TIDMTRX
RNS Number : 7528E
Tissue Regenix Group PLC
15 March 2022
Tissue Regenix Group plc
("Tissue Regenix" or "the Group")
Final year results for the year ended 31 December 2021
Annual Report and Notice of AGM
Tissue Regenix Group (AIM:TRX), the regenerative medical devices
company, announces its final results for the year ended 31 December
2021.
Financial Highlights
-- Returned to double digit revenue growth up 20% to US$19.7m
(2020: US$16.5m) due to a strong performance in the US
o BioRinse (R) ( orthopaedics and dental) revenue of US$12.7m, up 33% (2020: US$9.5m)
o Joint venture GBM-v increased revenue of US$2.8m, up 5% (2020:
US$2.6m)
o dCELL(R) (DermaPure(R)) sales remained consistent at US$4.2m
(2020: US$4.2m)
-- Gross Profit increased to US$8.5m (2020: US$7.5m)
-- Operating Loss reduced to US$4.9m (2020: US$12.4m)
-- Cash balance at 31 December 2021 of US$7.7m, supports current business growth plan
Operational Highlights
-- Completion of the Phase 1 facility expansion at the San
Antonio, Texas facility, in June 2021 on time and on budget
-- Launch of dCELL(R) product line extensions; DermaPure(R) Meshed, VNEW(TM) and MatrixND(TM)
-- Reorganisation of the dCELL(R) commercial operations to reinvigorate sales growth
-- Successfully secured several new strategic partners and
distributors resulting in a 36% increase in units shipped during
2021
-- ISO 13485 accreditation for the Garforth, Leeds facility received in February 2021
-- Completion of restructuring of the dCELL(R) operations in
January 2021 which will reduce the overhead cost base by c. US$700k
on an annualised basis
-- Sales for DermaPure(R) products to ARMS Medical were up 24%
Post balance sheet events
-- Exercised option to increase the current revolving credit
facility from US$3.0m to US$5.0m; provides financial
flexibility
-- Distribution agreement signed with Geistlich Biomaterials
Italia for the distribution of OrthoPure XT in Italy
Daniel Lee, Chief Executive Officer of Tissue Regenix,
commented: "Our organisation continued to demonstrate success
despite all the ongoing challenges associated with the pandemic.
Our positive financial performance during such uncertain
circumstances have set our trajectory to be even greater in 2022 as
our Group and our partners emerge from under the pandemic's cloud
that has limited our growth. With our focus on the 4S's - Supply,
Sales Revenue, Sustainability and Scale - these will serve us in
building shareholder value as we expand our opportunities and
global growth in regenerative medicine. 2021 represented the first
full year of my responsibilities as CEO of the Tissue Regenix Group
and I am delighted by the progress the organisation has made."
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 AGM will be held at DLA Piper, 160 Aldersgate St, Barbican,
London EC1A 4HT, on Tuesday 26 April 2022 at 1.00pm. At the time of
writing there are no restrictions in place that would prevent us
from holding a physical meeting and inviting all of our
shareholders to attend, so we are proceeding on the assumption that
we will be able to do so. The Board will, however, monitor
developments closely in case the position changes and, if it does,
we will notify you of any changes in our plans for the AGM both by
a regulatory news service announcement and via our website at
https://www.tissueregenix.com/. Shareholders are invited to submit
any question to the Board about the Annual Report and Accounts or
the AGM by contacting 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.
For more information:
Tissue Regenix Group plc www.tissueregenix.com
Daniel Lee, Chief Executive Officer Via Walbrook PR
David Cocke, Chief Financial Officer
Stifel Nicolaus Europe Limited (Nominated Adviser Tel: +44(0)20 7710 7600
and Broker)
Ben Maddison / Nick Harland
Walbrook PR Ltd Tel: +44 (0)20 7933 8780
Alice Woodings / Lianne Applegarth TissueRegenix@walbrookpr.com
About Tissue Regenix (www.tissuergenix.com)
Tissue Regenix is a leading medical devices company in the field
of regenerative medicine. The company's patented decellularisation
('dCELL(R)') technology 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 such as in sports
medicine, foot and ankle, and wound care.
