SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 20-F
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the fiscal year ended December 31, 2019
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number: 0-22320
Trinity Biotech plc
(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)
Ireland
(Jurisdiction of incorporation or organization)
IDA Business Park, Bray, Co. Wicklow, Ireland
(Address of principal executive offices)
Kevin Tansley
Chief Financial Officer
Tel: +353 1276 9800
Fax: +353 1276 9888
IDA Business Park, Bray, Co. Wicklow, Ireland
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
American Depositary Shares (each representing 4 ‘A’ Ordinary
Shares, par value US$0.0109)
NASDAQ Global Market
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual
report:
83,606,810 Class ‘A’ Ordinary Shares (excluding Treasury Shares)
(as of December 31, 2019)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ☐ No ☒
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer
and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the
Securities Act. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
International Financial Reporting Standards as issued
by the International Accounting Standards Board ☒
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Item 17 ☐ Item 18 ☐
This Annual Report on Form 20-F is incorporated by reference into our Registration Statements on Form S-8 File Nos. 333-182279 and 333-195232.
Yes ☐ No ☒
General
Forward-Looking Statements
TABLE OF CONTENTS
PART I
Item 1
Item 2
Item 3
Item 4
Item 4A
Item 5
Item 6
Item 7
Item 8
Item 9
Item 10
Item 11
Item 12
Identity of Directors, Senior Management and Advisers
Offer Statistics and Expected Timetable
Key Information
Information on the Company
Unresolved Staff Comments
Operating and Financial Review and Prospects
Directors, Senior Management and Employees
Major Shareholders and Related Party Transactions
Financial Information
The Offer and Listing
Additional Information
Quantitative and Qualitative Disclosures about Market Risk
Description of Securities Other than Equity Securities
PART II
Defaults, Dividend Arrearages and Delinquencies
Item 13
Material Modification to the Rights of Security Holders and Use of Proceeds
Item 14
Controls and Procedures
Item 15
Audit Committee Financial Expert
Item 16A
Code of Ethics
Item 16B
Principal Accountant Fees and Services
Item 16C
Exemptions from the Listing Standards for Audit Committees
Item 16D
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16E
Change in Registrant’s Certifying Accountant
Item 16F
Item 16G
Corporate Governance
Item 16H Mine Safety Disclosure
PART III
Item 17
Item 18
Item 19
Financial Statements
Financial Statements
Exhibits
Page
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166
General
As used herein, references to “we”, “us”, “Trinity Biotech” or the “Group” in this Form 20-F shall mean Trinity Biotech plc and its world-wide subsidiaries,
collectively. References to the “Company” in this annual report shall mean Trinity Biotech plc.
Our financial statements are presented in US Dollars and are prepared in accordance with International Financial Reporting Standards (“IFRS”) both as issued by
the International Accounting Standards Board (“IASB”) and as adopted by the European Union (“EU”). The IFRS applied are those effective for accounting
periods beginning January 1, 2019. Consolidated financial statements are required by Irish law to comply with IFRS as adopted by the EU which differ in certain
respects from IFRS as issued by the IASB. These differences predominantly relate to the timing of adoption of new standards by the EU. However, as none of
the differences are relevant in the context of Trinity Biotech, the consolidated financial statements for the periods presented comply with IFRS both as issued by
the IASB and as adopted by the EU. All references in this annual report to “Dollars” and “$” are to US Dollars, and all references to “Euro” or “€” are to
European Union Euro. Except as otherwise stated herein, all monetary amounts in this annual report have been presented in US Dollars. For presentation
purposes all financial information, including comparative figures from prior periods, have been stated in round thousands.
Forward-Looking Statements
This Annual Report on Form 20-F contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbour from civil
litigation for forward-looking statements accompanied by meaningful cautionary statements. Except for historical information, this report contains forward-
looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
which may be identified by words such as “estimates”, “anticipates”, “projects”, “plans”, “seeks”, “may”, “will”, “expects”, “intends”, “believes”, “should” and
similar expressions or the negative versions thereof and which also may be identified by their context. Such statements, whether expressed or implied, are based
upon current expectations of the Company and speak only as of the date made. The Company assumes no obligation to publicly update or revise any forward-
looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. These
statements are subject to various risks, uncertainties and other factors – please refer to the risk factors in Item 3 for a more comprehensive outline of these risks
and the threats which they pose to the Company and its results.
EXPLANATORY NOTE
We have filed this annual report on Form 20-F in reliance on the 45-day extension provided by an order issued by SEC under Section 36 of the Exchange Act
Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies, dated March 25, 2020 (Release No. 34-88465) (the
“Order”).
On April 27, 2020, we filed a Report on Form 6-K to indicate our intention to rely on the Order for such extension. Consistent with our statements made in the
Form 6-K, we were unable to file the Original Form 20-F by April 30, 2020 because Covid-19 has caused severe disruptions in travel and transportation and
limited access to our facilities resulting in limited support from our staff. We have been following the recommendations of local government and health
authorities to minimize exposure risk for our employees. The disruptions delayed our ability to complete our annual review and prepare the Annual Report by
April 30, 2020.
Item 1
Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2
Offer Statistics and Expected Timetable
Not applicable.
Item 3
Key Information
The following selected consolidated financial data of Trinity Biotech as at December 31, 2019 and 2018 and for each of the years ended December 31, 2019,
2018 and 2017 have been derived from, and should be read in conjunction with, the audited consolidated financial statements and notes thereto set forth in Item
18 of this Annual Report. The selected consolidated financial data as at December 31, 2017, 2016 and 2015 and for the years ended December 31, 2016 and
December 31, 2015 are derived from the audited consolidated financial statements not appearing in this Annual Report. This data should be read in conjunction
with the financial statements, related notes and other financial information included elsewhere herein.
1
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenues
Cost of sales
Gross profit
Other operating income
Research and development expenses
Selling, general and administrative expenses
Selling, general and administrative expenses - impairment
charges and inventory write-off/provision
Selling, general and administrative expenses – tax audit
settlement
2019
US$ ‘000
90,435
(52,315)
38,120
91
(5,325)
(27,661)
Year ended December 31,
2017
US$‘000
2018
US$‘000
2016
US$‘000
2015
US$‘000
97,035
(55,586)
41,449
102
(5,369)
(29,477)
99,140
(57,250)
41,890
100
(5,657)
(32,246)
99,611
(56,127)
43,484
239
(5,040)
(30,366)
(24,295)
(26,932)
(41,755)
(48,165)
(5,042)
—
—
—
Operating (loss)/profit
(24,112)
(20,227)
(37,668)
(39,848)
Financial income
Financial expenses
Net financing (expense)/income
(Loss)/Profit before tax
Income tax credit/(expense)
697
(6,582)
(5,885)
(29,997)
1,006
2,144
(5,080)
(2,956)
(23,183)
525
3,198
(5,405)
(2,207)
(39,875)
1,214
3,147
(5,439)
(2,292)
(42,140)
3,557
100,195
(53,683)
46,512
288
(5,069)
(28,225)
—
—
13,506
13,491
(4,054)
9,437
22,943
(756)
(Loss)/Profit for the year
(28,991)
(22,658)
(38,661)
(38,583)
22,187
(Loss)/Profit for the year on discontinued operations
(Loss)/Profit for the year (all attributable to owners of the
parent)
Basic (loss)/earnings per ADS (US Dollars)
Diluted (loss)/earnings per ADS (US Dollars)
Basic (loss)/earnings per ‘A’ ordinary share
(US Dollars)
Diluted (loss)/earnings per ‘A’ ordinary share
(US Dollars)
77
568
(1,609)
(62,042)
(391)
(28,914)
(1.38)
(1.38)
(0.35)
(0.35)
(22,090)
(1.06)
(1.06)
(0.27)
(0.27)
(40,270)
(1.86)
(1.86)
(0.47)
(0.47)
(100,625)
(4.38)
(4.38)
(1.10)
(1.10)
21,796
0.94
0.46
0.24
0.12
Weighted average number of shares used in computing basic
EPS per ADS
20,901,703
20,903,227
21,621,602
22,964,703
23,161,773
Weighted average number of shares used in computing diluted
EPS per ADS
25,467,516
25,877,205
26,877,544
28,299,399
27,407,793
Weighted average number of shares used in computing basic
EPS per ‘A’ ordinary share
83,606,810
83,612,908
86,486,409
91,858,813
92,647,091
Weighted average number of shares used in computing diluted
EPS per ‘A’ ordinary share
101,870,064
103,508,820
107,510,179
113,197,598
109,631,172
2
Consolidated Balance Sheet Data
Net current assets (current assets less current liabilities)
Non-current liabilities
Total assets
Capital stock
Shareholders’ equity
December 31,
2019
US$’000
December 31,
2018
US$’000
December 31,
2017
US$’000
December 31,
2016
US$’000
December 31,
2015
US$’000
51,941
(106,909)
131,071
1,213
4,713
69,057
(90,001)
151,659
1,213
44,054
91,362
(106,549)
192,974
1,213
65,196
108,208
(115,585)
249,592
1,213
108,727
143,085
(129,646)
363,683
1,209
213,892
There were no dividends declared or paid during 2019 in respect of the fiscal year 2018 (no dividends paid in 2018 in respect of the fiscal year 2017, no
dividends paid in 2017 in respect of the fiscal year 2016, final dividend of 22 cents per ADS was paid in 2015 in respect of the fiscal year 2014.
Risk Factors
You should carefully consider all of the information set forth in this Form 20-F, including the following risk factors, when investing in our securities. The risks
described below are not the only ones that we face. Additional risks not currently known to us or that we presently deem immaterial may also impair our
business operations. We could be materially adversely affected by any of these risks.
Risks Related to our Business
Our long-term success depends upon the successful development and commercialization of new products.
•
•
•
Our long-term viability and growth will depend upon the successful discovery, development and commercialization of other products from our research
and development (“R&D”) activities. In order to remain competitive, we are committed to significant expenditures on R&D and the commercialization of
new or enhanced products. The R&D process generally takes a significant amount of time from product inception to commercial launch. However, there is
no certainty that this investment in research and development will yield technically feasible or commercially viable products. We may have to abandon a
new or enhanced product or a product during its development phase in which we have invested substantial time and money. During the fiscal years ended
December 31, 2019, 2018 and 2017, we incurred US$9.6 million, US$9.9 million and US$10.4 million, respectively, in capitalised R&D expenses. We
expect to continue to incur significant costs related to our research and development activities.
Successful products require significant development and investment, including testing to demonstrate their performance capabilities, cost-effectiveness or
other benefits prior to commercialization. In addition, unless exempt, regulatory clearance or approval must be obtained before our medical device
products may be sold. Additional development efforts on these products may be required before we are ready to submit applications for marketing
authorisation to any regulatory authority. Regulatory authorities may not clear or approve these products for commercial sale or may substantially delay or
condition clearance or approval. In addition, even if a product is successfully developed and all applicable regulatory clearances or approvals are obtained,
there may be little or no market for the product. Accordingly, if we fail to develop and gain commercial acceptance for our products, or if we have to
abandon a new product during its development phase, or if competitors develop more effective products or a greater number of successful new products,
customers may decide to use products developed by our competitors. This would result in a loss of revenues and adversely affect our results of operations,
cash flow and business.
Our future growth in the United States is dependent in part on Food and Drug Administration (“FDA”) clearance of products. If FDA clearance is delayed
or not achieved for these products, it could have a material impact on the future growth of our business. Similarly, future growth outside of USA is
dependent on clearance of products by the relevant regulatory authorities in those countries.
Our ability to sell products could be adversely affected by competition from new and existing diagnostic products.
•
We have invested in research and development but there can be no guarantees that our R&D programmes will not be rendered technologically obsolete or
financially non-viable by the technological advances of our competitors, which would also adversely affect our existing product lines and inventory. The
main competitors of Trinity Biotech (and their principal products with which Trinity Biotech competes) include: Abbott Diagnostics (AxSYM™, IMx™,
i-STAT®, Determine™, Wampole™, Athena™, Biosite Triag®), Arkray (HA-8180), Bio-Rad (Bio-Plex™, Variant II, Turbo and D10™), Diasorin Inc.
(Liasion™, ETIMAX™), The Carlyle Group – Ortho Clinical Diagnostics (Vitros™), OraSure Technologies, Inc. (OraQuick®), Roche Diagnostics
(COBAS AMPLICOR™, Ampliscreen™, Accutrend™, Tina Quant™), Siemens – Beckman Coulter (Uni-Cel), Siemens – Dade-Behring (BEP 2000,
Enzygnost®), Siemens – Bayer (Centaur™), Siemens – DPC (Immulite™), Thermo Fisher (Konelab™) and Tosoh (G8™).
3
•
•
•
The diagnostics industry is focused on the testing of biological specimens in a laboratory or at the point-of-care and is highly competitive and rapidly
changing. As new products enter the market, our products may become obsolete or a competitor’s products may be more effective or more effectively
marketed and sold than ours. If we fail to maintain and enhance our competitive position, our customers may decide to use products developed by
competitors which could result in a loss of revenues.
We may in certain instances also face competition from products that are sold at a lower price. Where this occurs, customers may choose to buy lower cost
products from third parties or we may be forced to sell our products at a lower price, both of which could result in a loss of revenues or a lower gross
margin contribution from the sale of our products. We may also be required to increase our marketing efforts in order to compete effectively, which would
increase our costs.
Our tests compete with products made by our competitors. Multiple competitors are making investments in competing technologies and products, and a
number of our competitors may have a competitive advantage because of their greater financial, technical, research and other resources. Some competitors
offer broader product lines and may have greater market presence or name recognition than we have. If we receive FDA clearance, and in order to achieve
market acceptance, we and/or our distributors will likely be required to undertake substantial marketing efforts and spend significant funds to inform
potential customers and the public of the existence and perceived benefits of our products. Our marketing efforts for these products may not be successful.
As such, there can be no assurance that these products will obtain significant market acceptance and fill the market needs that are perceived to exist on a
timely basis, or at all.
If we fail to maintain regulatory approvals and clearances, or are unable to obtain, or experience significant delays in obtaining, regulatory clearances or
approvals for our future products or product enhancements, our ability to commercially distribute and market these products could suffer.
•
•
•
Our medical device products and operations are subject to rigorous government regulation in the United States by the FDA, and numerous other federal,
state and foreign governmental authorities, as well as and by comparable regulatory authorities in other jurisdictions such as the Health Products
Regulatory Authority (“HPRA”) in Ireland. In particular, we are subject to strict governmental controls on the development, manufacture, labelling,
storage, testing, advertising, promotion, marketing, distribution and import and export of our products. In addition, we or our distributors are often required
to register with and/or obtain clearances or approvals from foreign governments or regulatory bodies before we can import and sell our products in foreign
countries. The clearance and approval process for our products, while variable across countries, is generally lengthy, time consuming, detailed and
expensive.
The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and we may not be able to
obtain these clearances or approvals on a timely basis, if at all. In particular, the FDA permits commercial distribution of a new medical device only after
the device has received clearance under Section 510(k) of the Federal Food, Drug, and Cosmetic Act (“FDCA”), or is the subject of an approved premarket
approval application (“PMA”) unless the device is specifically exempt from those requirements. The FDA will clear marketing of a lower risk medical
device through the 510(k) process if the manufacturer demonstrates that the new product is substantially equivalent to other 510(k)-cleared products. High
risk devices deemed to pose the greatest risk, such as life-sustaining, life-supporting, or implantable devices, or devices not deemed substantially
equivalent to a previously cleared device, require the approval of a PMA.
The PMA process is more costly, lengthy and uncertain than the 510(k) clearance process. A PMA application must be supported by extensive data,
including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and
efficacy of the device for its intended use. The 510(k) clearance process usually takes from three to 12 months, but it can take longer. The process of
obtaining PMA approval is much more costly and uncertain than the 510(k) clearance process. It generally takes from one to three years, or even longer,
from the time the PMA application is submitted to the FDA, until an approval is obtained. There is no assurance that we will be able to obtain FDA
clearance or approval for any of our new products on a timely basis, or at all.
In the United States, the majority of our currently commercialized products have received pre-market clearance under Section 510(k) of the FDCA. If the
FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected, our
product introductions or modifications could be delayed or cancelled, which could cause our sales to decline. In addition, the FDA may determine that
future products will require the more costly, lengthy and uncertain PMA process. Although we currently market only one device pursuant to an approved
PMA, the FDA may demand that we obtain a PMA prior to marketing certain of our future products.
4
•
FDA can delay, limit or deny clearance or approval of a device for many reasons, including:
•
•
•
our ability to demonstrate to the FDA’s satisfaction that our products are safe and effective for their intended users;
insufficient data from our pre-clinical studies and clinical trials to support clearance or approval, where required; and
the failure of the manufacturing process or facilities we use to meet applicable requirements.
•
•
In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions
which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently cleared products on a
timely basis. For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k)
regulatory pathway, the FDA initiated an evaluation of the program, and in January 2011, announced several proposed actions intended to reform the
review process governing the clearance of medical devices. FDA’s review of its 510(k) clearance process could result in additional changes to regulatory
requirements or guidance documents which could increase the costs of compliance, or restrict our ability to maintain current clearances. In addition, as part
of the Food and Drug Administration Safety and Innovation Act (“FDASIA”), Congress reauthorised the Medical Device User Fee Amendments with
various FDA performance goal commitments and enacted several “Medical Device Regulatory Improvements” and miscellaneous reforms which are
further intended to clarify and improve medical device regulation both pre- and post-clearance and approval.
Our continued success is dependent on our ability to develop and market new products, some of which are currently awaiting clearance or approval from
the applicable regulatory authorities. There is no certainty that such clearance or approval will be granted or, even once granted, will not be revoked during
the continuing review and monitoring process. Further, regulatory authorities, including the FDA, may not approve or clear our future products for the
indications that are necessary or desirable for successful commercialization. A regulatory authority may impose requirements as a condition to granting a
marketing authorisation, may include significant restrictions or limitations as part of a marketing authorisation it grants and may delay or refuse to
authorise a product for marketing, even though a product has been authorised for marketing without restrictions or limitations in another country or by
another agency. Failure to receive clearance or approval for our new products, or commercially undesirable limitations on our clearances or approvals,
would have an adverse effect on our ability to expand our business.
Clinical trials necessary to support future premarket submissions will be expensive and will require enrollment of suitable patients who may be difficult to
identify and recruit. Delays or failures in our clinical trials will prevent us from commercializing any modified or new products and will adversely affect our
business, operating results and prospects.
•
•
•
Initiating and completing clinical trials necessary to support approval of future products under development, is time consuming and expensive and the
outcome uncertain. Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product we advance into clinical
trials may not have favorable results in later clinical trials.
Conducting successful clinical studies will require the enrollment of patients who may be difficult to identify and recruit. Patient enrollment in clinical
trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population, the nature of the trial
protocol, and the availability of appropriate clinical trial investigators. Patients may not participate in our clinical trials if they choose to participate in
contemporaneous clinical trials of competitive products.
Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required and we may not adequately develop such
protocols to support clearance and approval. Further, the FDA may require us to submit data on a greater number of patients than we originally anticipated
and/or for a longer follow-up period or change the data collection requirements or data analysis applicable to our clinical trials. Any challenges to patient
enrollment may cause an increase in costs and delays in the approval and attempted commercialization of our products or result in the failure of the clinical
trial. In addition, despite considerable time and expense invested in our clinical trials, FDA may not consider our data adequate to demonstrate safety and
efficacy. Such increased costs and delays or failures could adversely affect our business, operating results and prospects.
5
•
Our facilities and our clinical investigational sites operate under procedures that govern the conduct and management of FDA-regulated clinical studies
under 21 CFR Parts 50, 56 and 812, and Good Clinical Practices. Although the majority of our in-vitro diagnostic (“IVD”) clinical studies meet the
definition of exempted investigations under 21 Part 812 and are exempt from the Investigational Device Exemption (“IDE”) regulations in 21 CFR Part
812, we are still required to meet the requirements of 21 CFR Parts 50 and 56 for informed consent and Institutional Review Board (“IRB”) approval. FDA
may conduct Bioresearch Monitoring (“BiMo”) inspections of us and/or our clinical sites to assess compliance with FDA regulations, our procedures, and
the clinical protocol. If the FDA were to find that we or our clinical investigators are not operating in compliance with applicable regulations, we could be
subject to the above FDA enforcement action as well as refusal to accept all or part of our data in support of a 510(k) or PMA and/or we may need to
conduct additional studies.
If the third parties on which we rely to conduct our pre-clinical studies and clinical trials and to assist us with pre-clinical development do not perform as
contractually required or expected, we may not be able to obtain regulatory approval for or commercialize our products.
•
We may not have the ability to independently conduct our pre-clinical studies and clinical trials for our products and we may rely on third parties, such as
contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct such trials. If these third parties do not
successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the
quality or accuracy of the data they obtain is compromised due to the failure to adhere to our pre-clinical or clinical protocols or regulatory requirements or
for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to
obtain regulatory approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects
may be adversely affected. Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of
their control.
The results of our clinical trials may not support our product candidate claims.
•
Even if our clinical trials are completed as planned, we cannot be certain that their results will support our product candidate claims or that the FDA or
foreign authorities will agree with our conclusions regarding them. The clinical trial process may fail to demonstrate that our product candidates are safe
and effective for the proposed indicated uses, which could cause us to abandon a product candidate and may delay development of others. Any delay or
termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our product candidates and
generate revenues.
Failure to comply with FDA or other regulatory requirements may require us to suspend production of our products or institute a recall which could result
in higher costs and a loss of revenues.
•
Even after we obtain clearance or approval for our medical devices, we are still subject to ongoing and extensive post market regulatory requirements.
Regulation by the FDA and other federal, state and foreign regulatory agencies, such as the HPRA in E.U., impacts many aspects of our operations, and
the operations of our suppliers and distributors, including manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion,
marketing, record keeping, import and export. For example, the manufacture of medical devices must comply with the FDA’s Quality System Regulation
(“QSR”), which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization,
storage and shipping of our products. Our manufacturing facilities and those of our suppliers and distributors are, or can be, subject to periodic regulatory
inspections by the FDA to assess compliance with the QSR and other regulations, and by other comparable foreign regulatory authorities with respect to
similar requirements in other jurisdictions. The FDA and foreign regulatory agencies may require post-marketing testing and surveillance to monitor the
performance of approved products or place conditions on any product clearances or approvals that could restrict the commercial applications of those
products. The failure by us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies,
or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, any
of the following enforcement actions:
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untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
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unanticipated expenditures to address or defend such actions;
customer notifications for repair, replacement, refunds;
recall, detention or seizure of our products;
operating restrictions or partial suspension or total shutdown of production;
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products;
operating restrictions;
withdrawing 510(k) clearances on PMA approvals that have already been granted;
refusal to grant export approval for our products; or
criminal prosecution.
Other regulatory authorities have similar sanctions in their respective jurisdictions.
If any of these actions were to occur it would harm our reputation and cause our product sales and profitability to suffer and may prevent us from
generating revenue. Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with all applicable regulatory
requirements which could result in our failure to produce our products on a timely basis and in the required quantities, if at all.
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Even if regulatory clearance or approval of a product is granted, such clearance or approval may be subject to limitations on the intended uses for which
the product may be marketed and reduce our potential to successfully commercialize the product and generate revenue from the product. If the FDA
determines that our promotional materials, labeling, training or other marketing or educational activities constitute promotion of an unapproved use, it
could request that we cease or modify our training or promotional materials or subject us to regulatory enforcement actions. It is also possible that other
federal, state or foreign enforcement authorities might take action if they consider our training or other promotional materials to constitute promotion of an
unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for
reimbursement.
In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of our products, and we must
comply with medical device reporting requirements, including the reporting of adverse events and malfunctions related to our products. Later discovery of
previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency,
manufacturing problems, or failure to comply with regulatory requirements such as QSR, may result in changes to labeling, restrictions on such products
or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost
of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or
criminal penalties which would adversely affect our business, operating results and prospects.
In the ordinary course of business, we must frequently make subjective judgments with respect to compliance with applicable laws and regulations. If
regulators subsequently disagree with the manner in which we have sought to comply with these regulations, we could be subjected to substantial civil and
criminal penalties, as well as product recall, seizure or injunction with respect to the sale of our products. The assessment of any civil and criminal
penalties against us could severely impair our reputation within the industry and any limitation on our ability to manufacture and market our products
could have a material adverse effect on our business.
In addition to the FDA and other regulations described above, laws and regulations in some countries may restrict our ability to sell products in those
countries. While we intend to comply with any applicable restrictions, there is no guarantee we will be successful in these efforts.
We must also comply with numerous laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire
hazard control, disposal of hazardous substances and labour or employment practices. Compliance with these laws or any new or changed laws regulating
our business could result in substantial costs. Because of the number and extent of the laws and regulations affecting our industry, and the number of
governmental agencies whose actions could affect our operations, it is impossible to reliably predict the full nature and impact of these requirements. To
the extent the costs and procedures associated with complying with these laws and requirements are substantial or it is determined that we do not comply,
our business and results of operations could be adversely affected.
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Our products may in the future be subject to product recalls that could harm our reputation, business and financial results.
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Manufacturers may, on their own initiative, initiate actions, including a non-reportable market withdrawal or a reportable product recall, for the purpose of
correcting a material deficiency, improving device performance, or for other reasons. Additionally, the FDA and similar foreign health or governmental
authorities have the authority to require an involuntary recall of commercialized products in the event of material deficiencies or defects in design,
manufacturing or labeling or in the event that a product poses an unacceptable risk to health. In the case of the FDA, the authority to require a recall must
be based on an FDA finding that there is a reasonable probability that a device intended for human use would cause serious, adverse health consequences
or death. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors,
design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an
adverse effect on our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to FDA within 10
working days after the recall is initiated.
Companies are required to maintain certain records of post-market actions, even if they determine such actions are not reportable to the FDA. If we
determine that certain actions do not require notification of the FDA, the FDA may disagree with our determinations and require us to report those actions
as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take
enforcement action for failing to report the recalls when they were conducted or failing to timely report or initiate a reportable product action. Further,
depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will need to
obtain new approvals or clearances before we may market or distribute the corrected device. Seeking such approvals or clearances may delay our ability to
replace the recalled devices in a timely manner.
If our products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to medical device reporting regulations,
which can result in voluntary corrective actions or agency enforcement actions.
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We are also required to comply with the FDA’s Medical Device Reporting (“MDR”), requirements in the United States and comparable regulations
worldwide, such as the HPRA. For example, under the FDA’s MDR regulations, we are required to report to the FDA any incident in which our product
may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause
or contribute to death or serious injury. In addition, all manufacturers placing medical devices in European Union markets are legally bound to report any
serious or potentially serious incidents involving devices they produce or sell to the Competent Authority in whose jurisdiction the incident occurred.
Were this to happen to us, the relevant Competent Authority would file an initial report, and there would then be a further inspection or assessment if there
are particular issues. This would be carried out either by the Competent Authority or it could require that Trinity Biotech’s Notified Body, carry out the
inspection or assessment.
We have reported MDRs in the past, and we anticipate that in the future it is likely that we may experience events that would require reporting to the FDA
pursuant to the MDR regulations. Any adverse event involving our products could result in future voluntary corrective actions, or agency actions, such as
inspection, mandatory recall or other enforcement action.
Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital,
distract management from operating our business, and may harm our reputation and financial results.
Modifications to our products, if cleared or approved, may require new 510(k) clearances or pre-market approvals, or may require us to cease marketing or
recall the modified products until clearances or approvals are obtained.
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Any modification to a 510(k)-cleared device in the United States that could significantly affect its safety or effectiveness, or that would constitute a major
change in its intended use, design or manufacture, requires a new 510(k) clearance or, possibly, approval of a PMA. The FDA requires every manufacturer
to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with our decisions
regarding whether new clearances or approvals are necessary.
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If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMAs for modifications to previously cleared products
for which we conclude that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we
obtain clearance or approval, and we may be subject to significant regulatory fines or penalties. Further, our products could be subject to recall if the FDA
determines, for any reason, that our products are not safe or effective. Any recall or FDA requirement that we seek additional approvals or clearances could
result in significant delays, fines, increased costs associated with modification of a product, loss of revenue and potential operating restrictions imposed by
the FDA.
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For example, we obtained 510(k) clearance for our Primus Variant System for the separation and quantification of normal and abnormal haemoglobin
species as an aid in the diagnosis of haemoglobinopathies. The sample type used by this system was blood tubes. We subsequently introduced two systems
based on the original Primus Variant System and they were named as ultra² GeneSys Variant System and ultra² Resolution Variant System. The primary
focus of the GeneSys was on newborn screening using Dried Blood Spots as the sample type, while the Resolution was intended for confirmatory testing
on the adult population using blood tubes as the sample type. We determined that these modifications to the indications for use were within our existing
clearance and did not require the submission of a new 510(k) notification. The FDA stated that the use of Dried Blood Spots was not part of the original
submission and represented a new modified Intended Use. The FDA informed us that it disagreed with our decision not to seek new 510(k) clearances for
these modifications, and we filed new 510(k) notifications to obtain clearance for these indications. The FDA rejected our filing on the basis that the
predicate devise chosen did not meet their requirements. Additionally the FDA asked us to withdraw our product from the market. This has been done in
order to stay compliant. A new filing is underway using the predicate device indicated by the FDA. The new application is expected to be filed in the
second half of 2020.
Furthermore, the FDA’s ongoing review of the 510(k) program may make it more difficult for us to make modifications to any products for which we
obtain clearance, either by imposing more strict requirements on when a manufacturer must submit a new 510(k) notification for a modification to a
previously cleared product, or by applying more onerous review criteria to such submissions. For example, in accordance with FDASIA, the FDA was
obligated to prepare a report for Congress on the FDA’s approach for determining when a new 510(k) clearance will be required for modifications or
changes to a previously cleared device. The FDA issued this report and indicated that manufacturers should continue to adhere to the FDA’s 1997
Guidance on this topic when making a determination as to whether or not a new 510(k) clearance is required for a change or modification to a device.
However, the practical impact of the FDA’s continuing scrutiny of the 510(k) program remains unclear.
We may be subject to fines, penalties or injunctions if we are determined to be promoting the use of our products for unapproved or “off-label” uses.
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Our promotional materials must comply with FDA and other applicable laws and regulations. We believe that the specific uses for which our products are
marketed fall within the scope of the indications for use that have been cleared or approved by the FDA. However, the FDA could disagree and require us
to stop promoting our products for those specific uses until we obtain FDA clearance or approval for them. In addition, if the FDA determines that our
promotional materials constitutes promotion of an unapproved use, it could request that we modify our promotional materials or subject us to regulatory or
enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties.
It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional materials to constitute
promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims
for reimbursement. In that event, our reputation could be damaged and adoption of the products would be impaired.
If the FDA were to modify its policy of enforcement discretion with respect to our laboratory developed tests, we could incur substantial costs and delays
associated with trying to obtain premarket clearance or other approvals.
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Although the FDA has statutory authority to assure that medical devices are safe and effective for their intended uses, the FDA has generally exercised its
enforcement discretion and not enforced applicable regulations with respect to laboratory developed tests (“LDTs”), although reagents, instruments,
software or components provided by third parties and used to perform LDTs may be subject to FDA regulation.
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The FDA defines the term “laboratory developed test” as an IVD test that is intended for clinical use and designed, manufactured and used within a single
laboratory. Until 2014, the FDA exercised enforcement discretion such that it did not enforce provisions of the Food, Drug, and Cosmetic Act, or FDA
Act, with respect to LDTs. In July 2014, due to the increased proliferation of LDTs for complex diagnostic testing and concerns with several high-risk
LDTs related to lack of evidentiary support for claims and erroneous results, the FDA issued guidance that, when finalized, would adopt a risk-based
framework that would increase FDA oversight of LDTs. As part of this developing framework, FDA issued draft guidance in October 2014, informing
Congress and manufacturers of LDTs of its intent to collect information from laboratories regarding their current LDTs and newly developed LDTs
through a notification process. The FDA will use this information to classify LDTs and to prioritize enforcement of premarket review requirements for
categories of LDTs based on risk, using a public process. Specifically, the FDA plans to use advisory panels to provide recommendations to the agency on
LDT risks, classification and prioritization of enforcement of applicable regulatory requirements on certain categories of LDTs, as appropriate.
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We cannot provide any assurance that FDA regulation, including premarket review, will not be required in the future for any of our LDTs, whether through
additional guidance or regulations issued by the FDA, new enforcement policies adopted by the FDA or new legislation enacted by Congress. It is possible
that legislation will be enacted into law, regulations could be promulgated or guidance could be issued by the FDA which may result in increased
regulatory burdens for us to continue to offer our current LDTs or to develop and introduce new LDTs. We cannot predict the timing or content of future
legislation enacted, regulations promulgated or guidance issued regarding LDTs, or how it will affect our business.
If FDA premarket review, including clearance or approval, is required for our current or future LDTs (either alone or together with sample collection
devices), products or services we may develop, or we decide to voluntarily pursue FDA clearance or approval, we may be forced to stop selling our LDTs
while we work to obtain such FDA clearance or approval. Our business would be negatively affected until such review was completed and clearance to
market or approval was obtained. The regulatory process may involve, among other things, successfully completing additional clinical studies and
submitting premarket notification or filing a premarket approval application with the FDA. If premarket review is required by the FDA or if we decide to
voluntarily pursue FDA premarket review of our LDTs, there can be no assurance that any tests, products or services we may develop in the future will be
cleared or approved on a timely basis, if at all, nor can there be assurance that labeling claims will be consistent with our current claims or adequate to
support continued adoption of for our LDTs. If our LDTs are allowed to remain on the market but there is uncertainty in the marketplace about our tests, if
we are required by the FDA to label them investigational and we cannot offer the LDTs for diagnostic purposes, or if labeling claims the FDA allows us to
make are limited, orders may decline.
Ongoing compliance with FDA regulations would increase the cost of conducting our business, and subject us to heightened regulation by the FDA and
penalties for failure to comply with these requirements.
We are also subject to various federal and state laws targeting fraud and abuse in the healthcare industry.
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If we fail to comply with federal and state health care laws, including fraud and abuse, false claims, physician payment transparency and privacy and
security laws, we could face substantial penalties and our business, operations and financial condition could be adversely affected. We are subject to anti-
kickback laws, self-referral laws, false claims laws, and laws constraining the sales, marketing and other promotional activities of manufacturers of
medical devices by limiting the kinds of financial arrangements we may enter into with physicians, hospitals, laboratories and other potential purchasers of
our products. The laws that may affect our ability to operate include, but are not limited to:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and wilfully soliciting, receiving, offering or paying
remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of,
any good or service for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs. A person or
entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation; in
addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the False Claims Act;
the Physician Self-Referral Law, also known as the “Stark Law”, which provides for strict liability for referrals by physicians to entities with which
they or their immediate family members have a financial arrangement for certain designated health services, including clinical laboratory services
provided by our CLIA-certified laboratory owned and operated by our subsidiary Immco Diagnostics Inc., that are reimbursable by federal
healthcare programs, unless an exception applies. Penalties for violating the Stark Law include denial of payment, civil monetary penalties of up to
fifteen thousand dollars per claim submitted, and exclusion from federal health care programs, as well as a penalty of up to one-hundred thousand
dollars for attempts to circumvent the law;
federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims
for payment from Medicare, Medicaid or other federal third-party payors that are false or fraudulent. Suits filed under the False Claims Act, known
as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “whistleblowers”,
may share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims
Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim;
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the federal Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration to a federal healthcare
beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by
the government from a particular provider or supplier;
federal criminal laws that prohibit executing a scheme to defraud any federal healthcare benefit program or making false statements relating to
healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific
intent to violate it to have committed a violation;
the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and
Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health
information;
the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is
available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the Centers for
Medicare & Medicaid Services (“CMS”), information related to payments or other “transfers of value” made to physicians (defined to include
doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers to report annually to the
government ownership and investment interests held by the physicians described above and their immediate family members and payments or other
“transfers of value” to such physician owners. Manufacturers are required to submit reports to CMS by the 90th day of each calendar year. We
cannot assure you that we have and will successfully report all transfers of value by us, and any failure to comply could result in significant fines and
penalties. Failure to submit the required information may result in civil monetary penalties up to an aggregate of $150,000 per year (and up to an
aggregate of $1 million per year for “knowing failures”) for all payments, transfers of value or ownership or investment interests not reported in an
annual submission, and may result in liability under other federal laws or regulations;
federal and state laws governing the certification and licensing of clinical laboratories, including operational, personnel and quality requirements
designed to ensure that testing services are accurate and timely, and federal and state laws governing the health and safety of clinical laboratory
employees;
the U.S. Foreign Corrupt Practices Act, or the FCPA, which prohibits corporations and individuals from paying, offering to pay or authorising the
payment of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to
obtain or retain business or to otherwise influence a person working in an official capacity; the UK Bribery Act, which prohibits both domestic and
international bribery, as well as bribery across both public and private sectors; and bribery provisions contained in the German Criminal Code, which
makes the corruption and corruptibility of physicians in private practice and other healthcare professionals a criminal offense; and
analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items
or services reimbursed by any payor, including commercial insurers; state laws that require device companies to comply with the industry’s
voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that
may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to
payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy
and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same
effect, thus complicating compliance efforts.
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Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbours available under such laws, it is possible that some of
our business activities, including our relationships with physicians and other healthcare providers, some of whom may recommend, purchase and/or order
our tests, our sales and marketing efforts and certain arrangements with customers, including those where we provide our instrumentation for free in
exchange for minimum purchase requirements of our reagents, and our billing and claims processing practices, could be subject to challenge under one or
more of such laws. By way of example, some of our consulting arrangements with physicians do not meet all of the criteria of the personal services safe
harbour under the federal Anti-Kickback Statute. Accordingly, they do not qualify for safe harbour protection from government prosecution. A business
arrangement that does not substantially comply with a safe harbour, however, is not necessarily illegal under the Anti-Kickback Statute, but may be subject
to additional scrutiny by the government. We are also exposed to the risk that our employees, independent contractors, principal investigators, consultants,
vendors and distributors may engage in fraudulent or other illegal activity. Any action against us for violation of these laws, even if we successfully defend
against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
To enforce compliance with the federal laws, the U.S. Department of Justice (“DOJ”), has recently increased its scrutiny of interactions between health
care companies and health care providers, which has led to a number of investigations, prosecutions, convictions and settlements in the health care
industry. Dealing with investigations can be time and resource consuming and can divert management’s attention from the business. In addition,
settlements with the DOJ or other law enforcement agencies have forced healthcare providers to agree to additional compliance and reporting requirements
as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse
effect on our business.
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Many of the existing requirements are new and have not been definitively interpreted by state authorities or courts, and available guidance is limited. In
addition, changes in or evolving interpretations of these laws, regulations, or administrative or judicial interpretations, may require us to change our
business practices or subject our business practices to legal challenges, which could have a material adverse effect on our business, financial condition and
results of operations.
We have not yet developed a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules and program
requirements to which we are or may become subject. Although the development and implementation of such compliance programs can mitigate the risk
of investigation, prosecution, and penalties assessed for violations of these laws, or any other laws that may apply to us, the risks cannot be entirely
eliminated.
If our operations are found to be in violation of any of the laws described above or any other laws and regulations that apply to us, we could receive
adverse publicity, face enforcement action and be subject to penalties, including civil and criminal penalties, damages, fines, the curtailment or
restructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely
affect our ability to operate our business and our results of operations.
Our business could be adversely affected by changing conditions in the diagnostic market.
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The diagnostics industry is in transition with a number of changes that affect the market for diagnostic test products. The diagnostics industry has
experienced considerable consolidation through mergers and acquisitions in the past several years. For example, major consolidation among reference
laboratories and the formation of multi-hospital alliances, reducing the number of institutional customers for diagnostic test products. There can be no
assurance that we will be able to enter into and/or sustain contractual or other marketing or distribution arrangements on a satisfactory commercial basis
with these institutional customers.
Further, this consolidation trend may result in the remaining companies having greater financial resources and technological capabilities, thereby
intensifying competition in the industry, which could have a material adverse effect on our business.
We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position.
As of December 31, 2019, we had total indebtedness with a carrying value of approximately US$102.2 million, which included US$82.0 million of
outstanding indebtedness under our 4% exchangeable notes due in 2045. The exchangeable notes have a nominal amount of US$99.9 million and include a
number of put and call options. The earliest date on which holders can require Trinity Biotech to repurchase their notes at par is April 1, 2022.
Our debt may:
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limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;
limit our ability to use our cash flow or obtain additional financing for working capital, capital expenditures, acquisitions or other general business
purposes;
require us to use a substantial portion of our cash flow from operations to make debt service payments;
limit our flexibility to plan for, or react to, changes in our business and industry;
result in dilution to our existing shareholders in the event exchanges of the exchangeable notes are settled in our ordinary shares;
place us at a competitive disadvantage compared to our less leveraged competitors; and
increase our vulnerability to the impact of adverse economic and industry conditions.
In addition, the holders of the exchangeable notes have the ability to require us to repurchase their notes for cash if we undergo certain fundamental
changes, such as specified change of control transactions, our liquidation or dissolution, or the delisting of our ordinary shares from the Nasdaq Global
Market. Moreover, upon exchange of the exchangeable notes, unless we elect to deliver only our ordinary shares to settle such exchange, we will be
required to make cash payments in respect of the exchangeable notes. It is our intent and policy to settle the principal amount of the exchangeable notes in
cash upon exchange. However, we may not have enough available cash or be able to obtain financing at the time we are required to make any required
repurchases of surrendered exchangeable notes or to pay cash upon exchanges of the exchangeable notes. Our failure to repurchase the exchangeable notes
at a time when the repurchase is required by the indentures governing the exchangeable notes or to pay any cash payable on future exchanges of the
exchangeable notes as required by the indentures governing the exchangeable notes would constitute a default under that indenture. A default under those
indentures could also lead to a default under other debt agreements or obligations, including the amended credit agreement. If the repayment of the related
indebtedness were to be accelerated, we may not have sufficient funds to repay the related indebtedness, which could have a material adverse effect on our
financial condition and our business. In this regard, if we are unable to repay amounts under the amended credit agreement, the lenders under the amended
credit agreement could proceed against the collateral granted to them to secure that debt, which would seriously harm our business.
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To the extent we are unable to repay our debt as it becomes due with cash on hand or from other sources, we will need to refinance our debt, sell assets or
repay the debt with the proceeds from equity offerings. Additional indebtedness or equity financing may not be available to us in the future for the
refinancing or repayment of existing debt, or if available, such additional debt or equity financing may not be available on a timely basis, or on terms
acceptable to us and within the limitations specified in our then existing debt instruments. In addition, in the event we decide to sell additional assets, we
can provide no assurance as to the timing of any asset sales or the proceeds that could be realized by us from any such asset sale.
Future acquisitions may be less successful than expected, not generate the expected benefits, disrupt our ongoing business, distract our management,
increase our expenses and adversely affect our business, and therefore, growth may be limited.
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Trinity Biotech has historically grown organically and through the acquisition of, and investment in, other companies, product lines and technologies. We
may enter into strategic acquisitions or investments as a way to expand our business. These activities, and their impact on our business, are subject to many
risks, including the following:
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Suitable acquisitions or investments may not be found or consummated on terms or schedules that are satisfactory to us or consistent with our
objectives;
The benefits expected to be derived from an acquisition may not materialize and could be affected by numerous factors, such as regulatory
developments, insurance reimbursement, general economic conditions and increased competition;
• We may be unable to successfully integrate an acquired company’s personnel, assets, management systems, products and/or technology into our
business;
• Worse than expected performance of an acquired business may result in the impairment of intangible assets;
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Acquisitions may require substantial expense and management time and could disrupt our business;
• We may not be able to accurately forecast the performance or ultimate impact of an acquired business;
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An acquisition and subsequent integration activities may require greater capital and other resources than originally anticipated at the time of
acquisition;
An acquisition may result in the incurrence of unexpected expenses, the dilution of our earnings or our existing stockholders’ percentage ownership,
or potential losses from undiscovered liabilities not covered by an indemnification from the seller(s) of the acquired business;
An acquisition may result in the loss of our or the acquired company’s key personnel, customers, distributors or suppliers;
An acquisition of a foreign business may involve additional risks, including, but not limited to, foreign currency exposure, liability or restrictions
under foreign laws or regulations, and our inability to successfully assimilate differences in foreign business practices or overcome language or
cultural barriers; and
Our ability to integrate future acquisitions may be adversely affected by inexperience in dealing with new technologies.
The occurrence of one or more of the above or other factors may prevent us from achieving all or a significant part of the benefits expected from an
acquisition or investment. This may adversely affect our financial condition, results of operations and ability to grow our business or otherwise achieve our
financial and strategic objectives.
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Our revenues are highly dependent on a network of distributors worldwide.
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Trinity Biotech currently distributes its product portfolio through distributors in approximately 100 countries worldwide. Our continuing economic success
and financial security is dependent on our ability to secure effective channels of distribution on favourable trading terms with suitable distributors.
The loss or termination of our relationship with these key distributors could significantly disrupt our existing business unless suitable alternatives were
quickly found or lost sales to one distributor are absorbed by another distributor. Finding a suitable alternative to a lost or terminated distributor may pose
challenges in our industry’s competitive environment, and another suitable distributor may not be found on satisfactory terms, if at all. For instance, some
distributors already have exclusive arrangements with our competitors, and others do not have the same level of penetration into our target markets as our
existing distributors. If total revenue from these or any of our other significant distributors were to decrease in any material amount in the future or we are
not successful in timely transitioning business to new distributors, our business, operating results and financial condition could be materially and adversely
affected.
Reductions in government funding to agencies and organizations we work with could adversely affect our business and financial results.
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We sell our products into the public health market, which consists of state, county and other governmental public health agencies, community based
organizations, service organizations and similar entities. Many of these customers depend to a significant degree on grants or funding provided by
governments or governmental agencies to run their operations, including programs that use our products, such as our HIV testing products. In international
markets, we often sell our products to parties funded by such agencies. The level of available government grants or funding is unpredictable, and certain
organizations may not have their contracts renewed for funding. Available funding may be affected by various factors including future economic
conditions, legislative and regulatory developments, political changes, civil unrest and changing priorities for research and development activities. Any
reduction or delay in government funding or change in organizational contracts could cause our customers to delay, reduce or forego purchases of our
products or cause short term or long term fluctuations in our product revenues through these channels.
Trinity Biotech may be subject to liability resulting from its products or services.
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Trinity Biotech may be subject to claims for personal injuries or other damages if any of our products, or any product which is made with the use or
incorporation of any of our technologies, causes injury of any type or is found otherwise unsuitable during product testing, manufacturing, marketing, sale
or usage. There is no assurance that we would be successful in defending any product liability lawsuits brought against us. Regardless of merit or eventual
outcome, product liability claims could result in:
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Decreased demand for our products;
Lost revenues;
Damage to our image or reputation;
Costs related to litigation;
Diversion of management time and attention; and
Incurrence of damages payable to plaintiffs.
Trinity Biotech has global product liability insurance in place for its manufacturing subsidiaries up to a maximum of €6,500,000 (US$7,291,000) for any
one accident, limited to a maximum of €6,500,000 (US$7,291,000) in any one year period of insurance. A deductible of €5,000 ($5,600) for each claim
and every claim increasing to US$25,000 in respect of USA/Canada is applicable to each insurance event that may arise. There can be no assurance that
our product liability insurance is sufficient to protect us against liability that could have a material adverse effect on our business. In addition, although we
believe that we will be able to continue to obtain adequate coverage in the future, there is no assurance that we will be able to do so at acceptable costs.
Significant interruptions in production at our principal manufacturing facilities and/or third-party manufacturing facilities would adversely affect our
business and operating results.
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Products manufactured at our facilities in Bray, Ireland, Jamestown and Buffalo, New York, Kansas City, Missouri and Carlsbad, California comprised
approximately 85% of revenues during the fiscal year ended December 31, 2019. Our global supply of these products and services is dependent on the
uninterrupted and efficient operation of these facilities. In addition, we currently rely on a small number of third-party manufacturers to produce certain of
our diagnostic products and product components.
If we do not negotiate long-term contracts, our suppliers will likely not be required to provide us with any guaranteed minimum production levels. As a
result, we cannot assure you that we will be able to obtain sufficient quantities of product in the future.
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In addition, our reliance on third-party suppliers involves a number of risks, including, among other things:
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contract manufacturers or suppliers may fail to comply with regulatory requirements or make errors in manufacturing that could negatively affect the
efficacy or safety of our products or cause delays in shipments of our products;
we or our contract manufacturers and suppliers may not be able to respond to unanticipated changes in customer orders, and if orders do not match
forecasts, we or our suppliers may have excess or inadequate inventory of materials and components;
we or our contract manufacturers and suppliers may be subject to price fluctuations due to a lack of long-term supply arrangements for key
components;
we or our contract manufacturers and suppliers may lose access to critical services and components, resulting in an interruption in the manufacture,
assembly and shipment of our systems;
we may experience delays in delivery by our contract manufacturers and suppliers due to changes in demand from us or their other customers;
fluctuations in demand for products that our contract manufacturers and suppliers manufacture for others may affect their ability or willingness to
deliver components to us in a timely manner;
our suppliers or those of our contract manufacturer may wish to discontinue supplying components or services to us for risk management reasons;
we may not be able to find new or alternative components or reconfigure our system and manufacturing processes in a timely manner if the
necessary components become unavailable; and
our contract manufacturers and suppliers may encounter financial hardships unrelated to our demand, which could inhibit their ability to fulfill our
orders and meet our requirements.
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The operations of our facilities or these third-party manufacturing facilities could be adversely affected by fire, power failures, natural or other disasters,
such as earthquakes, floods, or terrorist threats. Although we carry insurance to protect against certain business interruptions at our facilities, some pieces
of manufacturing equipment are difficult to replace and could require substantial replacement lead-time. There can be no assurance that such coverage will
be adequate or that such coverage will continue to remain available on acceptable terms, if at all.
If any of these risks materialize, it could significantly increase our costs and impact our ability to meet demand for our products. If we are unable to satisfy
commercial demand for our products in a timely manner, our ability to generate revenue would be impaired, market acceptance of our products could be
adversely affected, and customers may instead purchase or use our competitors’ products. In addition, we could be forced to secure new or alternative
contract manufacturers or suppliers. Securing a replacement contract manufacturer or supplier could be difficult. The introduction of new or alternative
manufacturers or suppliers also may require design changes to our products that are subject to FDA and other regulatory clearances or approvals.
We may also be required to assess the new manufacturer’s compliance with all applicable regulations and guidelines, which could further impede our
ability to manufacture our products in a timely manner. As a result, we could incur increased production costs, experience delays in deliveries of our
products, suffer damage to our reputation, and experience an adverse effect on our business and financial results. Any significant interruption in the
Group’s or third-party manufacturing capabilities could materially and adversely affect our operating results.
We are highly dependent on our senior management team and other key employees, and the loss of one or more of these employees or the inability to attract
and retain qualified personnel as necessary could adversely affect our operations.
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Trinity Biotech’s success is dependent to a large extent upon the contributions of certain key management personnel. Our key employees at December 31,
2019 were Ronan O’Caoimh, our CEO and Chairman, Jim Walsh, Executive Director, and Kevin Tansley, our CFO/Executive Director. We may not be
able to attract or retain a sufficient number of qualified employees in the future due to the intense competition for qualified personnel among medical
products and other life science businesses.
If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will adversely
affect our ability to effectively manufacture, sell and market our products, to meet the demands of our strategic partners in a timely fashion, or to support
research, development and clinical programs. Although we believe we will be successful in attracting and retaining qualified personnel, competition for
experienced scientists and other personnel from numerous companies and academic and other research institutions may limit our ability to do so on
acceptable terms.
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We are dependent on third-party suppliers for certain critical components and the primary raw materials required for our test kits.
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The primary raw materials required for Trinity Biotech’s test kits consist of antibodies, antigens or other reagents, glass fibre and packaging materials
which are acquired from third parties. If our third-party suppliers are unable or unwilling to supply or manufacture a required component or product or if
they make changes to a component, product or manufacturing process or do not supply materials meeting our specifications, we may need to find another
source and/or manufacturer. This could require that we perform additional development work.
Some of our products, which we acquire from third parties, are highly technical and are required to meet exacting specifications, and any quality control
problems that we experience with respect to the products supplied by third-party vendors could adversely and materially affect our reputation, our attempts
to complete our clinical trials or commercialization of our products and adversely and materially affect our business, operating results and prospects. We
may also need to obtain FDA or other regulatory authorisations for the use of an alternative component or for certain changes to our products or
manufacturing process. We may also have difficulty obtaining similar components from other suppliers that are acceptable to the FDA or foreign
regulatory authorities and the failure of our suppliers to comply with strictly enforced regulatory requirements could expose us to regulatory action
including, warning letters, product recalls, termination of distribution, product seizures, or civil penalties. Completing that development and obtaining such
authorisations could require significant time and expense and we may not obtain such authorisations on a timely basis, or at all. The availability of critical
components and products from other third parties could also reduce our control over pricing, quality and timely delivery. These events could either disrupt
our ability to manufacture and sell certain of our products into one or more markets or completely prevent us from doing so, and could increase our costs.
Any such event could have a material adverse effect on our results of operations, cash flow and business. Furthermore, since some of these suppliers are
located outside of the United States, we are subject to foreign export laws and United States import and customs regulations, which complicate and could
delay shipments of components to us.
Although Trinity Biotech does not expect to be dependent upon any one source for these critical components or raw materials, alternative sources of
antibodies with the characteristics and quality desired by Trinity Biotech may not be available. Such unavailability could affect the quality of our products
and our ability to meet orders for specific products.
The Covid-19 outbreak could significantly disrupt our operations and adversely affect our results of operations.
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In December 2019, Covid-19 began to impact the population of Wuhan, China, a disease caused by a novel and highly contagious form of coronavirus.
While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other
countries and infections have been reported globally. The severity of the outbreak resulted in travel restrictions, quarantine and social distancing measures
imposed by governments in virtually all of the countries in which we market our products. The Covid-19 outbreak made it difficult to carry out our
marketing activities to promote our products to potential customers and gave rise to sudden significant changes in regional and global economic conditions
that could interfere with purchases of products or services. We currently are unable to predict the duration and severity of the spread of the Covid-19, and
responses thereto, and the impact on our business, results of operations, financial condition, cash flows and liquidity, as these depend on rapidly evolving
developments, which are highly uncertain. Many factors are beyond our control, such as the continued spread or recurrence of contagion, the
implementation of effective preventative and containment measures, the development of effective medical solutions, financial and other market reactions
to the foregoing, and reactions and responses of communities and societies. However, we know the Covid-19 outbreak will result in lower revenues in
2020 and potentially beyond.
Any similar future outbreak of a contagious disease, other adverse public health developments around the world, or the measures taken by the governments
around the world in response to a future outbreak of a contagious disease may restrict economic activities in affected regions, resulting in reduced business
volume, temporary closure of our facilities and offices or otherwise disrupt our business operations and adversely affect our results of operations.
Global economic conditions may have a material adverse impact on our results.
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We currently generate significant operating cash flows, which combined with access to the credit markets provides us with discretionary funding capacity
for research and development and other strategic activities. Uncertainty in global economic conditions may continue for the foreseeable future and
intensify. This uncertainty poses a risk to the overall economy that could impact demand for our products, as well as our ability to manage normal
commercial relationships with our customers, suppliers and creditors, including financial institutions. Volatile economic conditions have adversely affected
and could continue to adversely affect our financial performance and condition or those of our customers and suppliers. These circumstances could
adversely affect our access to liquidity needed to conduct or expand our business or conduct future acquisitions or make other discretionary investments.
Many of our customers rely on public funding provided by federal, state and local governments, and this funding has been and may continue to be reduced
or deferred as a result of economic conditions.
If global economic conditions deteriorate significantly, our business could be negatively impacted, including such areas as reduced demand for our
products from a slow-down in the general economy, supplier or customer disruptions resulting from tighter credit markets and/or temporary interruptions
in our ability to conduct day-to-day transactions through our financial intermediaries involving the payment to or collection of funds from our customers,
vendors and suppliers. These circumstances may adversely impact our customers and suppliers, which, in turn, could adversely affect their ability to
purchase our products or supply us with necessary equipment, raw materials or components. Even with the improvement of economic conditions, it may
take time for our customers and suppliers to establish new budgets and return to normal purchasing and shipping patterns. We cannot predict the
reoccurrence of any economic slowdown or the strength or sustainability of the economic recovery.
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We face risks relating to our international sales and business operations, including regulatory risks, which could impact our current business operations and
growth strategy.
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Our international sales and operations are subject to various United States and foreign laws and regulations relating to export controls (including, without
limitation, the U.S. Commerce Department’s Export Administration Regulations), economic sanctions (including, without limitation, various sanctions
regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control), and anti-corruption (including, without limitation, the
United States Foreign Corrupt Practice Act). Failure to comply with such applicable laws and regulations could subject us to civil or criminal penalties,
government investigations, debarment from export privileges, and reputational harm, which could have a material adverse effect on our business.
The U.K.’s withdrawal from membership of the E.U. could adversely affect us.
