direction, planting,
twisting and jumping, and it therefore
often affects participants in sports such as
football, basketball, tennis, swimming and
running.
However, it is unusual for such a trauma to
the knee joint to occur in isolation; therefore,
serious ACL injuries are often accompanied
by damage to other knee ligaments, or
a tear to the meniscus. The meniscus is
the cushioning that sits between the knee
bones, and a tear to this can lead to uneven
wearing of the joint surface and possible
early onset osteoarthritis.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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TICKER AIM: TRX www.tissueregenix.com1425380.02 1 June 2017 1:37 PM Proof 7CFO Statement“THE GROUP REPORTED WOUND CARE REVENUES OF £1,322K FOR THE 11-MONTH PERIOD (JANUARY 2016: £808K), AN INCREASE OF 64%.” PAUL DEVLIN CHIEF FINANCIAL OFFICERTissue Regenix plc have grown sales by 77% to £1,443k in the 11 months to December 2016 (January 2016: £816k). Operating loss in the same period was £11,060k (January 2016: £10,242k). Finance income was £114k in the period (January 2016: £213k) with a research and development tax credit of £1,034k (January 2016: £527k) generating a loss after tax of £9,912k (January 2016: £9,502k), of which £9,786k was attributable to equity holders. Accounting Reference Date Change As announced at the last annual result, the Group’s accounting reference period has been adjusted to a 31 December year end, meaning that the results now reported are for a shortened 11-month period, and moving forward will bring the fiscal year in line with the calendar year. Segmental AnalysisA split of the Group’s results by application area, as extracted from the operating segment analysis (see note 3), is shown below along with a further breakdown of administrative costs: Wound CareOrthopaedicsCardiacGBMVCentralTotal11Months up to31 Dec2016£00012 Months up to31 Jan2016£00011 Months up to31 Dec2016£00012 Months up to31 Jan2016£00011 Months up to31 Dec2016£00012 Months up to31 Jan2016£00011 Months up to31 Dec2016£00012 Months up to31 Jan2016£00011 Months up to31 Dec2016£00012 Months up to31 Jan2016£00011 Months up to31 Dec2016£00012 Months up to31 Jan2016£000Total segment1,322884 – – –76121 –81,443968Inter–segment–(76) – – –(76) – – –(152)Revenue1,322808 – – – –121 – –81,443816Cost of sales(288)(154) – – – –(66) – – –(354)(154)Gross Profit1,034654 – – – –55 – –81,089662Administrative costs(5,500)(4,938)(2,738)(2,382)(462)(352)(308)(183)(3,141)(3,049)(12,149)(10,904)Operating loss(4,466)(4,284)(2,738)(2,382)(462)(352)(253)(183)(3,141)(3,041)(11,060)(10,242)Finance income – – – – – – –114213114213Loss before taxation(4,466)(4,284)(2,738)(2,382)(462)(352)(253)(183)(3,027)(2,828)(10,946)(10,029)Taxation32316960032411116 – –181,034527Loss for the year(4,143)(4,115)(2,138)(2,058)(351)(336)(253)(183)(3,027)(2,810)(9,912)(9,502)Tissue Regenix AR2017-Proof 7.indd 1401/06/2017 13:39:04 T
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Wound Care
Orthopaedics
Cardiac
GBMV
Central
Total
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
Development
(388)
(1,108)
(2,376)
(2,279)
(363)
(289)
–
(4,626)
(3,672)
(486)
(158)
(246)
(116)
–
(103)
–
(99)
–
(63)
(308)
(183)
(3,141)
(3,049)
(4,150)
(3,556)
–
–
–
–
–
(3,127)
(3,676)
–
(4,872)
(3,672)
Sales and
marketing*
Operations**
Administrative
costs
(5,500)
(4,938)
(2,738)
(2,382)
(462)
(352)
(308)
(183)
(3,141)
(3,049)
(12,149)
(10,904)
* Sales and Marketing for Wound Care includes the entire costs for our US entity. Included within these costs is £607k (2016: £303k) commission on sales
** Operations includes travel, finance, board, legal, premises, depreciation, share based payment charge
The Group is organised into Cardiac,
Wound Care and Orthopaedics divisions
for internal management, reporting and
decision-making, based on the nature of
the products of the Group’s businesses.
For the first time, controlled joint venture
GBM-V has been separately analysed.
Central overheads, which primarily relate
to operations of the Group function are
generally not allocated to the business units.
These accounts have been prepared on a
going concern basis and I draw the readers
attention to the going concern statement in
the Corporate Governance Statement and
Note 1 to the financial accounts.
Wound Care
The Wound Care division remains by far the
largest contributor to sales for the Group,
with revenues of £1,322k for the 11-month
period (January 2016: £808k), an increase
of 64%. We continue to implement our
dual sales strategy, utilising both direct reps
and distributors for DermaPure®. We also
gained significant traction toward year end
with the announcement of the Premier, Inc.
GPO contract; however, due to the timing
of the agreement it had no material impact
on these figures. Following year end, we
also gained approval under Vizient, Inc, the
largest member owned GPO in the US.
Combined, this allows for potential access
to 75% of inpatient beds and we would
expect to see the results of this reflected in
the next set of annual results. The launch of
SurgiPure™ XD was postponed to allow for
the redeployment of resources.
Gross margin for the 11 month period
was 75%, in line with prior year (January
2016: 81%), and reflects the continued
programme of providing evaluation units and
improving market penetration. Additional
product sizes have been introduced over the
course of the year, adding to the product
mix effect on the margin.
Development costs for the post market
clinical data verification of DermaPure®
charged to the P&L has decreased year
on year to £388k (January 2016: £1,108k)
as costs to the value of £550k were
capitalised as SurgiPure™ XD received
510k clearance, reflecting the move to a
commercial product. Sales and Marketing
costs of £4,626k were incurred in the
period (January 2016: £3,672k), which are
expected to yield revenue benefits in FY17.
Commissions paid in the period of £607k
(January 2016: £303k) were driven by the
increase in sales via the distributor channel.
Orthopaedics
Investment in Orthopaedics continued in
the 11 month period with development
costs of £2,376k (January 2016: £2,279k),
and the recruitment of two commercial
positions; a VP Orthopaedics North America
to lead our entry into the US market place
with human tissue derived products, and
a EU Sales and Marketing Manager for
Orthopaedics in preparation for the launch
and commercialisation of OrthoPure™XT.
Costs have also been incurred on developing
marketing material in advance of the launch
of product into the market. Currently,
OrthoPure™ XT is expected to be launched
during 2017, subject to CE mark approval.
Cardiac
The results for the year for this segment are
not material. The joint venture tissue bank
has however been separately reported on
and is commented below. The £76k of
income from prior year relates to licensing
received in January 2016, which will fall into
the following year as a result of the change
in accounting reference date.
GBM-V
Our controlled joint venture processes our
human tissue applications within Europe,
and reported its first sales of £121k derived
from the commercialisation of cryo-preserved
corneas, it is expected that regulatory
approval for dCELL® products DermaPure®
and CardioPure™ (human heart valves) will be
achieved by year end, with commercialisation
expected in the first half of 2018. GBM-V is
consolidated for accounting purposes as
the accounting standards require this due
to having a majority of voting rights and
therefore control.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
Central
Central costs in the period were £3,141k
(January 2016: £3,049k), with the increase
being driven by relocating all UK personnel
into one premises.
Finance income
Finance income decreased to £114k
(January 2016: £213k) and represents
interest earned on cash deposits. The
Group follows a risk-averse policy of
treasury management. Cash deposits are
held across a number of counter parties
with institutions of prime financial standing.
The Group’s primary objective is to minimise
exposure to potential capital losses whilst
at the same time securing prevailing market
rates.
Taxation
The Group continues to submit enhanced
research and development tax claims and
elects to exchange tax losses for a cash
refund. The expected refund for the period
to December 2016 is £1,034k (January
2016: £527k). Tax losses carried forward
by the Group at the end of December 2016
were £32,037k (January 2016: £23,772k).
The Group therefore does not expect to pay
corporation tax for a number of years. Once
profitable, the Group also expects
to fall within the Patent Box regime and
benefit from the reduced corporation tax rate
within it.
Cash Balances
As at 31 December 2016 the Group had
cash resources of £8,173k (January 2016:
£19,907k) and was debt free. The outflow
in the year of £11,734k (January 2016:
£9,650k inflow after £20m financing) is
driven by the cash loss attributable to
operating activities.
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Risks
THE BOARD CAREFULLY CONSIDERS THE RISKS FACING THE GROUP AND
ENDEAVOURS TO MINIMISE THEIR IMPACT THROUGH THE NECESSARY
MITIGATING ACTIONS. THE PROMINENT RISKS FACING THE GROUP AT THIS
TIME ARE LISTED BELOW.
RISK AND IMPACT
MITIGATING FACTORS
Sourcing of Tissues
As we have a variety of tissue derived products the supply of
suitable donated human tissue could be a limitation.
We also rely on sourcing human tissue from accredited tissue bank
partners who carry their own company risks and potential failures.
There are also ethical implications around the sourcing of human
tissue and ensuring its proper use.
We employ a dual tissue strategy meaning that we can ensure that
supply will meet demand with our porcine variations of products.
Currently, we only have one tissue bank partner, therefore, we are
actively seeking another source to mitigate the reliance on a single
source.
We will only partner with tissue banks, and in territories that meet
our own ethical standards.
Intellectual Property
The success of the Group hinges on our ability to exploit our
intellectual property and ensure that this is not breached. We hold
a number of process patents; however, these can be difficult to
defend.
Management of Cash
The Company is currently consuming cash to fund working capital.
Whilst the funds raised are anticipated to provide funding for the
foreseeable future. The Company must ensure adequate measures
are in place to ensure to control and manage cash
Macroeconomic Risk
There is currently uncertainty around the position of Britain’s exit
from the EU, the impact that this may have on regulatory pathways
and the potential for political changes to the NHS.
There have also been significant changes since the US election
and it is still unclear how this may affect the healthcare and
reimbursement systems long term.
A significant amount of “know-how” is retained within the
Company which is not disclosed under patents.
The Company reports and forecasts cash on a regular basis
ensuring sufficient funds are in place. These forecasts and reports
are reviewed by the board monthly
Government imposed restrictions on healthcare spending work
in our favour as dCELL® products can potentially offer optimal
standard of care with less applications, or reduced rehab time.
There is also a minimised re-operation rate, reduced risk of
rejection and no need for anti- coagulant drugs.
Clinical Trials and Regulatory Pathways
We currently have a number of ongoing clinical trials and are in
the process of establishing the necessary work for US regulatory
pathways for porcine orthopaedic applications. Failure to comply
with the necessary clinical and ethical work specific to each
country would present a barrier to entry and significant financial
implications.
The Group has invested heavily in a robust regulatory and quality
department ensuring that the Company operates within the
necessary guidelines for each territory. We employ a number of
external advisers to ensure that we remain within the restrictions
imposed by clinical trials and to ensure correct reporting of all
results. The manufacturing facility is ISO 13485 accredited, and we
follow all regulatory imposed operational requirements.