In August 2017 Tissue Regenix acquired CellRight
Technologies(R), a biotech company that specializes in regenerative
medicine and is dedicated to the development of innovative
osteoinductive and wound care scaffolds that enhance healing
opportunities of defects created by trauma and disease. CellRight's
human osteobiologics may be used in spine, trauma, general
orthopaedic, dental, and ophthalmological surgical procedures.
Chairman's statement
Introduction
Despite the ongoing challenges posed by the COVID-19 pandemic,
in 2021 we saw continued positive momentum in creating long-term
sustainable shareholder value. The Group returned to double digit
revenue growth, thanks largely to an exceptionally strong
performance in the US.
I would like to extend my thanks to the Executive team and all
our employees for what has been achieved over the last year. The
Group has delivered robust financial and operational performances
and ended the period in a strong financial position that supports
the current business growth plan.
Clear strategy
Our ambition is to create a commercially focused global
regenerative medicine company addressing soft tissues and bone,
operating in a high-growth sector with a multi-billion-dollar
addressable market. Through its platform technologies, the Group
can commercialise its regenerative medicine products, helping to
transform the treatment of patients in key surgical applications.
The main focus of the Group's strategy is the commercialisation of
its product portfolio.
2021 has seen significant delivery of our strategy within our
four key areas of focus (Supply, Sales Revenue, Sustainability and
Scale), providing clear strategic direction of the Group's
ambitions and delivering shareholder value - The following are
notable achievements in the period:
-- Accelerated market penetration in the US, the largest healthcare market in the world:
o The BioRinse(R) division performed strongly in 2021, aided by
the completion of the first phase of the manufacturing
expansion
o The Group saw a strong comparative sales performance due to
its diverse surgical specialties
-- New partnership agreements:
o During the year we identified and signed additional
opportunities and distribution agreements that target products and
therapeutic areas which are complementary to our current processing
activities to diversify the Group's sales portfolio further
o The Group was successful in signing new strategic partners and
expanded its customer base following the acquisition of three of
the Group's existing strategic partners by larger organisations,
where we benefit from greater market penetration
o The Group also secured additional donor sourcing agreements in
the US
-- Phase 1 manufacturing facility expansion in San Antonio, Texas:
o Completed on time and on budget
o The completion of the manufacturing expansion increases the
Group's revenue generation potential and processing efficiency as
well as providing additional donor storage capacity
-- Reorganisation of US dCELL(R) divisional operations:
o The Group completed restructuring of the operational and
commercial activities for the dCELL(R) division which will provide
an opportunity to increase new customer wins as well as increased
penetration and upsell of existing accounts.
-- Expansion of product portfolio and additional product line extensions:
o During the year the Group successfully launched product line
extensions in its dCELL(R) division; DermaPure(R) Meshed, VNEW(TM)
and MatrixND(TM).
Board
With confirmation of my appointment as Non-Executive Chairman in
February 2021 and other Board appointments announced in the first
quarter of 2021, we now have a strong, commercially focused Board
and executive leadership in Danny Lee and David Cocke, collectively
committed to creating long-term sustainable value and growth of the
Group through an increased portfolio offering and market
penetration.
In January 2021, Trevor Phillips and Brian Phillips (no
relation) were appointed to the Board as Non-Executive Directors.
Brian and Trevor bring a wealth of experience particularly
regarding operations and corporate development in the life sciences
industry and financial management, which have been key in driving
the Group's success during 2021. Brian Phillips is Chair of the
Audit Committee and Trevor Phillips is Chair of the Remuneration
Committee.
Shortly following these appointments in January, David Cocke was
appointed CFO of the Group alongside Danny Lee, CEO, based in San
Antonio, Texas. David has 30 years' experience in senior finance
and operations roles having previously been CFO at Aperion
Biologics, Inc. and founding NuPak Medical, Ltd. in 1997 which was
later acquired by Katena Products, Inc. in 2017.
Financial overview
Trading in the year was robust with a return to double digit
revenue growth and in line with management expectations despite the
challenges of the COVID-19 pandemic. A particularly strong growth
performance was seen by the BioRinse(R) division aided by the
completion of the Phase 1 of the manufacturing expansion project.