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The United Kingdom (“U.K.”) exited the E.U. on January 31, 2020. There is now a transition period until the end of 2020 while the U.K. and E.U.
negotiate additional arrangements. The existing rules on trade, travel, and business for the U.K. and E.U. continue to apply during the transition period.
Our business in the U.K., the E.U. and world-wide could be affected by the impact of U.K.’s withdrawal from membership of the E.U. The U.K.’s exit
from the E.U. could cause volatility in global financial markets, including in global currency exchange rates, resulting in a slow-down in economic activity
in the U.K., Europe or globally, negatively impact new trade agreements between the U.K and other countries, and result in significant regulatory changes
and uncertainty. One or more of these events could make it more difficult or costly to sell our products, particularly in the U.K. and Europe, and negatively
affect our revenues and results of operations. The U.K.’s exit may also influence other countries and result in additional countries deciding to leave the
E.U. This in turn could result in additional changes and uncertainty, any or all of which could negatively impact our business.
Our sales and operations are subject to the risks of fluctuations in currency exchange rates.
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A substantial portion of our operations is based in Ireland and Europe is one of our main sales territories. As a result, changes in the exchange rate between
the U.S. Dollar and the Euro can have significant effects on our results of operations. In addition, in markets where we invoice in U.S. Dollars but where
the local currency has weakened, we have been required to reduce our pricing in order to preserve our competiveness. The Group has an exposure to the
Canadian Dollar through its two Canadian entities (Nova Century Scientific and Phoenix Biotech) and to the Brazilian Real through its Brazilian entity.
The Group also has revenues and costs denominated in British Sterling. The discontinued operation in Sweden, Fiomi Diagnostics, also gives us a Swedish
Krona exposure.
In the future, we may enter into hedging instruments to manage our currency exchange rate risk. However, our attempts to hedge against these risks may
not be successful. If we are unable to successfully hedge against unfavourable foreign currency exchange rate movements, our consolidated financial
results may be adversely impacted.
The conversion of our outstanding employee share options would dilute the ownership interest of existing shareholders.
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The total share options exercisable at December 31, 2019, as described in Item 18, Note 20 to the consolidated financial statements, are convertible into
American Depository Shares (ADSs), 1 ADS representing 4 “A” Ordinary Shares. The exercise of the share options exercisable will likely occur only
when the conversion price is below the trading price of our ADSs and will dilute the ownership interests of existing shareholders. For instance, should the
options of the 6,622,667 “A” Ordinary Shares (1,655,667ADSs) exercisable at December 31, 2019 be exercised, Trinity Biotech would have to issue
6,622,667 additional “A” Ordinary Shares (1,655,667 ADSs). On the basis of 96,162,410 “A” Ordinary Shares outstanding at December 31, 2019, this
would effectively dilute the ownership interest of the existing shareholders by approximately 7%.
It could be difficult for US holders of ADSs to enforce any securities laws claims against Trinity Biotech, its officers or directors in Irish Courts.
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At present, no treaty exists between the United States and Ireland for the reciprocal enforcement of foreign judgments. The laws of Ireland do however, as
a general rule, provide that the judgments of the courts of the United States have in Ireland the same validity as if rendered by Irish Courts. Certain
important requirements must be satisfied before the Irish Courts will recognise the United States judgment. The originating court must have been a court of
competent jurisdiction, the judgment may not be recognised if it is based on public policy, was obtained by fraud or its recognition would be contrary to
Irish public policy. Any judgment obtained in contravention of the rules of natural justice will not be enforced in Ireland.
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Our inability to manufacture products in accordance with applicable specifications, performance standards or quality requirements could adversely affect
our business.
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The materials and processes used to manufacture our products must meet detailed specifications, performance standards and quality requirements to ensure
our products will perform in accordance with their label claims, our customers’ expectations and applicable regulatory requirements.
As a result, our products and the materials used in their manufacture or assembly undergo regular inspections and quality testing. Factors such as defective
materials or processes, mechanical failures, human errors, environmental conditions, changes in materials or production methods by our vendors, and other
events or conditions could cause our products or the materials used to produce or assemble our products to fail inspections and quality testing or otherwise
not perform in accordance with our label claims or the expectations of our customers.
Any failure or delay in our ability to meet the applicable specifications, performance standards, quality requirements or customer expectations could
adversely affect our ability to manufacture and sell our products or comply with regulatory requirements. These events could, in turn, adversely affect our
revenues and results of operations.
Compliance with regulations governing public company corporate governance and reporting is complex and expensive.
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Many laws and regulations impose obligations on public companies, which have increased the scope, complexity and cost of corporate governance,
reporting and disclosure practices. Our implementation of certain aspects of these laws and regulations has required and will continue to require substantial
management time and oversight and may require us to incur significant additional accounting and legal costs. We continually evaluate and monitor
developments with respect to new and proposed rules and cannot predict or estimate the ultimate amount of additional costs we may incur or the timing of
such costs. These laws and regulations are also subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their
application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Although we are committed to
maintaining high standards of corporate governance and public disclosure, if we fail to comply with any of these requirements, legal proceedings may be
initiated against us, which may adversely affect our business.
Failure to achieve our financial and strategic objectives could have a material adverse impact on our business prospects.
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As a result of any number of risk factors identified herein, no assurance can be given that we will be successful in implementing our financial and strategic
objectives. In addition, the funds for research, clinical development and other projects have in the past come primarily from our business operations. If our
business slows and we have less money available to fund research and development and clinical programs, we will have to decide at that time which
programs to cut, and by how much. Similarly, if adequate financial, personnel, equipment or other resources are not available, we may be required to delay
or scale back our business. Our operations will be adversely affected if our total revenue and gross profits do not correspondingly increase or if our
technology, product, clinical and market development efforts are unsuccessful or delayed.
Furthermore, our failure to successfully introduce new or enhanced products and develop new markets could have a material adverse effect on our business
and prospects.
We may require future additional capital.
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Our future liquidity and ability to meet our future capital requirements will depend on numerous factors, including, but not limited to, the following:
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The costs and timing of expansion of sales and marketing activities;
The timing and success of the commercial launch of new products;
The extent to which we gain or expand market acceptance for existing, new or enhanced products;
The costs and timing of the expansion of our manufacturing capacity;
The success of our research and product development efforts;
The time, cost and degree of success of conducting clinical trials and obtaining regulatory approvals;
The magnitude of capital expenditures;
Changes in existing and potential relationships with distributors and other business partners;
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The costs involved in obtaining and enforcing patents, proprietary rights and necessary licenses;
The costs and liability associated with patent infringement or other types of litigation;
Competing technological and market developments; and
The scope and timing of strategic acquisitions.
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If additional financing is needed, we may seek to raise funds through the sale of equity or other securities or through bank borrowings. There can be no
assurance that financing through the sale of securities, bank borrowings or otherwise will be available to us on satisfactory terms, or at all.
Investor confidence and share value may be adversely impacted if we and/or our independent registered public accounting firm conclude that our internal
control over financial reporting is not effective.
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We expect that our internal controls will continue to evolve as our business activities change. Although we seek to diligently and vigorously review our
internal control over financial reporting in an effort to ensure compliance with the Section 404 requirements, any control system, regardless of how well
designed, operated and evaluated, can provide only reasonable, not absolute, assurance that its objectives will be met. In addition, the overall quality of our
internal controls may be affected by the internal control over financial reporting implemented by any business we acquire and our ability to assess and
successfully integrate the internal controls of any such business.
We could conclude that our internal control over financial reporting is not effective. These events could result in an adverse reaction in the financial
marketplace due to a loss of investor confidence in the reliability of our financial statements and effectiveness of our internal controls, which ultimately
could negatively impact the market price of our common stock.
The large amount of intangible assets and goodwill recorded on our balance sheet may lead to significant impairment charges in the future.
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We regularly review our long-lived assets, including identifiable intangible assets and goodwill, for impairment. Goodwill and acquired indefinite life
intangible assets are subject to impairment review on an annual basis and whenever potential impairment indicators are present. Other long-lived assets are
reviewed when there is an indication that an impairment may have occurred. The amount of goodwill and identifiable intangible assets on our consolidated
balance sheet is US$44 million (2018: US$53 million). In 2019, we recorded total impairment charges of US$24 million (2018: US$27 million). We may
record further significant impairment charges in the future if there are changes in market conditions, a significant reduction in share price or other changes
in the future outlook. In addition, we may from time to time sell assets that we determine are not critical to our strategy or execution. Future events or
decisions may lead to asset impairments and/or related charges. Certain non-cash impairments may result from a change in our strategic goals, business
direction or other factors relating to the overall business environment. Any significant impairment charges could have a material adverse effect on our
results of operations.
Our success depends on our ability to service and support our products directly or in collaboration with our strategic partners.
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To the extent that we or our strategic partners fail to maintain a high quality level of service and support for diagnostic products, there is a risk that the
perceived quality of our products will be diminished in the marketplace. Likewise, we may fail to provide the level, quantity or quality of service expected
by the marketplace. This could result in slower adoption rates and lower than anticipated utilisation of our products which could have a material adverse
effect on our business, financial condition and results of operations.
Consolidation of our customers or the formation of group purchasing organisations could result in increased pricing pressure that could adversely affect our
operating results.
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The health care industry has undergone significant consolidation resulting in increased purchasing leverage for customers and consequently increased
pricing pressures on our business. Additionally, some of our customers have become affiliated with group purchasing organisations. Group purchasing
organisations typically offer members price discounts on laboratory supplies and equipment if they purchase a bundled group of one supplier’s products,
which results in a reduction in the number of manufacturers selected to supply products to the group purchasing organization and increases the group
purchasing organization’s ability to influence its members’ buying decisions. Further consolidation among customers or their continued affiliation with
group purchasing organizations may result in significant pricing pressures and correspondingly reduce the gross margins of our business or may cause our
customers to reduce their purchases of our products, thereby adversely affecting our business, prospects, operating results or financial condition.
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We may be unable to protect or obtain proprietary rights that we utilise or intend to utilise.
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In developing and manufacturing our products, we employ a variety of proprietary and patented technologies. In addition, we have licensed, and expect to
continue to license, various complementary technologies and methods from academic institutions and public and private companies. We cannot provide
any assurance that the technologies that we own or license provide protection from competitive threats or from challenges to our intellectual property. In
addition, we cannot provide any assurances that we will be successful in obtaining licenses or proprietary or patented technologies in the future, or that
licenses granted to us by third parties will not be granted to other third parties who could potentially compete with us.
Filing, prosecuting and defending patents covering our current and future products throughout the world would be prohibitively expensive. Competitors
may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise
infringing products to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States. These
products may compete with our products in jurisdictions where we do not have any issued or licensed patents and any future patent claims or other
intellectual property rights may not be effective or sufficient to prevent them from so competing.
The scope of the patent protection we obtain may not be sufficiently broad to compete effectively in our markets; our patent applications could be rejected or
the existing patents could be challenged; and trade secrets and confidential know-how could be obtained by competitors.
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Trinity Biotech currently owns 6 U.S. patents with remaining patent lives varying from 1 year to 14 years.
We may fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. The patent applications
that we own or in-license may fail to result in issued patents with claims that cover our current products or any future products in the United States or in
other foreign countries. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found,
which can invalidate a patent or prevent a patent from issuing from a pending patent application.
We can provide no assurance that third parties will not challenge the validity, enforceability or scope of the patents Trinity Biotech may apply for, or
obtain, which may result in such patents being narrowed, invalidated, or held unenforceable. Any successful opposition to these patents or any other
patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any products covered by those patents.
Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product under patent protection could be
reduced. We can provide no assurance that our patents will continue to be commercially valuable.
Trade secrets and confidential know-how are important to our scientific and commercial success. Although we seek to protect our proprietary information
through confidentiality agreements and other contracts, we can provide no assurance that others will not independently develop the same or similar
information or gain access to our proprietary information.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these
requirements.
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Periodic maintenance fees on any issued patent are due to be paid to the United States Patent and Trademark Organization (“USPTO”) and other foreign
patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign national or international patent agencies require
compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an
inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in
which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the
relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of patent rights include, but are not limited to, failure to timely file
national and regional stage patent applications based on our international patent application, failure to respond to official actions within prescribed time
limits, non-payment of fees and failure to properly legalise and submit formal documents. If we or our licensors fail to maintain the patents and patent
applications covering our current or future products, our competitors might be able to enter the market, which would have an adverse effect on our
business.
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Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
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Depending on actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable
ways that would weaken our ability to obtain new patents or to enforce patents that we have licensed or that we might obtain in the future.
For example, the United States has enacted and implemented wide-ranging patent reform legislation, which could increase the uncertainties and costs
surrounding the prosecution of our patent applications and the enforcement or defence of our issued patents. On September 16, 2011, the Leahy-Smith
America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent
law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The United States Patent Office
recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law
associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear
what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase
the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defence of our issued patents, all of which could
have an adverse effect on our business and financial condition.
Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain
circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain
patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.
Product infringement claims by other companies could result in costly disputes and could limit our ability to sell our products.
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Litigation over intellectual property rights is prevalent in the diagnostic industry, including patent infringement lawsuits, interferences, derivation and
administrative law proceedings, inter party review, and post-grant review before the USPTO, as well as oppositions and similar processes in foreign
jurisdictions.
As the market for diagnostics continues to grow and the number of participants in the market increases, we may increasingly be subject to patent
infringement claims. It is possible that a third-party may claim infringement against us. For example, because patent applications can take many years to
issue, there may be currently pending patent applications which may later result in issued patents that our products may infringe. Defence of these claims,
regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of managerial and financial resources from our
business. Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and
commercialise one or more of our products. The pendency of any litigation may cause our distributors and customers to reduce or terminate purchases of
our products. If found to infringe, we may have to pay substantial damages, including treble damages and attorneys’ fees for wilful infringement, obtain
one or more licenses from third parties, pay royalties or redesign our affected products, which may be impossible or require substantial time and monetary
expenditure. Any substantial loss resulting from such a claim could cause our revenues to decrease and have a material adverse affect on our profitability,
and the damage to our reputation in the industry could have a material adverse affect on our business.
If we need to obtain a license as a result of litigation, we cannot predict whether any such license would be available at all or whether it would be available
on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our
research or allow commercialisation of our products. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In
that event, we would be unable to further develop and commercialise one or more of our products, which could harm our business significantly.
We may be involved in lawsuits to enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time
consuming and unsuccessful.
•
Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or
unauthorised use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court
may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on
the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defence proceedings could put one or more of
our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against
a third party may also cause the third party to bring counter claims against us such as claims asserting that our patents are invalid or unenforceable. In
patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge
could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or lack of statutory
subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant
material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims
before the USPTO in post-grant proceedings such as ex parte re-examinations, inter partes review, or post-grant review, or oppositions or similar
proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of
invalidity and unenforceability is unpredictable.
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We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. For the patents and
patent applications that we have licensed, we may have limited or no right to participate in the defence of any licensed patents against challenge by a third
party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent
protection on our current or future products. Such a loss of patent protection could harm our business.
We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws
may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a license on
commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result
in substantial costs and distract our management and other employees.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our
confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of
hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an
adverse effect on the price of our ordinary shares.
Our ability to protect our information systems and electronic transmissions of sensitive data from data corruption, cyber-based attacks, security breaches or
privacy violations is critical to the success of our business.
•
•
We are highly dependent on information technology networks and systems, including the Internet, to securely process, transmit and store electronic
information, including personal information of our customers. Security breaches of this infrastructure, including physical or electronic break-ins, computer
viruses, malware attacks by hackers and similar breaches, can cause all or portions of our websites to be unavailable, create system disruptions, shutdowns,
erasure of critical data and software or unauthorised disclosure of confidential information. We invest in security technology to protect our data against
risks of data security breaches and cyber-attacks and we have implemented solutions, processes, and procedures to help mitigate these risks, such as
encryption, virus protection, security firewalls and comprehensive information security and privacy policies. However, despite our security measures, our
information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.
The age of our information technology systems, as well as the level of our protection and business continuity or disaster recovery capability, varies from
site to site, and there can be no guarantee that any such plans, to the extent they are in place, will be effective. In addition, a security breach or privacy
violation that leads to disclosure of consumer information (including personally identifiable information or protected health information) could harm our
reputation, compel us to comply with disparate state breach notification laws and otherwise subject us to liability under laws that protect personal data,
resulting in increased costs or loss of revenue. If we are unable to prevent further security breaches or privacy violations or implement satisfactory
remedial measures, our operations could be disrupted, we may be subject to legal claims or proceedings, or we may suffer loss of reputation, financial loss
and other regulatory penalties because of lost or misappropriated information, including sensitive consumer data, which could have a material adverse
impact on our business, financial condition and results of operations. While we currently expend resources to protect against cyber-attacks and security
breaches, hackers and other cyber criminals are using increasingly sophisticated and constantly evolving techniques, and we may need to expend additional
resources to continue to protect against potential security breaches or to address problems caused by such attacks or any breach of our safeguards. In
addition, a data security breach could distract management or other key personnel from performing their primary operational duties.
In addition, the interpretation and application of consumer and data protection laws in the United States, Europe and elsewhere are often uncertain,
contradictory and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, this
could result in government-imposed fines or orders requiring that we change our data practices, which could have an adverse effect on our business.
Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our
business.
Reductions in government funding and research budgets could adversely affect our business and financial results.
•
We sell our products into the public health market, which consists of state, county and other governmental public health agencies, community-based
organisations, service organisations and similar entities. Many of these customers depend to a significant degree on grants or funding provided by
governmental agencies to run their operations including programs that use our products. In international markets, we often sell our products to parties
funded by such agencies. The level of available government grants or funding is unpredictable and may be affected by various factors including future
economic conditions, legislative and regulatory developments, political changes, civil unrest and changing priorities for research and development
activities. Any reduction or delay in government funding could cause our customers to delay, reduce or forego purchases of our products.
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Risks Related to Government Regulation
Changes in healthcare regulation could affect our revenues, costs and financial condition.
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In the United States in recent years, there have been numerous initiatives at the federal and state level for comprehensive reforms affecting the payment
for, the availability of and reimbursement for healthcare services. These initiatives have ranged from proposals to fundamentally change federal and state
healthcare reimbursement programs, including providing comprehensive healthcare coverage to the public under government-funded programs, to minor
modifications to existing programs. One example is the Patient Protection and Affordable Care Act, the Federal healthcare reform law enacted in 2010 (the
“Affordable Care Act”). Similar reforms may occur internationally.
Legislative and regulatory bodies are likely to continue to pursue healthcare reform initiatives in many forms and may continue to reduce funding in an
effort to lower overall federal healthcare spending. The U.S. government recently enacted legislation that eliminated what is known as the “individual
mandate” under the Affordable Care Act and may enact other changes in the future. The ultimate content and timing of any of these types of changes in
other healthcare reform legislation and the resulting impact on us are impossible to predict. If significant reforms are made to the healthcare system in the
U.S., or in other jurisdictions, those reforms may increase our costs or otherwise have an adverse effect on our financial condition and results of operations.
Tax matters, including disagreements with taxing authorities, the changes in corporate tax rates and imposition of new taxes could impact our results of
operations and financial condition.
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We are subject to regular reviews, examinations, and audits by tax authorities in a number of jurisdictions across the world with respect to our taxes.
Although we believe our tax estimates are reasonable, if a taxing authority disagrees with the positions we have taken, we could face additional tax
liability, including interest and penalties. There can be no assurance that payment of such additional amounts upon final adjudication of any disputes will
not have a material impact on our results of operations and financial position.
A significant portion of our business is located in the U.S. and is subject to income and other taxes in the U.S. and our operations, plans and results are
affected by tax and other initiatives. In December, 2017, the U.S. Government enacted comprehensive tax legislation known as the Tax Cuts and Jobs Act.
This legislation made broad and complex changes to the U.S. tax code, including but not limited to reducing the corporate tax rate from 35% to 21%,
requiring a one-time mandatory deemed repatriation of certain deferred foreign earnings tax on and accelerating first year expensing of certain capital
expenditures. The legislation also introduced new tax laws affecting our taxable income, which includes, but is not limited to, a new provision designed to
tax global intangible low taxed income, limitations on the deductibility of certain executive compensation, creating a base erosion anti-abuse tax and
modifying or repealing many deductions and credits. The ultimate impacts of the Tax Act may differ from the Company’s estimates due to changes in the
interpretations and assumptions made, as well as any forthcoming regulatory guidance. The changes to the tax code could also affect our valuation of
deferred tax assets and liabilities. Any such change in valuation would have a material impact on our income tax expense and deferred tax balances.
Our laboratory business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under, or future changes in, the law or
regulations of the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”), or those of other state or local agencies.
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Our laboratory operated by our subsidiary Immco Diagnostics Inc. is subject to CLIA, which is administered by CMS and extends federal oversight to
virtually all clinical laboratories by requiring that they be certified by the federal government or by a federally-approved accreditation agency. CLIA is
designed to ensure the quality and reliability of clinical laboratories by, among other things, mandating specific standards in the areas of personnel
qualifications, administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections.
Laboratories must undergo on-site surveys at least every two years, which may be conducted by the Federal CLIA program or by a private CMS approved
accrediting agency such as the College of American Pathologists, among others. The sanction for failure to comply with CLIA requirements may be
suspension, revocation or limitation of a laboratory’s CLIA certificate, which is necessary to conduct business, as well as significant fines and/or criminal
penalties.
We are also subject to regulation of laboratory operations under state clinical laboratory laws of New York and of certain other states from where we accept
specimens. State clinical laboratory laws may require that laboratories and/or laboratory personnel meet certain qualifications, specify certain quality
controls or require maintenance of certain records. For example, California requires that we maintain a license to conduct testing in California, and
California law establishes standards for our day-to-day laboratory operations, including the training and skill required of laboratory personnel and quality
control.
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In some respects, notably with respect to qualifications of testing personnel, California’s clinical laboratory laws impose more rigorous standards than does
CLIA. Certain other states, including Florida, Maryland, New York and Pennsylvania, require that we hold licenses to test specimens from patients
residing in those states, and additional states may require similar licenses in the future. Potential sanctions for violation of these statutes and regulations
include significant fines and the suspension or loss of various licenses, certificates and authorisations, which could adversely affect our business and results
of operations.
Item 4
Information on the Company
Trinity Biotech develops, acquires, manufactures and markets medical diagnostic products for the clinical laboratory and point-of-care segments of the
diagnostic market. These products are used to detect autoimmune, infectious and sexually transmitted diseases, diabetes and disorders of the liver and intestine.
Trinity Biotech also is a significant provider of raw materials to the life sciences and research industries globally.
Trinity Biotech markets its portfolio of almost 850 products to customers in approximately 100 countries around the world through its own sales force and a
network of international distributors and strategic partners.
Trinity Biotech was incorporated as a public limited company (“plc”) registered in Ireland in 1992. The Company commenced operations in 1992 and, in
October 1992, completed an initial public offering of its securities in the US. The principal offices of the Group are located at IDA Business Park, Bray, Co
Wicklow, Ireland. The Group has expanded its product base through internal development and acquisitions.
The following represents the most recent acquisition made by Trinity Biotech:
Acquisition of Immco Diagnostics Inc
In 2013, the Group acquired 100% of the common stock of Immco Diagnostics Inc (“Immco”) for US$32.88m.
Immco, which is headquartered in Buffalo, New York, specialises in the development, manufacture and sale of autoimmune test kits on a worldwide basis. This
product line is complemented by specialised reference laboratory services in diagnostic immunology, pathology and immunogenetics, marketed to U.S. based
hospitals and reference laboratories.
Principal Markets
The primary market for Trinity Biotech’s diagnostic products is the Americas (which consists principally of North America and South America). During fiscal
year 2019, 58% (US$52.2 million) (2018: US$57.6 million or 59%) (2017: 60% or US$59.5 million) of the Group’s total revenues were derived from products
sold in the Americas. Sales in the non-Americas (principally European, Asian and African countries) represented 42% (US$38.2 million) of total sales for fiscal
year 2019 (2018: 41% or US$39.5 million) (2017: 40% or US$39.6 million)
For a more comprehensive segment analysis please refer to Item 5, “Results of Operations” and Item 18, Note 2 to the consolidated financial statements.
Principal Products
The brand names of the principal products of Trinity Biotech are listed below, organised first by point of use and second by application. The trademarks and
registered marks noted below are owned by Trinity Biotech.
Point-Of-Care
Infectious Diseases
UniGold™
Recombigen®
Infectious Diseases
MarDx®
MarBlot®
Haemoglobin
Premier™
Ultra™
Clinical Laboratory
Clinical Chemistry
EZ™
Blood Bank Screening
Captia™
Autoimmune
ImmuBlot™
ImmuGlo™
ImmuLisa™
OTOblot™
Trinity Biotech also sells raw materials to the life sciences industry and research institutes globally through its wholly owned subsidiary, Benen Trading Ltd.,
trading as Fitzgerald Industries.
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Trinity Biotech sells its products through its direct sales organisations in the United States, Brazil and to an extent in the United Kingdom, France and Germany
and then through its network of principal distributors and non-governmental bodies into approximately 100 countries globally.
Point-of-Care (“POC”)
Point-of-care refers to diagnostic tests which are carried out in the presence of the patient.
Uni-Gold™ HIV
We believe that Trinity Biotech makes a very significant contribution to the global effort to meet the challenge of human immuno-deficiency virus, or HIV, with
its principal product, Uni-Gold™ HIV. In Africa, Uni-Gold™ HIV has been used for many years in voluntary counselling and testing centres in the sub-Saharan
region where it is a cornerstone to early detection and treatment intervention.
The Future of Point-Of Care at Trinity Biotech
In Africa, HIV testing typically involves using a point-of-care rapid test for screening followed by a different rapid test as the confirmatory test. Our Uni-Gold™
HIV product is the dominant confirmatory HIV test in the African market and has been the gold standard for over 15 years. It is the confirmatory test of choice in
the vast majority of significant African countries.
Point-Of-Care is key to the growth of Trinity Biotech. Central to this growth will be a new HIV screening test, TrinScreen HIV, which we are in the process of
developing. Trinity Biotech has not previously competed in the larger screening market, which is valued at approximately US$150 million p.a. The screening
market is addressed by few companies. TrinScreen will not jeopardise our existing confirmatory business as it employs a different HIV antigen to the existing
Uni-Gold™ HIV test. In other words, countries will be able to use both the TrinScreen test and the Uni-Gold™ HIV test as part of their testing algorithm . Our
strategy is to leverage the existing brand equity of Trinity Biotech in African markets to take market share in the screening market. This initiative will be
supported by increased sales and marketing resources in the African market. Market opportunities for the TrinScreen product also exist in other territories, in
particular in emerging countries.
The company also sells the only FDA approved and CLIA waived syphilis point-of-care test in the USA.
The Trinity Biotech Uni-Gold™ S. pneumonia, Uni-Gold™ Legionella, Uni-Gold™ C. difficile and Uni-Gold™ Syphilis are all Conformité Européenne (“CE”)
marked and we will concentrate selling these products on international markets outside of the USA.
These point-of-care products will be sold through Trinity Biotech’s sales and marketing organisation to clinical and reference laboratories directly in the United
Kingdom, France and Germany and through independent distributors and strategic partners in other countries.
Clinical Laboratory
Trinity Biotech supplies the clinical laboratory segment of the in-vitro diagnostic market with a range of diagnostic tests and instrumentation which detect:
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Infectious diseases;
Glycated haemoglobin (for diabetes monitoring and diagnosis) and haemoglobin variants for the detection of haemoglobinopathies (haemoglobin
abnormalities);
Autoimmune diseases
Trinity Biotech also supplies this market with other products through its clinical chemistry business.
Infectious Diseases
Trinity Biotech manufactures specialty and esoteric biomarkers of infectious diseases. The products are used in processing patient samples whose results aid
physicians in the diagnosis and clinical assessment of a broad range of infectious diseases. The key clinical laboratory disease areas that Trinity Biotech serves
include:
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Lyme disease,
Sexually transmitted diseases, including Syphilis and Herpes.
• Markers for Epstein Barr, measles, mumps, toxoplasmosis, cytomegalovirus, rubella, varicella and other viral pathogens.
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Trinity Biotech develops, manufactures and distributes products in enzyme-linked immunosorbent (“ELISA”) and cytotoxicity assay formats. As a complement
to its product range, the company also offers third party automated processors to its customers.
The vast majority of the Infectious Diseases product line of Trinity Biotech is FDA cleared for sale in the United States and CE marked in Europe. Products are
sold in approximately 100 countries in total, with the focus on the Americas, Europe and Asia. The infectious disease products are sold through the sales and
marketing organisation of Trinity Biotech to clinical and reference laboratories directly in the U.S. and U.K. and through independent distributors and strategic
partners in other countries.
Diabetes and Haemoglobinopathies
Trinity Biotech manufactures products for in-vitro diagnostic testing for haemoglobin A1c (“HbA1c”) used in the monitoring and diagnosis of diabetes, as well
identifying those who are at a high risk of developing diabetes (pre-diabetic). The Premier Hb9210 uses patented boronate affinity technology to test for HbA1c
which is a measure of a patient’s average blood sugar control over the last 100 to 120 days. It is a highly accurate biomarker available for the diagnosis of
diabetes and is a strong indicator of a diabetic’s glycemic control. HbA1c is also used to identify those at risk of becoming diabetic; often referred to as impaired
glucose tolerance. Additionally HbA1c is used in the assessment of diabetes complications.
Trinity Biotech manufactures its own A1c instrument, the Premier Hb9210, which was launched in Europe and obtained FDA approval in late 2011. In Europe,
Trinity Biotech distributes Premier Hb9210 through its partner Menarini Diagnostics. In the USA and Brazil, Trinity Biotech sells the Premier Hb9210 through
its own direct sales organisations. In the rest of the world, Trinity sells the Premier Hb9210 through a network of distributors. The Premier’s unique features, cost
structure and core technology enables it to compete in most economies and settings.
Trinity Biotech also sells products for haemoglobin variants, primarily through the Ultra2 instrument. This is used for the detection of haemoglobinapothies,
which are genetic defects that result in abnormal structure of the haemoglobin molecule. Haemoglobinapathies include sickle-cell diseases, alpha and beta
thalassemia which are amongst the most common genetic disorders in the world.
Trinity Biotech has launched the Premier Resolution, its next generation Haemoglobinapothy Analyzer in Europe and the Middle East after undergoing rigorous
and successful field trials. In 2020, the Premier Resolution will be submitted to the FDA for approval. The Premier Resolution uses an internally developed
column as well as state of the art hardware and software innovations in order to provide unparalleled variant detection. It is a best in class analyser that will
enable Trinity to expand upon its leading position as a key supplier to this highly specialised segment.
The point-of-care segment of the HbA1c market is addressed by the Tri-stat system. The Tri-stat offers rapid, precise analysis in a simple and highly cost
effective manner. Using boronate affinity technology and a two phase optical system, The instrument can process three samples simultaneously with the three
results available in just 10 minutes. In 2018, a new, second generation Tri-stat analyser was launched in international markets outside of the USA.
Autoimmune Diseases
Autoimmune diseases are diseases that involve an abnormal immune response in which the immune system attacks the body’s own cells and tissues.
In 2013, Trinity Biotech acquired Immco Diagnostics (“Immco”), an autoimmunity company known for novel assay development and high impact contributions
to autoimmune disease diagnostic research.
Immco develops, manufactures and sells products in the following formats for diagnosis of autoimmune diseases:
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Immunofluorescence Assay (“IFA”),
Enzyme-linked immunosorbent (“ELISA”),
• Western Blot (“WB”) and
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Line immunoassay (“LIA”).
The Immco products are a seamless fit for the instrument platforms that Trinity Biotech markets its infectious diseases products. Additionally, Trinity sells a
complete line of IFA processors. The majority of Immco’s products are FDA cleared for sale in the U.S. and CE marked in Europe.
The Immco product line addresses the high growth, lower throughput, specialty autoimmune segment, where competition is limited. The principal autoimmune
conditions in this segment are rheumatoid arthritis, vasculitis, lupus, celiac and Crohn’s disease, ulcerative colitis, neuropathy, Hashimoto’s disease and Grave’s
disease.
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In addition, Immco is the only company able to market a panel of proprietary early markers for Sjogrens disease often referred to as “dry eye disorder”
The Immco products are sold through Trinity Biotech’s sales and marketing organisation to clinical and reference laboratories directly in the USA and via
distributors in other countries. Menarini Diagnostics, a European market leader in autoimmune testing, distributes Immco products in the key European markets.
The diagnostic product line is complemented by Immco’s New York state licensed reference laboratory offering specialised services in diagnostic immunology,
pathology and immunogenetics, and is marketed to U.S.-based reference laboratories and hospitals.
Clinical Chemistry
The speciality clinical chemistry business of Trinity Biotech includes reagent products such as ACE, bile acids, lactate, oxalate and glucose-6-phosphate
dehydrogenase (“G6PDH”) that are clearly differentiated in the marketplace. These products are suitable for both manual and automated testing and have proven
performance in the diagnosis of many disease states from liver and kidney disease to G6PDH deficiency which is an indicator of haemolytic anaemia.
Blood Bank Screening
Trinity Biotech manufactures enzyme-linked immunosorbent assays (“ELISA”), for the detection of Syphilis and Malaria. These products are sold through
distributors and are manufactured under original equipment manufacturer agreements for other major third party diagnostic companies. The business is not
currently operating in the United States.
Sales and Marketing
Trinity Biotech sells its products through its own direct sales force in the United States. Our sales team in the United States is responsible for marketing and
selling the Trinity Biotech range of Point-Of-Care, Infectious Diseases, Haemoglobins, Autoimmune and Clinical Chemistry products. Meanwhile the direct
sales force in Brazil sells the company’s haemogloblins product range.
Through its international sales and marketing organisation, which is located in Ireland, Trinity Biotech sells:
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Its Clinical Chemistry product range directly to hospitals and laboratories in Germany and France;
Infectious Diseases and Clinical Chemistry product ranges directly to hospitals and laboratories in the UK; and
All product lines through independent distributors and strategic partners in a further approximately 100 countries.
Competition
The diagnostic industry is very competitive. There are many companies, both public and private, engaged in the sale of medical diagnostic products and
diagnostics-related research and development, including a number of well-known pharmaceutical and chemical companies. Competition is based primarily on
product reliability, customer service and price. This is a technology driven market with an emphasis on automation and emerging biomarkers. Trinity actively
works on increasing automation for the clinical laboratory. Trinity seeks to bring novel biomarkers to market by licensing agreements with universities and
innovative companies.
The Group’s competition includes several large companies such as, but not limited to: Abbott Diagnostics, Arkray, Bio-Rad, Diasorin Inc., Johnson & Johnson,
OraSure Technologies Inc., Roche Diagnostics, Siemens (from the combined acquisitions of Bayer, Dade-Behring and DPC), Thermo Fisher and Tosoh.
Patents and Licences
Patents
Many of Trinity Biotech’s tests are not protected by specific patents, due to the significant cost of putting patents in place for Trinity Biotech’s wide range of
products. However, Trinity Biotech believes that substantially all of its tests are protected by proprietary know-how, manufacturing techniques and trade secrets.
From time-to-time, certain companies have asserted exclusive patent, copyright and other intellectual property rights to technologies that are important to the
industry in which Trinity Biotech operates. In the event that any of such claims relate to its planned products, Trinity Biotech intends to evaluate such claims and,
if appropriate, seek a licence to use the protected technology. There can be no assurance that Trinity Biotech would, firstly, be able to obtain licences to use such
technology or, secondly, obtain such licences on satisfactory commercial terms. If Trinity Biotech or its suppliers are unable to obtain or maintain a licence to
any such protected technology that might be used in Trinity Biotech’s products, Trinity Biotech could be prohibited from marketing such products. It could also
incur substantial costs to redesign its products or to defend any legal action taken against it. If Trinity Biotech’s products should be found to infringe protected
technology, Trinity Biotech could also be required to pay damages to the infringed party.
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Licences
Trinity Biotech has entered into a number of key licensing arrangements including the following:
Immco entered into a license agreement on January 19, 2012, and subsequently an amended license agreement on June 14, 2018. The license pertains to any
product or service relating to identifying indicators of Sjogren’s disease. The agreement is effective through January 21, 2036 and is worldwide in scope.
Royalties are payable based on agreement in place.
In 2013, Trinity Biotech entered into a licence agreement with a leading market participant, giving the Group a non-exclusive, worldwide licence access to a
significant HIV-2 patent portfolio for the purpose of making, using and selling a HIV test kit, subject to certain limitations.
In 2012, Trinity Biotech entered into a licence agreement with the CDC in Atlanta, Georgia, United States for the rights to use Cardiolipin and other
immunoassays and mechanisms in developing and producing a Syphilis rapid test.
In 2006, Trinity Biotech entered into a new licence agreement with Inverness Medical Innovations (“IMI”) to IMI’s updated broad portfolio of lateral flow
patents, which expanded the field of use to include over the counter (“OTC”) for HIV products, thus ensuring Trinity Biotech’s freedom to operate in the lateral
flow market with its UniGold™ technology. As a platform technology, the lateral flow licences obtained from Inverness Medical Innovations also apply to
Point-of-Care tests developed at our Carlsbad facility.
In 2005, Trinity Biotech obtained a licence from the University of Texas for the use of certain Lyme disease antigens, thus enabling the inclusion of these
antigens in the Group’s Lyme diagnostic products.
On December 19, 1999 Trinity Biotech obtained a non-exclusive commercial licence from the National Institute of Health (“NIH”) in the United States for NIH
patents relating to the general method of producing HIV-1 in cell culture and methods of serological detection of antibodies to HIV-1.
Each of the key licensing arrangements disclosed under this subheading terminates on the date expiration or adjudication of invalidity or unenforceability of the
last of the particular licensed patents covered by the respective agreement. Each licensor has the right to terminate the arrangement in the event of non-
performance by Trinity Biotech. The key licensing arrangements, with the exception of the agreement entered into in 2013 which provides for the payment of a
lump sum licence fee, require the Group to pay a royalty to the licence holder which is based on sales of the products which utilise the relevant technology being
licensed. The royalty rates vary from 1.6% to 12.5% of sales. The total amount paid by Trinity Biotech under key licensing arrangements in 2019 was
US$338,000 (2018: US$442,000).
Government Regulation
The research, development, preclinical and clinical testing, as well as the manufacture, labelling, marketing, sales, record-keeping, advertising, distribution, and
promotion of Trinity Biotech’s products are subject to extensive and rigorous government regulation in the United States and in other countries in which Trinity
Biotech’s products are sought to be marketed.
The process of obtaining authorisation to market our products varies, depending on the product categorisation and the country, from merely notifying the
authorities of intent to sell, to lengthy formal approval procedures which often require detailed laboratory and clinical testing and other costly and time-
consuming processes. The main regulatory bodies which require extensive clinical testing are the FDA in the United States, the Health Product Regulatory
Authority (as the authority over Trinity Biotech in Europe) and Health Canada.
The process in each country varies considerably depending on the nature of the test, the perceived risk to the user and patient, the facility at which the test is to
be used and other factors. As 58% of Trinity Biotech’s 2019 revenues were generated in the Americas (with a large concentration of this in the United States)
and as the United States represents a substantial proportion of the worldwide diagnostics market, an overview of FDA regulation has been included below.
Food and Drug Administration
All of our products sold in the United States are medical devices subject to the Federal Food, Drug, and Cosmetic Act (“FDCA”), as implemented and enforced
by the U.S. Food and Drug Administration (“FDA”). Certain products sold in the United States require FDA clearance to market under Section 510(k) of the
FDCA. Other products sold in the United States require premarket approval (“PMA”) to market.
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Failure by us or by our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other regulatory authorities,
which may result in sanctions including, but not limited to:
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untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
unanticipated expenditures to address or defend such actions
customer notifications for repair, replacement, refunds;
recall, detention or seizure of our products;
operating restrictions or partial suspension or total shutdown of production;
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products;
operating restrictions;
withdrawing 510(k) clearances or PMA approvals that have already been granted;
refusal to grant export approval for our products; or
criminal prosecution.
The FDA governs the following activities that we perform or that are performed on our behalf, to ensure that medical products distributed domestically or
exported internationally are safe and effective for their intended uses:
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product design, development and manufacture;
product safety, testing, labeling and storage;
record keeping procedures;
product marketing, sales and distribution; and
post-marketing surveillance, complaint handling, medical device reporting, reporting of deaths, serious injuries or device malfunctions and
repair or recall of products.
FDA premarket clearance and approval requirements
Access to U.S. Market. Each medical device that Trinity Biotech may wish to commercially distribute in the U.S. will require either pre-market notification
(more commonly known as 510(k)) clearance or approval of a pre-market approval (“PMA”) application prior to commercial distribution, unless specifically
exempt. Under the FDCA, medical devices are classified into one of three classes -- Class I, Class II or Class III -- depending on the degree of risk associated
with each medical device and the extent of control needed to ensure safety and effectiveness. Class I devices are those for which safety and effectiveness can be
assured by adherence to FDA’s general regulatory controls for medical devices, which include compliance with the applicable portions of the FDA's Quality
System Regulation ("QSR"), facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling,
advertising, and promotional materials (the “General Controls”). Some Class I devices also require premarket clearance by the FDA through the 510(k)
premarket notification process described below.
Class II devices are subject to FDA’s general controls, and any other special controls as deemed necessary by FDA to ensure the safety and effectiveness of the
device. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process. Unless a specific
exemption applies, 510(k) premarket notification submissions are subject to user fees.
Devices deemed by the FDA to pose the greatest risk, such as life sustaining, life-supporting or implantable devices, or devices deemed not substantially
equivalent to a previously 510(k)-cleared device are categorised as Class III, requiring approval of a PMA.
510(k) Clearance Pathway. When a 510(k) clearance is required, Trinity Biotech must submit a pre-market notification demonstrating that the proposed device
is substantially equivalent to a previously cleared 510(k) device, a device that was in commercial distribution before May 28, 1976 for which the U.S. Food and
Drug Administration has not yet called for the submission of pre-market approval applications, or is a device that has been reclassified from Class III to either
Class II or I. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As a practical
matter, clearance may take longer. As a practical matter, the FDA’s 510(k) clearance pathway usually takes from 3 to 12 months, but it can take longer, and
clearance is never assured. Although many 510(k) pre-market notifications are cleared without clinical data, in some cases, the U.S. Food and Drug
Administration requires significant clinical data to support substantial equivalence.
In reviewing a pre-market notification, the FDA may request additional information, including clinical data, which may significantly prolong the review process.
After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its
intended use, requires a new 510(k) clearance or could even require a PMA approval, if the change raises complex or novel scientific issues or the product has a
new intended use. The FDA requires each manufacturer to make this determination initially, but the FDA may review any such decision and may disagree with a
manufacturer’s determination.
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If the FDA disagrees with a manufacturer’s determination, the FDA may require the manufacturer to cease marketing and/or recall the modified device until
510(k) clearance or pre-market approval is obtained. We have modified aspects of some of our devices since receiving regulatory clearance. Some of those
modifications we believe could not significantly affect the safety or efficacy of the device, and therefore, we believe new 510(k) clearances or pre-market
approvals are not required. We have also obtained new 510(k) clearances from the FDA for other modifications to our devices.
In the future, we may make additional modifications to our products after they have received FDA clearance or approval, and in appropriate circumstances,
determine that new clearance or approval is unnecessary.
However, the FDA may disagree with our determination and if the FDA requires us to seek 510(k) clearance or pre-market approval for any modifications to a
previously cleared product, we may be required to cease marketing or recall the modified device until we obtain the required clearance or approval. Under these
circumstances, we may also be subject to significant regulatory fines or other penalties. In addition, the FDA continues to evaluate the 510(k) process and may
make substantial changes to industry requirements, including which devices are eligible for 510(k) clearance, the ability to rescind previously granted 510(k)s
and additional requirements that may significantly impact the process.
PMA Approval Pathway. A device that does not qualify for 510(k) clearance generally will be placed in class III and required to obtain PMA approval, which
requires proof of the safety and effectiveness of the device to the FDA’s satisfaction for its intended use. A PMA application must provide extensive technical,
preclinical and clinical trial data and also information about the device and its components regarding, among other things, device design, manufacturing and
labelling. In addition, an advisory panel made up of clinicians and/or other appropriate experts from outside the FDA is typically convened to evaluate the
application and make recommendations to the FDA as to whether the device should be approved.
Although the FDA is not bound by the advisory panel decision, the panel’s recommendation is important to the FDA’s overall decision making process. The
PMA approval pathway is more costly, lengthy and uncertain than the 510(k) clearance process. After a premarket approval application is sufficiently complete,
the FDA will accept the application and begin an in-depth review of the submitted information. By statute, the FDA has 180 days to review the “accepted
application”, although, generally, review of the application can take between one and three years, but it may take significantly longer. During this review period,
the FDA may request additional information or clarification of information already provided. In addition, the FDA will conduct a pre-approval inspection of the
manufacturing facility to ensure compliance with Quality System Regulation, which imposes elaborate design development, testing, control, documentation and
other quality assurance procedures in the design and manufacturing process.
After approval of a PMA, a new PMA or PMA supplement is required in the event of a modification to the device, its labelling or its manufacturing process.
The FDA imposes substantial user fees for the submission and review of PMA applications. The FDA may approve a PMA application with post-approval
conditions intended to ensure the safety and effectiveness of the device including, among other things, restrictions on labelling, promotion, sale and distribution
and collection of long-term follow-up data from patients in the clinical study that supported approval. Failure to comply with the conditions of approval can
result in materially adverse enforcement action, including the loss or withdrawal of the approval. New PMA applications or PMA supplements are required for
significant modifications to the manufacturing process, labelling of the product and design of a device that is approved through the PMA process. PMA
supplements often require submission of the same type of information as the original PMA application, except that the supplement is limited to information
needed to support any changes from the device covered by the original PMA application, and may not require as extensive clinical data or the convening of an
advisory panel.
Clinical Studies
Devices that have not received FDA approval or clearance and are used in clinical trials are considered to be and must be labeled as investigational devices.
FDA regulates these products under the IDE regulations. (See 21 C.F.R. § 812.)
Per the IDE regulations, clinical studies that involve investigational devices are divided into two categories, based on the type of device. Studies of devices
considered by the agency to present a significant risk require prior approval by an Institutional Review Board (“IRB”), informed consent of patients, and FDA
approval of an IDE application, which details in part the clinical study protocol, pursuant to 21 C.F.R. § 812. A significant risk device study is defined as a study
of a device that presents a potential for serious risk to the health, safety, or welfare of a subject and falls into at least one of the following categories: (1) it is
intended as an implant; (2) it is used in supporting or sustaining human life; (3) it is of substantial importance in diagnosing, curing, mitigating or treating a
disease, or otherwise prevents impairment of human health; or (4) it otherwise presents a potential for serious risk to the health, safety, or welfare of a subject.
See 21 C.F.R. 812.3(m). Studies of non significant risk investigational devices require IRB approval and informed consent; however, the sponsor of the study
does not have to obtain FDA approval of an IDE application before beginning the study.
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Most clinical studies of IVDs (all of which technically involve investigational use only (“IUO”) devices) are exempted from the IDE regulation, so long as the
IUO device and the study meet certain regulatory criteria. Specifically, devices are exempt from IDE requirements if they are intended for IUO and:
• Are non-invasive;
• Do not require an invasive sampling procedure that poses a significant risk;
• Do not introduce energy into a subject by design or intention;
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Are not to be used as a diagnostic procedure without confirmation of the diagnosis by another medically established diagnostic product or
procedure; and
• Comply with the labeling requirements for IUO devices, as outlined in 21 C.F.R. § 812.2(c)(3).
If an IUO device does not meet all the requirements for exemption, studies involving that IUO device would be subject to the IDE regulations. The majority of
our products are exempt from the IDE regulation. However, we are required to have IRB approval prior to and during our clinical trials and must obtain
informed consent from study participants.
Post-market Regulation
After the FDA permits a device to enter commercial distribution, numerous regulatory requirements apply. These include:
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product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;
Quality System Regulation, (“QSR”), which requires manufacturers, including third-party manufacturers, to follow stringent design, testing,
control, documentation and other quality assurance procedures during all aspects of the manufacturing process;
labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;
clearance of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use of
one of our cleared devices;
approval of product modifications that affect the safety or effectiveness of one of our approved devices;
medical device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may have
caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious
injury if the malfunction of the device or a similar device were to recur;
post-approval restrictions or conditions, including post-approval study commitments;
post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness
data for the device;
the FDA's recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that
is in violation of governing laws and regulations;
regulations pertaining to voluntary recalls; and
notices of corrections or removals.
We have registered our facilities with the FDA as medical device manufacturers. The FDA has broad post-market and regulatory enforcement powers. We are
subject to announced and unannounced inspections by the FDA to determine our compliance with the QSR and other regulations and these inspections may
include the manufacturing facilities of our suppliers. In 2017, the FDA closed its pilot program for MDSAP (Medical Device Single Audit Program) and began
accepting third party inspection reports from approved Auditing Organizations in lieu of conducting its own routine surveillance inspections. MDSAP audits are
paid by the manufacturer and conducted annually. The FDA receives and reviews the MDSAP report and may respond to the manufacturer with its own
inspection if it deems the facility is not in control. If the FDA finds any failure to comply, the agency can institute a wide variety of enforcement actions, ranging
from a public warning letter to more severe sanctions such as fines, injunctions, and civil penalties; recall or seizure of products; the issuance of public notices or
warnings; operating restrictions, partial suspension or total shutdown of production; refusing requests for 510(k) clearance or PMA approval of new products;
withdrawing 510(k) clearance or PMA approvals already granted; and criminal prosecution.
Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission and by state
regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of other companies have been the subject of enforcement
action brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham Act and similar state laws,
competitors and others can initiate litigation relating to advertising claims. If the FDA determines that our promotional materials or training constitutes
promotion of an unapproved use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions,
including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or
foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which
could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, our
reputation could be damaged and adoption of the products would be impaired.
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Furthermore, our products could be subject to voluntary recall if we or the FDA determine, for any reason, that our products pose a risk of injury or are
otherwise defective. Moreover, the FDA can order a mandatory recall if there is a reasonable probability that our device would cause serious adverse health
consequences or death.
Unanticipated changes in existing regulatory requirements or adoption of new requirements could have a material adverse effect on the Group. Any failure to
comply with applicable QSR or other regulatory requirements could have a material adverse effect on the Group’s revenues, earnings and financial standing.
There can be no assurances that the Group will not be required to incur significant costs to comply with laws and regulations in the future or that laws or
regulations will not have a material adverse effect upon the Group’s revenues, earnings and financial standing.
Clinical Laboratory Improvement Amendments of 1988, (“CLIA”)
Purchasers of Trinity Biotech’s clinical diagnostic products and our reference laboratory in the United States may be regulated under The Clinical Laboratory
Improvements Amendments of 1988 and related federal and state regulations. CLIA is intended to ensure the quality and reliability of clinical laboratories in the
United States by mandating specific standards in the areas of personnel qualifications, administration and participation in proficiency testing, patient test
management, quality control, quality assurance and inspections. The regulations promulgated under CLIA established three levels of diagnostic tests (“waived”,
“moderately complex” and “highly complex”) and the standards applicable to a clinical laboratory depend on the level of the tests it performs. Laboratories
performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. In addition, we and our
customers are required to meet certain laboratory licensing requirements for states with regulations beyond CLIA. For more information on state licensing
requirements, see the sections entitled “Government Regulation – New York Laboratory Licensing” and “Government Regulation – Other States’ Laboratory
Licensing.”
Under CLIA, a laboratory is any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the
diagnosis, prevention or treatment of disease, or the impairment of or assessment of health.
CLIA requires that a laboratory hold a certificate applicable to the type of laboratory examinations it performs and that it complies with, among other things,
standards covering operations, personnel, facilities administration, quality systems and proficiency testing, which are intended to ensure that clinical laboratory
testing services are accurate, reliable and timely. Laboratories must register and list their tests with the Centers for Medicare & Medicaid Services, or CMS, the
agency that oversees CLIA.
CLIA compliance and certification is also a prerequisite to be eligible to bill for services provided to governmental payor program beneficiaries and for many
private payors. CLIA is user-fee funded. Therefore, all costs of administering the program must be covered by regulated facilities, including certification and
survey costs.
To renew our CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards. We also may be subject to
additional unannounced inspections. Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories
performing less complex tests. CLIA requires full validation including accuracy, precision, specificity, sensitivity and establishment of a reference range for any
test used in clinical testing. The regulatory and compliance standards applicable to the testing we perform may change over time and any such changes could
have a material effect on our business.
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Federal Oversight of Laboratory Developed Tests and Research Use Only Products
Trinity Biotech supplies clinical laboratories with raw materials, such as reagent products, that may be used by clinical laboratories in clinical laboratory tests,
which are regulated under CLIA, as well as by applicable state laws. Although the FDA has statutory authority to assure that medical devices are safe and
effective for their intended uses, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to laboratory
developed tests, or LDTs. The FDA defines the term “laboratory developed test” as an in vitro diagnostic test that is intended for clinical use and designed,
manufactured and used within a single laboratory. Until 2014, the FDA exercised enforcement discretion such that it did not enforce provisions of the Food,
Drug and Cosmetic Act with respect to LDTs. In July 2014, due to the increased proliferation of LDTs for complex diagnostic testing, and concerns with several
high-risk LDTs related to lack of evidentiary support for claims and erroneous results, the FDA issued guidance that, when finalized, would adopt a risk based
framework that would increase FDA oversight of LDTs. As part of this developing framework, FDA issued draft guidance in October 2014, informing Congress
and manufacturers of LDTs of its intent to collect information from laboratories regarding their current LDTs and newly developed LDTs through a notification
process. The FDA will use this information to classify LDTs and to prioritize enforcement of premarket review requirements for categories of LDTs based on
risk, using a public process. Specifically, FDA plans to use advisory panels to provide recommendations to the agency on LDT risks, classification and
prioritization of enforcement of applicable regulatory requirements on certain categories of LDTs, as appropriate.
Some products are for research use only (“RUO”), or for IUO. RUO and IUO products are not intended for human clinical use and must be properly labeled in
accordance with FDA guidance. Claims for RUOs and IUOs related to safety, effectiveness, or diagnostic utility or that it are intended for human clinical
diagnostic or prognostic use are prohibited. In November 2013, the FDA issued guidance titled “Distribution of In Vitro Diagnostic Products Labeled for
Research Use Only or Investigational Use Only - Guidance for Industry and Food and Drug Administration Staff.” This guidance sets forth the requirements to
utilize such designations, labeling requirements and acceptable distribution practices, among other requirements. Mere placement of an RUO or IUO label on an
in vitro diagnostic product does not render the device exempt from otherwise applicable clearance, approval or other requirements. The FDA may determine that
the device is intended for use in clinical diagnosis based on other evidence, including how the device is marketed.
We cannot predict the potential effect the FDA’s current and forthcoming guidance on LDTs and IUOs/RUOs will have on our reagents or materials that we
market to the life sciences industry, and that we may use in the development of assays in our reference laboratory. We cannot be certain that the FDA might not
promulgate rules or issue guidance documents that could affect our ability to sell these materials to the market. Should any of the reagents marketed by us to the
life sciences industry and used in conducting diagnostic services be affected by future regulatory actions, our business could be adversely affected by those
actions.
We cannot provide any assurance that FDA regulation, including premarket review, will not be required in the future for LDTs that rely on our reagents or
through our reference laboratory, whether through additional guidance or regulations issued by the FDA, new enforcement policies adopted by the FDA or new
legislation enacted by Congress.
Legislative proposals addressing oversight of LDTs were introduced in recent years and we expect that new legislative proposals will be introduced from time to
time. It is possible that legislation could be enacted into law or regulations or guidance could be issued by the FDA which may result in new or increased
regulatory requirements.
Product Exports
Export of products subject to 510(k) notification requirements, but not yet cleared to market, are permitted without FDA export approval, if statutory
requirements are met. Unapproved products subject to PMA requirements can be exported to any country without prior FDA approval provided, among other
things, they are not contrary to the laws of the destination country, they are manufactured in substantial compliance with the QSR, and have been granted valid
marketing authorisation in Australia, Canada, Israel, Japan, New Zealand, Switzerland, South Africa or member countries of the European Union or of the
European Economic Area (“EEA”). FDA approval must be obtained for exports of unapproved products subject to PMA requirements if these export conditions
are not met.
There can be no assurance that Trinity Biotech will meet statutory requirements and/or receive required export approval on a timely basis, if at all, for the
marketing of its products outside the United States.
Healthcare Reform
The Protecting Access to Medicare Act of 2014 (“PAMA”), which was signed into law on April 1, 2014, significantly alters the current payment methodology
under the Medicare Clinical Laboratory Fee Schedule, or CLFS. Under PAMA, beginning January 1, 2016, clinical laboratories must report laboratory test
contracted payment data for each Medicare-covered clinical diagnostic laboratory test that it furnishes during a time period to be defined by future regulations,
which we expect will cover the previous 12 months. The reported data must include the payment rate (reflecting all discounts, rebates, coupons and other price
concessions) and the volume of each test that was paid by each contracted private payor (including health insurance issuers, group health plans, Medicare
Advantage plans and Medicaid managed care organisations). Beginning in 2017, the Medicare payment rate for each clinical diagnostic lab test will be equal to
the weighted median amount for the test from the most recent data collection period.