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RISK AND IMPACT
MITIGATING FACTORS
Transfer of Technology to Partners
In order to process our human tissue applications we require the
transfer of the technology to partners where there is the potential
for a leak of Intellectual Property.
Any transfer of Intellectual Property or “know-how” is done
so under strict legal agreements and the Group looks only to
undertake such arrangements with partners, and in territories
where there is appropriate legal protection.
Retention of Staff
We have a number of roles which require specialised knowledge
of the Technology, and Company, which are also privy to sensitive
Intellectual Property. There are also commercial roles fundamental
in building the commercial success of the Company across various
subsidiaries and territories.
The Company ensure to an internal succession plan in place for
all positions fundamental to the smooth operating of the Company
and continually monitors the relevant talent pools for future
recruitment. Staff privy to sensitive information are tied into non-
disclosure agreements and were a breach of intellectual property
to happen, all clinical data for dCELL® Technology is owned and
specific to the Tissue Regenix Group.
Damage to Manufacturing Facility
There is the potential for a damaging incident, e.g. fire, to occur
at our manufacturing facility. This would have an impact on
production of our porcine products and therefore potential sales.
We have a comprehensive risk analysis procedure in place and
test all alarm systems on a weekly basis, whilst continually pact
testing all electrical equipment. We have an out of hours team
that are available around the clock should a breach occur out of
operating hours. Our research and development laboratories are
contained within separate building units, meaning that should there
be an incident in one, it will not affect all business activities. Should
a power outage occur, a number of generators can be employed
to ensure that this does not affect the manufacturing process or
loss of the temperature controlled materials.
Product Quality
The Group operates in a highly regulated environment with strict
quality requirements. Failure to meet these standards could result
in the loss of reputation, loss of revenues, loss of a customer, recall
costs as well as sanctions from the regulator.
The Group operates a strictly controlled Quality Management
System and has in-house experts to ensure compliance with all
regulatory requirements. We continually test the quality of our
products in-house and have these results verified by external
analysis.
Competition
As the focus on regenerative medicine increases there may be
products or companies that could be in direct competition with
our product portfolio or decellularisation technology which could
potentially have a detrimental effect on the commercial success
of the Company. This now also includes to a much larger extent
breakthroughs in modern technology such as 3D printing.
We continually monitor the competitive landscape in order to
understand where best to position our products and the alternative
treatment options that may be available.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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TICKER AIM: TRX www.tissueregenix.com1825380.02 1 June 2017 1:37 PM Proof 7Board of DirectorsJonathan GlennNon-Executive DirectorJonathan was Group Finance Director of Consort Medical plc from September 2006 to December 2007 until he took up the position of Chief Executive Officer in December 2007. Prior to joining Consort Medical plc, Jonathan was global Head of Finance at Celltech Group plc and later Chief Financial Officer of Akubio Ltd, a Cambridge-based developer of instrumentation for the Life Sciences industry. Mr Glenn is a member of the Institute of Chartered Accountants in England and Wales.John SamuelChairmanJohn Samuel joined Tissue Regenix Limited as Chairman in March 2008. John qualified as a Chartered Accountant with Price Waterhouse and has held a number of senior finance positions in industry. He was formerly the CEO of the Molnlycke Health Care Group, a global provider of single use surgical and wound care products to the healthcare sector. Until January 2010 he was a Partner with Apax Partners LLP. Currently he is also Chairman of Xeros Group Plc, and VernaCare Group Ltd.Antony Odell Chief Executive OfficerAntony Odell was appointed CEO of Tissue Regenix in October 2008 and has led its growth from a small privately held spin-out to the present time. He has over 30 years commercial experience in the medical technology sector. Antony has a strong corporate sector background having worked for Critikon, Johnson & Johnson Medical and was European Business Director for its Vascular Access franchise, General Manager (UK & Ireland) for Fresenius (Critical Care & Diagnostics) and International Knee Manager for Stryker (Howmedica International). Antony was also VP, Medical for BTG when the company was involved in early stage technology commercialisation and was CEO for a Scottish NHS cardiovascular device spin-out, Tayside Flow Technologies Ltd (now Vascular Flow Technologies Ltd).Paul Devlin Chief Financial OfficerPaul joined Tissue Regenix plc as CFO in January 2017, having spent the largest part of his career in businesses undergoing significant change. His experience includes listed and private equity owned businesses in the FMCG, food, pharmaceutical and healthcare technology sectors. Recent experience includes the sale of Fletchers Bakeries to Finsbury Food Group plc, part of which was the successful reverse listing of Fletchers on AIM. Previous employment includes Northern Foods plc, Mallinckrodt Inc., Bakkavor and Tunstall Healthcare.Tissue Regenix AR2017-Proof 7.indd 1801/06/2017 13:39:13 TISSUE REGENIX GROUP PLC ANNUAL REPORT AND ACCOUNTS FOR THE 11 MONTHS UP TO 31 DECEMBER 2016GOVERNANCE1925380.02 1 June 2017 1:37 PM Proof 7Alan MillerNon-Executive DirectorAlan Miller is the Chief Investment Officer and a Founding Partner of SCM Direct, an online wealth management company. He was formerly the Chief Investment Officer and founding shareholder of New Star Asset Management from early 2001 until early 2007. Prior to that, Alan was a Director at Jupiter Asset Management in charge of their specialist high performance division between 1994 and 2000. He is also a qualified accountant and alumni of the London Business School.Randeep Singh GrewalNon-Executive DirectorRandeep Grewal is a fund manager at Trium Capital LLP. He has 17 years of experience in institutional investing having worked at F&C Asset Management, ICAP Equities and Tudor Capital, where he spent ten years covering and investing in healthcare companies. He is also a non-executive director of BB Healthcare Investment Trust, listed on the London Stock Exchange, since December 2016. Randeep has been involved in a number of start-up and early stage companies both personally and as an investor. He read medicine at the University of Cambridge and trained in the NHS as a vascular surgeon for eight years.Steven CouldwellNon-Executive DirectorWith over 18 years of senior management experience, Steven Couldwell was formerly Chief Operating Officer and Head of Global Biosurgery division at Sanofi, which has revenues of approximately $750m. He has a proven international track record in driving revenues and profit growth in the pharmaceutical, medical device and CRO industries. Steven was formerly Vice President and General Manager of Covance Laboratories Europe and worked for Smith & Nephew for almost 20 years in a number of roles including President Orthopaedics (Europe) and Senior VP Sales and Marketing for Smith & Nephew’s Advanced Wound Management business.Shervanthi Homer-VanniasinkamNon-Executive DirectorShervanthi Homer-Vanniansinkim graduated from Mysore University in India in 1981. She later became a Fellow of the Royal College of Surgeons of Edinburgh in 1989, and a Fellow of the Royal College of Surgeons of England in 1998. She was appointed Consultant Vascular Surgeon at Leeds General Infirmary in 1995, a post she continues to hold. She also holds a number of appointments with various higher education and health trusts around the country including; Consultant Vascular Surgeon, The General Infirmary at Leeds, Clinical Sub-Dean, University of Leeds Medical School, Professor of Surgery (Founding), University of Warwick Medical School & University Hospitals Coventry and Warwickshire NHS Trust, Professor of Engineering and Surgery, University College London.Tissue Regenix AR2017-Proof 7.indd 1901/06/2017 13:39:20 Governance Framework
Board of
Directors &
Committees
Risk &
Performance
Management
Legal &
Regulatory
Communication
Code of
Conduct &
Ethics
THE COMPANY EMPLOYS SEVERAL LEVELS OF CORPORATE GOVERNANCE
MANAGEMENT IN ORDER TO MINIMISE RISK, ENSURE COMPLIANCE AND
STRATEGIC ALIGNMENT THROUGHOUT ALL MEMBERS OF THE GROUP AND
ITS SUBSIDIARY COMPANIES.
The structure of the internal control system is separated into many
levels linked by consistent and transparent communications, both to
internal and external stakeholders.
The Board of Directors & Committees:
Monitor the internal control system, reviewing accounting
information, potential business risks, employee policies and
market communications. The Board also splits into an Audit and
Remuneration Committee to ensure compliance with market
imposed regulations:
Remuneration Committee:
STEVE COULDWELL CHAIR
RANDEEP GREWAL
ALAN MILLER
Audit Committee:
ALAN MILLER CHAIR
RANDEEP GREWAL
JONATHAN GLENN
Legal & Regulatory
We employ a number of legal and regulatory advisers, for both our
stock exchange listing, and also validation of our products and
clinical trial pathways.
Business Practices & Ethics
As a Company that operates in a highly regulated and sensitive
environment we ensure that we operate with a vigorous code of
conduct and ethics. We also monitor any existing and potential
partners to ensure that they align with our company values.
Risk & Performance Management
As a Company we are well aware of, and continually monitor, the
primary risks to our business, and any external developments that
occur that could have a detrimental effect on the performance of
the Company and look to take the necessary actions to mitigate any
impact that these could have on our performance.
Internally, we report our monthly performance against a number
of objectives and COGs allowing us to track performance
management, and identify and potential improvements to our
structure and operational efficiencies.
Communications
We communicate any relevant Company news to external
stakeholders in the most timely manner possible through the
necessary news flow outlets. The Board reviews all relevant
information to ensure that the correct information is adequately
explained to offer transparency and a true reflection of the Company.
Internal and cross company communications is equally as valued
and we have a number of staff engagement initiatives in order to
keep knowledge and alignment with the Corporate positioning,
values and progress high.
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Corporate Governance Statement
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Going Concern
As at 31 December 2016, the Group had £8.2m of cash and cash
equivalents available to it, with an updated balance as of 30 April
2017 of £5.4m, providing the Group with sufficient funds until Q3 of
the current year. The Directors have considered their obligation, in
relation to the assessment of the going concern of the Group and
each statutory entity within it and have reviewed the current budget
cash forecasts and assumptions as well as the main risk factors
facing the Group as set out on page 16.
The Directors reasonably believe that additional funds will be raised
before current funding is exhausted that will provide the company
with sufficient funds to continue its activities for not less than 12
months from the date of approval of these financial statements.
The growing commercial traction of the wound care business in
the US and the increasing contribution to Group revenue from the
GBM-V controlled joint venture, also reduce the historic rate of cash
consumption, which is currently £1m per month. These financial
statements have therefore been prepared on a going concern basis.
Corporate governance
The Directors recognise the importance of sound corporate
governance and have observed the principles of the UK Corporate
Governance Code, to the extent that they consider them
appropriate for the Group’s size, throughout the accounting year.
The Board
The Board currently comprises three Executive Directors and five
Non-Executive Directors.
Audit Committee
The Audit Committee’s primary responsibilities are to monitor the
integrity of the financial affairs and statements of the Company,
to ensure that the financial performance of the Company and any
subsidiary of the Company is properly measured and reported
on, to review reports from the Company’s Auditors relating to the
accounting and internal controls and to make recommendations
relating to the appointment of the external Auditors.
The Audit Committee comprises Alan Miller, who acts as chairman
of the committee, Jonathan Glenn and Randeep Grewal.
Internal Control
The Board is responsible for maintaining a sound system of
internal control. The Board’s measures are designed to manage,
not eliminate risk, and such a system provides reasonable but not
absolute assurance against material misstatement or loss. The
Board confirms that it has established the procedures necessary to
implement the guidance “Internal Control Guidance for Directors on
the Combined Code” (The Turnbull Report).
