Tissue Regenix Group plc
('Tissue Regenix', 'Group' or the 'Company')
Final results for the year ended 31 December 2022
Annual Report and Notice of AGM
Tissue Regenix (AIM: TRX), the regenerative medical device group, announces its audited results for the year ended 31 December 2022, having delivered on its strategy for growth whilst achieving strong commercial traction. Across the period Tissue Regenix has improved margins, recorded over 20% revenue growth and reported positive Adjusted EBITDA for the first time in the fourth quarter of 2022, illustrating it is well positioned to drive profitable and sustainable growth.
Financial Highlights
· Group revenues increased by 24% to USD24,476k (2021: USD19,746k)
o BioRinse® increased 26% to USD16,049k (2021: USD12,711k) driven by growth across the allograft segments
o dCELL® increased 25% to USD5,301k (2021: USD4,246k) as the effects of the commercial reorganisation in 2022 gained traction
o GBM-V increased 12% to USD3,126k (2021: USD2,789k) (24% constant currency), driven by increased donor tissue supply
· Gross profit of USD11,258k (2021: USD8,476k). Significant improvement in gross margin - 46% (FY 2021: 43%) due to a price increase in the BioRinse segment and further efficiencies
· Positive Adjusted EBITDA for fourth quarter of 2022 due to sales growth and tight expense management
· Cash position at 31 December 2022 of USD5,949k (2021: USD7,709k) to support the current business growth plan
Operational Highlights
· Addition of VNEW™ Fascia Lata product for the Group's Urological/gynaecological partner ARMS Medical
· Distribution agreements and initiation for OrthoPure® XT in Italy, Germany, and agreement for China and Hong Kong (post-period end)
· Increased efficiencies in donor processing provide for a c. USD10.0m additional sales revenue potential from the Group's existing footprint. Phase 2 expansion now not required until 2025
· 124% more donors sourced to increase supply and meet the needs of the Group's commercial partners
· Commercial reorganisation of dCELL division has begun to show benefits with renewed sales growth, as well as 41 new distributors hired and trained
· Identified and are in the process of establishing a third-party logistics provider to provide distribution services to the European Union and the UK
Post-period Highlight
· The Group revised and expanded its credit facility to USD10,000k (from the current USD5,000k), and the credit facility term has been extended to 2028
Jonathan Glenn, Chair of Tissue Regenix, commented: "During what has been a year of immense progress with some notable milestones achieved, we have continued to demonstrate and realise operational and commercial growth. This has been the result of our continued focus on our 4S strategy - Supply, Sales Revenue, Sustainability and Scale. We have experienced over 20% revenue growth across the Group, resulting in a positive adjusted EBITDA for the fourth quarter of 2022. Execution of this strategy will continue to provide us with the opportunity to build shareholder value as we broaden our opportunities in regenerative medicine, addressing many critical unmet clinical needs around the globe."
Annual Report and Accounts and Notice of AGM
As part of the Company's move to electronic reporting, the Annual Report and Accounts, notice of AGM and accompanying form of proxy, will be available later this morning on the Company's website, www.tissueregenix.com, in accordance with AIM Rule 20. For those who opted to receive hard copies of the Annual Report, these will be posted today.
The Company's AGM will be held at DLA Piper, 160 Aldersgate St, Barbican, London EC1A 4HT, on 27 April 2023 at 1.00 pm. Shareholders are invited to ask the Board questions about the Accounts or the AGM by email emailing Walbrook PR at TissueRegenix@walbrookpr.com.
The results of the votes on the proposed resolutions will be announced by RNS as soon as practicable after the conclusion of the AGM.
Proposed Share Consolidation
The Company currently has 7,035,794,890 Existing Ordinary Shares of 0.1 pence each in issue. The middle market share price of each Ordinary Share as at close on 20 March 2023 was 0.605 pence, giving a market capitalization of £42.57 million. The Directors consider that the number of Existing Ordinary Shares is not only unwieldly in volume for a company of Tissue Regenix's market capitalisation, but when combined with the prevailing share price, is not conducive to an orderly market. The Directors believe that both these factors may have the potential to cause a de-stabilising effect on the share price due to small trading volumes having a disproportionate effect on share prices.
The Board believes that a consolidation of the Company's Ordinary Share Capital will result in a more appropriate number of shares in issue for the Company. Accordingly, the Board has proposed a capital reorganisation in early 2023, which will result in shareholders holding one new Ordinary Share for every 100 existing Ordinary Shares ('the Consolidation').
The Board anticipates that the Consolidation may also help to make the Company's shares more attractive to investors and may result in a narrowing of the bid/offer spread, thereby improving liquidity.
For the avoidance of doubt, there is no present intention to raise any equity capital or issue any further shares in relation to our growth plans as Tissue Regenix is more than adequately funded to execute on its strategy.
Investor Briefing
Daniel Lee, Chief Executive Officer, and David Cocke, Chief Financial Officer, will host a live online presentation relating to the final results via the Investor Meet Company platform at 1.30pm on Thursday 23 March 2023. The presentation is open to all existing and potential shareholders.
Investors can sign up to Investor Meet Company for free and register for the presentation here: https://www.investormeetcompany.com/tissue-regenix-group-plc/register-investor
Investors who already follow Tissue Regenix on the Investor Meet Company platform will be de facto invited.
For more information:
| Tissue Regenix Group plc | ||
| David Cocke, Chief Financial Officer | Via Walbrook PR | |
| | | |
| finnCap Ltd (Nominated Adviser and Broker) | | |
| Emily Watts/Geoff Nash/George Dollemore - Corporate Finance | | |
| Nigel Birks/Harriet Ward - ECM | | |
|
| | |
| Walbrook PR (Financial PR & IR) | Tel: +44(0)20 7933 8780 | |
| Alice Woodings / Lianne Applegarth | TissueRegenix@walbrookpr.com | |
About Tissue Regenix (www.tissueregenix.com)
Tissue Regenix is a leading medical device Group in the field of regenerative medicine. The Group's patented decellularisation technology ('dCELL®') removes DNA and other cellular material from animal and human soft tissue, leaving an acellular tissue scaffold which is not rejected by the patient's body and can then be used to repair diseased or damaged body structures. Current applications address many critical clinical needs in sports medicine, foot and ankle and wound care.
