27183 1 June 2020 4:29 pm Proof 6FOR YEAR ENDED 31 DECEMBER 2019AND ACCOUNTSANNUAL REPORTTissue Regenix Group plc Annual Report and Financials for year ended 31 December 2019Stock Code: TRX27183-Tissue-Regenix-AR-2019.indd 301-Jun-20 4:31:29 PM Who we are
TISSUE REGENIX GROUP
(“Tissue Regenix”) is a pioneering,
international medical technology company,
focusing on the development of regenerative
products using our two platform technologies,
dCELL®, addressing soft tissue needs, and
BioRinse®, providing inductive bone allografts.
We are currently helping to transform the treatment
of patients in three key areas: BioSurgery,
Orthopaedics (sports medicine/spine), and
Dental, with an active development programme
in the Cardiac field.
Our vision
To establish Tissue
Regenix as a leader in the
science and innovation
of regenerative medicine.
Transforming patient care
and delivering favourable
health economic outcomes.
Our values
Dedication to patients
Passion for innovation
Drive for excellence
Investment case
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Two novel regenerative medicine
platforms for the treatment of soft
tissues and bone
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International manufacturing
capabilities
Uncompromising integrity
Expansive distribution opportunities
Multiple commercialisation
opportunities – innovative product
portfolio and pipeline
Tissue processing science and
development expertise
Differentiated clinical
outcomes
Company snapshot
| £13.0m revenue FY2019
| 12% growth year-on-year
| £2.4m net cash at 31 Dec 2019
| £14.6m gross equity fundraise
undertaken post year end, subject
to approval
| Specialist sales and distribution
partners
TISSUE REGENIX GROUP PLC
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Highlights
Financial
Operational
£m
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Revenue growth by product
Annual growth (including impact of FX)
+5%
+25%
+31%
+79%
+23%
+46%
BioRinse
dCELL®
1 Revenue by product on a pro-forma basis.
BioRinse acquired as part of July 2017
acquisition of CellRight Technologies, LLC. 2016
financials relate to 11 months to 31 December
2016.
£13.0m
Group sales increased
(2018: £11.6m) +12%, driven by:
– DermaPure sales increased by 25%
to £4.2m (2018: £3.4m), due to
the increasing demand within the
urogynaecology market and greater
penetration into key accounts
– Orthopaedics and Dental revenue of
£6.7m (2018: £6.4m) +5%
– Joint venture GBM-v achieved sales of
£2.1m (2018: £1.8m) +13%
Operations
– Orthopaedic donor throughput more
than doubled between Q1 and Q4 2019
– Second shift commenced in San
Antonio facility
– Sub-contracted a percentage of
DermaPure production to Community
Tissue Services (“CTS”)
– Lease signed on an additional 21,000
sq ft facility in San Antonio
– $0.3m grant from Universal City to
commence utility infrastructure work
– Established donor services team and
enhanced supply chain
– Further Group Purchasing Organisation
approval for DermaPure increasing
coverage to c.95% of US GPO hospitals
– Soft launch of DermaPure non-
oriented, specifically for applications in
urogynaecology
Contents
Overview
Who we are
Directors and officers
Highlights
Chairman’s statement
At a glance
Product pipeline
Strategic report
Our markets
Our divisions
Business model
Our strategic growth drivers
Future milestones: strategy in action
Key performance indicators
Our management team
– Further approvals in major hospital
Interim CEO operational review
institutions
R&D, Clinical
– 11 new DermaPure clinical case studies
undertaken for new applications
– Continuation of OrthoPure XT clinical
data collection
Management
– Daniel Lee appointed President, US
Operations, January 2019
– Tina Trimble appointed VP, Donor
Services, March 2019
Financial overview
Risks
Sustainability
s172 statement
Governance
Profile of the current Directors
Corporate governance
Directors’ remuneration report
£2.4m
Cash balance at 31 December 2019
– Cash balance is after drawing down £1.0m
– Gareth Jones appointed interim CEO,
Directors’ report
August 2019
Statement of directors’ responsibilities
– Kirsten Lund appointed Group Finance
Director, November 2019
Financials
– Lance Johnson appointed VP, Quality
Independent Auditor’s Report
of the Revolving Credit Facility (“RCF”)
and Regulatory, November 2019
– Secured debt facility of up to $20m with
MidCap Financial Trust (“MidCap”) drawing
down an initial $7.5m and accessing the
$3m RCF in June 2019
– Repaid $5.5m of MidCap Term Loan
following renegotiation in November 2019
– Completed an equity fundraise via
placement of ordinary shares raising gross
proceeds of £14.6m on 22 May 2020,
conditional on shareholder approval at a
General Meeting of shareholders and also
to admission of the fundraising shares to
trading on AIM
Post balance sheet events
– Company subject to cyber attack in
January 2020, which was resolved with
no long term impact
– Q1 2020 revenue increased 18% year-
on-year
– US Government backed loans of $1m
secured April 2020 to assist with US
cost base during COVID-19 pandemic
– UK manufacturing staff furloughed due
to COVID-19 pandemic
– New strategic collaboration with a top
10 global healthcare company for white
label manufacturing announced May
2020
– CE Mark approval for OrthoPure XT
received May 2020
Consolidated statement of
comprehensive income
Consolidated statement of financial
position
Consolidated statement of changes
in equity
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 financial
statements
Notice of Annual General Meeting
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Annual Report and Accounts for the year ended 31 December 2019
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27183 1 June 2020 4:29 pm Proof 6 We remain focused on delivering positive, sustainable growth across key divisions of the business. Our strategic realignment has been successful, and having fully integrated CellRight Technologies into the Group, we have achieved considerable commercial and operational progress. We are well positioned to capitalise on these achievements, as well as to grow our addressable market opportunities through the launch of new products, and partnerships, during 2020 and beyond.INTERIM NON-EXECUTIVECHAIRMANJonathan GlennIntroductionDuring 2019 our focus was on optimising our supply chain and operational processes, which allows us to develop and maintain strong working relationships with our current and potential strategic partners. As previously announced we have experienced capacity constraints at our San Antonio facility however, despite this, we still reported top-line revenue growth of 12%, and saw continued significant demand for our products. As a result of the operational initiatives implemented throughout the year, we believe we are now positioned to achieve continued top-line growth into the future.Financial performanceThe Group recorded top-line revenue of £13.0m (2018: £11.6m) however, the overall performance was impacted by the capacity constraints experienced. This particularly affected our BioRinse orthopaedic portfolio, where we continue to see high levels of demand, from both our current customers and partners such as Arthrex, Inc.and also potential future opportunities that we are not currently positioned to serve until the additional capacity expansion project is completed.Our DermaPure portfolio, under the BioSurgery division, continued to see strong growth, increasing sales by 25% year-on-year, derived primarily from further penetration into key hospital accounts and the urogynaecology market, with strategic partner, ARMS Medical. Our controlled joint venture, GBM-v, has continued to increase revenue from their corneal business and is now financially self-sufficient. The Company renegotiated the terms of the MidCap Financial funding, secured in June 2019, repaying $5.5m of the initial $7.5m term loan and at the year end the Group recorded a cash position of £2.4m after drawing down £1m of the MidCap Revolving Credit Facility. The Board has successfully secured alternative financing, details of which were announced post year end, as discussed further below. OperationsFollowing the review of our supply chain and operational processes we implemented several initiatives, including commencement of the recruitment and training of a second shift at the facility in San Antonio. However, due to the three-four month lead time for the BioRinse orthopaedic portfolio, the benefits of this increased processing became evident towards the end of the year, with an uptick in sales during Q4 which we expect to continue into 2020. READ MORE IN THE INTERIM CEO REPORT ON PAGES 18–21. Our strategyWe made the strategic decision to shift our focus away from R&D and concentrate on the commercialisation of the existing product lines. This still allows for product line extensions, such as DermaPure non-oriented, to be brought to market in a cost efficient and timely manner, but removes the cost and burden of organic product development and pre-clinical trials, as we focus on reaching break even and increasing value for our stakeholders.We have continued to strengthen our relationships with key strategic partners, including Arthrex and ARMS Medical. We have also identified additional opportunities and distribution agreements that target products and therapeutic areas which are complementary to current processing activities and will diversify the Group’s sales portfolio. READ MORE ABOUT OUR STRATEGY ON PAGES 10–11. TISSUE REGENIX GROUP PLC OVERVIEW / 02Chairman’s statement27183-Tissue-Regenix-AR-2019.indd 201-Jun-20 4:31:32 PM Management
Post balance sheet events
Outlook
In January 2020, the Company was subject
to a cyber attack at our base in San Antonio,
Texas. There is not expected to be any
long-term financial implications and, as
announced on 15 April 2020, Q1 2020 sales
grew by 18% year-on-year, confirming that
sales were not materially impacted by this
event.
As with all businesses, the COVID-19
pandemic has been a challenging time.
However, I am encouraged by the work
undertaken by the management team to
ensure the health and wellbeing of our
employees and stakeholders whilst also
allowing processing at our San Antonio
facility to continue in line with all relevant US
Government protocols. We recently received
US Government backed loans of $1m to
assist with the payroll, health insurance and
utility and rent payments in the US during this
time. Further details of this can be found in
the financial overview on page 21.
In the UK, following UK Government advice,
our technical and operations staff were
furloughed and processing halted once we
ensured there was sufficient levels of finished
goods to meet near-term demand.
During March 2020, John Samuel stepped
down from the position of Executive
Chairman and as a Director of the Board.
John had been a Director of the Company
for 12 years and played an important role in
building the Company from a start up to its
current form. On behalf of the Board and all
stakeholders, I would like to thank John for
his unwavering commitment to the Company
throughout this time.
In line with our refocused strategy, in May
2020 we entered a white label (unbranded)
manufacturing agreement, launching a new
product line with a top 10 global healthcare
company. It is expected that this agreement
will have a material impact on our top-line
revenue during the next two years.
In addition, OrthoPure XT, a decellularised
xenograft ligament was awarded a CE mark
in May 2020.
Following a recurrence of his illness, Steve
Couldwell retired from the position of Chief
Executive Officer (CEO) in August 2019.
On behalf of the Board I would like to thank
Steve for his commitment and exceptional
leadership as both CEO and, prior to this,
a Non-Executive Director of the Company.
Gareth Jones, Chief Operating Officer,
stepped into the interim CEO position
where he remains, and Mike Barker joined
as interim Chief Finance Officer in January
2019 before being formally appointed in
August 2019. Due to family circumstances,
Mike stepped down from this position in
November; I would like to thank Mike for
his support and guidance in what was a
challenging time for the management team.
Kirsten Lund, Group Financial Controller,
was promoted to Group Finance Director in
November 2019.
We strengthened our operational
management team in the US appointing
Daniel Lee, President of US Operations,
in January 2019, and Tina Trimble, VP
Donor Services, in March 2019. Both bring
significant experience to the team and have
been at the forefront of implementing the
successful operational improvements.
READ MORE ABOUT OUR MANAGEMENT TEAM
ON PAGES 16–17.
S Operations
Shareholders
In June 2019, Woodford Investment
Management, the second largest shareholder
of the Tissue Regenix Group, suspended
their Equity Income Fund, instigating a
period of uncertainty. During the year the
composition and nature of our investor base
changed with an increase in smaller funds
and individual shareholders. On behalf of
the Board I would like to thank all of our
shareholders for their continued support of
the business.
Our employees
Our employees remain a key stakeholder
in the success of our business. We look
to maintain a collaborative and supportive
working environment where everyone
can excel, and I would like to thank all
employees for their continued hard work
and commitment. Due to the shift in our
strategy to focus on the commercial growth
of our existing product portfolio, and as the
Group looks to maintain cash reserves, a
restructuring of our employee base was
undertaken in Q4 2019, resulting in a number
of redundancies, primarily from the R&D and
clinical teams in the UK.
We believe there is strong underlying
demand for our portfolio of products,
which is further illustrated by our recent
announcement regarding a new strategic
collaboration.
The COVID-19 pandemic has affected most
businesses during H1 2020. As previously
communicated, a number of elective surgical
procedures that utilise our products have
been postponed and there remains ongoing
uncertainty around level and duration of the
disruption from the pandemic and therefore,
the time it will take to perform any delayed
surgical procedures thereafter. However, the
Group has continued to work closely with
partners and distributors during this time and
we remain confident that, once appropriate,
we are well positioned to service the demand
for our products and address these clinical
requirements.
Post-period, on 22 May 2020, we
announced that gross proceeds of £14.6m
had been conditionally raised through an
offer of new ordinary shares in the Company
to institutional and qualifying retail investors.
This fundraise is conditional on shareholder
approval at a General Meeting of
shareholders to be held on 9 June 2020, and
also to admission of the fundraising shares
to trading on AIM. If this does not occur, the
Directors would consider alternative sources
of funding, however the Group would only
have sufficient working capital to trade
through to the first week of August without
taking any mitigating measures and the
Directors may not be in a position to pursue
further the commercial activities of the Group
and in such circumstances would need to
take immediate steps to protect the position
of its creditors.
The injection of capital from this fundraising
will allow the Group to accelerate the
planned capacity expansion of its US
manufacturing facility and capabilities.
Additionally, during 2019, we made
significant progress in optimising processes
at the current facility, such that donor
throughput had more than doubled by the
end of the year. Together this investment and
the current operational initiatives will enable
us to meet the anticipated future demand
for our products, and allow us to realise new
opportunities that we foresee emerging once
the impact of the COVID-19 pandemic has
passed. This, we believe, will translate into
a step change for the business. Therefore,
despite the current near-term uncertainty
resulting from the COVID-19 pandemic, the
Board remains confident in the Group’s future
prospects.
Jonathan Glenn
Interim Chairman
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27183 1 June 2020 4:29 pm Proof 6Two high growth product lines focused on bone and skin:Healthcare areaBone SkinTechnology platformBioRinse®dCELL®FY19 revenue£6.7m£4.2mProductsConCelltrate®DermaPure®Applications |Foot/ankle |Spine |Dental |Orthopaedics |Urogynaecology |Sports medicine |Open wound |PlasticsDifferentiators + Induces new bone growth + Faster healing + Superior handling + Reduced flush out + Clinical outcomes + No second graft site required + Stored at room temperature + Superior handlingProduct portfolioTwo innovative technology platforms - Three key clinical focus areas - Four strategic growth driversInnovative platform technologies READ MORE ABOUT OUR STRATEGIC GROWTH DRIVERS PAGES 10–11. –BioRinse™ Technology – Natural bone filler solutions verified to be osteoinductive to stimulate and regenerate native bone growth Differentiated characteristics: –Maintaining the five key natural bone growth factors and bone morphogenic proteins that promote active regeneration –Contains 100% allograft bone, proven to produce better clinical outcomes –Verified to be osteoinductive –Ability to deliver malleable bone collagen scaffolds in various physical forms to meet clinical needs –dCELL® Technology – Gentle soft tissue decellularisation process, removes DNA and cellular material to reduce risk of rejectionDifferentiated characteristics: –Maintains the natural acellular scaffold of the tissue structure to allow for cellular proliferation –Supports regeneration of native tissue –Stored at room temperature –Can be applied to both human or animal tissue sources –Favourable health economic benefits due to reduced operation time, reduction in rehabilitation required, no anticoagulant drugs Addressing clinical needs through complementary bone and soft tissue platformsTISSUE REGENIX GROUP PLC OVERVIEW / 04At a glance Through our platform technologies, Tissue Regenix are focused on the development of regenerative medicine products, in three key clinical areas: BioSurgery, Orthopaedics and Dental, with an active development programme in the Cardiac field.27183-Tissue-Regenix-AR-2019.indd 401-Jun-20 4:31:36 PM 27183 1 June 2020 4:29 pm Proof 6ProductApplication/indicationPhase Primary market DermaPure – Decellularised allograft tissue Orthopaedics, trauma, woundcareHCT/PsUSA DermaPure Non-Oriented – Decellularised allograft tissue with no basement membrane Urogynaecology and surgicalRegistered with the FDA as HCT/Ps USASurgiPure XD – Decellularised xenograft tissue Hernia repair510(K) Clearance USA OrthoPure XT – Decellularised xenograft ligamentAnterior cruciate ligamentCE Mark certifiedUK and EUConCelltrate 100 – Demineralised allograft bone matrix Orthopaedics, spine Registered with the FDA as HCT/Ps USAMatrix OI FlexIt – Demineralised cortical bone strip Maxillofacial, periodontal defects Registered with the FDA as HCT/PsUSAMatrix OI 100 DBM – Demineralised cortical fibres and fillers with mineralised cancellous fibresSpinal, lumbar fusions, non-structural bone-grafting Registered with the FDA as HCT/PsUSA Matrix OI Strips & Blocks – Stem cell containment scaffold that minimises the use of fixations devicesOrthopaedics, spinalRegistered with the FDA as HCT/PsUSAMatrixCellect 100 DBM – Demineralised allograft bone putty Orthopaedics, spinal Registered with the FDA as HCT/PsUSAMartixCellect 100 DBM Crunch – Demineralised allograft bone matrix containing cancellous chips Orthopaedics, spinal Registered with the FDA as HCT/PsUSA Matrix IQ – Decellularised allograft tissue Maxilliofacial and dentalRegistered with the FDA as HCT/PsUSAAmnioWorks – Human Amniotic membrane Surgical graft Registered with the FDA as HCT/PsUSADentalFix – mineralised particulate allografts featuring a unique elongated shapeDental and maxillofacial Registered with the FDA as HCT/PsUSAKey: Tissue types:Allograft – donated human tissues/bone Xenograft – donated porcine (pig) tissue Amniotic membrane – inner most layer of the placenta recovered following delivery of the child Demineralised Cortical bone – the outer part of the bone, which retains biologic properties including growth factors Demineralised Cancellous bone – porous bone matrix which provides a scaffold to allow growth of the patient’s own bone.1 http://www.aabb.org/advocacy/regulatorygovernment/ct/hctps/Pages/default.aspx2 https://www.fda.gov/medical-devices/premarket-submissions/premarket-notification-510k 3 https://www.gov.uk/guidance/medical-devices-conformity-assessment-and-the-ce-markThe Group has a novel product portfolio of both soft tissue and bone applications to address a number of clinical indications. Phase: Registered with FDA as HCT/Ps – USA regulatory pathway Human cells, tissues, and cellular and tissue-based products (HCT/Ps) consist of human cells or tissues intended for implantation, transplantation, infusion or transfer into a human recipient.1 Products must be: |Minimally manipulated |Intended for homologous use only 510(k) clearance – USA regulatory pathway A 510(k) is a premarket submission made to FDA to demonstrate that the device to be marketed is as safe and effective, that is, substantially equivalent, to a legally marketed device.2CE Mark approval – UK & EU regulatory pathway Demonstrate that the medical device meets the requirements in the Medical Devices Directive (MDD) by carrying out a conformity assessment. The assessment route depends on the classification of the device.The CE mark can be placed on the product to show that the medical device has met the requirements when it has passed the conformity assessment.3Annual Report and Accounts for the year ended 31 December 2019OVERVIEW / 05Product pipeline27183-Tissue-Regenix-AR-2019.indd 501-Jun-20 4:31:40 PM 27183 1 June 2020 4:29 pm Proof 6The demand for biologic regenerative treatments is driven by a demographic shift towards a more active, older generation and an increase in lifestyle-related illnesses such as obesity and diabetes. Health systems need to be transformed so that they can ensure affordable access to evidence-based medical interventions that respond to the needs of older people and can help prevent care dependency later in life1.”Tissue Regenix is helping to transform the treatment of patients in three key areas: BioSurgery, Orthopaedics and Dental, with an active development programme in Cardiac applications. Our products address sports medicine, spine, degenerative diseases, surgical and oral conditions. What is regenerative medicine?Regenerative medicine is an interdisciplinary field that focuses on providing safe and reliable ways to repair, restore, or replace damaged tissues or organs. The two main components of regenerative medicine are stem cell therapy and tissue engineering.Health economicsThe shift in demographics has increased the strain on both private and public healthcare systems, as they look to accommodate an increasing number of patients and procedures within limited budgets. In order to maintain the level of mobility they seek, patients are requiring repeated surgeries and therefore new novel technologies are emerging to combat this. Regenerative medicine has the potential to assist with this growing global dilemma as it has been shown to minimise healing time, hospital stays and rehabilitation spends, reducing the overall end-to-end spend for multiple procedures. Increasing clinical demand Regenerative, biologic solutions are being utilised in an increasing number of clinical applications and one area where Tissue Regenix has seen increasing market demand is urogynaecology. With over 100,0002 women in the US filing personal injury lawsuits following complications from the implantation of transvaginal mesh patches, the FDA acted in April 2019 ordering manufacturers of surgical mesh to stop selling all devices intended for transvaginal repair of pelvic organ prolapse3. As these products were withdrawn from the market there was a clear need for a biologic solution for the approximately 200,0004 women in the US who undergo surgical procedures each year.Regenerative medicineMarket opportunitiesCellRight Technologies San Antonio, Texas –Human Tissue US –Processing dCELL® and BioRinse productsGBM-v Rostock Germany –Human Tissue EU –Corneas and working on regulatory approvals for Cardiac productsTissue Regenix Leeds, UK –Porcine Tissue –Processing SurgiPure XD and OrthoPure XT Global operations infrastructurePlatform for international expansionRegulatory environment The medical device and biologics industry is highly regulated with specific country and institutional regulations for the approval and use of products. Our human tissue products are regulated under the HCT/P pathway for minimally manipulated tissues in the US, whilst in Europe where we look to commercialise our xenograft tissues, we are subject to the Medicines and Healthcare products Regulatory Agency (MHRA), and also, the Medical Device Regulations, introduced in 2017. Following Britain’s exit from the European Union, the MHRA has confirmed that during the transition period to the 31 December 2020, CE Certificates will continue to be valid for both EU and UK markets.1 https://www.who.int/ageing/health-systems/en/ 2 https://www.meshmedicaldevicenewsdesk.com/mesh-lawsuit/ 3 https://www.fda.gov/news-events/press-announcements/fda-takes-action-protect-womens-health-orders-manufacturers-surgical-mesh-intended-transvaginal4 https://www.uptodate.com/contents/pelvic-organ-prolapse-in-women-choosing-a-primary-surgical-procedureTISSUE REGENIX GROUP PLC STRATEGIC REPORT / 06Our markets27183-Tissue-Regenix-AR-2019.indd 601-Jun-20 4:31:47 PM 27183 1 June 2020 4:29 pm Proof 6BioSurgeryRepair and replacement of soft tissue – dCELL®Orthopaedics & DentalRepair and augmentation of bone and soft tissue – BioRinse™ & dCELL®GBM-v & CardiacMulti-tissue bank facility, supplying corneas and working on pulmonary and aortic heart valve regulatory approvals2019 achievements –Soft launch for product line extension DermaPure non-oriented –Increased inventory by outsourcing some DermaPure production to CTS –Secured a number of prestigious marque accounts –Achieved further GPO approval taking total to c.95% of hospitals covered 2020 milestones –Full roll out of DermaPure non-oriented –Identify potential distribution opportunities for SurgiPure XD –Further expansion into the North American market and overseas markets –Secure a strategic partner for woundcare applications 2019 achievements –Increased processing throughput for orthopaedic (BioRinse) portfolio –Increased amniotic product processing and throughtput –Revamped donor services team and recruited employees with key skills –Recruited and introduced a second shift at San Antonio facility 2020 milestones –Secure additional strategic partnerships –Launch additional product lines in collaboration with strategic partners –Complete phase one of the facility expansion project –Review opportunities for OrthoPure XT following CE Mark approval 2019 achievements –Increased sales of cornea products by 13% year-on-year –Progressed CardioPure regulatory clearance application2020 milestones –Achieve marketing authorisation in Germany for cryopreserved valves, CardioPure dCELL heart valves and Pulmonary Patch –Start commercial distribution of CardioPure products –Develop proposition to contract manufacture cardiac tissue products for other European tissue banksOur divisionsThe Group comprises of three key operating divisions allowing each to function independently and appoint the optimal commercial strategy, management and access to relevant Key Opinion Leaders. This also allows us the benefits of operational synergies across the Group while reporting against each division financially. 25% increase year- on-year salesGBM-VFinancially self sustainableProcessingmore than doubled in the yearThrough demonstrating our product differentiators and clinical outcomes during 2019 we have gained:11 new case studies (8 Orthopaedics, 2 General, 1 Oral/maxillofacial)7 poster presentationsThrough demonstrating our product differentiators and clinical outcomes during 2019 we have gained:2 new case studies5 new KOL/healthcare professionals Surgeon specialtyNumber of new healthcare professionals with agreementsOrthopaedics7Vascular1Plastics2Urology1General1Annual Report and Accounts for the year ended 31 December 2019STRATEGIC REPORT / 07Our divisions27183-Tissue-Regenix-AR-2019.indd 701-Jun-20 4:31:57 PM 27183 1 June 2020 4:29 pm Proof 6Gentle soft tissue decellularisation process, removing DNA and cellular material to reduce risk of rejection.The dCELL® process involves the creation of biological scaffolds, which are essentially inert. By removing DNA and cellular material from biological tissues, the patient’s cells can repopulate and colonise, creating new, like-for-like tissue, which is recognised and accepted by the body, significantly reducing the risk of rejection, and stimulating a natural healing process.PeopleOur employees are key to our continued growth due to their experience, qualifications and commitment.IPProvides protection for the technologies at the heart of our business; a fundamental resource for our growth.Working capital Supports the product development pipeline and enables us to make investments that support our future growth.Manufacturing capabilitiesFundamental in ensuring the production and development of our products on a global scale.Strategic partnershipsAllowing faster market penetration, physician conversion and delivering revenue growth.Licensing and distribution agreementsEnsuring we can serve the global market potential.Natural bone filler solutions guaranteed to be osteoinductive to stimulate and regenerate native bone growth.This process has the potential to provide better clinical outcomes as it contains 100% allograft bone, maintaining the five key natural bone growth factors, and can deliver these properties through malleable bone collagen in various physical forms.BioRinse™ TechnologydCELL® TechnologyIn order to continue to create value for our stakeholders, we invest in the Group’s key resources. For example, improving our manufacturing capabilities.We aim to implement a business model that ensures our product portfolios have the market reach and penetration to deliver novel, regenerative solutions to patients, and provide returns to our shareholders. Through a combination of strategic partnerships, distributors and direct sales, we believe we have a balanced and robust business model to drive our commercial growth, achieve our key performance indicators and transform patient care. Our offeringOur key resourcesTISSUE REGENIX GROUP PLC STRATEGIC REPORT / 08Business model27183-Tissue-Regenix-AR-2019.indd 801-Jun-20 4:31:58 PM Our key activities
Our competitive
advantage
We create value for
our stakeholders
01
Commercialisation
Currently we have a portfolio
of 12 primary product lines on
the market, with new product
line extensions in the pipeline.