Some key features of the internal control system are:
I. Management accounts information, budgets, forecasts and
business risk issues are regularly reviewed by the Board who
meet at least ten times per year;
II. The Company has operational, accounting and employment
policies in place;
III. The Board actively identifies and evaluates the risks inherent
in the business and ensures that appropriate controls and
procedures are in place to manage these risks;
IV. There is a clearly defined organisational structure; and
V. There are well-established financial reporting and control
systems.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Directors’ Remuneration Report
Remuneration Policy
The Group’s policy is to provide Executive Directors with a
competitive market-based package in order to reward individual and
Group performance and deliver outstanding shareholder returns.
The Remuneration Committee is committed to ensuring that the
Company’s key executive team is incentivized to drive sustainable
earnings growth and returns to shareholders, thereby creating a
genuinely strong alignment of interests between management and
investors.
It is the Company’s policy that Executive Directors should have
contracts with an indefinite term providing for a maximum of six
months’ notice. In the event of early termination, the Directors’
contracts provide for compensation up to a maximum of basic
salary for the notice period.
Non-Executive Directors are employed on letters of appointment
which may be terminated on not less than three months’ notice.
Companies with securities listed on AIM do not need to comply with
the UKLA Listing Rules. The Remuneration Committee is however
committed to maintaining high standards of corporate governance
and disclosure and has applied the guidelines as far as practical
given the current size and development of the Company.
Remuneration Committee
The Remuneration Committee’s primary responsibilities are to review
the performance of the Executive Directors of the Company and to
determine the broad policy and framework for their remuneration
and the terms and conditions of their service and that of senior
management (including the remuneration of and grant of options to
such persons under any share scheme adopted by the Company).
The Remuneration Committee comprises Steven Couldwell, who is
chairman of the committee, Randeep Grewal, and Alan Miller. The
committee meets no less than twice in each financial year.
The main elements of the remuneration packages for Executive
Directors and senior management are:
Basic annual salary
The base salary is reviewed annually at the beginning of each year.
The review process is undertaken by the Remuneration Committee
and takes into account several factors, including the current position
and development of the Group, individual contribution and market
salaries for comparable organisations.
Discretionary annual bonus
All Executive Directors and senior managers are eligible for a
discretionary annual bonus which is paid in accordance with a
bonus scheme developed by the Remuneration Committee. This
takes into account individual contribution, business performance
and commercial progress, along with financial results.
On 24 April 2014 the Remuneration Committee approved the
implementation of a deferred annual bonus plan to commence from
the financial year ended 31 January 2014 (the “Deferred Annual
Bonus Plan”). Under the terms of the Deferred Annual Bonus Plan
directors and senior managers may waive up to 50% of their annual
cash bonus and in return receive a share option over ordinary shares
in the Company (the “Deferred Allocation”). The number of ordinary
shares comprising the Deferred Allocation (i.e. subject to the option)
will be calculated by dividing the amount of the cash bonus waived
by the closing market value of the ordinary shares of the Company
on the dealing day immediately prior to the date of deferral of the
bonus. The Deferred Allocation option is not capable of exercise until
the vesting date has been reached which is three years from the
date of grant of the award. By participating in the Deferred Annual
Bonus Plan Directors and senior managers will be entitled to receive
a matching award at no additional cost (the “Matching Allocation”).
The Matching Award will be an option over ordinary shares in the
Company. The number of ordinary shares comprising the Matching
Allocation will be equivalent to three times the number of ordinary
shares received in the Deferred Allocation. Participants will not be
entitled to receive the Matching Allocation until the vesting date is
reached which is three years from the date of grant of the award.
Additionally, participants will not be entitled to receive the Matching
Award unless shares price growth performance targets have been
achieved and those price targets sustained for 30 consecutive days.
Share incentive schemes
The Group operates a share option plan, under which certain
Directors and senior management have been granted options to
subscribe for ordinary shares. All options are equity settled. The
options are subject to service and performance conditions, have
an exercise price of between 0.5 pence and 22.5 pence and the
vesting period is generally one-three years. If the options remain
unexercised after a period of ten years from the date of grant, the
options expire. The Group has no legal or constructive obligation to
repurchase or settle the options in cash.
In addition, certain Executive Directors are eligible to acquire
interests in ordinary shares in the Company to be owned jointly
with the trustee of the Tissue Regenix Group Employee Share Trust
(EBT) and under which, subject to meeting performance criteria
conditions, most of any future increase in the value of the shares will
accrue to the employees.
Remuneration Policy for
Non-Executive Directors
Remuneration for Non-Executive Directors is set by the Chairman
and the Executive Members of the Board. Non-Executives do not
participate in bonus schemes.
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Directors’ Remuneration
The remuneration of the main Board Directors’ of Tissue Regenix who served in the 11 months to 31 December 2016 was:
Antony Odell1
John Samuel1
Ian Jefferson1*
Randeep Grewal
Steven Couldwell
Jonathan Glenn
Alan Miller
Shervanthi Homer-Vanniansinkim
Total
Salary & fees
£000
183
99
240
18
23
21
23
15
Bonus
£000
100
–
–
–
–
–
–
–
Benefits
£000
Total up to
December
2016
£000
Total up to
January 2016
£000
10
–
12
–
–
–
–
–
293
99
252
18
23
21
23
15
310
100
212
20
25
–
25
–
622
100
22
744
692
1.
*
In addition certain directors hold employee share scheme interests in the company. Fair value share based payment charges recognised in the consolidated
statement of comprehensive income attributable to these directors are; John Samuel £4,000 (2015: £13,000), Antony Odell £45,000 (2016: £35,000), Ian
Jefferson £NIL (2016: £46,000)
Included within this salary is £50,000 for exiting the business, and £52,500 payment in lieu of notice.
Directors’ Shareholdings
Directors’ interests in the shares of the Company, including family interests at 31 December 2016 were:
John Samuel2
Antony Odell2
Ian Jefferson2
Alan Miller
2.
Includes shares held jointly by the director and EBT as set out below.
31 December
2016
Number
Ordinary shares of 0.5p each
31 January
31 December
2016
2016
Number
%
24,276,928
3.19%
24,276,928
5,572,800
1,009,404
0.73%
0.13%
5,572,800
1,009,404
21,886,988
2.88%
21,886,988
31 January
2016
%
3.19%
0.73%
0.13%
2.88%
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Directors’ Remuneration Report
Directors’ Interests in Jointly Owned EBT Shares and Share Options
Directors’ interests in shares owned jointly with the Trustees of the Tissue Regenix Group Employee Benefit Trust (EBT) and in share options
to acquire ordinary shares of 0.5 pence each in the Company at 31 January 2016 were:
At
1 February
2016
Exercised
during year
Lapsed
during year
Granted
during year
At
31 December
2016
Exercise
price
Approved EMI scheme options
Antony Odell1
Antony Odell2
Antony Odell3
Ian Jefferson4
Ian Jefferson3
John Samuel5
John Samuel3
Unapproved scheme options
Antony Odell6
Antony Odell8
Antony Odell10
Ian Jefferson6
Ian Jefferson7
Ian Jefferson9
Ian Jefferson11
John Samuel6
EBT scheme shares12
Antony Odell
Ian Jefferson
John Samuel
8,307,608
1,187,200
577,777
872,727
577,777
2,400,000
577,777
422,223
519,480
–
122,779
346,936
505,976
–
88,890
5,372,800
827,586
10,740,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
260,202
379,182
629,031
–
–
–
–
–
–
–
–
–
–
–
–
8,307,608
0.73 pence
1,187,200
5.00 pence
577,777
22.50 pence
872,727
13.75 pence
577,777
22.50 pence
2,400,000
5.00 pence
577,777
22.50 pence
422,223
22.50 pence
519,480
0.05 pence
1,021,936
1,021,936
0.05 pence
–
–
–
122,779
22.50 pence
86,734
0.05 pence
126,794
0.05 pence
838,708
209,677
0.05 pence
–
–
–
–
88,890
22.50 pence
5,372,800
5.00 pence
827,586
14.50 pence
10,740,000
5.00 pence
1. There were no performance conditions in relation to the 8,307,608 options granted to Antony Odell prior to the reverse acquisition all of which were eligible
to be exercised at 31 January 2016.
2. There were employment period and performance conditions in relation to the 1,187,200 options granted on 29 June 2010 which allowed for vesting in three
equal proportions on or after the three consecutive annual anniversaries from the date of grant, subject to the Company’s share price reaching 10 pence per
share, 15 pence per share and 20 pence per share by the respective three vesting dates. As at 31 January 2016 all the performance conditions had been
met and the options were eligible for exercise.
3. There were employment period and performance conditions in relation to the 577,777 options granted on 4 February 2014 which allowed for vesting in three
equal proportions on or after the three consecutive annual anniversaries from the date of grant, subject to the Company’s share price reaching 30 pence per
share, 40 pence per share and 50 pence per share by the respective three vesting dates. As at 31 January 2016 none of the performance conditions had
been met and no options were eligible for exercise.
4. There were employment period and performance conditions in relation to the 872,727 options granted on 6 July 2011 which allowed for vesting in three
equal proportions on or after the three consecutive annual anniversaries from the date of grant, subject to the Company’s share price reaching 15 pence per
share, 20 pence per share and 25 pence per share by the respective three vesting dates. As at 31 January 2016 all the performance conditions had been
met and the options were eligible for exercise.
5. There were employment period and performance conditions in relation to the 2,400,000 options granted on 29 June 2010 which allowed for vesting in three
equal proportions on or after the three consecutive annual anniversaries from the date of grant, subject to the Company’s share price reaching 10 pence per
share, 15 pence per share and 20 pence per share by the respective three vesting dates. As at 31 January 2016 all the performance conditions had been
met and the options were eligible for exercise.
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6. There were employment period and performance conditions in relation to the 422,223, 122,779 and 88,890 options granted on 4 February 2014 which
allowed for vesting in three equal proportions on or after the three consecutive annual anniversaries from the date of grant, subject to the Company’s share
price reaching 30 pence per share, 40 pence per share and 50 pence per share by the respective three vesting dates. As at 31 January 2016 none of the
performance conditions had been met and no options were eligible for exercise.
7. There were employment period and performance conditions in relation to the 346,936 options granted on 20 May 2014 under the Company Deferred Annual
Bonus plan. 86,734 options vest after three years and correspond to the amount of bonus deferred by the participant. The remaining 260,202 options which
relate to the matching award vest in three equal proportions three years after the date of grant, subject to the Company’s share price reaching 30 pence per
share, 40 pence per share and 50 pence per share by the vesting dates. As at 31 December 2016 the matching award had lapsed due to resignation.
8. There were employment period and performance conditions in relation to the 519,480 options granted on 12 May 2015 under the Company Deferred Annual
Bonus plan. 129,870 options vest after three years and correspond to the amount of bonus deferred by the participant. The remaining 389,610 options
which relate to the matching award vest in three equal proportions three years after the date of grant, subject to the Company’s share price reaching 25
pence per share, 30 pence per share and 35 pence per share by the vesting dates. As at 31 January 2016 none of the performance conditions had been
met and no options were eligible for exercise.