In August 2017, Tissue Regenix acquired CellRight Technologies®, a biotech company that specialises in regenerative medicine and is dedicated to the development of high quality, innovative tissue scaffolds, which can enhance healing opportunities in defects created by trauma and disease. CellRight®'s human tissue products may be used in spine, trauma, general orthopaedic, dental and ophthalmological surgical procedures.
Joint Chair & CEO Statement
2022 performance
2022 has been a solid year of growth, marked by achieving several new milestones for the Group. As we had forecast, our top-line revenues exceeded the prior year and continued a positive growth trajectory. Our three main business units all demonstrated growth building on the strong and sustainable market position we have built for our company. As a result, the Group has demonstrated sales growth greater than its peers over the past three years and succeeded in meeting market expectations. This is despite the significant headwinds faced by commercial healthcare organisations in 2022. We are pleased that the Group continued to execute on its plans to deliver further operational and commercial growth. We have continued to expand our distribution network with new products and increased the number of strategic partners and distributors we work with to broaden the adoption of our innovative products. All of this could not have happened without the talented and dedicated employees of the Group, which we would like to thank for their hard work.
Strategy
Our focus remains on the 4S strategy which continues to be the foundation for how we operate, execute and drive our growth:
· Supply - highlighted by the fundamental ability to source donor tissue and having the capacity to produce various graft products
· Sales Revenue - to distribute the finished grafts to the clinicians and institutions that need these products to treat patients
· Sustainability - to manage sales revenue along with expenses to be a profitable entity that does not need additional external capital to operate
· Scale - to utilise the first three S's to continue to invest in and grow the business, license or acquire new products, technologies and companies
We believe any significant issues with tissue supply are now behind us and have stabilised, given that capacity has been increased to service our needs through to 2025. Our sales growth continues across all divisions, highlighted by achieving an important milestone for the Group of an adjusted EBITDA profitable fourth quarter of 2022. Sustainability remains a key focus and by delivering this we will create new opportunities for the Group with respect to scale, internally and externally.
BioRinse
Through a primary focus on the United States ('US') orthopaedics and dental markets, our BioRinse portfolio reported a strong performance in 2022 with sales of USD16,049k (2021:USD12,711k). The 26% growth was led by confidence in our ConCelltrate® demineralised bone matrix, and AmnioWorks™ birth tissue product families. Our strategic partners continue to have confidence in the superior performance of our products and our ability to deliver products in the required quantities and timeframes due to our elevated processing capacity. Since the completion of the Phase 1 expansion, we have been able to supply products and adjust to unanticipated customer needs in half the amount of time. Achieving these service levels with our partners and distributors across all the surgical specialties we serve (orthopaedics, sports medicine, spine, dental, trauma, others), has earned us a solid and much improved reputation in the industry. Our growth rate is above the market rate for the period (see Market Overview for more details on underlying market growth rates), with our top five product families demonstrating a greater than 18% year-on-year revenue growth. We believe we are taking market share, with the opportunity to deliver further significant and sustainable growth in the years ahead.
Our additional capacity provides for further opportunities both in the US and the rest of the world. In the period, we began our discussions and efforts to distribute allograft tissue outside the US, identifying target markets and distribution partners. We also engaged a third-party logistics partner and began the required regulatory approvals to expand into Europe. We expect to initiate commercial distribution in select markets in 2023 and are excited about the opportunities that we can see.
dCELL
In 2022, the dCELL commercial business was restructured to bring our commercial leadership closer to our customers, distributors and clinicians. One objective was to increase our distribution footprint in areas where we had established business by adding a further 32 distributors. We exceeded that goal by adding 41 distributors by the end of the calendar year, and as a result sales revenue for this division was USD5,301k (2021:USD4,246k) an increase of 25%. The demand for dCELL products with our urological/gynecological partner increased during 2022 driven by continued market penetration of Dermapure, non-oriented DermaPure and increased utilisation of the pre-shaped VNEW product. We launched VNEW™ Fascia Lata in late 2022 and anticipate this product will develop significant traction in 2023.
During the period, the market for elective surgeries in the EU rebounded, so our efforts to set up distribution of OrthoPure XT started to gain momentum. OrthoPure XT is the only non-human biologic tissue graft available to the market for certain anterior cruciate ligament reconstruction procedures. This product was introduced into Italy and Germany in 2022 and we expect more significant revenue contributions in 2023.
Advancing the clinical science of a new and novel product such as OrthoPure XT provides benefits to growth in the product's life cycle. In April 2022, the four-year clinical experience with OrthoPure XT was presented at the 20th European Society of Sports Traumatology, Knee Surgery & Arthroscopy Congress in Paris. The continued positive long term safety and performance of OrthoPure XT has important implications in this high demand application. A manuscript on the five-year clinical experience is in preparation and planned for submission to a major European publication.
GBM-V
The GBM-V joint venture operates in a Good Manufacturing Practices facility which has been producing commercial corneal products since 2016. In 2022, the combination of increased supply and yield improvements resulted in the achievement of a record year of distributed corneal grafts, with revenues up 12% (up 24% at constant currency) to USD3,126k (2021: USD2,789k).
New strategic partners and distributors
We continued to meet operational milestones, support the growth of our commercial partners and secure additional strategic partnerships or distributorships in 2022.
For BioRinse, our top customers change annually due to market dynamics but we continued to bring on additional strategic partners and distributors, signing 10 agreements in 2022, for specialties such as spine and dental. Across the BioRinse portfolio we experienced a 5% increase in the number of orders we processed.
For dCELL, we increased the number of distributors, substantially ahead of our internaltargets. Overall revenue was up 25% versus prior year and neared the levels seen pre-pandemic. Orders for dCELL products increased by 20% versus the prior year which translated into 29% more units shipped. The addition of new distributors also enabled us to penetrate existing accounts more deeply, with revenue up 80% in some existing hospital systems.