It is also our intention to
expand into new geographic
territories.
02
Optimisation
Ensuring that we maintain
product differentiation,
optimise our margins and
have a competitive market
offering.
03
Distribution
and licensing
Building a network of key
distributors and evaluating
licensing opportunities for
new geographic territories.
Patients
Providing a return to a better quality of
life, differentiated clinical outcomes and
optimised healthcare costs.
Partners
Strong strategic partnerships with large
scale businesses and continued growth
opportunities in the long term.
Physicians and
healthcare providers
Products with ease of use that will benefit
their patients and provide economic
benefits to the whole healthcare system.
Shareholders
Investment in a Company with growth
opportunities that is focused on creating
sustainable value for both shareholders
and addressing wider socio-economic
issues.
Employees
We provide training and development
opportunities, promote a positive
professional culture, and support a
healthy work/life balance.
READ MORE ABOUT OUR
STAKEHOLDERS ON PAGES 28 AND 29.
Distributor
network
We can leverage cross-
selling opportunities
through our distributor
network and industry
relationships.
Team
Our experienced
management team,
well qualified and
skilled employees,
and knowledgeable
Board ensure we have
the capabilities to deliver
future growth.
Innovation
We have an innovative
product pipeline with
multiple opportunities
to develop the
commercialisation of our
platform technologies.
Products
Performance of our
products in the clinical
environment provides
us with a competitive
advantage over
competitors.
Manufacturing
We have international
manufacturing capabilities
and an expanding
geographic presence.
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Our strategic growth drivers
Strategic objective
Description
2019 performance
Focus and goals for 2020
Link to KPIs
Link to risks
The US is the largest healthcare market in
the world and where we see the greatest
opportunity.
We intend to leverage our platform
technologies dCELL® and BioRinse to further
our market penetration though a hybrid
sales model, a combination of direct sales,
distribution and OEM agreements.
– Second shift commenced in San Antonio facility
– Achieved further GPO coverage taking total to
c.95% for DermaPure
– Secured additional prestigious hospital
accounts
– DermaPure non-oriented soft launch
– New dental distributors signed
– Further penetration into high volume accounts
Our current commercialisation efforts are
focused on the US markets; however, there is
the opportunity and market demand for us to
enter new geographic territories.
We have been restricted in our ability to provide
our BioRinse products for international expansion
due to our processing capacity constraints.
However, where opportunities have arisen that
can be fulfilled without detrimental impact on
existing business, we have supplied product into
other territories such as Canada, Central America,
South America and Saudi Arabia.
Accelerate
US market
penetration
Exploit global
market potential
– Continued to strengthen relationships with
existing strategic partners, particularly Arthrex,
Inc. and ARMS Medical.
– Brought DermaPure non-oriented to market
following consultation with ARMS Medical
– Entered discussions with other significant
parties for IP and product development
collaborations
– Undertaken 11 additional DermaPure case
studies for different clinical applications
– Signed 12 new Key Opinion Leaders for
DermaPure
– Launched DermaPure non-oriented
– Undertaken two case studies for BioRinse
portfolio
At the beginning of 2018 we revised our
commercial strategy, which we continue to
implement, with a focus on establishing and
building strategic partnerships to further our
market penetration.
Broaden strategic
partnerships
This allows for the potential to increase OEM
agreements and initiate discussions around
joint IP collaborations.
Our success is reliant upon the ability to
commercialise our current product portfolio
and the potential for augmenting this with line
extensions and new innovative products.
We therefore look to establish a database
of compelling clinical data to validate our
technology platforms and further our physician
conversion rates.
These clinical data portfolios are also
imperative when we seek new strategic
partnership opportunities and when navigating
regulatory clearance in new territories.
Strengthen
portfolio
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27183-Tissue-Regenix-AR-2019.indd 10
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TISSUE REGENIX GROUP PLC
– Commence phase one of capacity expansion programme
– Group sales growth
– Finance – Insufficient funds
– Strengthen relationships with strategic partners
– Extended roll out of DermaPure non-oriented product
– Expand distribution network
– Launch new product SKUs
– Increase number of
strategic partnership
and distribution
opportunities
to invest in the required
expansion
– Operational – The Group is
unable to expand in line with
demand
– Commence phase one of the capacity expansion project
– Group sales growth
– Finance – Insufficient funds
– Evaluate opportunities for OrthoPure XT in the UK and select European
– Increase number of
markets
distribution network
– Ramp up European market awareness of BioRinse products through our
strategic partnerships
and distribution
opportunities
– Enter distribution arrangements with overseas partners for the supply of
our dCELL® product range
– Investigate potential licencing opportunities in other geographic
territories
– Ramp up DermaPure non-oriented opportunity and market penetration
– Group sales growth
– Operational - The Group is
in partnership with ARMS Medical
– Clinical data collection
– Launch new product developments with strategic partners
– Enter new clinical applications and geographic territories with new and
existing strategic partners
– Identify potential distribution opportunities for SurgiPure XD
– Evaluate opportunities for OrthoPure XT in the UK and select European
– Clinical data collection
– Clinical & Regulatory – Loss
markets
– Launch new product developments with strategic partners
– Improve product
portfolio and pipeline
– Collect additional real work clinical data through case studies
– IP collaboration
– Commence post marketing clinical studies
to invest in the required
expansion
– Operational – The Group is
unable to expand in line with
demand
– Clinical & Regulatory – Loss
of license or restriction due to
regulatory failings
– Political landscape
unable to expand in line with
demand
– Commercial - Competitor
product could reach the
market first or outperform the
Group’s products
of license or restriction due to
regulatory failings
– Commercial – Competitor
product could reach the
market first or outperform the
Group’s products
– Finance – Insufficient funds to
commence or complete trials
– Operational – The Group is
unable to expand in line with
demand
the world and where we see the greatest
opportunity.
– Achieved further GPO coverage taking total to
c.95% for DermaPure
– Secured additional prestigious hospital
We intend to leverage our platform
technologies dCELL® and BioRinse to further
accounts
our market penetration though a hybrid
– DermaPure non-oriented soft launch
sales model, a combination of direct sales,
distribution and OEM agreements.
– New dental distributors signed
– Further penetration into high volume accounts
Our current commercialisation efforts are
We have been restricted in our ability to provide
focused on the US markets; however, there is
our BioRinse products for international expansion
the opportunity and market demand for us to
due to our processing capacity constraints.
enter new geographic territories.
However, where opportunities have arisen that
can be fulfilled without detrimental impact on
existing business, we have supplied product into
other territories such as Canada, Central America,
South America and Saudi Arabia.
Accelerate
US market
penetration
Exploit global
market potential
At the beginning of 2018 we revised our
– Continued to strengthen relationships with
commercial strategy, which we continue to
existing strategic partners, particularly Arthrex,
implement, with a focus on establishing and
Inc. and ARMS Medical.
building strategic partnerships to further our
market penetration.
– Brought DermaPure non-oriented to market
following consultation with ARMS Medical
– Entered discussions with other significant
parties for IP and product development
collaborations
Broaden strategic
partnerships
This allows for the potential to increase OEM
agreements and initiate discussions around
joint IP collaborations.
Strengthen
portfolio
Our success is reliant upon the ability to
– Undertaken 11 additional DermaPure case
commercialise our current product portfolio
studies for different clinical applications
and the potential for augmenting this with line
extensions and new innovative products.
– Signed 12 new Key Opinion Leaders for
DermaPure
We therefore look to establish a database
– Launched DermaPure non-oriented
of compelling clinical data to validate our
– Undertaken two case studies for BioRinse
technology platforms and further our physician
portfolio
conversion rates.
These clinical data portfolios are also
imperative when we seek new strategic
partnership opportunities and when navigating
regulatory clearance in new territories.
Strategic objective
Description
2019 performance
Focus and goals for 2020
Link to KPIs
Link to risks
The US is the largest healthcare market in
– Second shift commenced in San Antonio facility
– Commence phase one of capacity expansion programme
– Strengthen relationships with strategic partners
– Extended roll out of DermaPure non-oriented product
– Expand distribution network
– Launch new product SKUs
– Group sales growth
– Increase number of
strategic partnership
and distribution
opportunities
– Finance – Insufficient funds
to invest in the required
expansion
– Operational – The Group is
unable to expand in line with
demand
– Commence phase one of the capacity expansion project
– Group sales growth
– Evaluate opportunities for OrthoPure XT in the UK and select European
– Increase number of
markets
– Ramp up European market awareness of BioRinse products through our
distribution network
– Enter distribution arrangements with overseas partners for the supply of
our dCELL® product range
– Investigate potential licencing opportunities in other geographic
territories
strategic partnerships
and distribution
opportunities
– Finance – Insufficient funds
to invest in the required
expansion
– Operational – The Group is
unable to expand in line with
demand
– Clinical & Regulatory – Loss
of license or restriction due to
regulatory failings
– Political landscape
– Ramp up DermaPure non-oriented opportunity and market penetration
– Group sales growth
– Operational - The Group is
in partnership with ARMS Medical
– Clinical data collection
– Launch new product developments with strategic partners
– Enter new clinical applications and geographic territories with new and
existing strategic partners
– Identify potential distribution opportunities for SurgiPure XD
unable to expand in line with
demand
– Commercial - Competitor
product could reach the
market first or outperform the
Group’s products
– Evaluate opportunities for OrthoPure XT in the UK and select European
– Clinical data collection
– Clinical & Regulatory – Loss
markets
– Launch new product developments with strategic partners
– Improve product
portfolio and pipeline
– Collect additional real work clinical data through case studies
– IP collaboration
– Commence post marketing clinical studies
of license or restriction due to
regulatory failings
– Commercial – Competitor
product could reach the
market first or outperform the
Group’s products
– Finance – Insufficient funds to
commence or complete trials
– Operational – The Group is
unable to expand in line with
demand
Annual Report and Accounts for the year ended 31 December 2019
READ MORE ABOUT OUR
KPIS ON PAGES 14 AND 15.
READ MORE ABOUT OUR
RISKS ON PAGES 22 TO 25.
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Future milestones: strategy in action
Strategic objective
Focus
Near 6–12 months
Mid 12–18 months
Long 18+ months
Drive sales growth of current products in the
US market through current direct and indirect
distribution channels and increasing GPO
relationships
– Launch DermaPure non-oriented for
urogynaecology applications
– Increase operational capacity through
commencement of phase 1 of the capacity
expansion programme
– Collection and publication of real world clinical data
– Collaboration with strategic partners for future product
– Assess capital availability for phase 2 of the capacity expansion
development
programme
Continue to build global sales reach through
expansion of distribution partnerships and
licensing agreements
– Target additional territories for distribution
and licensing opportunities
– Continued expansion of UK and EU BioRinse distribution
– Focus on business development for geographic expansion
opportunities
– Pursue licensing and partnership opportunities
Pursue further, and develop existing
distribution, licensing or IP collaboration
partnerships
– Sign up additional strategic partnerships for
OEM and product collaboration opportunities
– Increase licensing and strategic partnerships
– Pursue further joint IP opportunities
Bring new products and product line
extensions to market from pipeline of products
currently in development
– Identify potential distribution opportunities for
– CardioPure manufacturing and marketing license
– Collaboration with strategic partners for future product
SurgiPure XD
– Evaluate opportunities for OrthoPure XT in the
UK and select European markets
development
Accelerate
US market
penetration
Exploit global
market potential
Broaden strategic
partnerships
Strengthen
portfolio
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01-Jun-20 4:32:12 PM
TISSUE REGENIX GROUP PLC
Accelerate
US market
penetration
Exploit global
market potential
Broaden strategic
partnerships
Strengthen
portfolio
Strategic objective
Focus
Near 6–12 months
Mid 12–18 months
Long 18+ months
Drive sales growth of current products in the
– Launch DermaPure non-oriented for
US market through current direct and indirect
urogynaecology applications
distribution channels and increasing GPO
relationships
– Increase operational capacity through
commencement of phase 1 of the capacity
expansion programme
– Collection and publication of real world clinical data
– Collaboration with strategic partners for future product
– Assess capital availability for phase 2 of the capacity expansion
development
programme
Continue to build global sales reach through
– Target additional territories for distribution
expansion of distribution partnerships and
and licensing opportunities
licensing agreements
– Continued expansion of UK and EU BioRinse distribution
– Focus on business development for geographic expansion
opportunities
– Pursue licensing and partnership opportunities
Pursue further, and develop existing
– Sign up additional strategic partnerships for
distribution, licensing or IP collaboration
OEM and product collaboration opportunities
partnerships
– Increase licensing and strategic partnerships
– Pursue further joint IP opportunities
Bring new products and product line
– Identify potential distribution opportunities for
– CardioPure manufacturing and marketing license
– Collaboration with strategic partners for future product
development
extensions to market from pipeline of products
SurgiPure XD
currently in development
– Evaluate opportunities for OrthoPure XT in the
UK and select European markets
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Key performance indicators
KPI
FINANCIAL
Cash position
Definition
Why this is important?
Commentary
Link to strategy
Maintaining sufficient cash resources to enable the
business to develop.
Ensuring sufficient cash resources to support the
investment and working capital requirements of the
Group for the long-term success of the business.
Following the repayment of $5.5m to MidCap Financial our cash resources were
A blend of all four strategic growth
limited and started to hinder the growth of the Group. However, it is believed that the
drivers
equity placing announced post year-end will allow for the investment into facilities and
working capital to drive the future success of the business.
Group sales
growth
An increase in top-line revenue delivered across
key commercial divisions.
In order to reach sustainable profitability, Group sales
must increase to allow investment in development and
make returns to shareholders.
Despite operational challenges due to manufacturing capacity constraints during 2019
A blend of all four strategic growth
we increased the top-line sales by 12% year-on-year. As we see the additional supply
drivers
coming online, through the operational initiatives implemented, to meet this growing
demand, we expect this top-line sales growth to accelerate.
CLINICAL
Clinical data
collection
Clinical data is increasing in importance as
physicians and healthcare providers seek the best
products for both clinical outcomes and economic
value.
IP collaboration and
exploitation
Intellectual property is at the heart of our business
for both dCELL® and BioRinse portfolios.
Collaboration allows us to expand the potential of
these IP platforms as we explore licensing deals
and future R&D opportunities.
The regulatory pathways for our porcine products is
dependent upon the ability to produce, run and monitor
a successful clinical trial. Clinical data is collected in post
marketing studies to demonstrate our differentiating
factors and reinforce the economic and clinical benefits,
and drive clinical adoption.
Our business is built around two platform technologies
and our ability to successfully protect, commercialise and
differentiate our products.
IP collaboration allows us to leverage our R&D capabilities
while utilising the large marketing and distribution arms of
our partners.
We continue to collect clinical data to strengthen our portfolio following the CE mark
certification for OrthoPure XT to supplement the three years clinical data, to date.
We have a number of respected Key Opinion Leaders who work with us undertaking
case studies and presenting at prestigious conferences across the world. During 2019
we undertook 11 new case studies for DermaPure, and 2 for BioRinse products. We
look to continue to increase the number of case studies collected moving forward.
Accelerate market penetration
Strengthen portfolio
We continuously review our IP portfolio to ensure that we have in place the correct
Strengthen portfolio
level of protection for patents and processes in territories and ensure that infringement
Accelerate market penetration
does not occur.
Although the dCELL process is patent protected, we keep the BioRinse process as
know-how in order to protect this IP.
COMMERCIAL
Improve product
portfolio and pipeline
Increase number
of strategic partners
and distribution
opportunities
OPERATIONAL
Increase
manufacturing
capacity
HR
Staff retention and
development
In order to ensure the business can continue to
develop there is a need to continually assess, and
when appropriate, develop and launch products
where market needs are identified.
In order to improve our competitive advantage, it is
important that we augment our product portfolio with
product line extensions, which increase our market
penetration and augment the existing product portfolio;
these line extensions generally have an expedited route to
market and favourable margins.
Strategic partnerships are key to our
commercialisation strategy, allowing us to access
partners’ distribution networks, potential licensing
opportunities and R&D collaboration.
To enable our products to reach the largest possible
audience, it is important that we continually develop
our routes to market and expand our network with new
partners.
During 2019 we launched DermaPure non-oriented specifically for urogynaecological
applications, which provides increased yields from donors by utilising different layers
of the dermis and has a favourable margin impact due to the minimal additional work
required.
Strengthen portfolio
Accelerate market penetration
During 2019 we expanded our GPO approvals to c.95% of the US hospitals under
Broaden strategic partnerships
these agreements allowing them to access DermaPure. This extensive coverage has
enabled us to expand our distribution network and customer base which now includes
several key hospital accounts.
We must ensure that we have enough processing
capacity to meet the growing demand, with the
correct technical and operational experts to
facilitate this.
As we look to grow our top-line revenue, and further
market penetration with our strategic partners, we must
be able to process enough inventory to meet demand.
Without this, we risk losing potential partners as they
move their requirements elsewhere.
During 2019 we initiated a second shift for processing in our San Antonio facility,
specifically for the BioRinse product portfolio, whilst outsourcing a percentage of our
DermaPure production to CTS. We also signed a lease on a 21,000 sq ft facility that
will allow us to expand further once the required funding is secured.
Accelerate US market penetration
Exploit global market potential
Broaden strategic partnerships
The retention and development of employees is
key as we invest in relevant training, qualifications
and development, while also ensuring that
succession plans are in place.
Our industry is highly skilled and reliant upon employees
with the correct qualifications, training and experience.
Therefore, staff retention is key and the ability to attract
and maintain the best talent in the industry provides us
with a competitive edge.
In Q4 2019 we undertook a restructuring of our employee base to focus on
A blend of all four strategic growth
commercialisation and operational activities. As part of this exercise we increased the
drivers
number of processors and key operational hires in the US, allowing us to commence
a second shift for BioRinse processing. Our succession plan came to the fore with the
promotion of Kirsten Lund to Group Finance Director.
ENVIRONMENTAL SUSTAINABILITY
Responsible energy
consumption
With increasing scrutiny on businesses’
environmental footprints, it is imperative that we
take all available measures to reduce our energy
consumption and operate in a sustainable and
responsible manner.
Our facilities require specific storage, temperature and
air quality, all of which can consume a large volume of
energy, especially when required 24 hours a day. We
must ensure that we take all available options to reduce
our energy consumption and increase our environmental
sustainability.
TISSUE REGENIX GROUP PLC
During the year we implemented an energy reduction programme at the UK
A blend of all four strategic growth
manufacturing facility to allow for more efficient clean room operation and shut down
drivers
during periods of inactivity leading to an overall energy saving of 35%.
S
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KPI
FINANCIAL
Cash position
Group sales
growth
CLINICAL
Clinical data
collection
COMMERCIAL
Increase number
of strategic partners
and distribution
opportunities
OPERATIONAL
Increase
manufacturing
capacity
HR
Staff retention and
development
Definition
Why this is important?
Commentary
Link to strategy
Maintaining sufficient cash resources to enable the
Ensuring sufficient cash resources to support the
business to develop.
investment and working capital requirements of the
Group for the long-term success of the business.
Following the repayment of $5.5m to MidCap Financial our cash resources were
limited and started to hinder the growth of the Group. However, it is believed that the
equity placing announced post year-end will allow for the investment into facilities and
working capital to drive the future success of the business.
A blend of all four strategic growth
drivers
An increase in top-line revenue delivered across
In order to reach sustainable profitability, Group sales
key commercial divisions.
must increase to allow investment in development and
make returns to shareholders.
Despite operational challenges due to manufacturing capacity constraints during 2019
we increased the top-line sales by 12% year-on-year. As we see the additional supply
coming online, through the operational initiatives implemented, to meet this growing
demand, we expect this top-line sales growth to accelerate.
A blend of all four strategic growth
drivers
Clinical data is increasing in importance as
The regulatory pathways for our porcine products is
physicians and healthcare providers seek the best
dependent upon the ability to produce, run and monitor
products for both clinical outcomes and economic
a successful clinical trial. Clinical data is collected in post
value.
marketing studies to demonstrate our differentiating
factors and reinforce the economic and clinical benefits,
and drive clinical adoption.
IP collaboration and
exploitation
Intellectual property is at the heart of our business
Our business is built around two platform technologies
for both dCELL® and BioRinse portfolios.
and our ability to successfully protect, commercialise and
Collaboration allows us to expand the potential of
differentiate our products.
these IP platforms as we explore licensing deals
IP collaboration allows us to leverage our R&D capabilities
and future R&D opportunities.
while utilising the large marketing and distribution arms of
our partners.
We continue to collect clinical data to strengthen our portfolio following the CE mark
certification for OrthoPure XT to supplement the three years clinical data, to date.
We have a number of respected Key Opinion Leaders who work with us undertaking
case studies and presenting at prestigious conferences across the world. During 2019
we undertook 11 new case studies for DermaPure, and 2 for BioRinse products. We
look to continue to increase the number of case studies collected moving forward.
We continuously review our IP portfolio to ensure that we have in place the correct
level of protection for patents and processes in territories and ensure that infringement
does not occur.
Although the dCELL process is patent protected, we keep the BioRinse process as
know-how in order to protect this IP.
Accelerate market penetration
Strengthen portfolio
Strengthen portfolio
Accelerate market penetration
Improve product
portfolio and pipeline
In order to ensure the business can continue to
In order to improve our competitive advantage, it is
develop there is a need to continually assess, and
important that we augment our product portfolio with
when appropriate, develop and launch products
product line extensions, which increase our market
where market needs are identified.
During 2019 we launched DermaPure non-oriented specifically for urogynaecological
applications, which provides increased yields from donors by utilising different layers
of the dermis and has a favourable margin impact due to the minimal additional work
required.
Strengthen portfolio
Accelerate market penetration
penetration and augment the existing product portfolio;
these line extensions generally have an expedited route to
market and favourable margins.
Strategic partnerships are key to our
To enable our products to reach the largest possible
commercialisation strategy, allowing us to access
audience, it is important that we continually develop
partners’ distribution networks, potential licensing
our routes to market and expand our network with new
opportunities and R&D collaboration.
partners.
During 2019 we expanded our GPO approvals to c.95% of the US hospitals under
these agreements allowing them to access DermaPure. This extensive coverage has
enabled us to expand our distribution network and customer base which now includes
several key hospital accounts.
Broaden strategic partnerships
We must ensure that we have enough processing
As we look to grow our top-line revenue, and further
capacity to meet the growing demand, with the
market penetration with our strategic partners, we must
correct technical and operational experts to
be able to process enough inventory to meet demand.
facilitate this.
Without this, we risk losing potential partners as they
move their requirements elsewhere.
During 2019 we initiated a second shift for processing in our San Antonio facility,
specifically for the BioRinse product portfolio, whilst outsourcing a percentage of our
DermaPure production to CTS. We also signed a lease on a 21,000 sq ft facility that
will allow us to expand further once the required funding is secured.
Accelerate US market penetration
Exploit global market potential
Broaden strategic partnerships
The retention and development of employees is
Our industry is highly skilled and reliant upon employees
key as we invest in relevant training, qualifications
with the correct qualifications, training and experience.
and development, while also ensuring that
Therefore, staff retention is key and the ability to attract
succession plans are in place.
and maintain the best talent in the industry provides us
with a competitive edge.
In Q4 2019 we undertook a restructuring of our employee base to focus on
commercialisation and operational activities. As part of this exercise we increased the
number of processors and key operational hires in the US, allowing us to commence
a second shift for BioRinse processing. Our succession plan came to the fore with the
promotion of Kirsten Lund to Group Finance Director.
A blend of all four strategic growth
drivers
ENVIRONMENTAL SUSTAINABILITY
Responsible energy
consumption
With increasing scrutiny on businesses’
Our facilities require specific storage, temperature and
environmental footprints, it is imperative that we
air quality, all of which can consume a large volume of
take all available measures to reduce our energy
energy, especially when required 24 hours a day. We
consumption and operate in a sustainable and
must ensure that we take all available options to reduce
responsible manner.
our energy consumption and increase our environmental
sustainability.
During the year we implemented an energy reduction programme at the UK
manufacturing facility to allow for more efficient clean room operation and shut down
during periods of inactivity leading to an overall energy saving of 35%.
A blend of all four strategic growth
drivers
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Our management team
We have a senior
management team with
extensive experience in the
healthcare industry and the
capital markets. They are
challenged and supported
by both an experienced
and well balanced Board
of Non-Executive Directors,
together with the teams of
employees that they lead.
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KIRSTEN LUND
Group Finance Director and
Company Secretary
Kirsten Lund was promoted to the
position of Group Finance Director in
November 2019 after being Group
Financial Controller for over a year. Kirsten
leads the finance teams in both the UK
and US, and advises the Board on all
financial matters relating to the Group.
After joining Tissue Regenix in 2010 as
Finance and Administration Assistant,
Kirsten successfully completed the
ACCA qualification, achieving chartered
status in 2015. Kirsten has been a key
member of the team throughout the last
10 years. Utilising the knowledge acquired
over the years in the healthcare sector,
Kirsten provides invaluable experience
and understanding around the Company
structure and routes to market, and works
closely with the management team to help
drive forward the strategy of the business.
GARETH JONES
Interim CEO
Gareth has 27 years’ experience in
finance having qualified as a Chartered
Accountant in 1993 with PwC. Gareth
joined Tissue Regenix in November 2018
as CFO before moving into the COO
position, then stepping into the interim
CEO role August 2019.