9. There were employment period and performance conditions in relation to the 505,976 options granted on 12 May 2015 under the Company Deferred
Annual Bonus plan. 126,494 options vest after three years and correspond to the amount of bonus deferred by the participant. The remaining 379,482
options which relate to the matching award vest in three equal proportions three years after the date of grant, subject to the Company’s share price reaching
25 pence per share, 30 pence per share and 35 pence per share by the vesting dates. As at 31 December 2016 the matching award had lapsed due to
resignation.
10. There were employment period and performance conditions in relation to the 1,021,936 options granted on 29 June 2016 under the Company Deferred
Annual Bonus plan. 255,484 options vest after three years and correspond to the amount of bonus deferred by the participant. The remaining 766,452
options which relate to the matching award vest in three equal proportions three years after the date of grant, subject to the Company’s share price reaching
20 pence per share, 25 pence per share and 30 pence per share by the vesting dates. As at 31 December 2016 none of the performance conditions had
been met and no options were eligible for exercise
11. There were employment period and performance conditions in relation to the 838,708 options granted on 29 June 2016 under the Company Deferred
Annual Bonus plan. 209,677 options vest after three years and correspond to the amount of bonus deferred by the participant. The remaining 629,031
options which relate to the matching award vest in three equal proportions three years after the date of grant, subject to the Company’s share price reaching
20 pence per share, 25 pence per share and 30 pence per share by the vesting dates. As at 31 December 2016 the matching award had lapsed due to
resignation
12. The Tissue Regenix Group Employee Benefit Trust (“the EBT”) was established with Osiris Management Services Limited appointed as trustee (“the Trustee”)
to enable the Trust to acquire ordinary shares in the Company and to make interests in those shares available for the benefit of current and future employees
of the Company and its subsidiaries. Antony Odell and John Samuel have interests in ordinary shares in the Company which were acquired jointly with the
Trustee in the market on 29 June 2010 at a price of 5 pence per share. Ian Jefferson has an interest in ordinary shares in the Company which were acquired
jointly with the Trustee in the market on 25 July 2012 at a price of 14.25 pence. The shares were all acquired pursuant to certain conditions set out in Joint
Owned Equity agreements (“JOEs”). Subject to meeting the performance criteria conditions set out in the JOEs, most of any future increase in the value of
the shares will accrue to the employees provided that they have not ceased employment with the Group on or before the date that these conditions are met.
The employees are also under certain circumstances able to benefit from an increase in the value of the Shares on a takeover, change of control, scheme of
arrangement or a voluntary winding-up of the Company. Where the performance conditions are not met, the Trustee has an option to acquire the interests
of the employees in the shares at a price equal to the original purchase cost they paid so that none of any increase in the value of the shares will accrue to
them. The market price of the shares at 31 January 2015 was 15.38 pence per share, the highest and lowest prices during the year were 20.75 pence and
13.25 pence respectively. Further details of all share options and jointly owned shares held by the Trustee are set out in note 16 to the financial statements.
On behalf of the Board
STEVE COULDWELL
CHAIRMAN OF THE REMUNERATION COMMITTEE
2 June 2017
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Directors’ Report
The Directors present their report and consolidated financial
statements for the year ended 31 December 2016.
Directors and Their Interests
The following Directors held office in the year.
Principal Activity
The principal activity of the Group is the exploitation of innovative
platform technologies in the field of tissue engineering and
regenerative medicine. The Company is incorporated and domiciled
in the UK.
Business Model
A description of the Company’s activities and how it seeks to add
value are included in the Chairman’s statement and Chief Executive’s
report on pages 4 and 7 to 9.
Business Review and Results
A review of the Group’s performance and future prospects is
included in the Chairman’s statement and Chief Executive’s report
on pages 4 and 7 to 9. The loss for the 11 months attributable to
equity holders was (£9,787) (12 months to January 2016: £9,411k).
The Directors do not recommend the payment of a dividend (2016:
nil).
Share Capital and Funding
Full details of the Group and Company’s share capital movements
during the year are given in note 15 to the financial statements.
John Samuel
Antony Odell
Ian Jefferson
(resigned 21 November 2016)
Paul Devlin
(appointed 06 January 2017)
Steve Couldwell
Jonathan Glenn
Shervanthi Homer-Vanniansinkam (appointed 01 June 2016)
Alan Miller
Randeep Singh Grewal
Directors’ interests in the shares of the Company, including family
interests, are included in the Remuneration Report on pages 22 to
25.
Directors’ Indemnity Insurance
The Group has maintained insurance throughout the year for its
Directors and officers against the consequences of actions brought
against them in relation to their duties for the Group.
Substantial Shareholders
As at 31 December 2016, shareholders holding more than 3% of the share capital of Tissue Regenix Group plc were:
Name of shareholder
Invesco Limited
Woodford Investment Management LLP
Techtran Group Ltd
Baillie Gifford & Co Ltd
Leeds University
Jupiter
NFU Mutual
John Samuel*
* Includes 10,740,000 shares held jointly by the Director and the Tissue Regenix Employee Share Trust.
Number of
shares
% of voting
rights
211,328,351
147,057,872
103,042,837
50,550,887
33,980,127
33,308,392
26,564,000
24,276,928
27.80
19.35
13.56
6.65
4.39
4.45
3.49
3.19
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Employment Policies
The Group supports employment of disabled people where possible
through recruitment, by retention of those who become disabled
and generally through training, career development and promotion.
The Group is committed to keeping employees as fully informed as
possible with regard to the Group’s performance and prospects and
seeks their views, wherever possible, on matters which affect them
as employees.
Statement as to Disclosure of Information
to the Auditor
The Directors who were in office on the date of approval of these
financial statements have confirmed, that as far as they are aware,
that there is no relevant audit information of which the Auditor is
unaware. Each of the Directors has confirmed that they 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 it has been communicated to the Auditor.
Auditor
In accordance with section 489 of the Companies Act 2006,
a resolution to appoint KPMG LLP as Auditor will be made to
members at the Annual General Meeting.
On behalf of the Board
ANTONY ODELL
CHIEF EXECUTIVE OFFICER
2 June 2017
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Statement of Directors’ Responsibilities
IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the parent company and enable them to
ensure that its financial statements comply with the Companies Act
2006. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Group and parent
company financial statements for each financial year. As required by
the AIM Rules of the London Stock Exchange they are required to
prepare the Group financial statements in accordance with IFRSs as
adopted by the EU and applicable law and have elected to prepare
the parent company financial statements on the same basis.
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 of the Group and parent Company and of
their profit or loss for that period. In preparing each of the Group and
parent company financial statements, the Directors are required to:
{ select suitable accounting policies and then apply them
consistently;
{ make judgements and estimates that are reasonable and
prudent;
{ state whether they have been prepared in accordance with
IFRSs as adopted by the EU; and
{ prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
parent company will continue in business.
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Independent Auditor’s Report
TO THE MEMBERS OF TISSUE REGENIX GROUP PLC
We have audited the financial statements of Tissue Regenix Group plc for the period ended 31 December 2016 set out on pages 30 to 55.
The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the EU and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
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.
Respective Responsibilities of Directors and Auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 28, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on,
the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require
us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the Audit of the Financial Statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/
auditscopeukprivate.
Opinion on financial statements
In our opinion:
{ the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2016
and of the Group’s loss for the period then ended;
{ the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
{ the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in
accordance with the provisions of the Companies Act 2006; and
{ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on Other Matters Prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year is consistent with the financial
statements.
Based solely on the work required to be undertaken in the course of the audit of the financial statements and from reading the Strategic
report and the Directors’ report:
{ we have not identified material misstatements in those reports; and
{ in our opinion, those reports have been prepared in accordance with the Companies Act 2006.
Matters on Which We Are Required to Report by Exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
{ adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
{ the Parent Company financial statements are not in agreement with the accounting records and returns; or
{ certain disclosures of Directors’ remuneration specified by law are not made; or
{ we have not received all the information and explanations we require for our audit.
IAN BEAUMONT (SENIOR STATUTORY AUDITOR)
FOR AND ON BEHALF OF KPMG LLP, STATUTORY AUDITOR
CHARTERED ACCOUNTANTS
1 SOVEREIGN SQUARE
LEEDS
LS1 4DA
2 June 2017
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Consolidated Statement of Comprehensive Income
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
REVENUE
Cost of sales
GROSS PROFIT
Administrative expenses
OPERATING LOSS
Finance income
LOSS BEFORE TAXATION
Taxation
LOSS FOR PERIOD
ATTRIBUTABLE TO:
Equity holders of the parent
Non-controlling interests
OTHER COMPREHENSIVE INCOME:
Foreign currency translation differences – foreign operations
TOTAL COMPREHENSIVE EXPENSE FOR THE PERIOD
ATTRIBUTABLE TO:
Equity holders of the parent
Non-controlling interests
LOSS PER SHARE
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
Notes
3
3
4
6
7
1,443
(354)
1,089
(12,149)
(11,060)
114
816
(154)
662
(10,904)
(10,242)
213
(10,946)
(10,029)
1,034
(9,912)
527
(9,502)
(9,786)
(126)
(9,912)
(9,410)
(92)
(9,502)
(1)
(1)
(9,913)
(9,503)
(9,787)
(126)
(9,913)
(9,411)
(92)
(9,503)
Basic and diluted on loss attributable to equity holders of the parent
8
(1.29)p
(1.27)p
The loss for the period arises from the Group’s continuing operations.
The accompanying notes form an integral part of the financial statements.
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Consolidated Statement of Changes in Equity
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
Attributable to equity holders of the parent
Share
capital
£000
Share
premium
£000
Merger
reserve
£000
Reverse
acquisition
reserve
£000
Reserve
for own
shares
£000
Share
based
payment
reserve
£000
Retained
earnings
deficit
£000
Non-
controlling
interests
£000
Total
£000
Total
equity
£000
At 31 January 2015
3,271
31,972
10,884
(7,148)
(831)
810
(27,380) 11,578
– 11,578
Loss for the period
Other comprehensive
expense
Loss and total
comprehensive
expense for the period
Non-controlling interest
arising on creation of a
joint venture
–
–
–
–
–
–
–
–
Issue of shares
526
18,421
Exercise of share
options
Share based payment
expense
4
–
68
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 31 January 2016
3,801
50,461
10,884
(7,148)
(831)
Loss for the period
Other comprehensive
expense
Loss and total
comprehensive
expense for the period
Non-controlling interest
arising on creation of a
joint venture
Issue of shares
Exercise of share
options
Share based payment
expense
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
136
946
–
–
–
–
–
–
210
(9,410)
(9,410)
(92)
(9,502)
(1)
(1)
–
(1)
(9,411)
(9,411)
(92)
(9,503)
–
–
– 18,947
–
–
72
136
9
9
– 18,947
–
–
72
136
(36,791) 21,322
(83) 21,239
(9,786)
(9,786)
(126)
(9,912)
(1)
(1)
–
(1)
(9,787)
(9,787)
(126)
(9,913)
–
–
–
–
–
–
–
210
–
–
–
–
–
–
–
210
At 31 December 2016
3,801
50,461
10,884
(7,148)
(831)
1,156
(46,578) 11,745
(209) 11,536
The accompanying notes form an integral part of the financial statements.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2016
As at
31 December
2016
£000
As at
31 January
2016
£000
Notes
9
10
11
12
13
14
15
15
15
15
18
16
1,087
550
1,637
661
3,130
8,173
11,964
13,601
(2,065)
(2,065)
11,536
3,801
50,461
10,884
(7,148)
(831)
1,156
(46,578)
11,745
(209)
11,536
901
–
901
64
2,325
19,907
22,296
23,197
(1,958)
(1,958)
21,239
3,801
50,461
10,884
(7,148)
(831)
946
(36,791)
21,322
(83)
21,239
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
TOTAL NON-CURRENT ASSETS
Current assets
Inventory
Trade and other receivables
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium
Merger reserve
Reverse acquisition reserve
Reserve for own shares
Share based payment reserve
Retained earnings deficit
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF PARENT
Non-controlling interests
TOTAL EQUITY
Approved by the Board of Directors and authorised for issue on 2 June 2017.