In 2022, we introduced VNEW Fascia Lata produced for our Urological/gynaecological partner ARMS Medical. The fascia lata tissue is underutilised so this product enabled us to use tissue which would otherwise be discarded and meets with our mission of maximising the gift of human tissue donation whilst also helping us to improve our gross marginThis type of tissue is used as a sling in stress urinary incontinence procedures, which affects about 10% of the female population. We currently await the introduction of two other new products through our strategic partners.
The pandemic impacted the launch of OrthoPure XT into the UK and selected European markets, however the market for elective surgeries in the EU has rebounded since, and our efforts to setup distribution of the product has started to gain momentum. In March 2022, we signed an agreement with Geistlich Biomaterials Italia, a subsidiary company of Geistlich Pharma AG, which included a commitment to advance the clinical science for OrthoPure XT. Sales and clinical use of OrthoPure XT have begun in Italy and initial feedback has been positive. In November 2022, we signed an agreement with 2Med GmbH to be our exclusive distributor in Germany and we filled an initial stocking order. To aid us in bringing on distribution partners as part of our European growth strategy, we have engaged a seasoned sports medicine commercial consultant to identify these partners for OrthoPure XT.
Post year end, we signed an agreement with Kingsung Medical Group ('Kingsung') for the exclusive distribution of OrthoPure XT into China and Hong Kong. As part of the agreement, Kingsung will share the cost to obtain regulatory approval in China. It is estimated that the current market for ligament reconstruction procedures in China and Hong Kong is approximately 200k - 250k procedures and growing. This opportunity compares favourably to the size of the United States market, with ligament reconstruction procedures there estimated to be in the range of 250k-400k.
Further product line extensions or product improvements are anticipated during 2023 which will continue to drive our organic growth, efficiently utilising our facility and tissues and supporting the commercial efforts of our organisation and strategic partners.
Operations
2022 was a successful year for the Group following the completion of the Phase 1 capacity expansion programme in San Antonio in 2021, which provided additional space for donor storage, processing and production, and distribution and laid the foundation for future growth.
To meet the need of our commercial partners and our focus on supply, in 2022 we sourced 124% more donors overall. Though we processed fewer Musculoskeletal donors in 2022, our capacity shifted to the fluctuating demands for Dermis and Amnion where processing increased by 135% and 130%, respectively.
The additional capacity for storage has alleviated our concerns for tissue supply for use in producing products. In 2022 we implemented a programme to help us manage the inventory of released donor tissue by making some of it available to other processing companies, subsequently establishing a number of ongoing relationships with other tissue processors. This programme aligns with our responsibility to honour the gift of tissue donation through utilisation in a timely manner for products that can help patients.
Following the addition of two sterile packaging rooms at our San Antonio facility, we have realised some unanticipated gains to our overall capacity for processing and production. This additional capacity is estimated to add c.USD10 million of revenue generation potential. This has effectively delayed our need for the 10 additional clean rooms in the Phase 2 expansion from 2024 until 2025. The expansion has also provided more flexibility in terms of how we can schedule processing and production. As a result, we have been able to respond to orders or unanticipated changes in almost half the amount of time required prior to the Phase 1 expansion.
All of the Group's tissue operations in the US are regulated by the Food and Drug Administration ('FDA') and need to comply with American Association of Tissue Banks ('AATB') certification requirements. Following reinspection by the AATB, we received recertification in December 2022 till March 2025.
Our UK Operations in Garforth received ISO 13485 recertification in January 2022 and also completed a surveillance audit by our notified body. As a result of a change in medical device regulation in the European Union from the Medical Device Directive to the Medical Device Regulation ('MDR') our UK team submitted our MDR update in mid-2022 and have been informed that review will not begin till mid 2023 due to the backlog created by the MDR requirement. The team has processed and shipped the OrthoPure XT device to meet the commercial demands of our European partners.
The impact of the pandemic
The prolonged effects of the pandemic are evident and we still see issues with staff shortages at healthcare institutions impacting elective procedures and we are still seeing component and material supply chain issues affecting our operations or those of our material or equipment providers due to global supply issues. These supply chain issues have indirect effects as they have also lengthened the timelines of our third party vendors and services. Wage inflation and the tight labour market have made it competitive for all to retain or recruit talented personnel. Our resilience and resourcefulness will continue to minimise the impact of any lasting pandemic related issues.
Organisational changes
In January 2022 Kirsten Lund was appointed into the Europe, Middle East and Africa ('EMEA') Business Director role and remains as our Corporate Secretary. Capitalising on her experiences within the organisation, Kirsten will coordinate and drive our efforts to establish commercial distribution focused in the EMEA region.
We will continue to invest in resources which will grow our organisation across all divisions. Additions to our commercial team in BioRinse and dCELL will bring further opportunities to our organisations and spread our footprint in the US and the rest of the world.
Outlook
We will continue to build on our 4S Strategy to provide a solid foundation for the future, with sales revenue and sustainability becoming the priorities in 2023. The Group is well prepared for additional market fluctuations as markets continue to normalise post-pandemic.
The BioRinse products will remain the dominant revenue contributor in 2023 whilst growth will come from existing and new partners as well as new products. We anticipate significant growth from our dCELL as we continue to invest and expand into markets which historically have been underrepresented, while our GBM-V joint venture consistently identifies opportunities to increase its tissue supply or other opportunities to maintain growth.
Our geographic outreach with our human tissue dCELL and BioRinse portfolios will expand as we sign agreements with additional distributors. Alongside this, OrthoPure XT will be introduced into additional EU and other markets in 2023.
In 2023, we aim to pursue the commercialisation of those products which utilise our core technology platforms, provide product line extensions that are fast to market, and address a specific clinical or commercial need. Whilst we will continue to assess when we need to invest in further capacity expansion, we will develop further efficiencies and be creative in our business practices, whilst looking at all opportunities to scale the business for additional longer term growth.
A combination of the team that we have in place; the products we currently have and the pipeline of new products we are developing; the commercial relationships we have and the distribution base that we have established all give the Board optimism about the future, both short and long term, for the Company. We believe that we are extremely well positioned to take advantage of the opportunities in front of us and to create a profitable, sustainable, cash generative company for shareholders.
We are all excited by the significant opportunities.