The Group's cash position at year end supports our current business
growth plan.
2022 Outlook
Despite another year with continuing challenges posed by the
pandemic and the postponement of elective surgeries across all
specialties, we continue to make encouraging progress on our
strategy, deliver revenue growth, expand our product portfolio and
deliver operational efficiency. Importantly, while we recognise the
ongoing challenges of COVID-19, we continue to see strong demand
for our products and the Board is optimistic as we see a return to
pre-pandemic conditions, this demand will drive sales revenue
growth as the Group moves towards profitability.
On behalf of the Board, I would like to thank Danny and David
for their excellent leadership along with the rest of our
management team and employees for their hard work to achieve a
strong recovery despite the external challenges over the year. We
would also like to thank our shareholders, our business partners
and suppliers for their continued support throughout 2021 and we
look forward with optimism for the year ahead.
Jonathan Glenn
Chairman
14 March 2022
Chief Executive Officer's statement
In my first full year as CEO of the Group, we have established a
clear strategy, accelerated market penetration in the US and
expanded our customer base and product portfolio whilst increasing
our processing efficiency and donor storage capacity. These full
year results reflect the progress we have made as we drive towards
profitability.
I am pleased to report that the Group performed admirably during
2021 despite the ongoing global challenges posed by the pandemic
when hospitals, governments and healthcare providers postponed
elective surgeries across all specialties. Despite these challenges
we continued to make progress and reinvigorate commercial growth.
As our products experienced broader adoption, this growth was
supported by the Group's dedicated and resilient employees.
Strategy
The tissue engineering market is anticipated to grow
significantly and is projected to reach $6.8bn by 2027, growing at
a 14% Compound Annual Growth Rate (CAGR) from 2020 owing to
increases in the prevalence of chronic diseases and trauma
emergencies, increased awareness of tissue engineering, and
potential pipeline products.
In 2021, we announced our 4S strategy as the foundation of how
we operate 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
and grow the business, license or acquire new products,
technologies and companies
Our focus on the 4S's across all divisions and departments
provides a 360-degree approach and strategic direction for our
future success. We believe this focus will allow the Group to
achieve above-market growth rates, as we have demonstrated in 2021
with a 20% growth rate over 2020.
BioRinse(R) (Bone)
Orthopaedics and dental markets in the US reported a strong
performance in 2021 and our 33% year-on-year growth we experienced
in 2021 surpassed many others in this space. This is indicative of
the continued confidence in our products, strong performance of our
distributors and strategic partners, our participation in diverse
surgical specialties and the addition of new distributors.
dCELL(R) (Soft Tissue)
A strategic review was performed on the dCELL(R) division with
the objective of driving increased sales revenue momentum. This
review indicated that a flatter, more customer-facing commercial
organisation could yield enhanced customer penetration. As a
result, we compressed three layers of management into one, pushing
our commercial management closer to the end users and sales channel
partners. In addition, in January 2021 we restructured the
operations of this segment to become more efficient and reduce the
overhead cost base by c. $700k on an annualised basis.
As the pandemic continued into 2021, distributors faced numerous
challenges with the dCELL(R) product line due to the postponement
of elective surgical procedures. As a result, sales in this
division were flat year-on-year. However, the demand for our
DermaPure (R) products increased in the urological/gynaecological
sector driven by orders from ARMS Medical, which were up 24% from
the previous year.
The EU and its member countries experienced volatility
throughout 2021, especially in elective surgeries. OrthoPure(R) XT,
the first non-human biologic graft available to the market, is used
in the reconstruction of the Anterior Cruciate Ligament (ACL) and
can be used following re-rupture, the reconstruction of other knee
ligaments in multi-ligament procedures following trauma, and
primary ACL procedures where the autograft is unavailable or
inadequate. In mid-2020 we received the CE Mark for OrthoPure(R) XT
and in November 2020 launched the product into a limited number of
European markets. However, the pandemic caused postponement of many
elective ACL procedures, so we plan to relaunch in 2022 when more
normal conditions resume. We expect to gain market traction in the
UK and EU and remain confident that OrthoPure(R) XT will begin to
add revenues in 2022.