The accompanying notes form an integral part of the financial statements.
JOHN SAMUEL
CHAIRMAN
PAUL DEVLIN
CHIEF FINANCIAL OFFICER
Company number: 5969271
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Consolidated Statement of Cash Flows
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
Operating activities
Operating loss
Adjustment for:
Depreciation of property, plant and equipment
Share based payment
Cash R&D tax credit received
Operating cash outflow
Increase in inventory
Increase in trade and other receivables
Increase in trade and other payables
Net cash outflow from operations
INVESTING ACTIVITIES
Interest received
Net cash acquired on creation of joint venture
Capitalised development expenditure
Purchases of property, plant and equipment
Net cash (outflow)/inflow from investing activities
FINANCING ACTIVITIES
Proceeds from issue of share capital
Net cash inflow from financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of period
CASH AND CASH EQUIVALENTS AT END OF PERIOD
The accompanying notes form an integral part of the financial statements.
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
Notes
9
18
6
10
9
15
(11,060)
(10,242)
301
210
319
245
136
745
(10,230)
(9,116)
(597)
(90)
106
(30)
(596)
862
(10,811)
(8,880)
114
–
(550)
(487)
(923)
–
–
(11,734)
19,907
8,173
213
9
(711)
(489)
19,019
19,019
9,650
10,257
19,907
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notes to the Financial Statements
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
1) BASIS OF PREPARATION
The financial statements of Tissue Regenix Group plc are audited consolidated financial statements for the period to 31 December 2016.
These include audited comparatives for the year to 31 January 2016.
As announced in the previous annual report the Board changed the accounting year end to 31st December to bring it in line with calendar
year and therefore these accounts are showing an 11 month period to the comparative 12 month fiscal year.
The Group financial statements consolidate the financial statements of Tissue Regenix Group plc and the entities it controls, its subsidiaries.
Going Concern
At 31 December 2016, cash balances were £8.2m, with an updated cash balance as of 30 April 2017 of £5.4m, which is considered
sufficient to meet the needs of the business until the end of Q3 2017. It is expected that the Group's historic cash burn of c.£1m a month is
representative of the cash requirements for the Group to continue its ongoing activities for not less than the following 12 months. Significant
milestones have been achieved during the year, with listings in the US with GPO’s (Group Purchasing Organisations) covering 75% of the US
inpatient market, along with 93% Medicare coverage for outpatient use, and the addition of Tissue Regenix to the Federal Supply Schedule,
all of which demonstrate the viability of the Group’s commercial model. In line with the Group’s business plan further funding is envisaged as
the Group seeks to commercialise and develop its products.
The Directors, having taken appropriate advice, reasonably believe that additional equity funds will be committed before the end of Q3 2017,
to allow the Group to continue its operations and to continue to commercialise and develop its products; accordingly, the Directors have a
reasonable expectation that the Group will have adequate resources to continue in operation for the foreseeable future.
Although there can be no certainty in relation to the Group’s abilities to secure such funding, the Directors have a reasonable expectation
that the Group will have adequate resources to continue in operation for the foreseeable future and consider it appropriate to continue to
adopt the going concern basis in preparing the financial statements.
2) SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared under the historical cost convention in accordance with International Financial
Reporting Standards as adopted by the European Union.
The principal accounting policies applied are set out below.
Revenue
Revenue is measured as the fair value of the consideration received or receivable in the normal course of business, net of discounts, VAT
and other sales related taxes and is recognised to the extent that it is probable that the economic benefits associated with the transaction
will flow into the Company.
Grant income is recognised as earned based on contractual conditions, generally as expenses are incurred.
Foreign currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the
entity operates (its functional currency). For the purposes of the consolidated financial statements, the results and the financial position of
each Group entity are expressed in Pounds Sterling, which are the functional currency of the Company and the presentational currency for
the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign
currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items
denominated on foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value
that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated.
The assets and liabilities of foreign operations are translated using exchange rates at the balance sheet date. The components of
shareholders’ equity are stated at historical value. An average exchange rate for the period is used to translate the results and cash flows of
foreign operations. Exchange differences arising on translating the results and net assets of foreign operations are taken to the translation
reserve in equity until the disposal of the investment. The gain or loss in the income statement on the disposal of foreign operations includes
the release of the translation reserve relating to the operation that is being sold.
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Research and development
Research costs are charged to profit or loss as they are incurred. An intangible asset arising from development expenditure on an individual
project is recognised only when all of the following criteria can be demonstrated:
{ it is technically feasible to complete the product and the Company is satisfied that appropriate regulatory hurdles have been, or will be
achieved;
{ management intends to complete the product and use or sell it;
{ there is an ability to use or sell the product;
{ it can be demonstrated how the product will generate probable future economic benefits;
{ adequate technical, financial and other resources are available to complete the development, use or sell the product; and
{ expenditure attributable to the product can be reliably measured.
Such intangible assets are amortised on a straight-line basis from the point at which the assets are ready for use over the period of the
expected benefit, and are reviewed for an indication of impairment at each reporting date. Other development costs are charged against
profit or loss as incurred since the criteria for their recognition as an asset are not met.
The costs of an internally generated intangible asset comprise all directly attributable costs necessary to create, produce and prepare the
asset to be capable of operating in the manner intended by management. Directly attributable costs include employee costs incurred on
technical development, testing and certification, materials consumed and any relevant third party cost. The costs of internally generated
developments are recognised as intangible assets and are subsequently measured in the same way as externally acquired intangible assets.
However, until completion of the development project, the assets are subject to impairment testing only.
Leases
Rentals payable under operating leases, which are leases where the lessor retains a significant proportion of the risks and benefits of the
asset, are charged in the statement of comprehensive income on a straight-line basis over the expected lease term.
Property, plant and equipment
Property, plant and equipment assets are stated at historical cost.
Depreciation is provided on all property, plant and equipment assets at rates calculated to write each asset down to its estimated residual
value evenly over its expected useful life, as follows:
Laboratory equipment
over 5 years
Computer equipment
over 3 years
Fixtures and fittings:
over 5 years
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
2) SIGNIFICANT ACCOUNTING POLICIES continued
Impairment of property, plant and equipment and intangibles
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss (if any).
Discounted cash flow valuation techniques are generally applied for assessing recoverable amounts using three-year forward looking cash
flow projections and terminal value estimates, together with discount rates appropriate to the risk of the related cash generating units.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is recognised as an expense immediately.
Amortisation
Amortisation of intangibles is charged to the income statement on a straight-line basis over the estimated economical useful lives of
intangible assets,from product launch unless such lives are indefinite. No capitalised development costs to date have been amortised.
Share based payments
Share options
Equity settled share based payment transactions are measured with reference to the fair value at the date of grant, recognised on a straight-
line basis over the vesting period, based on the Company’s estimate of shares that will eventually vest. Fair value is measured using a
binomial valuation model.
At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired
and management’s best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will
ultimately vest. The movement in cumulative expense since the previous reporting date is recognised in the statement of comprehensive
income, with a corresponding entry in equity.
Jointly held shares
Where an employee acquires an interest in shares in the Company jointly with the Tissue Regenix Employee Share Trust, the fair value
benefit at the purchase date is recognised as an expense, with a corresponding increase to equity share based payment reserve on a
straight-line basis, over the vesting period.
The fair value benefit is measured using a binomial valuation model, taking into account the terms and conditions upon which the jointly
owned shares were purchased.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effect of non-transferability, sale
restrictions, and behavioural considerations.
Financial assets and liabilities
Trade and other receivables
Trade and other receivables do not carry any interest and are initially recognised at fair value. They are subsequently measured at amortised
cost using the effective interest rate method, less any provision for impairment.
Impairment provisions are recognised when there is objective evidence that the Group will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the
future expected cash flows associated with the impaired receivable.
Trade and other payables
Trade and other payables are not interest bearing and are initially recognised at fair value. They are subsequently measured at amortised
cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash at hand and deposits on a term of not greater than 12 months.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax from proceeds.
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the period. The Group’s liability for current tax is calculated by using tax rates that
have been enacted or substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the
financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred
tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled using tax rates
that have been enacted or substantively enacted by the reporting date. Deferred tax is charged or credited to profit or loss, except when it
relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.
Controlled Joint Venture
Tissue Regenix Group entered a joint venture in January 2016 establishing GBM-V. The figures for this entity are consolidated within these
accounts due to Tissue Regenix Group having control because it owns the majority of the voting rights.
Critical accounting estimates and areas of judgement
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates
and assumptions that have the most significant effects on the carrying amounts of the assets and liabilities in the financial information are
discussed below:
Equity settled share based payments
The estimation of share based payment costs requires the selection of an appropriate valuation method, consideration as to the inputs
necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest. Inputs subject to judgement
relate to the future volatility of the share price of comparable companies, the Group’s expected dividend yields, risk free interest rates and
expected lives of the options. The Directors draw on a variety of sources to aid in the determination of the appropriate data to use in such
calculations. The share based payment charge for the period was £210,000 (31 January 2016: £136,000).
Capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is a key judgement. During the year we capitalised development
costs of £550,000 in respect of a product / products for which we received 510k clearance. We deem this to be the point at which it
becomes probable that future economic benefits will be received from the product and hence the criteria for capitalisation are met. If we had
not capitalised these development costs, then there would have been a further charge of £550,000 to the income statement
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
2) SIGNIFICANT ACCOUNTING POLICIES continued
Accounting standards and interpretations not applied
At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group that have not
been applied in these financial statements were in issue but not yet effective:
IFRS 9
IFRS 15
IFRS 16
Financial Instruments
Revenue from Contracts with Customers
Leases
Annual improvement to IAS12
Recognition of Deferred Tax Assets for Unrealised Losses
Effective date
1 January 2018
1 January 2018
1 January 2019
1 January 2017
The Directors anticipate that the adoption of these Standards and Interpretations in future years will have no material impact on the financial
statements of the Group.
No Standards or Interpretations adopted in the year had any material impact on the financial statements of the Group.