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Other recent laws make changes impacting clinical laboratories, many of which have already gone into effect. The Patient Protection and Affordable Care Act,
as amended by the Health Care and Education Reconciliation Act, collectively, the Affordable Care Act (“ACA”), enacted in March 2010, among other things:
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includes a reduction in the annual update factor used to adjust payments under the CLFS for inflation. This update factor reflects the consumer price index
for all urban consumers, or CPI-U, and the ACA reduces the CPI-U by 1.75% for the years 2011 through 2015. The Affordable Care Act also imposes a
multifactor productivity adjustment in addition to the CPI-U, which may further reduce payment rates;
requires certain medical device manufacturers to pay an excise tax in an amount equal to 2.3% of the price for which such manufacturer sells its medical
devices that are listed with the FDA; and
requires the coordination and promotion of research on comparative clinical effectiveness of different technologies and procedures, initiatives to revise
Medicare payment methodologies, such as bundling of payments across the continuum of care by providers and clinicians and initiatives to promote quality
indicators in payment methodologies.
The Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction,
tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby
triggering the legislation’s automatic reduction (known as sequestration) to several government programs. This included aggregate reductions to Medicare
payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in
effect through 2024 unless additional Congressional action is taken.
Further, in February 2012, the Middle Class Tax Relief and Job Creation Act of 2012 was passed, which, among other things, reduced by 2% the 2013 Medicare
CLFS and rebased payments at the reduced rate for subsequent years. Overall, when adding this 2% reduction to the ACA’s 1.75% reduction to the update factor
and the productivity adjustment, the payment rates under the CLFS declined by 2.95% and 0.75% for 2013 and 2014, respectively.
This reduction does not include the additional sequestration adjustment. Lastly, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into
law, which, among other things, increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
State and Federal Privacy and Security Laws
Under the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical
Health Act, or collectively, HIPAA, the U.S. Department of Health and Human Services (“HHS”), has issued regulations to protect the privacy and security of
individually identifiable health information, also known as protected health information (“PHI”), held, used or disclosed by health care providers, such as our
reference laboratory, and other covered entities.
HIPAA also regulates standardisation of data content, codes and formats used in certain electronic health care transactions and standardisation of identifiers for
health plans and providers. HIPAA also governs patient access to laboratory test reports. Effective October 6, 2014, individuals (or their personal representatives,
as applicable) have the right to access test reports directly from laboratories and to direct that copies of those reports be transmitted to persons or entities
designated by the individual. Penalties for violations of HIPAA regulations include civil and criminal penalties.
In addition to federal privacy regulations, there are a number of state laws governing the privacy, confidentiality and security of individually identifiable health
information and other personal information that are applicable to our business. Where these state laws are stricter than the requirements imposed by HIPAA or
impose different or additional requirements than HIPAA, we may be subject to additional restrictions and liability above and beyond HIPAA’s requirements.
The laws governing privacy and security of health information and other personal information are rapidly changing and new laws governing privacy and security
may be adopted in the future as well. We can provide no assurance that we are or will remain in compliance with diverse privacy and security requirements in all
of the jurisdictions in which we do business or process personal information, or in which our patients reside, or that we will be able to keep up with the cost of
complying with new or additional requirements. Failure to comply with privacy and security requirements could result in damage to our reputation, adversely
affect customer or investor confidence in us and reduce the demand for our services from existing and potential customers. In addition, we could face litigation,
penalties and regulatory actions including civil or criminal penalties and significant costs for compliance with new or changing requirements, all of which could
generate negative publicity and which could have a materially adverse effect on our business.
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Federal and State Anti-Kickback Laws
The Federal Anti-Kickback Statute makes it a felony for a person or entity, including a laboratory, to knowingly and willfully offer, pay, solicit or receive any
remuneration, directly or indirectly, to induce or in return for either the referral of an individual or the purchase, lease or order, or arranging for the purchase,
lease or order, of items, services or other business that is reimbursable under any federal health care program, including Medicare and Medicaid. Courts have
stated that an arrangement may violate the Anti-Kickback Statute if any one purpose of the arrangement is to encourage patient referrals or other federal health
care program business, regardless of whether there are other legitimate purposes for the arrangement. In addition, a person or entity does not need to have actual
knowledge of the statute or specific intent to violate it in order to have committed a violation. The definition of "remuneration" has been broadly interpreted to
include anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of
payments, ownership interests and providing anything at less than its fair market value. The Anti-Kickback Statute is broad and prohibits many arrangements and
practices that are lawful in businesses outside of the healthcare industry.
Recognising that the Anti-Kickback Statute may technically prohibit innocuous or beneficial arrangements within the healthcare industry, HHS has issued a
series of regulatory safe harbours. Although full compliance with these safe harbours protects health care providers and other parties against prosecution under
the federal Anti-Kickback Statute, the failure of a transaction or arrangement to fit within a specific safe harbour does not necessarily mean that the transaction
or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued. Instead, the legality of the arrangement will be evaluated on
a case-by-case basis based on a cumulative review of all of its facts and circumstances. Penalties for the Federal Anti-Kickback Statute violations are severe and
include imprisonment, criminal fines, civil money penalties and exclusion from participation in federal health care programs.
Federal and state law enforcement authorities scrutinise arrangements between health care entities or providers and potential referral sources to ensure that the
arrangements are not designed as a mechanism to induce patient care referrals or induce the purchase or prescribing of particular products or services.
The law enforcement authorities, the courts and Congress have also demonstrated a willingness to look behind the formalities of a transaction to determine the
underlying purpose of payments between health care providers or entities and actual or potential referral sources.
Many states have also adopted statutes similar to the federal Anti-Kickback Statute, some of which apply to payments in connection with the referral of patients
for healthcare items or services reimbursed by any source, not only governmental payor programs. There can be no assurance that our relationships with
physicians, hospitals, clinical laboratories and other customers will not be subject to investigation or challenge under such laws.
Physician Self-Referral Prohibitions
In addition to the Anti-Kickback Statute, a federal law directed at physician "self-referral," commonly known as the Stark Law, prohibits, among other things,
physicians who personally or through an immediate family member, have a financial relationship, including an investment, ownership or compensation
relationship with an entity, including clinical laboratories, from referring Medicare patients to that entity for designated health services, which include clinical
laboratory services, unless an exception applies. In addition, the clinical laboratory is prohibited from billing for any tests performed pursuant to a prohibited
referral. Recent court cases have extended the Stark law's prohibition to referral of Medicaid patients as well. A person who engages in a scheme to circumvent
the Stark Law's referral prohibition may be fined up to US$100,000 for each such arrangement or scheme. In addition, any person who presents or causes to be
presented a claim to the Medicare or Medicaid programs in violation of the Stark Law is subject to civil monetary penalties of up to US$15,000 per bill
submission, an assessment of up to three times the amount claimed and possible exclusion from participation in federal governmental payor programs. Bills
submitted in violation of the Stark Law may not be paid by Medicare or Medicaid and any person collecting any amounts with respect to any such prohibited bill
is obligated to refund such amounts. Many states also have anti- "self-referral" and other laws that are not limited to Medicare and Medicaid referrals.
Like the Anti-Kickback Statute, the Stark Law is broad in its application to health care transactions and arrangements. Accordingly, the Stark Law contains many
exceptions, which protect certain arrangements and transactions from the Stark Law penalties. The Stark Law is a strict liability statute, however, so intent is
irrelevant, i.e., a physician's financial relationship with a laboratory must meet an exception under the Stark Law, or the referrals are prohibited. Thus, unlike the
Anti-Kickback Statute's safe harbours, if a laboratory's financial relationship with a referring physician does not meet the requirements of a Stark Law exception,
then the physician is prohibited from making Medicare and Medicaid referrals to the laboratory and any such referrals will result in overpayments to the
laboratory and subject the laboratory to the Stark Law's penalties. Many states have also adopted statutes similar to the Stark Law, some of which apply to
payments in connection with the referral of patients for healthcare items or services reimbursed by any source, not only governmental payor programs.
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Civil Monetary Penalties Law
The federal Civil Monetary Penalties Law, among other things, prohibits the offering or giving of remuneration, including the provision of free items and
services, to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary's selection of a particular supplier of
items or services reimbursable by a federal or state governmental program. Violations could lead to civil money penalties of up to $10,000 for each wrongful act,
assessment of three times the amount claimed for each item or service and exclusion from the federal healthcare programs.
Other Federal and State Fraud and Abuse Laws
In addition to the requirements discussed above, several other health care fraud and abuse laws apply to our business. For example, provisions of the Social
Security Act permit Medicare and Medicaid to exclude an entity that charges the federal health care programs substantially in excess of its usual charges for its
services. The terms "usual charge" and "substantially in excess" are ambiguous and subject to varying interpretations.
HIPAA also created federal criminal statutes that prohibit, among other actions, knowingly and willfully executing or attempting to execute, a scheme to defraud
any healthcare benefit program, including private third-party payors, and knowingly and willfully falsifying, concealing or covering up a material fact or making
any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the
Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a
violation.
A violation of each of these statutes is a felony and may result in fines, imprisonment or exclusion from governmental payor programs. Many states have similar
statutes that may carry significant penalties.
The Federal False Claims Act prohibits a person from knowingly submitting a claim, making a false record or statement in order to secure payment or retaining
an overpayment by the federal government. Actions which violate the Anti-Kickback Statute or Stark Law also incur liability under the False Claims Act. In
addition to actions initiated by the government itself, the statute’s “qui tam” provisions authorise actions to be brought on behalf of the federal government by a
private party having knowledge of the alleged fraud.
Because the complaint is initially filed under seal, the action may be pending for some time before the defendant is even aware of the action. If the government is
ultimately successful in obtaining redress in the matter or if the plaintiff succeeds in obtaining redress without the government's involvement, then the plaintiff
will receive a percentage of the recovery.
When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government,
plus civil penalties ranging from $5,500 to $11,000 for each separate false claim, exclusion from participation in federal health care programs and criminal
penalties. Several states have also adopted comparable state false claims act, some of which apply to all payors.
The ACA, among other things, also imposed new reporting requirements on manufacturers of certain devices, drugs and biologics for certain payments and
transfers of value by them and in some cases their distributors to physicians and teaching hospitals, as well as ownership and investment interests held by
physicians and their immediate family members.
New York Laboratory Licensing
Because our reference laboratory located in New York receives specimens from New York State, our clinical reference laboratory is required to be licensed under
New York laws and regulations, which establish standards for, among other things:
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day-to-day operation of a clinical laboratory, including training and skill levels required of laboratory personnel;
physical requirements of a facility;
equipment; and
validation and quality control.
New York law also mandates proficiency testing for laboratories licensed under New York state law, regardless of whether such laboratories are located in New
York. If a laboratory is out of compliance with New York statutory or regulatory standards, the state regulatory agency may suspend, limit, revoke or annul the
laboratory's New York license, censure the holder of the license or assess civil money penalties. Statutory or regulatory noncompliance may result in a
laboratory's operator being found guilty of a misdemeanor under New York law. The state regulatory agency also must approve any LDT before the test is
offered in New York. Should we be found out of compliance with New York laboratory requirements, we could be subject to such sanctions, which could harm
our business. We cannot provide assurance that the state will at all times find us to be in compliance with applicable laws.
36
Other States' Laboratory Licensing
In addition to New York, other states including California, Florida, Maryland, Pennsylvania and Rhode Island, require licensing of out-of-state laboratories under
certain circumstances. From time to time, we may become aware of other states that require out-of-state laboratories to obtain licensure in order to accept
specimens from the state and it is possible that other states do have such requirements or will have such requirements in the future.
Regulation outside the United States
Distribution of Trinity Biotech’s products outside of the United States is also subject to foreign regulation. Each country’s regulatory requirements for product
approval and distribution are unique and may require the expenditure of substantial time, money, and effort.
There can be no assurance that new laws or regulations will not have a material adverse effect on Trinity Biotech’s business, financial condition, and results of
operation. The time required to obtain needed product approval by particular foreign governments may be longer or shorter than that required for FDA clearance
or approval. There can be no assurance that Trinity Biotech will receive on a timely basis, if at all, any foreign government approval necessary for marketing its
products.
Organisational Structure
Trinity Biotech plc and its subsidiaries (“the Group”) is a manufacturer of diagnostic test kits and instrumentation for sale and distribution worldwide.
Trinity Biotech’s executive offices are located at Bray, Ireland while its research and development, manufacturing and marketing activities are principally
conducted at the following:
•
•
Trinity Biotech Manufacturing Limited, based in Bray, Ireland;
Clark Laboratories Inc, based in Jamestown, New York;
• MarDx Diagnostics Inc, based in Carlsbad, California;
•
•
•
•
•
Primus Corporation, based in Kansas City;
Biopool US Inc (trading as Trinity Biotech USA), based in Jamestown, New York;
Immco Diagnostics Inc, based in Amherst and Buffalo, New York;
Nova Century Scientific Inc, based in Burlington, Canada; and
Trinity Biotech Brazil based in Sao Paulo, Brazil.
The Group’s distributor of raw materials for the life sciences industry, Benen Trading Ltd (trading as Fitzgerald Industries), is based in Bray, Ireland and Acton,
Massachusetts, USA.
For a more comprehensive schedule of the subsidiary undertakings of the Group please refer to Item 18, Note 33 to the consolidated financial statements.
Property, Plant and Equipment
Trinity Biotech has seven manufacturing sites worldwide, five in the Americas. (Amherst, Williamsville and Jamestown, NY, Kansas City, MO, Carlsbad, CA
and Extrema, Brazil), and one in Bray, Ireland. An additional facility is owned in Burlington, Canada which serves as a distribution centre and also carries out
some research and development activities.
The U.S. and Irish facilities are each FDA registered and ISO certified facilities. As part of its ongoing commitment to quality, each Trinity Biotech facility was
granted the latest ISO 13485 certification. This certification was granted by internationally recognised notified bodies. This serves as external verification that
Trinity Biotech has established an effective quality system in accordance with an internationally recognised standard. By having an established quality system
there is a presumption that Trinity Biotech will consistently manufacture products in a controlled manner. To achieve this certification, each Trinity Biotech
facility performed an extensive review of the existing quality system and implemented any additional regulatory requirements.
The facilities at Jamestown, NY, Kansas City, MO and Carlsbad, CA and Bray, Ireland also achieved certification to the requirements of the Medical Device
Single Audit Programme (MDSAP). The Medical Device Single Audit Program allows an MDSAP recognized Auditing Organization to conduct a single
regulatory audit of a medical device manufacturer that satisfies the relevant requirements of the regulatory authorities participating in the program. International
regulatory authorities that are participating in the MDSAP include, Therapeutic Goods Administration of Australia, Brazil’s Agência Nacional de Vigilância
Sanitária, Health Canada, Japan’s Ministry of Health, Labour and Welfare, and the Japanese Pharmaceuticals and Medical Devices Agency The World Health
Organization (WHO) Prequalification of In Vitro Diagnostics (IVDs) Programme and the European Union (EU) are Official Observers.
37
Trinity Biotech has entered into a number of related party transactions with JRJ Investments (“JRJ”), a partnership currently owned by Mr O’Caoimh and Dr
Walsh, directors of the Company, and directly with Mr O’Caoimh, to provide current and potential future needs for the Group’s manufacturing and research and
development facilities, located in Bray, Ireland. Trinity Biotech has entered into an agreement for a 25 year lease with JRJ, for 15,780 square feet of offices at an
annual rent of €381,000 (US$427,000), which expires in 2027. Trinity Biotech has entered into lease agreements with Ronan O’Caoimh for a 43,860 square foot
manufacturing facility in Bray, Ireland and an adjacent warehouse of 16,000 square feet. The annual rent for the manufacturing facility is €787,000
(US$883,000) and the annual rent for the warehouse is €144,000 (US$162,000). These two leases expire in 2028 and 2026 respectively. See Item 7 – Major
Shareholders and Related Party Transactions.
Trinity Biotech USA operates from a 25,610 square foot FDA and ISO 9001 approved facility in Jamestown, New York. The facility was purchased by Trinity
Biotech USA in 1994. Additional warehousing space is also leased in Jamestown, New York at an annual rental charge of US$183,000.
MarDx operates from two facilities in Carlsbad, California. The first facility comprises 21,436 square feet and the second adjacent facility comprises 14,500
square feet. The last number of years have seen a steady migration of customers away from using Western Blot for diagnosing Lyme in favour of alternative
testing platforms. Production volumes at our Carlsbad, California facility (which specialises in Western Blot manufacturing) have declined steadily to the extent
that it no longer makes economic sense to continue. Consequently, in the early part of 2020 management decided to close this facility from June 30, 2020. Both
facilities operated by Mardx are leased and in 2020, we have given notice to the landlords that we will terminate our leases on June 30, 2020. During the period
until closure, final batches of Lyme Western Blot for our remaining customers will be produced, whilst simultaneously transferring non-Lyme product
manufacturing to other Group facilities.
Primus Corp. operates from a 39,000 square foot facility in Kansas City, Missouri and an adjacent 13,500 square foot facility mainly used for warehousing. The
leases on these properties run until 2022 and 2025 respectively and annual rents are US$119,000 and US$47,000 respectively.
Immco Diagnostics Inc. operates from a 20,520 square foot facility in Amherst, New York and a 31,731 square foot facility in Williamsville, New York, subject
to leases expiring in 2022 and 2033 respectively. The annual rent for the Amherst facility is US$257,000. The Williamsville facility’s annual rent is currently
US$405,000, rising to US$452,000 by 2029. An additional 5,120 square foot facility is owned by Trinity Biotech in Burlington, Canada.
Additional office and factory space is leased by the Group in Acton, Massachusetts, Sao Paulo, Brazil and Extrema, Brazil at an annual cost of US$95,000,
US$11,000 and US$33,000 respectively.
At present, we have sufficient productive capacity to cover demand for our product range. We continue to review our level of capacity in the context of future
revenue forecasts. In the event that these forecasts indicate capacity constraints, we will either obtain new facilities or expand our existing facilities.
In relation to products produced at our facilities – these are as follows:
Bray, Ireland – Point-of-Care/HIV, Immunofluorescence and Clinical Chemistry products are manufactured at this site.
Jamestown, New York – this site specializes in the production of Microtitre Plate EIA products for infectious diseases and auto-immunity.
Carlsbad, California – this facility specialises in the development and manufacture of products utilising Western Blot and lateral flow technology. Our suite of
Lyme products is manufactured at this facility and our new Infectious Diseases Point-of-Care range are manufactured at this site. In 2020, management made the
decision to close this facility permanently (see above).
Kansas City, Missouri – this site is responsible for the manufacture of the Group’s haemoglobin range of products.
Buffalo, New York – these sites are responsible for the manufacture of autoimmune test kits and the majority of R&D activities for Immco Diagnostics, along
with its reference laboratory business.
We are in material compliance with all environmental legislation, regulations and rules applicable in each jurisdiction in which we operate.
38
Item 4A Unresolved Staff Comments
Not applicable.
Item 5
Operating and Financial Review and Prospects
Operating Results
Trinity Biotech’s consolidated financial statements include the attributable results of Trinity Biotech plc and all its subsidiary undertakings collectively. This
discussion covers the years ended December 31, 2019, December 31, 2018 and December 31, 2017, and should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form 20-F. The financial statements have been prepared in accordance with IFRS both as
issued by the International Accounting Standards Board (“IASB”) and as subsequently adopted by the European Union (“EU”) (together “IFRS”). Consolidated
financial statements are required by Irish law to comply with IFRS as adopted by the EU which differ in certain respects from IFRS as issued by the IASB. These
differences predominantly relate to the timing of adoption of new standards by the EU. However, as none of the differences are relevant in the context of Trinity
Biotech, the consolidated financial statements for the periods presented comply with IFRS both as issued by the IASB and as adopted by the EU.
Trinity Biotech has availed of the exemption under SEC rules to prepare consolidated financial statements without a reconciliation to U.S. generally accepted
accounting principles (“U.S. GAAP”) as at and for the three year period ended December 31, 2019 as Trinity Biotech is a foreign private issuer and the financial
statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”).
Overview
Trinity Biotech develops, manufactures and markets diagnostic test kits used for the clinical laboratory and Point-of-Care (“POC”) segments of the diagnostic
market. These test kits are used to detect infectious diseases, sexually transmitted diseases, blood disorders and autoimmune disorders, as well as monitoring and
diagnosing diabetes and haemoglobin variants. The Group markets almost 850 different diagnostic products in approximately 100 countries. In addition, the
Group manufactures its own and distributes third party infectious disease diagnostic instrumentation. Trinity Biotech, through its Fitzgerald subsidiary, is a
provider of raw materials to the life sciences industry.
Factors affecting our results
The global diagnostics market is growing due to, among other reasons, the ageing population and the increasing demand for rapid tests in a clinical environment.
Our revenues are directly related to our ability to identify significant revenue-generating products while they are still in development and to bring them to market
quickly and effectively. Efficient and productive research and development is crucial in this environment as we, like our competitors, search for effective and
cost-efficient solutions to diagnostic problems. The growth in new technology will almost certainly have a fundamental effect on the diagnostics industry as a
whole and upon our future development.
The comparability of our financial results for the years ended December 31, 2019, 2018, 2017, 2016 and 2015 have been impacted by the decision to discontinue
operations in Fiomi Diagnostics AB in 2016 following the withdrawal of the Troponin premarket submission to the U.S. Food and Drug Administration (see
Item 18, Note 10). The Group also realised impairment losses in 2016, 2017, 2018 and in 2019 as a result of annual impairment reviews as at December 31,
2016, December 31, 2017, December 31, 2018 and December 31, 2019 (see Item 18, Note 13). There were no acquisitions made in 2019, 2018, 2017, 2016 or
2015.
For further information about the Group’s principal products, principal markets and competition please refer to Item 4, “Information on the Company”.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared
in accordance with IFRS. The preparation of these financial statements requires us to make estimates and judgements that affect the reported amount of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
On an on-going basis, we evaluate our estimates, including those related to intangible assets, contingencies and litigation. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
We believe the critical accounting policies described below reflect our more significant judgements and estimates used in the preparation of our consolidated
financial statements.
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Revenue Recognition
Goods sold and services rendered
The Group recognises revenue when it transfers control over a good or service to a customer. Revenue is recognised to the extent that it is probable that
economic benefit will flow to the Group and the revenue can be measured. No revenue is recognised if there is uncertainty regarding recovery of the
consideration due at the outset of the transaction or the possible return of goods. Revenue, including any amounts invoiced for shipping and handling costs,
represents the transaction price the value of goods and services supplied to external customers, net of discounts and rebates and excluding sales taxes. The
transaction price is determined by reference to the contract and arrangements with the customer.
Revenue from products is generally recorded as of the date of shipment, consistent with typical ex-works shipment terms. Where the shipment terms do not
permit revenue to be recognised as of the date of shipment, revenue is recognised when the Group has satisfied all of its performance obligations to the customer
in accordance with the shipping terms. Some contracts oblige the Group to ship product to the customer ahead of the agreed payment schedule. For these
shipments, a contract asset is recognised when control over the goods has transferred to the customer. The financing component is insignificant as invoicing for
these shipments occurs within a short period of time after shipment has occurred and standard 30 day credit terms apply.
Revenue from services rendered is recognised in the statement of operations in proportion to the stage of completion of the transaction at the balance sheet date.
We operate a licenced reference laboratory that specializes in diagnostics for autoimmune diseases. The laboratory provides testing services to two types of
customers. Firstly, institutional customers, such as hospitals and commercial diagnostic testing providers, and secondly insurance companies on behalf of their
policyholders. The revenue recognition for services provided to insurance companies requires some judgement. The laboratory is based in USA, where there are
rules requiring all insurance companies to be billed the same amount per test. However, the amount that each insurance company pays for a particular test varies
according to their own internal policies and this can typically be considerably less than the amount invoiced. We recognise laboratory services revenue for
insurance companies by taking the invoiced amount and reducing it by an estimated percentage based on historical payment data. We review the percentage
reduction annually based on the latest data. As a practical expedient, and in accordance with IFRS, we apply a portfolio approach to the insurance companies as
they have similar characteristics. We judge that the effect on the financial statements of using a portfolio approach for the insurance companies will not differ
materially from applying IFRS 15 to the individual contracts within that portfolio.
In some countries, the Group leases instruments to customers as part of a bundled package. Where a contract has multiple performance obligations and its
duration is greater than one year, the transaction price is allocated to the performance obligations in the contract by reference to their relative standalone selling
prices. As a practical expedient, no allocation of the transaction price is done for instrument contracts which are less than one year’s duration. For contracts
where control of the instrument is transferred to the customer, the fair value of the instrument is recognised as revenue at the commencement of the lease and is
matched by the related cost of sale. Fair value is determined on the basis of standalone selling price. In the case where control of the instrument does not transfer
to the customer, revenue is recognised on the basis of customer usage of the instrument. See also Note 1(v).
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is
required before the payment is due.
The Group’s obligation to provide a refund for faulty products under the standard warranty terms is recognised as a provision, see Item 18, Note 24 for details.
Research and development expenditure
We write-off research and development expenditure as incurred, with the exception of expenditure on projects whose outcome has been assessed with reasonable
certainty as to technical feasibility, commercial viability and recovery of costs through future revenues. Such expenditure is capitalised at cost within intangible
assets and amortised over its expected useful life of 15 years, which commences when the product is launched.
In-process research and development (“IPR&D”) is tested for impairment on an annual basis, in the fourth quarter, or more frequently if impairment indicators
are present, using projected discounted cash flow models. If IPR&D becomes impaired or is abandoned, the carrying value of the IPR&D is written down to its
revised fair value with the related impairment charge recognised in the period in which the impairment occurs. If the fair value of the asset becomes impaired as
the result of unfavourable data from any ongoing or future clinical trial, changes in assumptions that negatively impact projected cash flows, or because of any
other information regarding the prospects of successfully developing or commercialising our programs, we could incur significant charges in the period in which
the impairment occurs. The valuation techniques utilised in performing impairment tests incorporate significant assumptions and judgments to estimate the fair
value, as described above. The use of different valuation techniques or different assumptions could result in materially different fair value estimates.
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Factors which impact our judgement to capitalise certain research and development expenditure include the degree of regulatory approval for products and the
results of any market research to determine the likely future commercial success of products being developed. We review these factors each year to determine
whether our previous estimates as to feasibility, viability and recovery should be changed.
At December 31, 2019 the carrying value of capitalised development costs was US$22,778,000 (2018 US$26,265,000) (see Item 18, Note 14 to the consolidated
financial statements). The decrease in 2019 was mainly as a result of an impairment loss charge of US$11,904,000. This charge was partially offset by additions
of US$9,569,000 and amortisation of US$1,182,000.
Impairment of intangible assets and goodwill
Definite lived intangible assets are reviewed for indicators of impairment annually while goodwill and indefinite lived assets are tested for impairment annually,
either individually or at the cash generating unit level. Factors considered important, as part of an impairment review, include the following:
•
•
•
•
•
Significant underperformance relative to expected, historical or projected future operating results;
Significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
Obsolescence of products;
Significant decline in our stock price for a sustained period; and
Our market capitalisation relative to net book value.
When we determine that the carrying value of intangibles, non-current assets and related goodwill may not be recoverable based upon the existence of one or
more of the above indicators of impairment, any impairment is measured based on our estimates of projected net discounted cash flows expected to result from
that asset, including eventual disposition. Our estimated impairment could prove insufficient if our analysis overestimated the cash flows or conditions change in
the future.
Goodwill and other intangibles are subject to impairment testing on an annual basis. The recoverable amount of each of the cash-generating units (“CGU”) is
determined based on a value-in-use computation, which is the only methodology applied by the Group and which has been selected due to the impracticality of
obtaining fair value less costs to sell measurements for each reporting period. For the purpose of the annual impairment tests, goodwill is allocated to the relevant
CGU. The impairment test performed as at December 31, 2019 identified a total impairment loss of US$76,740,000 in seven cash generating units (“CGUs”), of
which US$24,295,000 has been recorded in the 2019 financial statements. Refer to Item 18, Note 14 for further information.
The value-in-use calculations use cash flow projections based on the 2020 budget and projections for a further four years using projected revenue and cost
growth rates of between 0% and 7%.
At the end of the five year forecast period, terminal values for each CGU, based on a long term growth rate of 2%, are used in the value-in-use calculations. The
value-in-use represents the present value of the future cash flows, including the terminal value, discounted at a rate appropriate to each CGU.
The key assumptions employed in arriving at the estimates of future cash flows are subjective and include projected EBITDA, net cash flows, discount rates and
the duration of the discounted cash flow model. The assumptions and estimates used were derived from a combination of internal and external factors based on
historical experience. The pre-tax discount rates used range from 20% to 27% (2018: 20% to 35%). Post tax discount rates have been calculated using external
inputs such as prevailing short and long term interest rates, a small stock premium, a stock beta and the corporate tax rates applicable to each CGU. The discount
rates reflect the risk profile of each CGU. See Item 18, Note 14 to the consolidated financial statements for further information.
The value-in-use calculation is subject to significant estimation, uncertainty and accounting judgements and is particularly sensitive in the following areas;
•
•
In the event that there was a variation of 10% in the assumed level of future growth in revenues, which would represent a reasonably likely range of
outcomes, there would be an additional impairment loss of US$743,000 at December 31, 2019
In the event there was a 10% variation in the discount rate used to calculate the potential impairment of the carrying values, which would represent a
reasonably likely range of outcomes, there would be an additional impairment loss of US$5,420,000 at December 31, 2019.
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Allowance for slow-moving and obsolete inventory
We evaluate the realisability of our inventory on a case-by-case basis and make adjustments to our inventory provision based on our estimates of expected losses.
We write off inventory that is approaching its “use-by” date and for which no further re-processing can be performed. We also consider recent trends in revenues
for various inventory items and instances where the realisable value of inventory is likely to be less than its carrying value. Given the allowance is calculated on
the basis of the actual inventory on hand at the particular balance sheet date, there were no material changes in estimates made during 2019, 2018 or 2017 which
would have an impact on the carrying values of inventory during those periods, except as discussed below. At December 31, 2019 our allowance for slow
moving and obsolete inventory was US$6,716,000 which represents approximately 17.33% of gross inventory value. This compares with US$6,299,000, or
approximately 17.18% of gross inventory value, at December 31, 2018 and US$7,543,000, or approximately 18.70% of gross inventory value, at December 31,
2017 (see Item 18, Note 17 to the consolidated financial statements). The estimated allowance for slow moving and obsolete inventory as a percentage of gross
inventory has increased between 2019 and 2018 due our decision to cull some old and declining product lines. In the case of raw materials and work in progress,
the size of the provision has been based on expected future production of these products. Management is satisfied that the assumptions made with respect to
future sales and production levels of these products are reasonable to ensure the adequacy of this provision. In the event that the estimate of the provision
required for slow moving and obsolete inventory was to increase or decrease by 2% of gross inventory, which would represent a reasonably likely range of
outcomes, then a change in allowance of US$774,000 at December 31, 2019 (2018: US$733,000) (2017: US$807,000) would result.
Allowance for impairment of receivables
We make judgements as to our ability to collect outstanding receivables and where necessary make allowances for impairment. Such impairments are made
based upon a specific review of all significant outstanding receivables. In determining the allowance, we analyse our historical collection experience and current
economic trends. If the historical data we use to calculate the allowance for impairment of receivables does not reflect the future ability to collect outstanding
receivables, additional allowances for impairment of receivables may be needed and the future results of operations could be materially affected. Given the
specific manner in which the allowance is calculated, there were no material changes in estimates made during 2019, 2018 or 2017 which would have an impact
on the carrying values of receivables in these periods. At December 31, 2019, the allowance was US$5,443,000 which represents approximately 6.0% of Group
revenues. This compares with US$4,202,000 at December 31, 2018 which represented approximately 4.3% of Group revenues and to US$3,590,000 at
December 31, 2017 which represented approximately 3.6% of Group revenues. The increase in the allowance for impairment of receivables in the year ended
December 31, 2019 was due to a general deterioration in the age of receivables. In the event that the estimate of impairment was to increase or decrease by 0.5%
of Group revenues, which would represent a reasonably likely range of outcomes, then a change in the allowance of US$452,000 at December 31, 2019 (2018:
US$485,000) (2017: US$496,000) would result.
Accounting for income taxes
Significant judgement is required in determining our worldwide income tax expense provision. In the ordinary course of a global business, there are many
transactions and calculations where the ultimate tax outcome is uncertain.
Some of these uncertainties arise as a consequence of revenue sharing and cost reimbursement arrangements among related entities, the process of identifying
items of revenue and expense that qualify for preferential tax treatment and segregation of foreign and domestic income and expense to avoid double taxation. In
addition, we operate within multiple taxing jurisdictions and are subject to audits in these jurisdictions. These audits can involve complex issues that may require
an extended period of time for resolution. Although we believe that our estimates are reasonable, no assurance can be given that the final tax outcome of these
matters will not be different than that which is reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our
income tax provision and profit in the period in which such determination is made. Deferred tax assets and liabilities are determined using enacted or
substantively enacted tax rates for the effects of net operating losses and temporary differences between the book and tax bases of assets and liabilities.
While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing whether deferred tax assets can be
recognised, there is no assurance that these deferred tax assets may be realisable. The extent to which recognised deferred tax assets are not realisable could have
a material adverse impact on our income tax provision and net income in the period in which such determination is made. In addition, we operate within multiple
taxing jurisdictions and are subject to audits in these jurisdictions. These audits can involve complex issues that may require an extended period of time for
resolution. In management’s opinion, adequate provisions for income taxes have been made.
Item 18, Note 15 to the consolidated financial statements outlines the basis for the deferred tax assets and liabilities and includes details of the unrecognised
deferred tax assets at year end. The Group does not recognise deferred tax assets arising on unused tax losses except to the extent that there are sufficient taxable
temporary differences relating to the same taxation authority and the same taxable entity which will result in taxable amounts against which the unused tax losses
can be utilised before they expire.
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Share-based payments
For equity-settled share-based payments (share options), the Group measures the services received and the corresponding increase in equity at fair value at the
measurement date (which is the grant date) using a trinomial model. Given that the share options granted do not vest until the completion of a specified period of
service, the fair value, which is assessed at the grant date, is recognised on the basis that the services to be rendered by employees as consideration for the
granting of share options will be received over the vesting period.
The share options issued by the Group are not subject to market-based vesting conditions as defined in IFRS 2, Share-based Payment. Non-market vesting
conditions are not taken into account when estimating the fair value of share options as at the grant date; such conditions are taken into account through adjusting
the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised equates to the number of
equity instruments that actually vest. The expense in the statement of operations in relation to share options represents the product of the total number of options
anticipated to vest and the fair value of those options; this amount is allocated to accounting periods on a straight-line basis over the vesting period.
Given that the performance conditions underlying the Group’s share options are non-market in nature, the cumulative charge to the statement of operations is
only reversed where the performance condition is not met or where an employee in receipt of share options relinquishes service prior to completion of the
expected vesting period. Share based payments, to the extent they relate to direct labour involved in development activities, are capitalised.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are
exercised. The Group does not operate any cash-settled share-based payment schemes or share-based payment transactions with cash alternatives as defined in
IFRS 2.
Exchangeable notes and derivative financial instruments
The exchangeable notes are treated as a host debt instrument with embedded derivatives attached. On initial recognition, the host debt instrument is recognised at
the residual value of the total net proceeds of the bond issue less fair value of the embedded derivatives. Subsequently, the host debt instrument is measured at
amortised cost using the effective interest rate method.
The embedded derivatives are initially recognised at fair value and are restated at their fair value at each reporting date. The fair value changes of the embedded
derivatives are recognised in the statement of operations. See Item 18, Note 25 to the consolidated financial statements for further information.
Impact of Recently Issued Accounting Pronouncements
The consolidated financial statements have been prepared in accordance with IFRS both as issued by the IASB and as subsequently adopted by the EU. The
IFRS applied are those effective for accounting periods beginning 1 January 2019. Consolidated financial statements are required by Irish law to comply with
IFRS as adopted by the EU which differ in certain respects from IFRS as issued by the IASB.
These differences predominantly relate to the timing of adoption of new standards by the EU. However, as none of the differences are relevant in the context of
Trinity Biotech, the consolidated financial statements for the periods presented comply with IFRS both as issued by the IASB and as adopted by the EU. During
2019, the IASB and the International Financial Reporting Interpretations Committee (“IFRIC”) issued additional standards, interpretations and amendments to
existing standards which are effective for periods starting after the date of these financial statements. A list of these additional standards, interpretations and
amendments, and the potential impact on the financial statements of the Group, is outlined in Item 18, Note 1(xxx).
43
Subsequent Events
Decision to close Carlsbad manufacturing plant in 2020
The last number of years have seen a steady migration of customers away from using the Western Blot testing format for diagnosing Lyme in favour of
alternative testing platforms. Production volumes at our Carlsbad, California facility (which specialises in Western Blot manufacturing) have declined steadily to
the extent that it no longer makes economic sense to continue. Consequently, in the early part of 2020, management decided to close this facility from June 30,
2020.
During the period until closure, final batches of Lyme Western Blot for remaining customers will be produced, whilst simultaneously transferring non-Lyme
product manufacturing to other Group facilities. No provision has been reflected in the 2019 financial statements relating to the costs associated with closing this
facility, terminating employment contracts, transferring assets to new locations in the Group. The Company recorded a provision of US$2.4 million in its income
statement for Q1, 2020 to cover the related closure costs. This primarily includes the write-off of inventory and redundancy costs and is mainly non-cash in
nature.
Covid-19 pandemic
Impact on Revenues
Subsequent to the balance sheet date, the Company’s revenues have been significantly impacted by the Covid-19 Pandemic with the greater impact being seen
from April 2020 onwards. In particular, this resulted in significant reduction in:
•
•
•
Haemoglobins revenues – including both instrument and consumables revenues with the impact being greater on diabetes (A1c) rather than on haemoglobin
variant revenues.
Autoimmune revenues – testing volumes were particularly impacted at our reference laboratory in Buffalo, New York but there were also lower product
sales in all major markets.
HIV, Infectious Diseases and Clinical chemistry product sales.
However, there were increases in sales of our transport medium product (used to transport Covid-19 patient samples in a stable environment), respiratory tests
for Legionnaire’s Disease and Strep Pneumoniae and of coronavirus-related antibodies sold by our life sciences supply business, Fitzgerald.
Covid-19 Expenditure Reduction Measures
All of the company’s operations have remained open during the pandemic though at reduced levels of output in line with expected demand. However, in response
to the expected reduction in revenues, the company undertook a number cost cutting measures which included the following:
•
•
•
The company furloughed a large percentage of its work forces in the USA, Ireland and Canada in April, 2020. Meanwhile, in Brazil and other locations,
staff costs were also significantly reduced by means of pay cuts.
The elimination of virtually all travel costs and significant reductions in discretionary sales and marketing expenditure.
Availing of governmental supports. This included the receipt of US$4.5 million of loans under the U.S. government’s Paycheck Protection Program
(“PPP”). Under the provisions of the PPP, these loans will be partially or totally forgiven, based on the extent to which a borrower’s workforce returns to
normal levels in the eight-week period immediately following the loans being granted. Upon receipt of these loans, the Company ended the furloughing of
all staff in the USA and therefore expects that a large percentage of these loans will be forgiven later in 2020, once the necessary verification has taken
place. In Ireland, the company also availed of economic support mechanisms being provided by the Irish Government though a significant level of
furloughing continued into June, 2020, mainly due to the expected lower demand for HIV products for the African market.
Impact on Working Capital
Due to the measures implemented by the company in response to falling demand for products the Company’s cash position at May 31, 2020 was similar to that
reported in the financial statements as at 31 December, 2019. Furthermore, the Company has not seen any significant deterioration in the recoverability of its
inventory and accounts receivables balances as at 31 December, 2019. Meanwhile, the company is continuing to pay its creditors.
Asset Impairment
The annual impairment test on the carrying value of goodwill and other assets was carried out as at December 31, 2019 – see note 14. In determining whether a
potential asset impairment exists, a range of internal and external factors are considered. However, the impairment test only takes into account conditions
existing at the end of the reporting period. Covid-19 began to impact the population of Wuhan, China in December 2019 and initially the outbreak was largely
concentrated in China. It was declared to be a pandemic by the World Health Organization in March 2020. The Company’s impairment test as at December 31,
2019 therefore does not reflect the downturn in economic activity or the aforementioned impacts on the Company’s revenues and expenditure caused by the
Covid-19 pandemic.
If the impairment test was reperformed using projections which take into account the aforementioned impacts on revenues and expenditure, the impairment loss
as at December 31, 2019 for Primus Corp. and Immco Diagnostics would be higher by US$1.8 million and US$1.7 million respectively. The reason these two
Cash Generating Units are the only units affected is that the other Cash Generating Units’ assets were already fully impaired, except Fitzgerald, as at December
31, 2019.
44
Results of Operations
Year ended December 31, 2019 compared to the year ended December 31, 2018
The following compares our results in the year ended December 31, 2019 to those of the year ended December 31, 2018 under IFRS. Our analysis is divided as
follows:
1.
2.
3.
4.
5.
Overview
Revenues
Operating Loss
Loss for the year
Discontinued operations
1. Overview
In 2019, revenues decreased by 6.8% from US$97.0 million in 2018 to US$90.4 million. The three main factors behind the decrease in revenues are:
i.
ii.
iii.
Lyme disease revenues decreased following the loss of certain large customers that migrated their Lyme testing away from Western Blot assays to
alternative testing platforms,
HIV point-of-care sales decreased following our decision to discontinue sales of the Unigold HIV test in the USA and
Revenues for our Fitzgerald business, which sells antibodies to the life sciences and research industries, reduced following higher than average
revenues in 2018.
These declines were partially offset by Haemoglobins and Autoimmunity revenues which continued to grow in 2019.
Geographically, 58% of our sales were generated in the Americas, 30% in Africa/Asia and 12% in Europe.
There was a slight decrease in gross margin in 2019 (42.2% versus 42.7%) and this is mainly due to the impact of lower revenues, particularly in the context of
our relatively high fixed cost base and the adverse currency movements. Selling General & Administrative Expenditure (excluding impairment charges and tax
settlement) decreased from US$29.5 million in 2018 to US$27.7 million in 2019, which represents a decrease of 6.2%. The decrease is mainly attributable to a
cost reduction programme, lower amortization charges and the impact of foreign currency fluctuations.
The Company recognized an impairment charge of US$24.3 million in 2019 (2018: US$26.9 million). A number of factors contributed to the impairment
charges including the Company’s market capitalisation at the end of the year which was lower when compared to the end of 2018, the inclusion of the latest cash
flow projections and net asset values for each cash generating unit and increased volatility in the Company’s share price and higher market interest rates which
resulted in a higher discount factor being applied to the Company’s expected future cash flows.
The settlement of a tax audit, mainly relating to payroll taxes, resulted in a charge of US$5.0m, excluding interest.
The operating loss for continuing operations was US$24.1 million for the year, which compares to US$20.2 million for 2018. Excluding the impairment charge
and the once-off tax settlement, the operating profit for continuing operations for 2019 is US$5.2 million, compared to US$6.7 million in 2018. This decrease in
operating profit before impairment charges and tax audit settlement in 2019 is mainly attributable to lower revenues and to a lesser extent the lower gross margin.
In 2019, net financing expense was US$5.9 million compared to US$3.0 million in 2018. The increase of US$2.9 million was due to the inclusion of notional
interest expense on facility leases of US$0.9m due to the adoption of IFRS 16, Leases, interest on a tax audit settlement of US$1.0 million and lower deposit
interest, offset by a reduction in interest payable on our Exchangeable Notes of $0.4m following the buyback of a portion of the notes in 2018.
The loss for the year from continuing operations amounted to US$29.0 million, compared to US$22.7 million in 2018. Before the impact of impairment charges
and the tax audit settlement, the loss for 2019 from continuing operations would have been US$0.3 million, compared to a US$4.3 million profit for 2018.
45
2. Revenues
Trinity Biotech’s revenues consist of sales of diagnostic kits and related instrumentation, laboratory testing services sales and sales of raw materials to the life
sciences industry. The Group recognises revenue when it transfers control over a good or service to a customer. Revenue is recognised to the extent that it is
probable that economic benefit will flow to the Group and the revenue can be measured. Revenue from products is generally recorded as of the date of shipment,
consistent with typical ex-works shipment terms. Where the shipment terms do not permit revenue to be recognised as of the date of shipment, revenue is
recognised when the Group has satisfied all of its performance obligations to the customer in accordance with the shipping terms. Some contracts oblige the
Group to ship product to the customer ahead of the agreed payment schedule. For these shipments, a contract asset is recognised when control over the goods has
transferred to the customer. Revenue from services rendered is recognised in the statement of operations in proportion to the stage of completion of the
transaction at the balance sheet date.
In some countries, the Group leases instruments to customers as part of a bundled package. Where a contract has multiple performance obligations and its
duration is greater than one year, the transaction price is allocated to the performance obligations in the contract by reference to their relative standalone selling
prices. For contracts where control of the instrument is transferred to the customer, the fair value of the instrument is recognised as revenue at the
commencement of the lease and is matched by the related cost of sale. Fair value is determined based on standalone selling prices. In the case where control of
the instrument does not transfer to the customer, revenue is recognised on the basis of customer usage of the instrument.
Revenues by Product Line
Trinity Biotech’s revenues for the year ended December 31, 2019 were US$90,435,000 compared to revenues of US$97,035,000 for the year ended December
31, 2018, which represents a decrease of US$6,600,000 or 6.8%. The following table sets forth selected sales data for each of the periods indicated.
Revenues
Clinical Laboratory
Point-of-Care
Laboratory Services
Total
Clinical Laboratory
Year ended December 31,
2019
US$ ’000
2018
US$’000
% Change
68,127
11,393
10,915
71,618
14,836
10,581
(4.9)%
(23.2)%
3.2%
90,435
97,035
6.8%
Clinical Laboratory revenues decrease by US$3,491,000 in 2019, which represents a decrease of 4.9%. This decrease was mainly attributable to a 16% decrease
in Infectious Diseases revenues. Lower sales of Western Blot tests for Lyme disease in USA mainly accounted for this decrease caused by the on-going migration
of Lyme confirmatory testing to alternative testing platforms. Similarly, revenues for our other infectious diseases tests on ELISA platforms have also been
declining for several years, particularly in USA but we have succeeded in partially making up for these declines by selling more to emerging markets, with China
being the largest market. Our Fitzgerald business, which sells antibodies to the life sciences and research industries, had a decrease in revenues of 14% following
a higher than average level of sales in 2018 driven by high sales in Asia. Partially offsetting these decreases was higher revenues for haemoglobin A1c testing.
Point-of-Care
Point-of-Care revenues decreased from US$14,836,000 in 2018 to US$11,393,000 in 2019, which is a decrease of US$3,443,000 (-23.2%). This decrease was
mainly due to lower HIV revenues in USA following the decision during 2019 to discontinue sales of the Unigold HIV test in that market. The reduction in
funding for public health HIV testing programs in addition to the CDC’s recommendations in favour of fourth generation antigen testing led to the decline of
HIV Point-of-Care sales in the USA for the last number of years. Volumes had declined to the extent that when manufacturing and marketing costs were taken
into account it was no longer an economically viable product. The remaining decrease is due to lower Syphilis Point-of-Care tests revenues.
Laboratory Services
Our New York reference laboratory offers laboratory-testing services for autoimmune disorders, such as Sjogren’s syndrome, hearing loss, celiac disease, lupus,
rheumatoid arthritis and systemic sclerosis. The laboratory had another good year in 2019, growing revenue by 3.2% to US$10,915,000. Revenues for Sjögrens
Syndrome accounts for 23% of the total revenues in 2019.
46
Revenues by Geographical Region
The following table sets forth selected sales data, analysed by geographic region, based on location of customer:
Revenues
Americas
Asia/Africa
Europe
Total
Year ended December 31,
2019
US$‘000
2018
US$‘000
% Change
52,183
27,686
10,566
57,559
29,466
10,010
90,435
97,035
(9.3)%
(6.0)%
5.6%
(6.8)%
In the Americas, revenues decreased US$5,376,000 or 9.3% mainly due to three factors: (i) the decision to exit the HIV point-of-care testing market in USA
during 2019, (ii) the continued migration of Lyme confirmatory testing away from Western Blot to alternative testing platforms and (iii) lower haemoglobins
revenues in Brazil due to a marked weakness in the Brazilian currency. These declines were partially offset by growth in laboratory testing revenues from our
autoimmune reference laboratory and higher revenues from our diabetes testing business in USA.
Asia/Africa revenues decreased by 6.0%, or US$1,780,000 compared to 2018. The main reason for this was lower revenues in Asia for our Fitzgerald business,
which sells antibodies to the life sciences and research industries. In 2018, Fitzgerald achieved higher than average revenues in Asia and 2019 saw a return to a
more normal level of sales in that territory. Higher haemoglobin A1c revenues partially offset the reduction in Fitzgerald sales in the territory.
In Europe, revenues increased by 5.6% or US$556,000, compared to 2018. The increase was due to higher haemoglobin A1c revenues due to the continued
success of the Premier instrument. This was partly offset by lower sales of infectious diseases revenues in the territory.
For further information about the Group’s principal products, principal markets and competition please refer to Item 4, “Information on the Company”.
3. Operating Loss – continuing operations
The following table sets forth the Group’s operating loss from continuing operations:
Revenues
Cost of sales
Gross profit
Other operating income
Research & development
SG&A expenses
Selling, general and administrative expenses – tax audit settlement
Selling, general and administrative expenses - impairment charges
Year ended December 31,
2019
US$’000
2018
US$’000
% Change
90,435
(52,315)
38,120
91
(5,325)
(27,661)
(5,042)
(24,295)
97,035
(55,586)
41,449
102
(5,369)
(29,477)
—
(26,932)
(6.8)%
(5.9)%
(8.0)%
(10.8)%
(0.8)%
(6.2)%
—
(9.8)%
Operating loss on continuing operations
(24,112)
(20,227)
19.2%
47
Cost of sales and gross margin
Total cost of sales decreased by US$3,271,000 from US$55,586,000 for the year ended December 31, 2018 to US$52,315,000, for the year ended December 31,
2019, a decrease of 5.9%. The gross margin of 42.2% in 2019 compares to a gross margin of 42.7% in 2018. This decrease was mainly due to the impact of
lower revenues, particularly in the context of our relatively high fixed cost base and the adverse currency movements mentioned above. This was partly offset by
cost savings that were implemented during the year and the changes resulting from the adoption of IFRS 16, Leases.
Other operating income
In 2019, other operating income mainly comprises income from the provision of canteen services recognised under a Transitional Services Agreement with
Diagnostica Stago. Other operating income decreased by 10.8% to US$91,000 mainly due to currency movements.
Research and development expenses (“R&D”)
Research and development expenditure recorded in the Statement of Operations decreased from US$5,369,000 in 2018 to US$5,325,000 in 2019. The decrease
in 2019 is mainly due to lower salaries expenses resulting from a cost reduction programme. For details of the Company’s various R&D projects see “Research
and Products under Development” below.
Selling, General & Administrative expenses (“SG&A”)
Total SG&A expenses decreased by US$1,816,000 from US$29,477,000 for the year ended December 31, 2018 to US$27,661,000 for the year ended December
31, 2019.
The following table outlines the breakdown of SG&A expenses in 2019 compared to 2018.
SG&A (excl. share-based payments and amortisation)
Share-based payments
Amortisation
Total
Year ended December 31,
2018
US$’000
2018
US$’000
24,561
732
2,368
25,317
1,335
2,825
% Change
(3.0)%
(45.2)%
(16.2)%
27,661
29,477
(6.2)%
Selling General & Administrative Expenditure (excluding share-based payments and amortisation)
SG&A expenses excluding share-based payments and amortisation decreased from US$25,317,000 for the year ended December 31, 2018 to US$24,561,000 for
the year ended December 31, 2019, which represents a decrease of 3.0%. The decrease of US$756,000 is mainly attributable to:
•
•
•
•
full year effect of cost savings implemented in 2018 as part of a cost saving programme. This resulted in lower costs under a wide range of headings
including salaries, I.T. costs and discretionary sales and marketing costs and commission payments,
lower pay for employees as a consequence of lower revenues,
the foreign currency impact which resulted in Euro-denominated and Brazilian-denominated costs being lower by 5% and 7% respectively,
partly offset by a gain on the purchase of a portion of our exchangeable notes recorded in 2018 (US$463,000) and higher legal fees and tax professional
fees mainly associated with the tax audit which was concluded in 2019 in one of the jurisdictions in which the Group operates.
Share-based payments
The expense represents the fair value of share options granted to directors and employees, which is charged to the statement of operations over the vesting period
of the underlying options. The Group has used a trinomial valuation model for the purposes of valuing these share options with the key inputs to the model being
the expected volatility over the life of the options, the expected life of the option, the option price, the dividend yield and the risk free rate.
The Group recorded a total share-based payments charge of US$758,000 (2018: US$1,369,000). The decrease of US$611,000 in the total share-based payments
expense is due to a lower number of share options still being in their vesting period in 2019 compared to 2018. The total charge is shown in the following
expense headings in the statement of operations: US$26,000 (2018: US$34,000) was charged against cost of sales and US$732,000 (2018: US$1,335,000) was
charged against selling, general & administrative expenses.
48
For further details, refer to Item 18, Note 22 to the consolidated financial statements.
Amortisation
Amortisation decreased from US$2,825,000 for the year ended December 31, 2018 to US$2,368,000 for the year ended December 31, 2019. The decrease of
US$457,000 is due to lower amortisation on development projects. The decrease was partly as a consequence of the impairment recorded at December 31, 2018
which resulted in a lower carrying value for development projects.
Selling, general and administrative expenses – tax audit settlement
A tax audit settlement of US$6,442,000 arising in one of the jurisdictions in which the company operates was reached in the year end December 31, 2019. The
tax audit concluded in December 2019. The settlement consisted of US$3,863,000 in relation to a patent dividend scheme, which had operated via Rayville
Limited from 1995 to 2010, US$1,231,000 in relation to payments for CEO Services made to Darnick Company (a company controlled by the family of Ronan
O’Caoimh), US$75,000 in relation to R&D tax credits. Penalties were US$273,000. Interest charges were US$1,000,000 and this is shown as a financial
expense. The total settlement excluding interest of US$1,000,000 was US$5,442,000 and this was partially offset by an existing provision of US$400,000,
resulting in an expense of US$5,042,000.
Selling, general and administrative expenses - impairment charges
Impairment charges of US$24,295,000 for the year ended December 31, 2019 are included in selling, general and administrative expenses. In 2018, impairment
charges of US$26,932,000 were included in selling, general and administrative expenses. The Group carries out an annual impairment review of asset valuations.
In determining whether a potential asset impairment exists, a range of internal and external factors are considered. A number of factors affected this calculation
in 2019 including:
•
•
•
the Company’s market capitalisation at the end of the year which was lower when compared to the end of 2018.
the inclusion of the latest cash flow projections and net asset values for each cash generating unit; and
increased volatility in the Company’s share price and higher market interest rates which resulted in a higher discount factor being applied to the
Company’s expected future cash flows.
For further details, see Item 18, Notes 13, 14 and 18.
4. Loss for the year
The following table sets forth selected statement of operations data for each of the periods indicated.
Operating loss
Net financing expense
Loss before tax
Income tax credit
Loss for the year from continuing operations
Net Financing income
Year ended December 31,
2019
US$‘000
2018
US$‘000
% Change
(24,112)
(5,885)
(29,997)
1,006
(20,227)
(2,956)
(23,183)
525
(28,991)
(22,658)
19.2%
99.1%
29.4%
91.6%
28.0%
Net financing expense was US$5,885,000 for the year-end December 31, 2019 compared to US$2,956,000 in 2018. Financial income decreased by
US$1,427,000 from US$2,124,000 for the year-end December 31, 2018 to US$697,000 in 2019. There was a decrease of US$1,155,000 in the income arising
from the revaluation of embedded derivatives at fair value and a decrease of US$272,000 in bank deposit interest due to the lower cash deposits and lower
interest rates.
Financial expenses increased by US$1,502,000 to US$6,582,000 during 2019 mainly due to interest arising on a tax audit settlement of US$1,000,000 and an
increase of US$908,000 in lease interest mainly resulting from the adoption of IFRS 16, Leases on January 1, 2019. The new accounting treatment brings
operating leases onto the Balance Sheet with a related interest expense. Offsetting this increase was lower cash and non-cash exchangeable notes interest (down
by US$406,000) following the buyback of a portion of the exchangeable notes in the third quarter of 2018.
49
Taxation
The Group recorded a tax credit on continuing operations of US$1,006,000 for the year ended December 31, 2019 compared to a tax credit of US$525,000 for
the year ended December 31, 2018. The 2019 tax credit comprises US$165,000 of current tax credit and US$841,000 of a deferred tax credit. For further details
on the Group’s tax charge please refer to Item 18, Note 9 and Note 15 to the consolidated financial statements.
Loss for the year from continuing operations
The loss for the year amounted to US$28,991,000, compared to a loss of US$22,658,000 in 2018, representing an increase of 28.0%.