Jonathan Glenn
Chair
Daniel Lee
Chief Executive Officer
20 March 2023
Financial Review
Revenue
During the year ended 31 December 2022, revenue increased by 24% to USD24,476k (2021: USD19,746k).
The Group experienced growth across all three key business segments for the year as more fully described below:
· The BioRinse segment increased top line sales by 26% to USD16,049k (2021: USD12,711k) driven by growth across the allograft segments led by the ConCelltrate and AmnioWorks product families.
· Revenue from the dCELL division increased 25% to USD5,301k (2021: USD4,246k) as the commercial reorganisation implemented in 2022 gained traction.
· The Group's joint venture, GBM-V, based in Rostock, Germany, increased sales by 12% (up by 24% at constant currency) to USD3,126k (2021: USD2,789k) as a result of increased tissue supply.
Cost of sales and gross profit
Gross profit for the year was USD11,258k (2021: USD8,476k). Gross margin percentage increased to 46% (2021: 43%). In early 2022, a price increase was put in place in the BioRinse division to address the cost pressures associated with the inflationary environment. The benefits of this increase were offset slightly due to a margin reduction in the dCELL segment caused by a one-off provision (c. USD447k) related to a supply contract termination.
Included in costs of sales is cost of product USD10,053k (2021: USD10,348) and third-party commissions USD1,205k (2021: USD922k).
Administrative expenses
During 2022, administrative expenses before exceptional items increased by USD769k, or 6%, to USD13,268k (2021: USD12,499k) driven primarily by additional staffing costs.
Exceptional items
There were no exceptional items recorded during the year ended 31 December 2022 (2021: USD355k).
Finance income/charges
Finance income of USD8k (2021: USD3k) represented interest earned on cash deposits. Finance charges for the year were reported at USD826k (2021: USD767k) and related primarily to interest charges and associated costs in respect of the MidCap Financial Trust ('MidCap') loan arrangement.
Loss for the year
The loss for the year was USD2,596k (2021 loss: USD4,985k) resulting in a basic loss per share of 0.04 cents (2021 loss per share: 0.07 cents). The reduction in the loss for the year was driven by the increases in sales revenue and gross margin percentage.
Taxation
The Group continues to invest in developing its product offering, and as such is eligible to submit enhanced research and development tax claims, enabling it to exchange tax losses for a cash refund. In the year to December 2022, a refund of USD401k was receivable (2021: USD534k). The year-on-year reduction was a result of the business continuing to move its resources away from research and development to more commercial activities.
Corporation tax payable in the US amounted to USD nil (2021: USD nil). A corporation tax credit of USD232k (2021: USD157k) was recognised in the period. Gross tax losses carried forward in the UK were USD58,900k (2021: USD60,779k). The Group does not currently pay tax in the UK. A deferred tax asset has not been recognised as the timing and recoverability of the tax losses remain uncertain.
Statement of Financial Position
At December 2022, the Group had net assets of USD30,401k (2021: USD33,392k) of which cash in hand totalled USD5,949k (2021: USD7,709k).
Inventory levels increased 12% against the 24% sales revenue increase at USD10,882k (2021: USD9,719k) as the BioRinse and dCELL segments managed stock levels closely to increase inventory turnover while also keeping adequate stock levels to meet customer demand.
Intangible assets decreased slightly to USD15,061k (2021: USD15,064k) in the year. A further USD709k of development costs were capitalised in the year. The balance of movements in this account relate to amortisation.
The Directors carried out the annual impairment review, as required by IAS 36, to determine whether there was any requirement for an impairment provision in respect of its non-current assets at 31 December 2022.
The results of the test indicated that the recoverable amount of the Group's non-current assets was at least equal to the carrying amount of those assets and, therefore, no provision for impairment was required at 31 December 2022 (2021: USD nil).
Working capital decreased slightly in the year to USD9,365k (2021: USD9,992k), driven by an increase in inventory from continued growth in manufacturing activities and an increase in trade receivables due to sales growth, offset by an increase in trade and other payables and an increase in the current portion of loans and borrowings. (See subsequent development paragraph below for more information on the Group's credit facilities.) The Statement of Financial Position included corporation tax receivable of USD401k (2021: USD534k) in respect of UK research and development tax credits.
Borrowings and lease liability
Borrowings include the USD6,258k debt facility through MidCap and the USD3,350k lease liability related to the Group's leasehold in San Antonio, TX (2021: USD4,465k and USD3,482k respectively). The MidCap debt facility includes USD2,000k in respect of the term loan and USD4,387k in respect of the revolving credit facility, net of USD129k of capitalised debt issue costs.
Dividend
No dividend has been proposed for the year to 31 December 2022 (2021: Nil).
Accounting policies
The Group's consolidated financial information has been prepared in accordance with UK adopted International Accounting Standards ('UK adopted IAS').
Going concern
The Group financial statements have been prepared on a going concern basis based on cash flow projections approved by the Board for the Group for the period to 31 December 2024 (the 'Cash Flow Projections'). Funding requirements are reviewed on a regular basis by the Group's Chief Executive Officer and Chief Financial Officer and are reported to the Board at each Board meeting, as well as on an ad hoc basis, if requested. The Cash Flow Projections show that the Group will continue to consume cash over the forecast period. Until sufficient cash is generated from its operations, the Group remains reliant on cash reserves of USD5.9 million at 31 December 2022 and the ongoing support of MidCap (borrowings of USD6.3 million at 31 December 2022) to meet its working capital requirements, capital investment programme and other financial commitments. As of December 31, 2022, repayment on the MidCap borrowings is scheduled to begin in July 2023 (See subsequent development paragraph below for more information on the MidCap borrowings).
In compiling the Cash Flow Projections, the Board has considered a downside scenario regarding the effect of reduced and delayed revenues due to slower market uptake of the Group's product offering. The Cash Flow Projections prepared by the Board, including the downside scenario, indicate that the Group will still have cash reserves at the end of the forecast period. The Group's Cash Flow Projections assume that the MidCap revolving credit facility is available throughout the forecast period and the term loan repayment begins in 2024 (see subsequent development paragraph below for more information on the MidCap borrowings). The availability of these facilities is dependent upon compliance with a rolling twelve-month revenue covenant which is measured on a monthly basis. The Cash Flow Projections, including the downside scenario, indicate compliance with this covenant throughout the forecast period. In summary, the Directors have considered their obligations in relation to the assessment of the going concern basis for preparation of the financial statements of the Group and have reviewed the Cash Flow Projections, including the downside scenario. On the basis of their assessment, they have concluded that the going concern basis remains appropriate for use in these financial statements.