3) SEGMENTAL REPORTING
The following table provides disclosure of the Group’s revenue by geographical market based on location of the customer:
USA
Rest of the World
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
1,322
121
1,443
808
8
816
Analysis of revenue by customer
During the period ending 31 December 2016 the Group had two customers who individually exceeded 10% of revenue. These customers
generated 12% and 10% of revenue respectively.
Operating segments
The Group is organised into Cardiac, Wound Care, Orthopaedics and GBM-V divisions for internal management, reporting and decision-
making, based on the nature of the products of the Group’s businesses. Managers have been appointed within these divisions, who report
to the Board. These are the reportable operating segments in accordance with IFRS 8 “Operating Segments”. The Directors recognise that
the operations of the Group are dynamic and therefore this position will be monitored as the Group develops.
In accordance with IFRS 8, the Group has derived the information for its operating segments using the information used by the Chief
Operating Decision Maker. The Group has identified the Board of Directors as the Chief Operating Decision Maker as it is responsible for the
allocation of resources to the operating segments and assessing their performance.
Central overheads, which primarily relate to operations of the Group function, are not allocated to the business units.
38
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
Wound Care
Orthopaedics
Cardiac
GBMV
Central
Total
I
S
L
A
C
N
A
N
F
I
11
Months
up to
31 Dec
2016
£000
1,322
–
1,322
884
(76)
808
(288)
(154)
1,034
654
Total segment
Inter-segment
Revenue
Cost of sales
Gross Profit
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
1,443
–
1,443
12
Months
up to
31 Jan
2016
£000
968
(152)
816
(354)
(154)
1,089
662
–
–
-
–
–
-
–
-
–
8
-
8
–
8
Administrative costs
(5,500)
(4,938)
(2,738)
(2,382)
Operating loss
(4,466)
(4,284)
(2,738)
(2,382)
Finance income
–
–
–
–
(183)
(3,141)
(3,049)
(12,149)
(10,904)
(183)
(3,141)
(3,041)
(11,060)
(10,242)
–
114
213
114
213
Loss before taxation (4,466)
(4,284)
(2,738)
(2,382)
(462)
(352)
(253)
(183)
(3,027)
(2,828)
(10,946)
(10,029)
Taxation
323
169
600
324
111
16
–
–
18
1,034
527
Loss for the year
(4,143)
(4,115)
(2,138)
(2,058)
(351)
(336)
(253)
(183)
(3,027)
(2,810)
(9,912)
(9,502)
Administrative costs are broken down as follows:
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(462)
(462)
–
76
(76)
–
–
–
(352)
(352)
–
121
–
121
(66)
55
(308)
(253)
Wound Care
Orthopaedics
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
Cardiac
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
GMBV
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
Central
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
Total
11
Months
up to
31 Dec
2016
£000
12
Months
up to
31 Jan
2016
£000
(3,127)
(3,676)
(4,872)
(3,672)
Development
(388)
(1,108)
(2,376)
(2,279)
(363)
(289)
Sales and
marketing*
(4,626)
(3,672)
Operations**
(486)
(158)
(246)
(116)
–
(103)
–
(99)
–
–
–
–
–
–
–
–
–
(63)
(308)
(183)
(3,141)
(3,049)
(4,150)
(3,556)
Admin costs
(5,500)
(4,938)
(2,738)
(2,382)
(462)
(352)
(308)
(183)
(3,141)
(3,049)
(12,149)
(10,904)
* Sales and Marketing for Wound Care includes the entire costs for our US entity. Included within these costs is £607k (2016: £303k) commission on sales
** Operations includes travel, finance, board, legal, premises, depreciation, share based payment charge
Other segment information
The Group’s non-current assets are predominantly held by UK entities and consequently no geographical statement of financial position
disclosures are required.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
4) LOSS FROM OPERATIONS
Loss from operations is stated after crediting:
Grant income
Loss from operations is stated after charging to administrative expenses:
Depreciation of plant and equipment (see note 9)
Operating lease rentals – land and buildings
Staff costs (see note 5)
Foreign exchange (gains)/losses
Research and development (inclusive of research and development personnel)
Auditor’s remuneration:
— fees payable to Company’s Auditor for the audit of the Parent Company and
consolidated financial statements
— auditing the accounts of subsidiaries pursuant to legislation
Other services:
— fees in relation to corporation tax
— fees in relation to other services
Total Auditor’s remuneration
5) STAFF COSTS
The average monthly number of persons (including Directors) employed by the Group during the period
was:
Directors
Laboratory and administration staff
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
–
–
301
64
7,026
(115)
3,127
11
20
41
28
100
245
341
4,798
33
3,676
11
18
27
13
69
11 Months
up to
31 December
2016
Number
12 Months
up to
31 January
2016
Number
7
73
80
6
64
70
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
I
S
L
A
C
N
A
N
F
I
The aggregate remuneration, including Directors, comprised:
Wages and salaries
Share based expense (see note 18)
Social security, pension and healthcare costs
Directors’ remuneration included above comprised:
Emoluments for qualifying services
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
6,036
210
780
7,026
4,090
136
572
4,798
744
788
Directors’ emoluments disclosed above include £293,000 paid to the highest paid Director (Dec 2016: £310,000) as well as share based payments benefit of
£45,000 (Jan 2016: £35,000).
6) FINANCE INCOME
Bank interest receivable
7) TAXATION
Tax on loss on ordinary activities
Current tax:
UK corporation tax credit on losses of period
Deferred tax:
Origination and reversal of temporary timing differences
Tax credit on loss on ordinary activities
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
114
213
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
(1,034)
(1,034)
–
(1,034)
(527)
(527)
–
(527)
The charge for the period can be reconciled to the loss before tax per the Statement of Comprehensive Income as follows:
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
7) TAXATION continued
Factors affecting the current tax charges
The tax assessed for the period varies from the small company rate of corporation tax as explained below:
The tax assessed for the year varies from the small company rate of corporation tax as explained below:
Loss on ordinary activities before tax
Tax at the standard rate of corporation tax 20%
Effects of:
Expenses not deductible for tax purposes
Research and development tax credits received
Surrender of research and development relief for repayable tax credit
Research and development enhancement
Prior year adjustment
Unutilised tax losses
Tax credit for the period
Deferred Tax
Tax losses
Losses available to carry forward against future trading profits
Deferred tax asset – unrecognised*
* The Company has not recognised a deferred tax asset relating to these losses as their recoverability is uncertain.
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
(10,946)
(2,189)
(10,029)
(2,006)
–
(875)
1,249
(706)
(158)
1,645
(1,034)
27
(492)
679
(377)
(35)
1,677
(527)
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
32,037
5,767
23,772
4,279
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
I
S
L
A
C
N
A
N
F
I
8) LOSS PER SHARE (BASIC AND DILUTED)
Basic loss per share is calculated by dividing the loss attributable to equity holders of the parent by the weighted average number of ordinary
shares in issue during the period excluding own shares held jointly by the Tissue Regenix Employee Share Trust and certain employees.
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the period to assume
conversion of all dilutive potential ordinary shares.
Total loss attributable to the equity holders of the parent
Weighted average number of ordinary shares in issue during the period
Loss per share
Basic and diluted on loss for the period
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
(9,787)
(9,411)
No.
No.
760,124,264
743,183,878
(1.29)p
(1.27)p
The Company has issued employee options over 12,883,285 ordinary shares and there are 16,940,386 jointly owned shares which are
potentially dilutive. There is however, no dilutive effect of these issued options as there is a loss for each of the periods concerned.
9) PROPERTY, PLANT AND EQUIPMENT
Cost
At 31 January 2015
Additions
At 31 January 2016
Additions
At 31 December 2016
Depreciation
At 31 January 2015
Charge for the period
At 31 January 2016
Charge for the period
At 31 December 2016
Net book value
At 31 December 2016
At 31 January 2016
At 31 January 2015
Laboratory
equipment
£000
Fixtures and
fittings
£000
Computer
equipment
£000
742
198
940
158
1,098
357
149
506
132
638
460
434
385
53
357
410
124
534
41
61
102
84
186
348
308
12
133
156
289
205
494
95
35
130
85
215
279
159
38
Total
£000
928
711
1,639
487
2,126
493
245
738
301
1,039
1,087
901
435
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
10) INTANGIBLES
Development costs
Total
11) INVENTORY
Raw materials and consumables
Work in progress
Finished goods including goods for resale
Total
The replacement cost of stocks approximates to the value at which they are stated in the accounts.
12) TRADE AND OTHER RECEIVABLES
Trade debtors
Other receivables
Prepayments and accrued income
As at
31 December
2016
£000
As at
31 January
2016
£000
550
550
–
–
As at
31 December
2016
£000
As at
31 January
2016
£000
126
74
461
661
–
–
64
64
As at
31 December
2016
£000
As at
31 January
2016
£000
427
2,231
472
3,130
398
1,464
463
2,325
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Trade debtors is reduced due to a provision valued at £90k (Jan 2016: £nil).
At year end £63K of the trade debtors value is past due that has no provision against (Jan 2016: £132K)
Trade debtors, split by the currency they will be settled, are shown below:
US Dollars
Euros
Trade debtors
As at
31 December
2016
£000
As at
31 January
2016
£000
339
88
427
398
–
398
44
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I
S
L
A
C
N
A
N
F
I
13) RISK MANAGEMENT OF FINANCIAL ASSETS AND LIABILITIES
The Company’s activities expose it to a variety of financial risks: market risk, specifically interest rate risk; credit risk; and liquidity risk. The
Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the Company’s financial performance.
The management of these risks is vested in the Board of Directors. The policies for managing each of these risks are summarised below:
Management of market risk
i) Interest rate risk
As the Company has no significant borrowings the risk is limited to the potential reduction in interest received on cash surpluses held.
Interest rate risk is managed in accordance with the liquidity requirement of the Group, with a minimal amount of its cash surpluses held
within short term accounts, which have variable interest rates attributable to them, to ensure that sufficient funds are available to cover the
working capital requirements of the Company.
Interest rate sensitivity
The principal impact to the Company is the result of interest bearing cash and cash equivalent balances held as set out below:
Cash and cash equivalents
Cash and cash equivalents
Fixed rate
£000
7,654
December 2016
Floating rate
£000
519
Fixed rate
£000
18,725
January 2016
Floating rate
£000
1,182
Total
£000
8,173
Total
£000
19,907
Due to the high proportion of funds held on a fixed deposit, the impact of a 5% increase/decrease in interest rates would have an immaterial
impact on the loss in each period.
Management of credit risk
The Company is exposed to credit risk from its operating activities; this principally arises from short term bank deposits. The Company
seeks to minimise this risk by only depositing funds with banks with a high credit rating.
The maximum exposure to credit risk on the Company’s financial assets is represented by their carrying amounts as outlined in the
categorisation of financial instruments table below.
The Company does not consider that any changes in fair value of financial assets or liabilities in the year are attributable to credit risk.
Management of liquidity risk
The Company seeks to manage liquidity risk to ensure that sufficient liquidity is available to meet foreseeable needs and to invest cash
assets safely and profitably.
No maturity analysis for financial liabilities is presented, as the Directors consider that liquidity risk is not material.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
13) RISK MANAGEMENT OF FINANCIAL ASSETS AND LIABILITIES continued
The Company had cash and cash equivalents at each reporting date as is set out below.