5. Discontinued operations
The Cardiac Point-of-Care operation was discontinued during the year ended December 31, 2016. Expenses, gains and losses relating to the discontinuation of
the Cardiac point-of-care tests operation have been eliminated from profit or loss from the Group’s continuing operations and are shown as a single line item on
the face of the Consolidated Statement of Operations. The following table sets forth selected statement of operations data for each of the periods indicated.
Profit on discontinued operations
Year ended December 31,
2019
US$‘000
2018
US$‘000
77
568
The profit on discontinued operations is US$77,000 in year ended December 31, 2019, which is mainly due to the unwinding of cardiac point-of-care business
Fiomi Diagnostics accumulated foreign currency translation reserve. A profit of US$568,000 was recorded in the year ended December 31, 2018 mainly due to
the recovery of taxes paid in Sweden by Fiomi. For further details, see Item 18, Note 10.
50
Results of Operations
Year ended December 31, 2018 compared to the year ended December 31, 2017
The following compares our results in the year ended December 31, 2018 to those of the year ended December 31, 2017 under IFRS. Our analysis is divided as
follows:
1.
2.
3.
4.
5.
Overview
Revenues
Operating Loss
Loss for the year
Discontinued operations
1. Overview
In 2018, revenues decreased by 2.1% from US$99.1 million in 2017 to US$97.0 million. This was mainly attributable to a 12% fall in point-of-care revenues
primarily due to lower HIV sales in the African market where there was some overstocking in one of the larger countries in which we operate. Clinical
Laboratory revenues decreased by 2% with a decline in US infectious diseases revenues being partially offset by higher revenues for haemoglobin A1c testing.
These declines were partially offset by lab services revenues which performed strongly.
Geographically, 59% of our sales were generated in the Americas, 30% in Africa/Asia and 11% in Europe.
There was a slight increase in gross margin in 2018 (42.7% versus 42.3%) and this is mainly attributable to cost savings implemented during the year. Selling
General & Administrative Expenditure (excluding impairment charges and inventory write-offs) decreased from US$32.2 million in 2017 to US$29.5 million for
2018, which represents a decrease of 9%. The decrease is mainly attributable to a cost reduction programme, lower amortization charges and certain non-
recurring costs in the prior year.
The annual impairment test resulted in impairment charges of US$26.9 million in 2018 (2017: US$41.8 million). A number of factors contributed to the
impairment charges including the Company’s market capitalisation at the end of the year that was lower when compared to the end of 2017, the inclusion of the
latest cash flow projections and net asset values for each cash generating unit and increased volatility in the Company’s share price and higher market interest
rates which resulted in a higher discount factor being applied to the Company’s expected future cash flows.
The operating loss for continuing operations is US$20.2 million for the year, which compares to US$37.7 million for 2017. Excluding the impairment charge, the
operating profit for continuing operations for 2018 is US$6.7 million, compared to US$4.1 million in 2017. The increase of US$2.6 million in operating profit
before impairment charges in 2018 is mainly attributable to the higher gross profit and lower selling, general and administrative expenses.
In 2018, net financing expense was US$3.0 million compared to US$2.2 million in 2017. The increase of US$0.8 million is mainly attributable to the revaluation
of embedded derivatives at fair value, which resulted in lower income of US$1.0 million in 2018 compared to 2017.
The loss for the year from continuing operations amounted to US$22.7 million, compared to US$38.7 million in 2017. Before the impact of impairment charges,
the profit for 2018 from continuing operations would have been US$4.3 million, compared to US$3.1 million for 2017.
2. Revenues
Trinity Biotech’s revenues consist of sales of diagnostic kits and related instrumentation, laboratory testing services sales and sales of raw materials to the life
sciences industry. The Group recognises revenue when it transfers control over a good or service to a customer. Revenue is recognised to the extent that it is
probable that economic benefit will flow to the Group and the revenue can be measured. Revenue from products is generally recorded as of the date of shipment,
consistent with typical ex-works shipment terms. Where the shipment terms do not permit revenue to be recognised as of the date of shipment, revenue is
recognised when the Group has satisfied all of its performance obligations to the customer in accordance with the shipping terms. Some contracts oblige the
Group to ship product to the customer ahead of the agreed payment schedule. For these shipments, a contract asset is recognised when control over the goods has
transferred to the customer. Revenue from services rendered is recognised in the statement of operations in proportion to the stage of completion of the
transaction at the balance sheet date.
51
The Group leases instruments to customers typically as part of a bundled package. Where a contract has multiple performance obligations and its duration is
greater than one year, the transaction price is allocated to the performance obligations in the contract by reference to their relative standalone selling prices. For
contracts where control of the instrument is transferred to the customer, the fair value of the instrument is recognised as revenue at the commencement of the
lease and is matched by the related cost of sale. Fair value is determined based on standalone selling price. In the case where control of the instrument does not
transfer to the customer, revenue is recognised on the basis of customer usage of the instrument.
Revenues by Product Line
Trinity Biotech’s revenues for the year ended December 31, 2018 were US$97,035,000 compared to revenues of US$99,140,000 for the year ended December
31, 2017, which represents a decrease of US$2,105,000 or 2.1%. The following table sets forth selected sales data for each of the periods indicated.
Revenues
Clinical Laboratory
Point-of-Care
Laboratory Services
Total
Clinical Laboratory
Year ended December 31,
2018
US$’000
2017
US$’000
% Change
71,618
14,836
10,581
73,366
16,774
9,000
(2.4)%
(11.6)%
17.6%
97,035
99,140
(2.1)%
Clinical Laboratory revenues decrease by US$1,748,000 in 2018, which represents a decrease of 2.4%. This decrease was mainly attributable to a 14% decrease
in Infectious Diseases revenues. These tests are used to detect infectious and sexually transmitted diseases, and disorders of the liver and intestine. Revenues for
these tests have been declining for several years, particularly in USA but we have succeeded in partially making up for these declines by selling more to
emerging markets, with China being the largest market. Another factor was that a significant Lyme disease contract with one of the major clinical laboratory
service providers in the US was lost. Partially offsetting these decreases was higher revenues for haemoglobin A1c testing, which increased by 4% compared to
2017.
Point-of-Care
Point-of-Care revenues decreased by US$1,938,000, which represents a reduction of 11.6%. Revenues for our Unigold HIV test in 2018 were down $1.9 million
compared to 2017. Sales prices were relatively stable during 2018 and the reduction in point-of-care revenues arose in the African market, where sales are more
erratic and variable in nature and was in a large part due to overstocking in one of the larger countries in which we operate. In the Americas, HIV revenues in
USA declined slightly but this was offset by a strong performance in Latin America.
Laboratory Services
We offer laboratory-testing services for autoimmune disorders from our lab in Buffalo, New York. In recent years, there has been a growing demand for
autoimmune diagnostic testing and this growth accelerated in 2018 with laboratory services revenues recording a 17.6% increase equating to US$1,581,000.
Revenues for Sjögrens Syndrome accounts for 23% of the total revenues.
52
Revenues by Geographical Region
The following table sets forth selected sales data, analysed by geographic region, based on location of customer:
Revenues
Americas
Asia/Africa
Europe
Total
Year ended December 31,
2018
US$‘000
2017
US$‘000
% Change
57,559
29,466
10,010
59,539
27,131
12,470
(3.3)%
8.6%
(19.7)%
97,035
99,140
(2.1)%
In the Americas, revenues decreased US$1,980,000 or 3.3% due to the multi-year trend of falling sales of infectious diseases tests in the USA. In addition, a
significant Lyme disease contract with one of the major clinical laboratory service providers in the US was lost in 2018. These declines were partially offset by
strong growth (17.6%) in laboratory testing revenues from our autoimmune reference laboratory, higher point-of-care revenues in Latin America and higher
revenues from our diabetes testing business, although the increase was impacted negatively by a marked weakness in the Brazilian currency.
Asia/Africa revenues increased by 8.6%, or US$2,335,000 compared to 2017. The main reasons for this was increased revenues for haemoglobin A1c in
Asia/Middle East and higher revenues in Asia for our Fitzgerald business, which sells antibodies to the life sciences and research industries. Haemoglobin A1c
revenues in the territory were driven by continued strong demand for our diabetes analyser, the Premier. These increases were partially offset by lower HIV sales
in Africa due to erratic ordering patterns and was contributed to by the impact of significant overstocking by one larger customer that occurred during 2017.
In Europe, revenues decreased by 19.7% or US$2,460,000, compared to 2017. The decrease was due to lower haemoglobin A1c revenues mainly caused by one
major European customer purchasing significantly fewer instruments due to overstocking in the previous year. There was also lower sales of infectious diseases
revenues in the territory.
For further information about the Group’s principal products, principal markets and competition please refer to Item 4, “Information on the Company”.
3. Operating Loss – continuing operations
The following table sets forth the Group’s operating loss from continuing operations:
Revenues
Cost of sales
Gross profit
Other operating income
Research & development
SG&A expenses
Selling, general and administrative expenses - impairment charges and inventory write-
Year ended December 31,
2018
US$’000
2017
US$’000
% Change
97,035
(55,586)
41,449
102
(5,369)
(29,477)
99,140
(57,250)
41,890
100
(5,657)
(32,246)
(2.1)%
(2.9)%
(1.1)%
2.0%
(5.1)%
(8.6)%
off/provision
(26,932)
(41,755)
(35.5)%
Operating loss on continuing operations
(20,227)
(37,668)
(46.3)%
53
Cost of sales and gross margin
Total cost of sales decreased by US$1,664,000 from US$57,250,000 for the year ended December 31, 2017 to US$55,586,000, for the year ended December 31,
2018, a decrease of 2.9%. The gross margin of 42.7% in 2018 compares to a gross margin of 42.3% in 2017. The increase in gross margin in 2018 is mainly
attributable to cost savings implemented during the year and a lower depreciation charge. Both of these factors outweighed the negative impact of lower point-
of-care and Lyme revenues.
Other operating income
In 2018, other operating income mainly comprises income from the provision of canteen services recognised under a Transitional Services Agreement with
Diagnostica Stago. Other operating income increased by 2% to US$102,000 mainly due to currency movements.
Research and development expenses (“R&D”)
Research and development expenditure recorded in the Statement of Operations decreased from US$5,657,000 in 2017 to US$5,369,000 in 2018. The decrease
in 2018 is mainly due to some non-recurring regulatory costs in 2017. For details of the Company’s various R&D projects see “Research and Products under
Development” below.
Selling, General & Administrative expenses (“SG&A”)
Total SG&A expenses decreased by US$2,769,000 from US$32,246,000 for the year ended December 31, 2017 to US$29,477,000 for the year ended December
31, 2018.
The following table outlines the breakdown of SG&A expenses in 2018 compared to 2017.
SG&A (excl. share-based payments and amortisation)
Share-based payments
Amortisation
Total
Year ended December 31,
2018
US$’000
2017
US$’000
25,317
1,335
2,825
28,050
893
3,303
% Change
(9.7)%
(49.5)%
(14.5)%
29,477
32,246
(8.6)%
Selling General & Administrative Expenditure (excluding share-based payments and amortisation)
SG&A expenses excluding share-based payments and amortisation decreased from US$28,050,000 for the year ended December 31, 2017 to to US$25,317,000
for the year ended December 31, 2018, which represents a decrease of 9.7%. The decrease of US$2,733,000 is mainly attributable to:
•
•
•
•
flood damage incident at one of our U.S. plants in 2017 (US$894,000),
a settlement in relation to a licence royalty dispute in 2017 (US$497,000),
a gain on the purchase of a portion of our exchangeable notes in 2018 (US$463,000),
cost savings implemented in 2018 as part of a cost saving programme.
Share-based payments
The expense represents the fair value of share options granted to directors and employees, which is charged to the statement of operations over the vesting period
of the underlying options. The Group has used a trinomial valuation model for the purposes of valuing these share options with the key inputs to the model being
the expected volatility over the life of the options, the expected life of the option, the option price, the dividend yield and the risk free rate.
The Group recorded a total share-based payments charge of US$1,369,000 (2017: US$928,000). The increase of US$441,000 in the total share-based payments
expense is due to a larger number of share options being in their vesting period in 2018 compared to 2017. The total charge is shown in the following expense
headings in the statement of operations: US$34,000 (2017: US$35,000) was charged against cost of sales and US$1,335,000 (2017: US$893,000) was charged
against selling, general & administrative expenses.
For further details, refer to Item 18, Note 22 to the consolidated financial statements.
54
Amortisation
Amortisation decreased from US$3,303,000 for the year ended December 31, 2017 to US$2,825,000 for the year ended December 31, 2018. The decrease of
US$478,000 is due to lower amortisation on development projects.
Selling, general and administrative expenses - impairment charges and inventory write-off/provision
Impairment charges of US$26,932,000 for the year ended December 31, 2018 are included in selling, general and administrative expenses. In 2017, impairment
charges of US$41,755,000 were included in selling, general and administrative expenses. The Group carries out an annual impairment review of the asset
valuations. In determining whether a potential asset impairment exists, a range of internal and external factors are considered. A number of factors affected this
calculation including:
•
•
•
the Company’s market capitalisation at the end of the year that was lower when compared to the end of 2017.
the inclusion of the latest cash flow projections and net asset values for each cash generating unit; and
increased volatility in the Company’s share price and higher market interest rates which resulted in a higher discount factor being applied to the
Company’s expected future cash flows.
For further details, see Item 18, Notes 13, 14 and 18.
4. Loss for the year
The following table sets forth selected statement of operations data for each of the periods indicated.
Operating loss
Net financing expense
Loss before tax
Income tax credit
Year ended December 31,
2018
US$‘000
2017
US$‘000
(20,227)
(2,956)
(23,183)
525
(37,668)
(2,207)
(39,875)
1,214
% Change
(46.2)%
33.9%
(41.9)%
(56.8)%
Loss for the year from continuing operations
(22,658)
(38,661)
(41.4)%
Net Financing income
Net financing expense was US$2,956,000 for the year-end December 31, 2018 compared to US$2,207,000 in 2017. Financial income decreased by
US$1,074,000 from US$3,198,000 for the year-end December 31, 2017 to US$2,124,000 in 2018. There was a decrease of US$1,002,000 in the income arising
from the revaluation of embedded derivatives at fair value and a decrease of US$72,000 in bank deposit interest due to the lower cash deposits.
Financial expenses decreased by US$325,000 to US$5,080,000 during 2018 mainly due to lower interest following the buyback of a portion of the exchangeable
notes in the third quarter of 2018.
Taxation
The Group recorded a tax credit on continuing operations of US$525,000 for the year ended December 31, 2018 compared to a tax credit of US$1,214,000 for
the year ended December 31, 2017. The 2018 tax credit comprises US$119,000 of current tax credit and US$406,000 of a deferred tax credit. For further details
on the Group’s tax charge please refer to Item 18, Note 9 and Note 15 to the consolidated financial statements.
Loss for the year from continuing operations
The loss for the year amounted to US$22,658,000, compared to a loss of US$38,661,000 in 2017, representing a decrease of 41.4.%.
55
5. Discontinued operations
The Cardiac Point-of-Care operation was discontinued during year ended December 31, 2016. Expenses, gains and losses relating to the discontinuation of the
Cardiac point-of-care tests operation have been eliminated from profit or loss from the Group’s continuing operations and are shown as a single line item on the
face of the Consolidated Statement of Operations. The following table sets forth selected statement of operations data for each of the periods indicated.
Profit/(Loss) on discontinued operations
Year ended December 31,
2018
US$‘000
2017
US$‘000
568
(1,609)
The profit on discontinued operations is US$568,000 in year ended December 31, 2018, which mainly comprises recovery of taxes paid in Sweden by the
cardiac point-of-care business Fiomi Diagnostics. A loss of US$1,609,000 was recorded in the year ended December 31, 2017 mainly due to the unwinding of
Fiomi’s accumulated foreign currency translation reserve. For further details, see Item 18, Note 10.
Liquidity and Capital Resources
Financing
The Group entered into finance lease arrangements with Allied Irish Bank in 2015 and 2018 and with Wells Fargo in 2018. The Group has no other bank
borrowings. During 2015, the Group issued US$115,000,000 of exchangeable senior notes which will mature on April 1, 2045, subject to earlier repurchase,
redemption or exchange. The notes are senior unsecured obligations and accrue interest at an annual rate of 4%, payable semi-annually in arrears on April 1 and
October 1 of each year, beginning on October 1, 2015. In August 2018, the Group purchased US$15,100,000 of the exchangeable notes. The nominal amount of
the debt after the purchase is US$99,900,000. The exchangeable note was issued in order to fund potential future acquisitions and for general corporate purposes,
including continued product development and commercialization and share buyback.
To mitigate the financial impact of the Covid-19 outbreak, the Company has availed of governmental supports. This included the receipt of US$4.5 million of
loans in 2020 under the U.S. government’s Paycheck Protection Program (“PPP”). Under the provisions of the PPP, these loans will be partially or totally
forgiven, based on the extent to which a borrower’s workforce returns to normal levels in the eight-week period immediately following the loans being granted.
Upon receipt of these loans, the Company ended the furloughing of all staff in the USA and therefore expects that a large percentage of these loans will be
forgiven later in 2020, once the necessary verification has taken place.
Working capital
In the Directors’ opinion, the Group will have access to sufficient funds to support its existing operations for at least the next 12 months by utilising existing cash
resources and cash generated from operations. The directors have considered the Group’s current financial position and cash flow projections, taking into account
all known events and developments including the Covid-19 pandemic. While acknowledging that there will be a temporary decrease in revenues due to
Covid-19, the company has taken measures to reduce expenditure, to obtain government pandemic supports in Ireland and USA and to exploit sales opportunities
of products related to coronavirus. (For more information on the impact of Covid-19 – refer to Subsequent Events in Item 18, Note 31).
The amount of cash generated from operations will depend on a number of factors which include the following:
•
•
•
•
•
The ability of the Group to continue to generate revenue growth from its existing product lines;
The ability of the Group to generate revenues from new products following the successful completion of its development projects;
The extent to which capital expenditure is incurred on additional property plant and equipment;
The level of investment required to undertake both new and existing development projects; and
Successful working capital management in the context of a growing business.
56
Cash management
As at December 31, 2019, Trinity Biotech’s consolidated cash and cash equivalents and short term investments were US$15,231,000 and US$1,169,000
respectively. This compares to cash and cash equivalents and short-term investments of US$30,277,000 and US$nil respectively at December 31, 2018.
Cash generated from operations for the year ended December 31, 2019 amounted to US$5,875,000 (2018: US$5,978,000), a decrease of US$103,000. The
decrease in cash generated from operations of US$103,000 is attributable to a decrease in working capital outflows of US$5,028,000 and a decrease in operating
cash flows before changes in working capital of US$5,131,000. The decrease in operating cash flows before changes in working capital of US$5,131,000 is
primarily driven by the increase in operating loss before impairment losses during the current financial year. The working capital outflow decrease, when
compared to the prior year, is due to an increase in trade and other payables of US$3,570,000 and an increase in cash outflows for inventories of US$4,947,000
offset by the decrease in cash outflows for trade and other receivables of US$6,405,000.
The cash generated from operations was mainly attributable to an operating loss of US$24,112,000 (2018: loss of US$20,227,000), as adjusted for non cash
items of US$32,273,000 (2018: US$33,618,000) plus cash outflows due to changes in working capital of US$2,363,000 (2018: cash outflows of US$7,391,000).
Other non-cash charges decreased from US$33,618,000 for the year ended December 31, 2018 to US$32,273,000 for the year ended December 31, 2019. Once
off charges in 2019 are mainly attributable to the impairment of intangible assets (US$16,570,000), property, plant and equipment (US$6,349,000) and
prepayments (US$1,376,000).
The net cash outflows in 2019 due to changes in working capital of US$2,363,000 are due to the following:
•
•
•
An decrease in trade and other receivables of US$445,000 partially due to the decrease, year on year, in the debtors days number;
An increase in trade and other payables balance of US$151,000 due to timing of payments; and
An increase in inventory of US$2,959,000 due to the strategic management of inventory levels during the course of the year.
Net interest received amounted to US$560,000 (2018: US$874,000). This included interest received of US$464,000 (2018: US$735,000) on the Group’s cash
deposits.
Net cash outflows from investing activities for the year ended December 31, 2019 amounted to US$11,853,000 (2018: US$17,391,000) which were principally
made up as follows:
•
•
•
Payments to acquire intangible assets of US$9,718,000 (2018: US$9,863,000), which principally related to development expenditure capitalised as
part of the Group’s on-going product development activities; and
Acquisition of property, plant and equipment of US$2,118,000 (2018: US$7,528,000) incurred as part of the Group’s investment programme for its
manufacturing and distribution activities, and placement of instruments.
Disposal of property, plant and equipment of US$17,000 (2018: US$nil) incurred as part of the Group’s investment programme for its manufacturing
and distribution activities, and placement of instruments.
Net cash outflows from financing activities for the year ended December 31, 2019 amounted to US$7,529,000 (2018: outflows of US$16,872,000). This outflow
is due to the payment of lease liabilities (US$3,533,000) and an Interest payment on exchangeable notes (US$3,996,000). In 2018 the outflow was primarily due
to the purchase of exchangeable notes of $12,042,000 and interest payments related to exchangeable notes of $4,503,000. In 2018 payments of finance lease
liabilities in the year were US$374,000, offset by the receipt of US$481,000 from sale and leaseback transactions.
The majority of the Group’s transactions are conducted in US Dollars. The primary foreign exchange risk arises from the fluctuating value of the Group’s Euro
denominated expenses as a result of the movement in the exchange rate between the US Dollar and the Euro. The Group also faces foreign exchange risk from
movement in the exchange rate between the US Dollar and British Sterling, Canadian Dollar and Brazilian Real. Trinity Biotech continuously monitors its
exposure to foreign currency movements and expectations of future exchange rate exposure and, if deemed necessary, will cover a portion of this exposure
through the use of forward contracts. When used, these forward contracts are cash flow hedging instruments whose objective is to cover a portion of these Euro
forecasted transactions.
For a more comprehensive discussion of the Group’s use of financial instruments, its currency and interest rate structure and its funding and treasury policies
please refer to Item 11 “Quantitative and Qualitative Disclosures about Market Risk”.
57
Contractual obligations
The following table summarises our minimum contractual obligations and commercial commitments, including interest, as of December 31, 2019:
Payments due by Period
Contractual Obligations
Exchangeable note*
Exchangeable note interest
Right of asset leases obligations
Sale and leaseback lease obligations
Total
Total
US$’000
99,900
101,898
19,630
519
221,947
less than 1
year
US$’000
—
3,996
2,156
247
6,399
1-2 Years
US$’000
2-5 Years
US$’000
more than
5 years
US$’000
99,900
81,918
10,622
—
—
11,988
4,840
177
17,005
192,440
—
3,996
2,012
95
6,103
* The exchangeable notes will mature in 2045, however, they can be called early on April 1, 2022 and other subsequent dates.
In the past, Trinity Biotech incurred debt and raised equity to pursue its policy of growth through acquisition. However, since the divestiture of the Coagulation
product line in 2010, the Group has eliminated bank debt (with the exception of some equipment leasing) and has adequate cash resources. The Group raised
US$110,529,000 (net of fees) during 2015 through the issuance of exchangeable loan notes (see Item 18, Note 25 for further information). The Group intends to
grow organically for the foreseeable future and Trinity Biotech believes that it will have sufficient funds to meet its capital commitments and continue existing
operations in to the future, in excess of 12 months. If the Group was to make a large and unanticipated cash outlay, the Group would have further funding
requirements which could be met through access to equity and debt markets.
Impact of Currency Fluctuation
Trinity Biotech’s revenue and expenses are affected by fluctuations in currency exchange rates especially the exchange rate between the US Dollar and the Euro,
the Brazilian Real and Canadian Dollar. Trinity Biotech’s revenues are primarily denominated in US Dollars and its expenses are incurred principally in US
Dollars, Euro and Brazilian Real. The weakening of the US Dollar could have an adverse impact on future profitability.
Trinity Biotech holds most of its cash assets in US Dollars. As Trinity Biotech reports in US Dollars, fluctuations in exchange rates do not result in exchange
differences on these cash assets. Fluctuations in the exchange rate between the Euro or Brazilian Real and the US Dollar may impact on the Group’s Euro or Real
monetary assets and liabilities and on Euro, Swedish Krona or Real expenses and consequently the Group’s earnings.
Off-Balance Sheet Arrangements
After consideration of the following items the Group’s management have determined that there are no off-balance sheet arrangements which need to be reflected
in the financial statements.
Leases with Related Parties
The Group has entered into lease arrangements for premises in Ireland with JRJ Investments (“JRJ”), a partnership currently owned by Mr O’Caoimh and Dr
Walsh, directors of Trinity Biotech plc, and directly with Mr O’Caoimh. When entering into the lease arrangements, independent valuers have advised Trinity
Biotech that the rent fixed with respect to these leases represents a fair market rent. Details of these leases with related parties are set out in Item 4 “Information
on the Company”, Item 7 “Major Shareholders and Related Party Transactions” and Item 18, Note 28 to the consolidated financial statements.
58
Research & Development (“R&D”) carried out by third parties
Certain R&D activities of the Group have been outsourced to third parties. These activities are carried out in the normal course of business with these companies.
During 2019, a number of third party consultants and contractors were engaged to assist with development projects, working principally on the Autoimmune
Smart Reader project. The total amount paid to these R&D consultants and contractors in 2019 was US$1,285,000 (2018: US$363,000).
Research and Products under Development
Trinity Biotech has research and development groups focusing separately on haemoglobin products, infectious diseases and autoimmune products. During 2019,
these groups were located in Ireland and the USA and largely mirror the production capability at each production site. In addition to in-house activities, Trinity
Biotech sub-contracts some research and development from time to time to independent researchers based in the USA and Europe.
Principal Development Projects
The following table sets forth for each of Trinity Biotech’s main development projects, the costs incurred during each period presented and the cumulative costs
(before amortization and impairment) incurred as at 31 December 2019:
Product Name
HIV screening rapid test
Premier Instrument for Haemoglobin A1c testing
Autoimmune Smart Reader
Syphilis point-of-care test
Uni-Gold antigen improvement
G-6-PDH test
Uni-gold test enhancement
Tri-stat Point-of-Care instrument
Total
project
costs to
December
31,
2019 ¹
US$’000
8,474
32,027
2,071
1,324
2,362
2,244
4,718
9,029
2019
US$’000
2018
US$’000
2,587
1,930
1,325
870
691
582
376
361
1,657
2,653
746
454
453
850
796
727
¹ Cumulative costs to December 31, 2019 are shown before deduction of amortization and impairment losses.
The costs in the foregoing table mainly comprise the cost of internal resources, such as the payroll costs for the development teams and attributable overheads.
The remainder mainly comprises materials, consumables, regulatory trial and third party consultants’ costs.
The following table sets forth the estimated cost to complete each of the main development projects which were underway in 2019 and not yet completed. The
total estimated completion costs are anticipated to be incurred evenly up to the completion date of the relevant project.
Product Name
Premier Instrument for Haemoglobin A1c testing²
HIV screening rapid test
Autoimmune Smart Reader
Total
estimated
cost to
complete
US$’000
900
1,250
1,315
Estimated
date
for
completion
2020
2020
2021
² The cost to complete the Premier Instrument does not include the cost of developing the Premier 9210 v2.0.
There are inherent risks and uncertainties associated with completing development projects on schedule. In the experience of Trinity Biotech, the main risks to
the achievement of a project’s planned completion date occur primarily during the product’s verification and validation phase. During this phase the product must
attain successful results from in-house product testing and from third party clinical trials. Obtaining regulatory approval on a timely basis is another variable in
achieving a project’s planned completion date.
Some aspects of the development of a new product are outside of the control of Trinity Biotech. Notwithstanding the uncertainty surrounding these external
factors, Trinity Biotech believes the planned completion dates of these projects are realistic and achievable. If major development projects were severely delayed,
in the opinion of Trinity Biotech it would not impact significantly on Trinity Biotech’s financial position or on the capitalisation criteria. As the manufacturing
lead time for these new products is relatively short, it is anticipated that material cash inflows will commence shortly after each of the project’s planned
completion date.
59
The following is a description of the principal projects which are currently being undertaken by the research and development groups within Trinity Biotech:
Haemoglobin Development Group
Premier Hb9210 Instrument for Haemoglobin A1c Testing
This project entails the development of a new HPLC instrument for testing HbA1c. Development was initiated in late 2007, and was launched outside of the
United States in 2011 followed by within the United States in early 2012.
As part of our continuous improvement a new monitor, key board and frit housing have been customised and validated. These improvements maintain the
competiveness of the instruments. Looking forward, the Premier Hb9210 v2.0 is in the initial stages and design with an expected release date of mid-2021 and
will feature a new faster and more advanced column.
Premier Resolution Instrument for Haemoglobin Variant Testing
The company has developed the Premier Resolution instrument which is utilised for haemoglobin variant testing and is currently being rolled out in certain
international markets outside of the USA. The company intends submitting it to the FDA for clearance later in 2020. Meanwhile, Premier Resolution continues
to be enhanced with unique features such as lot specific gradients, an optimised internally developed column with extended column life, and a rapidly expanding
on-board variant library.
Tri-stat 2.0
Tri-stat 2.0 represents a new HbA1c device that offers rapid, precise analysis in a simple and highly cost effective manner. Using boronate affinity technology
and a two phase optical system, three samples can be analysed simultaneously. This instrument though often characterised as point-of-care is being targeted at
low volume laboratories and governmental outreach programs. The ability to perform three samples simultaneously enables the instrument to address these
segments. Taking advantage of the latest technology the instrument features a colour touchscreen, multiple language capability, modern connectivity, increased
storage capacity as well as replaceable diodes for state-of-the-art performance. Whilst the product has been launched in international markets, the company
continues to make enhancements to further improve its operational efficiency and accuracy.
Low to Medium throughput Haemoglobin instrument for A1c Testing
The company is developing a low to medium throughput Haemoglobin A1c instrument with a view to targeting the market segment for testing volumes which lie
between the Tri-stat 2.0 and Premier Hb9210. The company is targeting a launch date of 2021.
Point-of-Care Development Group
Trinity Biotech is in the process of developing point-of-care tests for the detection of HIV (TrinScreen) for the HIV screening market in Africa. The product
which was developed at the company’s Carlsbad facility is currently in its clinical trials phase after which the product will be submitted to the World Health
Organisation for approval.
Autoimmunity Development Group
IFA Smart Reader Project
The company is developing two devices which will enable cell based Immunofluorescence Assays (IFA) to be read in a more automated manner. The first
device, ScopeSmart will be an automated IFA reader capable of performing image capture, pattern recognition and analysis on IFA slides. This will then be
followed by SlideSmart which will fully automate this entire testing process by integrating the sample preparation.
Covid-19 Tests
In response to the Covid-19 pandemic, the company has commenced the development of tests for the detection of antibodies to Covid-19.
Trend Information
For information on trends in future operating expenses and capital resources, see “Results of Operations” and “Liquidity and Capital Resources” under Item 5.
60
Item 6 Directors, Senior Management and Employees
Directors
Name
Ronan O’Caoimh
Jim Walsh, PhD
Kevin Tansley
Denis R. Burger, PhD
Clint Severson
James D. Merselis
Age Title
64 Chairman and Chief Executive Officer
61 Executive Director
49 Executive Director, Chief Financial Officer & Company Secretary
76 Non Executive Director / Lead Director
71 Non Executive Director
66 Non Executive Director
The Directors of the Company as of the date of this Annual Report are:
Board of Directors & Executive Officers
Ronan O’Caoimh, Chairman and Chief Executive Officer, co-founded Trinity Biotech in June 1992 and acted as Chief Financial Officer until March 1994
when he became Chief Executive Officer. He was also elected Chairman in May 1995. In November 2007, it was decided to separate the role of Chief Executive
Officer and Chairman and Mr O’Caoimh assumed the role of Executive Chairman. In October 2008, following the resignation of the Chief Executive Officer, Mr
O’Caoimh resumed the role of Chief Executive Officer and Chairman. Prior to joining Trinity Biotech, Mr O’Caoimh was Managing Director of Noctech
Limited, an Irish diagnostics company. Mr O’Caoimh was Finance Director of Noctech Limited from 1988 until January 1991 when he became Managing
Director. Mr O’Caoimh holds a Bachelor of Commerce degree from University College Dublin and is a Fellow of the Institute of Chartered Accountants in
Ireland. On March 30, 2011, the service agreement with Ronan O’Caoimh as Chief Executive Officer was terminated and replaced by a management agreement
with Darnick Company. This arrangement ceased with effect from December 31, 2018 with Ronan O’Caoimh returning as an employee of the company.
Jim Walsh, PhD, Executive Director, initially joined Trinity Biotech in October 1995 as Chief Operations Officer. Dr Walsh resigned from the role of Chief
Operations Officer in 2007 to become a Non Executive Director of the Company. In October, 2010 Dr Walsh rejoined the company as Chief Scientific Officer.
Dr Walsh transferred from this position in 2015 and focuses on Business Development activities. Prior to joining Trinity Biotech, Dr Walsh was Managing
Director of Cambridge Diagnostics Ireland Limited (“CDIL”). He was employed with CDIL since 1987. Before joining CDIL he worked with Fleming GmbH as
Research & Development Manager. Dr Walsh holds a PhD in Chemistry from University College Galway.
Kevin Tansley, Chief Financial Officer, joined Trinity Biotech in March 2003 and was appointed Chief Financial Officer and Secretary to the Board of
Directors in November 2007. Mr. Tansley was appointed to the board in September 2016 as Executive Director. Mr Tansley trained as a chartered accountant in
the Corporate Financial Services practice of Arthur Andersen & Co. Prior to joining Trinity Biotech in 2003, Mr Tansley held a number of financial positions in
the Irish electricity utility ESB. Mr Tansley holds a Masters of Accounting from University College Dublin and is a Fellow of the Institute of Chartered
Accountants in Ireland.
Denis R. Burger, PhD, Non-executive director, co-founded Trinity Biotech in June 1992 and acted as Chairman from June 1992 to May 1995. He is currently
lead director of Aptose Biosciences, Inc, a cancer therapeutics, TSX and NASDAQ listed company. Until March 2007, Dr Burger was the Chairman and Chief
Executive Officer of AVI Biopharma Inc, a NASDAQ listed biotechnology company. He was also a co-founder and, from 1981 to 1990, Chairman of Epitope
Inc. In addition, Dr Burger has held a professorship in the Department of Microbiology and Immunology and Surgery (Surgical Oncology) at the Oregon Health
and Sciences University in Portland. Dr Burger received his degree in Bacteriology and Immunology from the University of California in Berkeley in 1965 and
his Master of Science and PhD in 1969 in Microbiology and Immunology from the University of Arizona.
Clint Severson, Non-executive director, joined the board of Trinity Biotech in November 2008 as a non-executive director. Mr Severson served as Chairman
and CEO of Abaxis Inc. from June, 1996 to August, 2018, a NASDAQ traded diagnostics company based in Union City, California. From February 1989 to May
1996, Mr Severson served as President and Chief Executive Officer of MAST Immunosystems, Inc., a privately-held medical diagnostic company and to date he
has accumulated over 40 years experience in the medical diagnostics industry. Mr Severson is also on the board of Cutera.
James D. Merselis, Non-executive director, joined the board of Trinity Biotech in February 2009. He is currently a Co-Founder and Managing Director of
Synchrony Bio LLC, a newly formed healthcare-focused venture investment fund based in St. Louis, MO. He is also a non-executive director for the following
companies: Kypha Inc., a St. Louis, Missouri based diagnostic company focused on Complement assays in the diagnosis and management of patients with
inflammatory diseases; Geneoscopy, a St. Louis, Missouri based company developing next generation diagnostics that leverage the power of RNA to better
prevent, detect, and treat gastrointestinal disease; and Abram Scientific Inc., a coagulation diagnostics company located in Palo Alto, California. Mr. Merselis
has more than forty years experience in healthcare, including twenty-two years at Boehringer Mannheim Diagnostics (now Roche Diagnostics). Mr. Merselis has
led a number of healthcare diagnostic start-ups. From 2002 to 2007, he served as President and CEO of HemoSense, Inc., a point-of-care diagnostics company
providing patients and physicians with rapid test results to help manage the risk of stroke with the use of Warfarin or Coumadin. During this time he successfully
took the company public (AMEX:HEM) followed two years later by its acquisition by Alere (now Abbott) (NYSE:ABT). His leadership at other start-ups has
included: Nexus Dx (now Samsung), Alverix, Inc. (now Becton Dickenson), and Micronics, Inc. (now SONY).
61
Compensation of Directors and Officers
The basis for the executive directors’ remuneration and level of annual bonuses is determined by the Remuneration Committee of the board. In all cases, bonuses
and the granting of share options are subject to stringent performance criteria. The Remuneration Committee consists of Dr Denis Burger (committee chairman
and lead director), Mr Clint Severson and Mr James Merselis. Directors’ remuneration shown below comprises salaries, pension contributions and other benefits
and emoluments in respect of executive directors. Non-executive directors are remunerated by fees and the granting of share options. The fees payable to non-
executive directors are determined by the board. Each director is reimbursed for expenses incurred in attending meetings of the board of directors.
Total directors and non-executive directors’ remuneration, excluding pension, for the year ended December 31, 2019 amounted to US$1,238,000. The pension
charge for the year amounted to US$42,000. See Item 18, Note 4 to the consolidated financial statements. The split of directors’ remuneration set out by director
is detailed in the table below:
Executive Director
Ronan O’Caoimh1
Jim Walsh
Kevin Tansley
Non-executive Director
Denis R. Burger
Peter Coyne2
James Merselis
Clint Severson
Salary/
Benefits
US$’000
Performance
related bonus
US$’000
Defined
contribution
pension
US$’000
Total
2019
US$’000
Total
2018
US$’000
425
—
375
800
—
—
213
213
—
—
42
42
425
—
630
1,055
585
9
523
1,117
Fees
US$’000
Total
2019
US$’000
Total
2018
US$’000
75
—
75
75
225
75
—
75
75
225
—
38
75
75
188
As at December 31, 2019 there was no accrual by the Company to provide pension, retirement or similar benefits for the directors (2018: NIL).
The total share-based compensation expense recognised in the consolidated statement of operations in 2019 in respect of options granted to both executive and
non-executive directors amounted to US$624,000. See Item 18, Note 11 to the consolidated financial statements.
There were no ‘A’ share options granted to the directors during 2019.
In addition, see Item 7 – Major Shareholders and Related Party Transactions for further information on the compensation of Directors and Officers.
1
2
Represents payments to Ronan O’Caoimh for director fees and to Darnick Company in respect of CEO services.
Peter Coyne resigned as Non-executive Director on June 5, 2018.
62
Directors’ Service Contracts
The Company has entered into service contracts with its Executive Directors and Officers. These contracts contain certain termination provisions which are
summarised below.
On March 30, 2011, the service agreement with Ronan O’Caoimh as Chief Executive Officer was terminated and replaced by an agreement with Darnick
Company, a company wholly-owned by members of Mr O’Caoimh’s immediate family. Pursuant to the agreement, Darnick Company will provide the Company
with the services of Mr O’Caoimh as Chief Executive Officer. The agreement contains certain non-competition and confidentiality provisions. The term of the
agreement will continue until such time as it is terminated by either party, subject to the Company providing one year’s notice. Where termination occurs within
12 months of a change of control of the Company, two year’s notice will apply. Darnick Company may terminate the agreement on six months’ notice. Mr
O’Caoimh remains as Chairman of the Board of Directors. This arrangement ceased with effect from December 31, 2018 with Ronan O’Caoimh returning as an
employee of the company.
Under the terms of his service contract, Kevin Tansley, Chief Financial Officer, is entitled to 12 months salary and benefits in the event of termination by the
Company. Where termination arises within 12 months of a change in control of the Company, Mr. Tansley is entitled to 18 months salary and benefits.
Board Practices
The Articles of Association of Trinity Biotech provide that one third of the directors in office (other than the Managing Director or a director holding an
executive office with Trinity Biotech) or, if their number is not three or a multiple of three, then the number nearest to but not exceeding one third, shall retire
from office at every annual general meeting. If at any annual general meeting the number of directors who are subject to retirement by rotation is two, one of
such directors shall retire and if the number of such directors is one, that director shall retire. Retiring directors may offer themselves for re-election. The
directors to retire at each annual general meeting shall be the directors who have been longest in office since their last appointment. As between directors of
equal seniority the directors to retire shall, in the absence of agreement, be selected from among them by lot.
The Board of Directors has established Audit, Remuneration and Compensation Committees. The Remuneration Committee consists of Dr. Denis Burger
(committee chairman and lead director), Mr Clint Severson and Mr James Merselis. This Committee is responsible for approving executive directors’
remuneration including bonuses and share option grants. The Audit Committee reviews the Group’s annual and interim financial statements and reviews reports
on the effectiveness of the Group’s internal controls. It also appoints the external auditors, reviews the scope and results of the external audit and monitors the
relationship with the auditors. The Audit Committee comprises two of the three non-executive directors of the Group, Mr James Merselis (Committee Chairman)
and Mr Clint Severson. The Compensation Committee currently comprises Mr Ronan O’Caoimh (Committee Chairman), Dr Jim Walsh and Mr Kevin Tansley.
The Board of Directors administers the Employee Share Option Plan. The Board determines the exercise price and the term of the options. Individual option
grants of less than 30,000 ‘A’ ordinary shares (7,500 ADRs) are approved by the Compensation Committee and subsequently ratified by the Board. Options
granted to the members of the Compensation Committee are approved by the Remuneration Committee and share options granted to non-executive directors are
decided by the other members of the board.
Because Trinity Biotech is a foreign private issuer, it is not required to comply with all of the corporate governance requirements set forth in NASDAQ Rule
5600 as they apply to U.S. domestic companies. The Group’s corporate governance measures differ in the following significant ways: (a) the Group has not
appointed an independent nominations committee or adopted a board resolution addressing the nominations process and (b) the Audit Committee of the Group
currently consists of two members (both of whom are non-executive directors) – while U.S. domestic companies listed on NASDAQ are required to have three
members on their audit committee and be comprised only of independent directors.
Employees
During 2019, Trinity Biotech had an average of 579 employees (2018: 575) consisting of 57 research scientists and technicians, 363 manufacturing and quality
assurance employees, and 159 finance, administration, sales and marketing staff (2018: 59 research scientists and technicians, 353 manufacturing and quality
assurance employees, and 163 finance, administration, sales and marketing staff). Trinity Biotech’s future hiring levels will depend on the growth of revenues.
The geographic spread of the Group’s average employees is as follows: 334 in our U.S. operations, 215 in Bray, Ireland, 2 in the UK and 28 in Sao Paulo, Brazil.
Stock Option Plans
The Board of Directors have adopted the Employee Share Option Plans (the “Plans”); with the most recently adopted Share Option Plan being the 2017 Plan.
The purpose of these Plans is to provide Trinity Biotech’s employees, consultants, officers and directors with additional incentives to improve Trinity Biotech’s
ability to attract, retain and motivate individuals upon whom Trinity Biotech’s sustained growth and financial success depends. These Plans are administered by
the Board of Directors. Options under the Plans may be awarded only to employees, officers, directors and consultants of Trinity Biotech.
The exercise price of options is determined by the Board of Directors. The term of an option will be determined by the Board, provided that the term may not
exceed ten years from the date of grant. Option grants up to 30,000 ‘A’ ordinary shares (7,500 ADRs) are administered by the Compensation Committee and
subsequently ratified by the Board. The Committee will also determine the exercise price and term of these options. All options will terminate 90 days after
termination of the option holder’s employment, service or consultancy with Trinity Biotech (or one year after such termination because of death or disability)
except where a longer period is approved by the board of directors.
Under certain circumstances involving a change in control of Trinity Biotech, the Board may accelerate the exercisability and termination of options.
63
As of February 28, 2020, 10,414,000 (2,603,500 ADS equivalent) of the options outstanding were held by the directors of Trinity Biotech as follows:
Director/Company Secretary
Ronan O’Caoimh*
Denis Burger
Jim Walsh
Kevin Tansley
Jim Merselis
Clint Severson
Number of
Options ‘A’
Shares
Number of
Options
ADS
Equivalent
Exercise
Price (Per
‘A’ Share)
Exercise
Price
(Per ADS)
Expiration Date of
Option
266,667
266,667
266,666
1,000,000
1,000,000
244,000
2,030,000
2,030,000
20,000
20,000
20,000
321,000
95,000
20,000
53,333
53,333
53,334
360,000
360,000
30,000
166,667
166,667
166,666
340,000
340,000
184,000
20,000
20,000
20,000
95,000
95,000
20,000
20,000
20,000
20,000
95,000
95,000
20,000
66,667
66,667
66,667
250,000
250,000
61,000
507,500
507,500
5,000
5,000
5,000
80,250
23,750
5,000
13,333
13,333
13,334
90,000
90,000
7,500
41,667
41,667
41,667
85,000
85,000
46,000
5,000
5,000
5,000
23,750
23,750
5,000
5,000
5,000
5,000
23,750
23,750
5,000
2.43
2.43
2.43
1.34
1.34
1.34
0.69
0.69
2.43
2.43
2.43
1.34
1.34
1.34
2.43
2.43
2.43
1.34
1.34
1.34
2.43
2.43
2.43
1.34
1.34
1.34
2.43
2.43
2.43
1.34
1.34
1.34
2.43
2.43
2.43
1.34
1.34
1.34
9.73
9.73
9.73
5.35
5.35
5.35
2.74
2.74
9.73
9.73
9.73
5.35
5.35
5.35
9.73
9.73
9.73
5.35
5.35
5.35
9.73
9.73
9.73
5.35
5.35
5.35
9.73
9.73
9.73
5.35
5.35
5.35
9.73
9.73
9.73
5.35
5.35
5.35
24/02/2023
24/02/2023
24/02/2023
07/09/2024
07/09/2024
07/09/2024
14/06/2026
14/06/2026
24/02/2023
24/02/2023
24/02/2023
07/09/2024
07/09/2024
07/09/2024
24/02/2023
24/02/2023
24/02/2023
07/09/2024
07/09/2024
07/09/2024
24/02/2023
24/02/2023
24/02/2023
07/09/2024
07/09/2024
07/09/2024
24/02/2023
24/02/2023
24/02/2023
07/09/2024
07/09/2024
07/09/2024
24/02/2023
24/02/2023
24/02/2023
07/09/2024
07/09/2024
07/09/2024
*Includes options issued to Darnick Company which in the past provided Trinity Biotech with the services of Mr. O’Caoimh as Chief Executive Officer.
64
As of February 28, 2020 the following total options were outstanding:
Total options outstanding
Number of ‘A’
Ordinary Shares
Subject to Option
12,303,990
Range of
Exercise Price
per Ordinary
Share
Range of
Exercise Price
per ADS
US$0.46-
US$4.36
US$1.83-
US$17.45
As of February 28, 2020 there were no warrants to purchase ‘A’ Ordinary Shares in the Company outstanding.
Item 7 Major Shareholders and Related Party Transactions
As of February 28, 2020 Trinity Biotech has outstanding 96,162,410 ‘A’ Ordinary shares. Such totals exclude 12,303,990 shares issuable upon the exercise of
outstanding options and warrants.
The following table sets forth, as of February 28, 2020, the Trinity Biotech ‘A’ Ordinary Shares beneficially held by (i) each person believed by Trinity Biotech
to beneficially hold 5% or more of such shares, (ii) each director and the Company Secretary of Trinity Biotech, and (iii) all directors and the Company Secretary
as a group.
Except as otherwise noted, all of the persons and groups shown below have sole voting and investment power with respect to the shares indicated. The Group is
not controlled by another corporation or government.
Stonehill Capital Management, LLC
Paradice Investment Management, LLC
Hunter Associates, Inc.
Ronan O’Caoimh
Jim Walsh
Denis Burger
Clint Severson
James Merselis
Kevin Tansley
Directors & Co. Secretary as a group (6 persons)
Number of
‘A’
Ordinary
Shares
Beneficially
Owned
12,010,288
6,172,460
5,918,000
14,161,496(1)
2,303,611(2)
496,000(3)
558,000(4)
458,600(5)
1,514,000(6)
19,491,707(1)(2)(3)(4)(5)(6)(7)
Number of
ADSs
Beneficially
Owned
Percentage
‘A’ Ordinary
Shares (8)
Percentage
Total
Voting
Power
3,002,572
1,543,115
1,479,500
3,540,374
575,903
124,000
139,500
114,650
378,500
4,872,927
11.1%
5.7%
5.5%
13.1%
2.1%
0.5%
0.5%
0.4%
1.4%
18.0%
11.1%
5.7%
5.5%
13.1%
2.1%
0.5%
0.5%
0.4%
1.4%
18.0%
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Includes 7,104,000 ‘A’ Ordinary shares issuable upon exercise of options issued to Darnick Company.
Includes 910,000 ‘A’ Ordinary shares issuable upon exercise of options. Note that 1,200,000 ‘A’ Ordinary shares (300,000 ADSs) of Dr Walsh’s shares are
held in trust for the benefit of Dr Walsh’s immediate family.
Includes 496,000 ‘A’ Ordinary shares issuable upon exercise of options.
Includes 250,000 ‘A’ Ordinary shares issuable upon exercise of options.
Includes 250,000 ‘A’ Ordinary shares issuable upon exercise of options.
Includes 1,364,000 ‘A’ Ordinary shares issuable upon exercise of options.
Percentage ‘A’ Ordinary shares is based upon total outstanding ‘A’ Ordinary shares and total number of shares issuable upon exercise of options.
65
Related Party Transactions
The Group has entered into various arrangements with JRJ Investments (“JRJ”), a partnership owned by Mr O’Caoimh and Dr Walsh, directors of Trinity
Biotech, and directly with Mr O’Caoimh, to provide for current and potential future needs to extend its premises at IDA Business Park, Bray, Co. Wicklow,
Ireland.
The Group has entered into an agreement for a 25-year lease with JRJ for offices that adjacent to its then premises at IDA Business Park, Bray, Co. Wicklow,
Ireland. The annual rent of €381,000 (US$427,000) is payable from January 1, 2004. Upward-only rent reviews are carried out every five years and there have
been no increases arising from these rent reviews.
The Group has also entered into lease agreements with Ronan O’Caoimh for a 43,860 square foot manufacturing facility in Bray, Ireland and an adjacent
warehouse of 16,000 square feet. The annual rent for the manufacturing facility is €787,000 (US$883,000) and the annual rent for the warehouse is €144,000
(US$162,000). These two leases expire in 2028 and 2026 respectively. At the time, independent valuers advised the Group that the rent in respect of each of the
leases represents a fair market rent. Upward-only rent reviews are carried out every five years and there have been no increases arising from these rent reviews.
Trinity Biotech and its directors (excepting Mr O’Caoimh and Dr Walsh who express no opinion on this point) believe at the time that the arrangements entered
into represent a fair and reasonable basis on which the Group can meet its ongoing requirements for premises.
Darnick Company is wholly-owned by members of Mr. O’Caoimh’s immediate family. On March 30, 2011, the service agreement with Ronan O’Caoimh as
Chief Executive Officer was terminated and replaced by a management agreement with Darnick Company. Pursuant to the agreement, Darnick Company
provides Trinity Biotech with the services of Mr O’Caoimh as Chief Executive Officer. In 2019, the Group paid US$425,000 to Darnick Company in respect of
compensation for provision of CEO services.
Rayville Limited, an Irish registered company, which is wholly owned by the three executive directors and certain other executives of the Group, owns all of the
‘B’ non-voting Ordinary Shares in Trinity Research Limited, one of the Group’s subsidiaries. The ‘B’ shares do not entitle the holders thereof to receive any
assets of the company on a winding up. All of the ‘A’ voting ordinary shares in Trinity Research Limited are held by the Group. Trinity Research Limited may,
from time to time, declare dividends to Rayville Limited and Rayville Limited may declare dividends to its shareholders out of those amounts. Any such
dividends paid by Trinity Research Limited are ordinarily treated as a compensation expense by the Group in the consolidated financial statements prepared in
accordance with IFRS, notwithstanding their legal form of dividends to minority interests, as this best represents the substance of the transactions.
The last dividend paid by Trinity Research Limited to Rayville Limited was in June 2009 for US$2,830,000. At the time, this amount was immediately lent back
by Rayville Limited to Trinity Research Limited. Since then US$1,788,000 of these loans have been repaid and recognised as a compensation expense by the
Group. As of December 31, 2017 and December 31, 2018, the remaining amount of the loan was US$1,042,000. As this remaining amount of the original
dividend is matched by a loan from Rayville Limited to Trinity Research Limited which is repayable solely at the discretion of the Remuneration Committee of
the Board and is unsecured and interest free, the Group netted the dividend paid to Rayville Limited against the corresponding loan from Rayville Limited in the
2017 and 2018 consolidated financial statements. During 2019, Trinity Research Limited repaid loans to Rayville Limited of US$159,000 in order to meet its
obligations under a tax settlement arising from a tax audit.
The amount of payments to Rayville included in compensation expense was US$Nil for 2019, 2018, 2017 and 2016. There were no dividends payable to
Rayville Limited as at December 31, 2019, 2018, 2017 or 2016.
Arising out of a tax audit in one of the jurisdictions in which the company operates, the Company reached a tax settlement of US$6,442,000 in the year end
December 31, 2019. The tax audit concluded in late December 2019 and the payment of the settlement amount was made prior to the financial year end. The
settlement consisted of US$3,863,000 in relation to a patent dividend scheme, which had operated via Rayville Limited from 1995 to 2010, US$1,231,000 in
relation to payments for CEO Services made to Darnick Company (a company controlled by the family of Ronan O’Caoimh) and US$75,000 in relation to R&D
tax credits. Interest was US$1,000,000 and penalties were US$273,000. The total settlement of US$6,442,000 was partially offset by a provision of
US$400,000, resulting in an expense of US$6,042,000. Darnick Company agreed to contribute US$1,231,000 to the above settlement and this amount was
outstanding at December 31, 2019 and treated as a contingent asset at year end.
66
Item 8 Financial Information
Legal Proceedings
In 2017, a dispute arose over the application of the terms of a licence agreement to which the Company is a party. Rather than undergo a lengthy and costly legal
dispute, both parties reached a mutually acceptable agreement. In 2018, both parties signed an agreement that extends the term of the licence and settles the
dispute in relation to past royalties. The settlement costs were included in consolidated statement of operations in the year ended December 31, 2017.
In 2008 Trinity Biotech filed a civil suit with a New York court against the former shareholders of Primus Corporation. Trinity Biotech claimed that the
defendants unjustly received an overpayment of US$512,000 based on the fraudulent and wrongful calculation of the earnout payable to the shareholders of
Primus Corporation. Trinity Biotech also alleged that one of the former shareholders, Mr Thomas Reidy, failed to return stock certificates and collateral pledged
by Trinity Biotech as security for the payment of a US$3 million promissory note given to the defendants by Trinity Biotech as part of compensation under the
share purchase agreement for acquiring Primus. During 2009, all of the defendants with the exception of Mr. Reidy settled the legal action. The US District
Court, Southern District of New York granted a judgment against Mr. Reidy ordering him to pay Trinity damages of US$200,000 plus interest and to return stock
certificates and collateral pledged by Trinity Biotech as security for the payment of the US$3 million promissory note. Mr Reidy has paid Trinity Biotech
US$5,000 to date.
There are also a small number of legal cases being brought against the Group by certain of its former employees. There is a provision for cases where payment is
considered by management to be probable.
The ultimate resolution of the aforementioned proceedings is not expected to have a material adverse effect on our financial position, results of operations or
cash flows.
Item 9
The Offer and Listing
Trinity Biotech’s ADSs are listed on the NASDAQ Global Market under the symbol “TRIB”. In 2005, Trinity Biotech adjusted the ratio of ADSs to Ordinary
Shares and changed its NASDAQ Listing from the NASDAQ Small Capital listing to a NASDAQ National Market Listing. The ratio of ADSs to underlying
Ordinary Shares has changed from 1 ADS : 1 Ordinary Share to 1 ADS : 4 Ordinary Shares and all historical data has been restated as a result.
The Group’s ‘A’ Ordinary Shares were also listed and traded on the Irish Stock Exchange until November 2007, whereby the Company de-listed from the Irish
Stock Exchange. The Group’s depository bank for ADSs is The Bank of New York Mellon. On February 28, 2020, the reported closing sale price of the ADSs
was US$1.43 per ADS. The following tables set forth the range of quoted high and low sale prices of Trinity Biotech’s ADSs for (a) the years ended
December 31, 2015, 2016, 2017, 2018 and 2019; (b) the quarters ended March 31, June 30, September 30 and December 31, 2018; March 31, June 30,
September 30 and December 31, 2019; and (c) the months of March, April, May, June, July, August, September, October, November and December 2019 and
January and February 2020 as reported on NASDAQ. These quotes reflect inter-dealer prices without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
67
ADSs
ADSs
ADSs
Year Ended December 31
2015
2016
2017
2018
2019
2019
Quarter ended March 31
Quarter ended June 30
Quarter ended September 30
Quarter ended December 31
Month Ended
March 31, 2019
April 30, 2019
May 31, 2019
June 30, 2019
July 31, 2019
August 31, 2019
September 30, 2019
October 31, 2019
November 30, 2019
December 31, 2019
January 31, 2020
February 28, 2020
March 31, 2020
April 30, 2020
May 31, 2020
High
Low
US$
20.24
13.68
7.04
6.06
3.22
US$
10.74
5.76
4.50
2.14
0.69
High
Low
US$
3.22
3.02
2.59
1.20
US$
2.31
1.57
1.21
0.69
High
Low
3.22
3.02
2.83
2.16
2.59
2.22
1.42
1.20
1.03
1.09
1.47
1.43
1.40
1.59
1.77
2.40
2.68
2.15
1.57
1.63
1.30
1.21
0.69
0.80
0.92
1.03
0.95
0.62
0.88
1.26
The number of record holders of Trinity Biotech’s ADSs as at February 28, 2020 amounts to 439, inclusive of those brokerage firms and/or clearing houses
holding Trinity Biotech’s securities for their clients (with each such brokerage house and/or clearing house being considered as one holder).