In recent years he has worked as Chief
Financial Officer for LSE listed Applied
Graphene Materials. Previously, he was
at Emco Wheaton Division of private
equity owned Gardner Denver Inc., the
global provider of industrial equipment,
technologies and services, where he
joined as Finance Director in 2013. Prior
to this he spent seven years as Finance
Director of private equity backed start-
up, Vireol Bio-Industries plc. Between
1995 and 2006 Gareth was employed
by Syltone plc. After its acquisition by
Gardner Denver Inc. in 2004, Gareth
became European Finance Director and
then Divisional Finance Director of the
Blower Division. In this capacity he was
responsible for the day-to-day financial
operations of the Group’s largest division,
operating across four continents, with
revenues of c.$480m. He graduated from
the University of Nottingham in 1989 with
a BEng.
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TISSUE REGENIX GROUP PLC
DANIEL LEE
President US Operations
JOEL PICKERING
President, TRX BioSurgery
MIKE IZON
R&D Director
Daniel Lee has nearly 30 years’
experience in the medical device and
biologics industry, ranging from product
innovation to commercialisation to
corporate management. He joined
CellRight Technologies® as President of
U.S. Operations in January 2019. Prior
to joining CellRight, Danny was the Chief
Executive Officer for Scaffold Biologics
and Aperion Biologics. His previous
senior management roles include global
marketing for OsteoBiologics (acquired
by Smith & Nephew Endoscopy in 1996)
and marketing activities for Regeneration
Technologies (now RTI Surgical), a
leading allograft tissue processor. Danny
spent the first 10 years of his career in
R&D with the U.S. Surgical Corporation
(now Medtronic). Danny received his
B.E.S. degree in Materials Science and
Engineering from the Johns Hopkins
University, and his M.S. in Biomedical
Engineering from the University of
Alabama at Birmingham. He has 13
patents on implants and instruments used
in orthopaedic and general surgery.
Joel Pickering joined Tissue Regenix
Wound Care Inc. in October 2015
to assume the leadership of the US
marketing organisation. Joel moved into
the position of President in January 2017
and now guides the commercial marketing
strategy for DermaPure® in the United
States. Joel brings a wealth of wound
care marketing experience dating back
to 1996, with companies such as J&J
Medical, Lifecell, Convatec and KCI. Prior
to joining Tissue Regenix, Joel served as
VP of Marketing and Communications for
Novation, with responsibility for driving
growth in the US.
Through his time in the wound care
category, Joel has launched several new
brands and driven many established
brands to category-leading shares through
a combination of vision, communication
and team leadership.
Mike Izon joined as Head of QA/RA
and Clinical at Tissue Regenix in
November 2014. With a background in
pharmaceutical products and medical
devices, Mike has worked over the
last 10 years as a consultant, trainer
and assessor for the certification and
registration of medical devices. Having
worked extensively with early stage
medical device development companies,
Mike has also worked with household
names such as Procter & Gamble, Clairol
and Sanofi Aventis, to achieve worldwide
market clearance for a range of products
and technologies.
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27183 1 June 2020 4:29 pm Proof 6In 2019 we focused on optimising our operational capabilities to enable us to deliver the ever-increasing volume of product demanded by our customer base.During 2019 we implemented a number of efficiency improvements throughout our supply chain and operations, as we look to increase throughput at our San Antonio facility to service the increasing commercial demand from both existing, and new partners, and extend our reach into additional territories where we see significant opportunities. Divisional performance BioSurgery reported significant underlying growth, with a 25% year-on-year increase. This was largely driven by our strategic partnership with ARMS Medical, specialist distributor for the urogynaecology applications. Demand is growing in the urogynaecology marketplace due to the withdrawal of many synthetic mesh products.In September 2019, we undertook a soft launch for a ‘non-oriented’ DermaPure product to specifically address these applications. This product is processed from the second layer of dermis tissue and therefore has no basement membrane; however, it maintains the same biomechanical properties, extracellular matrix and regenerative activity of DermaPure. Removing the requirement for orientation makes handling and application in surgical settings much simpler, and initial feedback from clinicians has been extremely positive; we therefore see great potential for this product line extension in the future. Outside of the clinical benefits, this product line extension allows for the utilisation of layers of the dermis, which were previously unsuitable for processing, thereby improving donor yields and the number of patients treated. After outsourcing a percentage of our DermaPure production to Community Tissue Services (CTS), we worked closely with them throughout the year to improve both processing efficiencies and yields. Production transfers can be operationally challenging, however, having devoted the necessary resources to ensuring a smooth transition, we anticipate a significant increase in output from this partner during 2020.The Orthopaedics and Dental division was more significantly impacted due to the capacity constraints experienced throughout the year, resulting in year-on-year growth of 5%. Recognising the need to improve our supply chain, during H1 2019 we created a donor services team, recruiting additional specialist skills. The team worked closely with the production staff and this manifested in donor processing increasing by more than double throughout the year, with a commensurate increase seen in yields in the latter months as supply chain initiatives were pulled through. In order to ensure that we can continue to increase our processing and meet demand, we now have agreements in place with a number of donor recovery agencies resulting in improved access to donors meeting our quality criteria.In conjunction with this, during H1 we commenced the hiring and training of technicians in order to commence a second shift for processing of the BioRinse products. Due to the highly skilled nature of this work, in a regulated environment, the hiring process takes time as technicians need to undergo a rigorous training programme, which coupled with the three to four month lead time for the osteoinductivity testing for this product range, meant that we did not start to see the benefits of this in our revenues until late in Q4. However, it is anticipated that moving forward into 2020 the additional revenue associated with these initiatives will become apparent on a consistent basis. The revamping of the front end of the business has meant that we are in a far stronger position to capitalise on commercial opportunities during 2020 and beyond. In Germany, the Company’s controlled joint venture, GBM-v, has continued to increase sales from their cornea products and has reached a point of becoming financially self-sustainable through the revenues generated. They continue to pursue the required regulatory clearance for the CardioPure portfolio and work closely with the team in the UK in order to decipher the best path forward for this portfolio. FundingIn June 2019 we announced a credit facility of up to $20m with MidCap, via a term loan split into three tranches and a Revolving Credit Facility (“RCF”). We immediately drew down the initial $7.5m term loan and were granted access to a $3m RCF; the additional tranches were contingent upon agreed revenue targets and a $5m net equity raise. In November, due to operational challenges discussed, we renegotiated this agreement repaying $5.5m of the term loan. This repayment reduced our net cash position at 31 December 2019 to £2.4m. However, the Company implemented several cost saving initiatives to extend the cash runway including the restructuring of the employee base. In Q4 2019, a number of positions were made redundant, largely in the R&D and clinical function in Leeds; a cost saving that INTERIM CEOGareth JonesTISSUE REGENIX GROUP PLC STRATEGIC REPORT / 18Interim CEO operational review27183-Tissue-Regenix-AR-2019.indd 1801-Jun-20 4:32:19 PM is expected to deliver £1m per annum from
2020. In the trading statement released on
22 January 2020, the first signs of these
cost savings were evident. As we move
towards break even we will continue to
assess our cost base to ensure funds are
deployed in the most efficient manner.
Personnel
Following his appointed in January 2019 as
President of US Operations, Daniel Lee has
been a key member of the team working
to increase our throughput, improve yields,
and meet customer demand.
Alongside Daniel, in Q1 2019 Tina Trimble
joined as VP Donor Services. Tina is
well respected throughout the industry
holding a seat on the Board of the
American Association of Tissue Banks,
and has become a key member of our
team, implementing several initiatives in
order to improve our donor sourcing and
processing.
Product pipeline
During 2019 we undertook a soft launch
of DermaPure non-oriented, specifically for
use in urogynaecology applications, with
our strategic partner ARMS Medical, and to
date have recieved positive feedback from
clinicians.
Capacity expansion project
As previously documented we are
challenged with capacity constraints at our
San Antonio facility. In the existing facility
we currently face two limiting factors:
namely, space for freezers, which limits the
amount of donor tissue we can hold on
site, and clean room capacity. We currently
have five clean rooms, of which four are
dedicated to BioRinse products, and one
that processes DermaPure.
With the support of the MidCap funding we
were able to take the first steps towards
increasing our manufacturing footprint,
securing a ten year lease on a 21,000 sq.
ft facility adjacent to our existing facility in
San Antonio, Texas. We believe our plans,
which are in two phases, will provide a
significant capacity increase and help
us fulfil the demand for our products.
However, these expansion plans are
subject to completion of the recent funding.
We signed the lease, with an option to
buy, on the new facility in August 2019.
Universal City provided a grant of $0.3m to
support and permit the upgrades of utilities
and infrastructure serving the new facility,
which has now been completed.
Phase one of the expansion project will
involve moving the freezer capacity into
the new facility, allowing for two additional
clean rooms to be developed, bringing the
total number of clean rooms to seven, in
the current facility. This would also increase
our potential freezer capacity by threefold
allowing us to hold more donor tissue onsite.
We would expect this phase to be completed
in around six months, which given the
three to four month lead time for BioRinse
products, would allow for the first revenues to
become evident roughly nine to ten months
after commencement of this phase.
during this time will lead to a notable decline in
the number of elective procedures undertaken
at hospitals, which was initially most evident in
the urogynaecology and dental applications.
We continue to work closely with our partners
and distributors to ensure that, once these
procedures are recommenced in a normalised
manner, enough inventory of all products will
be available to meet demand.
Our current intention is for phase two to
provide a further ten clean rooms in the new
facility. The timing of this phase has not yet
been finalised. Once fully operational, it is
expected that this completed expansion
programme will increase the Company’s
revenue generation potential by up to c.$36m
per year.
Revenue per additional clean room is
inherently an estimate and depends on
several factors including the product mix, the
number of shifts, the availability of technicians
and donor tissue and continuing product
demand. Nonetheless, we are confident that
enough demand exists to justify the capacity
expansions outlined above.
Post balance sheet events
In January 2020 the Group was hit by a cyber
attack, which temporarily impacted our ability
to process at the facility in San Antonio.
We quickly implemented an action plan to
mitigate the potential impact, and believe
that there were no indications of any external
transfer of sensitive or financial data from the
business. There was a short-term impact
on our ability to service customer demand
as we were unable to release batches
for distribution in line with the necessary
regulations.
During the weeks that followed the attack, the
San Antonio team worked to catch up with
this demand, and in April 2020 we were able
to report that, despite this incident, revenue
increased by 18% year-on-year for Q1 2020.
Following the incident, the Company reported
this attack to all relevant authorities as
required, has reviewed its IT service providers
and implemented additional data security
procedures to reduce the risk of a similar
incident in the future.
As with most businesses, the Company
was impacted by the COVID-19 pandemic
that began in Q1 2020. The priority of the
Company throughout this time was to protect
the health and wellbeing of our employees
and stakeholders, and the Company ensured
to implement all relevant government-led
policies in relation to this. By undertaking
certain initiatives, there was minimal
disruption to the processing undertaken at
the facility in San Antonio, which continued to
show strong production throughput. As the
impact of COVID-19 becomes more evident,
we will continue to monitor and adapt our
approach. During Q2 it is apparent that
reprioritisation of healthcare professionals
At the facility in Leeds where processing of the
porcine products is undertaken, in-line with the
UK Government guidelines, our technical and
operations staff were furloughed until at least
the end of June 2020. However, the Group
holds sufficient inventory to meet near-term
demand of these particular products.
As a result of the uncertainties surrounding
the level and duration of disruption from
COVID-19, we are unable to determine how
long it will take to catch up on postponed
surgical procedures therefore, while sales
were not materially impacted during Q1 2020,
the Board is not able to provide clarity on the
outlook for 2020 until there is greater visibility
around the market environment.
In May 2020 we announced a strategic
collaboration with a top 10 global healthcare
company to bring to market a newly
developed product line. This agreement
for white label manufacturing follows
collaboration between the R&D teams of
both companies using one of the Group’s
proprietary technology platforms to address
orthopaedic soft tissue repairs. Agreements
such as this underscore the differentiation
of, and increasing market demand for, our
products, providing further validation of the
exciting growth potential for the business once
we have completed the planned expansion
of our processing capacity, and ensures that
we continue to drive our commercial strategy
forward, as illustrated by our strategic growth
drivers, for the continued success of the
business.
We were also awarded the CE Mark
certification for OrthoPure XT in May 2020,
for use in revision of the Anterior Cruciate
Ligament following re-rupture and also the
reconstruction of other knee ligaments,
including multi-ligament procedures following
trauma.
On 22 May 2020 the Group announced
that it had completed an equity fundraise,
by issuance of ordinary shares, to raise
gross proceeds of £14.6m, which provided
the resolutions are passed at the General
Meeting on the 9 June, will allow for the
commencement of the capacity expansion
programme and provide sufficient working
capital until at least December 2021. We
believe that this investment will move the
Group into a new sphere of opportunity and
competitive market positioning.
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Financial overview
Revenue
In the year ended 31 December 2019
revenue increase by 12% on an underlying
basis or 8% constant currency basis to
£13,033k (2018: £11,619k). As expected,
the year was second half weighted
(47%/53%) as throughput in our San
Antonio facility more than tripled in the year.
However, due to the lead times involved
it is expected that a significant proportion
of this increased processing will become
available for sale during H1 2020.
Revenue from the BioSurgery division,
which utilises the legacy Tissue
Regenix dCELL® Technology in product
DermaPure®, reported a year-on-year
increase in revenues of 25% to £4,233k
(2018: £3,381k). The withdrawal of many
synthetic products from the urogynocology
market meant that there was increasing
demand for biologic products such as
DermaPure®. Working closely with our
strategic partner, ARMS Medical, we saw
strong demand in this sector, resulting
in a year-on-year growth of 57%. The
expectation going into 2020 is that this
sector will continue to experience high
levels of growth.
We continued to expand our GPO
coverage and now have access to c.95%
of relevant US hospitals under GPO
agreements. This coverage enabled the
business to continue to grow its distribution
network in the US and secure several
leading marquee accounts.
The Orthopaedics and Dental division
reported annual revenues of £6,724k
(2018: £6,396k), an increase of 5% year-
on-year. The capacity constraints within the
San Antonio facility meant that output for
this division was constrained. Despite these
limitations, demand for products within
this division remain strong, and following
several operational changes within the San
Antonio facility during 2019, we expect
the orthopaedic portfolio to experience a
notable increase in output in 2020.
Our controlled joint venture in Germany,
GBM-v reported high levels of demand
for its cornea products, with year-on-year
growth of 13% to £2,076k (2018: £1,842k).
Cost of sales and
gross profit
Gross profit for the year is £6,019k (2018:
£5,917k). Gross margin percentage
decreased to 46% (2018: 51%) due to
product mix with the CellRight BioRinse
portfolio contributing a lower percentage of
overall sales due to capacity constraints,
which have been addressed throughout
the year, as discussed. As the business
continues to increase capacity to meet
demand, the margins are expected to
recover throughout 2020.
Included in costs of sales is cost of product
£5,803k (2018:£4,723k) and third party
commissions £1,211k (2018: £979k).A p
Administrative expenses
During the year administrative expenses
decreased by £985k to £13,198k (2018:
£14,183k), excluding exceptional costs,
largely due to a reduction in research and
development and sales and marketing costs
The increased focus on commercial activities
meant that the Group was able to reduce
its research and development expenditure
by £268k to £1,368k (2018: £1,635k). In
addition, the Group sought to reduce its
overhead cost base resulting in 18 positions
being made redundant in Q4 2019, largely
from the UK side of the business.
Exceptional items
Net assets were assessed for impairment
and a expense of £1,311k was posted in
recognition of SurgiPure development costs
in BioSurgery segment and fixed assets in the
Central and Other segment.
Redundancy costs in relation to the 18
positions made redundant in Q4 2019 are
accounted for in exceptional items and
amounted to £164k.
Litigation costs of £69k were charged in
the year.
A credit of £1,523k was due to the CellRight
contingent consideration which was not met.
Finance income/charges
Finance income of £17k (2018: £72k)
represented interest earned on cash deposits.
Finance charges for the year were reported at
£477k (2018: £262k), and related primarily to
interest charges and associated costs for the
MidCap loan arrangement.
Taxation
The Group continues to invest in developing
its product offering, and as, such is eligible to
submit enhanced research and development
tax claims, enabling it to exchange tax losses
for a cash refund. In the year to December
2019, a refund of £488k was receivable
(2018: £790k). The year-on-year reduction
was a result of the business continuing to
move its resources away from research and
development to more commercial activities.
Corporation tax payable in the US amounted
to £29k (2018: £72k). Gross tax losses
carried forward in the UK were £43,533k
(2018: £43,254k). The Group does not
currently pay tax in the UK. A deferred tax
asset has not been recognised as the timing
and recoverability of the tax losses remain
uncertain.
Loss for the year
The loss for the year was £7,106k (2018: loss
£8,259k) resulting in a basic loss per share of
(0.60p) (2018: loss (0.70p)).
Balance sheet
At December 2019, the Group had net assets
of £24,595k (2018: £32,570k) of which cash
in hand totalled £2,380k (2018: £7,816k).
Intangible assets decreased through
amortisation charges in the year. A further
£213k of development costs were capitalised
in the year, which were then fully impaired at
year end.
In addition to testing the CellRight cash
generating unit (CGU) for impairment, a
full impairment test was performed on
the Group’s CGUs as the Group’s market
capitalisation at 31 December 2019 was
lower than net assets. This impairment testing
resulted in an impairment of £1,311k, which
has been disclosed within exceptional items.
Net working capital decreased in the year,
which reflects the continued growth of
the business. The balance sheet included
corporations tax receivable of £1,035k (2018:
£1,200k) in respect of UK research and
development tax credits.
As part of the CellRight Technologies
acquisition agreement financial milestone
payments were contingent upon certain
revenue targets being achieved. The capacity
constraints experienced at the San Antonio
facility meant that these goals were not
met for 2019, as such the costs totalling
£1,523k were released. This was the last
financial milestone due for payment under this
acquisition.
Borrowings
Non-current liabilities represent the £2,286k
debt facility. This includes £1,525k of the term
loan and £761k of the revolving credit facility.
More information on page 64.
Dividend
No dividend has been proposed for the year
to 31 December 2019 (2018: Nil).
Accounting policies
The Group’s consolidated financial
information has been prepared in accordance
with International Financial Reporting
Standards as adopted in the EU. The Group’s
significant accounting policies, which have
been applied consistently throughout the
year, are set out on pages 50 to 54.
Going concern
These financial statements have been
prepared on a going concern basis, given
the current cash flow projections forecast for
the Group to 31 December 2021. Funding
TISSUE REGENIX GROUP PLC
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requirements are reviewed on a regular
basis by the Group’s Chief Executive
Officer and Group Finance Director and
are reported to the Board at each Board
meeting, as well as on an ad hoc basis, if
requested. Until sufficient cash is generated
from its operations, the Group remains
reliant on external funding including current
debt facilities provided by MidCap, to meet
its working capital requirements, capital
investment programme and other financial
commitments.
On 22 May, the Group announced that
gross proceeds of £14.6m had been
conditionally raised through an offer of
new ordinary shares in the Company
to Institutional and other qualifying
investors. This fundraise is conditional on
shareholder approval at a General Meeting
of shareholders to be held on 9 June 2020
and also to admission of the fundraising
shares to trading on AIM. In reporting
the Group’s finances on a going concern
basis, the Directors have assumed the
appropriate resolutions at this Meeting
will be passed. However, if the necessary
resolution is not passed, the fundraising
will not proceed and the Company would
not have funds immediately available to
continue executing its current business
plan. In this eventuality, the Directors would
need to consider alternative sources of
adequate funding. Should the Company be
unable to raise enough funds, shareholders
could be at risk of losing all or a substantial
amount of their investment.
The COVID-19 pandemic has affected
most businesses during H1 2020. As a
result of the reprioritisation of healthcare
professionals during this time, there has
been a decline in elective procedures
undertaken across a number of medical
specialities that use our products. Given
the uncertainty around the level and
duration of disruption from COVID-19,
it is difficult to determine how long the
current situation may last, and the time
taken to catch-up any postponed surgical
procedures thereafter. However, the Board,
in compiling possible cashflow projections
for the business, has considered a number
of scenarios regarding the effect of reduced
and delayed revenues due to COVID-19, and
has undertaken market soundings regarding
the likely timeframe for the recommencement
of procedures. It has concluded that, if
additional funds are received as expected,
there will not be a significant long-lasting
impact on the capability of the business to
carry out its commercial activities.
In summary, the Directors have considered
their obligations in relation to the assessment
of the going concern basis for preparation
of the financial statements 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
pages 22 to 25. They have concluded that it
remains appropriate to prepare the financial
statements on a going concern basis, noting
that assumptions relating to the completion
of the fundraise give rise to a material level of
uncertainty in respect of the going concern
assumption.
The financial statements do not include any
adjustments that would result in the basis
of preparation as a going concern being
inappropriate.
Post balance sheet events
The Group was victim to a cyber attack in
January 2020; no material financial impact
has been determined and operations are fully
back up and running.
Due to the impact of the COVID-19 pandemic
in Q1 2020, UK operations and technical staff
were furloughed under the Government job
retention scheme, and processing at the UK
facility was temporarily halted. In the US, due
to initiatives implemented, processing at this
facility continued without disruption however,
due to the reprioritisation of healthcare
professionals during this time, elective
surgeries such as urogynaecology or dental
procedures were postponed. The Company
secured over $1m of US Government backed
loans to assist with the US overhead costs
during this time. These loans have a two-year
term and carry a 1% annual interest rate
deferred for six months. However, under the
Loan agreements, the principal will not require
repayment if the funds are used to support
employee payroll, healthcare, utilities and rent
payments within the US during the next two
months. The Company intends to use the
funds to support these activities and therefore
expects the Loan not to require repayment.
Principal risks and
uncertainties
The principal risks and uncertainties facing
the Group are set out on pages 22 to 25.
Cautionary statement
The strategic report, containing the strategic
and financial reports of the Group contain
forward-looking statements that are subject
to risk factors associated with, amongst
other things, economic and business
circumstances occurring from time to time
within the markets in which the Group
operates. The expectations expressed
within these statements are believed to be
reasonable but could be affected by a wide
variety of variables beyond the Group’s
control. These variables could cause the
results to differ materially from current
expectations. The forward-looking statements
reflect the knowledge and information
available at the time of preparation.
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Risks
Our risk management framework
Accountability for reviewing and monitoring
The Board
Audit Committee
Operational
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).
In accordance with our governance
practices, the Audit Committee supports
the Board of Directors in monitoring the
Group’s risks.
At an operational level, we monitor
monthly performance against objectives
allowing us to track performance
management, and identify any potential
improvements to our structure and
operational efficiencies, as well as
monitoring and updating any existing
or potential risks and corresponding
mitigating actions.
Responsibility for implementation
The Board reviews and updates risks on a regular basis, maintains a risk register and addresses each
potential risk in terms of likelihood and impact on the business.
We have identified six areas of potential risk: product development; operational; clinical and regulatory;
finance and IT; HR; and commercial. The Board believes the following risks are the most significant for the
Company, however, they may not necessarily comprise all the associated or potential risks attached to
the Company. Alongside risks associated with changes in the market or economic conditions, the political
landscape, legal, regulatory or tax implications, there may also be risks that the Directors are currently
unaware of but that could have a significant effect on the Group’s ability to carry out its business.
A list of the principal risks and mitigating factors facing the Group at this time are listed below.
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TISSUE REGENIX GROUP PLC
Risk
Potential impact
Mitigating factors
Trend
Finance and IT
Risk that there are insufficient
funds to deliver products to
the market, invest in required
expansion or provide the
working capital required
We require investment into our infrastructure to
bring our product portfolios to market and service
the increasing demand from our current and future
customers. Without this, the Group will be unable to
deliver the anticipated future revenue growth.
The Board has oversight of all significant
cash spends and a well-established control
environment, which includes internal forecasting,
monthly reporting and approval limits on all
purchase orders.
Risk that the Group will be
subject to a cyber security
breach or failure of IT systems
The Company is reliant upon systems to allow
for, amongst other things, the accurate records
and reporting of donors. Any potential failure
of systems could impact the Group’s ability to
process and distribute products, lead to a data
security breach, loss of financial information and
have potential financial implications.
In order to maintain the cash position, the
Company reviews business priorities and
demands to ensure that funds are invested in the
most appropriate manner to deliver a return on
investment and grow the business positively.
The Group was hit by a cyber security attack in
January 2020. No ongoing material impact to the
business was experienced, however, processing
was temporarily halted at the San Antonio facility
while the restoration and testing of systems was
completed. The Group has since reviewed its IT
service providers and security procedures and
continues to do so on an ongoing basis moving
forward.
Operational
Risk that the Group may
experience an adverse event
resulting in a loss of license or
facility shutdown e.g. damage
due to fire, arson, flood or other
adverse events, or retraction of
licence from the FDA, AATB, HTA
or other regulatory body
Risk of over dependency on
single supplier or in-house
processing
As the Group manufactures most products in-
house the loss of a manufacturing facility would
have a detrimental effect on the ability to meet
customer demand. Should an adverse event
happen there would be a loss of stock and raw
materials, which would have significant financial
implications.
The Group has a track record of positive feedback
following audits and inspections and has
established control environments and procedures.
Facility insurance is in place in case of adverse
events and second source manufacturing options
have been identified.
With the novel technology processes requiring
specific raw materials, the loss of a supplier could
have a detrimental effect on the ability to produce
the media required. As the products are based
around animal or human tissues, failure to source
good quality, ethically handled tissues would result
in the inability to produce products in line with
specifications and therefore incur reputational
damage, customer dissatisfaction and potential
regulatory breaches.
Business interruption insurance is in place,
alternative suppliers are identified to ensure that
there is always a secondary source for raw goods,
and potential manufacturing capacity. We have
expanded the number of donor services agencies
in the US that we work with and have two
suppliers of porcine tissues in the UK. All suppliers
undergo a stringent audit to ensure that they
meet the Company’s internal standards and those
imposed by third party moderators.
Risk that the business is unable
to expand in line with growing
demand
Our commercial strategy is built around the
establishment of successful strategic and
distribution partnerships, which increase the
demand on our production and manufacturing
capabilities. If we are unable to expand in line with
this demand this could result in a loss of business
through customer dissatisfaction and reputational
damage.