Subsequent developments
In January 2023, the Group elected to increase its current revolving credit facility from USD5 million to USD10 million and extend the maturity until 2028. Repayment of the term loan will be made in equal instalments commencing in 2024. Although this financing is not dictated by the current business plan, which is fully funded by the Group's year end cash position, the additional liquidity is a prudent measure.
The Board believes that a consolidation of the Company's Ordinary Share Capital will result in a more appropriate number of shares in issue for the Company. Accordingly, the Board has proposed a capital reorganisation in early 2023, which will result in shareholders holding one new Ordinary Share for every 100 existing Ordinary Shares ('the Consolidation').
Cautionary statement
The strategic report, containing the strategic and financial reports of the Group contains forward-looking statements that are subject to risk factors associated with, amongst other things, economic and business circumstances occurring from time to time within the markets in which the Group operates. The expectations expressed within these statements are believed to be reasonable but could be affected by a wide variety of variables beyond the Group's control. These variables could cause the results to differ materially from current expectations. The forward-looking statements reflect the knowledge and information available at the time of preparation.
David Cocke
Chief Financial Officer
20 March 2023
Consolidated Statement of Income
For the year ended 31 December 2022
|
|
| 2022 USD'000 | 2021 USD'000 |
| Revenue | | 24,476 | 19,746 |
| Cost of sales | | (13,218) | (11,270) |
| Gross profit | | 11,258 | 8,476 |
| Administrative expenses | | (13,268) | (12,499) |
| Exceptional items | | - | (355) |
| Operating loss | | (2,010) | (4,378) |
| Finance income | | 8 | 3 |
| Finance charges | | (826) | (767) |
| Loss on ordinary activities before taxation | | (2,828) | (5,142) |
| Taxation | | 232 | 157 |
| Loss for the year | | (2,596) | (4,985) |
| | | | |
| Loss for the year attributable to: | | | |
| Owners of the parent company | | (2,695) | (4,792) |
| Non-controlling interest | | 99 | (193) |
| | | (2,596) | (4,985) |
|
| | | |
| Loss per Ordinary Share | | | |
| Basic and diluted, cents per share | | (0.04) | (0.07) |
The loss for the year arises from the Group's continuing operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
| | | 2022 USD'000 | 2021 USD'000 |
| Loss for the year | | (2,596) | (4,985) |
| Other comprehensive income | | | |
| Items that may be subsequently reclassified to profit or loss: |
|
|
|
| Foreign currency translation differences | | (653) | (4) |
| Total comprehensive loss for the year | | (3,249) | (4,989) |
|
| | | |
| Total comprehensive loss for the year attributable to: | | | |
| Owners of the parent company | | (3,348) | (4,796) |
| Non-controlling interest | | 99 | (193) |
| | | (3,249) | (4,989) |
Consolidated Statement of Financial Position
As at 31 December 2022
|
|
| 2022 USD'000 | 2021 USD'000 |
| Assets | | | |
| Non-current assets | | | |
| Property, plant and equipment | | 5,740 | 5,708 |
| Right-of-use assets | | 3,203 | 3,388 |
| Intangible assets | | 15,061 | 15,064 |
| | | 24,004 | 24,160 |
| Current assets | | | |
| Inventory | | 10,882 | 9,719 |
| Trade and other receivables | | 4,803 | 4,101 |
| Corporation tax receivable | | 401 | 534 |
| Cash and cash equivalents | | 5,949 | 7,709 |
| | | 22,035 | 22,063 |
| Total assets | | 46,039 | 46,223 |
| Liabilities | | | |
| Non-current liabilities | | | |
| Loans and borrowings | | (5,258) | (4,465) |
| Deferred tax | | (520) | (640) |
| Lease liability | | (3,216) | (3,364) |
| | | (8,994) | (8,469) |
| Current liabilities | | | |
| Trade and other payables | | (5,510) | (4,244) |
| Loans and borrowings | | (1,000) | - |
| Lease liability | | (134) | (118) |
|
| | (6,644) | (4,362) |
| Total liabilities | | (15,638) | (12,831) |
| Net assets | | 30,401 | 33,392 |
| Equity | | | |
| Share capital | | 15,950 | 15,947 |
| Share premium | | 134,179 | 134,173 |
| Merger reserve | | 16,441 | 16,441 |
| Reverse acquisition reserve | | (10,798) | (10,798) |
| Reserve for own shares | | (1,257) | (1,257) |
| Share-based payment reserve | | 824 | 1,573 |
| Cumulative translation reserve | | (1,958) | (1,305) |
| Retained deficit | | (122,129) | (120,432) |
| Equity attributable to owners of the parent company | | 31,252 | 34,342 |
| Non-controlling interest | | (851) | (950) |
| Total equity | | 30,401 | 33,392 |
Consolidated Statement of Changes In Equity
For the year ended 31 December 2022
| | Share capital USD'000
| Share premium USD'000
| Merger reserve USD'000
| Reserve acquisition reserve USD'000
| Reserve for own shares USD'000
| Share- based payment reserve USD'000
| Cumulative translation reserve USD'000
| Retained deficit USD'000
| Total USD'000
| Non-controlling interest USD'000
| Total equity USD'000
|
| At 31 December 2020 | 15,947 | 134,173 | 16,441 | (10,798) | (1,257) | 1,463 | (1,301) | (115,640) | 39,028 | (757) | 38,271 |
| Transactions with owners in their capacity as owners: | | | | | | | | | | | |
| Share-based payments | - | - | - | - | - | 110 | - | - | 110 | - | 110 |
| Total transactions with owners in their capacity as owners |
- |
- |
- |
- |
|
110 |
- |
- |
110 |
- |
110 |
| Loss for the year | - | - | - | - | - | - | - | (4,792) | (4,792) | (193) | (4,985) |
| Other comprehensive income: Currency translation differences |
- |
- |
- |
- |
- |
- |
(4) |
- |
(4) |
- |
(4) |
| Total other comprehensive income for the year |
- |
- |
- |
- |
- |
- |
(4) |
- |
(4) |
- |
(4) |
| Total comprehensive income for the year |
- |
- |
- |
- |
- |
- |
(4) |
(4,792) |
(4,796) |
(193) |
(4,989) |
| At 31 December 2021 | 15,947 | 134,173 | 16,441 | (10,798) | (1,257) | 1,573 | (1,305) | (120,432) | 34,342 | (950) | 33,392 |
| Transactions with owners in their capacity as owners: Exercise of share options |
3 |