68
Item 10 Additional Information
The following is a summary of certain provisions of the Articles of Association of Trinity Biotech plc. This summary does not purport to be complete and is
qualified in its entirety by reference to the complete text of the Articles, which are included as an exhibit to this annual report.
Objects
The Company’s objects, detailed in Clause 3 of its Memorandum of Association, are varied and wide ranging and include the carrying on of the business of
researchers, manufacturers, buyers, sellers and distributors of all kinds of patents, pharmaceutical, medicinal and diagnostic preparations, equipment, drugs and
accessories of every description. They also include the power to acquire shares or other interests or securities in other companies or businesses and to exercise all
rights in relation thereto. The Company’s registered number in Ireland is 183476.
Powers and Duties of Directors
The directors may make such arrangements as may be thought fit for the management of the Company’s affairs in the Republic of Ireland or abroad.
A director may enter into a contract and be interested in any contract or proposed contract with the Company either as vendor, purchaser or otherwise and shall
not be liable to account for any profit made by him resulting therefrom provided that he has first disclosed the nature of his interest in such a contract at a
meeting of the board as required by Section 231 of the Irish Companies Act 2014. Generally, a director must not vote in respect of any contract or arrangement
or any proposal in which he has a material interest (otherwise than by virtue of his holding of shares or debentures or other securities in or through the
Company). In addition, a director shall not be counted in the quorum at a meeting in relation to any resolution from which he is barred from voting.
A director is entitled to vote and be counted in the quorum in respect of certain arrangements in which he is interested (in the absence of some other material
interest). These include the giving of a security or indemnity to him in respect of money lent or obligations incurred by him for the Group, the giving of any
security or indemnity to a third party in respect of a debt or obligation of the Group for which he has assumed responsibility, any proposal concerning an offer of
shares or other securities in which he may be interested as a participant in the underwriting or sub-underwriting and any proposal concerning any other company
in which he is interested provided he is not the holder of or beneficially interested in 1% or more of the issued shares of any class of share capital of such
company or of voting rights.
The Board may exercise all the powers of the Company to borrow money, to mortgage or charge its undertaking, property and uncalled capital and to issue
debentures and other securities. The Board is obliged to restrict its borrowings to ensure that the aggregate amount outstanding of all monies borrowed by the
Group does not, without the previous sanction of an ordinary resolution of the Company, exceed an amount equal to twice the Adjusted Capital and Reserves (as
defined in the Articles of Association). However, no lender or other person dealing with the Company shall be obliged to see or to inquire whether the limit
imposed is observed and no debt incurred in excess of such limit will be invalid or ineffectual unless the lender has express notice at the time when the debt is
incurred that the limit was or was to be exceeded.
Directors are not required to retire upon reaching any specific age and are not required to hold any shares in the capital of the Group. The Articles provide for
retirement of the directors by rotation.
One third of the directors other than a director holding executive office or, if their number is not three or a multiple of three, then the number nearest to but not
exceeding one third, shall retire from office at each annual general meeting. If, however, the number of directors subject to retirement by rotation is two, one of
such directors shall retire. If the number of such directors is one, that director shall retire. Subject to the terms of the Articles, the directors to retire at each annual
general meeting shall be the directors who have been longest in office since their last appointment. Where directors are of equal seniority, the directors to retire
shall, in the absence of agreement, be selected by lot. A retiring director shall be eligible for re-appointment and shall act as director throughout the meeting at
which he retires. A separate motion must be put to a meeting in respect of each director to be appointed unless the meeting itself has first agreed that a single
resolution is acceptable without any vote being given against it.
69
Rights, Preferences and Restrictions Attaching to Shares
The Company may, subject to the provisions of the Irish Companies Act 2014, issue any share on the terms that it is, or at the option of the Company is to be
liable, to be redeemed on such terms and in such manner as the Company may determine by special resolution.
At a general meeting, on a show of hands, every member who is present in person or by proxy and entitled to vote shall have one vote (so, however, that no
individual shall have more than one vote) and upon a poll, every member present in person or by proxy shall have one vote for every share carrying voting rights
of which he is the holder. In the case of joint holders, the vote of the senior (being the first person named in the register of members in respect of the joint
holding) who tendered a vote, whether in person or by proxy, shall be accepted to the exclusion of votes of the other joint holders.
Subject to any conditions of allotment, the directors may from time to time make calls on members in respect of monies unpaid on their shares. At least 14 days
notice must be given of each call. A call shall be deemed to have been made at the time when the resolution of the directors authorising such call was passed.
Where a shareholder or person who appears to be interested in shares fails to comply with a request for information from the Company in relation to the capacity
in which such shares or interest are held, who is interested in them or whether there are any voting arrangements, that shareholder or person may be served with a
disenfranchisement notice and may thereby be restricted from transferring the shares and exercising the voting rights or receiving any sums in respect of the
shares (except in the case of a liquidation).
In addition, if cheques in respect of the last three dividends paid to a shareholder remain uncashed, the Company is, subject to compliance with the procedure set
out in the Articles of Association, entitled to sell the shares of that shareholder.
Before recommending a dividend, the directors may reserve out of the profits of the Company such sums as they think proper which shall be applicable for any
purpose to which the profits of the Company may properly be applied and, pending such application, may be either employed in the business of the Company or
be invested in such investments (other than shares of the Company or of its holding company (if any)) as the directors may from time to time think fit.
The Company may by ordinary resolution convert any paid up shares into stock and reconvert any stock into paid up shares of any denomination. The holders of
stock may transfer the same or any part thereof in the same manner and according to the same regulations to which the converted shares were subject.
Action Necessary to Change the Rights of Shareholders
In order to change the rights attaching to any class of shares, a special resolution passed at a class meeting of the holders of such shares is required. The
provisions in relation to general meetings apply to such class meetings except the quorum shall be two persons holding or representing by proxy at least one third
in nominal amount of the issued shares of that class. In addition, in order to amend any provisions of the Articles of Association in relation to rights attaching to
shares, a special resolution of the shareholders as a whole is required. The special rights attached to any class of shares in the capital of the Company shall not be
deemed to be varied by the creation or issue of further shares ranking pari passu.
Calling of AGMs and EGMs of Shareholders
The Company must hold a general meeting as its annual general meeting each year. Not more than 15 months can elapse between annual general meetings. The
annual general meetings are held at such time and place as the directors determine and all other general meetings are called extraordinary general meetings.
Every general meeting shall be held in the Republic of Ireland unless all of the members entitled to attend and vote at such meeting consent in writing to it being
held elsewhere or a resolution providing that it be held elsewhere was passed at the preceding annual general meeting. The directors may at any time call an
extraordinary general meeting and such meetings may also be convened on such requisition, or in default may be convened by such requisitions, as is provided
by the Irish Companies Act 2014.
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In the case of an annual general meeting or a meeting at which a special resolution is proposed, 21 clear days’ notice of the meeting is required and in any other
case seven clear days’ notice is required. Notice must be given in writing to all members and to the auditors in accordance with the Articles of Association and
must state the details specified in the Articles of Association. A general meeting (other than one at which a special resolution is to be proposed) may be called on
shorter notice subject to the agreement of the auditors and all members entitled to attend and vote at it. In certain circumstances provided for in the Irish
Companies Act 2014, extended notice of a general meeting is required. These include a meeting at which a resolution for the removal of a director before the
expiration of his term of office is proposed.
No business may be transacted at a general meeting unless a quorum is present. Five members present in person or by proxy (not being less than five individuals)
representing not less than 40% of the ordinary shares shall be a quorum. The Company is not obliged to serve notices upon members who have not served notice
on the Company of an address in the Republic of Ireland or the U.S. but otherwise there are no specific limitations in the Articles of Association restricting the
rights of non-resident or foreign shareholders to hold or exercise voting rights respect of shares in the Company.
However, the Financial Transfers Act, 1992 and regulations made thereunder prevent transfers of capital or payments between Ireland and certain countries.
These restrictions on financial transfers are more comprehensively described in “Exchange Controls” below. In addition, Irish competition law may restrict the
acquisition by a party of shares in the Company but this does not apply on the basis of nationality or residence.
Other Provisions of the Memorandum and Articles of Association
The Memorandum and Articles of Association do not contain any specific provisions:
•
•
•
which would have an effect of delaying, deferring or preventing a change in control of the Company and which would operate only with respect to a
merger, acquisition or corporate restructuring involving the Company (or any of its subsidiaries); or
governing the ownership threshold above which a shareholder ownership must be disclosed; or
imposing conditions governing changes in the capital which are more stringent than is required by Irish law.
The Company incorporates by reference all other information concerning its Memorandum and Articles of Association from the Registration Statement on Form
F-1 on June 12, 1992.
Irish Law
As required by the Companies Act 2014, all of Trinity Biotech’s private limited companies incorporated in Ireland (refer to Item 18, Note 32) have been
converted into the new form of private limited company. Pursuant to Irish law, Trinity Biotech must maintain a register of its shareholders. This register is open
to inspection by shareholders free of charge and to any member of the public on payment of a small fee. The books containing the minutes of proceedings of any
general meeting of Trinity Biotech are required to be kept at the registered office of the Company and are open to the inspection of any member without charge.
Minutes of meetings of the Board of Directors are not open to scrutiny by shareholders. Trinity Biotech is obliged to keep proper accounting records. The
shareholders have no statutory right to inspect the accounting records. The only financial records, which are open to the shareholders, are the financial
statements, which are sent to shareholders with the annual report. Irish law also obliges Trinity Biotech to file information relating to certain events within the
Company (changes to share rights, changes to the Board of Directors). This information is filed with the Companies Registration Office (the “CRO”) in Dublin
and is open to public inspection. The Articles of Association of Trinity Biotech permit ordinary shareholders to approve corporate matters in writing provided
that it is signed by all the members for the time being entitled to vote and attend at general meeting. Ordinary shareholders are entitled to call a meeting by way
of a requisition. The requisition must be signed by ordinary shareholders holding not less than one-tenth of the paid up capital of the Company carrying the right
of voting at general meetings of the Company. Trinity Biotech is generally permitted, subject to company law, to issue shares with preferential rights, including
preferential rights as to voting, dividends or rights to a return of capital on a winding up of the Company. Any shareholder who complains that the affairs of the
Company are being conducted or that the powers of the directors of the Company are being exercised in a manner oppressive to him or any of the shareholders
(including himself), or in disregard of his or their interests as shareholders, may apply to the Irish courts for relief. Shareholders have no right to maintain
proceedings in respect of wrongs done to the Company.
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Ordinarily, our directors owe their duties only to Trinity Biotech and not its shareholders. The duties of directors are twofold, fiduciary duties and duties of care
and skill. Fiduciary duties are owed by the directors individually and owed to Trinity Biotech. Those duties include duties to act in good faith towards Trinity
Biotech in any transaction, not to make use of any money or other property of Trinity Biotech, not to gain directly or indirectly any improper advantage for
himself at the expense of Trinity Biotech, to act bona fide in the interests of Trinity Biotech and exercise powers for the proper purpose. A director need not
exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. When
directors, as agents in transactions, make contracts on behalf of the Company, they generally incur no personal liability under these contracts.
It is Trinity Biotech, as principal, which will be liable under them, as long as the directors have acted within Trinity Biotech’s objects and within their own
authority. A director who commits a breach of his fiduciary duties shall be liable to Trinity Biotech for any profit made by him or for any damage suffered by
Trinity Biotech as a result of the breach. In addition to the above, a breach by a director of his duties may lead to a sanction from a Court including damages of
compensation, summary dismissal of the director, a requirement to account to Trinity Biotech for profit made and restriction of the director from acting as a
director in the future.
Material Contracts
Other than contracts entered into in the ordinary course of business, the following represents the material contracts entered into by the Group:
Acquisition of Immco Diagnostics Inc
In 2013, the Group purchased 100% of the common stock of Immco Diagnostics Inc for a total consideration of US$32.88m. Immco, which is headquartered in
Buffalo, New York, is a diagnostic company specialising in the development, manufacture and sale of autoimmune test kits on a worldwide basis.
The key terms of the acquisition are as follows:
•
•
•
Cash consideration of US$31,652,000;
Issuance of share option as at the acquisition date with a fair value of US$1,121,000; and
The transfer of 5,566 Trinity Biotech ADSs as at the acquisition date (fair value of US$110,000).
Acquisition of Fiomi Diagnostics AB
In 2012, the Group purchased 100% of the common stock of Fiomi Diagnostics AB for a total consideration of US$12.9 million (including US$3.2m of
contingent payments – net of interest of US$0.2m).
The key terms of the acquisition are as follows:
•
•
•
An up-front cash payment of US$5.6m;
The transfer of 408,000 Trinity Biotech ADSs as at the acquisition date (fair value of US$4.1m); and
Contingent cash consideration (net present value) of US$3.2m.
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Exchange Controls and Other Limitations
Affecting Security Holders
Irish exchange control regulations ceased to apply from and after December 31, 1992. Except as indicated below, there are no restrictions on non-residents of
Ireland dealing in domestic securities, which includes shares or depositary receipts of Irish companies such as Trinity Biotech. Except as indicated below,
dividends and redemption proceeds also continue to be freely transferable to non-resident holders of such securities. The Financial Transfers Act, 1992 gives
power to the Minister for Finance of Ireland to make provision for the restriction of financial transfers between Ireland and other countries and persons. Financial
transfers are broadly defined and include all transfers that would be movements of capital or payments within the meaning of the treaties governing the member
states of the European Union. The acquisition or disposal of ADSs or ADRs representing shares issued by an Irish incorporated company and associated
payments falls within this definition. In addition, dividends or payments on redemption or purchase of shares and payments on a liquidation of an Irish
incorporated company would fall within this definition.
At present the Financial Transfers Act, 1992 prohibits financial transfers involving the late Slobodan Milosevic and associated persons, Burma (Myanmar),
Belarus, certain persons indicted by the International Criminal Tribunal for the former Yugoslavia, the late Osama bin Laden, Al-Qaida, the Taliban of
Afghanistan, Democratic Republic of Congo, Democratic People’s Republic of Korea (North Korea), Iran, Iraq, Côte d’Ivoire, Lebanon, Liberia, Zimbabwe,
Sudan, Somalia, Republic of Guinea, Afghanistan, Egypt, Eritrea, Libya, Syria, Tunisia, certain known terrorists and terrorist groups, and countries that harbour
certain terrorist groups, without the prior permission of the Central Bank of Ireland.
Any transfer of, or payment in respect of, an ADS involving the government of any country that is currently the subject of United Nations sanctions, any person
or body controlled by any of the foregoing, or by any person acting on behalf of the foregoing, may be subject to restrictions pursuant to such sanctions as
implemented into Irish law. We do not anticipate that orders under the Financial Transfers Act, 1992 or United Nations sanctions implemented into Irish law will
have a material effect on our business.
Taxation
The following discussion is based on U.S. and Republic of Ireland tax law, statutes, treaties, regulations, rulings and decisions all as of the date of this annual
report. Taxation laws are subject to change, from time to time, and no representation is or can be made as to whether such laws will change, or what impact, if
any, such changes will have on the statements contained in this summary. No assurance can be given that proposed amendments will be enacted as proposed, or
that legislative or judicial changes, or changes in administrative practice, will not modify or change the statements expressed herein.
This summary is of a general nature only. It does not constitute legal or tax advice nor does it discuss all aspects of Irish taxation that may be relevant to any
particular Irish Holder or U.S. Holder of ordinary shares or ADSs.
This summary does not discuss all aspects of Irish and U.S. federal income taxation that may be relevant to a particular holder of Trinity Biotech ADSs in light
of the holder’s own circumstances or to certain types of investors subject to special treatment under applicable tax laws (for example, financial institutions, life
insurance companies, tax-exempt organisations, and non-U.S. taxpayers) and it does not discuss any tax consequences arising under the laws of taxing
jurisdictions other than the Republic of Ireland and the U.S. federal government. The tax treatment of holders of Trinity Biotech ADSs may vary depending upon
each holder’s own particular situation.
Prospective purchasers of Trinity Biotech ADSs are advised to consult their own tax advisors as to the US, Irish or other tax consequences of the purchase,
ownership and disposition of such ADSs.
U.S. Federal Income Tax Consequences to U.S. Holders
The following is a summary of certain material U.S. federal income tax consequences that generally would apply with respect to the ownership and disposition
of Trinity Biotech ADSs, in the case of a holder of such ADSs who is a U.S. Holder (as defined below) and who holds the ADSs as capital assets. This summary
is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, and judicial and administrative
interpretations thereof, all as in effect on the date hereof and all of which are subject to change either prospectively or retroactively. For the purposes of this
summary, a U.S. Holder is: an individual who is a citizen or a resident of the United States; a corporation created or organised in or under the laws of the United
States or any political subdivision thereof; an estate whose income is subject to U.S. federal income tax regardless of its source; or a trust that (a) is subject to the
primary supervision of a court within the United States and the control of one or more U.S. persons or (b) has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a U.S. person.
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This summary does not address all tax considerations that may be relevant with respect to an investment in ADSs. This summary does not discuss all the tax
consequences that may be relevant to a U.S. Holder in light of such Holder’s particular circumstances or to U.S. Holders subject to special rules, including
persons that are not U.S. holders, broker dealers, financial institutions, certain insurance companies, investors liable for alternative minimum tax, tax exempt
organisations, regulated investment companies, non-resident aliens of the U.S. or taxpayers whose functional currency is not the U.S. Dollar, persons who hold
ADSs through partnerships or other pass-through entities, persons who acquired their ADSs through the exercise or cancellation of employee stock options or
otherwise as compensation for services, investors that actually or constructively own 10% or more of Trinity Biotech’s voting shares, and investors holding
ADSs as part of a straddle or appreciated financial position or as part of a hedging or conversion transaction.
If an entity treated as a partnership for U.S. federal income tax purposes owns ADSs, the U.S. federal income tax treatment of a partner in such a partnership will
generally depend upon the status of the partner and the activities of the partnership. The partners in a partnership which owns ADSs should consult their tax
advisors about the U.S. federal income tax consequences of holding and disposing of ADSs.
This summary does not address the effect of any U.S. federal taxation other than U.S. federal income taxation. In addition, this summary does not include any
discussion of state, local or foreign taxation. You are urged to consult your tax advisors regarding the foreign and U.S. federal, state and local tax considerations
of an investment in ADSs.
For U.S. federal income tax purposes, U.S. Holders of Trinity Biotech ADSs will be treated as owning the underlying Class ‘A’ Ordinary Shares represented by
the ADSs held by them. This discussion assumes such treatment is respected.
Dividends and Other Distributions on ADSs
The gross amount of any distribution made by Trinity Biotech to U.S. Holders with respect to the underlying shares represented by the ADSs held by them,
including the amount of any Irish taxes withheld from such distribution, will be treated for U.S. federal income tax purposes as a dividend to the extent of Trinity
Biotech’s current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of any such distribution that exceeds
Trinity Biotech’s current and accumulated earnings and profits will be applied against and reduce a U.S. Holder’s tax basis in the U.S. Holder’s ADSs, and any
amount of the distribution remaining after the U.S. Holder’s tax basis has been reduced to zero will constitute capital gain. However, there can be no assurances
we will calculate earnings and profits under U.S. federal income tax principles. Therefore, any distribution we make to you may be reported as a dividend. The
capital gain will be treated as a long-term or short-term capital gain depending on whether or not the U.S. Holder’s ADSs have been held for more than one year
as of the date of the distribution.
Dividends paid by Trinity Biotech generally will not qualify for the dividends received deduction otherwise available to U.S. corporate shareholders.
Subject to complex limitations, any Irish withholding tax imposed on such dividends will be a foreign income tax eligible for credit against a U.S. Holder’s U.S.
federal income tax liability (or, alternatively, for deduction against income in determining such tax liability) where certain conditions are satisfied. The
limitations set out in the Code include computational rules under which foreign tax credits allowable with respect to specific classes of income, commonly
referred to as “baskets,” cannot exceed the U.S. federal income taxes otherwise payable with respect to each such class of income. Dividends generally will be
treated as foreign-source passive category income or, in the case of certain U.S. Holders, general category income for U.S. foreign tax credit purposes. Further,
there are special rules for computing the foreign tax credit limitation of a taxpayer who receives dividends subject to a reduced tax, see discussion below.
A U.S. Holder will be denied a foreign tax credit with respect to Irish income tax withheld from dividends received on the ADSs to the extent such U.S. Holder
has not held the ADSs for at least 16 days of the 31-day period beginning on the date which is 15 days before the ex-dividend date, or to the extent such U.S.
Holder is under an obligation to make related payments with respect to substantially similar or related property. Any days during which a U.S. Holder has
substantially diminished its risk of loss on the ADSs are not counted toward meeting the 16-day holding period required by the Code. If a refund of the tax
withheld is available to you under the laws of Ireland or under the United States and Ireland treaty (the “Treaty”), the amount of tax withheld that is refundable
will not be eligible for such credit against your U.S. federal income tax liability (and will not be eligible for the deduction against your U.S. federal taxable
income). The rules relating to the determination of the foreign tax credit are complex, and you should consult with your personal tax advisors to determine
whether and to what extent you would be entitled to this credit against your U.S. federal income tax liability.
Subject to certain limitations, including the PFIC rules discussed below, “qualified dividend income” received by a noncorporate U.S. Holder will be subject to
tax at lower rates. Distributions taxable as dividends paid on the ADSs should qualify as qualified dividend income provided that either: (i) we are entitled to
benefits under the Treaty or (ii) the ADSs are readily tradable on an established securities market in the U.S. and certain other requirements are met. We believe
that we are entitled to benefits under the Treaty and that the ADSs currently are readily tradable on an established securities market in the U.S. However, no
assurance can be given that the ordinary shares will remain readily tradable. The rate reduction does not apply unless certain holding period requirements are
satisfied. With respect to the ADSs, the U.S. Holder must have held such ADSs for at least 61 days during the 121-day period beginning 60 days before the ex-
dividend date. The rate reduction also does not apply to dividends received from passive foreign investment companies, see discussion below, or in respect of
certain hedged positions or in certain other situations. The legislation enacting the reduced tax rate contains special rules for computing the foreign tax credit
limitation of a taxpayer who receives dividends subject to the reduced tax rate. U.S. Holders of ADSs should consult their own tax advisors regarding the effect
of these rules in their particular circumstances.
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Dispositions of the ADSs
Upon a sale or exchange of ADSs, a U.S. Holder will recognise a gain or loss for U.S. federal income tax purposes in an amount equal to the difference between
the amount realised on the sale or exchange and the U.S. Holder’s adjusted tax basis in the ADSs sold or exchanged. Such gain or loss generally will be capital
gain or loss and will be long-term or short-term capital gain or loss depending on whether the U.S. Holder has held the ADSs sold or exchanged for more than
one year at the time of the sale or exchange. If you are a non-corporate U.S. Holder, long-term capital gains may be eligible for reduced tax rates.
Passive Foreign Investment Company
For U.S. federal income tax purposes, a foreign corporation is treated as a “passive foreign investment company” (or “PFIC”) in any taxable year in which, after
taking into account the income and assets of the corporation and certain of its subsidiaries pursuant to the applicable “look through” rules, either (1) at least 75%
of the corporation’s gross income is passive income or (2) at least 50% of the average value of the corporation’s assets is attributable to assets that produce
passive income or are held for the production of passive income. Based on the nature of its present business operations, assets and income, Trinity Biotech
believes that for the year 2018, it is not a PFIC. However, no assurance can be given that changes will not occur in Trinity Biotech’s business operations, assets
and income that might cause it to be treated as a PFIC at some future time.
If Trinity Biotech were to become a PFIC, a U.S. Holder of ADSs would be required to allocate to each day in the holding period for such U.S. Holder’s ADSs a
pro rata portion of any distribution received (or deemed to be received) by the U.S. Holder from Trinity Biotech, to the extent the distribution so received
constitutes an “excess distribution,” as defined under U.S. federal income tax law. Generally, a distribution received during a taxable year by a U.S. Holder with
respect to the underlying shares represented by any of the U.S. Holder’s ADSs would be treated as an “excess distribution” to the extent that the distribution so
received, plus all other distributions received (or deemed to be received) by the U.S. Holder during the taxable year with respect to such underlying shares, is
greater than 125% of the average annual distributions received by the U.S. Holder with respect to such underlying shares during the three preceding years (or
during such shorter period as the U.S. Holder may have held the ADSs). Any portion of an excess distribution that is treated as allocable to one or more taxable
years prior to the year of distribution during which Trinity Biotech was classified as a PFIC would be subject to U.S. federal income tax in the year in which the
excess distribution is made, but it would be subject to tax at the highest tax rate applicable to the U.S. Holder in the prior tax year or years. The U.S. Holder also
would be subject to an interest charge, in the year in which the excess distribution is made, on the amount of taxes deemed to have been deferred with respect to
the excess distribution. In addition, any gain recognised on a sale or other disposition of a U.S. Holder’s ADSs, including any gain recognised on a liquidation of
Trinity Biotech, would be treated in the same manner as an excess distribution. Any such gain would be treated as ordinary income rather than as capital gain.
If Trinity Biotech became a PFIC, a U.S. Holder may make a “qualifying electing fund” (or “QEF”) election in the year Trinity Biotech first becomes a PFIC or
in the year the U.S. Holder acquires the ADSs, whichever is later. This election provides for a current inclusion of Trinity Biotech’s ordinary income and capital
gain income in the U.S. Holder’s U.S. taxable income. In return, any gain on sale or other disposition of a U.S. Holder’s ADSs in Trinity Biotech, if it were
classified as a PFIC, will be treated as capital, and the interest penalty will not be imposed. This election is not made by Trinity Biotech, but by each U.S. Holder.
Trinity Biotech must provide certain information to the U.S. Holder in order to qualify as a QEF. U.S. Holders should contact their tax advisor for further
information on this area.
Alternatively, if the ADSs are considered “marketable stock” a U.S. Holder may elect to “mark-to-market” its ADSs, and such U.S. Holder would not be subject
to the rules described above. Instead, such U.S. Holder would generally include in income any excess of the fair market value of the ADSs at the close of each
tax year over its adjusted basis in the ADSs. If the fair market value of the ADSs had depreciated below the U.S. Holders adjusted basis at the close of the tax
year, the U.S. Holder may generally deduct the excess of the adjusted basis of the ADSs over its fair market value at that time. However, such deductions
generally would be limited to the net mark-to-market gains, if any, that the U.S. Holder included in income with respect to such ADSs in prior years. Income
recognised and deductions allowed under the mark-to-market provisions, as well as any gain or loss on the disposition of ADSs with respect to which the mark-
to-market election is made, is treated as ordinary income or loss (except that loss is treated as capital loss to the extent the loss exceeds the net mark-to-market
gains, if any, that a U.S. Holder included in income with respect to such ADSs in prior years). However, gain or loss from the disposition of ADSs (as to which a
“mark-to-market” election was made) in a year in which Trinity Biotech is no longer a PFIC, will be capital gain or loss. The ADSs should be considered
“marketable stock” if they traded at least 15 days during each calendar quarter of the relevant calendar year in more than de minimis quantities.
If a U.S. Holder owns ADSs during any year in which we are a PFIC, the U.S. Holder generally must file an IRS Form 8621 with respect to Trinity Biotech,
generally with the U.S. Holder’s federal income tax return for that year.
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Information Reporting and Backup Withholding
Distributions made with respect to underlying shares represented by ADSs and proceeds from the sale, exchange or other disposition of ADSs may be subject to
information reporting to the IRS and to US backup withholding tax. Backup withholding will not apply, however, if the U.S. Holder (i) is a corporation or comes
within certain exempt categories, and demonstrates its eligibility for exemption when so required, or (ii) furnishes a correct taxpayer identification number and
makes any other required certification.
Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a U.S. Holder’s U.S. tax liability,
and a U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the
IRS.
Information with Respect to Foreign Financial Assets
U.S. individuals (and, under proposed regulations, certain entities) that hold certain specified foreign financial assets, including stock in a foreign corporation,
with values in excess of certain thresholds are required to file with their U.S. federal income tax return Form 8938, on which information about the assets,
including their value, is provided. Taxpayers who fail to file the form when required are subject to penalties. An exemption from reporting applies to foreign
assets held through certain financial institutions. Investors are encouraged to consult with their own tax advisors regarding the possible application of this
disclosure requirement to their investment in our ordinary shares.
Medicare Contribution Tax
In addition to the income taxes described above, U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds will be subject
to a 3.8% Medicare contribution tax on net investment income, which includes dividends and capital gains.
U.S. Holders may be subject to state or local income and other taxes with respect to their purchase, ownership and disposition of ADSs. U.S. Holders of
ADSs should consult their own tax advisers as to the applicability and effect of any such taxes.
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Republic of Ireland Taxation
For the purposes of this summary, an “Irish Holder” means a holder of ordinary shares or ADSs evidenced by ADSs that (i) beneficially owns the ordinary shares
or ADSs registered in its name; (ii) in the case of individual holders, are resident, ordinarily resident and domiciled in Ireland under Irish taxation laws; (iii) in
the case of holders that are companies, are resident in Ireland under Irish taxation laws; and (iv) are not also resident in any other country under any double
taxation agreement entered into by Ireland.
For Irish taxation purposes, Irish Holders of ADSs will be treated as the owners of the underlying ordinary shares represented by such ADSs.
Solely for the purposes of this summary of Irish Tax considerations, a “U.S. Holder” means a holder of ordinary shares or ADSs evidenced by ADSs that
(i) beneficially owns the ordinary shares or ADSs registered in its name; (ii) is resident in the United States for the purposes of the Republic of Ireland/United
States Double Taxation Convention (the Treaty); (iii) in the case of an individual holder, is not also resident or ordinarily resident in Ireland for Irish tax
purposes; (iv) in the case of a corporate holder, is not a resident in Ireland for Irish tax purposes and is not ultimately controlled by persons resident in Ireland;
and (v) is not engaged in any trade or business in Ireland and does not perform independent personal services through a permanent establishment or fixed base in
Ireland.
In 2011, the Board decided that it was an appropriate time to commence a dividend policy for the first time in the Company’s history but the payment of
dividends has subsequently been suspended (see section below on Dividend Policy). Up to 31 December 2019, the payment of a dividend was generally subject
to dividend withholding tax (“DWT”) at the standard rate of income tax in force at the time the dividend is paid (the applicable rate was 20% in 2019). However,
the rate of DWT has increased to 25% in respect of dividends paid on or after 1 January 2020. Irish Revenue also plan to introduce a new “real time” collection
system for DWT based on an individual’s marginal income tax rate, however the introduction of this proposed system has been postponed at present. Under
current legislation, where DWT applies, Trinity Biotech will be responsible for withholding it at source.
DWT will not be withheld where an exemption applies and where Trinity Biotech has received all necessary documentation from the recipient prior to payment
of the dividend.
Corporate Irish Holders will generally be entitled to claim an exemption from DWT by delivering a declaration which confirms that the company is resident in
Ireland for tax purposes to Trinity Biotech in the form prescribed by the Irish Revenue Commissioners. Such corporate Irish Holders will generally not otherwise
be subject to Irish tax in respect of dividends received.
Individual Irish Holders will be subject to income tax on the gross amount of any dividend (that is the amount of the dividend received plus any DWT withheld),
at their marginal rate of income tax, currently either 20% or 40% depending on the individual’s circumstances, excluding Pay Related Social Insurance (“PRSI”)
and the Universal Social Charge (“USC”). Individual Irish Holders will be able to claim a credit against their resulting income tax liability in respect of DWT
withheld. Individual Irish Holders may, depending on their circumstances, also be subject to the Irish USC of up to 8%, with a further 3% surcharge also arising
on certain income in excess of €100,000 and a PRSI contribution of up to 4% in respect of their dividend income.
Under the Irish Taxes Consolidation Act 1997, dividends paid by Trinity Biotech to non-Irish shareholders will, unless exempted, be subject to DWT. Such non-
Irish shareholders will not suffer DWT on dividends if the shareholder is:
•
•
•
•
•
an individual resident in the U.S. (or certain other countries with which Ireland has a double taxation treaty) and who is neither resident nor
ordinarily resident in Ireland; or
a U.S. tax resident corporation not under the control of Irish residents; or
a corporation that is not resident in Ireland and which is ultimately controlled by persons resident in the U.S. (or certain other countries with which
Ireland has a double taxation treaty), with such person or persons not under the control of persons who are not so resident; or
a corporation that is not resident in Ireland and the principal class of whose shares (or its 75% parent’s principal class of shares) is substantially or
regularly traded on a recognised stock exchange; or
is otherwise entitled to an exemption from DWT.
In order to avail of the above exemption, certain declarations must be made in advance to the paying company.
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A self-assessment system applies to a company tax resident in a treaty jurisdiction receiving dividends, under which a non-resident company will provide a
declaration and certain information to the dividend paying company or intermediary to claim the exemption.
Special DWT arrangements are available in the case of shares in Irish companies held by U.S. resident holders through American depository banks using ADSs
where such banks enter into intermediary agreements with the Irish Revenue Commissioners and are viewed as qualifying intermediaries under Irish Tax
legislation. Under such agreements, American depository banks who receive dividends from Irish companies and pay the dividends on to the U.S. resident ADS
holders are allowed to receive and pass on a dividend from the Irish company on a gross basis (without any withholding) if:
•
•
•
the recipient is the direct beneficial owner of the shares, and
the depository bank’s ADS register shows that the direct beneficial owner of the dividends has a U.S. address on the register, and
there is an intermediary between the depository bank and the beneficial shareholder and the depository bank receives confirmation from the
intermediary that the beneficial shareholder’s address in the intermediary’s records is in the U.S.
Where the above procedures have not been complied with and DWT is withheld from dividend payments to U.S. Holders of ordinary shares or ADSs evidenced
by ADSs, such U.S. Holders can apply to the Irish Revenue Commissioners claiming a full refund of DWT paid by filing a declaration / claim in the form
prescribed by the Irish Revenue Commissioners. Certain accompanying information should also be included when making such claims.
The DWT rate applicable to U.S. Holders is reduced to 5% under the terms of the Treaty for corporate U.S. Holders holding 10% or more of voting shares and to
15% for other U.S. Holders. While this will, subject to the application of Article 23 of the Treaty, generally entitle U.S. Holders to claim a partial refund of DWT
from the Irish Revenue Commissioners, U.S. Holders will, in most circumstances, likely prefer to seek a full refund of DWT under Irish domestic legislation (see
above).
Disposals of Ordinary Shares or ADSs
Irish Holders that acquire ordinary shares or ADSs will generally be considered, for Irish tax purposes, to have acquired their ordinary shares or ADSs at a base
cost equal to the amount paid for the ordinary shares or ADSs. On subsequent dispositions, ordinary shares or ADSs acquired at an earlier time will generally be
deemed, for Irish tax purposes, to be disposed of on a “first in first out” basis before ordinary shares or ADSs acquired at a later time. Irish Holders that dispose
of their ordinary shares or ADSs will be subject to Irish capital gains tax (“CGT”) to the extent that the proceeds realised from such disposition exceed the
indexed base cost of the ordinary shares or ADSs disposed of and any incidental expenses. The current rate of CGT is 33% and this applies to disposals made on
or after 6 December 2012. Indexation of the base cost of the ordinary shares or ADSs is available up to 31 December 2002, and only in respect of ordinary shares
or ADSs held for more than 12 months prior to their disposal.
Irish Holders that have unutilised capital losses from other sources in the current, or any previous tax year, can generally apply such losses to reduce gains
realised on the disposal of the ordinary shares or ADSs.
An annual exemption allows individuals to realise chargeable gains of up to €1,270 in each tax year without giving rise to CGT. This exemption is specific to the
individual and cannot be transferred between spouses. Irish Holders are required, under Ireland’s self-assessment system, to file tax returns reporting any
chargeable gains arising to them in a particular tax year.
Where disposal proceeds are received in a currency other than Euro they must be translated into Euro amounts to calculate the amount of any chargeable gain or
loss. Similarly, acquisition costs denominated in a currency other than Euro must be translated at the date of acquisition in Euro amounts.
Irish Holders that realise a loss on the disposal of ordinary shares or ADSs will generally be entitled to offset such allowable losses against capital gains realised
from other sources in determining their CGT liability in that year. Allowable losses which remain unrelieved in a year may generally be carried forward
indefinitely for CGT purposes and applied against capital gains in future years.
Transfers between spouses who live together will not give rise to any chargeable gain or loss for CGT purposes with the acquiring spouse acquiring the same pro
rata base cost and acquisition date as that of the transferring spouse.
U.S. Holders will not be subject to Irish CGT on the disposal of ordinary shares or ADSs provided that such ordinary shares or ADSs are quoted on a stock
exchange at the time of disposition. The stock exchange for this purpose is the Nasdaq National Market (“NASDAQ”). While it is our intention to continue the
quotation of ADSs on NASDAQ, no assurances can be given in this regard.
78
If, for any reason, our ADSs cease to be quoted on NASDAQ, U.S. Holders will not be subject to CGT on the disposal of their ordinary shares or ADSs provided
that the ordinary shares or ADSs do not, at the time of the disposal, derive the greater part of their value from land, buildings, minerals, or mineral rights or
exploration rights in Ireland.
A gift or inheritance of ordinary shares will be, or in the case of ADSs may be, within the charge to capital acquisitions tax, regardless of where the disponer or
the donee/successor in relation to the gift/inheritance is domiciled, resident or ordinarily resident. Capital acquisitions tax is levied at a rate of 33% on the taxable
value of the gift or inheritance above certain tax-free thresholds and this rate applies in respect of gifts and inheritances taken on or after 6 December 2012 (the
rate was 30% between 7 December 2011 and 5 December 2012). The tax-free threshold is determined by the amount of the current benefit and of previous
benefits received within the group threshold since 5 December 1991, which are within the charge to capital acquisitions tax and the relationship between the
former holder and the successor. Gifts and inheritances between spouses are not subject to the capital acquisitions tax. Gifts of up to €3,000 can be received each
year from any given individual without triggering a charge to capital acquisitions tax. Where a charge to Irish CGT and capital acquisitions tax arises on the
same event, capital acquisitions tax payable on the event can be reduced by the amount of the CGT payable. There should be no clawback of the same event
credit of CGT offset against capital acquisitions tax provided the donee does not dispose of the ordinary shares or ADSs within two years from the date of gift.
The Estate Tax Convention between Ireland and the United States generally provides for Irish capital acquisitions tax paid on inheritances in Ireland to be
credited, in whole or in part, against tax payable in the United States, in the case where an inheritance of ordinary shares or ADSs is subject to both Irish capital
acquisitions tax and U.S. federal estate tax. The Estate Tax Convention does not apply to Irish capital acquisitions tax paid on gifts.
Irish stamp duty, which is a tax imposed on certain documents, is payable on all transfers of ordinary shares of an Irish registered company (other than transfers
made between spouses, transfers made between 90% associated companies, or certain other exempt transfers) regardless of where the document of transfer is
executed. Irish stamp duty is also payable on electronic transfers of ordinary shares. A transfer of ordinary shares made as part of a sale or gift will generally be
stampable at the ad valorem rate of 1% of the value of the consideration received for the transfer, or, if higher, the market value of the shares transferred. With
effect from 6 December 2017, stamp duty at a rate of 6% applied in certain circumstances to the sale or transfer of shares which derive their value, or the greater
part of their value, from non-residential property in Ireland (this rate was increased to 7.5% in respect of instruments executed on or after 9 October 2019). Any
instrument executed on or after 24 December 2008 which transfers stock or marketable securities on sale where the amount or value of the consideration is
€1,000 or less may be exempt from stamp duty. Where the consideration for a sale is expressed in a currency other than Euro, the duty will be charged on the
Euro equivalent calculated at the rate of exchange prevailing at the date of the transfer.
Transfers of ordinary shares where no beneficial interest passes (e.g. a transfer of shares from a beneficial owner to a nominee) will generally be exempt from
stamp duty.
Transfers of ADSs are exempt from Irish stamp duty as long as the ADSs are quoted on any recognised stock exchange in the U.S. or Canada.
Transfers of ordinary shares from the Depositary or the Depositary’s custodian upon surrender of ADSs for the purposes of withdrawing the underlying ordinary
shares from the ADS system, and transfers of ordinary shares to the Depositary or the Depositary’s custodian for the purposes of transferring ordinary shares
onto the ADS system, will be stampable at the ad valorem rate of 1% of the value of the shares transferred if the transfer relates to a sale or contemplated sale or
any other change in the beneficial ownership of ordinary shares. Such transfers will be exempt from Irish stamp duty if the transfer does not relate to or involve
any change in the beneficial ownership in the underlying ordinary shares and the transfer form contains the appropriate certification. The person accountable for
the payment of stamp duty is the transferee or, in the case of a transfer by way of gift or for consideration less than the market value, both parties to the transfer.
Stamp duty is normally payable within 30 days after the date of execution of the transfer (with a possible 14 day extension for online filings and payments). Late
or inadequate payment of stamp duty may result in liability for interest, penalties, surcharge and fines.
79
Dividend Policy
In 2011, the Board decided that it was an appropriate time to pay a dividend for the first time in the Company’s history. The Board proposed a final dividend of
22 cents per ADS in respect of the 2014 financial year and this proposal was approved by the shareholders at the 2015 Annual General Meeting of the Company
and subsequently paid during the course of 2015. A dividend of 22 cents per ADS was approved and paid in 2014, in respect of the 2014 financial year. A
dividend of 20 cents per ADS was approved and paid in 2013, in respect of the 2012 financial year. A dividend of 15 cents per ADS was approved and paid in
2012, in respect of the 2011 financial year. A dividend of 10 cents per ADS was approved and paid in 2011, in respect of the 2010 financial year. Dividends or
other distributions are declared and paid in US Dollars. Any future cash dividends will depend upon the Company’s results of operations, financial condition,
cash requirements, availability of surplus and such other factors as the Board of Directors may deem relevant, and will be subject to approval by the Company’s
shareholders. Accordingly, there can be no assurance that a dividend will be declared each year or that, if a dividend is declared, it will be comparable with the
one declared the previous year. In March 2016, the Company announced that it was suspending its dividend and that a share buyback program would be
commenced.
Documents on Display
This annual report and the exhibits thereto and any other document that we have to file pursuant to the Exchange Act may be inspected without charge and
copied at prescribed rates at the Securities and Exchange Commission public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549; and on
the Securities and Exchange Commission Internet site (http://www.sec.gov). You may obtain information on the operation of the Securities and Exchange
Commission’s public reference room in Washington, D.C. by calling the Securities and Exchange Commission at 1-800-SEC-0330 or by visiting the Securities
and Exchange Commission’s website at http://www.sec.gov, and may obtain copies of our filings from the public reference room by calling (202) 551-8090. The
Exchange Act file number for our Securities and Exchange Commission filings is 000-22320. The information on our website is not incorporated by reference
into this annual report.
Item 11
Quantitative and Qualitative Disclosures about Market Risk
Quantitative information about Market Risk
Interest rate sensitivity
Trinity Biotech monitors its exposure to changes in interest and exchange rates by estimating the impact of possible changes on reported profit before tax and net
worth. The Group accepts interest rate and currency risk as part of the overall risks of operating in different economies and seeks to manage these risks by
following the policies set above.
Trinity Biotech estimates that the maximum effect of a rise of one percentage point in one of the principal interest rates to which the Group is exposed, without
making any allowance for the potential impact of such a rise on exchange rates, would be a decrease in the loss before tax for 2019 by approximately 0.3%.
Exchange rate sensitivity
At year-end 2019, the total net liability denominated in currencies other than the US Dollar, principally the Euro, Brazilian Real, Canadian Dollar, Swedish
Krona and Great British Pound was US$7,282,000. In previous years, this amount has typically been a net asset, but the adoption of IFRS 16, Leases, has
resulted in significant Euro-denominated liabilities being included on the Balance Sheet for the first time.
A strengthening or weakening of the US Dollar by 10% against all the other currencies in which the Group operates, would have the approximate effect of
increasing or reducing the Group’s 2019 year-end net worth by US$728,000.
Qualitative information about Market Risk
Trinity Biotech’s treasury policy is to manage financial risks arising in relation to or as a result of underlying business needs. The activities of the treasury
function, which does not operate as a profit centre, are carried out in accordance with board approved policies and are subject to regular internal review. These
activities include the Group making use of spot and forward foreign exchange markets.
80
Trinity Biotech uses a range of financial instruments (including cash, forward contracts and finance leases) to fund its operations. These instruments are used to
manage the liquidity of the Group in a cost effective, low-risk manner. Working capital management is a key additional element in the effective management of
overall liquidity. Trinity Biotech does not trade in financial instruments or derivatives.
The main risks arising from the utilisation of these financial instruments are interest rate risk, liquidity risk and foreign exchange risk.
Trinity Biotech’s reported net income and net assets are all affected by movements in foreign exchange rates.
At December 31, 2019 Group borrowings were at fixed rates of interest and consisted of US Dollar denominated exchangeable notes and Euro and US Dollar
denominated finance leases. At December 31, 2019 year-end borrowings totalled US$102,174,000 (2018: US$82,344,000) (2017: US$93,841,000) at interest
rates of 4.00% to 5.51% (2018: 4.00% to 5.51%) (2017: 4.00% to 5.51%). The nominal amount of the Loan Note borrowings is US$99,900,000. The first date on
which holders of the Loan Note can exercise their put option is April 1, 2022. If the put option is exercised, the issuer has to repurchase the notes at par. At
December 31, 2014 the Group had no borrowings. See Item 18, Note 29.
In broad terms, a one-percentage point increase in interest rates would increase interest income by US$78,000 (2018: US$234,000) and would not affect the
interest expense in 2019 or 2018; resulting in an increase in interest income of US$78,000 (2018: US$234,000).
The majority of the Group’s activities are conducted in US Dollars. The primary foreign exchange risk arises from the fluctuating value of the Group’s Euro and
Brazilian Real denominated expenses as a result of the movement in the exchange rate between the US Dollar and those currencies. Arising from this, where
considered necessary, the Group periodically pursues a treasury policy which aims to sell US Dollars forward to match a portion of its uncovered Euro and Real
expenses at exchange rates lower than budgeted exchange rates. These forward contracts are primarily cashflow hedging instruments whose objective is to cover
a portion of these Euro or Real forecasted transactions. These forward contracts normally have maturities of less than one year after the balance sheet date. There
were no forward contracts in place as at 31 December, 2019.
The Group had foreign currency denominated cash balances equivalent to US$4,045,000 at December 31, 2019 (2018: US$3,052,000).
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Item 12
Description of Securities Other than Equity Securities
Fees and Charges Payable by ADS Holders
The table below summarizes the fees and charges that a holder of our ADSs may have to pay, directly or indirectly, to our depositary, The Bank of New York
Mellon, pursuant to the deposit agreement (filed with the SEC on January 15, 2004 as an exhibit to our Form F-6, registration no. 333-111946) and the types of
services and the amount of the fees or charges paid for such services. The actual fees payable by Trinity Biotech and the holders of ADSs are negotiated between
Trinity Biotech and the depositary. In connection with these arrangements, Trinity Biotech has agreed to pay various fees and expenses of the depositary. Trinity
Biotech will pay any fee chargeable upon the issuance of ADSs in connection with the exchange of the notes. Currently, ADS holders are responsible for paying
a fee upon the delivery of ordinary shares against the surrender of ADSs.
The fees and charges that an ADS holder may be required to pay can be changed in the future upon mutual agreement between Trinity Biotech and by the
depositary and may include:
Service
Rate
By whom paid
(1) Issuance of ADSs upon deposit of ordinary shares.
(2) Delivery of deposited securities against surrender of ADSs.
Up to $10.00 per 100
ADSs (or portion
thereof) issued.
Persons depositing ordinary shares or person receiving ADSs.
Up to $10.00 per 100
ADSs (or portion
thereof) issued.
Persons surrendering ADSs for the purpose of withdrawal of
deposited securities or persons to whom deposited securities
are delivered.
(3) Issuance of ADSs in connection with a distribution of shares.
(4) Distribution of cash dividends or other cash distributions, including
distribution of cash proceeds following the sale of rights, shares or
other property in accordance with the deposit agreement
(5) Transfer of ADSs
Up to $10.00 per 100
ADSs (or portion
thereof) issued.
Person to whom distribution is made.
Up to $0.02 per 1 ADS
Person to whom distribution is made.
Up to $1.50 per
certificate for ADRs or
ADRs transferred
Person to whom Receipt is transferred.
In addition, ADS holders are responsible for certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as:
•
•
•
•
transfer and registration fees of securities on Trinity Biotech’s securities register to or from the name of the depositary or its agent when ADS holders
deposit or withdrawal securities;
expenses for cable, telex and fax transmissions and for delivery of securities;
expenses incurred for converting foreign currency into U.S. dollars; and
taxes and duties upon the transfer of securities (i.e., when ordinary shares are deposited or withdrawn from deposit, other than taxes for which
Trinity Biotech is liable).
Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the
newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation. The brokers in turn
charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are
charged by the depositary to the holders of record of ADSs as of the applicable ADS record date.
82
The Depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (e.g., stock
dividend, rights), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the
name of the investor, the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via
DTC), the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from
the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their
clients’ accounts the amount of the fees paid to the depositary.
In the event of refusal to pay taxes or other governmental charges by the holder of an ADS, the depositary may, under the terms of the deposit agreement, refuse
the requested service until payment is received or may set off the amount of such tax or other governmental charge from any distribution to be made to the ADS
holder, and the ADS holder would remain liable for any deficiency.
The disclosure under this heading “Fees and Charges Payable by ADS Holders” is subject to and qualified in its entirety by reference to the full text of the
Deposit Agreement.
Part II
Item 13
Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14
Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
Item 15
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Group’s disclosure and control procedures are designed so that information required to be disclosed in reports filed or submitted under the Securities
Exchange Act 1934 is prepared and reported on a timely basis and communicated to management, to allow timely decisions regarding required disclosure. Our
management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the design and operation of
our disclosure controls and procedures pursuant to Rule 13a-15(d) of the Securities Exchange Act of 1934 as of the end of the period covered by this Form 20-F.
The Chief Executive Officer and Chief Financial Officer have concluded that disclosure controls and procedures were effective as of December 31, 2019.
In designing and evaluating our disclosure controls and procedures, our management, with the participation of the Chief Executive Officer and Chief Financial
Officer, recognised that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives, and our management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and
procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within the Group have been detected.
Management’s Annual Report on Internal Control over Financial Reporting
The management of Trinity Biotech are responsible for establishing and maintaining adequate internal control over financial reporting. Trinity Biotech’s internal
control over financial reporting is a process designed under the supervision and with the participation of the principal executive and principal financial officers to
provide reasonable assurance regarding the reliability of financial reporting and preparation of Trinity Biotech’s financial statements for external reporting
purposes in accordance with IFRS both as issued by the IASB and as subsequently adopted by the EU.
83
Trinity Biotech’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit
preparation of the financial statements in accordance with IFRS and that receipts and expenditures are being made only in accordance with the authorisation of
management and the directors of Trinity Biotech; and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or
disposition of Trinity Biotech’s assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect all misstatements.
It is not always possible to conduct an assessment of an acquired business’s internal control over financial reporting in the period between the purchase date and
the date of management’s assessment. In such cases, management will note that it has excluded the acquired business or businesses from its report on internal
control over financial reporting. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of internal control over financial reporting based on criteria established in the 2013 Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has
concluded that the Group’s internal control over financial reporting was effective as of December 31, 2019.
Since Trinity Biotech is a non-accelerated filer, our auditor, Grant Thornton, an independent registered public accounting firm, is not required to issue an
attestation report on the Group’s internal control over financial reporting as of December 31, 2019.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during the period covered by this Form 20-F that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
84
Item 16
16A Audit Committee Financial Expert
Mr James Merselis is an independent director and a member of the Audit Committee.
Our board of directors has determined that Mr James Merselis meets the definition of an audit committee financial expert, as defined in Item 401 of Regulation
S-K.
This determination is made on the basis that Mr Merselis has extensive experience in advising public and private groups on all aspects of corporate strategy.
16B Code of Ethics
Trinity Biotech has adopted a code of ethics that applies to the Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and all organisation
employees. Written copies of the code of ethics are available free of charge upon written request to us at the address on the first page of this annual report. If we
make any substantive amendments to the code of ethics or grant any waivers, including any implicit waiver, from a provision of these codes to our Chief
Executive Officer, Chief Financial Officer or Chief Accounting Officer, we will disclose the nature of such amendment or waiver on our website.
16C Principal Accountant Fees and Services
Fees Billed by Independent Public Accountants
The following table sets forth, for each of the years indicated, the fees billed by our independent public accountants and the percentage of each of the fees out of
the total amount billed by the accountants.
Audit
Audit-related
Tax
Total
Year ended December 31,
2019
Year ended December 31,
2018
US$’000
US$’000
US$’000
%
508
-
248
756
67%
-%
33%
562
-
17
579
97%
-%
3%
Audit services include audit of our consolidated financial statements, as well as work only the independent auditors can reasonably be expected to provide,
including statutory audits. Audit related services are for assurance and related services performed by the independent auditor, including due diligence related to
acquisitions and any special procedures required to meet certain regulatory requirements. Tax fees consist of fees for professional services for tax compliance
and tax advice.
Pre-Approval Policies and Procedures
Our Audit Committee has adopted policies and procedures for the pre-approval of audit and non-audit services rendered by our independent public accountants,
Grant Thornton. The policy generally pre-approves certain specific services in the categories of audit services, audit-related services, and tax services up to
specified amounts, and sets requirements for specific case-by-case pre-approval of discrete projects, those which may have a material effect on our operations or
services over certain amounts.
Pre-approval may be given as part of the Audit Committee’s approval of the scope of the engagement of our independent auditor or on an individual basis. The
pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be presented to the full Audit Committee at
its next scheduled meeting. The policy prohibits retention of the independent public accountants to perform the prohibited non-audit functions defined in
Section 201 of the Sarbanes-Oxley Act or the rules of the SEC, and also considers whether proposed services are compatible with the independence of the public
accountants.
85
16D Exemptions from the Listing Standards for Audit Committees
Not applicable.
16 E Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On March 3, 2011 the Company announced its intention to commence a Share Buyback Program for the first time in the Company’s history. Under the authority
given by the passing of Resolution 4 at the 2018 AGM, the maximum number of shares that may yet be purchased by Trinity Biotech or on the Group’s behalf at
December 31, 2019 was 20,901,703 (5,225,426 ADSs) (2018: 20,901,703 (5,225,426 ADSs)).
Share Buyback
Trinity Biotech did not purchase any of its own shares during 2019. During 2018, 107,740 shares ‘A’ Ordinary Shares (26,935 ADSs) were purchased by Trinity
Biotech or on the Group’s behalf (2017: 5,374,692).
16 F Change in Registrant’s Certifying Accountant
Not applicable.
16 G Corporate Governance
As Trinity Biotech is a foreign private issuer, it is not required to comply with all of the corporate governance requirements set forth in NASDAQ Rule 5600 as
they apply to U.S. domestic companies. The Group’s corporate governance measures differ in the following significant ways: (a) the Group has not appointed an
independent nominations committee or adopted a board resolution addressing the nominations process. At present, the Board as a whole address the nominations
process; and (b) the Audit Committee of the Group currently consists of two members (both of whom are independent non-executive directors) – while U.S.
domestic companies listed on NASDAQ are required to have three members on their audit committee.
16 H Mine Safety Disclosure
Not applicable.
86
Part III
Item 17
Financial Statements
The registrant has responded to Item 18 in lieu of responding to this item.
Item 18 Financial Statements
87
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Trinity Biotech plc
Opinion on the financial statements
We have audited the accompanying consolidated statement of financial position of Trinity Biotech plc and its subsidiaries (the “Company”) as of December 31,
2019 and 2018, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the three years in the
period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2019, in conformity with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ GRANT THORNTON
We have served as the Company’s auditor since 2008.