Additional processing for the dCELL® DermaPure
product was obtained through Community
Tissue Services, which in turn freed up additional
capacity for the BioRinse product portfolio in the
San Antonio facility, and a second shift was also
commenced in the San Antonio facility.
Additional capacity was also secured in August
2019 when the Company took out a lease on a
21,000 sq ft facility; this capacity is expected to
become operational once the necessary funding
is secured.
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Risks
Risks
continued
continued
Risk
Potential impact
Mitigating factors
Trend
Clinical and regulatory
Risk that products fail and cause
death or injury on implantation
into patients
Should a product fail upon implantation or incur
an adverse reaction due to the product properties,
the Group would be at risk of legal action, potential
loss of earnings through product retraction from
the market and reputational damage.
Risk of loss of license or
restrictions due to regulatory
failings
As the Group operates in a highly regulated
environment the loss of a license to manufacture
or sell products within a territory would result in
reputational and financial damage to the Company.
Before commercialisation, a series of clinical and
safety checks are run dependent on the nature of
the product. For our porcine products that require
a full clinical trial, this will initially be within an animal
model to confirm its safety before progressing to
the regulated clinical trial to judge the performance
of the product. An external regulatory body
review is undertaken and once market clearance
is gained, comprehensive training is provided
for sales representatives and surgeons prior to
utilisation of the product. For our human tissue
products, the necessary clinical performance trials
are commenced prior to commercialisation and all
products are issued with detailed instructions for
use.
The Group employs regulatory experts for each
territory in which manufacturing takes place, or
where the Group looks to navigate a regulatory
clearance for a product. The Group also has a track
record of positive feedback following external audits
and inspections and operated in established control
environments.
Commercial
Risk that a competitor product
reaches the market first and/
or products outperform Tissue
Regenix products, and the
business fails to keep up with
developments and new products
coming to the market
Should there be a competitive product that
outperforms one of the Tissue Regenix products
we could lose customers and distribution
opportunities. Should a competitor bring a product
to market before us they could potentially have an
advantage in gaining market share.
We continually monitor the commercial and
competitive landscape and look to stay ahead of
the trend with innovative product development and
line extensions. The Group works with partners
to identify potential market opportunities as it did
with ARMS Medical to soft launch the DermaPure
non-oriented product. The Group also continues to
collect post marketing clinical data to ensure that
the product offering remains differentiated.
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TISSUE REGENIX GROUP PLC
Risk
Potential impact
Mitigating factors
Trend
HR
Risk of potential loss of key
staff resulting in a loss of key
information, contacts or know-
how
The dCELL® process is patent protected, however,
the BioRinse process is based on know-how
and the Company has several trade secrets that
it looks to protect. As our commercial pipeline
is based upon key strategic and distribution
partnerships, as well as direct sales, there is the
potential that customers may feel a loyalty to a
person rather than the brand.
The Remuneration Committee is in place to
ensure that salaries and incentive schemes are
benchmarked against industry standards.
Contracts of employment are drafted to include
the necessary confidentiality and non-compete
clauses. The addition of key hires in the US
operations team has decreased the dependence
on individuals.
Political and economic landscape
Risk of significant change in
political or economic landscape
With both the UK and US undergoing periods
of political uncertainty there is the potential that
this could affect our ability to commercialise and
import/export our products.
We have applied for and maintain the relevant
licenses necessary for import/export of our products,
including HTA and FDA approvals.
With the initial Brexit process now confirmed we
are working with the notified and regulatory bodies
to assess the impact and mitigating factors we can
undertake to minimise the effect of this following the
expiry of the transition period.
Social and environmental
Risk of unexpected social or
environmental event that could
affect the Group’s ability to
process or commercialse its
product portfolio
As seen with the COVID-19 pandemic in H1 2020,
there may be events that are outside of the control
of the Group that have social or environmental
impacts on the ability of the Group to continue to
process its products due to, amongst other things,
lack of suitable donor materials, personal protective
equipment for staff or inability of staff to attend the
workplace. Such events may also have an impact on
the level of applicable procedures being undertaken
by healthcare professionals and therefore impact the
Group’s revenue expectations.
The Group ensures to maintain sufficient stock of all
required personal protective equipment and donor
materials to allow for the continuation of processing
should supply of these items become temporarily
compromised. Due to the nature of the processing
and facilities, hygeine and cleanliness is always of
the highest priority. During the COVID-19 pandemic,
processing continued at the facility in San Antonio
with staggered shift patterns to minimise the number
of employees on site at once and individual working
in the clean rooms ensuring that we continue to have
supply to meet the expected demand.
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27183 1 June 2020 4:29 pm Proof 6ENVIRONMENTAL SUSTANABILITYAs with all businesses the emphasis on environmental sustainability is of the utmost importance and is subject to increasing scrutiny and regulation. It is the responsibility of all employees to follow the initiatives implemented to decrease our carbon footprint, energy consumption and environmental sustainability efforts.Throughout 2019 the Group successfully achieved a number of environmental milestones: –Reduced energy consumption by 35% at the UK manufacturing facility, by implementing an energy reduction programme including improvement of operational procedures to allow more effective clean room operation including shut down during periods of inactivity –Reduced our paper usage by moving to electronic documentation in our donor services and areas of our quality and regulatory functions in the San Antonio facility –Replaced existing fluorescent lighting with energy efficient LED bulbs reducing our associated electrical consumption by 75% We also ensure to maintain cardboard and plastic recycling units on site to encourage staff to dispose of waste responsibly and ensure where possible that any waste items associated with business functions are disposed of in this manner. We discourage any unnecessary business travel, and aim to undertake meetings via video conferencing or telephone to minimise our carbon emissions. CORPORATE SOCIAL RESPONSIBILITIES (“CSR”)Operating in a highly regulated environment, with particular sensitivities and responsibilities around the human donor processing, the Group ensures to operate with a high level of CSR across the business every day. Through the gift of donation we have the ability to positively impact hundreds of patients’ lives, therefore, we must treat each donation with the utmost respect and provide the next of kin with information around how many patients the donation has helped, if requested; something that can often help in the grieving process.HEALTH AND SAFETY We see the development and maintenance of a robust health and safety framework as a necessity in order to protect our employees, customers, suppliers and external stakeholders. The Board reviews a health and safety report as part of the monthly Board pack, which contains information on any near miss events, accidents, incidents and preventative measures implemented. Over the last 12 months we have identified and replaced disinfectants used in operational cleaning to reduce the use of more hazardous chemicals that have now been classified as suspect carcinogen (having the potential to cause cancer). IMPROVED PATIENT CARE AND HEALTH ECONOMIC OUTCOMES Tissue Regenix dCELL® and BioRinse Technology platforms process products that can enable improvements in patient care, enhancing their standard of living, which can often be transformative for their lives. On top of this, it allows for economic advantages in the cost of care by reducing the hospital stay length, minimised rehabilitation, in some orthopaedic cases, a reduction in reoccurring operations, and in many circumstances, a reduction in associated pain. CORPORATETissue Regenix recognises that it holds a corporate responsibility to its employees, customers, partners, suppliers and shareholders. To this end, the Group ensures it sets and maintains the highest employment, ethical and management standards. The Group employs a strict Corporate Governance Code and relies on its experienced management team and Board of Directors to ensure that all regulatory requirements across all business functions are met. ETHICS AND COMPLIANCE Operating in an industry based upon the processing of donated human or animal tissues demands the highest ethical standards throughout every facet of the Company. The Group aspires to implement and maintain these standards across all business functions and relations. The Company undertakes regular audit checks to ensure that partners, suppliers and employees comply with the ethical standards and operate to meet our expectations. Furthermore, the nature of the industry means that, as a business we are held to the highest standards by regulatory bodies, and regularly receive audits and inspections from external organisations such as the US Food and Drug Administration, Human Tissue Authority and American Association of Tissue Banks. The Group has a track record of passing all regulatory inspections and where recommendations are made to improve the control environment the Group would look to implement where applicable, as soon as practically possible. Modern Slavery Statement Tissue Regenix Group is committed to respecting human rights across all its operations and aims to work at the highest international standards in addition to local requirements. The Group fully supports the Modern Slavery Act 2015 and seeks to ensure the Group’s activities and those in its supply chains do not infringe on, or encourage, human rights abuses. Anti-corruption and anti-bribery mattersGroup policies are in place for topics such as anti-bribery and anti-corruption. These policies are regularly reviewed by the Executive management team and HR departments, copies of policies are provided to all employees during their induction and changes or updates are communicated to staff accordingly. EMPLOYEESAt the core of our business is our talented employee base, which drives the success of the Group. Through our values and behaviours, we look to develop a working environment in which employees are supported, continue development and can perform to the best of their abilities. We encourage teamwork and openness in the work place, through Company-wide policies and procedures, and by addressing the individual needs of employees to provide a functional working environment that enables a healthy work/life balance.EQUAL OPPORTUNITIESThe Group is committed to ensuring that equal opportunities are provided to all employees and potential employees, and do not discriminate on the basis of age, gender, ethnicity, religion, disability, sexual orientation or marital status. All employees are expected to conduct themselves in an appropriate manner adhering to our non-discrimination policy. In all aspects of our business the Group looks to act in ways that are compliant with the necessary laws and regulations, providing our employees with a work environment that is professional, ethical and fair. TISSUE REGENIX GROUP PLC STRATEGIC REPORT / 26Sustainability27183-Tissue-Regenix-AR-2019.indd 2601-Jun-20 4:32:39 PM 27183 1 June 2020 4:29 pm Proof 6Dedication to patients Our patients are at the heart of everything we do, and we are committed to delivering life-changing solutionsPassion for innovation We harness creativity across all areas of our business to generate novel and effective solutionsUncompromising integrity We take pride in what we do and are committed to the highest standards of ethics, honesty and fairness to earn the respect of all our stakeholders.Driving for excellenceWe continually seek excellence by delivering against our objectives and holding each other to account to perform to the best of our ability.ENGAGEMENT AND COMMUNICATION The Group endeavours to undertake engagement and communications with all stakeholder groups whether they are employees, investors, partners, suppliers, customers or key opinion leaders, and considers how the day-to-day activities of the Group, and the principal decisions taken throughout the year, could affect each stakeholder group. During 2019 the Group finalised an employee engagement programme. This is now engrained into the fabric of the business covering multiple areas from employee engagement to individual development. A key focus of this was establishing the vision, mission, values and behaviours that form an integral part of the Tissue Regenix Group ethos and culture. Our values and behaviour align with our vision and mission, driving a culture that will enable the Group to achieve our strategic objectives and KPIs. Values and behavioursGender diversityAge groupCustomerWe will deliver to our customers via unparalleled service, innovative solutions that challenge the existing market place assumptions on clinical efficacy and value.PhysiciansWe will partner with physicians to provide trusted solutions that deliver superior clinical and health economic outcomes utilising our core technology platforms for both allograft and xenograft tissue.ShareholdersWe will deliver market performances that make Tissue Regenix a focus of strategic investment for investors, providing sustained and predictable growth with above category returns.EmployeesWe will foster a vibrant and diverse culture that rewards performance and accountability, nurturing career development.MissionRestoring patient function and vitaliityPatient64.3%35.7%5940%2560%3718–1920–2525−3030–3535–4045–5040–4550–5555–6060–6565–7070–7512352118–1920–2525–3030–3535–4045–5040–4550–5555–6060–6565–7070–751110109147811ExecutiveSite leadershipManagerTechnical/ administrationMaleExecutiveSite leadershipManagerTechnical/ administrationUK teamLevelGeographical splitUS teamFemaleUK teamUS teamVision and missionAnnual Report and Accounts for the year ended 31 December 2019STRATEGIC REPORT / 2727183-Tissue-Regenix-AR-2019.indd 2701-Jun-20 4:32:41 PM Section 172 statement and
non-financial information statement
The Directors of Tissue Regenix Group plc
consider, both individually and together, that
they have acted in the way they consider, in
good faith, would be most likely to promote
the success of the Company for the benefit
of its members as a whole (having regard
to the stakeholders and matters set out in
s.172(1)(a-f) of the Act) in the decisions taken
during the year ended 31 December 2019.
Section 172 of the UK’s Companies Act
describes a company director’s general duty
to promote the success of the company:
A director of a company must act in the
way he considers, in good faith, would be
most likely to promote the success of the
company for the benefit of its members as a
whole, and in doing so have regard (amongst
other matters) to: the likely consequences of
any decisions in the long term; the interests
of the company’s employees; the need to
foster the company’s business relationships
with suppliers, customers and others; the
impact of the company’s operations on
the community and the environment; the
desirability of the company maintaining a
reputation for high standards of business
conduct; and the need to act fairly as
between members of the company.
Overview of how the Board
performed its duty to promote
the success of the Group
The following table summarises how
the Board has met the s172 obligations
throughout the year for the various
stakeholder groups.
Stakeholder
group
Investors
Why?
How?
We strive to engage with our investor
base and obtain investor buy-in and
confidence in our commercial strategy
and strategic objectives, which is
discussed in more detail on pages 10
to 11.
A supportive base of investors interested
in a long-term holding in the Company
provides the stability need to allow us to
execute the agreed strategy and deliver
improved financial results.
The Board is fully committed to having
open and transparent dialogues with
all shareholders. Throughout the year
management and Directors look to meet
with, and update, institutional and retail
investors through a variety of platforms;
whether it be by face-to-face meeting,
telephone conversation, AGM, retail
investor forum, website or social media,
or news announcements.
Employees
The long-term success of the Company
is built around our highly skilled and
experienced workforce.
Our Employee Engagement initiatives
are discussed further in the sustainability
report set out on pages 26 to 27.
Our technicians are highly specialised,
and we have world class research and
development expertise at all facilities.
We continue to expand our network of
partner and distributor relationships who
are managed by our experienced sales
and marketing teams.
We look to create an environment where
all employees can excel and value
both practical experience as well as
academic qualifications. We believe in
investing in our workforce to maintain
a low turn-over rate and build an agile
and adaptive workforce who can
successfully navigate the ever-evolving
industry landscape to maintain our
competitive positioning. We support
employees with further education and
qualifications, in-house support for the
development of managerial roles and
provide a remuneration and benefits
framework that supports a healthy work/
life balance.
Throughout the year management hold
a number of town hall meetings where
employees are fully briefed on Company
developments and have an open forum
to ask questions.
Email updates are also issued as
Company news is announced to ensure
that all employees are aware of the latest
developments.
Team meetings are encouraged at
least once a week, with line managers
then reporting directly into the CEO
every week to ensure cohesion across
the business. This also allows any
concerns from employees to be raised
with line managers and escalated to
the Executive team in a timely manner if
required.
Employees also have access to the non-
executive directors. During H2 2019,
Randeep Grewal undertook two trips
to the US to meet the US management
team.
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What were the key topics of
engagement and consideration in
principal decisions
Key topics of engagement for investors
throughout the year was around:
The MidCap debt instrument and subsequent
restructuring of this, as well as the overall
financial position of the Group.
Full year and interim financial results and
reports.
The changes to the Executive management
team.
Consideration in principal decisions:
The Board considered the implications of
the MidCap Financial loan facility on existing
equity investors. As encouraged by significant
shareholders who were looking to ease the
requirement of further equity financing, it was
agreed that this facility would provide the
necessary capital with favourable non-dilutive
qualities for existing shareholders.
The Board consulted with shareholders regarding
the potential capacity expansion project to
ensure that this investment would create
shareholder value.
Key topics of engagement for employees
throughout the year was around:
The change of Executive management as Steve
Couldwell retired from the position of CEO.
The financial position of the Group as
the MidCap financing was secured and
restructured.
The commencement of a second shift to
increase processing capacity at the facility in
San Antonio.
The restructuring of the business in Q4 2019,
which led to a number of redundancies.
Health and safety protocols and procedures.
Updates to quality management systems and
training records.
Consideration in principal decisions:
The Remuneration Committee considered and
approved a new bonus structure, as well as
the launch of an employee save as you earn
scheme.
In reviewing the Group’s strategy and
restructuring, consideration was given to
the vision, mission, values and behaviours
as discussed on pages 26 to 27, which all
employees had helped to shape.
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Stakeholder
group
Why?
How?
Customers and
Key Opinion
Leaders
We work with several prestigious key
opinion leaders across clinical settings in
order to assist with physician conversion
and drive the clinical discussion around
the differentiators of our product
portfolio.
Our clinical affairs team work closely
with our key opinion leaders and engage
with them for a number of clinical case
studies, which can be then used as
evidence when discussing with new
potential customers.
This type of engagement and clinical
advocacy is crucial as we work to grow
our product and brand recognition and
increase the number of patients who can
benefit from our market-leading product
portfolio.
Practical training sessions are
undertaken to ensure that correct
application and utilisation of our
products is achieved, therefore
improving the occurrence of superior
clinical outcomes.
Suppliers
Suppliers are fundamental to the
Group’s ability to source high-quality
raw materials and ethically sourced and
handled tissues. We look to partner
with suppliers who can augment our
internal capabilities and build long-
term beneficial relationships ultimately
delivering end customer value.
Society
(including
environment)
The Group is committed to operating
with a high level of corporate social
responsibility and environmental
sustainability. Minimising its
environmental impact to benefit society
as a whole.
We aim to attend relevant industry
conferences throughout the year
to increase our network of clinical
professions and grow our brand
exposure.
The Group has in place a code of
conduct and integrity that it expects all
suppliers to meet. Audits of suppliers
take place to ensure that donated
porcine or human tissue is handled
ethically and in line with the Group’s
standards. The Executive management
review supplier payment practices and
ensure that all suppliers are paid in a
timely manner, and cost of such supplies
is in line with industry standards. The
Board monitors risks associated with
suppliers and ensures that second
sourcing options are available to
minimise any business disruption should
a supplier relationship fail.
The Group has implemented a number
of initiatives with relation to the Group’s
energy consumption and carbon
footprints. Details of these can be found
on page 26.
The Board have in place a stringent
code of conduct and ethics and ensures
to adhere to these in order to protect the
wider society; this includes the auditing
of suppliers to ensure that all human
rights are adhered to and anti-bribery
and anti-corruption policies.
What were the key topics of
engagement and consideration in
principal decisions
Key topics of engagement for customers
and key opinion leaders throughout the
year was around:
Product line extensions and product
improvement.
Capacity constraint management.
Clinical case study opportunities and outcomes.
Consideration in principal decisions:
When setting the Group’s budget and
operational priorities the Board consider the
needs of customers and how to best meet their
requirements
The Board review consultation with Key Opinion
Leaders and customers to drive product
development and augmentation initiatives in
order to optimise our product portfolio. This
led to the development and soft launch of
DermaPure non-oriented during 2019.
Key topics of engagement for suppliers
throughout the year was around:
Ability to meet increasing demand as we scale
the business.
Ethics and code of conduct particularly
regarding sourcing and handling of materials.
Consideration in principal decisions:
The Board consider and review suppliers when
approving the Group strategy and commercial
expansion plans to ensure that enough high-
quality materials are sourced at reasonable
prices to allow ramp up of processing.
Consideration in principle decisions:
A focus throughout the year was to decrease
the Group’s energy consumption carbon
footprint and waste management, protecting
the wider society and local communities in
which we are based.
Non-financial information statement
The below table summarises where non-financial information is included in the Annual Report and Accounts:
Reporting requirements
Environmental matters
Employees
Human rights
Anti-corruption and anti-bribery matters
Social matters
Business model
Principal risks
Non-financial KPIs
Page location
Environmental KPI on page 14 and performance on page 26
As discussed in sustainability pages 26 to 27
Modern slavery statement on page 26
Ethics and compliance on page 26
As discussed in sustainability pages 26 to 27
Business model on pages 08 to 09
Risk management on pages 22 to 25
Key performance indicators on pages 14 to 15
The Strategic Report on pages 06 to 29 was approved by the Board on 4 June 2020.
Gareth Jones
Interim Chief Executive Officer, Tissue Regenix Group
Annual Report and Accounts for the year ended 31 December 2019
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Profile of the current Directors
KEY
Committees
Audit Committee
Chair of Audit Committee
Remuneration Committee
Chair of Remuneration Committee
Skills
Industry
Accounting
Commercial
Clinical
G
O
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Joined the Group: January 2016
Joined the Group: October 2018
JONATHAN GLENN
Interim Non-Executive Chair
GARETH JONES
Interim CEO
2019 Committees:
2019 Committees: N/A
Skills:
Skills:
External appointments: N/A
External appointments: N/A
Bio:
Bio:
Jonathan was most recently CEO of Consort
Medical from December 2007 until its
acquisition for £505m by Recipharm AB in
early 2020. Jonathan originally joined Consort
Medical as Group Finance Director from
September 2006 to December 2007, and
prior to this 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. Jonathan is a member
of the Institute of Chartered Accountants in
England and Wales.
Gareth has 27 years’ experience in finance
having qualified as a Chartered Accountant in
1993 with PwC. Gareth joined Tissue Regenix
in October 2018 as CFO before moving into
the interim CEO role August 2019.
In recent years he has worked as Chief
Financial Officer for LSE listed Applied
Graphene Material. Previously he was at Emco
Wheaton Division of private equity owned
Gardner Denver Inc., the global provider
of industrial equipment, technologies and
services, where he joined as Finance Director
in 2013. Prior to this, he spent seven years
as Finance Director of private equity backed
start-up, Vireol Bio-Industries plc. Between
1995 and 2006 Gareth was employed by
Syltone plc. After its acquisition by Gardner
Denver Inc. in 2004, Gareth became European
Finance Director and then Divisional Finance
Director of the Blower Division. In this capacity
he was responsible for the day-to-day financial
operations of the Group’s largest division,
operating across four continents, with revenues
of c.$480m. He graduated from the University
of Nottingham in 1989 with a BEng.
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Joined the Group: March 2008
Joined the Group: June 2013
Joined the Group: June 2016
ALAN MILLER
Non-Executive Director
RANDEEP SINGH GREWAL
Non-Executive Director
SHERVANTHI
HOMER-VANNIASINKAM
Non-Executive Director
2019 Committees:
2019 Committees:
2019 Committees: N/A
Skills:
Skills:
Skills:
External appointments: N/A
Bio:
Alan 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 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.
External appointments:
Chairman, BB Healthcare
Non-Executive Director, Hox Therapeutics
Limited
Bio:
Randeep Grewal has over 20 years of
experience in investing having worked most
recently at Trium Capital, as well as F&C
Asset Management, ICAP Equities and Tudor
Capital, where he spent 10 years covering
and investing in healthcare companies. He
also became non-executive director of BB
Healthcare Investment Trust, listed on the
London Stock Exchange, in December 2016
before becoming Chairman in July 2019.
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.
External appointments: N/A
Bio:
Shervanthi Homer-Vanniasinkam graduated
in medicine from Mysore University Medical
School in India, and is a Fellow of both the
Royal College of Surgeons of Edinburgh,
and the Royal College of Surgeons of
England. She was appointed Consultant
Vascular Surgeon at Leeds General Infirmary
in 1995, a post she continues to hold. Her
concomitant posts include: Founding Co-
director of the novel medical undergraduate
scholarship programe, EXSEL@Leeds;
Founding Professor of Surgery, University
of Warwick Medical School & University
Hospitals Coventry and Warwickshire;
Professor of Engineering & Surgery, University
College London.
Professor Homer-Vanniasinkam has
published over 100 papers and book
chapters, delivered over 300 presentations,
and has a significant research grant portfolio
(several £m, to date). She has an outstanding
track record of national (Universities of
Leeds, London, Warwick) and international
(Harvard, Yale, Singapore, India) collaborative
research programmes that encompass basic,
translational and clinical studies. Professor
Homer-Vanniasinkam is currently a Visiting
Scholar at Harvard University and the Yeoh
Ghim Seng Visiting Professor of Surgery at
the National University of Singapore.
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Corporate governance
As an AIM listed Company,
the Board of Tissue
Regenix Group recognises
the importance for strong
corporate governance
and business ethics. The
Company adopted the latest
Quoted Company Alliance
Corporate Governance
Code, which came into
effect in September 2018,
and has employed these
guidelines as far as possible.
The Board is ultimately
accountable to the
Company’s shareholders for
good corporate governance,
and this report along with
the audit, remuneration and
risk reports, highlight the
steps taken to ensure that
the Company takes action to
comply with the standards.
The roles and responsibilities
of the Board
The Board is responsible for ensuring that a
successful business strategy is implemented
across the Group to drive commercial
success and deliver value for shareholders.
The Board is comprised of two independent
Non-Executive Directors, one Non-Executive
Director1, the interim Non-Executive
Chairman, and one Executive Director, the
Interim Chief Executive Officer (CEO). The
Board considers its size, composition and
balance of skills is currently in line with the
requirements of the Group, with a mix of
financial, clinical and commercial expertise to
advise the Group on its chosen commercial
strategy.
There is a clear division of responsibility
between the Board Chair and CEO position,
with the Chairman advising and leading the
Board, as well as making himself available
to meet with shareholders. The CEO is
responsible for the day-to-day execution of
the agreed strategy and ensuring operational
compliance. Training is made available to
each Non-Executive Director (NED) to ensure
that they are completely aware of their
regulatory responsibilities and requirements.
The Board aims to meet formally at least 10
times a year, with provision being made to
join via telephone if a member of the Board
is unable to attend in person. Outside of
the scheduled meetings the Board will meet
to discuss ad hoc business events where
necessary, and the CEO keeps the Board
fully informed of any business developments
that could positively or negatively impact the
performance or value of the Company; any
business decisions that require formal Board
approval, or any event that could impact the
Board or individual member carrying out their
duties and regulatory responsibilities.
The Board also operates two sub-
committees, the Audit and Renumeration
Committees, to ensure compliance with
market regulations.
The 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, and to
review reports from the Company’s external
auditors relating to the accounting and
internal controls. The Audit Committee also
recommends to the Board the appointment
and reappointment of external auditors.
The Audit Committee considers the scope
and results of the external audit and its
cost effectiveness. It also reviews the fees,
independence and objectivity of the external
auditors by discussing with the auditors
their annual assessment regarding their
independence, policies and procedures, and
analysing the audit and non-audit work.