6 |
- |
- |
- |
- |
- |
- |
9 |
- |
9 |
| Transfer tor retained deficit in respect of lapsed, expired and exercised options |
- |
- |
- |
- |
- |
(998) |
- |
998 |
- |
- |
- |
| Share-based payments | - | - | - | - | - | 249 | - | - | 249 | - | 249 |
| Total transactions with owners in their capacity as owners |
3 |
6 |
- |
- |
- |
(749) |
- |
998 |
258 |
- |
258 |
| Loss for the year | - | - | - | - | - | - | - | (2,695) | (2,695) | 99 | (2,596) |
| Other comprehensive income: Currency translation differences |
- |
- |
- |
- |
- |
- |
(653) |
- |
(653) |
- |
(653) |
| Total other comprehensive income for the year |
- |
- |
- |
- |
- |
- |
(653) |
- |
(653) |
- |
(653) |
| Total comprehensive income for the year |
- |
- |
- |
- |
- |
- |
(653) |
(2,695) |
(3,348) |
99 |
(3,249) |
| At 31 December 2022 | 15,950 | 134,179 | 16,441 | (10,798) | (1,257) | 824 | (1,958) | (122,129) | 31,252 | (851) | 30,401 |
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
| |
| 2022 USD'000 | 2021 USD'000 |
| Operating activities | | | |
| Loss on ordinary activities before taxation | | (2,828) | (5,142) |
| Adjustments for: | | | |
| Finance income | | (8) | (3) |
| Finance charges | | 826 | 767 |
| Depreciation of property, plant and equipment | | 353 | 258 |
| Depreciation of right-of-use assets | | 164 | 103 |
| Amortisation of intangible assets | | 618 | 730 |
| Share-based payments | | 249 | 110 |
| Unrealised foreign exchange (gain)/loss | | (239) | 55 |
| Operating cash outflow before movements in working capital | | (865) | (3,122) |
| Increase in inventory | | (1,163) | (115) |
| Increase in trade and other receivables | | (702) | (512) |
| Increase in trade and other payables | | 1,249 | 159 |
| Net cash used in operations | | (1,481) | (3,590) |
| Research and development tax credits received | | 187 | 615 |
| Net cash used in operating activities | | (1,294) | (2,975) |
|
| | | |
| Investing activities | | | |
| Interest received | | 8 | 3 |
| Purchase of property, plant and equipment | | (381) | (1,550) |
| Capitalised development expenditure | | (709) | (497) |
| Net cash used in investing activities | | (1,082) | (2,044) |
|
| | | |
| Financing activities | | | |
| Proceeds from exercise of share options | | 9 | - |
| Proceeds from loans and borrowings | | 1,708 | 602 |
| Interest paid on loans and borrowings | | (450) | (391) |
| Lease liability payments | | (66) | (102) |
| Lease interest payments | | (291) | (301) |
| Net cash generated from/used in financing activities | | 910 | (192) |
| | | | |
| Net decrease in cash and cash equivalents | | (1,466) | (5,211) |
| Cash and cash equivalents at beginning of year | | 7,709 | 12,968 |
| Effect of movements in exchange rates on cash held | | (294) | (48) |
| Cash and cash equivalents at end of year | | 5,949 | 7,709 |
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
1. Significant accounting policies
Basis of preparation
The financial information set out herein does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.
The financial information for the year ended 31 December 2022 has been extracted from the Company's audited financial statements which were approved by the Board of Directors on 20 March 2023 and which, if adopted, will be delivered to the Registrar of Companies for England and Wales.
The financial information for the year ended 31 December 2021 has been extracted from the Company's audited financial statements which were approved by the Board of Directors on 14 March 2022.
Statutory accounts for the years ended 31 December 2022 and 31 December 2021 have been reported on by the auditor. Their reports for both years (i) were unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their audit report and (iii) did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.
The information in this preliminary statement has been extracted from the audited financial statements for the year ended 31 December 2022 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with UK adopted International Accounting Standards ('IAS').
The Company is a public limited company incorporated and domiciled in England and whose shares are quoted on AIM, a market operated by The London Stock Exchange.
The address of the registered office is Unit 3, Phoenix Court, Lotherton Way, Garforth LS25 2GY.
Going concern
The Group financial statements have been prepared on a going concern basis based on cash flow projections, approved by the Board for the Group, for the period to 31 December 2024 (the 'Cash Flow Projections'). Funding requirements are reviewed on a regular basis by the Group's Chief Executive Officer and Chief Financial Officer and are reported to the Board at each Board meeting, as well as on an ad hoc basis if requested. The Cash Flow Projections show that the Group will continue to consume cash over the forecast period. Until sufficient cash is generated from its operations, the Group remains reliant on cash reserves of USD5.9 million at 31 December 2022 and the ongoing support of MidCap (borrowings of USD6.3 million at 31 December 2022) to meet its working capital requirements, capital investment programme and other financial commitments.
In compiling the Cash Flow Projections, the Board has considered a downside scenario regarding the effect of reduced and delayed revenues due to slower market uptake of the Group's product offerings. The Cash Flow Projections prepared by the Board, including the downside scenario, indicate that the Group will still have cash reserves at the end of the forecast period. The Group's Cash Flow Projections assume that the MidCap revolving credit facility is available throughout the forecast period and the term loan repayment will begin in 2024 in accordance with the revised terms agreed in January 2023. The availability of these facilities is dependent upon compliance with a rolling 12-month revenue covenant which is measured on a monthly basis. The Cash Flow Projections indicate compliance with this covenant throughout the forecast.