Cash and cash equivalents
AA-
A
BBB+
As at
31 December
2016
£000
As at
31 January
2016
£000
16
7,654
503
8,173
29
18,725
1,153
19,907
The above has been split by the Fitch rating system and gives an analysis of the credit rating of the financial institutions where cash balances
are held.
Capital risk management
The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximising the return to
stakeholders. The Company’s overall strategy is to minimise costs and liquidity risk.
The capital structure of the Company consists of equity attributable to the owners of the Company, comprising issued capital, reserves and
retained earnings as disclosed in notes 15 and 16 and in the Statement of Changes in Equity.
Categorisation of financial instrument
Financial assets/(liabilities)
At 31 December 2016
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Financial assets/(liabilities)
At 31 January 2016
Trade and other receivables
Cash and cash equivalents
Trade and other payables
The Company had no financial instruments measured at fair value.
Loans and
receivables
£000
Financial
liabilities at
amortised
cost
£000
2,658
8,173
–
10,831
–
–
(765)
(765)
Loans and
receivables
£000
Financial
liabilities at
amortised
cost
£000
1,862
19,907
–
21,769
–
–
(573)
(573)
Total
£000
2,658
8,173
(765)
10,066
Total
£000
1,862
19,907
(573)
21,196
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I
S
L
A
C
N
A
N
F
I
14) TRADE AND OTHER PAYABLES
Trade payables
Taxes and social security
Accruals
As at
31 December
2016
£000
As at
31 January
2016
£000
618
147
1,300
2,065
501
72
1,385
1,958
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
Trade payables, split by the currency they will be settled in, are shown below:
As at
31 December
2016
£000
As at
31 January
2016
£000
Sterling
US Dollars
Euros
Trade payables
15) SHARE CAPITAL
Total ordinary shares of 0.5 p each as at
31 January 2015
Issue of shares
Share options exercised
Total ordinary shares of 0.5p each as at
31 January 2016
Issue of shares
Share options exercised
Total ordinary shares of 0.5p each as
at 31 January 2016
150
332
136
618
Number
£000
654,123,031
105,263,158
738,075
Share
capital
£000
Share
premium
£000
Merger
reserve
£000
Reverse
acquisition
reserve
£000
3,271
526
4
31,972
18,421
68
10,884
(7,148)
–
–
–
–
170
242
89
501
Total
£000
38,979
18,947
72
760,124,264
3,801
50,461
10,884
(7,148)
57,998
–
–
–
–
–
–
–
–
–
–
–
–
760,124,264
3,801
50,461
10,884
(7,148)
57,998
As permitted by the provisions of the Companies Act 2006, the Company does not have an upper limit to its authorised share capital.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
16) MOVEMENT IN RETAINED EARNINGS AND RESERVE FOR OWN SHARES
Retained
earnings
deficit
£000
At 31 January 2016
Loss for the period
Exchange movement
Minority interest
At 31 December 2016
Reserve
for own
shares
£000
(831)
–
–
–
(36,791)
(9,912)
(1)
126
(46,578)
(831)
17) COMMITMENTS
Operating lease commitments
The Group leases premises under non-cancellable operating lease agreements. The future aggregate minimum lease and service charge
payments under non-cancellable operating leases are as follows:
Land and buildings:
Amounts due within one year
As at
31 December
2016
£000
As at
31 January
2016
£000
64
124
18) SHARE BASED PAYMENTS
Share options and shares held in employee benefit trust (“EBT”)
The Company operates a share option plan, under which certain employees have been granted options to subscribe for ordinary shares.
All options are equity settled. The options have an exercise price of between 0.5p to 22.5p and a vesting period between one and three
years. If the options remain unexercised after a period of ten years from the date of grant, the options expire. The Group has no legal or
constructive obligation to repurchase or settle the options in cash.
The Group also operates a jointly owned EBT share scheme for senior management, under which the trustee of the Group sponsored EBT
has acquired shares in the Group jointly with a number of employees. The shares were acquired pursuant to certain conditions, set out in
Jointly Owned Equity agreements (“JOEs”). Subject to meeting the performance criteria conditions set out in the JOEs, the employees are
able to benefit from most of any future increase in the value of the jointly owned EBT shares. The fair value benefit is measured using the
binomial model, taking into account the terms and conditions upon which the jointly owned shares were purchased.
48
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I
S
L
A
C
N
A
N
F
I
The number and weighted average exercise prices of share options and EBT shares are as follows:
At 31 January 2015
Exercised in the period
Lapsed during the period
Issued in the period
At 31 January 2016
Exercised in the period
Lapsed during the period
Issued in the period
At 31 December 2016
Number of share interests
EMI
options
Unapproved
options
EBT
shares
Total
16,532,091
5,424,377
16,940,386
38,896,854
(53,328)
(684,748)
(822,222)
(222,254)
1,430,839
2,939,098
–
–
–
(738,076)
(1,044,476)
4,369,937
17,087,380
7,456,473
16,940,386
41,484,239
–
–
(160,008)
(1,431,905)
–
5,094,124
–
–
–
–
(1,591,913)
5,094,124
16,927,372
11,118,692
16,940,386
44,986,450
Weighted
average
exercise
price per
share (£)
0.0706
0.0974
0.1407
0.1238
0.0657
–
0.0368
0.0507
0.0650
There were 17,199,750 share options outstanding at 31 December 2016 which was eligible to be exercised. The remaining options were not
eligible to be exercised as these are subject to employment period and market based vesting conditions, some of which had not been met
at 31 December 2016.
The performance conditions in relation to these options allows for vesting in three equal proportions on or after the three consecutive annual
anniversaries from the date of grant subject to the Company’s share price reaching certain hurdle values by the respective vesting dates.
There were 16,940,386 of the jointly held EBT shares which were eligible to vest as at 31 December 2016.
The fair value benefit received on share options granted is measured using the binomial model taking in to account the effects of the vesting
and performance conditions, expected exercise price and the payment of the dividends by the Company. The fair value benefits received on
EBT shares are measured using the Binomial model, taking into account the terms and conditions upon which the jointly owned shares were
purchased. The following table lists the inputs to the models used:
Dividend yield
Expected volatility
Risk-free interest rate (%)
Expected vesting life of EBT shares and
options (years)
Weighted average share price (£)
Options
Granted year to
31 December 2016
EBT shares
Granted year to
31 December 2016
Options
Granted year to
31 January 2016
–
45%
0.9
4
0.0507
–
–
–
–
–
–
47%
0.9
4
0.1238
Share options issued under the DAB scheme which are not exercised within four years from the date of grant will expire. Any other share
options and employee interests in jointly owned EBT shares which are not exercised within ten years from the date of grant will expire.
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notes to the Financial Statements continued
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
18) SHARE BASED PAYMENTS continued
A charge has been recognised in the Statement of Comprehensive Income for each year as follows:
Share options
Jointly owned shares
Total share based payments
19) RELATED PARTY TRANSACTIONS
Trading transactions with:
Transactions with significant shareholders:
Patent support costs
Transactions with key management personnel
The Company’s key management personnel comprise only the Directors of the Company.
During the year the Company entered into the following transactions in which the Directors had an interest:
Directors’ remuneration:
Remuneration received by the Directors from the Company is set out below:
Short term employment benefits*
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
210
–
210
136
–
136
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
–
28
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
744
694
* In addition, certain Directors hold share options and jointly owned shares in the Company for which a fair value share based charge of £72,000 has been
recognised in the Consolidated Statement of Comprehensive Income (Jan 2016: £94,000).
During the period ended 31 December 2016, the Company entered into numerous transactions with its subsidiary company which net off on
consolidation – these have not been shown above.
20) ULTIMATE CONTROLLING PARTY
The Directors believe that there is no ultimate controlling party.
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Company Statement of Changes in Equity
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
Attributable to the equity holders of the Company
Share
capital
£000
3,271
Share
premium
£000
31,972
Merger
reserve
£000
10,884
Share based
payment
reserve
£000
Retained
earnings
reserve
£000
737
(6,324)
At 31 January 2015
Total expense and other comprehensive
loss for the period
Issue of shares
Share options exercised
Share based payment expense
–
526
4
–
–
18,421
68
–
–
–
–
–
At 31 January 2016
3,801
50,461
10,884
Total expense and other comprehensive
loss for the period
Issue of shares
Share options exercised
Share based payment expense
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2016
3,801
50,461
10,884
The accompanying notes form an integral part of the financial statements.
–
–
–
136
873
–
–
–
210
1,083
(1,203)
–
–
–
(7,527)
58,492
(1,701)
(1,701)
–
–
–
–
–
210
(9,228)
57,001
I
S
L
A
C
N
A
N
F
I
Total
£000
40,540
(1,203)
18,947
72
136
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Company Statement of Financial Position
AS AT 31 DECEMBER 2016
As at
31 December
2016
£000
As at
31 January
2016
£000
Notes
C3
C4
C5
C6
15
15
15
18
12,922
12,922
63
36,531
7,819
44,413
57,335
12,922
12,922
60
26,230
19,598
45,888
58,810
(334)
(334)
(318)
(318)
57,001
58,492
3,801
50,461
10,884
1,083
(9,228)
57,001
3,801
50,461
10,884
873
(7,527)
58,492
ASSETS
Non-current assets
Investments
Total non-current assets
Current assets
Trade and other receivables
Intercompany loan balance
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium
Merger reserve
Share based payment reserve
Retained earnings deficit
TOTAL EQUITY
Approved by the Board of Directors and authorised for issue on 2 June 2017.
The accompanying notes form an integral part of the financial statements.
JOHN SAMUEL
CHAIRMAN
PAUL DEVLIN
CHIEF FINANCIAL OFFICER
Company number: 5969271
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Company Statement of Cash Flows
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
Operating activities
Loss before interest and tax
Adjustment for non-cash items:
Share based payments
Operating cash outflow
Increase in trade and other receivables
Increase in trade and other payables
Net cash generated from operations
INVESTING ACTIVITIES
Interest received
Loan to subsidiary undertaking
Net cash generated from investing activities
FINANCING ACTIVITIES
Proceeds from issue of share capital
Net cash used in financing activities
DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at start of period
CASH AND CASH EQUIVALENTS AT END OF PERIOD
The accompanying notes form an integral part of the financial statements.
11 Months
up to
31 December
2016
£000
12 Months
up to
31 January
2016
£000
Notes
18
C5
15
(1,815)
(1,416)
210
(1,605)
(3)
16
136
(1,280)
(20)
50
(1,592)
(1,250)
114
(10,301)
(10,187)
–
–
(11,779)
19,598
7,819
213
(8,349)
(8,136)
19,019
19,019
9,633
9,965
19,598
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notes to the Company Information
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
C1. Principal accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006 and in accordance with IFRS.
The principal accounting policies adopted is the same as for those set out in the Group’s financial statements.
C2. Company results
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company’s
statement of comprehensive income. The Parent Company’s result for the period ended 31 December 2016 was a loss of £1,701k (2016:
£1,203k).
The audit fee for the Company is set out in note 4 of the Group’s financial statements.