The Group’s external auditors have
unrestricted access to the Audit Committee
and attend the Audit Committee meetings
throughout the year. The Executive Directors
attend the Audit Committee meeting by
invitation only.
The 2019 Audit Committee comprises of
Alan Miller, who acts as Chairman of the
Committee, Jonathan Glenn and Randeep
Grewal.
The Remuneration Committee
Report
The Remuneration Committee report is
available on pages 36 to 38.
The 2019 Remuneration Committee
comprises of Randeep Grewal, who acts as
Chairman of the Committee, Jonathan Glenn
and Alan Miller.
Since taking up the position of interim
Non-Executive Chairperson in March 2020,
Jonathan Glenn has stepped down from the
Renumeration Committee with Shervanthi
Homer-Vanniasinkam taking this place.
Audit Committee
Remuneration Committee
Alan
Miller
Randeep
Grewal
Randeep
Grewal
Jonathan
Glenn
Alan
Miller
Jonathan
Glenn
1 Alan Miller, Non-Executive Director, is no longer considered to be independent due to tenure on the Board.
TISSUE REGENIX GROUP PLC
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The roles of the Board
Internal control
Jonathan Glenn –
Interim Non-Executive Chair
| Ensures the effectiveness of the Board in all
decision-making
| Provides guidance to the CEO on key
business decisions
| Facilitates discussions of the Board
and ensures that all contributions from
Executive and Non-Executive Directors are
considered
| Makes himself available to all shareholders
to ensure effective communications
The Board is responsible for maintaining a
sound system of internal controls. These
measures are designed to minimise any
potential risks identified 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 in the “Internal
Control Guidance for Directors on the
Combined Code” (The Turnbull Report).
Some key features of the internal control
system are:
Gareth Jones – Interim CEO
| Responsible for the overall operational
effectiveness of the business
| Manages the day-to-day business and
leads the strategic direction as advised
by the Board Chair and Non-Executive
Directors
| Ensure effective communication with all
employees and promotes collaborative
working and cohesion between all
members of the global leadership team
| Proactively meets with existing and
potential investors to relay the corporate
story and investment case
| Ensures that the Board Chair and Non-
Executive Directors are provided with a
comprehensive and accurate business
update every month via both Board packs
and, when applicable, Board meetings
Company Secretary –
Kirsten Lund
| Responsible to the Board and ensuring
compliance with all statutory regulations
| Responsible for advising the Board on all
Governance matters
| Provides support to Non-Executive
Directors
| Responsible under the direction of the
CEO, for ensuring that the Board receives
accurate and timely information
Non – Executive Directors
| Help to develop the business strategy and
bring an independent outlook
| Chair and participate in the Audit and
Remuneration Committees
| Challenge and support the Executive
Director on the main issues affecting the
Group
| Bring a range of complementary
experience to the Board to assist with
business decision-making
| Are available if shareholders want to raise
concerns that normal channels have failed
to resolve
– well established financial reporting and
control systems;
– the Board actively identifies, evaluates and
monitors the risks inherent in the business
and ensure that appropriate controls and
procedures are in place to manage these
risks;
– there is a clearly designed organisation and
reporting structure; and
– the Company has operational, accounting
and employment policies in place.
In addition, the Board regularly assess the
internal control environment under which the
business operates and where appropriate
implements additional measures to ensure
that adequate controls are maintained.
Quoted Company Alliance
Corporate Governance Code
The Board has concluded that the most
applicable corporate governance framework
for the Company to follow would be the
Quoted Company Alliance Corporate
Governance Code, which the Group
implemented in September 2018. Below is an
overview as to how the Company addresses
the 10 points of the Code.
1. “Establish a strategy and
business model which
promote long-term value for
shareholders”
Tissue Regenix Group has established a
portfolio of regenerative medical products,
based on two platform technologies, to
address critical and increasing clinical needs,
transforming patient care and providing
favourable health economic outcomes. We
aim to expand the adoption of our dCELL®
and BioRinse technologies and become
a partner of choice for both clinicians and
strategic partners. We aim to optimise the
adoption of our products and drive additional
revenues more rapidly through product
line extensions, which have a quick route
to market, and address specific clinical
requirements where we see significant
opportunities. Underpinning this, the business
has adopted four key strategic growth
drivers that it believes will accelerate market
Annual Report and Accounts for the year ended 31 December 2019
penetration and revenue growth, namely:
accelerate US market penetration; exploit
global market potential; broaden strategic
partnerships; and strengthen the portfolio.
More details of these strategic growth drivers
can be found on pages 10 to 11 of this
report.
2. “Seek to understand and
meet shareholder needs and
expectations”
The Group actively engages with its
shareholders throughout the year
both through direct meetings, website
communications and stock exchange
announcements. Commissioned analyst
research notes are made available on the
Company’s website as well as clinical case
studies and published papers.
Senior management, typically the CEO and
Group Finance Director aim to meet with, or
speak with, significant shareholders at least
twice in a year usually after the interim and
annual results announcements, to provide
an update on strategy and progress of the
Company and the Group as a whole, and to
receive shareholder feedback. The Company
also undertakes several publicly available
updates to all shareholders, through forums
such as interviews, trading updates and PR
announcements.
The Company holds an Annual General
Meeting each year at which all shareholders
are welcome to attend and speak with
management.
Company contact details are included on
the Company’s website and on all regulatory
announcements.
3. “Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success”
The Board of Directors of the Company
considers relationships with stakeholders of
the Tissue Regenix Group as fundamental to
its success.
During 2018 the Company embarked on an
employee engagement programme, which is
now engrained into the fabric of the business,
covering multiple areas from employee
engagement to individual development,
and drives the Company culture, vision and
mission, and values and behaviours. More
information can be found in the sustainability
report on pages 26 to 27.
In relation to our joint venture company
GBM-v in Rostock, Germany, quarterly Board
meetings are held involving both joint venture
parties along with less formal monthly update
calls.
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Corporate governance
continued
In respect of organ procurement and tissue
sourcing, Tissue Regenix actively audits
these suppliers on a regular basis to ensure
that tissues are from a properly regulated
source and obtained and handled with the
highest ethical standards.
The nature of our business means that
we pay close attention to our corporate
social responsibilities, tracking each
donation, and wherever requested, by
either regulatory bodies or next of kin,
proving further information around the use
of donation.
As a global Company we consider our
carbon footprint and environmental
responsibility ensuring that any significant
international air travel is essential and could
not be facilitated by alternative means,
such as a WebEx meeting. During 2019
we also undertook an energy reduction
programme at the UK manufacturing facility
leading to a 35% energy saving.
Further details of our corporate social
responsibility strategy are set out at page
26 of this report.
The Board considers feedback from its
advisers and stakeholders formally at its
monthly Board meetings or sooner on a
more informal basis as required.
4. “Embed effective risk
management, considering
both opportunities and
threats, throughout the
organisation”
The Board carefully considers the
strengths, weaknesses, opportunities
and risks facing Tissue Regenix Group,
and endeavours to minimise the impact
of weaknesses and risks by employing
the necessary mitigation actions. Tissue
Regenix Group is a pioneering international
medical technology company, focusing on
the development of regenerative products
utilising two platform technologies. We
are helping to transform the treatment of
patients in four key areas: BioSurgery (soft
tissue replacement and repair in wounds,
urogynaecology and trauma), Orthopaedics
and Dental, with an ongoing development
programme for Cardiac applications. We
process tissues at our facilities in the UK,
Europe and North America. Tissue Regenix
Group has an experienced and dedicated
management and scientific team, and the
prominent risks facing the Group are kept
under review and updated as necessary;
details are set out on pages 22 to 25 of
this report.
As noted above, the Group regularly audits
its suppliers to ensure that the highest ethical
standards are maintained.
In respect of its intellectual property rights,
the Group engages a professional patent and
trademark attorney to monitor its intellectual
property portfolio.
Tissue Regenix maintains a central finance
team, currently based in the UK, but with
two permanent team members in the US.
The Group seeks to operate consistent
accounting policies and engages annual
external audits from professional auditors of
its financial results and reports, findings from
which will be presented to the Board and
made available to all shareholders. The Board
review monthly financial reports including
key performance indicators provided by the
Group Finance Director in respect of the
management of cash within the business and
review against budgets and forecasts.
The Group also has a number of operational
controls that all employees are expected to
adhere to including management structure,
Board reserved matters, financial monitoring,
internal policies, codes of conduct and
training, health and safety monitoring and IT
controls.
5. “Maintain the Board as a
well-functioning, balanced
team led by the Chair”
The Board is comprised of two independent
Non-Executive Directors, one Non-Executive
Director, the Non-Executive Chairman, and
one Executive Director, the Chief Executive
Officer. The Non-Executive Directors bring
a mix of financial, clinical and industry
experience to the Board, and the Board
believes that its composition is suitable for
the Company requirements.
At least 10 formal Board meetings are held
each year with enough notice for Directors
to participate. A monthly Board report is
produced, and meeting agendas and Board
papers are produced in advance of each
meeting so that the Board can properly
consider the matters to be discussed. The
Company maintains minutes of the Board
meetings. Directors are also expected to
make themselves available on an ad hoc
basis for consultation if the need arises.
There are two Committees of the Board,
the Audit Committee and the Remuneration
Committee, each of which are formed
of three of the Non-Executive Directors
of the Company, with each Committee
having policies to govern how they are
run. The Directors who form these two
Committees have financial experience so
are appropriate persons to advise on these
matters. The Audit Committee meets at
least twice per year and is chaired by Alan
Miller who has relevant financial experience.
The Remuneration Committee meets no
fewer than twice per year, and is chaired
by Randeep Grewal who has financial
experience and experience of being a fund
manager and investor. Further details of these
Committees can be found on page 32 of this
Annual Report.
A Nomination Committee has been set
up in order to assess the structure, size
and composition of the Board as well as
the appointment of any new Director, as
and when appropriate. For senior level
appointments the Board will engage the
expertise of a relevant recruitment company
to assist with the search and hiring of a
relevant individual.
The Non-Executive Directors are appointed
through formal non-executive appointment
letters, which contain a three-month notice
period. The non-executive appointment
letters contain an indicative time commitment
of 20 days per annum; however, these
indicate that this is an estimate and that all
Directors are expected to commit sufficient
time to fully discharge their responsibilities.
The Company has not had any issues with
regular non-attendance at meetings.
Executive Directors have formal service
contracts, which require them to work
full-time in the business and have no other
significant outside business commitments.
These service agreements have a maximum
of six-months’ notice to terminate.
The Company follows the provisions in its
Articles of Association in respect of the
retirement and reappointment of Directors at
its Annual General Meeting each year.
The Board is satisfied that it has a suitable
balance between independence and
knowledge of the business to allow it to
discharge its duties and responsibilities
effectively and that effective controls have
been put in place.
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TISSUE REGENIX GROUP PLC
To supplement the Board, the Group
maintains a team of senior management
to inform the Board and keep it abreast of
key developments throughout its business.
The senior management are detailed on
the Company’s website and includes
for example: Daniel Lee, President US
Operations; Mike Izon, R&D Director; and
Joel Pickering, President of the BioSurgery
division, as well as other relevant senior
managers. As well as the main Board, Tissue
Regenix participates in the board of its joint
venture company, GBM-v along with its joint
venture partner. Having close ties to the
senior management team and joint venture
partners in this way allows the Group to
ensure that all divisions of the business are
kept up to date and facilitates the Group in
ensuring that all its divisions are compliant
with the Group’s codes and practices.
10. “Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders
and other relevant
stakeholders”
Please see responses in respect of principles
2, 3 and 5 above in relation to shareholder
communications and meetings, and Board
communications and meetings. In addition
to this, the Company communicates
with its shareholders through regulatory
announcements and its Annual Report.
Reports from both the Remuneration
Committee and the Audit Committee are
set out in the Annual Report. The Company
also hold an Annual General Meeting, which
all shareholders are invited to attend. In the
event that the Company received a significant
proportion of votes against a resolution at a
General Meeting, it would seek to review the
rationale for this and consider appropriate
actions.
6. “Ensure that, between
8. “Promote a corporate culture
them, the Directors have
the necessary up-to-date
experience, skills and
capabilities”
The Board is satisfied that it has an effective
balance of skills and relevant experience to
operate effectively.
Each Board member brings a different set
of capabilities, for example, all the Directors
other than Shervanthi Homer-Vanniasinkam
have financial experience, both Shervanthi
Homer-Vanniasinkam and Randeep Grewal
have clinical experience, and Gareth Jones
and Jonathan Glenn both have relevant
international industry experience.
The Board maintains its skillset through their
day-to-day roles and uses external advisers
to enhance its knowledge where necessary.
If any member of the Board considers that
additional training is required to fulfil their role,
the Company would seek to provide such
training as and when necessary.
The Company keeps in regular contact with
its nomad, Stifel Nicolaus Europe, typically
meeting once every two weeks and ad hoc
as required. The Company also seeks advice
from its legal advisers and accountants as
and where necessary including, for example,
in relation to the acquisition of CellRight
Technologies LLC. The Company employs
RSM UK Audit LLP to audit its Annual
Accounts and Report.
The Company Secretary role is currently held
by the Group Finance Director, Kirsten Lund.
Given the size of the Company, it has
not sought to formally appoint a Senior
Independent Director; however, Alan Miller is
the longest serving Non-Executive Director.
7. “Evaluate Board performance
based on clear and relevant
objectives, seeking continuous
improvement”
The CEO and Group Finance Director of
the Company are measured against a
clearly defined set of personal objectives
agreed by the Board and monitored by the
Remuneration Committee. The Board keeps
under review its composition and the balance
of skills and experience of Non-Executive
Directors.
that is based on ethical
values and behaviours”
As a Company that operates in a highly
regulated and sensitive environment, the
Company ensures that it operates with
a vigorous code of conduct and ethics.
Tissue Regenix Group strives to maintain
a sustainable, ethical and responsible
Company.
The Group, led by the Interim Chief Executive
Officer, maintains open and transparent
channels of communication with all
employees in order to promote values and
behaviours which consistently reflect the
Group’s ethos.
Operating in an industry based upon
processing of human and animal derived
tissues demands the highest ethical
standards, and the Group aspires to
maintain these across all business functions
and relations. The Company undertakes
regular audit checks to ensure that partners,
suppliers and employees comply with the
ethical standards and operate to meet our
expectations.
9. “Maintain governance
structures and processes
that are fit for purpose and
support good decision-
making by the Board”
Please see the details of the Board and its
Committees set out in respect of principles
5, 6 and 7 above. Details of the main roles
of the Audit Committee and Remuneration
Committee are set out in this Annual Report
on page 32, and the Company’s website.
A Nomination Committee has been set
up in order to assess the structure, size
and composition of the Board as well as
the appointment of any new Director, as
and when appropriate. For senior level
appointments the Board will engage the
expertise of a relevant recruitment company
to assist with the search and hiring of a
relevant individual.
In addition to this, the Group operates a clear
list of matters which are reserved for the
Board.
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Directors’ remuneration report
Share incentive schemes
The Group operates a share option plan,
under which certain Executive 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 1–3 years.
If the options remain unexercised after a
period of 10 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.
Remuneration policy
The Group’s remuneration 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
management team is incentivised 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 Executive 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 no 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 2019 Remuneration Committee
comprises Randeep Grewal as Chair of the
Committee, Alan Miller and Jonathan Glenn.
The Committee meets no fewer 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 taking 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, in accordance
with the Group’s strategy 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
Allocation 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 Allocation unless
share price growth performance targets
have been achieved and those price targets
sustained for 30 consecutive days.
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TISSUE REGENIX GROUP PLC
Directors’ remuneration
The remuneration of the main Board Directors of Tissue Regenix who served in the year to 31 December 2019 was:
John Samuel
Steven Couldwell (resigned 30/07/2019)
Gareth Jones*
Randeep Grewal
Jonathan Glenn
Alan Miller
Shervanthi Homer-Vanniasinkam
Michel Barker (appointed on 28th August and resigned
18th November 2019)
Paul Devlin (resigned 31 January 2018)
Total
Salary and
fees
£000
111
141
188
35
30
35
30
38
–
608
Bonus
£000
–
60
50
–
–
–
–
–
–
110
Total up to
December
2019
£000
111
203
250
35
Total up to
December
2018
£000
111
356
33
35
30
35
30
40
–
734
30
35
30
–
15
645
Benefits
£000
–
2
12
–
–
–
–
2
–
16
Within 2018 the total bonus payments were £120k and benefits were £13k.
* Gareth Jones was awarded a bonus of £120k in respect of his performance during 2019. Given the cash position of the Company as at the year
end, payment of this bonus was deferred pending an improvement in the cash position, for instance following the completion of a successful
fundraise. Given this conditionality, the accounting standards require us to recognise this in the year it is paid and therefore it does not show in
the above table. Gareth has decided to invest the vast majority of the net proceeds of this bonus into the recently announced fundraise.
Directors’ shareholdings
Directors’ interests in the shares of the Company, including family interests at 31 December 2019 were:
John Samuel (Note 1)
Alan Miller
Jonathan Glenn
Shervanthi Homer-Vanniasinkam
31 December
2019
Number
31 December
2019
%
31 December
2018
Number
31 December
2018
%
26,276,928
22,886,988
600,000
250,000
2.22%
1.97%
0.06%
0.02%
26,276,928
22,886,988
600,000
250,000
2.22%
1.97%
0.06%
0.02%
Note 1 includes shares held jointly by the Director and EBT as set out overleaf in Note 3.
Directors’ interests 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 December 2019 were:
John Samuel
John Samuel (Note 1)
Unapproved scheme options
John Samuel (Note 2)
Steven Couldwell
EBT scheme shares (Note 3)
John Samuel
At 1 January
2019
Lapsed
during year
At
31 December
2019
Exercise
price
2,400,000
577,777
–
–
2,400,000
577,777
5.00 pence
22.50 pence
88,890
10,000,000
–
10,000,000
88,890
–
22.50 pence
8.00 pence
10,740,000
–
10,740,000
5.00 pence
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Directors’ remuneration report
continued
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 December 2019 was
1.0 pence per share, the highest and lowest
prices during the year were 8.25 pence and
0.6 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
Randeep Grewal
Chairman of the Remuneration Committee
4 June 2020
Note 1. 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 December 2019 none of the performance
conditions had been met and no options
were eligible for exercise.
Note 2. There were employment period
and performance conditions in relation to
the 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 December 2019 none of the performance
conditions had been met and no options
were eligible for exercise.
Note 3. 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. John Samuel has 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. The shares were all acquired
pursuant to certain conditions set out in
Joint Owned Equity agreements (“JOEs”).
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TISSUE REGENIX GROUP PLC
Directors’ report
The Directors present their
report and consolidated
financial statements for
the Tissue Regenix Group
plc, and its subsidiary
undertakings for the year
ended 31 December 2019.
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 and
is listed on the London Stock Exchange
Alternative Invest Market. The subsidiary
undertakings principally affecting the Group
are listed in note C5 of the Company’s
financial statements.
Business model
A description of the Company’s business
model is included on pages 08 to 09.
Explanations of activities and how it seeks
to add value are included in the Chairman’s
statement on page 02 to 03 and Interim CEO
operational review report on pages 18 to 19
as well as the KPI report on pages 14 to 15
and future milestones on pages 12 to 13.
Business review and results
A review of the Group’s performance and
future prospects is included in the Chairman’s
statement on pages 02 to 03 and Interim
CEO operational report on pages 18 to 19,
as well as the future milestones on pages 12
to 13 and KPIs set out on pages 14 to 15. A
review of the Group’s financial performance
is within the financial overview on pages 20
to 21. The loss for the 12 months attributable
to equity holders of the parent was (£7,697k)
(2018: £8,186k). The Directors do not
recommend the payment of a dividend (2018:
nil).
Share capital and funding
Full details of the Group and Company’s
share capital movements during the year are
given in note 19 to the financial statements.
Directors and their interests
The following Directors held office in the year:
Statement as to disclosure of
information to the Auditor
John Samuel – resigned 20 March 2020
Steve Couldwell – retired 1 August 2019
Gareth Jones
Mike Barker – appointed 28 August 2019;
retired 18 November 2019
Jonathan Glenn
Shervanthi Homer-Vanniasinkam
Alan Miller
Randeep Singh Grewal
Directors’ interests in the shares of the
Company, including family interests, are
included in the remuneration report on pages
36 to 38.
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.
Corporate governance
The corporate governance report is set out
on pages 32 to 35.
The Directors who were in office on the date
of approval of these financial statements have
confirmed, that as far as they are aware, 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.
Financial instruments
Further details of financial risk management
objectives and policies are set out on pages
22 to 25 and in note 14 of the financial
statements.
Auditor
RSM UK Audit LLP have indicated willingness
to continue in office, in accordance with the
recommendation of the Audit Committee
and section 489 of the Companies Act
2006. A resolution to reappoint RSM as the
Company’s Auditor will be proposed at the
forthcoming Annual General Meeting.
Substantial shareholders
Strategic report
The Group has chosen in accordance with
Companies Act 206 s414C (11) to set out
in the Group’s strategic report information
required by Large and Medium-sized
Companies and Groups (Accounts and
Reports) Regulations 2008, Sch 7 to be
contained in the Directors’ report in relation
to research and development and future
developments and important events affecting
the Group since the end of the year.
The Directors Report was approved by the
Board on 4 June 2020.
On behalf of the Board
Gareth Jones
Interim Chief Executive Officer
As at 31 December 2019, shareholders
holding more than 3% of the share capital of
Tissue Regenix Group plc were:
Name of
shareholder
Link Group*
IP Group
Jupiter Asset
Management
Director
and Related
Holdings(s)
Number of
shares
234,212,642
153,042,837
% of voting
rights
19.98
13.06
99,740,965
8.51
50,313,916**
4.33
* Link Group were appointed as administrators for
the Woodford Equity Income Fund
** Includes 10,740,000 shares held jointly by the
Director and the Tissue Regenix Employee
Share Trust.
Employment Policies
The Group is committed to keeping
employees as fully informed as possible
regarding the Group’s performance and
prospects and seeks their views, wherever
possible, on matters which affect them as
employees. More information can be found in
our sustainability report on pages 26 to 27.
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Statement of directors’ responsibilities
In respect of the Annual Report and the financial statements
The directors are responsible for preparing the Strategic Report and the Directors’ Report, and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare group and company financial statements for each financial year. They are required by the AIM
Rules of the London Stock Exchange to prepare group financial statements in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union (“EU”) and have elected under Company law to prepare the company financial statements in
accordance with IFRS as adopted by the EU.
The group financial statements are required by law and IFRS adopted by the EU to present fairly the financial position and performance of the
group; the Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial
statements giving a true and fair view are references to their achieving a fair presentation.
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 the company and of the profit or loss of the group for that period.
In preparing each of the group and company financial statements, the directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with IFRS as adopted by the EU;
d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the company will
continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and the company’s
transactions and disclose with reasonable accuracy at any time the financial position of the group and the company and enable them to
ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group
and the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Tissue Regenix
Group website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
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TISSUE REGENIX GROUP PLC
Statement of directors’ responsibilities
In respect of the Annual Report and the financial statements
Independent auditor’s report
To the members of Tissue Regenix Group PLC
Opinion
We have audited the financial statements of Tissue Regenix Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 December 2019 which comprise the consolidated statement of comprehensive income, the consolidated and parent company
statements of financial position, the consolidated and parent company statements of changes in equity, the consolidated and parent company
statements of cash flow and the notes to the financial statements, including a summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act
2006.
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 2019 and
of the group’s loss for the year then ended;
| the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
| the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as
applied in accordance with the Companies Act 2006; and
| the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We
are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to SME listed entities and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Material uncertainty related to going concern
We draw attention to note 1 in the financial statements, which indicates that the fundraising announced on 22 May 2020 is conditional upon
shareholder approval in a general meeting. As stated in note 1, these events or conditions, along with the other matters as set forth in note 1,
indicate that a material uncertainty exists that may cast significant doubt on the group’s and the parent company’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
Summary of our audit approach
Key audit matters
Group
| Goodwill impairment
Materiality
Parent Company
| Impairment of intercompany receivables
Group
| Overall materiality: £297,000
| Performance materiality: £222,000
Parent Company
| Overall materiality: £169,000
| Performance materiality: £127,000
Scope
Our audit procedures covered 100% of revenue, 100% of total assets and 100% of loss before tax.
Annual Report and Accounts for the year ended 31 December 2019
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Independent auditor’s report continued
To the members of Tissue Regenix Group PLC
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group and parent company
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the group and parent company financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matters described in the Material uncertainty related to going concern section, we have determined the matters described
below to be the key audit matters to be communicated in our report.
Goodwill impairment
Key audit matter description
How the matter was addressed
in the audit
As disclosed in note 11, the CellRight Technologies LLC (“CellRight”) cash generating unit (CGU) includes
goodwill of £15.3m. CellRight was acquired in 2017 and the presence of goodwill requires an impairment
test to be performed at least annually. The CellRight CGU is a legal entity in its own right and forms part of
the Orthopaedics and Dental operating segment.
Any recorded impairment charge would most likely have a material impact on the financial statements and
we therefore considered this matter to be one of the matters of most significance in the current year audit.
Impairment testing requires management to compare the carrying amount of the CGU’s attributable
assets and liabilities with the higher of fair value less costs of disposal and value in use (the “Recoverable
Amount”). Where the carrying amount is higher than Recoverable Amount then an impairment
charge arises. Impairment testing involves a significant degree of judgement because management’s
determination of value in use is based on a number of assumptions including an assessment of future
performance in a high growth sector and the selection of an appropriate discount rate.
Management provided us with an impairment model for the CellRight CGU as detailed in note 11 that
showed no impairment was necessary. The value in use calculation is dependent upon cash flows derived
from expected EBITDA, working capital movements and capital expenditure requirements. We identified
that the two key assumptions within the model were revenue growth (which was 26% compound annual
growth over the five-year forecast period, reducing to long term growth of 2% thereafter) and the use of a
weighted average cost of capital (WACC) of 13.5% for the discount rate.