Dublin, Ireland
June 15, 2020
88
CONSOLIDATED STATEMENT OF OPERATIONS
Revenues
Cost of sales
Gross profit
Other operating income
Research and development expenses
Selling, general and administrative expenses
Selling, general and administrative expenses – tax audit settlement
Impairment charges
Operating loss
Financial income
Financial expenses
Net financing expense
Loss before tax
Total income tax credit
Loss for the year on continuing operations
Profit/(Loss) for the year on discontinued operations
Loss for the year (all attributable to owners of the parent)
Basic loss per ADS (US Dollars) – continuing operations
Diluted loss per ADS (US Dollars) – continuing operations
Basic loss per ‘A’ ordinary share (US Dollars) –continuing operations
Diluted loss per ‘A’ ordinary share (US Dollars) – continuing operations
Basic loss per ADS (US Dollars) – group
Diluted loss per ADS (US Dollars) – group
Basic loss per ‘A’ ordinary share (US Dollars) – group
Diluted loss per ‘A’ ordinary share (US Dollars) –group
89
Notes
2
5
6
7
2,8
2, 8
11
2, 9
2
10
2
12
12
12
12
12
12
12
12
2019
Total
US$‘000
Year ended December 31
2018
Total
US$‘000
2017
Total
US$‘000
90,435
(52,315)
38,120
91
(5,325)
(27,661)
(5,042)
(24,295)
(24,112)
697
(6,582)
97,035
(55,586)
41,449
102
(5,369)
(29,477)
-
(26,932)
(20,227)
2,124
(5,080)
99,140
(57,250)
41,890
100
(5,657)
(32,246)
-
(41,755)
(37,668)
3,198
(5,405)
(5,885)
(2,956)
(2,207)
(29,997)
1,006
(23,183)
525
(39,875)
1,214
(28,991)
(22,658)
(38,661)
77
568
(1,609)
(28,914)
(22,090)
(40,270)
(1.39)
(1.39)
(0.35)
(0.35)
(1.38)
(1.38)
(0.35)
(0.35)
(1.08)
(1.08)
(0.27)
(0.27)
(1.06)
(1.06)
(0.26)
(0.26)
(1.79)
(1.79)
(0.45)
(0.45)
(1.86)
(1.86)
(0.47)
(0.47)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Loss for the year
Other comprehensive (loss)/income
Items that will be reclassified subsequently to profit or loss
Foreign exchange translation differences
Other comprehensive (loss)/income
2019
US$‘000
Year ended December 31
2018
US$‘000
2017
US$‘000
(28,914)
(22,090)
(40,270)
Notes
2
(167)
(167)
(520)
(520)
3,086
3,086
Total Comprehensive Loss (all attributable to owners of the parent)
(29,081)
(22,610)
(37,184)
90
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At December 31
2019
US$‘000
2018
US$‘000
Notes
ASSETS
Non-current assets
Property, plant and equipment
Goodwill and intangible assets
Deferred tax assets
Other assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Income tax receivable
Cash and cash equivalents
Short term investments
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity attributable to the equity holders of the parent
Share capital
Share premium
Treasury shares
Accumulated surplus
Translation reserve
Other reserves
Total equity
Current liabilities
Income tax payable
Trade and other payables
Provisions
Lease liabilities
Total current liabilities
Non-current liabilities
Exchangeable notes
Derivative financial instruments
Lease liabilities
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
91
13
14
15
16
17
18
19
20
2
21
21
21
21
21
21
23
24
26
25
25
26
15
2
9,290
43,654
6,252
485
59,681
32,021
20,987
1,982
15,231
1,169
71,390
5,362
52,951
6,127
558
64,998
30,359
24,441
1,584
30,277
-
86,661
131,071
151,659
1,213
16,187
(24,922)
16,145
(3,933)
23
1,213
16,187
(24,922)
55,319
(3,766)
23
4,713
44,054
48
16,947
50
2,404
19,449
82,021
4
17,745
7,139
106,909
210
16,908
50
436
17,604
81,382
238
526
7,855
90,001
126,358
107,605
131,071
151,659
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Other reserves
Share
capital
‘A’ ordinary
shares
US$’000
1,213
-
-
Share
premium
US$’000
Treasury
Shares
US$’000
Translation
reserve
US$’000
Warrant
reserve
US$’000
Hedging
reserves
US$’000
Accumulated
surplus
US$’000
16,187
-
-
(17,327)
-
-
(6,332)
-
3,086
4,529
-
-
Balance at January 1, 2017
Loss for the period
Other comprehensive income
Total comprehensive
income/(loss)
Transfer of warrant reserve
(Note 22)
Share-based payments (Note
22)
Shares purchased (Note 21)
Balance at December 31,
2017
3,086
-
-
-
-
-
-
-
-
-
-
-
-
(7,456)
-
-
-
1,213
16,187
(24,783)
(3,246)
Balance at January 1, 2018
Loss for the period
Other comprehensive income
1,213
-
-
16,187
-
-
(24,783)
-
-
(3,246)
-
(520)
Total comprehensive loss
Share-based payments (Note
22)
Shares purchased (Note 21)
Balance at December 31,
2018
-
-
-
-
-
-
-
(520)
-
(139)
-
-
1,213
16,187
(24,922)
(3,766)
Balance at January 1, 2019
Loss for the period
Other comprehensive income
1,213
-
-
16,187
-
-
(24,922)
-
-
-
-
-
-
-
-
-
-
-
(3,766)
-
(167)
(167)
-
-
Total comprehensive loss
Share-based payments (Note
22)
Adjustment on transition to
IFRS 16 (Note 13)
Balance at December 31,
2019
Total
US$’000
108,727
(40,270)
3,086
110,434
(40,270)
-
(40,270)
(37,184)
4,529
1,109
-
-
1,109
(7,456)
75,802
65,196
75,802
(22,090)
-
65,196
(22,090)
(520)
(22,090)
(22,610)
1,607
-
1,607
(139)
55,319
44,054
55,319
(28,914)
-
44,054
(28,914)
(167)
(28,914)
(29,081)
839
839
(11,099)
(11,099)
23
-
-
-
-
-
-
23
23
-
-
-
-
-
23
23
-
-
-
-
-
(4,529)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,213
16,187
(24,922)
(3,933)
92
23
16,145
4,713
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Loss for the year
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation
Amortisation
Income tax (credit) / expense
Financial income
Financial expense
Share-based payments
Foreign exchange (gains)/losses on operating cash flows
Loss on disposal or retirement of property, plant and equipment
Movement in inventory provision
Impairment of prepayments
Impairment of property, plant and equipment
Impairment of intangible assets
Provision for closure costs
Other non-cash items
Operating cash flows before changes in working capital
(Increase) / decrease in trade and other receivables
Decrease / (increase) in inventories
(Decrease) / increase in trade and other payables
Cash generated from operations
Interest paid
Interest received
Income taxes received / (paid)
Net cash generated by operating activities
Cash flows from investing activities
Payments to acquire intangible assets
Acquisition of property, plant and equipment
Disposal of property, plant and equipment
Licence fees
Net cash used in investing activities
Cash flows from financing activities
Share buyback
Interest payment on exchangeable notes
Purchase of exchangeable notes
Proceeds from sale & leaseback transactions
Payment of lease liabilities
Net cash used in financing activities
Decrease in cash and cash equivalents and short term investments
Effects of exchange rate movements on cash held
Cash and cash equivalents and short-term investments at beginning of year
Notes
11
11,14
8
8
22
11
17
7, 18
7, 13
7, 14
10
23
30
30
30
Year ended December 31,
2018
US$‘000
2019
US$‘000
2017
US$‘000
(28,914)
(22,090)
(40,270)
2,526
2,368
(1,006)
(697)
6,582
758
(93)
17
1,567
1,376
6,349
16,570
-
835
8,238
445
(2,959)
151
5,875
(1,000)
560
(18)
5,417
(9,718)
(2,118)
(17)
-
1,296
2,825
(1,115)
(2,124)
5,080
1,369
311
15
300
1,608
6,112
19,212
-
570
13,369
(5,960)
1,988
(3,419)
5,978
(39)
874
416
7,229
1,896
3,303
(374)
(3,198)
5,405
928
307
3
2,275
1,651
10,437
29,667
(1,794)
(728)
9,508
306
(2,461)
2,017
9,370
(53)
776
(843)
9,250
(9,863)
(7,528)
(10,229)
(4,839)
-
(1,112)
(11,853)
(17,391)
(16,180)
-
(3,996)
-
-
(3,533)
(434)
(4,503)
(12,042)
481
(374)
(7,799)
(4,600)
-
51
(295)
(7,529)
(16,872)
(12,643)
(13,965)
88
30,277
(27,034)
(296)
57,607
(19,573)
71
77,109
Cash and cash equivalents and short term investments at end of year
19,20
16,400
30,277
57,607
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted by Trinity Biotech plc (“the Company”) and its subsidiaries (“the Group”) are set out below.
i)
General information
Trinity Biotech develops, acquires, manufactures and markets medical diagnostic products for the clinical laboratory and point-of-care segments of the
diagnostic market. These products are used to detect autoimmune, infectious and sexually transmitted diseases, diabetes and disorders of the liver and
intestine. Trinity Biotech is a significant provider of raw materials to the life sciences and research industries globally. Trinity Biotech also operates a
licenced reference laboratory that specializes in diagnostics for autoimmune diseases.
ii)
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) both as issued by the
International Accounting Standards Board (“IASB”) and as subsequently adopted by the European Union (“EU”) (together “IFRS”). The IFRS applied
are those effective for accounting periods beginning January 1, 2019. Consolidated financial statements are required by Irish law to comply with IFRS as
adopted by the EU which differ in certain respects from IFRS as issued by the IASB. These differences predominantly relate to the timing of adoption of
new standards by the EU. However, in relation to the 2019 consolidated financial statements there are no differences regarding the effective date of new
IFRS relevant to Trinity Biotech as issued by the IASB and as adopted by the EU. In relation to prior periods presented, none of the differences are
relevant in the context of Trinity Biotech and the consolidated financial statements comply with IFRS both as issued by the IASB and as adopted by the
EU.
iii)
Basis of preparation
The consolidated financial statements have been prepared in United States Dollars (US$), rounded to the nearest thousand, under the historical cost basis
of accounting, except for derivative financial instruments, certain balances arising on acquisition of subsidiary entities and share-based payments which
are initially recorded at fair value. Derivative financial instruments are also subsequently revalued and carried at fair value.
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the
application of policies and amounts reported in the financial statements and accompanying notes. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making
the judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future
periods.
Judgements made by management that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in
the next year are discussed in Note 32.
The directors have considered the Group’s current financial position and cashflow projections, taking into account all known events and developments
including the Covid-19 pandemic. While acknowledging that there will be a temporary decrease in revenues due to Covid-19, the company has taken
measures to reduce expenditure, to obtain government pandemic supports in Ireland and USA and to exploit sales opportunities of products related to
coronavirus. (For more information on the impact of Covid-19 – refer to Subsequent Events in Note 31). The directors believe that the Group will be able
to continue in operational existence for at least the next 12 months from the date of approval of these consolidated financial statements and that it is
appropriate to continue to prepare the consolidated financial statements on a going concern basis.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. The accounting
policies have been applied consistently by all Group entities.
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
iv)
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and
reporting policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or
convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
Transactions eliminated on consolidation
Intra-group balances and any unrealised gains or losses or income and expenses arising from intra-group transactions are eliminated in preparing the
consolidated financial statements.
v)
Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost less any accumulated depreciation and any impairment losses (see Note 1(viii)). The cost of self-
constructed assets includes the cost of materials, direct labour and attributable overheads. It is not Group policy to revalue any items of property, plant
and equipment.
Depreciation is charged to the statement of operations on a straight-line basis to write-off the cost of the assets over their expected useful lives as follows:
• Leasehold improvements
• Buildings
• Office equipment and fittings
• Computer equipment
• Plant and equipment
5-15 years
50 years
10 years
3-5 years
5-15 years
Land is not depreciated. The residual values, if not insignificant, useful lives and depreciation methods of property, plant and equipment are reviewed and
adjusted if appropriate on a prospective basis, at each balance sheet date. There were no changes to useful lives in the year.
Leased assets - as lessee
The Group has applied IFRS 16, Leases, using the modified retrospective approach and therefore comparative information has not been restated.
Accounting policy applicable from 1 January 2019
For any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is, or contains a lease. A lease is defined as ‘a
contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply
this definition the Group assesses whether the contract meets three key evaluations which are whether:
•
•
•
the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time
the asset is made available to the Group
the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use,
considering its rights within the defined scope of the contract
the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the right to direct
‘how and for what purpose’ the asset is used throughout the period of use.
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at
cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to
dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives
received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate. Lease payments included in the measurement
of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be
payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the
liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes
in in-substance fixed payments.When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and
loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use
asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. On the
statement of financial position, right-of-use assets have been included in property, plant and equipment and lease liabilities have been included in
separate lines within the current liabilities and non-current liabilities sections.
Leased assets - as lessor
The Group’s accounting policy under IFRS 16 has not changed from the comparative period. As a lessor, the Group classifies its leases as either
operating or finance leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the
underlying asset, and classified as an operating lease if it does not.
Accounting policy applicable before 1 January 2019
Leased assets – as lessee
Leases under terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Property, plant and
equipment acquired by way of finance lease is stated at an amount equal to the lower of its fair value and present value of the minimum lease payments at
inception of the lease, less accumulated depreciation and any impairment losses. Lease payments are apportioned between finance charges and reduction
of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in financial
expenses in the statement of operations.
Depreciation is calculated in order to write-off the amounts capitalised over the estimated useful lives of the assets, or the lease term if shorter, by equal
annual instalments. The excess of the total rentals under a lease over the amount capitalised is treated as interest, which is charged to the statement of
operations in proportion to the amount outstanding under the lease. Leased assets are reviewed for impairment (see Note 1(viii)).
Leases other than finance leases are classified as “operating leases”, and the rentals thereunder are charged to the statement of operations on a straight-
line basis over the period of the leases. Lease incentives are recognised in the statement of operations on a straight-line basis over the lease term.
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leased assets – as lessor
Leases where the Group substantially transfers the risks and benefits of ownership of the asset to the customer are classified as finance leases within
finance lease receivables. The Group recognises the amount receivable from assets leased under finance leases at an amount equal to the net investment
in the lease. Finance lease income is recognised as revenue in the statement of operations reflecting a constant periodic rate of return on the Group’s net
investment in the lease.
Assets provided to customers under leases other than finance leases are classified as operating leases and carried in property, plant and equipment at cost
and are depreciated on a straight-line basis over the useful life of the asset or the lease term, if shorter.
Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is
incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the replaced item can be
measured reliably. All other costs are recognised in the statement of operations as an expense as incurred.
vi)
Goodwill
In respect of business combinations that have occurred since January 1, 2004 (being the transition date to IFRS), goodwill represents the difference
between the cost of the acquisition and the fair value of the net identifiable assets acquired.
In respect of acquisitions prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under the old basis
of accounting, Irish GAAP, (“Previous GAAP”). Save for retrospective restatement of deferred tax as an adjustment to retained earnings in accordance
with IAS 12, Income Taxes, the classification and accounting treatment of business combinations undertaken prior to the transition date were not
reconsidered in preparing the Group’s opening IFRS balance sheet as at January 1, 2004.
To the extent that the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the cost of a
business combination, the identification and measurement of the related assets, liabilities and contingent liabilities are revisited accompanied by a
reassessment of the cost of the transaction, and any remaining balance is immediately recognised in the statement of operations.
At the acquisition date, any goodwill is allocated to each of the cash generating units expected to benefit from the combination’s synergies. Following
initial recognition, goodwill is stated at cost less any accumulated impairment losses (see Note 1(viii)).
vii)
Intangibles, including research and development (other than goodwill)
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the
expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably. The asset is deemed to be
identifiable when it is separable (that is, capable of being divided from the entity and sold, transferred, licensed, rented or exchanged, either individually
or together with a related contract, asset or liability) or when it arises from contractual or other legal rights, regardless of whether those rights are
transferable or separable from the Group or from other rights and obligations.
Intangible assets acquired as part of a business combination are capitalised separately from goodwill if the intangible asset meets the definition of an asset
and the fair value can be reliably measured on initial recognition. Subsequent to initial recognition, these intangible assets are carried at cost less any
accumulated amortisation and any accumulated impairment losses (Note 1(viii)). Intangible assets with definite useful lives are reviewed for indicators of
impairment annually while intangible assets with indefinite useful lives and those not yet brought into use are tested for impairment annually, either
individually or at the cash generating unit level.
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved
products and processes, is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to
complete the development. The expenditure capitalised includes the cost of materials, direct labour and attributable overheads and third party costs.
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset
to which it relates.
The technical feasibility of a new product is determined by a specific feasibility study undertaken at the first stage of any development project. The
majority of our new product developments involve the transfer of existing product know-how to a new application. Since the technology is already
proven in an existing product which is being used by customers, this facilitates the proving of the technical feasibility of that same technology in a new
product.
The results of the feasibility study are reviewed by a design review committee comprising senior managers. The feasibility study occurs in the initial
research phase of a project and costs in this phase are not capitalised.
The commercial feasibility of a new product is determined by preparing a discounted cash flow projection. This projection compares the discounted sales
revenues for future periods with the relevant costs. As part of preparing the cash flow projection, the size of the relevant market is determined, feedback
is sought from customers and the strength of the proposed new product is assessed against competitors’ offerings. Once the technical and commercial
feasibility has been established and the project has been approved for commencement, the project moves into the development phase.
All other development expenditure is expensed as incurred. Subsequent to initial recognition, the capitalised development expenditure is carried at cost
less any accumulated amortisation and any accumulated impairment losses (Note 1(viii)).
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the
statement of operations as an expense as incurred.
Expenditure on internally generated goodwill and brands is recognised in the statement of operations as an expense as incurred.
Amortisation
Amortisation is charged to the statement of operations on a straight-line basis over the estimated useful lives of intangible assets, unless such lives are
indefinite. Intangible assets are amortised from the date they are available for use in its intended market. The estimated useful lives are as follows:
• Capitalised development costs
• Patents and licences
• Other (including acquired customer and supplier lists)
15 years
6-15 years
6-15 years
The Group uses a useful economic life of 15 years for capitalised development costs. This is a conservative estimate of the likely life of the products. The
Group is confident that products have a minimum of 15 years life given the inertia that characterizes the medical diagnostics industry and the barriers to
enter into the industry. The following factors have been considered in estimating the useful life of developed products:
(a)
(b)
(c)
once a diagnostic test becomes established, customers are reluctant to change to new technology until it is fully proven, thus resulting in relatively
long product life cycles. There is also reluctance in customers to change to a new product as it can be costly both in terms of the initial changeover
cost and as new technology is typically more expensive.
demand for the diagnostic tests is enduring and robust within a wide geographic base. The diseases that the products diagnose are widely prevalent
(HIV, Diabetes and Chlamydia being just three examples) in many countries. There is a general consensus that these diseases will continue to be
widely prevalent in the future.
there are significant barriers to new entrants in this industry. Patents and/or licences are in place for many of our products, though this is not the
only barrier to entry. There is a significant cost and time to develop new products, it is necessary to obtain regulatory approval and tests are
protected by proprietary know-how, manufacturing techniques and trade secrets.
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain trade names acquired are deemed to have an indefinite useful life as there is no foreseeable limit to the period over which these assets are
expected to generate cash inflows for the Group.
Where amortisation is charged on assets with finite lives, this expense is taken to the statement of operations through the ‘selling, general and
administrative expenses’ line.
Useful lives are examined on an annual basis and adjustments, where applicable, are made on a prospective basis.
viii)
Impairment
The carrying amount of the Group’s assets, other than inventories, accounts receivable, cash and cash equivalents, short-term investments and deferred
tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s
recoverable amount (being the greater of fair value less costs to sell and value in use) is assessed at each balance sheet date.
Fair value less costs to sell is defined as the amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between
knowledgeable and willing parties, less the costs that would be incurred on disposal. Value in use is defined as the present value of the future cash flows
expected to be derived through the continued use of an asset or cash-generating unit. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset for which the future cash flow estimates have not yet been adjusted. The estimates of future cash flows exclude cash inflows or outflows
attributable to financing activities. For an asset that does not generate largely independent cash flows, the recoverable amount is determined by reference
to the cash generating unit to which the asset belongs.
For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each
balance sheet date at the cash generating unit level. The goodwill and indefinite-lived assets were reviewed for impairment at December 31, 2018 and
December 31, 2019. See Note 14.
In-process research and development (IPR&D) is tested for impairment on an annual basis, in the fourth quarter, or more frequently if impairment
indicators are present, using projected discounted cash flow models. If IPR&D becomes impaired or is abandoned, the carrying value of the IPR&D is
written down to its revised fair value with the related impairment charge recognised in the period in which the impairment occurs. If the fair value of the
asset becomes impaired as the result of unfavorable data from any ongoing or future clinical trial, changes in assumptions that negatively impact
projected cash flows, or because of any other information regarding the prospects of successfully developing or commercializing our programs, we could
incur significant charges in the period in which the impairment occurs. The valuation techniques utilized in performing impairment tests incorporate
significant assumptions and judgments to estimate the fair value, as described above. The use of different valuation techniques or different assumptions
could result in materially different fair value estimates.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses
are recognised in the statement of operations.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-
generating units and then to reduce the carrying amount of other assets in the cash-generating units on a pro-rata basis.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been recognised.
An impairment loss in respect of goodwill is not reversed.
Following recognition of any impairment loss (and on recognition of an impairment loss reversal), the depreciation or amortisation charge applicable to
the asset or cash generating unit is adjusted prospectively with the objective of systematically allocating the revised carrying amount, net of any residual
value, over the remaining useful life.
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
ix)
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in, first-out principle and includes all expenditure which has
been incurred in bringing the products to their present location and condition, and includes an appropriate allocation of manufacturing overhead based on
the normal level of operating capacity. Net realisable value is the estimated selling price of inventory on hand in the ordinary course of business less all
further costs to completion and costs expected to be incurred in selling these products.
The Group provides for inventory, based on estimates of the expected realisability. The estimated realisability is evaluated on a case-by-case basis and
any inventory that is approaching its “use-by” date and for which no further re-processing can be performed is written off. Any reversal of an inventory
provision is recognised in the statement of operations in the year in which the reversal occurs.
x)
Trade and other receivables
Trade receivables are amounts due from customers for products sold or services provided in the ordinary course of business. Trade and other receivables
are stated at their amortised cost less impairment losses incurred. Cost approximates fair value given the short term nature of these assets. The Group
records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for
default at any point during the life of the financial instrument. Expected credit losses are recorded on all of trade receivables based on an assessment of
each individual debtor taking into account the probability of default or delinquency in payments and the probability that debtor will enter into financial
difficulties or bankruptcy.
xi)
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Trade and other payables are stated
at cost. Cost approximates fair value given the short term nature of these liabilities.
xii)
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term deposits which are readily available at year-end. Deposits with maturities less than six
months as at the year-end date are recognised as cash and cash equivalents and are carried at fair value when there is no expected loss in value on early
termination. The Group has no short-term bank overdraft facilities. Where restrictions are imposed by third parties, such as lending institutions, on cash
balances held by the Group these are treated as financial assets in the financial statements.
xiii)
Short-term investments
Short-term investments comprise short-term bank deposits which have maturities greater than six months as at the year-end date. Short-term deposits
made for varying periods depending on the immediate cash requirements of the Group and earn interest at the respective deposit rates in place. Where
restrictions are imposed by third parties, such as lending institutions, on short-term deposits held by the Group these are treated as financial assets in the
financial statements.
xiv)
Share-based payments
For equity-settled share-based payments (share options), the Group measures the services received and the corresponding increase in equity at fair value
at the measurement date (which is the grant date) using a trinomial model. Given that the share options granted do not vest until the completion of a
specified period of service, the fair value, which is assessed at the grant date, is recognised on the basis that the services to be rendered by employees as
consideration for the granting of share options will be received over the vesting period.
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The share options issued by the Group are not subject to market-based vesting conditions as defined in IFRS 2, Share-based Payment. Non-market
vesting conditions are not taken into account when estimating the fair value of share options as at the grant date; such conditions are taken into account
through adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised
equates to the number of equity instruments that actually vest. The expense in the statement of operations in relation to share options represents the
product of the total number of options anticipated to vest and the fair value of those options; this amount is allocated to accounting periods on a straight-
line basis over the vesting period. Given that the performance conditions underlying the Group’s share options are non-market in nature, the cumulative
charge to the statement of operations is only reversed where the performance condition is not met or where an employee in receipt of share options
relinquishes service prior to completion of the expected vesting period. Share based payments, to the extent they relate to direct labour involved in
development activities, are capitalised, see Note 1(vii).
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options
are exercised. The Group does not operate any cash-settled share-based payment schemes or share-based payment transactions with cash alternatives as
defined in IFRS 2.
xv)
Government grants
Grants that compensate the Group for expenses incurred such as research and development, employment and training are recognised as income in the
statement of operations on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an
asset are recognised in the statement of operations as other operating income on a systematic basis over the useful life of the asset.
xvi)
Revenue recognition
Goods sold and services rendered
The Group recognises revenue when it transfers control over a good or service to a customer. Revenue is recognised to the extent that it is probable that
economic benefit will flow to the Group and the revenue can be measured. No revenue is recognised if there is uncertainty regarding recovery of the
consideration due at the outset of the transaction or the possible return of goods. Revenue, including any amounts invoiced for shipping and handling
costs, represents the value of goods and services supplied to external customers, net of discounts and rebates and excluding sales taxes.
Revenue from products is generally recorded as of the date of shipment, consistent with typical ex-works shipment terms. Where the shipment terms do
not permit revenue to be recognised as of the date of shipment, revenue is recognised when the Group has satisfied all of its performance obligations to
the customer in accordance with the shipping terms. Some contracts oblige the Group to ship product to the customer ahead of the agreed payment
schedule. For these shipments, a contract asset is recognised when control over the goods has transferred to the customer. The financing component is
insignificant as invoicing for these shipments occurs within a short period of time after shipment has occurred and standard 30 day credit terms apply.
The Group operates a licensed referenced laboratory in the US, which provides testing services to institutional customers and insurance companies. In the
US, there are rules requiring all insurance companies to be billed the same amount per test. However, the amount that each insurance company pays for a
particular test varies according to their own internal policies and this can typically be considerably less than the amount invoiced. We recognise lab
services revenue for insurance companies by taking the invoiced amount and reducing it by an estimated percentage based on historical payment data. We
review the percentage reduction annually based on the latest data. As a practical expedient, and in accordance with IFRS, we apply a portfolio approach
to the insurance companies as they have similar characteristics. We judge that the effect on the financial statements of using a portfolio approach for the
insurance companies will not differ materially from applying IFRS 15 to the individual contracts within that portfolio.
Revenue from services rendered is recognised in the statement of operations in proportion to the stage of completion of the transaction at the balance
sheet date.
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Group leases instruments to customers typically as part of a bundled package. Where a contract has multiple performance obligations and its
duration is greater than one year, the transaction price is allocated to the performance obligations in the contract by reference to their relative standalone
selling prices. For contracts where control of the instrument is transferred to the customer, the fair value of the instrument is recognised as revenue at the
commencement of the lease and is matched by the related cost of sale. Fair value is determined on the basis of standalone selling price. In the case where
control of the instrument does not transfer to the customer, revenue is recognised on the basis of customer usage of the instrument. See also Note 1(v).
In obtaining these contracts, the Group incurs a number of incremental costs, such as sales bonus paid to sales staff commissions paid to distributors and
royalty payments. As the amortisation period of these costs, if capitalised, would be less than one year, the Group makes use of the practical expedient in
IFRS 15.94 and expenses them as they incur.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of
time is required before the payment is due.
The Group’s obligation to provide a refund for faulty products under the standard warranty terms is recognised as a provision, see Note 24 for details.
Other operating income
Other operating income mainly comprises income recognised under Transitional Services Agreements (TSA) with Diagnostica Stago. As part of the
divestiture of the Coagulation product line in April 2010, the Group entered into a TSA. The services provided by the Group to Stago under the TSA
comprise canteen services. This income has not been treated as revenue since the TSA activities are incidental to the main revenue-generating activities
of the Group.
xvii)
Employee benefits
Defined contribution plans
The Group operates defined contribution schemes in various locations where its subsidiaries are based. Contributions to the defined contribution schemes
are recognised in the statement of operations in the period in which the related service is received from the employee.
Other long-term benefits
Where employees participate in the Group’s other long-term benefit schemes (such as permanent health insurance schemes under which the scheme
insures the employees), or where the Group contributes to insurance schemes for employees, the Group pays an annual fee to a service provider, and
accordingly the Group expenses such payments as incurred.
Termination benefits
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal
detailed plan to either terminate employment before normal retirement date, or to provide termination benefits as a result of an offer made to encourage
voluntary redundancy.
xviii) Foreign currency
A majority of the revenue of the Group is generated in US Dollars. The Group’s management has determined that the US Dollar is the primary currency
of the economic environment in which the Company and its subsidiaries (with the exception of the Group’s subsidiaries in Brazil, Canada and Sweden)
principally operate. Thus the functional currency of the Company and its subsidiaries (other than the Brazilian, Canadian and Swedish subsidiaries) is the
US Dollar. The functional currency of the Brazilian entity is the Brazilian Real, the functional currency of the Canadian subsidiary, Nova Century
Scientific Inc, is the Canadian Dollar and the functional currency of the Swedish subsidiary is the Swedish Kroner. The presentation currency of the
Company and Group is the US Dollar. Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at
the balance sheet date. The resulting gains and losses are included in the statement of operations. Non-monetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Results and cash flows of subsidiary undertakings, which have a functional currency other than the US Dollar, are translated into US Dollars at average
exchange rates for the year, and the related balance sheets have been translated at the rates of exchange ruling on the balance sheet date. Any exchange
differences arising from the translations are recognised in the currency translation reserve via the statement of changes in equity.
Where Euro, Brazilian Real, Canadian Dollar or Swedish Kroner amounts have been referenced in this document, their corresponding US Dollar
equivalent has also been included and these equivalents have been calculated with reference to the foreign exchange rates prevailing at December 31,
2019.
xix)
Hedging
The activities of the Group expose it primarily to changes in foreign exchange rates and interest rates. The Group uses derivative financial instruments,
from time to time, such as forward foreign exchange contracts to hedge these exposures.
The Group enters into forward contracts to sell US Dollars forward for Euro. The principal exchange risk identified by the Group is with respect to
fluctuations in the Euro as a substantial portion of its expenses are denominated in Euro but its revenues are primarily denominated in US Dollars. Trinity
Biotech monitors its exposure to foreign currency movements and may use these forward contracts as cash flow hedging instruments whose objective is
to cover a portion of this Euro expense.
At the inception of a hedging transaction entailing the use of derivatives, the Group documents the relationship between the hedged item and the hedging
instrument together with its risk management objective and the strategy underlying the proposed transaction. The Group also documents its quarterly
assessment of the effectiveness of the hedge in offsetting movements in the cash flows of the hedged items.
Derivative financial instruments are recognised at fair value. Where derivatives do not fulfil the criteria for hedge accounting, they are classified as held-
for-trading and changes in fair values are reported in the statement of operations. The fair value of forward exchange contracts is calculated by reference
to current forward exchange rates for contracts with similar maturity profiles and equates to the current market price at the balance sheet date.
The portion of the gain or loss on a hedging instrument that is deemed to be an effective cash flow hedge is recognised directly in the hedging reserve in
equity and the ineffective portion is recognised in the statement of operations. As the forward contracts are exercised the net cumulative gain or loss
recognised in the hedging reserve is transferred to the statement of operations and reflected in the same line as the hedged item.
xx)
Exchangeable notes and derivative financial instruments
The Company’s exchangeable notes are treated as a host debt instrument with embedded derivatives attached. On initial recognition, the host debt
instrument is recognised at the residual value of the total net proceeds of the bond issue less fair value of the embedded derivatives. Subsequently, the
host debt instrument is measured at amortised cost using the effective interest rate method.
The embedded derivatives are initially recognised at fair value and are restated at their fair value at each reporting date. The fair value changes of the
embedded derivatives are recognised in the statement of operations, except for changes in fair value related to the Group’s own credit risk, which are
recorded in the statement of comprehensive income.
Where the exchangeable notes are redeemed early or repurchased in a way that does not alter the original conversion privileges, the consideration paid is
allocated to the respective components and the amount of any gain or loss is recognised in the consolidated statement of operations.
xxi)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of
Directors.
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
xxii)
Tax (current and deferred)
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the statement of operations except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax represents the expected tax payable or recoverable on the taxable profit for the year using tax rates enacted or substantively enacted at the
balance sheet date in the countries where the company and its subsidiaries operate and generate income, and taking into account any adjustments
stemming from prior years.
Deferred tax is provided on the basis of the balance sheet liability method on all temporary differences at the balance sheet date which is defined as the
difference between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets and liabilities are not
subject to discounting and are measured at the tax rates that are anticipated to apply in the period in which the asset is realised or the liability is settled
based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised when it is
probable that future taxable profits will be available to utilize the associated losses or temporary differences. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities.
Deferred tax assets and liabilities are recognised for all temporary differences (that is, differences between the carrying amount of the asset or liability
and its tax base) with the exception of the following:
i.
Where the deferred tax liability arises from goodwill not deductible for tax purposes or the initial recognition of an asset or a liability in a
transaction that is not a business combination and affects neither the accounting profit nor the taxable profit or loss at the time of the transaction;
and
ii. Where, in respect of temporary differences associated with investments in subsidiary undertakings, the timing of the reversal of the temporary
difference is subject to control and it is probable that the temporary difference will not reverse in the foreseeable future.
Where goodwill is tax deductible, a deferred tax liability is not recognised on initial recognition of goodwill. It is recognised subsequently for the taxable
temporary difference which arises when the goodwill is amortised for tax with no corresponding adjustment to the carrying value of the goodwill.
The carrying amounts of deferred tax assets are subject to review at each balance sheet date and are derecognised to the extent that future taxable profits
are considered to be inadequate to allow all or part of any deferred tax asset to be utilised.
xxiii) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
xxiv) Cost of sales
Cost of sales comprises product cost including manufacturing and payroll costs, quality control, shipping, handling, and packaging costs and the cost of
services provided.
xxv)
Finance income and costs
Financing expenses comprise interest costs payable on leases and exchangeable notes. Interest payable on finance leases is allocated to each period
during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Financing expenses also includes the
financing element of long term liabilities which have been discounted.
Finance income includes interest income on deposits and is recognised in the statement of operations as it accrues, using the effective interest method.
Finance income also includes fair value adjustments to embedded derivatives associated with exchangeable notes.
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
xxvi)
Treasury shares
When the Group purchases its own equity instruments (treasury shares), the costs, including any directly attributable incremental costs, are deducted
from equity. No gain or loss is recognised in the statement of operations on the purchase, sale, issue or cancellation of the Group’s own equity
instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in share premium. Voting rights related to
treasury shares are nullified for the Group and no dividends are allocated to them.
xxvii) Equity
Share capital represents the nominal (par) value of shares that have been issued. Share premium includes any premiums received on issue of share capital.
Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.
xxviii) Profit or loss from discontinued operations
A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale. Profit or loss from discontinued
operations comprises the post-tax profit or loss of discontinued operations and the post-tax gain or loss resulting from the measurement and disposal of
assets classified as held for sale.
xxix) Fair values
For financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which inputs to the fair value
measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value are observable, either directly
or indirectly
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are not based on observable
market data
xxx)
New IFRS Standards and Interpretations not applied
The IASB and IFRIC have issued additional standards and interpretations which are effective for periods starting after January 1, 2019, all of which have
not yet been adopted by the EU. IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB. However, the Group’s
consolidated financial statements for the financial years presented would be no different had IFRS as issued by the IASB been applied. The following
standards and interpretations have yet to be adopted by the Group:
International Financial Reporting Standards (IFRS/IAS)
Effective date
IFRS 3
Business Combinations
IFRS 8
Operating Segments
IFRS 9
Financial Instruments
IAS 39
Financial Instruments
January 1, 2020 (issued by the IASB with effectivity date of January 1,
2020)
January 1, 2020 (issued by the IASB with effectivity date of January 1,
2020)
January 1, 2020 (issued by the IASB with effectivity date of January 1,
2020)
January 1, 2020 (issued by the IASB with effectivity date of January 1,
2020)
The IASB also issued 'Amendments to References to the Conceptual Framework in IFRS Standards'. The amendments in the table above are effective for
annual periods beginning on or after 1 January 2020.
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The IASB issued amendments to IFRS 3 in October 2018 regarding the definition of a business. The amendments clarify that the process required to
meet the definition of a business must be substantive; and, that the inputs and process must together significantly contribute to creating outputs. The
definition of outputs has been narrowed to focus on goods and services provided to customers and other income from ordinary activities. In addition, the
amendments indicate that an acquisition of primarily a single asset or group of similar assets is unlikely to meet the definition of a business. The
amendments will be applied prospectively for business combinations and asset acquisitions occurring on or after January 1, 2020. The Group is finalising
its review of the impact of this amendment, but does not expect the clarification to have a material impact on the value of acquisitions or additions to
property, plant and equipment.
In September 2019, the IASB issued amendments to IFRS 9, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial
Instruments: Disclosures, which concludes phase one of its work to respond to the effects of Interbank Offered Rates (IBOR) reform on financial
reporting. The changes relate to hedge accounting and Group does not expect the amendment to have a material impact.
In 2019, the Group has adopted the new accounting pronouncements which have become effective this year, and are as follows:
IFRS 16 ‘Leases’ IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining whether an Arrangement contains a
Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27 ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’).
The adoption of this new Standard has resulted in the Group recognising a right-of-use asset and related lease liability in connection with each former
operating lease except for those identified as low-value or having a remaining lease term of less than 12 months from the date of initial application.
The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognised in equity
as an adjustment to the opening balance of retained earnings for the current period. Prior periods have not been restated. Right-of-use assets have been
assessed for impairment on transition by applying IAS 36, Impairment as at January 1, 2019. This resulted in an adjustment on transition to IFRS 16 of
US$11,099,000, which reduces the value of the assets recorded in property, plant and equipment, with a corresponding movement in Accumulated
Surplus. See Note 13.
The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in existence at the date of initial
application of IFRS 16, being 1 January 2019. At this date, the Group has also elected to measure the right-of-use assets at an amount equal to the lease
liability adjusted for any prepaid or accrued lease payments that existed at the date of transition.
On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and for leases of low-value
assets the Group has applied the optional exemptions to not recognise right-of-use assets but to account for the lease expense on a straight line basis over
the remaining lease term.
For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date of initial application at the same
amounts as under IAS 17 immediately before the date of initial application.
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
1.
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following is a reconciliation of the financial statement line items from IAS 17 to IFRS 16 at January 1, 2019:
Property, plant & equipment
Lease liabilities
Retaining earnings
Total
2.
SEGMENT INFORMATION
Carrying
amount at
December 31,
2018
US$000
5,362
(962)
(55,319)
(50,919)
Re-
measurement
US$000
21,185
(21,185)
-
Impairment
US$000
(11,099)
-
11,099
IFRS 16
carrying
amount at
January 1,
2019
US$000
15,448
(22,147)
(44,220)
-
-
(50,919)
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the Board of
Directors. Management has determined the operating segments based on the reports reviewed by the Board of Directors, which are used to make strategic
decisions. The Board considers the business from a geographic perspective based on the Group’s management and internal reporting structure. Sales of
product between companies in the Group are made on commercial terms which reflect the nature of the relationship between the relevant companies.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise interest-bearing loans, borrowings and expenses and corporate expenses. Segment capital expenditure is the total cost during
the year to acquire segment plant, property and equipment and intangible assets that are expected to be used for more than one period, whether acquired
on acquisition of a business combination or through acquisitions as part of the current operations.
The Group comprises two main geographical segments (i) the Americas and (ii) Rest of World. The Group’s geographical segments are determined by
the location of the Group’s assets and operations. The Group has also presented a geographical analysis of the segmental data for Ireland as is consistent
with the information used by the Board of Directors.
The reportable operating segments derive their revenue primarily from one source (i.e. the market for diagnostic tests for a range of diseases and other
medical conditions). In determining the nature of its segmentation, the Group has considered the nature of the products, their risks and rewards, the
nature of the production base, the customer base and the nature of the regulatory environment. The Group acquires, manufactures and markets a range of
diagnostic products. The Group’s products are sold to a similar customer base and the main body whose regulation the Group’s products must comply
with is the Food and Drug Administration (“FDA”) in the US.
The following presents revenue and profit information and certain asset and liability information regarding the Group’s geographical segments.
i)
The distribution of revenue by geographical area based on location of assets was as follows:
Revenue
Year ended December 31, 2019
Revenue from external customers
Inter-segment revenue
Total revenue
Year ended December 31, 2018
Revenue from external customers
Inter-segment revenue
Total revenue
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Eliminations
US$’000
Total
US$‘000
64,045
39,563
26,390
1,629
103,608
28,019
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
65,863
38,665
31,172
2,899
104,528
34,071
107
-
-
-
-
-
-
-
(41,192)
90,435
-
(41,192)
90,435
Eliminations
US$’000
Total
US$‘000
-
(41,564)
97,035
-
(41,564)
97,035
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
2.
SEGMENT INFORMATION (CONTINUED)
Year ended December 31, 2017
Revenue from external customers
Inter-segment revenue
Total revenue
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Eliminations
US$’000
Total
US$‘000
66,092
42,147
108,239
33,048
3,587
36,635
-
-
-
-
(45,734)
99,140
-
(45,734)
99,140
ii)
The distribution of revenue by customers’ geographical area was as follows:
Revenue
Americas
Asia / Africa
Europe (including Ireland) *
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
52,183
27,686
10,566
90,435
57,559
29,466
10,010
97,035
59,539
27,131
12,470
99,140
* Revenue from customers in Ireland is not disclosed separately due to the immateriality of these revenues.
iii)
The distribution of revenue by major product group was as follows:
Revenue
Clinical laboratory
Point-of-Care
Laboratory services
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
68,127
11,393
10,915
90,435
71,618
14,836
10,581
97,035
73,366
16,774
9,000
99,140
iv)
The group has recognised the following amounts relating to revenue in the consolidated statement of operations:
Revenue
Revenue from contracts with customers (a)
Revenue from other sources
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
90,435
-
90,435
97,035
-
97,035
99,140
-
99,140
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
2. SEGMENT INFORMATION (CONTINUED)
(a) Disaggregation of revenue from contracts with customers:
The Group derives revenue from the transfer of goods and services over time and at a point in time in the following geographical areas:
Timing of revenue recognition
Year ended December 31, 2019
At a point in time
Over time
Total
Timing of revenue recognition
Year ended December 31, 2018
At a point in time
Over time
Total
Timing of revenue recognition
Year ended December 31, 2017
At a point in time
Over time
Total
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Total
US$‘000
63,300
745
26,390
—
64,045
26,390
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
64,941
922
65,863
31,172
—
31,172
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
65,164
928
66,092
33,048
—
33,048
—
—
—
—
—
—
—
—
—
89,690
745
90,435
Total
US$‘000
96,113
922
97,035
Total
US$‘000
98,212
928
99,140
(b) The Group derives revenue from the transfer of goods and services over time and at a point in time based on customers’ geographical area as
follows:
Timing of revenue recognition
Year ended December 31, 2019
At a point in time
Over time
Total
Timing of revenue recognition
Year ended December 31, 2018
At a point in time
Over time
Total
Americas
US$‘000
Asia / Africa
US$‘000
Europe
US$‘000
Total
US$‘000
51,438
745
27,686
—
52,183
27,686
10,566
—
10,566
89,690
745
90,435
Americas
US$‘000
Asia / Africa
US$‘000
Europe
US$‘000
Total
US$‘000
56,637
922
57,559
29,466
—
29,466
10,010
—
10,010
96,113
922
97,035
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
2.
SEGMENT INFORMATION (CONTINUED)
Timing of revenue recognition
Year ended December 31, 2017
At a point in time
Over time
Total
v)
The distribution of segment results by geographical area was as follows:
Year ended December 31, 2019
Result before impairment and unallocated expenses
Impairment
Result after impairment
Unallocated expenses *
Operating loss
Net financing expense (Note 8)
Loss before tax
Income tax credit (Note 9)
Loss for the year on continuing operations
Profit for the year on discontinued operations (Note 10)
Loss for the year
Year ended December 31, 2018
Result before impairment and unallocated expenses
Impairment
Result after impairment
Unallocated expenses *
Operating loss
Net financing expense (Note 8)
Loss before tax
Income tax credit (Note 9)
Loss for the year on continuing operations
Loss for the year on discontinued operations (Note 10)
Loss for the year
Americas
US$‘000
Asia / Africa
US$‘000
Europe
US$‘000
Total
US$‘000
58,611
928
59,539
27,131
-
27,131
12,470
-
12,470
98,212
928
99,140
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Total
US$‘000
5,239
(14,562)
(4,334)
(9,733)
(9,323)
(14,067)
(108)
—
(108)
797
(24,295)
(23,498)
(614)
(24,112)
(5,885)
(29,997)
1,006
(28,991)
77
(28,914)
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Total
US$‘000
5,514
(19,095)
1,900
(7,837)
(13,581)
(5,937)
(44)
—
(44)
7,370
(26,932)
(19,562)
(665)
(20,227)
(2,956)
(23,183)
525
(22,658)
568
(22,090)
110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
2.
SEGMENT INFORMATION (CONTINUED)
Year ended December 31, 2017
Result before exceptional expenses
Impairment
Result after exceptional expenses
Unallocated expenses *
Operating profit
Net financing expense (Note 8)
Loss before tax
Income tax credit (Note 9)
Loss for the year on continuing operations
Loss for the year on discontinued operations (Note 10)
Loss for the year
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Total
US$‘000
3,744
(9,194)
1,125
(32,561)
(5,450)
(31,436)
(44)
—
(44)
4,825
(41,755)
(36,930)
(738)
(37,668)
(2,207)
(39,875)
1,214
(38,661)
(1,609)
(40,270)
* Unallocated expenses represent head office general and administration costs of the Group, which cannot be allocated to the results of any specific
geographical area.
vi)
The distribution of segment assets and segment liabilities by geographical area was as follows:
As at December 31, 2019
Assets and liabilities
Segment assets
Unallocated assets:
Income tax assets (current and deferred)
Cash and cash equivalents and short-term investments
Total assets as reported in the Group balance sheet
Segment liabilities
Unallocated liabilities:
Income tax liabilities (current and deferred)
Total liabilities as reported in the Group balance sheet
As at December 31, 2018
Assets and liabilities
Segment assets
Unallocated assets:
Income tax assets (current and deferred)
Cash and cash equivalents and short-term investments
Total assets as reported in the Group balance sheet
Segment liabilities
Unallocated liabilities:
Income tax liabilities (current and deferred)
Total liabilities as reported in the Group balance sheet
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Total
US$‘000
69,224
37,212
1
106,437
8,234
16,400
131,071
14,575
104,396
200
119,171
7,187
126,358
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Total
US$‘000
75,658
38,009
4
113,671
7,711
30,277
151,659
99,540
8,065
107,605
8,946
90,444
150
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
2.
SEGMENT INFORMATION (CONTINUED)
vii)
The distribution of long-lived assets, which are property, plant and equipment, goodwill and intangible assets and other non-current assets (excluding
deferred tax assets), by geographical area was as follows:
Rest of World – Ireland
Americas
viii)
The distribution of depreciation and amortisation by geographical area was as follows:
Depreciation:
Rest of World – Ireland
Americas
Amortisation:
Rest of World – Ireland
Americas
ix)
The distribution of share-based payment expense by geographical area was as follows:
Rest of World – Ireland
Americas
Share based-payments – discontinued operations
See Note 22 for further information on share-based payments.
112
December
31, 2019
US$‘000
December
31, 2018
US$‘000
14,626
38,803
14,864
44,007
53,429
58,871
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
322
2,208
2,530
642
1,726
2,368
74
1,301
1,375
655
2,170
2,825
1,186
1,238
2,424
1,164
2,139
3,303
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
659
99
758
—
758
1,265
104
1,369
—
1,369
841
87
928
—
928
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
2.
x)
SEGMENT INFORMATION (CONTINUED)
The distribution of interest income and interest expense by geographical area was as follows:
Interest Income
Year ended December 31, 2019
Interest income earned
Non-cash financial income
Inter-segment interest income
Total
Interest Expense
Year ended December 31, 2019
Interest on finance leases
Interest on tax audit settlement (Note 6)
Cash interest on exchangeable notes
Non-cash interest on exchangeable notes ( Note 25)
Inter-segment interest expense
Total
Interest Income
Year ended December 31, 2018
Interest income earned
Non-cash financial income
Inter-segment interest income
Total
Interest Expense
Year ended December 31, 2018
Interest on finance leases
Cash interest on exchangeable notes
Non-cash interest on exchangeable notes ( Note 25)
Inter-segment interest expense
Total
Interest Income
Year ended December 31, 2017
Interest income earned
Non-cash financial income
Inter-segment interest income
Total
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Eliminations
US$‘000
Total
US$‘000
47
—
—
47
417
233
—
650
—
—
4,853
4,853
—
—
(4,853)
(4,853)
464
233
—
697
Americas
US$‘000
Ireland
US$‘000
Rest of World
Other
US$‘000
Eliminations
US$‘000
Total
US$’000
294
—
—
—
4,853
5,147
653
1,000
3,996
639
—
6,288
—
—
—
—
—
—
—
—
—
—
947
1,000
3,996
639
(4,853)
—
(4,853)
6,582
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Eliminations
US$’000
Total
US$‘000
32
—
—
32
704
1,388
—
2,092
—
—
4,853
4,853
—
—
(4,853)
(4,853)
736
1,388
—
2,124
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Eliminations
US$’000
Total
US$‘000
7
—
—
4,853
4,860
32
4,352
689
—
5,073
—
—
—
—
—
—
—
—
(4,853)
(4,853)
39
4,352
689
—
5,080
Rest of World
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Eliminations
US$’000
Total
US$‘000
764
2,390
—
3,154
—
—
4,853
4,853
—
—
(4,853)
(4,853)
808
2,390
—
3,198
44
—
—
44
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
2.
SEGMENT INFORMATION (CONTINUED)
Interest Expense
Year ended December 31, 2017
Americas
US$‘000
Ireland
US$‘000
Other
US$‘000
Eliminations
US$’000
Total
US$‘000
Rest of World
Interest on deferred consideration and licence fee
Interest on finance leases
Cash interest on exchangeable notes
Non-cash interest on exchangeable notes (Note 25)
Inter-segment interest expense
Total
—
—
—
—
4,853
4,853
40
42
4,600
723
—
5,405
—
—
—
—
—
—
—
—
—
—
(4,853)
(4,853)
40
42
4,600
723
—
5,405
xi)
The distribution of taxation (expense)/credit by geographical area was as follows:
Rest of World – Ireland
Rest of World – Other
Americas
xii)
During 2019, 2018 and 2017 there were no customers generating 10% or more of total revenues.
xiii)
The distribution of capital expenditure by geographical area was as follows:
December
31, 2019
US$‘000
December
31, 2018
US$‘000
December
31, 2017
US$‘000
831
—
175
1,006
(59)
(3)
587
525
192
(81)
1,103
1,214
Rest of World – Ireland
Rest of World – Other
Americas
3.
PERSONNEL EXPENSES
Wages and salaries
Social welfare costs
Pension costs
Tax settlement (Note 6)
Share-based payments
December
31, 2019
US$‘000
December
31, 2018
US$‘000
20,758
-
12,863
7,148
1,746
8,911
33,621
17,805
December
31, 2019
US$‘000
December
31, 2018
US$‘000
December
31, 2017
US$‘000
25,885
2,538
503
5,094
758
26,475
2,585
490
—
1,369
26,316
2,424
459
—
928
34,778
30,919
30,127
Personnel expenses are shown net of capitalisations. Total personnel expenses, inclusive of amounts capitalised for wages and salaries, social welfare
costs and pension costs, for the year ended December 31, 2019 amounted to US$36,288,000 (2018: US$38,002,000) (2017: US$37,351,000). Total share
based payments, inclusive of amounts capitalised in the balance sheet, amounted to US$838,000 for the year ended December 31, 2019 (2018:
US$1,607,000) (2017: US$1,109,000). See Note 22 for further details.
114
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
3.
PERSONNEL EXPENSES (CONTINUED)
The average number of persons employed by the Group in the financial year was 579 (2018: 575) (2017: 556) and is analysed into the following
categories:
Research and development
Administration and sales
Manufacturing and quality
4.
PENSION SCHEMES
December 31,
2019
December 31,
2018
December 31,
2017
57
159
363
579
59
163
353
575
60
162
334
556
The Group operates defined contribution pension schemes for certain of its full time employees. The benefits under these schemes are financed by both
Group and employee contributions. Total contributions made by the Group in the financial year and charged against income amounted to US$503,000
(2018: US$490,000) (2017: US$458,000). The pension accrual for the Group at December 31, 2019 was US$43,000 (2018: US$45,000), (2017:
US$33,000).
5.
OTHER OPERATING INCOME
Rental income from premises
Other income
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
3
88
91
3
99
102
-
100
100
Other income mainly comprises income recognised under Transitional Services Agreements (TSA) with Diagnostica Stago. As part of the divestiture of
the Coagulation product line in April 2010, the Group entered into a TSA. The services provided by the Group to Stago under the TSA comprise canteen
services. This income has not been treated as revenue since the TSA activities are incidental to the main revenue-generating activities of the Group.
6.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES – TAX AUDIT SETTLEMENT
Arising out of a tax audit in one of the jurisdictions in which the company operates, the Company reached a tax settlement of US$6,442,000 in the year
ended December 31, 2019. The tax audit concluded in late December 2019 and the payment of the settlement amount was made prior to the financial
year end. The settlement consisted of US$3,863,000 in relation to a patent dividend scheme, which had operated via Rayville Limited from 1995 to 2010,
US$1,231,000 in relation to payments for CEO Services made to Darnick Company (a company controlled by the family of Ronan O’Caoimh) and
US$75,000 in relation to R&D tax credits. Penalties were US$273,000. Interest was US$1,000,000 and this is shown as a financial expense. The total
settlement excluding interest of US$5,442,000 was partially offset by a provision of US$400,000, resulting in an expense of US$5,042,000, which is
shown as Selling, general and administrative expenses – tax audit settlement.
Darnick Company agreed to contribute US$1,231,000 to the above settlement and this amount was outstanding at December 31, 2019 and was treated as
a contingent asset and not recognised in the consolidated statement of financial position at year-end.
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
7.
IMPAIRMENT CHARGES
In accordance with IAS 36, Impairment of Assets, the Group carries out an annual impairment review of the asset valuations. In determining whether a
potential asset impairment exists, a range of internal and external factors are considered. A number of factors affected this calculation including:
•
•
•
The Company’s market capitalisation at the end of the year that was lower when compared to the end of 2018.
The inclusion of the latest cash flow projections and net asset values for each cash generating unit; and
Increased volatility in the Company’s share price and higher market interest rates which resulted in a higher discount factor being applied to the
Company’s expected future cash flows.
The impact of the above items on the statement of operations for the year ended December 31, 2019, December 31, 2018 and December 31, 2017 was as
follows:
Selling, general & administration expenses
Impairment of PP&E (Note 13)
Impairment of goodwill and other intangible assets (Note 14)
Impairment of prepayments (Note 18)
Total impairment loss
Income tax impact of impairment loss
Total impairment loss after tax
8.
FINANCIAL INCOME AND EXPENSES
Financial income:
Non-cash financial income
Interest income
Financial expense:
Interest on leases
Interest on tax audit settlement (Note 6)
Cash interest on exchangeable notes
Non-cash interest on exchangeable notes (Note 25)
Interest on deferred consideration and licence fee
Net Financing Expense
December
31, 2019
US$’000
December
31, 2018
US$’000
December
31, 2017
US$’000
6,349
16,570
1,376
24,295
6,112
19,212
1,608
26,932
148
(1,752)
10,437
29,667
1,651
41,755
(
(517)
24,443
25,180
41,238
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
233
464
697
(947)
(1,000)
(3,996)
(639)
-
(6,582)
(5,885)
1,388
736
2,124
(39)
-
(4,352)
(689)
-
(5,080)
(2,956)
2,390
808
3,198
(42)
-
(4,600)
(723)
(40)
(5,405)
(2,207)
Exchangeable note interest expense and non-cash financial income and expense relate to the exchangeable senior notes issued in 2015. For further
information, refer to Note 25.
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
9.
INCOME TAX CREDIT
The tax credit based on the loss comprises:
Current tax (credit)/expense
Irish Corporation tax
Foreign taxes (a)
Adjustment in respect of prior years
Total current tax (credit)/expense
Deferred tax credit (b)
Origination and reversal of temporary differences (see Note 15)
Origination and reversal of net operating losses (see Note 15)
Total deferred tax credit
Total income tax credit on continuing operations in statement of operations
Tax (credit)/charge on discontinued operations (see Note 10)
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
(312)
197
(50)
(165)
(841)
-
(841)
(1,006)
-
00
(258)
195
(56)
(119)
(2,031)
1,625
(406)
(525)
(590)
(51)
358
150
457
(5,969)
4,298
(1,671)
(1,214)
323
(891)
Total tax credit
(1,006)
(1,115)
(a)
(b)
In 2019, the foreign taxes relate primarily to Canada.