In summary, the Directors have considered their obligations in relation to the assessment of the going concern basis for the preparation of the financial statements of the Group and have reviewed the Cash Flow Projections. On the basis of their assessment, they have concluded that the going concern basis remains appropriate for use in these financial statements.
2. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. 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 the current and future periods.
The following are the critical judgements and estimations that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements:
Judgements and estimations
Recoverability of non-current assets
The Directors carried out the annual impairment review, as required by IAS 36, to determine whether there was any requirement for an impairment provision in respect of its non-current assets at 31 December 2022.
The carrying amount of non-current assets at 31 December 2022 was USD24.0 million (2021: USD24.2 million).
The Group's non-current assets include intangible assets and goodwill arising on the acquisition of CellRight Technologies LLC, which are considered to be a single cash generating unit ('CGU'). Only the assets included in the CGU are subject to impairment review.
The aggregate carrying value of the CGU was assessed for impairment based on value in use which requires the Directors to estimate the future cash flows expected to arise from the CGU using a suitable discount rate in order to calculate present value. The future cash flows expected to arise were calculated using a discount rate of 18.3% (2021: 14.6%) based on the weighted average cost of capital. The impairment test indicated that the recoverable amount was at least equal to the carrying amount of the assets and, therefore, no provision for impairment was required at 31 December 2022 (2021: USD nil).
It is possible that any, or all of these key assumptions may change, which may then impact the estimated values of the Group's non-current assets, and this may then require a material adjustment to the carrying value of the assets in future periods.
Fair value of share-based payments
Equity settled share-based payment transactions are measured by reference to the fair value at the date of grant, recognised on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest.
The Group is required to make a number of judgements and estimations when measuring the fair value of options granted during the year, including use of the appropriate fair value model, inputs to that model and estimations in relation to the anticipated vesting period.
The Directors consider that the appropriate model for calculating the fair value of options is the binomial model, where the performance conditions of grants are market-based, the Monte Carlo model where there are multiple performance conditions and the Black-Scholes model where there are non-market related performance conditions.
At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous reporting date is recognised in the consolidated statement of comprehensive income, with a corresponding entry in equity.
It is possible that these estimates may vary at each reporting date resulting in an adjustment to the allocation of the fair value over the remaining vesting period.
3. Segmental information
The following table provides disclosure of the Group's revenue by geographical market based on the location of the customer:
| | | | | 2022 USD'000 | 2021 USD'000 | |
| US | | | 20,711 | 16,883 |
| |
| Rest of World | | | 3,765 | 2,863 |
| |
| | | | 24,476 | 19,746 |
| |
Analysis of revenue by customer
During the year ended 31 December 2022, the Group had one customer who individually exceeded 10% of revenue. This customer generated 13% of revenue (2021: one customer who generated 14% of revenue).
Operating segments
In accordance with IFRS 8, the Group has derived the information for its operating segments using the information used by the chief operating decision-maker, who has been identified as the Board of Directors.
The Board of Directors has determined that the Group has three operating segments for internal management, reporting and decision-making purposes, namely dCELL, BioRinse, and GBM-V.
Central overheads, which primarily relate to operations of the Group function, are not allocated to an operating segment.
Revenue from all operating segments derives from the sale of biological medical devices.
Segmental information is presented below.
|
| |
| dCELL 2022 USD'000 | BioRinse 2022 USD'000 | GBM-V 2022 USD'000 | Central 2022 USD'000 | Total 2022 USD'000 | |
| Income Statement | | | | | | | ||
| Revenue | | 5,301 | 16,049 | 3,126 | - | 24,476 | ||
| Gross profit | | 1,829 | 8,258 | 1,171 | - | 11,258 | ||
| Depreciation | | (10) | (394) | - | (113) | (517) | ||
| Amortisation | | - | (618) | - | - | (618) | ||
| | | | | | | | ||
| Operating (loss)/ profit | | (994) | 678 | 409 | (2,103) | (2,010) | ||
| Net finance charges | | - | (818) | - | - | (818) | ||
| (Loss)/profit before taxation | |
(994) |
(140) |
409 |
(2,103) |
(2,828) | ||
| Taxation | | 112 | 120 | - | - | 232 | ||
| (Loss)/profit for the year | |
(882) |
(20) |
409 |
(2,103) |
(2,596) | ||
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| dCELL 2021 USD'000 | BioRinse 2021 USD'000 | GBM-V 2021 USD'000 | Central 2021 USD'000 | Total 2021 USD'000 | |
| Income Statement | | | | | | | ||
| Revenue | | 4,246 | 12,711 | 2,789 | - | 19,746 | ||
| Gross profit | | 1,720 | 5,852 | 904 | - | 8,476 | ||
| Exceptional items | | (183) | (120) | - | (52) | (355) | ||
| Depreciation | | (18) | (305) | (3) | (35) | (361) | ||
| Amortisation | | - | (730) | - | - | (730) | ||
| | | | | | | | ||
| Operating loss | | (1,236) | (1,043) | (154) | (1,945) | (4,378) | ||
| Net finance charges | | 1 | (757) | - | (8) | (764) | ||
| Loss before taxation | | (1,235) | (1,800) | (154) | (1,953) | (5,142) | ||
| Taxation | | 37 | 120 | - | - | 157 | ||
| Loss for the year | | (1,198) | (1,680) | (154) | (1,953) | (4,985) | ||
| | | | | | | | | |
| | | | | | | | | |
|
| |
| dCELL 2022 USD'000 | BioRinse 2022 USD'000 | GBM-V 2022 USD'000 | Central 2022 USD'000 | Total 2022 USD'000 | |