The pandemic delayed our plans to expand the geographic outreach
of our dCELL(R) and BioRinse(R) portfolios into new territories and
we anticipate demand for our dCELL(R) products will resume as
surgical procedures return to pre-pandemic levels. In 2022 we plan
to establish a logistical partner and distributors in select
European markets for our human tissue products which will be made
possible by our increased processing capacity.
dCELL(R) product line extensions
We continued to pursue the commercialisation of products which
utilise our core technology platforms, provide product line
extensions that are fast to market and address a specific clinical
or commercial need.
In 2021 we introduced three new products which utilise our
dCELL(R) technology platform:
-- DermaPure(R) Meshed; used to treat wounds where additional
surface area coverage and wound drainage is needed (approximately
70,000 procedures in the US per annum) and eliminates time
consuming manual meshing in the operating room. Targeted for use by
general, plastic and trauma surgeons who treat patients with
conditions that result in loss of integumental tissue (skin),
requiring replacement, repair, or reconstruction
-- VNEW(TM); a pre-cut dermal allograft that can be used in
pelvic organ prolapse procedures (approximately 300,000 procedures
in the US per annum) which are frequently performed in women post
childbirth. ARMS Medical, our exclusive distributor for this
product, placed their initial stocking order in August and
re-ordered in December
-- Matrix ND(TM); a dermal allograft designed for use in dental
or oral and maxillofacial procedures for soft tissue repair
coverage and augmentation which was developed to meet the need of
our dental partners (approximately 400,000 procedures in the US per
annum). A dental membrane is frequently used in conjunction with
dental bone grafting procedures
Additional product line extensions and product improvements are
anticipated during 2022 which will contribute to our organic growth
and support the commercial efforts of our organisation and
strategic partners.
GBM-v
Our controlled joint venture in Germany, GBM-v, grew 6% in 2021
despite continued impacts from the pandemic on elective procedures,
specifically for corneal transplants in Germany. The demand for
corneal tissue continues to outpace supply, but the market has been
suppressed due to the postponement of elective surgeries with many
patients electing to defer to avoid entering healthcare
institutions. We expect this growth to continue and accelerate as
more normalised conditions return.
New strategic partners and distributors
Despite the challenges of the pandemic, we continued to be
successful in securing new strategic partners and distributors and
saw a 36% increase in the units shipped in 2021. One partial
explanation for this increase in shipments was the consolidation of
several of our strategic partners. Three of these were acquired by
larger entities that have a more significant presence in the
marketplace and importantly more distribution outlets. As an
example, one of our BioRinse(R) customers was acquired in 2021, and
orders increased by 142% year-on-year under the new ownership. We
also signed new agreements with four strategic partners and
distributors who target specialty markets such as spinal and
dental.
Manufacturing facilities
In February 2021, San Antonio experienced an unprecedented
snowstorm and freeze which impacted electrical and water services
throughout the state of Texas. This temporarily affected our
ability to process at the facility in San Antonio, but the power
loss did not impact materials in storage in the ultra-low
temperature freezers. We were unable to service customer demand the
following week as delivery services had also been impacted and had
limited capacity. During the weeks that followed, the team worked
to catch up with demand and service all our customers. In the
future, any impact to the Group due to a power grid failure will be
partially addressed through a battery back-up system to be
implemented in 2022.
The relocation in October 2020 of our operations in the UK to
Garforth, Leeds and reinitiating the processing of the OrthoPure(R)
XT product, required the product to be recertified for the CE Mark.
The recommendation for certification of the facility to ISO 13485
was received in February 2021.
In mid-2021 we completed our Phase 1 capacity expansion
programme in San Antonio on time and on budget. The Phase 1
expansion comprised of fitting out approximately half of a 21,000
sq. ft. building that is adjacent to our existing facility in San
Antonio to provide improvements in key areas: donor storage,
processing, production, and distribution.
We moved the bulk of our storage freezer space to the new
facility in mid-March and added capacity through the purchase of
new, more efficient ultra-low temperature freezers to triple our
donor tissue storage capabilities which will meet demand over the
next 3-5 years. The expansion also included a new distribution
facility which consolidated this function and its personnel to one
location. The anticipated labour and time savings in processing
orders was realised in 2021 as we increased unit shipments by 36%
with only one additional member of staff.