In 2019, there was a deferred tax credit of US$444,000 (2018: charge of US$369,000; 2017: credit of US$170,000) recognised in respect of Ireland
and a deferred tax credit of US$397,000 (2018: credit of US$775,000; 2017: credit of US$1,501,000) recognised in respect of overseas tax
jurisdictions.
Effective tax rate
Loss before taxation
As a percentage of loss before tax:
Current tax
Total (current and deferred)
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
(29,997)
(23,183)
(39,875)
(0.55)%
(3.36)%
(0.51)%
(2.26)%
1.14%
(3.05)%
The following table reconciles the applicable Republic of Ireland statutory tax rate to the effective total tax rate for the Group:
Irish corporation tax
Effect of current year net operating losses and temporary differences for which no deferred
tax asset was recognised (a)
Effect of tax rates on overseas earnings
Effect of Irish income taxable at higher tax rate
Adjustments in respect of prior years
Effect of changes in US tax code (b)
R&D tax credits
Other items (c)
December 31,
2019
December 31,
2018
December 31,
2017
(12.5)%
(12.5)%
(12.5)%
13.21%
(3.05)%
0.04%
(0.17)%
-
(2.69)%
1.80%
15.76%
(6.10)%
0.05%
0.94%
-
(1.70)%
1.29%
12.05%
(2.09)%
-
0.38%
(1.89)%
(0.17)%
1.17%
Effective tax rate
(3.36)%
(2.26)%
(3.05)%
117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
9.
INCOME TAX (CREDIT)/EXPENSE (CONTINUED)
(a)
(b)
The effect of current year net operating losses and temporary differences for which no deferred tax asset was recognised is analyzed further in the
table below (see also Note 15). No deferred tax asset was recognised because there was no reversing deferred tax liability in the same jurisdiction
reversing in the same period and no future taxable income in the same jurisdiction.
In 2017, a number of changes were made to the USA tax code, the most significant of which was the reduction in the federal corporation tax rate to
21%. This resulted in a once-off tax credit in 2017 of US$753,000 arising from the reduction in deferred tax balances due to the tax rate change,
partially offset by the effect of mandatory deemed repatriation of certain deferred foreign earnings. The other changes to the USA tax code did not
have a material impact on the Group.
(c) Other items comprise items not chargeable to tax/expenses not deductible for tax purposes. In 2019, other items mainly comprise the tax audit
settlement recorded in Selling, General and Administrative expenses (see also Note 6), which is not deductible for tax. Additionally, the movement
in the exchangeable notes’ embedded derivatives value and the accretion of notional interest on the Loan Note’s host contract, both of which are
exempt from deferred taxation recognition under IAS 12, Income Taxes.
Unrecognised deferred tax assets – continuing operations
Increase in net operating losses arising in US
Temporary differences arising in US
Decrease in net operating losses arising in Brazil
Increase in net operating losses arising in Ireland
The distribution of loss before taxes by geographical area was as follows:
Effect in
2019
US$’000
Percentage
effect in
2019
Effect in
2018
US$’000
Percentage
effect in
2018
1,117
129
608
2,110
3,964
3.72%
0.43%
2.03%
7.03%
2,174
19
(20)
1,482
9.38%
0.08%
(0.09)%
6.39%
13.21%
3,655
15.76%
Rest of World – Ireland
Rest of World – Other
Americas
At December 31, 2019, the Group had unutilised net operating losses as follows:
USA
Ireland
Brazil
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
(20,318)
4,760
(14,439)
(9,590)
4,809
(18,402)
(35,821)
4,809
(8,863)
(29,997)
(23,183)
(39,875)
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
1,034
73,754
5,789
80,577
2,382
60,629
4,001
67,012
7,737
57,206
4,060
69,003
In the USA, the utilisation of net operating loss carryforwards is limited to future profits in the USA. All of the net operating losses for the USA arose
prior to January 1, 2018 and have a maximum carryforward of 20 years. In respect of the US, US$994,000 will expire by December 31, 2036, and
US$40,000 will expire by December 31, 2037.
118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
9.
INCOME TAX (CREDIT)/EXPENSE (CONTINUED)
At December 31, 2019, the Group had unrecognised deferred tax assets in respect of unused tax losses and unused tax credits as follows:
Ireland – unused tax losses
US – unused tax losses
US – unused tax credits
Brazil – unused tax losses
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
12,062
3,291
493
1,968
9,953
2,174
364
1,360
8,471
-
345
1,380
Unrecognised deferred tax asset
17,814
13,851
10,196
The accounting policy for deferred tax is to calculate the deferred tax asset that is deemed recoverable, considering all sources for future taxable profits.
The deferred tax assets in the above table have not been recognised due to uncertainty regarding the full utilization of these losses in the related tax
jurisdiction in future periods. Only when it is probable that future profits will be available to utilize the forward losses or temporary differences is a
deferred tax asset recognised. When there is a reversing deferred tax liability in that jurisdiction that reverses in the same period, the deferred tax asset is
restricted so that it equals the reversing deferred tax liability.
The Group has US state credit carryforwards of US$624,000 at December 31, 2019 (2018: US$461,000; 2017: US$436,000). A deferred tax asset of
US$493,000 (2018: US$364,000; 2017: US$345,000) in respect of US state credit carryforwards was not recognised due to uncertainties regarding future
full utilisation of these state credit carryforwards in the related tax jurisdiction in future periods
10.
PROFIT/(LOSS) FOR THE YEAR ON DISCONTINUED OPERATION
In 2016, management decided to cease the development of Cardiac point-of-care tests on the Meritas platform. These products were being developed by
the Group’s subsidiary Fiomi Diagnostics (“Fiomi”) located in Sweden. The decision to cease the development work and to close the Swedish operation
came after the company held a meeting with the U.S. Food and Drug Administration (“FDA”) in order to obtain an update on the Meritas Troponin
premarket submission. At that meeting the FDA suggested that the submission should be withdrawn. The FDA made it known that any new point-of-care
Troponin product would be required to demonstrate performance equivalent to the most recently cleared laboratory-based device. As there was no
certainty that this level of performance could ever be achieved by the point-of-care Meritas product, even with the benefit of further development efforts,
management decided to cease the development work on Troponin I and the analyzer and its sister products, BNP and D-dimer.
Expenses, gains and losses relating to the discontinuation of the Cardiac point-of-care tests operation have been eliminated from profit or loss from the
Group’s continuing operations and are shown as a single line item (net of related taxes) on the face of the Consolidated Statement of Operations. The
discontinued operation had no revenues since commencement as the products were still in their development phase. In 2016, the loss on discontinued
operations included the write off of the carrying value of all capitalised development costs, goodwill, property, plant and equipment, inventories and other
assets associated with the Meritas project. It also included a provision for the cost of closing the Swedish facility, mainly consisting of contractual
obligations associated with terminating premises and supplier contracts, as well as redundancy costs for 41 employees.
119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
10.
PROFIT/(LOSS) FOR THE YEAR ON DISCONTINUED OPERATION (CONTINUED)
In 2017, settlements were negotiated with a number of counterparties that were lower than had been estimated in the previous years’ financial statements.
The resultant excess provision for closure costs was released to the Consolidated Statement of Operations. During 2017, all remaining employees and all
operating lease obligations were terminated. The loss on discontinued operations in 2017 also included a charge in relation to foreign translation reserves
that had been recognised in previous periods as a reserve movement. In 2018, taxes paid to the Swedish tax authorities were recovered and there was a
resulting tax credit of US$590,000.
The operating loss for the Cardiac point-of-care tests operation in Sweden and the profit/(loss) on re-measurement of its assets and liabilities are
summarised as follows:
Revenues
Operating loss
Loss for the year
Profit/(Loss) on re-measurement of assets and liabilities:
Closure costs
Foreign currency translation reserve
Tax credit/(expense)
Total profit/(loss)
Profit/(Loss) for the year from discontinued operations
Basic earnings per ordinary share – discontinued operations
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
—
—
—
(8)
85
—
77
77
—
—
—
(22)
—
590
568
568
—
—
—
1,794
(3,080)
(323)
(1,609)
(1,609)
Basic earnings/(loss) per ordinary share for discontinued operations is computed by dividing the profit after taxation on discontinued operations of
US$77,000 (2018: profit US$568,000) (2017: loss US$1,609,000) for the financial year by the weighted average number of ‘A’ ordinary shares in issue.
As at December 31, 2019, this amounted to 83,606,810 shares (2018: 83,612,908 shares) (2017: 86,486,409 shares), see note 12 for further details.
Diluted earnings per ordinary share – discontinued operations
Diluted earnings/(loss) per ordinary share for discontinued operations is computed by dividing the profit/(loss) after taxation on discontinued operations
of US$77,000 (2018: profit US$568,000) (2017: loss US$1,609,000) for the financial year by the diluted weighted average number of ordinary shares in
issue of 101,870,064 (2018: 103,508,820) (2017: 107,510,179), see note 12 for further details. Under IAS 33 Earnings per Share, diluted earnings per
share cannot be anti-dilutive. Therefore, diluted loss per ADS in accordance with IFRS is equal to basic earnings per ADS.
Earnings per ADS
In June 2005, Trinity Biotech adjusted its ADS ratio from 1 ADS: 1 ordinary share to 1 ADS: 4 ordinary shares. Earnings per ADS for all periods
presented have been restated to reflect this exchange ratio.
Basic earnings/(loss) per ADS for discontinued operations is computed by dividing the profit after taxation on discontinued operations of US$77,000
(2018: profit US$568,000) (2017: loss US$1,609,000) for the financial year by the weighted average number of ADS in issue of 20,901,703 (2018:
20,903,227); (2017: 21,621,602), see note 12 for further details.
Diluted earnings/(loss) per ADS for discontinued operations is computed by dividing the profit after taxation on discontinued operations of US$77,000
(2018: profit US$568,000) (2017: loss US$1,609,000) for the financial year, by the diluted weighted average number of ADS in issue of 25,467,516
(2018: 25,877,205) (2017: 26,877,544), see note 12 for further details.
120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
10.
PROFIT/(LOSS) FOR THE YEAR ON DISCONTINUED OPERATION (CONTINUED)
Basic earnings/(loss) per ADS (US Dollars) – discontinued operations
Diluted earnings/(loss per ADS (US Dollars) – discontinued operations
Basic earnings/(loss) per ‘A’ share (US Dollars) – discontinued operations
Diluted earnings/(loss) per ‘A’ share (US Dollars) – discontinued operations
Cash flows
The cash flows attributable to discontinued operations are as follows:
Cash flows from operating activities
Cash flows from investing activities
December 31,
2019
December 31,
2018
December 31,
2017
0.00
0.00
0.00
0.00
0.03
0.02
0.01
0.01
(0.07)
(0.07)
(0.02)
(0.02)
December 31,
2019
US$000
December 31,
2018
US$000
December 31,
2017
US$000
(5)
-
527
-
(2,847)
-
There were no cash flows from financing activities attributable to discontinued operations for the years ended December 31, 2019, 2018 or 2017.
11.
LOSS BEFORE TAX
The following amounts were charged / (credited) to the statement of operations:
Directors’ emoluments (including non- executive directors):
Remuneration
Pension
Share based payments
Auditor’s remuneration
Audit fees
Tax fees
Other non-audit fees
Depreciation*
Amortisation
Loss on the disposal of property, plant and equipment
Net foreign exchange differences**
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
1,238
42
624
523
172
-
2,526
2,368
17
(179)
1,261
44
1,204
506
15
-
1,296
2,825
15
344
1,800
44
727
568
73
-
1,896
3,303
3
(17)
*
**
Note that US$4,000 (2018: US$79,000) (2017: US$528,000) of depreciation was capitalised to research and development projects during 2019 in line
with the Group’s capitalisation policy for Intangible projects.
The net foreign exchange differences in 2017 do not include US$440,000 which were included in the operating expenses that were stated in Note 10 in
respect of the discontinued operations in Fiomi.
121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
12.
LOSS PER SHARE
Basic earnings per ordinary share
Basic earnings per ordinary share for the group is computed by dividing the loss after taxation of US$28,914,000 (2018: loss of US$22,090,000) (2017:
loss of US$40,270,000) for the financial year by the weighted average number of ‘A’ ordinary shares in issue. Basic earnings per ordinary share for
continuing operations is computed by dividing the loss after taxation for continued operations of US$28,991,000 (2018: loss of US$22,658,000) (2017:
loss of US$38,661,000) for the financial year by the weighted average number of ‘A’ ordinary shares in issue.
As at December 31, 2019, this amounted to 83,606,810 shares (2018: 83,612,908 shares) (2017: 86,486,409 shares).
‘A’ ordinary shares
December 31,
2019
December 31,
2018
December 31,
2017
83,606,810
83,612,908
86,486,409
Basic earnings per share denominator
83,606,810
83,612,908
86,486,409
Reconciliation to weighted average earnings per share denominator:
Number of ‘A’ ordinary shares at January 1 (Note 21)
Weighted average number of shares issued during the year*
Weighted average number of treasury shares
96,162,410
(12,555,600)
96,162,410
-
(12,549,502)
96,162,410
-
(9,676,001)
Basic earnings per share denominator
83,606,810
83,612,908
86,486,409
*The weighted average number of shares issued during the year is calculated by taking the number of shares issued multiplied by the number of days in
the year each share is in issue, divided by 365 days.
Diluted earnings per ordinary share
Diluted earnings per ordinary share for the group is computed by dividing the adjusted loss after tax of US$24,512,000 (2018: loss of US$18,437,000)
(2017: loss of US$37,337,000) for the financial year by the diluted weighted average number of ordinary shares in issue of 101,870,064 (2018:
103,508,820) (2017: 107,510,179). Diluted earnings per ordinary share for continuing operations is computed by dividing the adjusted loss after tax on
continuing operations of US$24,590,000 (2018: loss of US$19,005,000) (2017: loss of US$35,728,000) for the financial year by the diluted weighted
average number of ordinary shares in issue of 101,870,064 (2018: 103,508,820) (2017: 107,510,179). The adjusted loss after tax on continuing operations
is computed by adding back the interest expense, accretion interest and movements in the fair value of the derivatives on the exchangeable notes to the
loss after taxation for continuing operations.
Under IAS 33 Earnings per Share, diluted earnings per share cannot be anti-dilutive. Therefore, diluted loss per ordinary share in accordance with IFRS
would be equal to basic earnings per ordinary share.
The basic weighted average number of ordinary shares for the Group may be reconciled to the number used in the diluted earnings per ordinary share
calculation as follows:
Basic earnings per share denominator (see above)
Issuable on exercise of options and warrants
Issuable on conversion of exchangeable notes
December 31,
2019
December 31,
2018
December 31,
2017
83,606,810
-
18,263,254
83,612,908
22,359
19,873,553
86,486,409
-
21,023,770
Diluted earnings per share denominator
101,870,064
103,508,820
107,510,179
122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
12.
LOSS PER SHARE (CONTINUED)
The loss after tax for the year may be reconciled to the amount used in the diluted earnings per ordinary share calculation as follows:
Loss after tax for the year
Non-cash financial income (Note 8)
Cash interest expense (Note 8)
Non-cash interest on exchangeable notes (Note 8)
Adjusted loss after tax
Earnings per ADS
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
(28,914)
(233)
3,996
639
(22,090)
(1,388)
4,352
689
(40,270)
(2,390)
4,600
723
(24,512)
(18,437)
(37,337)
In June 2005, Trinity Biotech adjusted its ADS ratio from 1 ADS: 1 ordinary share to 1 ADS: 4 ordinary shares. Earnings per ADS for all periods
presented have been restated to reflect this exchange ratio.
Basic earnings per ADS for the Group is computed by dividing the loss after taxation of US$28,914,000 (2018: loss of US$22,090,000) (2017: loss of
US$40,270,000) for the financial year by the weighted average number of ADS in issue of 20,901,703 (2018: 20,903,227); (2017: 21,621,602). Basic
earnings per ADS for continuing operations is computed by dividing the loss after taxation of US$28,991,000 (2018: loss of US$22,658,000) (2017: loss
of US$38,661,000) for the financial year by the weighted average number of ADS in issue of 20,901,703 (2018: 20,903,227); (2017: 21,621,602).
ADS
December 31,
2019
December 31,
2018
December 31,
2017
20,901,703
20,903,227
21,621,602
Basic earnings per share denominator
20,901,703
20,903,227
21,621,602
Reconciliation to weighted average earnings per share denominator:
Number of ADS at January 1 (Note 21)
Weighted average number of shares issued during the year*
Weighted average number of treasury shares
24,040,602
-
(3,138,899)
24,040,602
-
(3,137,375)
24,040,602
-
(2,419,000)
Basic earnings per share denominator
20,901,703
20,903,227
21,621,602
Diluted earnings per ADS for the Group is computed by dividing the adjusted loss after taxation of US$24,512,000 (2018: loss of US$18,437,000) (2017:
loss of US$37,337,000) for the financial year, by the diluted weighted average number of ADS in issue of 25,467,516 (2018: 25,877,205) (2017:
26,877,544).
Under IAS 33 Earnings per Share, diluted earnings per share cannot be anti-dilutive. Therefore, diluted loss per ADS in accordance with IFRS would be
equal to basic earnings per ADS.
*The weighted average number of shares issued during the year is calculated by taking the number of shares issued multiplied by the number of days in
the year each share is in issue, divided by 365 days.
The basic weighted average number of ADS shares for the Group may be reconciled to the number used in the diluted earnings per ADS share
calculation as follows:
Basic earnings per share denominator (see above)
Issuable on exercise of options and warrants
Issuable on conversion of exchangeable notes
December 31,
2019
December 31,
2018
December 31,
2017
20,901,703
-
4,565,814
20,903,227
5,590
4,968,388
21,621,602
-
5,255,942
Diluted earnings per share denominator
25,467,517
25,877,205
26,877,544
123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
13.
PROPERTY, PLANT AND EQUIPMENT
Cost
At January 1, 2018
Additions
Disposals or retirements
Exchange adjustments
At December 31, 2018
At January 1, 2019
Adjustment on transition to IFRS 16
Additions
Disposals or retirements
Exchange adjustments
At December 31, 2019
Accumulated depreciation and impairment losses
At January 1, 2018
Charge for the year
Impairment loss
Disposals or retirements
Exchange adjustments
Land
and buildings
US$‘000
Leasehold
improvements
US$‘000
Computers,
fixtures and
fittings
US$‘000
Plant and
equipment
US$‘000
Total
US$‘000
2,624
19
—
(38)
2,605
2,605
20,961
681
—
22
24,269
(1,283)
(80)
(578)
—
7
3,004
1,609
(1)
(52)
4,560
4,560
—
71
(1,626)
—
5,894
829
(131)
(7)
6,585
6,585
149
168
(2,610)
—
37,895
5,068
(1,804)
(1,095)
49,417
7,525
(1,936)
(1,192)
40,064
53,814
40,064
75
1,905
(3,314)
(54)
53,814
21,185
2,825
(7,550)
(32)
3,005
4,292
38,676
70,242
(2,659)
(47)
(543)
—
6
(5,308)
(185)
(423)
130
3
(34,367)
(1,063)
(4,568)
1,679
827
(43,617)
(1,375)
(6,112)
1,809
843
At December 31, 2018
(1,934)
(3,243)
(5,783)
(37,492)
(48,452)
At January 1, 2019
Charge for the year
Adjustment on transition to IFRS 16
Impairment loss as at December 31, 2019
Disposals or retirements
Reallocations / reclassifications
Exchange adjustments
At December 31, 2019
Carrying amounts
At December 31, 2019
At December 31, 2018
(1,934)
(1,545)
(10,984)
(4,024)
—
—
(6)
(3,243)
(105)
—
(233)
1,544
—
—
(5,783)
(200)
(40)
(276)
2,618
—
(1)
(37,492)
(680)
(75)
(1,816)
3,331
(5)
(3)
(48,452)
(2,530)
(11,099)
(6,349)
7,493
(5)
(10)
(18,493)
(2,037)
(3,682)
(36,740)
(60,952)
968
1,317
610
802
1,936
2,572
9,290
5,362
5,776
671
124
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
13.
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Right-of-use assets
The right-of-use assets are included in the same line item as the corresponding underlying assets would be presented if they were owned. The Group has
used the modified retrospective application method for its first time application of IFRS 16, Leases in 2019. Right-of-use assets were assessed for
impairment on transition by applying IAS 36, Impairment as at January 1, 2019. Right of Use assets leased by three Cash Generating Units, in which there
was an unallocated impairment loss as at December 31, 2018, were impaired by a total of US$11,099,000. This amount is shown in the Consolidated
Statement of Changes in Equity as a movement in Accumulated Surplus.
US$000
21,185
(11,099)
10,086
IFRS 16
carrying
amount at
January 1,
2019
US$000
Right-of-use assets cost at transition before impairment
Impairment adjustment on transition
Right-of-use assets value at transition after impairment
The following is a reconciliation of the financial statement line items from IAS 17 to IFRS 16 at January 1, 2019:
Property, plant & equipment
Lease liabilities
Retaining earnings
Total
Additional information on the right-of-use assets by class of assets is as follows:
Carrying
amount at
December 31,
2018
US$000
5,362
(962)
(55,319)
(50,919)
Buildings
Computer equipment
Remeasurement
US$000
Impairment
US$000
21,185
(21,185)
-
(11,099)
-
11,099
15,448
(22,147)
(44,220)
-
-
(50,919)
Carrying
amount
At December
31, 2019
US$000
5,220
7
5,227
Depreciation
Impairment
Year ended
December 31,
2019
US$000
Year ended
December 31,
2019
US$000
(1,523)
(39)
(3,913)
(63)
(1,562)
(3,976)
Income from sub-letting right-of-use buildings amounted to US$3,000 in the year ended December 31, 2019.
125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
13.
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
No. of Right-
of-Use leased
assets
Range of remaining
term in years
Average
remaining
lease term
(years)
No. of Leases
with extension
options
No. of Leases
with options to
purchase
13
9
11
1 to 14
1 to 2
1 to 2
5
1
2
1
-
-
-
9
-
No. of leases
with variable
payments
linked to index
2
-
-
No. of leases
with
termination
options
4
9
1
Right-of-Use assets
Building
Vehicle
I.T.
equipment
and office
The annual impairment review performed at December 31, 2019 showed that the carrying value of the Group’s assets exceeded the amount to be
recovered through use or sale of the assets by a total of US$76,740,000. The details of the impairment review are described in Note 14. When an
impairment loss is identified in a cash generating unit, it must be first allocated to reduce the carrying amount of any goodwill allocated to the cash
generating unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. In this manner, an impairment
loss of US$6,349,000 was allocated to property, plant and equipment as at December 31, 2019. The recoverable amount of property, plant and equipment
was determined to be the value in use of each cash generating unit.
The annual impairment review performed at December 31, 2018 showed that the carrying value of the Group’s assets exceeded the amount to be
recovered through use or sale of the assets by a total of US$57,794,000. The details of the impairment review are described in Note 14. When an
impairment loss is identified in a cash generating unit, it must be first allocated to reduce the carrying amount of any goodwill allocated to the cash
generating unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. In this manner, an impairment
loss of US$6,112,000 was allocated to property, plant and equipment in 2018. The recoverable amount of property, plant and equipment was determined to
be the value in use of each cash generating unit.
Assets held under operating leases (where the Company is the lessor)
The Company has a number of assets included in plant and equipment which generate operating lease revenue for the Group. The net book value of these
assets as at December 31, 2019 and 2018 is US$Nil following full write down of the assets due to group impairment (refer to Note 14). Depreciation
charged on these assets in 2019 amounted to US$7,000 (2018: US$8,000).
Included in disposals/retirements in 2019 is US$Nil (2018: US$12,000) relating to the net book value of leased instruments reclassified as inventory on
return from customers.
Property, plant and equipment under construction
There were no assets under contraction included in property, plant and equipment at December 31, 2019 (2018: US$204,000).
126
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
14.
GOODWILL AND INTANGIBLE ASSETS
Cost
At January 1, 2018
Additions
Disposals
Exchange adjustments
At December 31, 2018
At January 1, 2019
Additions
Disposals
Reclassification
Exchange adjustments
At December 31, 2019
Accumulated amortisation and Impairment losses
At January 1, 2018
Charge for the year
Disposals
Impairment losses
Exchange adjustments
At December 31, 2018
At January 1, 2019
Charge for the year
Disposals
Impairment losses
Exchange adjustments
At December 31, 2019
Carrying amounts
At December 31, 2019
Goodwill
US$‘000
Development
costs
US$‘000
Patents and
licences
US$‘000
Other
US$‘000
Total
US$‘000
81,689
—
—
—
136,918
9,871
—
(17)
81,689
146,772
81,689
—
—
—
—
146,772
9,569
—
—
36
81,689
156,377
(63,791)
—
—
(1,757)
—
(102,140)
(1,564)
—
(16,773)
(30)
9,947
—
—
—
9,947
9,947
4
—
—
—
9,951
(9,728)
—
—
(86)
—
33,818
410
—
—
262,372
10,281
—
(17)
34,228
272,636
34,228
38
—
—
—
272,636
9,611
—
—
36
34,266
282,283
(21,959)
(1,261)
—
(596)
—
(197,618)
(2,825)
—
(19,212)
(30)
(65,548)
(120,507)
(9,814)
(23,816)
(219,685)
(65,548)
—
—
(3,550)
—
(120,507)
(1,182)
—
(11,904)
(6)
(9,814)
(2)
—
(3)
—
(23,816)
(1,184)
—
(1,113)
—
(219,685)
(2,368)
—
(16,570)
(6)
(69,098)
(133,599)
(9,819)
(26,113)
(238,629)
At December 31, 2018
16,141
26,265
12,591
22,778
132
133
8,153
43,654
10,412
52,951
Included within development costs are costs of US$3,719,000 which were not amortised in 2019 (2018: US$4,192,000). These development costs are not
being amortised as the projects to which the costs relate were not fully complete at December 31, 2019 or at December 31, 2018. As at December 31,
2019 these projects are expected to be completed during the period from January 1, 2020 to December 31, 2022 at an expected further cost of
approximately US$5,557,000.
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
14.
GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
The following represents the costs incurred during each period presented for each of the principal development projects:
Product Name
HIV screening rapid test
Premier Instrument for Haemoglobin A1c testing
Autoimmune Smart Reader
Syphilis point-of-care test
Uni-Gold antigen improvement
G-6-PDH test
Uni-gold test
Tri-stat Point-of-Care instrument
Ultra Genesys
Column enhancement
Sjogrens tests
Other projects
Total capitalised development costs
2019
US$’000
2018
US$’000
2,587
1,930
1,325
870
691
582
376
361
237
236
135
239
9,569
1,657
2,653
746
454
453
850
796
727
263
292
414
566
9,871
All of the development projects for which costs have been capitalised are judged to be technically feasible, commercially viable and likely to
produce future economic benefits. In reaching this conclusion, many factors have been considered including the following:
(a)
The Group only develops products within its field of expertise. The R&D team is experienced in developing new products in this field and this
experience means that only products which have a high probability of technical success are put forward for consideration as potential new products.
(b) A technical feasibility study is undertaken in advance of every project. The feasibility study for each project is reviewed by the R&D team leader,
and by other senior management depending on the size of the project. The feasibility study occurs in the initial research phase of the project and
costs in this phase are not capitalised.
(c) Nearly all of our new product developments involve the transfer of our existing product know-how to a new application. The Group does not
engage in pure research. Every development project is undertaken with the intention of bringing a particular new product to market for which there
is a known demand.
(d)
The commercial feasibility of each new product is established prior to commencement of a project by ensuring it is projected to achieve an
acceptable income after applying appropriate discount rates.
Other intangible assets
Other intangible assets consist primarily of acquired customer and supplier lists, trade names, website and software costs.
Amortisation
Amortisation is charged to the statement of operations through the selling, general and administrative expenses line.
128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
14.
GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
Impairment testing for intangibles including goodwill and indefinite lived assets
Goodwill and other intangibles are subject to impairment testing on an annual basis. In determining whether a potential asset impairment exists, a range
of internal and external factors are considered. A number of factors impacted this calculation including:
•
•
•
the Company’s market capitalisation at the end of the year, which was lower when compared to the end of 2018,
the inclusion of the latest cash flow projections and net asset values for each cash generating unit; and
increased volatility in the Company’s share price and higher market interest rates which resulted in a higher discount factor being applied to the
Company’s expected future cash flows.
As the future discounted cash flows for a number of cash generating units (“CGUs”) was below the carrying value of their net assets, the Group
recognised a non-cash impairment charge of US$24,295,000 at December 31, 2019.
The impairment test performed as at December 31, 2019 identified a total impairment loss of US$76,740,000 in seven CGUs, of which US$24,295,000
has been recorded in the 2019 financial statements. Not all of the total impairment loss was recorded in the financial statements due to the allocation
method proscribed in IAS 36, Impairment of Assets. According to this accounting standard, the impairment loss for each CGU is first allocated to reduce
the carrying amount of any goodwill allocated to the CGU, then to other assets of the unit pro rata on the basis of the carrying amount of each asset in the
CGU. The full impairment loss for Biopool US Inc, Trinity Biotech Manufacturing Limited, Clark Laboratories Inc,, Mardx Diagnostics Inc and Trinity
Biotech Do Brasil could not be reflected in the 2019 financial statements for these entities because each of these entities had insufficient assets to write
down after excluding those assets with a known recoverable amount. The amount of impairment loss that could not be recorded for Biopool US Inc,
Trinity Biotech Manufacturing Limited, Clark Laboratories Inc,, Mardx Diagnostics Inc and Trinity Biotech Do Brasil was US$29,423,000,
US$7,707,000, US$33,000,US$5,817,000 and US$9,465,000 respectively. As a result, the impairment loss that was recorded in the 2019 financial
statements was US$24,295,000, being the total impairment loss of US$76,740,000 less the amounts which could not be recorded.
The impairment loss arose from the impairment review performed on Biopool US Inc,, Trinity Biotech Manufacturing Limited, Clark Laboratories Inc,,
Mardx Diagnostics Inc, Immco Diagnostics, Primus Corp. and Trinity Biotech Do Brasil. An impairment loss arose in these entities due to the carrying
value of their net assets exceeding the entity’s discounted future cashflows. The recoverable amount of each of the CGUs is determined based on a value-
in-use computation, which is the only methodology applied by the Group and which has been selected due to the impracticality of obtaining fair value
less costs to sell measurements for each reporting period. For the purpose of the annual impairment tests, goodwill is allocated to the relevant CGU. The
annual impairment analysis is based on a valuation technique involving level 3 inputs, see Note 1 (xxix).
The value-in-use calculations use cash flow projections based on the 2020 projections for each CGU and a further four years projections using estimated
revenue and cost growth rates of between 0% and 7%. At the end of the five year forecast period, terminal values for each CGU, based on a long term
growth rate of 2%, are used in the value-in-use calculations. The value-in-use represents the present value of the future cash flows, including the terminal
value, discounted at a rate appropriate to each CGU. The key assumptions employed in arriving at the estimates of future cash flows are subjective and
include projected EBITDA, net cash flows, discount rates and the duration of the discounted cash flow model. The assumptions and estimates used were
derived from a combination of internal and external factors based on historical experience. The pre-tax discount rates used range from 20% to 27%
(2018: 20% to 35%)
129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
14.
GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
The table below sets forth the impairment loss recorded for each of the CGU’s:
Trinity Biotech Manufacturing Limited
Immco Diagnostics Inc
Primus Corp
Trinity Biotech Do Brasil
Clark Laboratories Inc.
Mardx Diagnostics Inc.
Biopool US Inc.
Total impairment loss
The table below sets forth the breakdown of the impairment loss for each class of asset:
Goodwill and other intangible assets (see Note 14)
Property, plant and equipment (see Note 13)
Prepayments (see Note 18)
Total impairment loss
December 31,
2019
US$’000
9,732
6,332
5,321
1,253
727
720
210
December 31,
2018
US$’000
7 ,837
-
12,424
2,785
3,377
-
509
24,295
26,932
December 31,
2019
US$’000
16,570
6,349
1,376
December 31,
2018
US$’000
19,212
6,112
1,608
24,295
26,932
The impairment loss at December 31, 2019 allocated to goodwill arose in Immco Diagnostics Inc. The impairment loss at December 31, 2018 allocated
to goodwill arose in Clark Laboratories Inc.
The value-in-use calculation is subject to significant estimation, uncertainty and accounting judgements and is particularly sensitive in the following
areas;
•
•
In the event that there was a variation of 10% in the assumed level of future growth in revenue growth rate, which would represent a reasonably
likely range of outcomes, there would be an additional impairment loss of US$743,000 at December 31, 2019.
In the event there was a 10% variation in the discount rate used to calculate the potential impairment of the carrying values, which would represent a
reasonably likely range of outcomes, there would be an additional impairment loss of US$5,420,000 at December 31, 2019.
The annual impairment test only takes into account conditions existing at the end of the reporting period. COVID-19 began to impact the population of
Wuhan, China in December 2019 and initially the outbreak was largely concentrated in China. It was declared a pandemic by the World Health
Organization in March 2020. The Company’s impairment test as at December 31, 2019 therefore does not reflect the downturn in economic activity or
the aforementioned impacts on the Company’s revenues and expenditure caused by the Covid-19 pandemic. If the impairment test was reperformed using
projections which take into account the aforementioned impacts on revenues and expenditure, the impairment loss as at December 31, 2019 for Primus
Corp. and Immco Diagnostics would be higher by US$1.8 million and US$1.7 million respectively.
Significant Goodwill and Intangible Assets with Indefinite Useful Lives
CGUs or combinations of CGUs for which the carrying amount of goodwill is significant for the purposes of impairment testing in comparison with the
Group’s total carrying amount of goodwill are those where the percentage is greater than 20% of the total.
130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
14.
GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
The additional disclosures required for the CGU with significant goodwill are as follows:
Fitzgerald Industries
Carrying amount of goodwill (US$’000)
Discount rate applied (real pre-tax)
Excess value-in-use over carrying amount (US$’000)
% EBITDA would need to decrease for an impairment to arise
Long-term growth rate
December
31,
2019
December
31,
2018
12,592
12,592
20.42%
2,385
12.11%
2.0%
19.80%
8,847
32.6%
2.0%
The key assumptions and methodology used in respect of this CGU are consistent with those described above. The assumptions and estimates used are
specific to the individual CGU and were derived from a combination of internal and external factors based on historical experience.
Intangible Assets with Indefinite Useful lives
(included in other intangibles)
Fitzgerald Industries International CGU
Fitzgerald trade name
RDI trade name
Primus Corporation CGU
Primus trade name
Immco Diagnostic CGU
Immco Diagnostic trade name
Total
December 31,
2019
US$‘000
December 31,
2018
US$‘000
970
560
500
2,938
4,968
970
560
547
3,393
5,470
The trade name assets purchased as part of the acquisition of Fitzgerald in 2004, Primus and RDI in 2005 and Immco Diagnostics in 2013 were valued
using the relief from royalty method and based on factors such as (1) the market and competitive trends and (2) the expected usage of the name. It was
considered that these trade names will generate net cash inflows for the Group for an indefinite period.
In 2019, impairment losses of US$47,000 and US$455,000 were allocated against the Primus trade name and the Immco Diagnostic trade name
respectively as the carrying value of the related CGUs’ net assets exceeded their discounted future cashflows.
131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
15. DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities of the Group are attributable to the following:
Property, plant and equipment
Intangible assets
Inventories
Provisions
Other items
Deferred tax assets/(liabilities)
Assets
Liabilities
Net
2019
US$000
2018
US$’000
2019
US$’000
2018
US$’000
2019
US$’000
2018
US$’000
1,027
—
642
3,838
745
6,252
815
—
668
4,311
333
6,127
(9)
(6,099)
—
—
(1,031)
(37)
(7,189)
—
—
(629)
1,018
(6,099)
642
3,838
(286)
778
(7,189)
668
4,311
(296)
(7,139)
(7,855)
(887)
(1,728)
The deferred tax asset in 2019 is mainly due to deductible temporary differences relating to provisions, property, plant and equipment, share-based
payments and the elimination of unrealised intercompany inventory profit. In 2019, the deferred tax asset increased by US$125,000. Due to the
impairment loss in 2019, the amount of deferred tax assets recoverable through the reversal of taxable timing differences is lower because the deferred
tax liability relating to impaired assets was significantly reduced. In other words, deferred tax assets were derecognized as they exceeded the amount of
reversing deferred tax liabilities.
The deferred tax liability is caused by the net book value of non-current assets being greater than the tax written down value of non-current assets,
temporary differences due to the acceleration of the recognition of certain charges in calculating taxable income permitted in Ireland and the US and
deferred tax recognised on fair value asset uplifts in connection with business combinations. The deferred tax liability decreased by US$716,000 in 2019,
principally because of the impairment of intangible assets on which the deferred tax liabilities were recognised.
Deferred tax assets and liabilities are only offset when the entity has a legally enforceable right to set off current tax assets against current tax liabilities
and where the intention is to settle current tax liabilities and assets on a net basis or to realise the assets and settle the liabilities simultaneously. At
December 31, 2019 and at December 31, 2018 no deferred tax assets and liabilities are offset as it is not certain as to whether there is a legally
enforceable right to set off current tax assets against current tax liabilities and it is also uncertain as to what current tax assets may be set off against
current tax liabilities and in what periods.
The vast majority of temporary differences are expected to reverse after 2021.
Unrecognised deferred tax assets
Deferred tax assets have not been recognised by the Group in respect of the following items:
Capital losses
Net operating losses
US alternative minimum tax credits
Other temporary timing differences
US state credit carryforwards
132
December 31,
2019
US$’000
December 31,
2018
US$’000
8,293
80,577
1,928
7,399
493
8,293
67,012
1,674
3,880
364
98,690
81,223
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECMEBER 31, 2019
15.
DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
There was an increase of US$17,467,000 in the unrecognised deferred tax assets during the year ended December 31, 2019. For comments on the
uncertainty prompting less than full recognition refer to Note 9. The movement in the unrecognised deferred tax assets during the year ended December
31, 2019 is analysed as follows:
Movement in unrecognised deferred tax assets
Net operating losses in US
Alternative minimum tax credit in US
Net operating losses in Brazil
Net operating losses in Ireland
Other deferred tax assets in Ireland
Other deferred tax assets in US
US state credit carryforwards
Total – continuing operations
Increase /
(decrease)
US$’000
Applicable
tax rate
%
Tax
effect
US$’000
21%
n/a
34%
12.5% -25%
12.5%
21%
n/a
(1,348)
254
1,788
13,125
(1,938)
5,457
129
17,467
(283)
254
608
2,353
(243)
1,146
129
3,964
A deferred tax asset of US$1,968,000 (2018: US$1,360,000) was not recognised in respect of net operating losses in Brazil. The entity in Brazil was
incorporated in 2012 and has cumulative losses to date. The deferred tax asset has not been recognised for Brazil due to uncertainty regarding the full
utilization of these losses in the related tax jurisdiction in future periods. Only when it is probable that future profits will be available to utilize the
forward losses or temporary differences is a deferred tax asset recognised.
A deferred tax asset of US$4,820,000 (2018: US$3,564,000) was not recognised in respect of net operating losses of Trinity Biotech Investments Ltd.
(“TBIL”). TBIL, which is tax resident in Ireland, issued an exchangeable note of US$115 million in 2015 following its incorporation earlier in that year.
To date this entity has recorded cumulative losses, as its interest expenses is greater than its interest income. The deferred tax asset has not been
recognised due to uncertainty regarding the full utilization of these losses in future periods. Only when it is probable that future profits will be available
to utilize the forward losses is a deferred tax asset recognised. In accordance with IAS 12, Income Taxes, both the movement in the exchangeable note’s
embedded derivatives value and the movement on the exchangeable note’s host contract, being the accretion of notional interest, are exempt from
deferred taxation recognition.
A deferred tax asset of US$6,619,000 (2018: US$5,691,000) was not recognised in respect of net operating losses in Trinity Biotech Manufacturing Ltd.
An additional US$243,000 (2018: US$485,000) was not recognized in respect of other temporary timing differences. The total unrecognized deferred tax
asset is US$6,862,000. The deferred tax assets in respect of net operating losses and other temporary timing differences have not been recognised due to
insufficient deferred tax liabilities following the impairment charges relating to fixed assets in this entity. When there is a reversing deferred tax liability
in a jurisdiction that reverses in the same period, the deferred tax asset is restricted so that it equals the reversing deferred tax liability.
A deferred tax asset of US$381,000 (2018: US$213,000) was not recognised in respect of net operating losses in Trinity Biotech Plc. The deferred tax
asset has not been recognised due to uncertainty regarding the full utilization of these losses in future periods. Only when it is probable that future profits
will be available to utilize the forward losses or temporary differences is a deferred tax asset recognised.
A deferred tax asset of US$3,291,000 (2018: US$2,174,000) was not recognised in respect of net operating losses, alternative minimum tax credits and
other deferred tax assets in US. The deferred tax asset has not been recognised due to insufficient deferred tax liabilities following the impairment charge
relating to property, plant and equipment and intangible assets. When there is a reversing deferred tax liability in a jurisdiction that reverses in the same
period, the deferred tax asset is restricted so that it equals the reversing deferred tax liability. A deferred tax asset of US$493,000 (2018: US$364,000) in
respect of US state credit carryforwards was also not recognised due to uncertainties regarding the timing of the utilisation of these state credit
carryforwards in the related tax jurisdiction in future periods.
No deferred tax asset is recognised in respect of a capital loss forward of US$8,293,000 (2018: US$8,293,000) in Ireland as it is not probable that there
will be future capital gains against which to offset these capital losses.
133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
15.
DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
Unrecognised deferred tax liabilities
At December 31, 2019 and 2018, there was no recognised or unrecognised deferred tax liability for taxes that would be payable on the unremitted
earnings of certain of the Group’s subsidiaries. The Company is able to control the timing of the reversal of the temporary differences of its subsidiaries
and it is probable that these temporary differences will not reverse in the foreseeable future.
Movement in temporary differences during the year
Property, plant and equipment
Intangible assets
Inventories
Provisions
Other items
Property, plant and equipment
Intangible assets
Inventories
Provisions
Other items
Tax value of loss carryforwards recognised
16.
OTHER ASSETS
Finance lease receivables (see Note 18)
Other assets
Balance
January, 1
2019
US$’000
Recognised
in income
US$’000
Balance
December 31,
2019
US$’000
778
(7,189)
668
4,311
(296)
(1,728)
240
1,090
(26)
(473)
10
841
1,018
(6,099)
642
3,838
(286)
(887
(887)
Balance
January, 1
2018
US$’000
Recognised
in income
US$’000
Balance
December 31,
2018
US$’000
350
(9,443)
1,006
3,510
818
1,625
(2,134)
428
2,254
(338)
801
(1,114)
(1,625)
778
(7,189)
668
4,311
(296)
—
406
(1,728)
December 31,
2019
US$‘000
December 31,
2018
US$‘000
403
82
485
476
82
558
The Group leases instruments as part of its business. For details of future minimum finance lease receivables with non-cancellable terms, please refer to
Note 18.
134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
17.
INVENTORIES
Raw materials and consumables
Work-in-progress
Finished goods
December 31,
2019
US$‘000
December 31,
2018
US$‘000
12,654
6,940
12,427
32,021
10,556
8,239
11,564
30,359
All inventories are stated at the lower of cost or net realisable value. The replacement cost of inventories does not differ from cost. Total inventories for
the Group are shown net of provisions of US$6,716,000 (2018: US$6,299,000). Cost of sales in 2019 includes inventories expensed of US$50,748,000
(2018: US$55,285,000), (2017: US$54,904,000).
The movement on the inventory provision for the three year period to December 31, 2019 is as follows:
Opening provision at January 1
Charged during the year
Utilised during the year
Released during the year
Closing provision at December 31
December
31,
2019
US$‘000
December
31,
2018
US$‘000
6,299
1,567
(1,150)
-
7,543
480
(1,544)
(180)
December
31,
2017
US$‘000
10,017
2,561
(4,749)
(286)
6,716
6,299
7,543
During 2019, US$Nil (2018: US$180,000), (2017: US$286,000) of inventory provision relating to net realisable value was released to the statement of
operations following a current year review of inventory usage.
18.
TRADE AND OTHER RECEIVABLES
Trade receivables, net of impairment losses
Prepayments
Contract assets
Value added tax
Finance lease receivables
December 31,
2019
US$‘000
December 31,
2018
US$‘000
17,754
576
2,317
59
281
21,318
807
1,894
63
359
20,987
24,441
Trade receivables are shown net of an impairment losses provision of US$5,443,000 (2018: US$4,202,000) (see Note 29). Prepayments are shown net of
impairment of US$1,376,000 (2018: US$1,608,000) (see Note 7).
Contract assets have increased compared to the prior year as the Group shipped more product to customers with cost per test contracts in the last month
of the year.
135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
18.
TRADE AND OTHER RECEIVABLES (CONTINUED)
Long-term contract receivable
(i) Finance lease commitments – Group as lessor
The Group leases instruments as part of its business. Future minimum receivables with non-cancellable terms are as follows:
Less than one year
Between one and five years (Note 16)
Less than one year
Between one and five years (Note 16)
December 31, 2019
US$‘000
Gross
investment
Unearned
income
523
805
1,328
242
402
644
December 31, 2018
US$‘000
Gross
investment
Unearned
income
617
888
1,505
258
412
670
Minimum
payments
receivable
281
403
684
Minimum
payments
receivable
359
476
835
The Group classified future minimum lease receivables between one and five years of US$403,000 (2018: US$476,000) as Other Assets, see Note 16.
Under the terms of the lease arrangements, no contingent rents are receivable.
(ii) Operating lease commitments – Group as lessor
The Group leases instruments under operating leases as part of its business.
Future minimum rentals receivable under non-cancellable operating leases are as follows:
Less than one year
Between one and five years
Less than one year
Between one and five years
136
December 31, 2019
US$‘000
Instruments
3,528
27
3,555
Total
3,528
27
3,555
December 31, 2018
US$‘000
Instruments
Total
3,498
32
3,530
3,498
32
3,530
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
19.
CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents
20.
SHORT-TERM INVESTMENTS
All liquid investments with a maturity greater than six months are considered to be short-term investments.
Investments (deposits)
21.
CAPITAL AND RESERVES
Share capital
In thousands of shares
In issue at January 1
Issued for cash
In issue at December 31
In thousands of ADSs
Balance at January 1
Issued for cash
Balance at December 31
In thousands of shares
Balance at January 1
Purchased during the year
Balance at December 31
In thousands of ADSs
Balance at January 1
Purchased during the year
Balance at December 31
137
December 31,
2019
US$’000
December 31,
2018
US$’000
6,275
8,956
6,854
23,423
15,231
30,277
December 31,
2019
US$’000
December 31,
2018
US$’000
1,169
1,169
-
-
Class ‘A’
Ordinary
shares
2019
Class ‘A’
Ordinary
shares
2018
96,162
-
96,162
-
96,162
96,162
ADS
2019
24,041
-
ADS
2018
24,041
-
24,041
24,041
Class ‘A’
Treasury
shares
2019
Class ‘A’
Treasury
shares
2018
12,556
-
12,448
108
12,556
12,556
ADS
Treasury
shares
2019
ADS
Treasury
shares
2018
3,139
-
3,139
3,112
27
3,139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
21.
CAPITAL AND RESERVES (CONTINUED)
The Group had authorised share capital of 200,700,000 ‘A’ ordinary shares of US$0.0109 each (2018: 200,700,000 ‘A’ ordinary shares of US$0.0109
each) as at December 31, 2019.
(a) During 2019, the Group did not issue any shares from the exercise of employee options (2018: nil). At December 31, 2019, there were no amounts
receivable on issuance share capital (2018: US$nil) relating to the exercise of share options.
(b) During 2019, the Group did not repurchase any ‘A’ ordinary shares under its share buyback program. (2018: 107,740 ‘A’ ordinary shares or 26,935
ADS’s).
(c)
There were no dividends paid during 2019 in respect of the 2018 financial year, (nil in respect of the 2017 financial year), (nil in respect of the
2016 financial year). As provided in the Articles of Association of the Company, dividends or other distributions are declared and paid in US
Dollars.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign currency
denominated operations of the Group since January 1, 2004.
Warrant reserve
The Group calculates the fair value of warrants at the date of issue taking the amount directly to a separate reserve within equity. The fair value is
calculated using the trinomial model. The fair value which is assessed at the grant date is calculated on the basis of the contractual term of the warrants.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged
transactions entered into but not yet crystallised.
The warrant and hedging reserves form Other Reserves in the Consolidated Statement of Financial Position.
Treasury shares
During 2019, the Group did not purchase any (2018: 107,740) ‘A’ Ordinary shares (2018: 26,935 ADS’s) ‘Treasury shares’. The total cost of these shares
in 2018 was US$139,000.
22.
SHARE OPTIONS AND SHARE WARRANTS
Warrants
There were no warrants outstanding at the beginning of 2019, and there were no warrants granted in either 2019 or 2018. As there were no warrants
outstanding, the warrant reserve was transferred to the accumulated surplus reserve during 2017.
Options
Under the terms of the Company’s Employee Share Option Plans, options to purchase 12,303,990 ‘A’ Ordinary Shares (3,075,998 ADS’s) were
outstanding at December 31, 2019. Under these Plans, options are granted to officers, employees and consultants of the Group at the discretion of the
Compensation Committee (designated by the Board of Directors), under the terms outlined below.
Certain options have been granted to consultants of the Group and, where this is the case, the Group has measured the fair value of the services provided
by these consultants by reference to the fair value of the equity instruments granted. This approach has been adopted in these cases as it is impractical for
the Group to reliably estimate the fair value of such services.
138
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
22.
SHARE OPTIONS AND SHARE WARRANTS (CONTINUED)
The terms and conditions of the grants are as follows, whereby all options are settled by physical delivery of shares:
Vesting conditions
The options vest following a period of service by the officer or employee. The required period of service is determined by the Board and Remuneration
Committee at the date of grant of the options (usually the date of approval by the Compensation Committee) and it is generally over a three to four-year
period. There are no market conditions associated with the share option vesting periods.
Contractual life
The term of an option is determined by the Board, Compensation Committee and Remuneration Committee provided that the term may not exceed a
period of between seven to ten years from the date of grant. All options will terminate 90 days after termination of the option holder’s employment,
service or consultancy with the Group (or one year after such termination because of death or disability) except where a longer period is approved by the
Board of Directors. Under certain circumstances involving a change in control of the Group, the Compensation Committee may accelerate the
exercisability and termination of options.
The number and weighted average exercise price of share options and warrants per ordinary share is as follows (as required by IFRS 2, this information
relates to all grants of share options and warrants by the Group):
Outstanding January 1, 2017
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Outstanding January 1, 2018
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Outstanding January 1, 2019
Granted
Exercised
Expired / Forfeited
Outstanding at end of year
Exercisable at end of year
Weighted-
average
exercise
price
US$
Per ‘A’
Ordinary
Share
3.19
1.31
-
3.86
1.92
Options and
warrants
‘A’ Ordinary
Shares
9,830,183
5,630,000
-
(4,732,807)
10,727,376
Range
US$
Per ‘A’
Ordinary
Share
0.66 –4.47
1.24 –1.44
-
0.75 –4.47
1.24 –4.36
3,268,707
2.57
1.66 –4.36
10,727,376
720,000
-
(539,176)
10,908,200
1.92
1.07
-
2.50
1.83
1.24 –4.36
0.67 –1.37
-
1.34 –4.23
0.67 –4.36
6,091,864
2.09
1.24 –4.36
10,908,200
4,370,000
-
(2,974,210)
12,303,990
1.83
0.68
-
2.25
1.31
0.67 –4.36
0.46 –0.78
-
0.66 –4.23
0.46 –4.36
6,622,667
1.73
1.24 –4.36
139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
22.
SHARE OPTIONS AND SHARE WARRANTS (CONTINUED)
Outstanding January 1, 2017
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
Outstanding January 1, 2018
Granted
Exercised
Expired / Forfeited
Outstanding at end of year
Exercisable at end of year
Outstanding January 1, 2019
Granted
Exercised
Expired / Forfeited
Outstanding at end of year
Exercisable at end of year
Options and
warrants
‘ADS’
Equivalent
2,457,546
1,407,500
-
(1,183,202)
Weighted-
average
exercise
price US$
Per ‘ADS’
12.76
5.25
-
10.26
Range US$
Per ‘ADS’
2.64 - 17.88
4.95 – 5.75
-
3.00 –17.88
2,681,844
7.69
4.96–17.44
817,179
10.29
6.64 –17.45
2,681,844
180,000
-
(134,794)
7.69
4.28
-
10.00
4.96 - 17.44
2.68 – 5.48
-
5.36 – 16.92
2,727,050
7.32
2.68–17.44
1,522,966
8.36
4.96 –17.44
2,727,050
1,092,500
-
(743,552)
7.32
2.72
-
8.99
2.68–17.44
1.83 - 3.10
-
2.64 – 16.92
3,075,998
5.24
1.83 – 17.45
1,655,667
6.92
4.95 –17.45
There were no share options exercised during 2019, 2018 or 2017.
The opening share price per ‘A’ Ordinary share at the start of the financial year was US$0.57 or US$2.29 per ADS (2018: US$1.28 or US$5.10 per ADS)
(2017: US$1.73 or US$6.93 per ADS) and the closing share price at December 31, 2019 was US$0.26 or US$1.03 per ADS (2018: US$0.57 or US$2.29
per ADS) (2017: US$1.28 or US$5.10 per ADS). The average share price for the year ended December 31, 2019 was US$0.49 per ‘A’ Ordinary share or
US$1.95 per ADS.
A summary of the range of prices for the Company’s stock options for the year ended December 31, 2019 follows:
Outstanding
No. of
options
‘A’ ordinary
shares
Weighted–
average
exercise
price
4,600,000
5,613,990
1,980,000
110,000
12,303,990
0.69
1.35
2.48
4.19
Exercise price
range
US$0.46-
US$0.99
US$1.00-
US$2.05
US$2.06-
US$2.99
US$3.00
-US$4.36
Weighted-
average
contractual
life
remaining
(years)
6.42
4.69
3.13
2.07
140
No. of
options
‘A’ ordinary
shares
-
4,542,667
1,970,000
110,000
6,622,667
Exercisable
Weighted–
average
exercise
price
Weighted-
average
contractual
life
remaining
(years)
-
1.34
2.48
4.19
-
4.68
3.13
2.07
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
22.
SHARE OPTIONS AND SHARE WARRANTS (CONTINUED)
Exercise price
range
US$1.84-
US$3.96
US$4.00-
US$8.20
US$8.24-
US$11.96
US$12.00
-US$17.45
No. of
options
‘ADS
equivalent’
1,150,000
1,403,498
495,000
27,500
3,075,998
Outstanding
Weighted–
average
exercise
price
Weighted-
average
contractual
life
remaining
(years)
2.75
5.40
9.92
16.75
6.42
4.69
3.13
2.07
No. of
options
‘ADS
equivalent’
-
1,135,667
492,500
27,500
1,655,667
Exercisable
Weighted–
average
exercise
price
Weighted-
average
contractual
life
remaining
(years)
-
5.38
9.91
16.75
-
4.68
3.13
2.07
The weighted-average remaining contractual life of options outstanding at December 31, 2019 was 5.06 years (2018: 4.33 years).
A summary of the range of prices for the Company’s stock options for the year ended December 31, 2018 follows:
Exercise price
range
US$0.66-
US$0.99
US$1.00-
US$2.05
US$2.06-
US$2.99
US$3.00
-US$4.47
Exercise price
range
US$2.64-
US$3.96
US$4.00-
US$8.20
US$8.24-
US$11.96
US$12.00
-US$17.88
Outstanding
No. of
options
‘A’ ordinary
shares
Weighted–
average
exercise
price
Weighted-
average
contractual
life
remaining
(years)
430,000
6,111,800
4,168,400
198,000
10,908,200
No. of
options
‘ADS
equivalent’
107,500
1,527,950
1,042,100
49,500
2,727,050
0.88
1.35
2.51
4.20
6.79
5.64
2.23
2.97
Outstanding
Weighted–
average
exercise
price
Weighted-
average
contractual
life
remaining
(years)
3.52
5.40
10.04
16.80
6.79
5.64
2.23
2.97
141
No. of
options
‘A’ ordinary
shares
-
2,476,133
3,437,731
178,000
6,091,864
No. of
options
‘ADS
equivalent’
-
619,033
859,433
44,500
1,522,966
Exercisable
Weighted–
average
exercise
price
Weighted-
average
contractual
life
remaining
(years)
-
1.35
2.51
4.20
-
5.57
1.83
2.93
Exercisable
Weighted–
average
exercise
price
Weighted-
average
contractual
life
remaining
(years)
-
5.40
10.04
16.80
-
5.57
1.83
2.93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
22.
SHARE OPTIONS AND SHARE WARRANTS (CONTINUED)
Charge for the year under IFRS 2
The charge for the year is calculated based on the fair value of the options granted which have not yet vested.