We performed audit work on this model by:
| Using a specialist to check the calculations within the model and to obtain an independent estimate of
the WACC.
| Challenging management to support the revenue growth rate within the model and comparing forecast
growth with available market reports.
| Considering the sensitivity of the headroom within the model to reasonably possible changes in the
revenue growth rate.
Key observations
As a result of our work we concurred with management’s assessment that there was no impairment and
we ensured that the disclosure in note 11 made it clear the calculation of value in use is sensitive to a
reasonably possible change in sales growth rates.
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TISSUE REGENIX GROUP PLC
Impairment of intercompany receivables (parent company only)
Key audit matter description
The parent company has receivable balances from subsidiary undertakings that are currently loss making.
The receivables are repayable on demand and the subsidiary undertakings do not have sufficient liquid
assets to make repayment should the parent company call in the receivable balance.
One of the most significant matters in the current year audit of the parent company is that these
receivable balances may be impaired and management are required to calculated an expected credit
loss (“ECL”) provision in accordance with IFRS9 Financial Instruments. The calculation of ECLs involves a
significant degree of judgement as management have to make assumptions about future cash generation
and consider multiple scenarios through which the balances may be recovered.
Given the magnitude of these receivable balances and the potential for impairment we considered this
matter to be one of the matters of most significance in the current year audit.
At the 31 December 2019, the carrying value of amounts due from group undertakings amounted to
£20.6m after recording an ECL provision of £49.9m (see note C7).
How the matter was addressed
in the audit
We obtained management’s calculation of the ECL and the underlying calculations prepared to support
the carrying value of the balance and performed work as follows:
| Assessed the reasonableness of the scenarios considered by management and the probabilities
assigned to each.
| Ensured that the cash flow forecasts used were consistent with those contained within impairment
tests performed on CellRight and the group’s net assets (as disclosed at note 11).
| Recalculated the computation of the ECL.
Key observations
As a result of our work we concurred with management’s calculated ECL and we ensured that the key
estimates within the calculation were adequately disclosed within the critical estimates at note C2.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit
procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole, could
reasonably influence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements. Based
on our professional judgement, we determined materiality as follows:
Group
Overall materiality
£297,000
Basis for determining
overall materiality
2.3% of Revenue
Rationale for benchmark
applied
Revenue selected given shareholder and stakeholder
focus on revenue growth. The group is still in relatively
early phase of development and revenue growth is
critical to reducing significant operating losses.
Parent company
£169,000
0.4% of net assets. The percentage applied to the
benchmark has been restricted for the purpose of
calculating an appropriate component materiality.
Net assets selected as the parent company is purely
a holding company and no income statement is
presented.
Performance materiality
£222,000
£127,000
Basis for determining
performance materiality
75% of overall materiality
75% of overall materiality
Reporting of
misstatements to the
Audit Committee
Misstatements in excess of £15,000 and misstatements
below that threshold that, in our view, warranted
reporting on qualitative grounds.
Misstatements in excess of £8,000 and misstatements
below that threshold that, in our view, warranted
reporting on qualitative grounds.
Annual Report and Accounts for the year ended 31 December 2019
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Independent auditor’s report continued
To the members of Tissue Regenix Group PLC
An overview of the scope of our audit
The group consists of 11 components, located in the United Kingdom, USA and Germany. The coverage achieved by our audit procedures
was:
Full scope audit
Specific audit procedures
Total
Number of
components
9
1
10
Revenue
100%
-%
100%
Total assets
100%
-%
100%
Profit
before tax
94%
6%
100%
Specific audit procedures were performed on one component as they contained the Borrowings secured by the group during the year and the
related finance costs. Analytical procedures were performed at group level for the remaining component.
Of the above, a full scope audit for 1 component was undertaken by a component auditor. Whilst not significant in its own right, this
component contained material amounts of revenue.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
| the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
| the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our
opinion:
| 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.
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TISSUE REGENIX GROUP PLC
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than
the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Michael Thornton
(Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
Central Square
Fifth Floor
29 Wellington Street
Leeds LS1 4DL
4 June 2020
Annual Report and Accounts for the year ended 31 December 2019
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Consolidated statement of comprehensive income
For the year ended 31 December 2019
REVENUE
Cost of sales
GROSS PROFIT
Administrative expenses before exceptional items
Exceptional items
Total administrative expenses
OPERATING LOSS
Finance income
Finance charges
LOSS BEFORE TAXATION
Tax
LOSS FOR YEAR
ATTRIBUTABLE TO:
Equity holders of the parent
Non-controlling interests
OTHER COMPREHENSIVE INCOME:
Foreign currency translation differences – foreign operations
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR
ATTRIBUTABLE TO:
Equity holders of the parent
Non-controlling interests
LOSS PER SHARE
Basic and diluted loss attributable to equity holders of parent
The loss for the period arises from the Group’s continuing operations.
Notes
3
3
4
6
7
8
9
2019
£000
13,033
(7,014)
6,019
(13,198)
(21)
(13,219)
(7,200)
17
(477)
(7,660)
554
(7,106)
(6,973)
(133)
(7,106)
(724)
(7,830)
(7,697)
(133)
(7,830)
2018
£000
11,619
(5,702)
5,917
(14,183)
(423)
(14,606)
(8,689)
72
(262)
(8,879)
620
(8,259)
(8,186)
(73)
(8,259)
1,360
(6,899)
(6,826)
(73)
(6,899)
9
(0.60)p
(0.70)p
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27183-Tissue-Regenix-AR-2019.indd 46
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1 June 2020 4:29 pm
Proof 6
01-Jun-20 4:32:45 PM
TISSUE REGENIX GROUP PLC
Consolidated statement of comprehensive income
For the year ended 31 December 2019
Consolidated statement of financial position
At 31 December 2019
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
TOTAL NON-CURRENT ASSETS
CURRENT ASSETS
Inventory
Trade and other receivables
Corporation tax receivable
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Borrowings
Deferred tax
TOTAL NON-CURRENT LIABILITIES
Current liabilities
Borrowings
Trade and other payables
TOTAL CURRENT LIABILITIES
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
Notes
2019
£000
2018
£000
10
11
12
13
14
16
18
16
15
19
20
21
2,357
17,999
20,356
4,185
2,539
1,035
2,380
10,139
30,495
(2,115)
(670)
(2,785)
(171)
(2,944)
(3,115)
(5,900)
24,595
5,859
86,399
10,884
(7,148)
(831)
983
(70,936)
25,210
(615)
24,595
2,828
19,938
22,766
2,330
3,551
1,200
7,816
14,897
37,663
–
(791)
(791)
–
(4,302)
(4,302)
(5,093)
32,570
5,859
86,398
10,884
(7,148)
(831)
1,129
(63,239)
33,052
(482)
32,570
The consolidated financial statements were approved by the Board of Directors on 4 June 2020 and were signed on its behalf by:
Gareth Jones
Interim Chief Executive Officer
Company number: 05969271
Hocri ina, cernum nonsunt abus oculisquiur. Ahabus pro vis est ius patin vitast etem videludam intra imum delissed igil consuam. Ehebusc
restatatem. Eger in vasdam orisquam movesicis cuperorte is cerriostraes se, norumur nihilis, Ti. Ficiae ficam moenihic rei sis.
Terbit. Unum ignonsuliis intiussa dic tant, que cupioneque autudellabus Ad demere fora Sp. Ti, niu vita, ne nius, sinemus, publinatatum inarit. M.
Labutum inte con tanum di condact atisquemus, dest nerris viliamque cienirmis huide possimusa que is caus consulture morum hostorum tia
virmilicies nimenatimuri consi publiquit reis sen haberit. Aximedi umenaticiam que consupe suntrum nendum mortem ad imo et; efec re imanum
opopoptili caet dii scerfervius. Fur acchum maximus consus, maximure consultis, quamdiemus pro ur lossupi ocultimus in diis elutemus is,
de consime convens idicaet Catque nosta videmur quam pricatante tem nonit? Ti. Perbite cae consis prae publica temus, no. Catuuspiorum
aut int, quit, quam Romnic iam. Gra verum. Satemere tabunum tisse vereo manterc eperbistio, conc ressuli caedem, vis faudem horatia
essensulicae tam vilne te fecon tiuris nius fui popublina, videmo compere, unum plicast ina, pos iame vividep opossim plicae fortides cones
init? Os in videndi urbis? Am taliurn imandie ntudemp opublis, quem ocusquemod inum propopublist pulicatuus omnoniae ad supiondium ficon
Etri consultus et; inunu ignotala stio, quasdam entero us loc rehem Romanum incurnunte facrebatis conscre iae dere diem inequas teatraetre
vidiis atus pulvis comnit, que iam quodi inc renatat, pris C. Qua remum pori faude neque converd icatam tea quamque nihilic amdiend ercere es
senimum liem tatur. Actursuam iam quem actus hinem nos ad res comnius publicitam tat, noximus nons fica pridit praedientim essenti ssulesc
eperipse anterorbena, urnum que condi, ut gra neque forterunter hil turnum dica milnequa comnimunihic facrem no. Ac templinum dem. Verussi
linpro, tem pribus publis cut norum tante inate nove, fue ad nonsulego utus etiam diuris. Nu cononstrum que a omnium, nos elici furenimis?
Alariortu volto et ommo hilis potam ad conihi, Ti. Valicam. Satam que me re adenimum, que a nihi, nimula imaiora traritaripio iam hocut vessi
cum terebus, quam iae con sultori tessoltus sena, quem publiam tudempl. et vesseni hinerum enatand ierestr avehemoviu in acerede morbis,
eliis? At ocupecres aurnunclego catu quium atum de tem omaionsuam cor quam esedest dente ta L. Am propublius viliciem ave, efessed
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Annual Report and Accounts for the year ended 31 December 2019
27183-Tissue-Regenix-AR-2019.indd 47
27183
1 June 2020 4:29 pm
Proof 6
01-Jun-20 4:32:45 PM
Consolidated statement of changes in equity
For the year ended 31 December 2019
Attributable to equity holders of parent
Share
capital
£000
5,855
–
–
Share
premium
£000
86,398
–
–
Merger
reserve
£000
10,884
–
–
Reverse
acquisition
reserve
£000
(7,148)
–
–
Reserve
for own
shares
£000
(831)
–
–
Share
based
payment
reserve
£000
1,186
–
–
Retained
earnings
deficit
£000
(56,413)
(8,186)
1,360
–
4
–
5,859
–
–
–
–
5,859
–
–
–
86,398
–
–
–
1
–
86,399
–
–
–
10,884
–
–
–
–
–
10,884
–
–
–
(7,148)
–
–
–
–
–
(7,148)
–
–
–
(831)
–
–
–
–
–
(831)
–
–
(57)
1,129
–
–
(6,826)
–
–
(63,239)
(6,973)
(724)
–
–
(146)
983
(7,697)
–
–
(70,936)
Non-
controlling
interests
£000
(409)
(73)
–
(73)
–
–
(482)
(133)
–
(133)
–
–
(615)
Total
£000
39,931
(8,186)
1,360
(6,826)
4
(57)
33,052
(6,973)
(724)
(7,697)
1
(146)
25,210
Total
equity
£000
39,522
(8,259)
1,360
(6,899)
4
(57)
32,570
(7,106)
(724)
(7,830)
1
(146)
24,595
At 31 December 2017
Loss for the period
Other comprehensive income
Loss and total comprehensive
expense for the period
Exercise of share options
Share based payment credit
At 31 December 2018
Loss for the period
Other comprehensive expense
Loss and total comprehensive
expense for the period
Exercise of share options
Share based payment credit
At 31 December 2019
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27183-Tissue-Regenix-AR-2019.indd 48
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Proof 6
01-Jun-20 4:32:45 PM
TISSUE REGENIX GROUP PLC
Consolidated statement of cash flows
For the year ended 31 December 2019
OPERATING ACTIVITIES
Loss before taxation
Adjustment for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of intangible assets and property, plant and equipment
Share based payments
Interest receivable
Interest payable
Operating cash outflow before working capital movements
Decrease/(Increase) in inventory
Decrease/(Increase) in trade and other receivables
(Decrease)/Increase in trade and other payables
Cash outflows from operations
Research & Development tax credit received
Net cash outflow from operations
INVESTING ACTIVITIES
Interest received
Purchases of property, plant and equipment
Capitalised development expenditure
Acquisition of subsidiary
Net cash outflow from investing activities
FINANCING ACTIVITIES
Interest paid
Proceeds from exercise of share options
Proceeds from new loans
Repayment of loans
Net cash inflow from financing activities
Decrease in cash and cash equivalents
Foreign exchange translation movement
Cash and cash equivalents at start of period
CASH AND CASH EQUIVALENTS AT END OF PERIOD
Notes
10
11
10/11
20
6
7
6
10
11
2019
£000
2018
£000
(7,660)
(8,879)
476
570
1,311
(146)
(17)
477
(4,989)
(1,855)
1,076
(1,567)
(7,335)
653
(6,682)
17
(438)
(213)
–
(634)
(384)
1
6,479
(4,193)
1,903
(5,413)
(23)
7,816
2,380
598
575
–
(57)
(72)
262
(7,573)
542
(1,188)
156
(8,063)
1,225
(6,838)
72
(290)
(116)
(1,564)
(1,898)
–
4
–
–
4
(8,732)
125
16,423
7,816
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Annual Report and Accounts for the year ended 31 December 2019
27183-Tissue-Regenix-AR-2019.indd 49
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Proof 6
01-Jun-20 4:32:46 PM
Notes to the financial statements
For the year ended 31 December 2019
1) BASIS OF PREPARATION
The financial statements of Tissue Regenix Group plc are audited consolidated financial statements for the year ended 31 December 2019.
These include audited comparatives for the year ended 31 December 2018.
The Company is incorporated and domiciled in the United Kingdom and its registered number is 05969271. The address of the registered
office is Unit 1 and 2 Astley Way, Astley Industrial Estate, Swillington LS26 8XT. The Company was incorporated on 17 October 2006. The
principal activity of Tissue Regenix Group is to develop, manufacture and commercialise biological medical devices.
The Group financial statements consolidate the financial statements of Tissue Regenix Group plc and the entities it controls, being its
subsidiaries and its joint venture interest.
Going Concern
These financial statements have been prepared on a going concern basis, given the current cash flow projections forecast for the Group to
31 December 2021. Funding requirements are reviewed on a regular basis by the Group’s Chief Executive Officer and Group Finance Director
and are reported to the Board at each Board meeting, as well as on an ad hoc basis, if requested. Until sufficient cash is generated from its
operations, the Group remains reliant on external funding including current debt facilities provided by MidCap, to meet its working capital
requirements, capital investment programme and other financial commitments.
On 22 May, the Group announced that gross proceeds of £14.6m had been conditionally raised through an offer of new ordinary shares in
the Company to Institutional and other qualifying investors. This fundraise is conditional on shareholder approval at a General Meeting of
shareholders to be held on 9 June 2020 and also to admission of the fundraising shares to trading on AIM. In reporting the Group’s finances
on a going concern basis, the Directors have assumed the appropriate resolutions at this Meeting will be passed. However, if the necessary
resolution is not passed, the fundraising will not proceed and the Company would not have funds immediately available to continue executing
its current business plan. In this eventuality, the Directors would need to consider alternative sources of adequate funding. Should the
Company be unable to raise enough funds, shareholders could be at risk of losing all or a substantial amount of their investment.
The COVID-19 pandemic has affected most businesses during H1 2020. As a result of the reprioritisation of healthcare professionals during
this time, there has been a decline in elective procedures undertaken across a number of medical specialities that use our products. Given
the uncertainty around the level and duration of disruption from COVID-19, it is difficult to determine how long the current situation may last,
and the time taken to catch-up any postponed surgical procedures thereafter. However, the Board, in compiling possible cashflow projections
for the business, has considered a number of scenarios regarding the effect of reduced and delayed revenues due to COVID-19 and, has
undertaken market soundings regarding the likely timeframe for the recommencement of procedures. It has concluded that, if additional
funds are received as expected, there will not be a significant long-lasting impact on the capability of the business to carry out its commercial
activities.
In summary, the Directors have considered their obligations in relation to the assessment of the going concern basis for preparation of the
financial statements 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 pages 22 to 25. They have concluded that it remains appropriate to prepare
the financial statements on a going concern basis, noting that assumptions relating to the completion of the fundraise give rise to a material
level of uncertainty in respect of the going concern assumption.
The financial statements do not include any adjustments that would result in the basis of preparation as a going concern being inappropriate.
2) SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group
takes into consideration potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. The financial
statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that
control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so
causes the non-controlling interests to have a deficit balance.
Controlled Joint Venture
Tissue Regenix Group entered a joint venture in January 2016 establishing GBM-V GmbH, a company in Germany.
The results for this entity are consolidated within these financial statements because the Group controls the majority of the voting rights.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated.
Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s
interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence
of impairment.
Goodwill
Goodwill arising on the acquisition of a subsidiary undertaking is the difference between the fair value of the consideration payable and the fair
value of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill is tested annually for impairment as described below.
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Proof 6
01-Jun-20 4:32:46 PM
TISSUE REGENIX GROUP PLC
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 in
to the Company, which usually coincides with the despatch of goods.
Bill and hold sales
The Group has bill-and-hold arrangements with customers, and this revenue is recognised when the company considers that performance
obligations have been met and they meet the following criteria:
| The reason for the bill-and-hold arrangement must be substantive (usually the arrangement has been requested by the customer to facilitate
their shipping arrangements);
| The product must be identified separately as belonging to the customer (that is, it cannot be used to satisfy other orders);
| The product must be ready for physical transfer to the customer; and
| The Group cannot have the ability to use the product, or to direct it to another customer
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.
Exchange differences arising on transaction and monetary items in the financial statements of individual entities are recorded as a profit or loss
within the income statement.
The assets and liabilities of foreign operations are translated into sterling 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 operation are recorded in other comprehensive income and
taken to the translation reserve in equity until the disposal of the investment.
Research and Development
Research costs are charged to profit and 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 management 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 capitalisation 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.
Exceptional Items
Items which are significant by virtue of their size or nature and/or which are considered non-recurring are classified as an exceptional operating
item. Such items are included within the appropriate consolidated income statement category but are highlighted separately. Exceptional
operating items are excluded from the profit measures used by the Directors to monitor underlying performance.
Inventories
Inventories are recognised at the lower of cost and net realisable value. Cost is determined using the first in, first out method and represents the
purchase cost, including transport, for raw materials, together with a proportion of manufacturing overheads based on normal levels of activity
for work in progress and finished goods. Appropriate provisions for estimated irrecoverable amounts are recognised in the income statement
when there is objective evidence that the assets are impaired.
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Notes to the financial statements continued
For the year ended 31 December 2019
2) SIGNIFICANT ACCOUNTING POLICIES continued
Property, Plant and Equipment
Property, plant and equipment assets are stated at their historical cost of acquisition less any provision for depreciation or impairment.
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:
over 39 years
over 5–7 years
over 3 years
over 5 years
Buildings
Laboratory equipment
Computer equipment
Fixtures and fittings
Land is not depreciated.
Intangible Assets
Intangible assets are stated at fair value at acquisition. They are subsequently held at cost less any provision for impairment or amortisation.
Intangible assets are amortised through administrative expenses within the income statement over their expected useful life as follows:
Trademarks
Customer relationships
Process & IT technology
Supplier agreements
over 5 years
over 10 years
over 10 years
over 5 years
Impairment of Property, Plant and Equipment and Intangible Assets
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). For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).
Discounted cash flow valuation techniques are generally applied for assessing recoverable amounts using Board approved 5-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.
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 of the
option at the purchase date is recognised 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.
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.
An expected credit loss (‘ECL’) model, as introduced under IFRS 9, broadens the information that an entity is required to consider when
determining its expectations of impairment. Under this model, expectations of future events must be taken into account and this will result in
the earlier recognition of larger impairments against trade and other receivables.
In applying the ECL model the company considered the probability of a default occurring over the contractual life of its trade receivables
balances on initial recognition of those assets.
Impairment provisions are recognised for the group as follows, representing the expected credit losses over the contracted life of these
balances.
Not overdue
0 to 3 months overdue
to 4 months overdue
to 5 months overdue
Over 5 months overdue
0% of aged receivables
0% of aged receivables
25% of aged receivables
50% of aged receivables
100% of aged receivables
TISSUE REGENIX GROUP PLC
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2) SIGNIFICANT ACCOUNTING POLICIES continued
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.
Borrowings
Borrowings are interest bearing and are initially recognised at fair value less the directly attributable costs of issue. 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 6 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.
Leases
On commencement of a contract which gives the Group the right to use assets for a period of time in exchange for consideration, the Group
recognises a right-of-use asset and a lease liability unless the lease qualifies as a ‘short-term’ lease (term is twelve months or less with no option
to purchase the lease asset) or a ‘low-value’ lease (where the underlying asset is £4,000 or less when new).
The lease liability is initially measured at the present value of the lease payments during the lease term discounted using the interest rate implicit
in the lease, or the incremental borrowing rate if the interest rate implicit in the lease cannot be readily determined. The lease term is the non-
cancellable period of the lease plus extension periods that the Group is reasonably certain to exercise and termination periods that the Group
is reasonably certain not to exercise. Lease payments include fixed payments, less any lease incentives receivable, variable lease payments
dependant on an index or a rate and any residual value guarantees.
The lease liability is subsequently increased for a constant periodic rate of interest on the remaining balance of the lease liability and reduced
for lease payments. Interest on the lease liability is recognised in profit or loss. Variable lease payments not included in the measurement of the
lease liability as they are not dependent on an index or rate, are recognised in profit or loss in the period in which the event or condition that
triggers those payments occurs.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except to the extent
that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted
at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial
recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating
to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided
is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date.
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:
Estimates
Deferred tax
Deferred tax assets require management judgement in determining the amounts to be recognised. In particular, judgement is used when
assessing the extent to which deferred tax assets should be recognised with consideration given to the timing and level of future taxable income.
In the current year, given that the group is still loss making, the Directors judgement is not to recognise a deferred tax asset in respect of tax
losses. Deferred tax not recognised for 2019 is £7,451k (2018: £7,353k).
Impairment testing of non-current assets
At each reporting date the directors review the carrying amount of the Group’s non-current assets to determine whether there has been any
indication that those assets have suffered an impairment loss. In the current year the group market capitalisation at 31 December 2019 was
lower than net assets and therefore a full impairment test has been performed on the group’s net assets. This resulted in an impairment charge
of £972k against intangible assets and £339k against property, plant and equipment. Further details are provided in notes 10 and 11. The point
of whether to impair non-current assets is a key judgement.
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Notes to the financial statements continued
For the year ended 31 December 2019
2) SIGNIFICANT ACCOUNTING POLICIES continued
New accounting standards and amendments adopted in the year
During the year, the Company adopted the following standards effective from the 1st January 2019. The Company has applied these
standards in the preparation of the financial statements, and has not adopted any new or amended standards early.
Initial application of IFRS 16 Leases
The Group has applied IFRS 16 Leases for the first time in the year ended 31 December 2019. IFRS 16 replaces IAS 17 Leases. The Group
previously split leases between ‘finance leases’ that transferred substantially all the risks and rewards incidental to ownership of the asset to
the Group, and ‘operating leases’. The main change on application of IFRS 16 is the accounting for ‘operating leases’ where rentals payable
(as adjusted for lease incentives) were previously expensed under IAS 17 on a straight-line basis over the lease term.
The Group entered into a new agreement in relation to a property located in the USA on 14 August 2019. The landlord is currently in the
process of performing additional work and hence did not make the property available for use by the Group. Therefore, in accordance with
IFRS 16, the lease has not commenced as at 31 December 2019. The lease on the UK property at Swillington, Leeds expired during the
period and is currently rented on a month-to-month basis.
No right-of-use assets and lease liabilities were identified at the transition date due to application of the “short-term” and “low value”
exemptions. The prior year financial statements disclosed the Swillington lease liability of £61,000 expiring within one year – the “short term”
exemption was specifically applied to this lease.
Impact of other new International Financial Reporting Standards
The following other new standards and amended standards, none of which have had a material impact on these financial statements, are
mandatory and relevant to the Group for the first time for the financial period commencing 1 January 2019:
| IFRIC23: Uncertainty over Income Tax Treatments
| Amendments to IAS 19: Plan amendment, curtailment or settlement
| Annual Improvements to IFRS Standards 2015-2017 Cycle
Accounting standards in issue but not yet effective
At the date of authorisation of these financial statements the following standards and interpretations, which have not been applied in these
financial statements and which are considered potentially relevant, were in issue but not yet effective (and in some cases had not yet been
adopted by the EU):
| Amendments to References to the Conceptual Framework in IFRS Standards
| Amendments to IAS 1 and IAS 8: Definition of Material
| Amendments to IFRS 3 Business Combinations
The Directors anticipate that the adoption of the amendments to standards in future periods will have no material impact on the recognition
and measurement of assets, liabilities and the associated performance of the Group or the Company when the relevant standards and
interpretations come into effect.
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 world
Year to
31 December
2019
£000
10,679
2,354
13,033
Year to
31 December
2018
£000
9,434
2,185
11,619
Analysis of revenue by customer
During the year ending 31 December 2019 the Group had no customers who individually exceeded 10% of revenue (2018:no customers).
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TISSUE REGENIX GROUP PLC
3) SEGMENTAL REPORTING continued
Operating segments
The Group is organised into BioSurgery, Orthopaedics & Dental, Cardiac 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 Chief Executive Officer. These are the reportable operating segments in accordance with IFRS8 “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 IFRS8, 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 Chief Executive Officer as the Chief Operating Decision Maker as he 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 unit.