C3. Investment in subsidiary companies
At 31 December 2016, the Company held the following investments in subsidiaries:
Undertaking
Tissue Regenix Limited
TRx Wound Care Limited
TRx Orthopaedics Limited
TRx Cardiac Limited
TRx Vascular Limited
Sector
Regenerative medicine
Regenerative medicine
Regenerative medicine
Regenerative medicine
Regenerative medicine
Tissue Regenix Wound Care Inc*
Regenerative medicine
TRx Orthopedic Inc*
GBM-V GmbH
* Held through TRx Wound Care Limited
Registered Addresses:
Regenerative medicine
Regenerative medicine
Share of issued capital
and voting rights
2016
2016
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
50%
Tissue Regenix Limited, TRx Wound Care Limited, TRx Orthopaedics Limited, TRx Cardiac Limited, TRx Vascular Limited:
Unit 1 & 2, Astley Way, Astley Lane Industrial Estate, Swillington, Leeds, LS26 8XT
Tissue Regenix Wound Care Inc, TRx Orthopedic Inc:
2611 North Loop, 1604 West Suite 201, San Antonio, Texas, 78258
GBM-V Gmbh:
Wilhelm-Külz-Platz 3. 18055 Rostock
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Cost
At 1 January
Additions
At 31 December
Impairment
At 1 January
At 31 December
Carrying value at 31 December
C4. Trade and other receivables
Prepayments and accrued income
Other debtors
C5. Current assets
Intercompany loan
31 December
2016
£000
31 January
2016
£000
14,707
14,707
–
–
14,707
14,707
(1,785)
(1,785)
12,922
(1,785)
(1,785)
12,922
As at
31 December
2016
£000
As at
31 January
2016
£000
39
24
63
40
20
60
As at
31 December
2016
£000
As at
31 January
2016
£000
36,531
26,230
A loan of £36,531 was advanced to other subsidiary companies in the period. No interest was payable on the loan and is payable on
demand
C6. Trade and other payables
Trade creditors
Taxes and social security
Accruals
As at
31 December
2016
£000
As at
31 January
2016
£000
58
88
188
334
8
23
287
318
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notice of Annual General Meeting
Notice is given that the 2017 annual general meeting of Tissue Regenix Group plc (“Company”) will be held at DLA Piper UK LLP, Princes
Exchange, Princes Square, Leeds LS1 4BY on 30 June 2017 at 10.00 a.m. for the following purposes:
To consider and, if thought fit, to pass the following resolutions as ordinary resolutions:
1.
To receive the Company’s annual accounts, strategic report and directors’ and auditors’ reports for the 11 month period ended 31
December 2016.
2.
3.
4.
5.
6.
7.
8.
To appoint Paul John Devlin as a director of the Company.
To reappoint Alan Miller, who retires by rotation, as a director of the Company.
To reappoint Antony Odell, who retires by rotation, as a director of the Company.
To reappoint John Samuel, who retires by rotation, as a director of the Company.
To reappoint KPMG LLP as auditors of the Company.
To authorise the directors to determine the remuneration of the auditors.
That, pursuant to section 551 of the Companies Act 2006 (“Act”), the directors be generally and unconditionally authorised to allot
Relevant Securities:
8.1
up to an aggregate nominal amount of £1,269,033; and
8.2
comprising equity securities (as defined in section 560(1) of the Act) up to a further aggregate nominal amount of £1,269,033 in
connection with an offer by way of a rights issue:
8.2.1
8.2.2
to holders of ordinary shares in the capital of the Company in proportion (as nearly as practicable) to the respective numbers
of ordinary shares held by them; and
to holders of other equity securities in the capital of the Company, as required by the rights of those securities or, subject to
such rights, as the directors otherwise consider necessary,
but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury
shares, fractional entitlements, record dates or any legal or practical problems under the laws of any territory or the requirements of
any regulatory body or stock exchange,
provided that these authorities shall expire at the conclusion of the next annual general meeting of the Company after the passing
of this resolution or on 30 September 2018 (whichever is the earlier), save that, in each case, the Company may make an offer or
agreement before the authority expires which would or might require Relevant Securities to be allotted after the authority expires and
the directors may allot Relevant Securities pursuant to any such offer or agreement as if the authority had not expired.
In this resolution, “Relevant Securities” means shares in the Company or rights to subscribe for or to convert any security into
shares in the Company; a reference to the allotment of Relevant Securities includes the grant of such a right; and a reference to the
nominal amount of a Relevant Security which is a right to subscribe for or to convert any security into shares in the Company is to the
nominal amount of the shares which may be allotted pursuant to that right.
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To consider and, if thought fit, to pass the following resolutions as special resolutions:
That, subject to the passing of resolution 8 and pursuant to section 570 of the Act, the directors be and are generally empowered
9.
to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority granted by resolution 8 as
if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity
securities:
9.1
in connection with an offer of equity securities (whether by way of a rights issue, open offer or otherwise):
9.1.1
9.1.2
to holders of ordinary shares in the capital of the Company in proportion (as nearly as practicable) to the respective numbers
of ordinary shares held by them; and
to holders of other equity securities in the capital of the Company, as required by the rights of those securities or, subject to
such rights, as the directors otherwise consider necessary,
but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury
shares, fractional entitlements, record dates or any legal or practical problems under the laws of any territory or the requirements of
any regulatory body or stock exchange; and
9.2
otherwise than pursuant to paragraph 9.1 of this resolution up to an aggregate nominal amount of £380,709,
and this power shall expire at the conclusion of the next annual general meeting of the Company after the passing of this resolution
or on 30 September 2018 (whichever is the earlier), save that the Company may make an offer or agreement before this power
expires which would or might require equity securities to be allotted for cash after this power expires and the directors may allot equity
securities for cash pursuant to any such offer or agreement as if this power had not expired.
This power is in substitution for all existing powers under section 570 of the Act (which, to the extent unused at the date of this
resolution, are revoked with immediate effect).
By order of the board
PAUL DEVLIN
COMPANY SECRETARY
2 June 2017
Registered office
Units 1 & 2, Astley Way
Astley Way Industrial Estate
Swillington, Leeds LS26 8XT
Registered in England and Wales No. 05969271
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
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Notice of Annual General Meeting continued
Notes
Entitlement to attend and vote
1.
The right to vote at the meeting is determined by reference to the register of members. Only those shareholders registered in the
register of members of the Company as at close of business on 28 June 2017 (or, if the meeting is adjourned, close of business on
the date which is two working days before the date of the adjourned meeting) shall be entitled to attend and vote at the meeting in
respect of the number of shares registered in their name at that time. Changes to entries in the register of members after that time
shall be disregarded in determining the rights of any person to attend or vote (and the number of votes they may cast) at the meeting.
Proxies
2.
A shareholder is entitled to appoint another person as his or her proxy to exercise all or any of his or her rights to attend and to speak
and vote at the meeting. A proxy need not be a shareholder of the Company.
A shareholder may appoint more than one proxy in relation to the meeting, provided that each proxy is appointed to exercise the
rights attached to a different share or shares held by that shareholder. Failure to specify the number of shares each proxy appointment
relates to or specifying a number which when taken together with the numbers of shares set out in the other proxy appointments is in
excess of the number of shares held by the shareholder may result in the proxy appointment being invalid.
A proxy may only be appointed in accordance with the procedures set out in notes 3 and 4 below and the notes to the proxy form.
The appointment of a proxy will not preclude a shareholder from attending and voting in person at the meeting.
3.
A form of proxy is enclosed. When appointing more than one proxy, complete a separate proxy form in relation to each appointment.
Additional proxy forms may be obtained by contacting the Company’s registrar on 0871 664 0300 (Calls cost 12p per minute plus
your phone company’s access charge. Calls outside the United Kingdom will be charged at the applicable international rate. The
Company’s registrar is open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales) or the proxy
form may be photocopied. State clearly on each proxy form the number of shares in relation to which the proxy is appointed.
To be valid, a proxy form must be received by post or (during normal business hours only) by hand at the offices of the Company’s
registrar, Capita Asset Services PXS, 34 Beckenham Road, Beckenham BR3 4TU, no later than 10.00 a.m. on 28 June 2017 (or, if
the meeting is adjourned, no later than 48 hours before the time of any adjourned meeting).
4.
CREST members who wish to appoint a proxy or proxies for the meeting (or any adjournment of it) through the CREST electronic
proxy appointment service may do so by using 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 or instruction made using the CREST service 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 constitutes the appointment of a proxy or is 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 Capita Registrars (ID RA10) no later than 10.00 a.m. on 28 June 2017
(or, if the meeting is adjourned, no later than 48 hours before the time of any adjourned meeting). 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
Capita Registrars 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.
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 or her 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 are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings.
The Company may treat a CREST Proxy Instruction as invalid in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
Corporate representatives
5.
A shareholder which is a corporation may authorise one or more persons to act as its representative(s) at the meeting. Each such
representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual
shareholder, provided that (where there is more than one representative and the vote is otherwise than on a show of hands) they do
not do so in relation to the same shares.
Documents available for inspection
6.
The following documents will be available for inspection during normal business hours at the registered office of the Company from
the date of this notice until the time of the meeting. They will also be available for inspection at the place of the meeting from at least
15 minutes before the meeting until it ends.
6.1
6.2
Copies of the service contracts of the executive directors
Copies of the letters of appointment of the non-executive directors.
Biographical details of directors
7.
Biographical details of all those directors who are offering themselves for reappointment at the meeting are set out on pages 18 and
19 of the enclosed annual report and accounts.
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Directors and Officers
DIRECTORS
John Samuel
Antony Odell
Paul Devlin
Jonathan Glenn
Alan Miller
Randeep Singh Grewal
Steven Couldwell
Shervanthi Homer-Vanniasinkam
(Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Non- Executive Director)
COMPANY SECRETARY
Paul Devlin
COMPANY WEBSITE
www.tissueregenix.com
COMPANY NUMBER
05969271 (England & Wales)
REGISTERED OFFICE
Unit 1 & 2
Astley Way
Astley Lane Industrial Estate
Leeds
West Yorkshire
LS26 8XT
REGISTRAR
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
AUDITOR
KPMG LLP
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
LEGAL ADVISER
DLA Piper UK LLP
Princes Exchange
Princes Square
Leeds
LS1 4BY
NOMINATED ADVISER AND BROKER
Jefferies International Ltd
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
TISSUE REGENIX GROUP PLC
ANNUAL REPORT AND ACCOUNTS
FOR THE 11 MONTHS UP TO 31 DECEMBER 2016
IBC
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T
I
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S
U
E
R
E
G
E
N
I
X
G
R
O
U
P
P
L
C
A
N
N
U
A
L
R
E
P
O
R
T
A
N
D
A
C
C
O
U
N
T
S
F
O
R
T
H
E
1
1
M
O
N
T
H
S
U
P
T
O
3
1
D
E
C
E
M
B
E
R
2
0
1
6
TISSUE REGENIX GROUP PLC
UNIT 1 AND 2
ASTLEY WAY
ASTLEY LANE INDUSTRIAL ESTATE
SWILLINGTON
LEEDS
LS26 8XT
www.tissueregenix.com
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