| Statement of Financial Position | | | | | | | ||
| Non-current assets | | 1,376 | 22,382 | 13 | 233 | 24,004 | ||
| Current assets | | 3,571 | 14,998 | 806 | 2,660 | 22,035 | ||
| Total assets | | 4,947 | 37,380 | 819 | 2,893 | 46,039 | ||
| Non-current liabilities | | - | (8,921) | - | (73) | (8,994) | ||
| Current liabilities | | (736) | (5,171) | (255) | (482) | (6,644) | ||
| Total liabilities | | (736) | (14,092) | (255) | (555) | (15,638) | ||
| Net assets | | 4,211 | 23,288 | 564 | 2,338 | 30,401 | ||
| | | | | | | | ||
| Capital expenditure | | 124 | 230 | 9 | 36 | 399 | ||
| Additions to intangible assets | | 549 | 160 | - | - | 709 | ||
| | | | | | | | | |
| | | | | | | | | |
|
| |
| dCELL 2021 USD'000 | BioRinse 2021 USD'000 | GBM-V 2021 USD'000 | Central 2021 USD'000 | Total 2021 USD'000 | |
| Statement of Financial Position | | | | | | | ||
| Non-current assets | | 808 | 23,005 | 5 | 342 | 24,160 | ||
| Current assets | | 3,326 | 11,310 | 706 | 6,721 | 22,063 | ||
| Total assets | | 4,134 | 34,315 | 711 | 7,063 | 46,223 | ||
| Non-current liabilities | | - | (8,348) | - | (121) | (8,469) | ||
| Current liabilities | | (428) | (3,129) | (249) | (556) | (4,362) | ||
| Total liabilities | | (428) | (11,477) | (249) | (677) | (12,831) | ||
| Net assets | | 3,706 | 22,838 | 462 | 6,386 | 33,392 | ||
| | | | | | | | ||
| Capital expenditure | | 2 | 1,594 | 3 | 105 | 1,704 | ||
| Additions to intangible assets | | - | 497 | - | - | 497 | ||
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4. Taxation
|
| | | 2022 USD'000 | 2021 USD'000 |
| Current tax: | | | | |
| UK R&D tax credit | | | (112) | (37) |
| | | | | |
| Deferred tax: | | | | |
| Origination and reversal of temporary timing differences | | | (120) | (120) |
| Tax credit on loss for the year | | | (232) | (157) |
There has been no impact due to changes in UK taxation rates during the years reported. The enacted UK corporation tax rate of 25% forms the basis for the UK element of the deferred tax calculation, following the UK budget in 2021, when the chancellor announced an increase to the main rate of corporation tax in the UK to 25% from April 2023.
Unrelieved tax losses carried forward, as detailed below, have not been recognised as a deferred tax asset as there is currently insufficient evidence that the asset will be recoverable in the foreseeable future. The losses must be utilised in relation to the same operations.
| | | | | 2022 USD'000 | 2021 USD'000 |
|
| Tax losses | | | | | | |
| Losses available to carry forward | | | 58,900 | 60,779 | | |
| Unrecognised deferred tax asset at 25% (2021: 25%) | | |
14,725 |
15,195 | | |
The comparative tax losses and unrecognised deferred tax asset have been restated to include the impact of R&D tax credits which had previously been omitted.
5. Loss per Ordinary Share
Basic loss per Ordinary Share is calculated by dividing the net loss for the year attributable to owners of the parent company, by the weighted average number of Ordinary Shares in issue during the year, excluding own shares held jointly by the Tissue Regenix Employee Share Trust and certain employees.
Diluted loss per Ordinary Share is calculated by dividing the net loss for the year attributable to owners of the parent company, by the weighted average number of Ordinary Shares in issue during the year adjusted for the dilutive effect of potential Ordinary Shares arising from the Company's share options and jointly owned shares.
The calculation of the basic and diluted loss per Ordinary Share is based on the following data:
| | | | | 2022 USD'000 | 2021 USD'000 |
|
| Losses | | | | | ||
| Losses for the purpose of basic and diluted loss per Ordinary Share being net loss for the year attributable to owners of the parent company | | |
(2,695) |
(4,792) |
| |
|
| | | | | ||
| | | | | Number | Number |
|
| Number of shares | | | | |
| |
| Weighted average number of Ordinary Shares for the purpose of basic and diluted loss per Ordinary Share | | |
7,034,521,811 |
7,033,077,499 |
| |
|
| | | | |
| |
| Basic and diluted, cents per share | | | (0.04) | (0.07) |
| |
The Company has options issued over 200,929,300 (2021: 106,832,872) Ordinary Shares, warrants issued over 3,096,798 (2021: 3,096,798) Ordinary Shares and there are 16,112,800 (2021: 16,112,800) jointly owned Shares which are potentially dilutive.
Due to the losses incurred from continuing operations in the years reported, there is no dilutive effect from the existing share options and jointly owned shares.
6. Lease liabilities
| | | | 2022 USD'000 | 2021 USD'000 |
| Current lease liabilities | | | 134 | 118 |
| Non-current lease liabilities | | | 3,216 | 3,364 |
| At 31 December | | | 3,350 | 3,482 |
Maturity analysis of leases
The maturity of the gross contractual undiscounted cashflows due on the Group's lease liabilities is set out below based on the period between 31 December 2022 and the contractual maturity date.
|
Land and buildings | | | 2022 USD'000 | 2021 USD'000 |
| Less than 6 months | | | 203 | 202 |
| 6 months to 1 year | | | 203 | 208 |
| 1 year to 2 years | | | 412 | 420 |
| 2 years to 5 years | | | 3,107 | 3,518 |
| | | | 3,925 | 4,348 |
The movement in lease liabilities during the year was:
|
| | | 2022 USD'000 | 2021 USD'000 |
| At 1 January | | | 3,482 | 3,407 |
| Cash flows - financing activities | | | (357) | (403) |
| Non-cash movements - additions | | | 291 | 456 |
| Non-cash movements - foreign exchange movement | | |
(66) |
22 |
| At 31 December | | | 3,350 | 3,482 |
Effect of leases on financial performance
|
| | | 2022 USD'000 | 2021 USD'000 |
| Depreciation of right-of-use assets | | | 164 | 103 |
| Interest expense | | | 291 | 301 |
| | | | 455 | 404 |
The Group leases properties used for its operations in the UK and US.
UK property: Five-year fixed lease which includes a break clause in 2023.
US property: Five-year fixed lease which includes an option to purchase up to November 2024.
The Group's average effective borrowing rate for leases on 31 December 2022 was 9% (2021: 9%).
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