BioSurgery
Orthopaedics &
Dental
Cardiac
GBM-V
Central
Total
2019
£000
4,233
(2,535)
1,698
2018
£000
3,381
(1,769)
1,612
2019
£000
6,724
(3,076)
3,648
2018
£000
6,396
(2,676)
3,720
2019
£000
–
–
–
2018
£000
–
–
–
2019
£000
2,076
(1,403)
673
2018
£000
1,842
(1,257)
585
2019
£000
–
–
–
2018
£000
–
–
–
2019
£000
13,033
(7,014)
6,019
2018
£000
11,619
(5,702)
5,917
(3,729)
(4,169)
(4,553)
(4,992)
(328)
(428)
(663)
(551)
(3,925)
(4,043)
(13,198)
(14,183)
–
(983)
–
–
1,523
–
–
–
–
–
–
–
(72)
(69)
(3,155)
–
(423))
(2,980)
–
–
(618)
–
–
(1,272)
–
–
(328)
–
–
(428)
–
(152)
–
–
(142)
–
–
–
–
34
–
(176)
–
–
1,523
(1,311)
–
–
(92)
–
(4,193)
–
–
(4,043)
(164)
(69)
(7,200)
–
(423)
(8,689)
–
–
–
–
–
–
–
–
(460)
(190)
(460)
(190)
(3,155)
159
(2,996)
(2,980)
73
(2,907)
(618)
283
(901)
(1,272)
543
(729)
(328)
80
(248)
(428)
102
(326)
(142)
–
(142)
34
–
34
(4,653)
32
(4,621)
(4,233)
(98)
(4,331)
(7,660)
554
(7,106)
(8,879)
620
(8,259)
Revenue
Cost of sales
Gross Profit
Administrative
costs
Exceptional
costs:
Contingent
consideration
Impairment of
assets
Restructuring
costs
Litigation costs
Operating loss
Finance income/
(expense)
Loss before
taxation
Taxation
Loss for the year
Revenue from all operating segments derives from the sale of biologic medical devices.
Administrative expenses are broken down as follows:
BioSurgery
Orthopaedics &
Dental
Cardiac
GBM-V
Central
Total
Staff costs
Sales and marketing
costs
Research and
development
Depreciation and
amortisation
Establishment and
administration costs
Administrative costs
2019
£000
(2,862)
2018
£000
(2,936)
2019
£000
(2,931)
2018
£000
(2,639)
2019
£000
(134)
2018
£000
(222)
2019
£000
(349)
2018
£000
(297)
2019
£000
(889)
2018
£000
(1,365)
2019
£000
(7,165)
2018
£000
(7,459)
(395)
(901)
(136)
(125)
(5)
(25)
(15)
(20)
(204)
(256)
(164)
(530)
(1,307)
(168)
(164)
(4)
–
(409)
–
–
(755)
(1,071)
(1,367)
(1,635)
(15)
(20)
(276)
(279)
–
–
(17)
(7)
(739)
(867)
(1,047)
(1,173)
(201)
(3,729)
(148)
(4,169)
(680)
(4,553)
(642)
(4,992)
(21)
(328)
(17)
(428)
(278)
(663)
(227)
(551)
(1,684)
(3,925)
(1,811)
(4,043)
(2,864)
(13,198)
(2,845)
(14,183)
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Notes to the financial statements continued
For the year ended 31 December 2019
3) SEGMENTAL REPORTING continued
The balance sheet can be analysed segmentally as follows:
BioSurgery
Orthopaedics &
Dental
Cardiac
GBM-V
Central
Total
2019
£000
2018
£000
2019
£000
2018
£000
2019
£000
2018
£000
2019
£000
2018
£000
2019
£000
2018
£000
2019
£000
2018
£000
–
–
–
759
17,999
19,179
26
2,357
2,356
785
20,356
21,535
345
222
3,661
1,957
–
–
–
–
–
–
–
–
–
–
–
–
156
156
–
–
–
–
17,999
19,938
290
2,357
2,828
290
20,356
22,766
122
74
57
77
4,185
2,330
1,078
939
1,666
2,856
155
200
138
121
537
635
3,574
4,751
495
1,918
1,918
170
1,331
2,116
87
5,414
409
5,222
25,770 26,757
(586)
–
(586)
1,332
6
(553)
–
(553)
1,563
6
(2,163)
(2,115)
(4,278)
21,492
349
(2,474)
–
(2,474)
24,283
204
8
163
163
(42)
–
(42)
121
–
2
202
202
(42)
–
(42)
160
–
33
293
293
(112)
–
(112)
181
–
35
230
386
1,757
2,351
2,351
7,200
7,912
8,202
2,380
10,139
30,495
7,816
14,897
37,663
(102)
–
(102)
284
54
(882)
–
(882)
1,469
83
(1,922)
–
(1,922)
6,280
26
(3,785)
(2,115)
(5,900)
24,595
438
(5,093)
–
(5,093)
32,570
290
213
116
–
–
–
–
–
–
–
–
213
116
Non-current assets
Intangible assets
Property, Plant &
Equipment
Total non-current
assets
Current assets
Inventory
Trade & other
receivables
Cash & cash
equivalents
Total current assets
Total assets
Current liabilities
Trade & other
payables
Borrowings
Total liabilities
Net assets
Capital expenditure
Additions to
intangible assets
4) LOSS FROM OPERATIONS
Loss from operations is stated after charging/(crediting):
Depreciation of plant and equipment (see note 10)
Amortisation of intangible asset (see note 11)
Rentals subject to “short lease” exemption
Rentals under operating leases– land and buildings
Expensed inventory
Staff costs (see note 5)
Foreign exchange (gains)/losses
Research and development (exclusive of research and development staff costs)
Sales and marketing costs (exclusive of sales and marketing staff costs and commissions)
Exceptional items:
Restructuring costs
Remeasurement of contingent consideration
Impairment of non-current assets
Litigation costs
Auditor remuneration:
– fees payable to Company’s Auditor for the audit of the parent Company and consolidated financial
statements
– auditing the financial statements of subsidiaries pursuant to legislation
Other services:
– fees in relation to corporation tax
Total auditor’s remuneration
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2019
£000
476
571
213
–
5,803
7,165
(1)
1,368
755
164
(1,523)
1,311
69
21
20
53
43
116
2018
£000
598
575
–
85
4,723
7,459
55
1,635
1,071
–
–
–
423
423
20
56
24
100
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5) STAFF COSTS
The average monthly number of persons (including Directors) employed by the Group during the period was:
Directors
Laboratory and administration staff
The aggregate remuneration, including Directors, comprised:
Wages and salaries
Share based payments (see note 21)
Social security, pension & healthcare costs
Directors’ remuneration included above comprised:
Emoluments for qualifying services
2019
Number
2018
Number
7
92
99
7
79
86
£000
£000
6,178
(194)
1,181
7,165
6,405
(57)
1,111
7,459
734
645
Social security, pension and healthcare costs include pension contributions of £71k (2018: £95k)
Directors’ emoluments disclosed above include £250,000 paid to the highest paid Director (2018: £356,000). The share-based payments
charge for Directors was nil (2018: £71,000).
6) FINANCE INCOME
Bank interest receivable
7) FINANCE CHARGES
Imputed interest on deferred consideration
Interest on bank loans
8) TAXATION
Tax on loss on ordinary activities
Current tax:
UK corporation tax credit on losses of period
US corporation tax payable
Deferred tax:
Origination and reversal of temporary timing differences
Tax credit on loss on ordinary activities
Factors affecting the current tax charges
The tax assessed for the year varies from the main rate of corporation tax as explained below:
Loss on ordinary activities before tax
Tax at the standard rate of corporation tax 19% (2018:19%)
Effects of:
Research and development tax credits received
Surrender of research and development relief for repayable tax credit including enhancement
Other
Unutilised tax losses
Tax credit for the period
Annual Report and Accounts for the year ended 31 December 2019
2019
£000
17
2019
£000
(93)
(384)
(477)
2019
£000
(488)
29
(459)
(95)
(554)
2019
£000
(7,660)
(1,456)
(468)
305
85
980
(554)
2018
£000
72
2018
£000
(262)
–
(262)
2018
£000
(790)
72
(718)
98
(620)
2018
£000
(8,879)
(1,687)
(583)
203
170
1,277
(620)
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Notes to the financial statements continued
For the year ended 31 December 2019
8) TAXATION continued
Unrecognised deferred tax
Tax losses
Losses available to carry forward against future trading profits
Deferred tax asset – unrecognised* 17%
2019
£000
43,533
7,404
2018
£000
43,254
7,353
*The Group has not recognised a deferred tax asset relating to these losses as their recoverability is uncertain.
9) 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 year 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 year
Loss per share
Basic and diluted loss for the year
2019
£000
(6,973)
2018
£000
(8,186)
No.
1,171,867,216 1,171,633,442
No.
(0.60)p
(0.70)p
As set out in note 19.The Company has issued options over 19,553,729 (2018: 53,577,615) ordinary shares and there are 16,112,800
(2018: 16,112,800) 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.
10) PROPERTY, PLANT AND EQUIPMENT
Cost
At 31 December 2017
Exchange Adjustment
Additions
Transfers
At 31 December 2018
Exchange Adjustment
Additions
Disposals
Transfers
At 31 December 2019
Depreciation
At 31 December 2017
Exchange Adjustment
Charge for the period
Transfers
At 31 December 2018
Exchange Adjustment
Charge for the period
Disposals
Impairment (note 11)
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
Building &
land
£000
Laboratory
equipment
£000
Fixtures &
fittings
£000
Computer
equipment
£000
849
93
–
1,059
2,001
(70)
–
–
–
1,931
5
2
60
11
78
(1)
45
–
–
122
1,809
1,923
844
2,547
70
200
(1,091)
1,726
(40)
318
–
–
2,004
879
34
289
(13)
1,189
(24)
248
–
123
1,536
468
537
1,668
603
13
32
32
680
(5)
92
–
–
767
296
5
124
2
427
(1)
124
–
179
729
38
253
307
516
16
58
–
590
(10)
28
(2)
–
606
341
9
125
–
475
(5)
59
(2)
37
564
42
115
175
Total
£000
4,515
192
290
–
4,997
(125)
438
(2)
–
5,308
1,521
50
598
–
2,169
(31)
476
(2)
339
2,951
2,357
2,828
2,994
Transfers from Laboratory Equipment to Building & Land include nil (2018: £1.1m) for a clean room buildout for which there was no change to
the depreciation charged up to the point of transfer.
TISSUE REGENIX GROUP PLC
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11) INTANGIBLE ASSETS
Development
costs
£000
Goodwill
£000
Customer
relationships
£000
Trademarks
£000
Process
Tech
£000
Supplier
agreements
£000
Cost
At 31 December 2017
Additions*
Exchange adjustment
At 31 December 2018
Additions*
Exchange adjustment
At 31 December 2019
Amortisation
At 31 December 2017
Charge for the period
Exchange Adjustment
At 31 December 2018
Charge for the period
Exchange adjustment
Impairment (see below)
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
643
116
–
759
213
–
972
–
–
–
–
–
–
972
972
–
759
643
14,504
–
829
15,333
–
(71)
15,262
–
–
–
–
–
–
–
–
15,262
15,333
14,504
2,234
–
130
2,364
–
(294)
2,070
92
236
1
329
234
(15)
–
548
1,522
2,035
2,142
592
–
38
630
–
(78)
552
49
126
1
176
125
(8)
–
293
259
454
543
1,112
–
70
1,182
–
(147)
1,035
46
118
1
165
117
(9)
–
273
762
1,017
1,066
445
–
28
473
–
(59)
414
38
95
–
133
94
(7)
–
220
194
340
407
Total
£000
19,530
116
1,095
20,741
213
(649)
20,305
225
575
3
803
570
(39)
972
2,306
17,999
19,938
19,305
*Additions in both years arose from internal development.
Goodwill relates entirely to the acquisition of CellRight Technologies LLC in 2017 and is subject to annual impairment testing as described
below. The remaining amortisation periods for intangible assets which all arose on the acquisition of CellRight Technologies LLC are: Customer
relationships: 2.8 years, Trade marks: 7.8 years, Process Tech: 7.8 years, Supplier agreements: 2.8 years.
Impairment of non-current assets
Annual impairment test on CellRight Technologies LLC (“CellRight”)
The Group tests the CellRight cash generating unit (CGU) on an annual basis, or more frequently where impairment indicators exist, by
comparing the carrying value of the CGU with its value in use. Value in use is estimated based on future cash flow discounted to present value
using a pre-tax discount rate of 13.5% that reflects current market assessments of the time value of money. An impairment charge arises where
the carrying value exceeds the value in use.
The inputs into cash flow forecasts are based on the most recent budgets/forecasts approved and reviewed by the Directors for the following
year and extended forward for the next four years based on expected growth within that CGU over that period. At the end of year five, a terminal
value is calculated using a long-term growth assumption of 2%.
The key inputs to the cash flow forecasts are:
| forecasted changes in volumes (by consideration of future sales plans and production capacity);
| revenues (by management’s growth estimates of revenue to existing and new customers based on an understanding of the needs of those
customers obtained through working relationships);
| gross margin and overheads (by assessing efficiency of processes and underlying anticipated purchase prices);
| future anticipated capital expenditure; and
| movements in working capital.
The critical assumption within the cash flow forecasts relates to sales growth which is inherently difficult to forecast in a rapidly growing
marketplace. Across the five year forecast period, the compound annual growth rate (CAGR) is expected to be 26%. The impairment test
prepared indicates that there is substantial headroom between the value in use of £51,927k and the carrying value of £23,662k and the
Directors have therefore concluded that there is no impairment within the CellRight CGU. However, in drawing this conclusion the Directors note
the importance of achieving the anticipated CAGR and have calculated that an impairment arises in the event that the CAGR falls to 19% across
the five year period.
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Notes to the financial statements continued
For the year ended 31 December 2019
11) INTANGIBLE ASSETS continued
Group impairment test
Prior to any impairment, the Company’s net assets totalled £25,922k at 31 December 2019. Following a significant decline in the Company’s
share price over the year, this was above the market capitalisation of the Group at 31 December 2019 (£11,200k).
In accordance with IAS 36, the Directors have considered whether this situation was an indicator of impairment and concluded that an
impairment review should be performed at 31 December 2019. This was performed for each CGU by comparing the carrying value of the
CGU with its recoverable amount. The Directors determined that the CGUs of the group were consistent with the operating segments set
out in note 3 with the exception of the the Orthopeadics and dental segment which was split between CellRight and the other parts of the
Orthopedic segment.
The inputs into the cashflows for the value in use calculation were taken from the same five year forecast model as for the CellRight test
described above. Therefore the key assumptions are summarised above.
As a result of the testing, impairment charges totaling £1,311k arose in respect of the following CGUs where the recoverable amount of the
CGUs non-current assets was determined to be £nil:
| BioSurgery – carrying amount at 31 December 2019 of £1,792k, of which £809k was working capital and deemed recoverable whilst an
impairment charge of £983k arose against non-current assets (comprising £972k of development costs and £11k of property, plant and
equipment).
| GBM-V – carrying amount at 31 December 2019 of £324k, of which £172,000 was working capital and deemed recoverable whilst an
impairment charge of £152k arose against property, plant and equipment.
| Central – carrying amount at 31 December 2019 of £65,000 of which £176,000 related to property, plant and equipment and against which
a full impairment charge has been recorded.
Having completed this impairment review, the Directors note that substantially all of the group’s net assets are allocated to the CellRight CGU.
Details of the annual impairment review on CellRight are set out above.
12) INVENTORY
Raw materials and consumables
Work in progress
Finished goods including goods for resale
Total
Inventory is presented net of a provision of £nil (2018:£176,000).
13) TRADE AND OTHER RECEIVABLES
Trade debtors
Other receivables
Prepayments and accrued income
The Directors consider that the carrying amounts of trade and other receivables approximate to their fair values.
Trade receivables
Less: Allowance for expected credit losses
2019
£000
1,199
2,271
715
4,185
2019
£000
1,719
341
479
2,539
2019
£000
1,813
(94)
1,719
2018
£000
871
939
520
2,330
2018
£000
2,465
530
556
3,551
2018
£000
2,710
(245)
2,465
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TISSUE REGENIX GROUP PLC
13) TRADE AND OTHER RECEIVABLES continued
Allowance for expected credit losses
The Group has recognised a loss of £94,000 (2018: £245,000) in profit or loss in respect of the expected credit losses for the year ended
31 December 2019. The aging of the receivables and allowance for expected credit losses provided for above are as follows:
not overdue
0 to 3 months overdue
3 to 4 months overdue
4 to 5 months overdue
over 5 months overdue
Expected
credit loss
rate
0%
0%
25%
50%
100%
Carrying
amount
2019
£000
1,565
131
30
1
86
1,813
Allowance
for expected
credit losses
2019
£000
–
–
8
–
86
94
Carrying
amount
2018
£000
1,668
678
90
102
172
2,710
Allowance
for expected
credit losses
2018
£000
–
–
22
51
172
245
The average Credit terms with customers is 40 days (2018: 31 days)
Trade receivables, are analysed by the currencies of settlement below:
US Dollars
Euros
Sterling
Trade debtors
At
31 December
2019
£000
1,601
118
–
1,719
At
31 December
2018
£000
2,345
119
1
2,465
14) RISK MANAGEMENT OF FINANCIAL ASSETS AND LIABILITIES
The Group’s activities expose it to a variety of financial risks: market risk, specifically interest rate risk, credit risk and liquidity risk. The Group’s
overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on
the Group’s financial performance. The major change in risk management of financial assets and liabilities during the year was entering into the
Borrowing facility with Mid Cap as described in note 16. 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
Interest rate risk
The risk in the potential movement in interest received on cash surpluses held is limited. 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 Group.
The risk associated with movements in interest on the Groups borrowings is also limited due to low levels of borrowing which were £2,286k at
31 December 2019 (2018: £nil).
Interest rate sensitivity
The principal impact to the Company is the result of interest-bearing cash and cash equivalent balances held and borrowing held are set out below:
Asset / (liability)
Cash and cash equivalents
Borrowings
Cash and cash equivalents
December 2019
Fixed
rate
£000
1,078
–
Floating
rate
£000
1,302
(2,286)
December 2018
Floating
rate
£000
1,773
Fixed
rate
£000
6,043
Total
£000
2,380
(2,286)
Total
£000
7,816
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. The impact of a 5% increase/decrease in interest rates on the Group borrowing would have an immaterial
impact on the loss of the period.
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Notes to the financial statements continued
For the year ended 31 December 2019
14) RISK MANAGEMENT OF FINANCIAL ASSETS AND LIABILITIES continued
Management of credit risk
The Group is exposed to credit risk from its operating activities; it principally arises from short term bank deposits and trade debtors. The
Group seeks to minimise this risk by only depositing funds with banks with a high credit rating.
The maximum exposure to credit risk on the Group’s financial assets is represented by their carrying amounts as outlined in the categorisation
of financial instruments table below.
Trade debtor credit risk is mitigated by carrying out a credit review on all customers and setting a credit allowance that reflects the risk.
Management of liquidity risk
The Group seeks to manage liquidity risk to ensure that sufficient liquidity is available to meet foreseeable needs and to invest cash assets
safely and profitably.
The Group had cash and cash equivalents at each reporting date as set out below.
Cash and cash equivalents
AA-
A+
A
2019
£000
–
1,000
1,380
2,380
2018
£000
35
1,404
6,377
7,816
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.
With the exception of borrowings detailed in note 16 all of the group’s financial liabilities mature within less than 6 months (2018: all within 6
months). At 31 December 2019 the group was in compliance with all terms relating to the MidCap facilities and undrawn committed facilities
of £787k were available to draw down. The maturity of borrowings was as follows:
Less than 6 months
6 months to 1 year
1 year to 2 years
2 years to 5 years
2019
£000
–
171
342
1,773
2,286
2018
£000
–
–
–
–
–
Capital risk management
The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return to
stakeholders. The Group’s overall strategy is to minimise costs and liquidity risk.
The capital structure of the Group consists of equity attributable to the owners of the Group, comprising issued capital, reserves and retained
earnings as disclosed in note 19 and in the Statement of Changes in Equity.
Foreign currency risk management
The group’s exposure to currency exchange rates arises principally from assets and liabilities which are denominated and settled in local
currency. While the combination of assets and liabilities provides an element of natural hedging, there is an element of residual risk that can
impact the performance of the results of the Group over the course of each financial reporting period. Foreign currency transactions are
principally denominated in Dollars and Euros, and the associated foreign currency denominated financial assets and liabilities are set out
below:
Financial assets
Financial liabilities
Short-term exposure
2019
$000
1,601
(4,118)
(2,517)
2018
$000
2,345
(1,717)
628
2019
€000
121
(67)
54
2018
€000
119
(37)
82
The Group has exposure to the movements in the exchange rates in the Dollar and Euro at 31 December 2019. An analysis of the effect of
a reasonably possible movement in exchange rates shows that a movement of 10% in the exchange rate could result in net foreign currency
gains of £311k (2018: £80k) against the Dollar and gain £5k (2018: £7k) against the Euro.
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TISSUE REGENIX GROUP PLC
14) RISK MANAGEMENT OF FINANCIAL ASSETS AND LIABILITIES continued
Categorisation of financial instrument
Financial assets/(liabilities)
At 31 December 2019
Trade and other receivables
Cash and cash equivalents
Borrowings
Trade and other payables
Financial assets/(liabilities)
At 31 December 2018
Trade and other receivables
Cash and cash equivalents
Trade and other payables
15) TRADE AND OTHER PAYABLES
Current:
Trade payables
Taxes and social security
Accruals
Contingent consideration (see below)
Financial
assets at
amortised
cost
£000
Financial
liabilities at
amortised
cost
£000
Financial
liabilities
held at fair
value
£000
2,060
2,380
–
–
4,440
–
–
(2,286)
(2,868)
(5,154)
–
–
–
–
Financial
assets at
amortised
cost
£000
Financial
liabilities at
amortised
cost
£000
Financial
liabilities
held at fair
value
£000
2,995
7,816
–
10,811
–
–
(2,751)
(2,751)
–
–
(1,475)
(1,475)
Total
£000
2,060
2,380
(2,286)
(2,868)
(714)
Total
£000
2,995
7,816
(4,226)
6,585
At
31 December
2019
£000
At
31 December
2018
£000
1,650
76
1,218
–
2,944
855
76
1,896
1,475
4,302
Contingent consideration
As part of the acquisition of CellRight Technologies LLC in 2017, the Group agreed to pay a second milestone if gross revenue during the
second annual period equalled or exceeded $12.5m. The milestone was not achieved and the contingent consideration was therefore released
to the income statement.
The Directors consider that the carrying amount of trade and other payables and accruals approximates to their fair value. Trade payables are
analysed by the currencies of settlement below:
Sterling
US Dollars
Euros
Trade payables
At
31 December
2019
£000
310
1,273
67
1,650
At
31 December
2018
£000
242
576
37
855
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Notes to the financial statements continued
For the year ended 31 December 2019
16) BORROWINGS
At 31 December 2019
Term Loan
Revolving Credit
Gross borrowings
Less capitalised debt issue costs
Borrowings
Interest rate
%
US LIBOR+2.25%
US LIBOR+4.5%
Maturity
Jun 2024
Jun 2024
Current
£’000
171
–
171
–
171
Non-current
£’000
1,627
761
2,388
(273)
2,115
The Group had no borrowings at the prior year end.
A dollar denominated new bank facility was signed by the Group in June 2019 with MidCap Financial Trust (“MidCap”). The bank loans
outstanding at 31 December 2019 are represented by the following:
Term Loan: 5 years to June 2024. $2m current facility. Originally $7.5m was drawn in June and subsequently $5.5m was repaid as reported
by the Company. Interest maximum 2.25% above US LIBOR. Repayments of £85,500 per quarter from July 2020. Maturity analysis as
detailed in note 14.
Revolving Credit: Repayable in full on June 2024 at the latest. $3m maximum drawing. Interest maximum 4.5% above US LIBOR.
As part of these facilities, MidCap hold security over the Groups freehold property in San Antonio and IP in respect of the Term Loan. The
carrying amount of these assets pledged as security was £1.8m and £nil at 31 December 2019 (2018: £nil).
Also as part of these facilities, a warrant equating to 3% of the value of term loan was granted to Mid Cap based equating to an option over
3,096,798 at an exercise prices of £0.0574. The warrant gave rise to a share based payment charge as detailed in note 20.
Debt issue costs of £303k have been capitalised against the loan and will be amortised to the income statement over the life of the term loan.
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:
2019
£000
–
–
–
Land and buildings:
Amounts due within one year
Amounts due between 1–5 years
Total
18) DEFERRED TAX LIABILITIES
As at December 2018
Release to the income statement
Exchange adjustment
As at December 2019
The deferred tax liability relates wholly to non-current assets recognised on acquisition of CellRight Technologies LLC.
19) SHARE CAPITAL
2018
£000
61
–
61
Totals
£000
791
(95)
(26)
670
Share
capital
£000
5,855
4
5,859
–
5,859
Total Ordinary shares of 0.5p each as at 31 December 2017
Share options exercised
Total Ordinary shares of 0.5p each as at 31 December 2018
Share options exercised
Total Ordinary shares of 0.5p each as at 31 December 2019
Reserves of the Group represent the following:
Share Premium
Consideration received for shares issued above their nominal value
net of transaction costs.
Merger Reserve
Consideration and nominal value of the shares issued during a
merger and the fair value of the assets transferred differ.
Reverse Acquisition
Retained earnings of an acquisition
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Number
1,170,990,924
739,899
1,171,730,823
240,499
1,171,971,322
Own shares held
The Company’s authority to purchase its own shares is set out in
its Articles of Association and approved by the shareholders at the
Annual General Meeting.
Share-based Payment Reserve (note 20)
The cumulative share-based payment expense.
Retained Earnings
Cumulative profit and loss net of distributions to owners.
TISSUE REGENIX GROUP PLC
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As permitted by the provisions of the Companies Act 2006, the Company does not have an upper limit to its authorised share capital. All shares
are ordinary shares which are fully paid and entitle the holder to full voting rights, to full participation or distribution of dividends.
As described in note 20, there were employee related share options outstanding at 31 December 2019 over 32,569,731 shares (2018:
69,700,415 shares) and options issued to providers of borrowings over 3,096,798 shares (2018: nil).
20) 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 1 and 3 years. If
the options remain unexercised after a period of 10 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.