The fair value of the options is expensed over the vesting period of the option. US$758,000 was charged to the statement of operations in 2019, (2018:
US$1,369,000), (2017: US$928,000) split as follows:
Share-based payments – cost of sales
Share-based payments – selling, general and administrative
Total – continuing operations
Share-based payments – discontinued operations
Total
December 31,
2019
US$‘000
December 31,
2018
US$‘000
December 31,
2017
US$‘000
26
732
758
-
758
34
1,335
1,369
-
1,369
35
893
928
-
928
The total share based payments charge for the year was US$839,000 (2018: US$1,607,000) (2017: US$1,109,000). However, a total of US$80,000
(2018: US$238,000) (2017: US$181,000) of share based payments was capitalised in intangible development project assets during the year.
The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of
the fair value of services received is measured based on a trinomial model. The following are the input assumptions used in determining the fair value of
share options granted in 2019, 2018 and 2017:
Key
management
personnel
2019
Other
employees
2019
Key
management
personnel
2018
Other
employees
2018
Key
management
personnel
2017
Other
employees
2017
Weighted average fair value at
measurement date per ‘A’ share /
(per ADS)
US$0.14 /
(US$0.56)
US$0.25 /
(US$1.02)
Total ‘A’ share options granted /
(ADS’s equivalent)
4,060,000 /
(1,015,000)
310,000 /
(77,500)
Weighted average share price per ‘A’
share / (per ADS)
US$0.46 /
(US$1.84)
US$0.64 /
(US$2.53)
Weighted average exercise price per
‘A’ share / (per ADS)
US$0.69 /
(US$2.74)
US$0.64 /
(US$2.53)
Weighted average expected volatility
51.18%
47.31%
Weighted average expected life
4.15
4.42
Weighted average risk free interest
rate
1.84%
2.23%
Expected dividend yield
-
-
142
US$0.41 /
(US$1.64)
US$0.43 /
(US$1.72)
US$0.44 /
(US$1.76)
720,000 /
(180,000)
5,150,000/
(1,287,500)
480,000 /
(120,000)
US$1.07 /
(US$4.28)
US$1.07 /
(US$4.28)
US$1.34 /
(US$5.36)
US$1.31 /
(US$5.24)
US$1.34 /
(US$5.36)
US$1.31 /
(US$5.24)
42.69%
40.62%
40.48%
4.55
4.45
4.69
2.72%
-
1.59%
0.81%
1.91%
0.81%
-
-
-
-
-
-
-
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
22.
SHARE OPTIONS AND SHARE WARRANTS (CONTINUED)
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility is
based on the historic volatility (calculated based on the expected life of the options). The Group has considered how future experience may affect
historical volatility.
The profile and activities of the Group are not expected to change in the immediate future and therefore Trinity Biotech would expect estimated volatility
to be consistent with historical volatility.
23.
TRADE AND OTHER PAYABLES
Trade payables
Payroll taxes
Employee related social insurance
Accrued liabilities
Deferred income
Accrued liabilities include US$1,307,000 (2018: US$1,207,000) relating to contracted licence payments.
24.
PROVISIONS
Provisions
December
31, 2019
US$’000
December
31, 2018
US$’000
7,833
519
170
8,133
292
8,116
448
154
7,878
312
16,947
16,908
December
31, 2019
US$’000
December
31, 2017
US$’000
50
50
During 2019 and 2018 the Group experienced no significant product warranty claims. However, the Group believes that it is appropriate to retain a
product warranty provision to cover any future claims. The provision at December 31, 2019 represents the estimated cost of product warranties, the exact
amount which cannot be determined. US$50,000 represents management’s best estimate of these obligations at December 31, 2019.
25.
EXCHANGEABLE NOTES
The Group issued US$115,000,000 of exchangeable senior notes in 2015, which will mature on April 1, 2045, subject to earlier repurchase, redemption
or exchange. The notes are senior unsecured obligations and accrue interest at an annual rate of 4%, payable semi-annually in arrears on April 1 and
October 1 of each year, beginning on October 1, 2015.
The notes are convertible into ordinary shares of the parent entity at the applicable exchange rate, at any time prior to the close of business on the second
business day immediately preceding the maturity date, at the option of the holder, or repayable on April 1, 2045. The conversion rate is 47.112 ADSs per
$1,000 principal amount of notes, equivalent to an exchange price of approximately $21.88 per ADS. The exchange rate is subject to adjustment upon the
occurrence of certain events, but will not be adjusted for any accrued and unpaid interest. The notes include a number of non-financial covenants, all of
which were complied with at December 31, 2019.
In August 2018, the Group purchased US$15,100,000 of the exchangeable notes, at a rate of 79.75 cents in the Dollar. The amount paid was
US$12,042,000 plus accrued interest of US$205,000. The gain on the purchase was US$463,000 and this was shown within selling, general and
administrative expenses in the statement of operations for the year ended December 31, 2018. The nominal amount of the debt after the purchase is
US$99,900,000.
143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
25.
EXCHANGEABLE NOTES (CONTINUED)
The notes include a number of put and call options, and these embedded derivatives are measured at fair value through the Consolidated Statement of
Operations. The first date on which holders can exercise their put option is April 1, 2022. If the put option is exercised, the issuer has to repurchase the
notes at par. The embedded derivatives are summarised as follows:
Non-current assets
Exchangeable note bond call option
Non-current liabilities
Exchangeable note equity conversion option
Exchangeable note bond put option
Total value of embedded derivatives – net liability
December
31,
2019
US$’000
December
31,
2018
US$’000
-
4
-
4
4
-
238
-
238
238
Financial income in the consolidated statement of operations for the year includes US$234,000 (2018: US$1,388,000) arising from the revaluation of
embedded derivatives at fair value at December 31, 2019.
The exchangeable notes are treated as a host debt instrument with embedded derivatives attached. On initial recognition, the host debt instrument is
recognised at the residual value of the total net proceeds of the bond issue less fair value of the embedded derivatives. Subsequently, the host debt
instrument is measured at amortised cost using the effective interest rate method. The carrying value of exchangeable senior notes is calculated as
follows:
Balance at 1 January
Accretion interest
Less: purchased during the year at fair value
Exchangeable senior notes
Total value of embedded derivatives – liability
Total non-current liabilities
December 31,
2019
US$’000
December 31,
2018
US$’000
81,382
639
-
92,955
689
(12,262)
82,021
81,382
December 31,
2019
US$’000
82,021
4
December
31,
2018
US$’000
81,382
238
82,025
81,620
This liability will accrete back to its nominal value of US$99,900,000 over the term of the debt using an effective interest rate methodology. Financial
expense in the consolidated statement of operations for the year includes US$639,000 (2018: US$689,000) of accretion interest.
144
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
26.
LEASE LIABILITIES
The Group has leases for some of its manufacturing plants, all warehouses, offices, motor vehicles and some IT equipment. With the exception of short-
term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset (net of any depreciation and/or
impairment) and a lease liability. Variable lease payments which do not depend on an index or a rate (such as lease payments based on a percentage of
Group sales) are excluded from the initial measurement of the lease liability and asset. The Group classifies its right-of-use assets in a consistent manner
to its property, plant and equipment (see Note 13).
Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset
can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. Some leases
contain an option to purchase the underlying leased asset outright at the end of the lease, or to extend the lease for a further term. The Group is prohibited
from selling or pledging the underlying leased assets as security. For leases over office buildings and factory premises the Group must keep those
properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the Group must insure items of
property, plant and equipment and incur maintenance fees on such items in accordance with the lease contracts.
The reconciliation of operating lease commitments at December 31, 2018 to the additional lease liabilities recognized on the initial application of IFRS
16 at January 1, 2019 is as follows:
Operating Lease commitments at December, 31, 2018 (Note 27)
Relief option for short term leases
Relief option for low value assets
Effect of assumed probable lease extension in adoption of IFRS 16
Other
Gross lease liabilities at January 1, 2019
Discounting
Additional Lease liabilities as a result of the initial application of IFRS 16 at January 1, 2019
US$000
27,342
(130)
-
573
(149)
27,636
(6,451)
21,185
The lease liabilities were discounted at the incremental borrowing rate as at January 1, 2019. The weighted average discount rate was 5.0%.
Lease liabilities
Lease liabilities are payable as follows:
Current liabilities
Lease liabilities related to Right of Use assets
Sale and leaseback liabilities
Non-Current liabilities
Lease liabilities related to Right of Use assets
Sale and leaseback liabilities
145
December 31,
2019
US$’000
December 31,
2018
US$’000
2,156
248
2,404
17,474
271
17,745
-
436
436
-
526
526
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
26.
LEASE LIABILITIES
December 31, 2019
US$’000
Lease liabilities related to
Right of Use assets
December 31, 2019
US$’000
Sale and leaseback
liabilities
Less than one year
In more than one year, but not more than
two
In more than two years but not more than
five
more than five years
Minimum
lease
payments
3,017
2,787
6,700
12,748
25,252
Less than one year
In more than one year, but not more than two
In more than two years but not more than five
more than five years
Lease payments not recognised as a liability
Interest
Principal
Minimum
lease
payments
Interest
Principal
861
775
1,861
2,126
5,263
2,156
2,012
4,840
10,622
19,630
December 31,
2018
Operating
Leases
Minimum
lease
payments
3,083
2,783
6,777
14,699
27,342
267
107
185
-
559
19
12
9
-
40
248
95
176
-
519
December 31, 2018
US$’000
Sale and leaseback
liabilities
Minimum
lease
payments
473
271
294
-
1,038
Interest
Principal
37
19
20
-
76
436
252
274
-
962
The Group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low
value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be
recognised as lease liabilities and are expensed as incurred. The expense relating to payments not included in the measurement of the lease liability is as
follows:
Short term leases
Leases of low value assets
Variable lease payments
146
December
31, 2019
US$000
130
-
-
130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
26.
LEASE LIABILITIES (CONTINUED)
Terms and debt repayment schedule
The terms and conditions of outstanding interest bearing loans and borrowings at December 31, 2019 are as follows:
Facility
Sale and leaseback liabilities
Sale and leaseback liabilities
Total interest-bearing loans and
borrowings
Currency
Euro
USD
Nominal
interest
rate
Year of
maturity
Fair
Value
Carrying
Value
4.53%
5.51%
2023
2023
286
233
519
286
233
519
The terms and conditions of outstanding interest bearing loans and borrowings at December 31, 2018 were as follows:
Facility
Sale and leaseback liabilities
Sale and leaseback liabilities
Total interest-bearing loans and
borrowings
Currency
Euro
USD
Nominal
interest
rate
Year of
maturity
Fair
Value
Carrying
Value
4.53%
5.51%
2023
2023
648
314
962
648
314
962
The total paid in respect of lease liabilities in the year ended December 31, 2019 was US$3,533,000 (2018: US$374,000).
27.
COMMITMENTS AND CONTINGENCIES
(a)
Capital Commitments
The Group has capital commitments authorised and contracted for of US$323,000 as at December 31, 2019 (2018: US$187,000).
(b)
Leasing Commitments
The Group’s leasing commitments are shown in Note 26.
For future minimum finance lease commitments as at December 31, 2019, in respect of which the lessor has a charge over the related assets, see Note 26.
Future minimum non-cancelable operating lease commitments in accordance with IAS 17 as at December 31, 2018 were as follows:
2019
2020
2021
2022
2023
Later years
Total lease obligations
147
Year ended
2018
Operating
leases
US$’000
3,083
2,783
2,512
2,255
2,010
14,699
27,342
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
27.
COMMITMENTS AND CONTINGENCIES (CONTINUED)
(c)
Bank Security
The Group repaid in full its bank borrowings in April 2010, at which point all previous charges against Group assets were released. At December 31,
2019, Group borrowings were at fixed rates of interest and consisted Euro and USD denominated borrowings, refer to Note 29. The banks providing the
financing have a charge over the equipment for which the borrowing pertains.
(d)
Group Company Guarantees
Pursuant to the provisions of Section 357, Irish Companies Act, 2014, the Company has guaranteed the liabilities of Trinity Biotech Manufacturing
Limited, Trinity Research Limited, Benen Trading Limited and Trinity Biotech Financial Services Limited subsidiary undertakings in the Republic of
Ireland, for the financial year to December 31, 2019 and, as a result, these subsidiary undertakings have been exempted from the filing provisions of
Section 357, Irish Companies Act, 2014. Where the Company enters into these guarantees of the indebtedness of other companies within its Group, the
Company considers these to be insurance arrangements and accounts for them as such. The Company treats the guarantee contract as a contingent
liability until such time as it becomes probable that the company will be required to make a payment under the guarantee. The Company does not enter
into financial guarantees with third parties.
(e)
Contingent asset
Arising from the tax audit settlement described in Note 6, Darnick Company agreed to contribute US$1,231,000 towards the settlement. The tax audit
was finalised in late December 2019 and the amount due from Darnick Company was outstanding at December 31, 2019. This is a contingent asset at
December 31, 2019. In accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets, the amount owing will be recognised when
receipt of payment is virtually certain.
(f)
Government Grant Contingencies
The Group has received training and employment grant income from Irish development agencies. Subject to existence of certain conditions specified in
the grant agreements, this income may become repayable. No such conditions existed as at December 31, 2019. However if the income were to become
repayable, the maximum amounts repayable as at December 31, 2019 would amount to US$2,834,000 (2018: US$2,892,000).
(g)
Litigation
There are also a small number of legal cases being brought against the Group by certain of its former employees. There is a provision for cases where
payment is considered by management to be probable. The ultimate resolution of the aforementioned proceedings is not expected to have a material
adverse effect on the Group’s financial position, results of operations or cash flows.
28.
RELATED PARTY TRANSACTIONS
The Group has related party relationships with its subsidiaries, and with its directors and executive officers.
Leasing arrangements with related parties
The Group has entered into various arrangements with JRJ Investments (“JRJ”), a partnership owned by Mr O’Caoimh and Dr Walsh, directors of Trinity
Biotech, and directly with Mr O’Caoimh, to provide for current and potential future needs to extend its premises at IDA Business Park, Bray, Co.
Wicklow, Ireland.
The Group has entered into an agreement for a 25-year lease with JRJ for offices that adjacent to its then premises at IDA Business Park, Bray, Co.
Wicklow, Ireland. The annual rent of €381,000 (US$427,000) is payable from January 1, 2004. Upward-only rent reviews are carried out every five years
and there have been no increases arising from these rent reviews.
148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
28.
RELATED PARTY TRANSACTIONS (CONTINUED)
The Group has also entered into lease agreements with Ronan O’Caoimh for a 43,860 square foot manufacturing facility in Bray, Ireland and an adjacent
warehouse of 16,000 square feet. The annual rent for the manufacturing facility is €787,000 (US$883,000) and the annual rent for the warehouse is
€144,000 (US$162,000). These two leases expire in 2028 and 2026 respectively. At the time, independent valuers advised the Group that the rent in
respect of each of the leases represents a fair market rent. Upward-only rent reviews are carried out every five years and there have been no increases
arising from these rent reviews.
Trinity Biotech and its directors (excepting Mr O’Caoimh and Dr Walsh who express no opinion on this point) believe at the time that the arrangements
entered into represent a fair and reasonable basis on which the Group can meet its ongoing requirements for premises.
Compensation of key management personnel of the Group
At December 31, 2019, 2018 and 2017 the key management personnel of the Group were made up of three key personnel: the two executive directors;
Mr Ronan O’Caoimh and Dr Jim Walsh and Mr Kevin Tansley, our Chief Financial Officer/Executive Director. Kevin Tansley was appointed to the
board in September 2016 as an Executive Director.
Compensation for the year ended December 31, 2019 of these personnel is detailed below:
Short-term employee benefits
Performance related bonus
Post-employment benefits
Share-based compensation benefits
December
31, 2019
US$’000
December
31, 2018
US$’000
800
213
42
542
1,597
863
210
44
1,041
2,158
The amounts disclosed in respect of directors’ emoluments in Note 11 includes non-executive directors’ fees of US$225,000 (2018: US$188,000) and
share-based compensation benefits of US$82,000 (2018: US$313,000). Total directors’ remuneration is also included in “personnel expenses” (Note 3)
and “loss before tax” (Note 11). In 2019, share-based compensation benefits included in Note 11 exclude capitalised amounts of US$35,000 (2018:
US$149,000).
On March 30, 2011, the service agreement with Ronan O’Caoimh as Chief Executive Officer was terminated and replaced by an agreement with Darnick
Company, a company wholly-owned by members of Mr O’Caoimh’s immediate family. Directors’ compensation includes payments made to Darnick
Company. This arrangement ceased with effect from December, 31, 2018 with Ronan O’Caoimh returning as an employee of the company.
Directors’ interests in the Company’s shares and share option plan
At January 1, 2019
Shares of retired director
Options of retired director
Shares purchased during the year
Shares sold during the year
Granted
Expired / forfeited
At December 31, 2019
149
‘A’ Ordinary
Shares
9,139,706
(30,000)
—
—
(32,000)
—
—
Share options
8,655,004
—
(215,000)
—
—
4,060,000
(2,086,000)
9,077,706
10,414,004
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
28.
RELATED PARTY TRANSACTIONS (CONTINUED)
At January 1, 2018
Shares purchased during the year
Expired
At December 31, 2018
‘A’ Ordinary
Shares
5,719,706
3,420,000
—
Share options
8,770,004
—
(115,000)
9,139,706
8,655,004
Rayville Limited, an Irish registered company, which is wholly owned by the three executive directors and certain other executives of the Group, owns
all of the ‘B’ non-voting Ordinary Shares in Trinity Research Limited, one of the Group’s subsidiaries. The ‘B’ shares do not entitle the holders thereof to
receive any assets of the company on a winding up. All of the ‘A’ voting ordinary shares in Trinity Research Limited are held by the Group. Trinity
Research Limited may, from time to time, declare dividends to Rayville Limited and Rayville Limited may declare dividends to its shareholders out of
those amounts.
Any such dividends paid by Trinity Research Limited are ordinarily treated as a compensation expense by the Group in the consolidated financial
statements prepared in accordance with IFRS, notwithstanding their legal form of dividends to minority interests, as this best represents the substance of
the transactions.
The last dividend paid by Trinity Research Limited to Rayville Limited was in June 2009 for US$2,830,000. At the time this amount was immediately
lent back by Rayville Limited to Trinity Research Limited. Since then US$1,788,000 of these loans have been repaid and recognised as a compensation
expense by the Group. As of December 31, 2018 and December 31, 2019, the remaining amount of the loan was US$1,042,000. As this remaining
amount of the original dividend is matched by a loan from Rayville Limited to Trinity Research Limited which is repayable solely at the discretion of the
Remuneration Committee of the Board and is unsecured and interest free, the Group netted the dividend paid to Rayville Limited against the
corresponding loan from Rayville Limited in the 2018 and 2019 consolidated financial statements. During 2019, Trinity Research Limited repaid loans to
Rayville Limited of US$159,000 in order to meet its obligations under a tax settlement arising from a tax audit.
As described in Note 6, a settlement was reached with the tax authority in one of the jurisdictions in which the company operates which included the
payment of US$3,863,000 in relation to payments made by Trinity Research Limited to Rayville Limited and US$1,231,000 in relation to payments for
CEO services made to Darnick Company. Darnick Company agreed to contribute US$1,231,000 to the above settlement and this amount was
outstanding at December 31, 2019 and was treated as a contingent asset and not recognised in the consolidated statement of financial position at year-end
(refer to Note 27).
29.
DERIVATIVES AND FINANCIAL INSTRUMENTS
The Group uses a range of financial instruments (including cash, finance leases, receivables, payables and derivatives) to fund its operations. These
instruments are used to manage the liquidity of the Group in a cost effective, low-risk manner. Working capital management is a key additional element
in the effective management of overall liquidity. The Group does not trade in financial instruments or derivatives. The main risks arising from the
utilization of these financial instruments are interest rate risk, liquidity risk and credit risk.
150
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
29.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
Interest rate risk
Effective and repricing analysis
The following table sets out all interest-earning financial assets and interest bearing financial liabilities held by the Group at December 31, indicating
their effective interest rates and the period in which they re-price:
As at December 31, 2019
Note
Cash and cash equivalents
Short-term investments
Lease receivable
Licence payments
Exchangeable note
Lease payable on Right of
Use assets
Lease payable on sale &
leaseback transactions
Total
As at December 31, 2018
Cash and cash equivalents
Short-term investments
Lease receivable
Licence payments
Finance lease payable
Exchangeable note
Total
19
20
16,18
23
25
26
26
19
20
18
23
26
25
Note
Effective
interest
rate
1.1%
1.3%
4.0%
8.1%
Total
US$’000
15,231
1,169
684
(1,307)
6 mths or
less
US$’000
15,231
—
157
(1,307)
4.8%
(82,021)
—
6 –12 mths
US$’000
1-2 years
US$’000
2-5 years
US$’000
> 5 years
US$’000
—
1,169
124
—
—
—
—
202
—
—
—
—
201
—
—
—
—
—
—
(82,021)
5.0%
(19,630)
(1,136)
(1,020)
(2,012)
(4,840)
(10,622)
5.0%
(519)
(122)
(125)
(95)
(177)
—
(86,393)
12,823
148
(1,905)
(4,816)
(92,643)
Effective
interest
rate
1.8%
—
4.0%
3.0%
4.8%
4.8%
Total
US$’000
30,277
—
835
(1,207)
(962)
(81,382)
6 mths or
less
US$’000
30,277
—
191
(1,207)
(217)
—
(52,439)
29,044
6 –12 mths
US$’000
1-2 years
US$’000
2-5 years
US$’000
> 5 years
US$’000
—
—
168
—
(219)
—
(51)
—
—
238
—
(252)
—
(14)
—
—
238
—
(274)
—
—
—
—
—
—
(81,382)
(36)
(81,382)
In broad terms, a one-percentage point increase in interest rates would increase interest income by US$101,000 (2018: US234,000) and would not affect
the interest expense (2018: nil) resulting in an increase in net interest income of US$101,000 (2018: increase in net interest income of US$234,000).
Interest rate profile of financial assets / liabilities
The interest rate profile of financial assets/liabilities of the Group was as follows:
Fixed rate instruments
Fixed rate financial liabilities (licence fees)
Fixed rate financial liabilities (exchangeable note)
Fixed rate financial liabilities (lease payables)
Financial assets (short-term deposits and short-term investments)
Financial assets (lease receivables)
151
December 31,
2019
US$‘000
December 31,
2018
US$‘000
(1,307)
(82,021)
(20,149)
10,125
684
(1,207)
(81,382)
(962)
23,423
835
(92,668)
(59,293)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
29.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
Financial assets comprise cash and cash equivalents and short-term investments as at December 31, 2019 and December 31, 2018 (see Note 19 and 20).
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial liabilities at fair value through profit and loss. Therefore, a change in interest rates at
December 31, 2019 would not affect profit or loss.
There was no significant difference between the fair value and carrying value of the Group’s trade receivables and trade and other payables at
December 31, 2019 and December 31, 2018 as all fell due within 6 months.
Liquidity risk
The Group’s operations are cash generating. Short-term flexibility is achieved through the management of the Group’s short-term deposits.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
As at December 31,
2019
US$’000
Financial liabilities
Trade & other
payables
Lease payable on
Right of Use assets
Lease payable on sale
& leaseback
transactions
Exchangeable notes
Exchangeable note
interest
As at December 31,
2018
US$’000
Financial liabilities
Trade & other
payables
Exchangeable notes
Exchangeable note
interest
Carrying
amount
US$’000
Contractual
cash flows
US$’000
6 mths or
less
US$’000
6 mths –
12 mths
US$’000
1-2 years
US$’000
2-5 years
US$’000
>5 years
US$’000
16,947
19,630
519
82,021
16,947
19,630
519
99,900
16,947
1,136
122
—
999
101,898
1,998
120,116
238,894
20,203
—
1,020
125
—
1,998
3,143
—
2,012
95
—
3,996
6,103
—
—
4,840
10,622
177
—
11,988
—
99,900
81,918
17,005
192,440
Carrying
amount
US$’000
Contractual
cash flows
US$’000
6 mths or
less
US$’000
6 mths –
12 mths
US$’000
1-2 years
US$’000
2-5 years
US$’000
>5 years
US$’000
16,908
81,382
16,908
99,900
999
105,894
16,908
—
1,998
99,289
222,702
18,906
—
—
1,998
1,998
—
—
3,996
3,996
—
—
11,988
—
99,900
85,914
11,988
185,814
152
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
29.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
Foreign exchange risk
The majority of the Group’s activities are conducted in US Dollars. Foreign exchange risk arises from the fluctuating value of the Group’s Euro
denominated expenses as a result of the movement in the exchange rate between the US Dollar and the Euro. Arising from this, where considered
necessary, the Group pursues a treasury policy which periodically aims to sell US Dollars forward to match a portion of its uncovered Euro expenses at
exchange rates lower than budgeted exchange rates. These forward contracts are primarily cashflow hedging instruments whose objective is to cover a
portion of these Euro forecasted transactions. Forward contracts normally have maturities of less than one year after the balance sheet date. There were
no forward contracts in place as at December 31, 2019.
Foreign currency short term financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those
reported to key management translated into US Dollars at the closing rate:
As at December 31, 2019
Cash
Trade and other receivable
Trade and other payables
Total exposure
As at December 31, 2018
Cash
Trade and other receivable
Trade and other payables
Total exposure
EUR
US$‘000
GBP
US$‘000
SEK
US$‘000
CAD
US$‘000
BRL
US$‘000
Other
US$‘000
394
1,247
(2,350)
(709)
138
71
(27)
182
10
—
(142)
(132)
3,265
337
(47)
3,555
238
1,871
(796)
1,313
EUR
US$‘000
GBP
US$‘000
SEK
US$‘000
CAD
US$‘000
BRL
US$‘000
Other
US$‘000
81
894
(1,995)
(1,020)
122
113
(51)
184
9
38
(146)
(99)
2,512
430
(103)
2,839
322
2,065
(1,621)
766
—
—
—
—
6
6
(2)
10
The Group states its forward exchange contracts at fair value in the balance sheet. The Group classifies its forward exchange contracts as hedging
forecasted transactions and thus accounts for them as cash flow hedges.
There were no forward exchange contracts in place at December 31, 2019 or December 31, 2018.
Sensitivity analysis
A 10% strengthening of the US Dollar against the Euro at December 31, 2019 would have increased profit and other equity by the amounts shown below.
This analysis assumes that all other variables, in particular interest rates, remain constant.
December 31, 2019
Euro
December 31, 2018
Euro
153
Profit or
loss
US$’000
2,282
1,818
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
29.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
A 10% weakening of the US Dollar against the Euro at December 31, 2019 would have decreased profit and other equity by the amounts shown below.
This analysis assumes that all other variables, in particular interest rates, remain constant.
December 31, 2019
Euro
December 31, 2018
Euro
Credit Risk
Profit or
Loss
US$000
(2,790)
(2,222)
The Group has no significant concentrations of credit risk. Exposure to credit risk is monitored on an ongoing basis. The Group maintains specific
provisions for potential credit losses. To date such losses have been within management’s expectations. Due to the large number of customers and the
geographical dispersion of these customers, the Group has no significant concentrations of accounts receivable.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents and deferred consideration, the
Group’s exposure to credit risk arises from default of the counter-party, with a maximum exposure equal to the carrying amount of these instruments. The
Group’s management considers that all of the above financial assets that are not impaired or past due for each of the 31 December reporting dates under
review are of good credit quality.
The Group maintains cash and cash equivalents and enters into forward contracts, when necessary, with various financial institutions. The Group
performs regular and detailed evaluations of these financial institutions to assess their relative credit standing. The carrying amount reported in the
balance sheet for cash and cash equivalents and forward contracts approximate their fair value.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is as follows:
Third party trade receivables (Note 18)
Finance lease income receivable (Note 18)
Cash & cash equivalents (Note 19)
Short-term investments (Note 20)
Carrying
Value
December 31,
2019
US$’000
Carrying
Value
December 31,
2018
US$’000
17,754
684
15,231
1,169
21,318
835
30,277
—
34,838
52,430
The maximum exposure to credit risk for trade receivables and finance lease income receivable by geographic location is as follows:
United States
Euro-zone countries
United Kingdom
Other European countries
Other regions
154
Carrying
Value
December 31,
2019
US$’000
Carrying
Value
December 31,
2018
US$’000
8,647
786
121
7
8,877
9,472
1,502
132
84
10,963
18,438
22,153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
29.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
The maximum exposure to credit risk for trade receivables and finance lease income receivable by type of customer is as follows:
End-user customers
Distributors
Non-governmental organisations
Carrying
Value
December 31,
2019
US$’000
Carrying
Value
December 31,
2018
US$’000
9,453
7,199
1,786
9,253
11,860
1,040
18,438
22,153
Due to the large number of customers and the geographical dispersion of these customers, the Group has no significant concentrations of accounts
receivable.
Impairment Losses
The ageing of trade receivables at December 31, 2019 is as follows:
Not past due
Past due 0-30 days
Past due 31-120 days
Greater than 120 days
Gross
2019
US$’000
Impairment
2019
US$’000
10,924
3,743
2,115
6,415
23,197
8
6
27
5,402
5,443
Expected
Credit Loss
Rate
2019
%
Gross
2018
US$’000
Impairment
2018
US$’000
0.1%
0.2%
1.3%
84.2%
13,917
3,761
3,438
4,404
—
25,520
4
17
36
4,145
4,202
Expected
Credit Loss
Rate
2018
%
—
0.5%
1.0%
94.1%
—
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at January 1
Charged to costs and expenses
Amounts written off during the year
Balance at December 31
2019
US$’000
2018
US$’000
2017
US$’000
4,202
1,276
(35)
5,443
3,590
682
(70)
4,202
3,171
662
(243)
3,590
The allowance for impairment in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the
account owing is possible. At this point the amount is considered irrecoverable and is written off against the financial asset directly.
Capital Management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the
business. The Board of Directors monitors earnings per share as a measure of performance, which the Group defines as profit after tax divided by the
weighted average number of shares in issue.
Following the divestiture of the Coagulation product line in 2010, the Group eliminated all bank debt. In the past, the Group has funded acquisitions
using both equity and long term debt depending on the size of the acquisition and the capital structure in place at the time of the acquisition. Although at
December 31, 2019 the Group has no bank debt, it maintains a relationship with a number of lending banks and Trinity Biotech is listed on the
NASDAQ, which allows the Group to raise funds through equity financing where necessary. During 2015, the Group raised US$115,000,000 through the
issuance of 30 year exchangeable senior notes. During 2018 the Group repurchased $15,100,000 of the exchangeable senior notes. The remaining
exchangeable senior notes which will mature on April 1, 2045, subject to earlier repurchase, redemption or exchange, the earliest which is April 2022.
The Board of Directors is authorised to purchase its own shares on the market on the following conditions;
•
•
the aggregate nominal value of the shares authorised to be acquired shall not exceed 10% of the aggregate nominal value of the issued share capital
of the Company at the close of business on the date of the passing of the resolution:
the minimum price (exclusive of taxes and expenses) which may be paid for a share shall be the nominal value of that share:
•
the maximum price (exclusive of taxes and expenses) which may be paid for a share shall not be more than the average of the closing bid price on
NASDAQ in respect of the ten business days immediately preceding the day on which the share is purchased.
155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
29.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
Fair Values
The table below sets out the Group’s classification of each class of financial assets/liabilities, their fair values and under which valuation method they are
valued:
December 31, 2019
Loans and receivables at amortised cost
Trade receivables
Cash and cash equivalents
Investments (deposits)
Finance lease receivable
Liabilities at amortised cost
Exchangeable note
Lease liabilities
Trade and other payables (excluding deferred income)
Provisions
Fair value through profit and loss (FVPL)
Exchangeable note bond call option
Exchangeable note equity conversion option
Exchangeable note bond put option
Note
18
19
20
16,18
25
26
23
24
25
25
25
Level 1
US$’000
Level 2
US$’000
Total
carrying
amount
US$’000
Fair
Value
US$’000
17,754
15,231
1,169
684
34,838
—
(20,149)
(16,655)
(50)
—
—
—
—
—
17,754
15,231
1,169
684
17,754
15,231
1,169
684
34,838
34,838
(82,021)
—
—
—
(82,021)
(20,149)
(16,655)
(50)
(82,021)
(20,149)
(16,655)
(50)
(36,854)
(82,021)
(118,875)
(118,875)
—
—
—
—
—
(4)
—
(4)
—
(4)
—
(4)
—
(4)
—
(4)
(2,016)
(82,025)
(84,041)
(84,041)
For financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which inputs to the fair value
measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value are observable, either directly
or indirectly
156
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
29.
DERIVATIVES AND FINANCIAL INSTRUMENTS (CONTINUED)
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are not based on observable
market data.
December 31, 2018
Loans and receivables at amortised cost
Trade receivables
Cash and cash equivalents
Finance lease receivable
Liabilities at amortised cost
Exchangeable note
Finance lease payable
Trade and other payables (excluding deferred income)
Provisions
Fair value through profit and loss (FVPL)
Exchangeable note bond call option
Exchangeable note equity conversion option
Exchangeable note bond put option
Note
18
19
16,18
25
26
23
24
25
25
25
Level 1
US$’000
Level 2
US$’000
Total
carrying
amount
US$’000
Fair
Value
US$’000
21,318
30,277
835
52,430
—
(962)
(16,596)
(50)
—
—
—
—
21,318
30,277
835
21,318
30,277
835
52,430
52,430
(81,382)
—
—
—
(81,382)
(962)
(16,596)
(50)
(81,382)
(962)
(16,596)
(50)
(17,608)
(81,382)
(98,990)
(98,990)
—
—
—
—
—
(238)
—
(238)
—
(238)
—
(238)
—
(238)
—
(238)
34,822
(81,620)
(46,798)
(46,798)
The valuation techniques used for instruments categorised as level 2 are described below:
The fair values of the options associated with the exchangeable notes are calculated in consultation with third-party valuation specialists due to the
complexity of their nature. There are a number of inputs utilised in the valuation of the options, including share price, historical share price volatility,
risk-free rate and the expected borrowing cost spread over the risk-free rate.
157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
30.
RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The changes in the Group’s liabilities arising from financing activities can be classified as follows:
Balance at 1 January 2019
Cash-flows:
Interest paid
Repayment
Non-cash:
Interest charged
Adoption of IFRS 16 (Note 13)
Additions (related to Right of Use assets)
Exchange adjustment
Accretion interest
Fair value
Note
25,26
Borrowings &
derivative
financial
instruments
US$’000
Lease
liabilities
US$’000
81,620
(3,996)
962
—
—
(3,533)
3,996
—
—
—
639
(234)
—
21,185
679
(91)
947
—
Balance at 31 December 2019
25,26
82,025
20,149
Balance at 1 January 2018
Cash-flows:
Interest paid
Repurchase
Repayment.
Proceeds
Non-cash:
Interest charged
Reduction in accrued interest payable
Exchange adjustment
Accretion interest
Fair value
Balance at 31 December 2018
Borrowings &
derivative
financial
instruments
US$’000
Lease
liabilities
US$’000
Note
25,26
95,185
(4,503)
(12,042)
—
—
4,352
150
—
689
(2,211)
886
—
—
(374)
481
—
—
(31)
—
—
962
25,26
81,620
158
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
31.
POST BALANCE SHEET EVENTS
Decision to close Carlsbad manufacturing plant in 2020
The last number of years have seen a steady migration of customers away from using the Western Blot testing format for diagnosing Lyme in favour of
alternative testing platforms. Production volumes at our Carlsbad, California facility (which specialises in Western Blot manufacturing) have declined
steadily to the extent that it no longer makes economic sense to continue. Consequently, in the early part of 2020, management decided to close this
facility from June 30, 2020.
During the period until closure, final batches of Lyme Western Blot for remaining customers will be produced, whilst simultaneously transferring non-
Lyme product manufacturing to other Group facilities. No provision has been reflected in the 2019 financial statements relating to the costs associated
with closing this facility, terminating employment contracts, transferring assets to new locations in the Group. The Company recorded a provision of
US$2.4 million in its income statement for Q1, 2020 to cover the related closure costs. This primarily includes the write-off of inventory and
redundancy costs and is mainly non-cash in nature.
Covid-19 pandemic
Impact on Revenues
Subsequent to the balance sheet date, the Company’s revenues have been significantly impacted by the Covid-19 Pandemic with the greater impact
being seen from April 2020 onwards. In particular, this resulted in significant reduction in:
•
•
•
Haemoglobins revenues – including both instrument and consumables revenues with the impact being greater on diabetes (A1c) rather than on
haemoglobin variant revenues.
Autoimmune revenues – testing volumes were particularly impacted at our reference laboratory in Buffalo, New York but there were also lower
product sales in all major markets.
HIV, Infectious Diseases and Clinical chemistry product sales.
However, there were increases in sales of our transport medium product (used to transport Covid-19 patient samples in a stable environment), respiratory
tests for Legionnaire’s Disease and Strep Pneumoniae and of coronavirus-related antibodies sold by our life sciences supply business, Fitzgerald.
Covid-19 Expenditure Reduction Measures
All of the company’s operations have remained open during the pandemic though at reduced levels of output in line with expected demand. However, in
response to the expected reduction in revenues, the company undertook a number cost cutting measures which included the following:
•
•
•
The company furloughed a large percentage of its work forces in the USA, Ireland and Canada in April, 2020. Meanwhile, in Brazil and other
locations, staff costs were also significantly reduced by means of pay cuts.
The elimination of virtually all travel costs and significant reductions in discretionary sales and marketing expenditure.
Availing of governmental supports. This included the receipt of US$4.5 million of loans under the U.S. government’s Paycheck Protection
Program (“PPP”). Under the provisions of the PPP, these loans will be partially or totally forgiven, based on the extent to which a borrower’s
workforce returns to normal levels in the eight-week period immediately following the loans being granted. Upon receipt of these loans, the
Company ended the furloughing of all staff in the USA and therefore expects that a large percentage of these loans will be forgiven later in
2020, once the necessary verification has taken place. In Ireland, the company also availed of economic support mechanisms being provided by
the Irish Government though a significant level of furloughing continued into June, 2020, mainly due to the expected lower demand for HIV
products for the African market.
159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
31.
POST BALANCE SHEET EVENTS (CONTINUED)
Impact on Working Capital
Due to the measures implemented by the company in response to falling demand for products the Company’s cash position at May 31, 2020 was similar
to that reported in the financial statements as at 31 December, 2019. Furthermore, the Company has not seen any significant deterioration in the
recoverability of its inventory and accounts receivables balances as at 31 December, 2019. Meanwhile, the company is continuing to pay its creditors.
Asset Impairment
The annual impairment test on the carrying value of goodwill and other assets was carried out as at December 31, 2019 – see note 14. In determining
whether a potential asset impairment exists, a range of internal and external factors are considered. However, the impairment test only takes into account
conditions existing at the end of the reporting period. COVID-19 began to impact the population of Wuhan, China in December 2019 and initially the
outbreak was largely concentrated in China. It was declared to be a pandemic by the World Health Organization in March 2020. The Company’s
impairment test as at December 31, 2019 therefore does not reflect the downturn in economic activity or the aforementioned impacts on the Company’s
revenues and expenditure caused by the Covid-19 pandemic.
If the impairment test was reperformed using projections which take into account the aforementioned impacts on revenues and expenditure, the
impairment loss as at December 31, 2019 for Primus Corp. and Immco Diagnostics would be higher by US$1.8 million and US$1.7 million respectively.
The reason these two Cash Generating Units are the only units affected is that the other Cash Generating Units’ assets were already fully impaired, except
Fitzgerald, as at December 31, 2019.
32.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of these financial statements requires the Group to make estimates and judgements that affect the reported amount of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities.
On an on-going basis, the Group evaluates these estimates, including those related to intangible assets, contingencies and litigation. The estimates are
based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
Key sources of estimation uncertainty
Note 14 contains information about the assumptions and the risk factors relating to goodwill impairment. Note 22 outlines information regarding the
valuation of share options and warrants. Note 25 outlines the valuation techniques used by the Company in determining the fair value of exchangeable
notes and the associated embedded derivatives. In Note 29, detailed analysis is given about the interest rate risk, credit risk, liquidity risk and foreign
exchange risk of the Group. The Group recognises revenue when it transfers control over a good or service to a customer.
Critical accounting judgements in applying the Group’s accounting policies
Certain critical accounting judgements in applying the Group’s accounting policies are described below:
Research and development expenditure
Under IFRS as issued by IASB, the Group writes off research and development expenditure as incurred, with the exception of expenditure on projects
whose outcome has been assessed with reasonable certainty as to technical feasibility, commercial viability and recovery of costs through future
revenues. Such expenditure is capitalised at cost within intangible assets and amortised over its expected useful life of 15 years, which commences when
commercial production starts. For further information, refer to Note 14.
160
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
32.
ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
Acquired in-process research and development (IPR&D) is valued at its fair value at acquisition date in accordance with IFRS 3. The Company
determines this fair value by adopting the income approach valuation technique. Once the fair value has been determined, the Company will recognise
the IPR&D as an intangible asset when it: (a) meets the definition of an asset and (b) is identifiable (i.e. is separable or arises from contractual or other
legal rights).
Factors which impact our judgement to capitalise certain research and development expenditure include the degree of regulatory approval for products
and the results of any market research to determine the likely future commercial success of products being developed. We review these factors each year
to determine whether our previous estimates as to feasibility, viability and recovery should be changed.
Impairment of intangible assets and goodwill
Definite lived intangible assets are reviewed for indicators of impairment annually while goodwill and indefinite lived assets are tested for impairment
annually, individually or at the cash generating unit level.
Factors considered important, as part of an impairment review, include the following:
•
•
•
•
•
Significant underperformance relative to expected historical or projected future operating results;
Significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
Obsolescence of products;
Significant decline in our stock price for a sustained period; and
Our market capitalisation relative to net book value.
When we determine that the carrying value of intangibles, non-current assets and related goodwill may not be recoverable based upon the existence of
one or more of the above indicators of impairment, any impairment is measured based on our estimates of projected net discounted cash flows expected
to result from that asset, including eventual disposition. Our estimated impairment could prove insufficient if our analysis overestimated the cash flows or
conditions change in the future. For further information, refer to Note 14.
Allowance for slow-moving and obsolete inventory
We evaluate the realisability of our inventory on a case-by-case basis and make adjustments to our inventory provision based on our estimates of
expected losses. We write-off any inventory that is approaching its “use-by” date and for which no further re-processing can be performed. We also
consider recent trends in revenues for various inventory items and instances where the realisable value of inventory is likely to be less than its carrying
value. For further information, refer to Note 17.
Allowance for impairment of receivables
Revenue is recognised to the extent that it is probable that economic benefit will flow to the Group and the revenue can be measured. No revenue is
recognised if there is uncertainty regarding recovery of the consideration due at the outset of the transaction or the possible return of goods. We make
judgements as to our ability to collect outstanding receivables and where necessary make allowances for impairment. Such impairments are made based
upon a specific review of all significant outstanding receivables. In determining the allowance, we analyse our historical collection experience and
current economic trends. If the historical data we use to calculate the allowance for impairment of receivables does not reflect the future ability to collect
outstanding receivables, additional allowances for impairment of receivables may be needed and the future results of operations could be materially
affected. For further information, refer to Note 29.
161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
32.
ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
Accounting for income taxes
Significant judgement is required in determining our worldwide income tax expense provision. In the ordinary course of a global business, there are
many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise as a consequence of revenue sharing
and cost reimbursement arrangements among related entities, the process of identifying items of revenue and expense that qualify for preferential tax
treatment and segregation of foreign and domestic income and expense to avoid double taxation. In addition, we operate within multiple taxing
jurisdictions and are subject to periodic audits in these jurisdictions.
Deferred tax assets and liabilities are determined for the effects of net operating losses and temporary differences between the book and tax bases of
assets and liabilities, using tax rates projected to be in effect for the year in which the differences are expected to reverse. While we have considered
future taxable income and ongoing prudent and feasible tax planning strategies in assessing whether deferred tax assets can be recognised, there is no
assurance that these deferred tax assets may be realisable. The extent to which recognised deferred tax assets are not realisable could have a material
adverse impact on our income tax provision and net income in the period in which such determination is made.
Note 15 to the consolidated financial statements outlines the basis for the deferred tax assets and liabilities and includes details of the unrecognised
deferred tax assets at year end. The Group derecognised deferred tax assets arising on unused tax losses except to the extent that there are sufficient
taxable temporary differences relating to the same taxation authority and the same taxable entity which will result in taxable amounts against which the
unused tax losses can be utilized before they expire. The derecognition of these deferred tax assets was considered appropriate in light of the increased
tax losses caused by the restructuring and uncertainty over the timing of the utilization of the tax losses. Except for the derecognition of deferred tax
assets there were no material changes in estimates used to calculate the income tax expense provision during 2019, 2018 or 2017.
IFRS 16
IFRS 16, Leases, requires entities to make certain judgements and estimations. Critical judgements was required by the Company in the following areas:
•
•
•
Determining whether or not a contract contains a lease. Company assessed if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration
Significant judgement is also required in establishing whether or not it is reasonably certain that an extension option will be exercised,
considering whether or not it is reasonably certain that a termination option will not be exercised. In making this decision, management
considered the facts and circumstances that create a significant economic incentive. Factors specific to the asset, the entity and the wider market
were also considered.
Further, critical judgement is involved in determining whether or not variable lease payments are truly variable, or in-substance fixed. In-
substance variable lease payments are treated as fixed lease payments.
Key source of estimation and uncertainty is calculation of the appropriate discount rate to use. When making the determination, the company considered
the rate of interest that they would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a
similar value to the right-of-use asset in a similar economic environment.
Revenue Recognition
No revenue is recognised if there is uncertainty regarding recovery of the consideration due at the outset of the transaction or the possible return of goods.
We make a judgement as to the collectability of invoiced sales based on an assessment of the individual debtor taking into account past payment history,
the probability of default or delinquency in payments and the probability that debtor will enter into financial difficulties or bankruptcy.
We operate a licenced reference laboratory in New York, USA that specializes in diagnostics for autoimmune diseases. The laboratory provides testing
services to two types of customers. Firstly, institutional customers, such as hospitals and commercial diagnostic testing providers, and secondly insurance
companies on behalf of their policyholders. The revenue recognition for services provided to insurance companies requires some judgement. In the US,
there are rules requiring all insurance companies to be billed the same amount per test. However, the amount that each insurance company pays for a
particular test varies according to their own internal policies and this can typically be considerably less than the amount invoiced. We recognise lab
services revenue for insurance companies by taking the invoiced amount and reducing it by an estimated percentage based on historical payment data. We
review the percentage reduction annually based on the latest data. As a practical expedient, and in accordance with IFRS, we apply a portfolio approach
to the insurance companies as they have similar characteristics. We judge that the effect on the financial statements of using a portfolio approach for the
insurance companies will not differ materially from applying IFRS 15 to the individual contracts within that portfolio.
162
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
33.
GROUP UNDERTAKINGS
The consolidated financial statements include the financial statements of Trinity Biotech plc and the following principal subsidiary undertakings:
Name and registered office
Trinity Biotech plc
IDA Business Park, Bray
Co. Wicklow, Ireland
Trinity Biotech Manufacturing Limited
IDA Business Park, Bray
Co. Wicklow, Ireland
Trinity Research Limited
IDA Business Park, Bray
Co. Wicklow, Ireland
Benen Trading Limited
IDA Business Park, Bray
Co. Wicklow, Ireland
Principal activity
Investment and holding
company
Manufacture and sale
of diagnostic test kits
Research and
development
Principal Country of
incorporation and
operation
Ireland
Group % holding
Holding
company
Ireland
100%
Ireland
100%
Trading
Ireland
100%
Trinity Biotech Manufacturing Services Limited
IDA Business Park, Bray
Co. Wicklow, Ireland
Dormant
Ireland
100%
Trinity Biotech Luxembourg Sarl
1, rue Bender,
L-1229 Luxembourg
Investment and
provision of financial
services
Luxembourg
100%
Trinity Biotech Inc
Girts Road,
Jamestown,
NY 14702, USA
Clark Laboratories Inc
Trading as Trinity Biotech (USA)
Girts Road, Jamestown
NY14702, USA
Mardx Diagnostics Inc
5919 Farnsworth Court
Carlsbad
CA 92008, USA
Fitzgerald Industries International, Inc
2711 Centerville Road, Suite 400
Wilmington, New Castle
Delaware, 19808, USA
Holding Company
U.S.A.
100%
Manufacture and sale
of diagnostic test kits
U.S.A.
100%
Manufacture and sale
of diagnostic test kits
U.S.A.
100%
Management services
company
U.S.A.
100%
Biopool US Inc (trading as Trinity Biotech Distribution)
Girts Road, Jamestown
NY14702, USA
Sale of diagnostic test
kits
U.S.A.
100%
Primus Corporation
4231 E 75th Terrace
Kansas City,
MO 64132, USA
Manufacture and sale
of diagnostic test kits
and instrumentation
U.S.A.
100%
163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
32.
GROUP UNDERTAKINGS (CONTINUED)
Name and registered office
Phoenix Bio-tech Corp.
1166 South Service Road West
Oakville, ON L6L 5T7
Canada.
Fiomi Diagnostics Holding AB
Dag Hammarskjöldsv 52A
SE-752 37 Uppsala
Sweden
Fiomi Diagnostics AB
Dag Hammarskjöldsv 52A
SE-752 37 Uppsala
Sweden
Trinity Biotech Do Brasil
Comercio e Importacao Ltda
Rua Silva Bueno
1.660 – Cj. 101/102
Ipiranga
Sao Paulo
Brazil
Trinity Biotech (UK) Ltd
Mills and Reeve LLP
Botanic House
100 Hills Road
Cambridge, CB2 1PH
United Kingdom
Immco Diagnostics Inc
60 Pineview Drive
Buffalo
NY 14228, USA
Nova Century Scientific Inc
5022 South Service Road
Burlington
Ontario
Canada
Trinity Biotech Investment Ltd
PO Box 309
Ugland House
Grand Cayman
KY1-1104
Cayman Islands
Principal activity
Manufacture and sale of
diagnostic test kits
Principal Country of
incorporation and
operation
Canada
Group % holding
100%
Holding Company
Sweden
100%
Discontinued operation
Sweden
100%
Sale of diagnostic test
kits
Brazil
100%
Sales & marketing
activties
UK
100%
Manufacture and sale of
autoimmune products
and laboratory services
Manufacture and sale of
autoimmune products
Investment and
provision of financial
services
U.S.A.
100%
Canada
100%
Cayman Islands
100%
33.
AUTHORISATION FOR ISSUE
These Group consolidated financial statements were authorised for issue by the Board of Directors on June 15, 2020.
164
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this
Annual Report on its behalf.
Signatures
TRINITY BIOTECH PLC
By: /s/ RONAN O’CAOIMH
Mr Ronan O’Caoimh
Director/
Chief Executive Officer
Date: June 15, 2020
By: /s/ KEVIN TANSLEY
Mr Kevin Tansley
Company secretary/
Chief Financial Officer
Date: June 15, 2020
165
Item 19
Exhibits
Exhibit No.
Description of Exhibit
1.1
2.0
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Memorandum and Articles of Association of Trinity Biotech plc (included as Exhibit 1 to our Annual Report on Form 20-F (File
No. 000-22320), filed with the SEC on March 31, 2006).
Form of Deposit Agreement dated as of October 21, 1992, as amended and restated, among Trinity Biotech plc, The Bank of New York as
Depositary, and all Owners and holders from time to time of American Depositary Receipts issued thereunder (included as Exhibit 1 to our Form
F-6 (File No. 333-111946), filed with the SEC on January 15, 2004.)
Trinity Biotech plc Employee Share Option Plan 2013 (included as Exhibit 4.1 to our Registration Statement on Form S-8 (File
No. 333-195232), filed with the SEC on April 11, 2014).
Trinity Biotech plc Employee Share Option Plan 2011 (included as Exhibit 4 to our Registration Statement on Form S-8 (File No. 333-182279),
filed with the SEC on June 22, 2012).
Credit Facilities Letter dated as of February 6, 2015 between Allied Irish Banks, p.l.c. and Trinity Biotech plc, Trinity Biotech Manufacturing
Limited and Trinity Biotech Financial Services Limited, as Borrowers (included as Exhibit 4.7 to our Annual Report on Form 20-F (File
No. 000- 22320), filed with the SEC on March 25, 2015).
Guarantee Letter to Allied Irish Banks, p.l.c. dated as of February 6, 2015 by Trinity Biotech plc, Trinity Biotech Manufacturing Limited and
Trinity Biotech Financial Services Limited, as Borrowers (included as Exhibit 4.8 to our Annual Report on Form 20-F (File No. 000- 22320),
filed with the SEC on March 25, 2015).
Lease agreement dated as of October 18, 2004 between Ronan O’Caoimh and Jim Walsh with Trinity Biotech Manufacturing Limited in respect
of office premises in Bray, Co Wicklow, Ireland (included as Exhibit 4b.1 to our Annual Report on Form 20-F (File No. 000- 22320), filed with
the SEC on March 31, 2006).
Lease agreement dated as of November 26, 2004 between Ronan O’Caoimh, Jonathon O’Connell and Jim Walsh with Trinity Biotech plc in
respect of warehouse premises in Bray, Co Wicklow, Ireland (included as Exhibit 4b.2 to our to our Annual Report on Form 20-F (File No. 000-
22320), filed with the SEC on 31 March 2006).
Lease agreement dated as of December 20, 2007 between Ronan O’Caoimh and Jim Walsh with Trinity Biotech Manufacturing Limited in
respect of warehouse premises in Bray, Co Wicklow, Ireland (included as Exhibit 4.13 to our Annual Report on Form 20-F (File No. 000-
22320), filed with the SEC on March 25, 2015).
Lease agreement dated as of March 19, 2004 between Livers, LLC with Primus Corporation in respect of office premises in Kansas City,
Missouri, U.S.A. (included as Exhibit 4.14 to our Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
Lease agreement dated as of May 30, 2001 between Lorrelle S. Johnson and Sharon L. Johnson with Clark Laboratories Inc in respect of office
premises in Jamestown, New York, U.S.A. (included as Exhibit 4.15 to our Annual Report on Form 20-F (File No. 000- 22320), filed with the
SEC on March 25, 2015).
4.10
Lease agreement dated as of February 13, 2012 between Barco Inv. Inc with Mardx Diagnostics in respect of office premises in San Diego,
California, U.S.A. (included as Exhibit 4.16 to our Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
166
4.11
4.12
4.13
4.14
4.15
8.1
12.1
12.2
13.1
13.2
15.1
Lease agreement dated as of December 1, 2007 between 60 Pineview LLC with Immco Diagnostics Inc in respect of office premises in Amherst,
New York, U.S.A. (included as Exhibit 4.17 to our Annual Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
CDC Non-Exclusive Patent License Agreement dated as of May 22, 2012 (included as Exhibit 4.19 to our Annual Report on Form 20-F (File
No. 000- 22320), filed with the SEC on March 25, 2015).
The University of Texas System Materials License Agreement dated as of April 18, 2005 (included as Exhibit 4.20 to our Annual Report on
Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
Inverness Medical Innovations, Inc. Patent License Agreement renewal dated as of August 3, 2006 (included as Exhibit 4.21 to our Annual
Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
National Institute of Health Non-Exclusive Patent License Agreement dated as of December 17, 1999 (included as Exhibit 4.22 to our Annual
Report on Form 20-F (File No. 000- 22320), filed with the SEC on March 25, 2015).
List of significant subsidiaries of Trinity Biotech plc (included as Item 18, note 32 to the consolidated financial statements in this Annual
Report).
Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Consent of Independent Registered Public Accounting Firm
167
CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 12.1
I, Ronan O’Caoimh, certify that:
1. I have reviewed this annual report on Form 20-F of Trinity Biotech plc;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the company and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that
has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the company’s
auditors and the audit committee of the company’s board of directors:
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the company’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
June 15, 2020
/s/ RONAN O’CAOIMH*
Ronan O’Caoimh
Chief Executive Officer
* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.
CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 12.2
I, Kevin Tansley, certify that:
1. I have reviewed this annual report on Form 20-F of Trinity Biotech plc;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the company and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that
has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the company’s
auditors and the audit committee of the company’s board of directors:
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the company’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
June 15, 2020
/s/ KEVIN TANSLEY*
Kevin Tansley
Chief Financial Officer
* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 13.1
In connection with the Annual Report of Trinity Biotech plc (the “Company”) on Form 20-F for the period ended December 31, 2019 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Ronan O’Caoimh, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §
1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ RONAN O’CAOIMH*
Ronan O’Caoimh
Chief Executive Officer
June 15, 2020
* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by Trinity Biotech plc for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 13.2
In connection with the Annual Report of Trinity Biotech plc (the “Company”) on Form 20-F for the period ended December 31, 2019 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Kevin Tansley, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ KEVIN TANSLEY*
Kevin Tansley
Chief Financial Officer
June 15, 2020
* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by Trinity Biotech plc for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Consent of Independent Registered Public Accounting Firm
Exhibit 15.1
We have issued our reports dated June 15, 2020, with respect to the consolidated financial statements and internal control over financial reporting included in the
Annual Report of Trinity Biotech plc on Form 20-F for the year ended December 31, 2019. We consent to the incorporation by reference of said reports in the
following Registration Statements of Trinity Biotech plc:
Form Type
Form S-8
Form S-8
/s/ GRANT THORNTON
Dublin, Ireland
June 15, 2020
File Number
333-182279
333-195232
Effective Date
6/22/2012
4/11/2014