The number and weighted average exercise prices of share options and EBT shares are as follows:
At 31 December 2017
Exercised in the period
Lapsed during year
Issued in the year
At 31 December 2018
Exercised in the period
Lapsed during year
Issued in the year
At 31 December 2019
Number of share interests
EMI options
11,201,952
–
(5,934,236)
–
5,267,716
–
–
–
5,267,716
Unapproved
options
39,986,221
(739,899)
(3,631,300)
11,227,008
46,842,030
(240,499)
(41,842,799)
–
4,758,732
EBT shares
16,112,800
–
–
–
16,112,800
–
–
–
16,112,800
SAYE
options
1,930,081
–
(928,503)
476,291
1,477,869
–
(1,749,766)
6,702,380
6,430,483
Total
69,231,054
(739,899)
(10,494,039)
11,703,299
69,700,415
(240,499)
(43,592,565)
6,702,380
32,569,731
Weighted
average
exercise
price per
share (£)
0.0934
0.005
0.1098
0.0714
0.0882
0.0050
0.1010
0.0281
0.0596
Excluding the EBT shares, there were 4,361,603 share options outstanding at 31 December 2019 (2018: 4,361,603) 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 2019. The range of exercise prices applicable to share options is between 0.5p and 22.5p.
There were 16,112,800 of the jointly held EBT shares which were eligible to vest as at 31 December 2019.
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.
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
2019
–
47
1.0
3
0.0596
EBT shares
Granted
year to
31 December
2019
–
–
–
–
–
Options
Granted
year to
31 December
2018
–
42
1.0
3
0.00822
Share options issued under the Deferred Annual Bonus scheme (which is within the unapproved options) which are not exercised within 4 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 10
years from the date of grant will expire. The weighted average remaining contractual life of options outstanding at the end of the financial year
was 5.8 years (2018: 6.8 years).
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Notes to the financial statements continued
For the year ended 31 December 2019
20) SHARE BASED PAYMENTS continued
Other Share Options
Warrants were issued in the year to Mid Cap as part of the group’s new borrowing facilities. Options over 3,096,798 shares were granted at
an exercise price of 5.74p . The binomial model was used to value the share based payment charge and that the assumptions adopted are
consistent with those used in the calculation of 2019 employee share based payments above except the vesting period of nil. The warrants
were measured using an option pricing model as the Directors have concluded that there is no other reliable way of measuring the service
received.
A credit/(charge) has been recognised in the statement of comprehensive income for the year as follows:
At 31 December 2017
Credit in the period
At 31 December 2018
Credit in respect of employment related share options
Charge for warrants issued to MidCap
At 31 December 2019
21) NON-CONTROLLING INTEREST
As at 31 December 2018
Attributable loss for the period
As at 31 December 2019
Share based
payment
reserves
£000
1,186
(57)
1,129
(242)
96
983
2019
£000
(482)
(133)
(615)
2018
£000
(409)
(73)
(482)
The non-controlling interest has 50% (2018: 50%) equity holding. GBM-V GmbH contributed revenue of £2,076k (2018: £1,842k) and a loss
before tax of £(142k) (2018: £34k) for the year. Further financial information relating to GBM-V GmbH can be found in the segmental analysis
in note 3.
22) RELATED PARTY TRANSACTIONS
Transactions with key management personnel
The Company’s key management personnel comprise of only the Directors of the Group. During the year the Group entered into the following
transactions in which the Directors had an interest:
Directors’ remuneration:
Remuneration received by the Directors (including Employers NI) from the Group is set out below:
Short-term employment benefits
23) ULTIMATE CONTROLLING PARTY
The Directors believe that there is no ultimate controlling party.
2019
£000
836
2018
£000
709
24) POST BALANCE SHEET EVENTS
On 22 May, the Group announced that gross proceeds of £14.6m had been conditionally raised through an offer of new ordinary shares in
the Company to Institutional and qualifying retail investors. All conditions attached to this fundraise have since been satisfied, save for the
requirement that the issuance of these new shares be approved at a General Meeting of shareholders to be held on 9 June 2020.
The COVID-19 pandemic has affected most businesses during H1 2020. As a result of the reprioritisation of healthcare professionals during
this time, there has been a decline in elective procedures undertaken across a number of medical specialities that use our products. Given
the uncertainty around the level and duration of disruption from COVID-19, it is difficult to determine how long the current situation may last,
and the time taken to catch-up any postponed surgical procedures thereafter. However, the Board, in compiling possible cashflow projections
for the business, has considered a number of scenarios regarding the effect of reduced and delayed revenues due to COVID-19 and, has
undertaken market soundings regarding the likely timeframe for the recommencement of procedures. It has concluded that, if additional
funds are received as expected, there will not be a significant long-lasting impact on the capability of the business to carry out its commercial
activities. Whilst COVID-19 has had a significant short term impact on the business, the Directors remain confident with the long term
prospects for the group and they do not therefore believe that the pandemic gives rise to any particular concerns regarding the carrying values
of assets reported at 31 December 2019.
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TISSUE REGENIX GROUP PLC
Company statement of changes in equity
For the year ended 31 December 2019
At 31 December 2017
Total expense and other comprehensive loss for
the period
Share options exercised
Share based payment credit
At 31 December 2018
Total expense and other comprehensive loss for
the period
Share options exercised
Share based payment credit
At 31 December 2019
Share
capital
£000
5,855
Share
premium
£000
86,398
Merger
reserve
£000
10,884
Share based
payment
reserve
£000
1,113
Retained
earnings
reserve
£000
(11,123)
–
4
–
5,859
–
–
–
5,859
–
–
–
86,398
–
1
–
86,399
–
–
–
10,884
–
–
–
10,884
–
–
(57)
1,056
–
–
(146)
910
(2,342)
–
–
(13,465)
(50,001)
–
–
(63,466)
Total
£000
93,127
(2,342)
4
(57)
90,732
(50,001)
1
(146)
40,586
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Company statement of financial position
At 31 December 2019
ASSETS
Non-current assets
Investments
Intercompany loan receivables
Total non-current assets
Current assets
Trade and other receivables
Intercompany loan recievables
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
Share based payment reserve
Retained earnings deficit
TOTAL EQUITY
Notes
C5
C7
C6
C7
C9
C8
19
20
2019
£000
18,594
3,860
22,454
218
16,757
1,669
18,644
41,098
(512)
(512)
40,586
5,859
86,399
10,884
910
(63,466)
40,586
Restated
2018
£000
18,594
12,954
31,548
253
52,242
7,162
59,657
91,205
(473)
(473)
90,732
5,859
86,398
10,884
1,056
(13,465)
90,732
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 2019 was a loss of £50,001k (2018:
£2,342k).
The Company financial statements were approved by the Board of Directors and authorised for issue on 4 June 2020 and were signed on its
behalf by
Gareth Jones
Interim Chief Executive Officer
Company number: 05969271
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TISSUE REGENIX GROUP PLC
Company statement of cash flows
For the year ended 31 December 2019
Operating activities
Loss before interest and tax
Adjustment for non-cash items:
Share based payments
Impairment of intercompany loan receivables
Operating cash outflow
Decrease/(Increase) in trade and other receivables
Increase in trade and other payables
Net cash absorbed by operations
INVESTING ACTIVITIES
Interest received
Loan to subsidiary undertaking
Net cash used in investing activities
FINANCING ACTIVITIES
Proceeds from exercise of share options
Net cash generated from financing activities
DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at start of period
CASH AND CASH EQUIVALENTS AT END OF PERIOD
Notes
20
C10
2019
£000
2018
£000
(50,646)
(3,152)
(146)
48,600
(2,192)
35
39
(2,118)
645
(4,021)
(3,376)
1
1
(5,493)
7,162
1,669
(57)
1,310
(1,899)
(3)
89
(1,813)
810
(7,788)
(6,978)
4
4
(8,787)
15,949
7,162
Annual Report and Accounts for the year ended 31 December 2019
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Notes to the company financial statements
For the year ended 31 December 2019
C1. PRINCIPAL ACCOUNTING POLICIES
The separate financial statements of the Company are presented as required by the Companies Act 2006 and in accordance with
International Financial Reporting Standards as adopted by the EU. The principal accounting policies adopted are the same as for those set
out in the Group’s financial statements.
Adoption of new and revised standards
During the year, the Company adopted the following standards effective from the 1st January 2019. The Company has applied these
standards in the preparation of the financial statements, and has not adopted any new or amended standards early.
Initial application of IFRS 16 Leases
The Company has applied IFRS 16 Leases for the first time in the year ended 31 December 2019. IFRS 16 replaces IAS 17 Leases. The
Group previously split leases between ‘finance leases’ that transferred substantially all the risks and rewards incidental to ownership of the
asset to the Group, and ‘operating leases’. The main change on application of IFRS 16 is the accounting for ‘operating leases’ where rentals
payable (as adjusted for lease incentives) were previously expensed under IAS 17 on a straight-line basis over the lease term.
The Company has no right of use assets or leases as at 31 December 2019.
Investments
Fixed asset investments, including investments in subsidiaries, are stated at cost and reviewed for impairment if there are any indications that
the carrying value may not be recoverable.
C2. CRITICAL ACCOUNTING ESTIMATES
Estimates are continually evaluated and based on historical experience and other factors, including expectations of future events that we
believe to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates that have the most significant
effects on the carrying amounts of the assets and liabilities in the parent Company financial statements are described below:
Critical estimates:
Recoverability of receivables from subsidiaries and impairment of financial assets
Amounts owed by subsidiary undertakings represent loans made to the Company’s main subsidiary
The gross loan advanced by the Company is £70,699,000k (2018: £66,506,000). In accordance with IFRS 9 Financial Instruments, as the
subsidiary undertakings cannot repay the loan at the reporting date, the Company has made an assessment of expected credit losses. Having
considered multiple scenarios on the manner, timing, quantum and probability of recovery on the receivables, a cumulative lifetime expected
credit loss (ECL) of £49,910,000 has been recognised at 31 December 2019 (2018: £1,310,000).
The calculation of the allowance for lifetime expected credit losses requires a significant degree of estimation and judgement, in particular
in determining the probability weighted likely outcome for each scenario considered. The Directors assessment of ECL included repayment
through future cash flows over time (which are inherently difficult to forecast for the Company at its current stage of development) and also
the amount that could be realised through an immediate sale of the subsidiary undertakings. The Directors’ assessment of repayment through
future cash flows included a scenario where the loan was not recovered in full. The Directors’ allocated a probability weighting of 90% to
scenarios where recovery would be repayment over time, and 10% to the scenario where immediate sale of the subsidiary undertaking was
contemplated.
Given the quantum of the provision recorded at 31 December 2019, the outcome is materially sensitive to the key assumptions inherent in the
calculation. The carrying value of amounts owned by subsidiary undertakings at 31 December 2019 is disclosed in note C10 to the financial
statements.
C3. 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 2019 was a loss of £50,001k (2018:
£2,342k).
The audit fee for the Company is set out in note 4 of the Group’s financial statements.
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TISSUE REGENIX GROUP PLC
C4. STAFF COSTS
The average monthly number of persons (including Directors) employed by the Company during the period was:
Directors
Administration staff
The aggregate remuneration, including Directors, comprised:
Wages and salaries
Social security, pension & healthcare costs
Social security, pension and healthcare casts include pension contributions £20k (2018: £23k).
C5. INVESTMENT IN SUBSIDIARY COMPANIES
All other companies except Tissue Regenix Limited are held through Tissue Regenix Limited
Cost
Additions
Transfer
Impairment
Carrying value at 31 December 2019
2019
Number
2018
Number
7
1
8
£000
941
144
1,085
2019
£000
18,594
–
–
–
18,594
7
1
8
£000
692
114
806
2018
£000
14,707
6,500
(828)
(1,785)
18,594
Additions during the prior year were settled through the conversion of loans historically advanced to subsidiary undertakings into equity.
At 31 December 2019, 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
Tissue Regenix Wound Care Inc*
Tissue Regenix Orthopedics Inc^
Tissue Regenix Holdings Limited
Tissue Regenix Holdings Inc**
CellRight Technologies LLC†
GBM-V GmbH
Sector
Regenerative medicine
Regenerative medicine
Regenerative medicine
Regenerative medicine
Dormant
Regenerative medicine
Regenerative medicine
Holding company
Holding company
Regenerative medicine
Regenerative medicine
Share of issued capital and
voting rights
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
* Held through TRX Wound Care Limited ^Held through TRX Orthopaedics Limited **Held through Tissue Regenix Holdings Limited
† Held through Tissue Regenix Holdings Inc All others are held through Tissue Regenix Limited.
Registered Addresses:
Tissue Regenix Limited, TRX Wound Care Limited, TRX Orthopaedics Limited, TRX Cardiac Limited, TRX Vascular Limited, Tissue Regenix
Holdings Limited: Unit 1&2, Astley Way, Astley Lane Industrial Estate, Swillington, Leeds LS26 8XT.
Tissue Regenix Wound Care Inc, TRX Orthopedics Inc, CellRight Technologies LLC, Tissue Regenix Holding Inc: 1808 Universal City Boulevard,
Universal City Texas, 78148.
GBM-V Gmbh: Schillingallee 68, 18057, Rostock, Germany
Annual Report and Accounts for the year ended 31 December 2019
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Notes to the company financial statements continued
For the year ended 31 December 2019
C6. TRADE AND OTHER RECEIVABLES
Prepayments & accrued income
Other debtors
C7. INTERCOMPANY LOAN RECEIVABLES
Gross intercompany loan receivables
Less: Expected credit losses
Comprising:
Non-current assets
Current assets
2019
£000
22
196
218
2019
£000
70,527
(49,910)
20,617
3,860
16,757
20,617
2018
£000
38
215
253
Restated
2018
£000
66,506
(1,301)
65,196
12,954
52,242
65,196
Intercompany loans includes £828,000 gross before provision of £642,889 due from group’s EBT (2018: £828,000) (see note C10). No
interest was payable on loans to subsidiary undertakings and the loans are repayable on demand except for £13,217,878 unsecured loan to
Tissue Regenix Limited that is charged 4% above the Bank of England base rate and repayable in 2024.
During the year the Directors identified that intercompany loan receivables due after one year were previously classified incorrectly as current
assets. The comparative figures have been restated to reclassify £12,954,000 of intercompany loan receivables from current assets to non-
current assets. This restatement has no impact on reported profits for the year ended 31 December 2018 or reported net assets at that date.
C8. TRADE AND OTHER PAYABLES
Trade creditors
Taxes & social security
Accruals
2019
£000
124
30
358
512
2018
£000
82
34
357
473
C9. RISK MANAGEMENT OF FINANCIAL ASSETS AND LIABILITIES
The Company activities expose it to a variety of financial risks: market risk, interest rate risk, credit risk and liquidity risk. The Company overall
risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the
Company 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
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 Company, 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.
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TISSUE REGENIX GROUP PLC
C9. RISK MANAGEMENT OF FINANCIAL ASSETS AND LIABILITIES Continued
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
December 2019
Fixed
rate
£000
1,092
Floating
rate
£000
577
December 2018
Floating
rate
£000
1,105
Fixed
rate
£000
6,057
Total
£000
1,669
Total
£000
7,162
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; it principally arises from short term bank deposits and loans advanced to
subsidiary undertakings. The Company seeks to minimise this risk by only depositing funds with banks with a high credit rating and through
careful monitoring of the operations of subsidiaries.
The maximum exposure to credit risk on the Company financial assets is represented by their carrying amounts as outlined in the categorisation
of financial instruments table below.
Management of liquidity risk
The Company seeks to manage liquidity risk to ensure that sufficient funding 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.
The Company had cash and cash equivalents at each reporting date is set out below.
Cash and cash equivalents
A+
A
BBB+
2019
£000
1,000
669
–
2018
£000
1,000
6,162
–
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 note 19 and in the Statement of Changes in Equity.
Annual Report and Accounts for the year ended 31 December 2019
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Notes to the company financial statements continued
For the year ended 31 December 2019
C9. RISK MANAGEMENT OF FINANCIAL ASSETS AND LIABILITIES Continued
Categorisation of financial instrument
Financial assets/(liabilities)
Financial assets/(liabilities)
At 31 December 2019
Trade and other receivables
Cash and cash equivalents
Intercompany loans
Trade and other payables
At 31 December 2018
Trade and other receivables
Cash and cash equivalents
Intercompany loans
Trade and other payables
Financial
assets at
amortised
cost
£000
Financial
liabilities at
amortised
cost
£000
196
1,669
20,617
–
22,482
–
–
–
(482)
(482)
Financial
assets at
amortised
cost
£000
Financial
liabilities at
amortised
cost
£000
215
7,162
65,196
–
72,573
–
–
–
(439)
(439)
Total
£000
196
1,669
20,617
(482)
22,000
Total
£000
215
7,162
65,196
(439)
72,134
C10. RELATED PARTY TRANSACTIONS
Transactions with key management personnel
The Company’s key management personnel comprise only the Directors of the Group. During the year the Group entered into the following
transactions in which the Directors had an interest:
Directors’ remuneration:
Remuneration received by the Directors (including Employers NI) from the Group is set out below:
Short-term employment benefits
2019
£000
836
2018
£000
709
Intercompany loans during and at the end of the year (before provisions for expected credit losses of £49,910k (2018: £1,310k) were as
follows:
At 31 December 2018
(Repayment)/Advance in the year
Equity conversion
At 31 December 2019
Impairment provision:
At 31 December 2018
At 31 December 2019
Tissue
Regenix
Limited
43,880
3,579
–
47,459
(1,310)
(39,267)
TRx Cardiac
Limited
147
27
–
174
TRx
Orthopedics
Limited
3,745
(309)
–
3,436
TRx Wound
Care
Limited
17,906
724
–
18,630
Total
65,678
4,021
–
69,699
–
–
–
–
–
(10,000)
(1,310)
(49,267)
The Company has entered into a number of unsecured related party transactions with its subsidiary undertakings. The most significant
transactions carried out between the Company and its subsidiary undertakings are mainly for short and long-term financing. The company
also has a loan with the Employee Benefit Trust of (2018: £828,000) against which an impairment provision of £643,000 has been recorded
(2018: £nil). This is included as a debtor as there is a contractual loan agreement between the Company and the Trust.
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TISSUE REGENIX GROUP PLC
Notice of annual general meeting
Notice is given that the 2020 Annual General Meeting of Tissue Regenix Group plc (“Company”) will be held at the offices of Squire
Patton Boggs (UK) LLP at 6 Wellington Place, Leeds LS1 4AP on 30 June 2020 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 year ended 31 December 2019.
2. To reappoint Alan Miller who retires by rotation, as a director of the Company.
3. To reappoint Jonathan Glenn who retires by rotation, as a director of the Company.
4. To reappoint Shervanthi Homer-Vanniasinkam who retires by rotation, as a director of the Company.
5. To reappoint RSM UK Audit LLP as auditors of the Company.
6. To authorise the directors to determine the remuneration of the auditors.
7. That, pursuant to section 551 of the Companies Act 2006 (“Act”), the directors be generally and unconditionally authorised to allot Relevant
Securities, as set out in either resolution 7.1 or 7.2 below (being alternative resolutions depending on the outcome of the general meeting of
the Company to be held on 9 June 2020 (“2020 General Meeting”))
7.1. in the event that the resolutions set out in the notice of general meeting of the Company dated 22 May 2020 are duly passed at the 2020
General Meeting:
7.1.1 up to an aggregate nominal amount of £2,339,999; or
7.1.2 comprising equity securities (as defined in section 560(1) of the Act) up to a further aggregate nominal amount of £2,339,999 in
connection with an offer by way of a rights issue:
7.1.2.1. 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
7.1.2.2. 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 2021 (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; or
7.2 in the event that the resolutions set out in the notice of general meeting of the Company dated 22 May 2020 are not duly passed at the
2020 General Meeting:
7.2.1 up to an aggregate nominal amount of £1,953,285; or
7.2.2 comprising equity securities (as defined in section 560(1) of the Act) up to a further aggregate nominal amount of £1,953,285 in
connection with an offer by way of a rights issue:
7.2.2.1 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
7.2.2.2 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 2021 (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; or
In this resolution 7, “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.
These authorities are in substitution for all existing authorities under section 551 of the Act (which, to the extent unused at the date of this
resolution, are revoked with immediate effect).
To consider and, if thought fit, to pass the following resolutions as special resolutions:
8. That, subject to the passing of resolution 7 and pursuant to section 570 of the Act, the directors be and are generally empowered to allot
equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority granted by resolution 7 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:
8.1. in connection with an offer of equity securities (whether by way of a rights issue, open offer or otherwise):
8.1.1. 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
8.1.2. 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
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Notice of annual general meeting
8.2 otherwise than pursuant to paragraph 8.1 of this resolution, up to an aggregate nominal value as set out in either resolution 8.2.1 or
8.2.2. below (being alternative resolutions depending on the outcome of the 2020 General Meeting):
8.2.1. in the event that the resolutions set out in the notice of general meeting of the Company dated 22 May 2020 are duly passed at
the 2020 General Meeting, up to an aggregate nominal amount of £701,999; or
8.2.2. in the event that the resolutions set out in the notice of general meeting of the Company dated 22 May 2020 are not duly
passed at the 2020 General Meeting, up to an aggregate nominal amount of £585,985,
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 2021 (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).
9. That, pursuant to section 701 of the Act, the Company be and is generally and unconditionally authorised to make market purchases
(within the meaning of section 693(4) of the Act) of ordinary shares in the capital of the Company (“Shares”), provided that:
9.1. in the event that the resolutions set out in the notice of general meeting of the Company dated 22 May 2020 are duly passed at the
2020 General Meeting:
9.1.1. the maximum aggregate number of Shares which may be purchased is 701,999,753; and
9.1.2. the minimum price (excluding expenses) which may be paid for a Share is 0.1p; or
9.2. in the event that the resolutions set out in the notice of general meeting of the Company dated 22 May 2020 are not duly passed at
the 2020 General Meeting:
9.2.1. the maximum aggregate number of Shares which may be purchased is 117,197,132; and
9.2.2. the minimum price (excluding expenses) which may be paid for a Share is 0.5p; and
9.3 the maximum price (excluding expenses) which may be paid for a Share is an amount equal to 105 per cent of the average of the
middle market quotations for a Share as derived from the Daily Official List of the London Stock Exchange plc for the five business
days immediately preceding the day on which the purchase is made;
and (unless previously revoked, varied or renewed) this authority shall expire at the conclusion of the next annual general meeting of the
Company after the passing of this resolution or on 30 September 2021 (whichever is the earlier), save that the Company may enter into
a contract to purchase Shares before this authority expires under which such purchase will or may be completed or executed wholly or
partly after this authority expires and may make a purchase of Shares pursuant to any such contract as if this authority had not expired.
By order of the board
Kirsten Lund
Secretary
4 June 2020
Registered office
Units 1 & 2, Astley Way
Astley Lane Industrial Estate
Swillington
Leeds
LS26 8XT
Registered in England and Wales No. 05969271
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TISSUE REGENIX GROUP PLC
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 the close of business on 28 June 2020 (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.
2. In light of the spread of COVID-19 in the UK and associated measures put in place by the UK Government, the Company
encourages shareholders not to attend the meeting in person. Instead, shareholders who wish to vote are encouraged to complete
a form of proxy, appointing the chairman of the meeting as their proxy, in accordance with the instructions in notes 3-5 below.
Shareholders are advised that, if they attempt to attend the meeting in person, they may be denied entry to the venue.
Proxies
3. 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 4 and 5 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.
4. 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 +44 (0) 371 664 0300 (Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. We are 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,
Link Asset Services PXS 1, 34 Beckenham Road, Beckenham BR3 4TU, no later than 10.00 a.m. on 28 June 2020 (or, if the meeting is
adjourned, no later than 48 hours before the time of any adjourned meeting).
5. 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 Link Asset Services (ID RA10) no later than 10.00 a.m. on 28 June 2020 (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 Link Asset Services 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
6. 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
7. Subject to the restrictions imposed as a result of the spread of COVID-19 in the UK, 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:
7.1 Copies of the service contracts of the executive directors.
7.2 Copies of the letters of appointment of the non-executive directors.
Annual Report and Accounts for the year ended 31 December 2019
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Notice of annual general meeting
Biographical details of directors
8. Biographical details of all those directors who are offering themselves for reappointment at the meeting are set out on pages 30 and 31 of
the enclosed annual report and accounts.
Share capital
9. As at 4 June 2020 (the last practicable business day prior to the date of this notice), the Company’s issued share capital comprised
1,171,971,322 ordinary shares of 0.5 pence each. Each ordinary share carries the right to vote at a general meeting of the Company and,
therefore, the total number of voting rights in the Company as at the date of this document is 1,171,971,322.
10. In the event that the resolutions set out in the notice of general meeting of the Company dated 22 May 2020 are duly passed at the 2020
General Meeting and the 5,848,026,212 ordinary shares of 0.1 pence each are issued by the board of directors of the Company pursuant
to the Fundraising (as such term is defined in the circular of the Company dated 22 May 2020), the Company’s total number of voting
rights in the Company as at the date of the annual general meeting will be 7,019,997,534.
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TISSUE REGENIX GROUP PLC
Directors and Officers
DIRECTORS
Gareth Jones
Jonathan Glenn
Alan Miller
(Interim Chief Executive Officer)
(Interim Non-Executive Chariman)
(Non-Executive Director)
Randeep Singh Grewal
(Non-Executive Director)
Shervanthi Homer-Vanniasinkam
(Non-Executive Director)
COMPANY SECRETARY
Kirsten Lund
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
AUDITOR
RSM UK Audit LLP
Central Square
29 Wellington Street
Leeds
LS1 4DL
REGISTRAR
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
LEGAL ADVISERS
DLA Piper UK LLP
Princes Exchange
Princes Square
Leeds
LS1 4BY
Squire Patton Boggs UK LLP
6 Wellington Place
Leeds
LS1 4AP
NOMINATED ADVISER AND BROKER
Stifel Nicolaus Europe Ltd
150 Cheapside
London
EC2V 6ET
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27183 1 June 2020 4:29 pm Proof 6Tissue Regenix Group plc Annual Report and Financials for year ended 31 December 2019Tissue Regenix Group plc Unit 1 and 2 Astley Way Astley Lane Industrial Estate Swillington Leeds LS26 8XTwww.tissueregenix.com27183-Tissue-Regenix-AR-2019.indd 301-Jun-20 4:31:09 PM