The move of freezer storage and personnel into the new building
freed up space for processing and production in the existing
facility. Two sterile packaging rooms were added in the existing
facility, which brought the total number of clean rooms to seven.
The new sterile packaging rooms and installation of additional
processing equipment increased our BioRinse(R) portfolio processing
capacity by c.50%. Space created by the move to the new building
was also utilised to set up additional workspace for downstream
production activities such as final product boxing and
labelling.
When the Phase 1 expansion is up and running at full capacity,
the Group's revenue generation potential will be c.$30m per year
within the existing facility footprint. For Phase 2, it is our
intention to build an additional ten clean rooms in the new
facility, which will meet our capacity needs for the next 5-7 years
as we grow our portfolio, markets, customer base and global
presence.
The impact of COVID-19
The pandemic continued to stunt the surgical marketplace when
hospitals, governments and health care providers halted elective
procedures across all specialties. A partial return to normality
occurred in the second quarter of 2021 before the Delta variant
affected elective procedures in the third and early fourth quarter
of 2021. These disruptions led to unpredictable demand for our
products, however a healthy inventory meant we could respond as
needed to changes in the marketplace.
We remained diligent at all our facilities and implemented the
initiatives and guidelines necessary to minimise disruption. We had
already expanded our donor sourcing efforts in 2020 and in 2021
these efforts were further expanded to other tissue processors for
the procurement or disbursement of donor tissue. Tissue processors
have the responsibility to be the stewards of the gift of tissue
donation, so we need to consider all avenues for donor tissue to be
utilised in meeting the donor families' wishes.
Outlook
Our positive financial performance during such uncertain
circumstances has set our trajectory to be even greater in 2022 as
the Group and our partners expect to emerge from the pandemic. In
2021 we saw particularly strong growth in BioRinse(R) and with the
completion of the manufacturing expansion we expect this solid
performance to continue. As markets start to return to pre-pandemic
levels the Group is well positioned to meet the demand now that we
have the capacity and inventory in place to do so.
The implementation of a new commercialisation strategy for the
dCELL(R) products is expected to enable greater market penetration
and we look forward to increasing sales revenue momentum from this
segment as well as our additional product line extensions in
2022.
I am confident in our growth strategy, our products and their
potential to benefit patients in what will hopefully be a less
unsettled year ahead. With the changes we have made in 2021 the
business is well positioned to service our customers and drive
shareholder value. I look forward to the continuing success of the
Group in the coming year and as we move towards profitability.
Daniel Lee
Chief Executive Officer
14 March 2022
Financial review
With effect from 1 January 2021, the Group's presentation
currency changed from pounds sterling ("GBP") to United States
dollar ("$") as the Directors considered the USD to be more
representative of the geography in which the Group primarily
operates.
Revenue
In the year ended 31 December 2021 revenue increased by 20% to
$19,746k (2020: $16,473k).
The financial performance for the year was impacted at times by
the ongoing coronavirus pandemic, as Q1 saw ongoing effects of the
initial wave of the pandemic before widespread vaccine rollouts
took place in the US, and the Q3 and early Q4 sales were affected
by the Delta variant, before rebounding positively in November and
December 2021.
The BioRinse(R) segment performed strongly in 2021, aided by the
completion of the first phase of the expansion of the Group's
manufacturing capacity in San Antonio, TX. This unit successfully
grew top line sales by 33%, to $12,711k (2020: $9,562k) as the
BioRinse(R) division used its strong relationships with strategic
partners to take market share in the US.
Revenue from DermaPure(R), under the DCell(R) division, was
slower to respond to the easing of the pandemic and associated
restrictions with 2021 sales flat at $4,246k (2020: $4,247k).
The Group's joint venture, GBM-v, based in Rostock, increased
revenues 5% to $2,789k (2020: $2,664k) despite continued market
disruptions from the pandemic that continued throughout 2021.
Cost of sales and gross profit
Gross profit for the year was $8,476k (2020: $7,570k). Gross
margin percentage decreased to 43% (2020: 46%). In 2021 the Group
transferred certain excess tissues at a reduced margin in order to
honour the gift of tissue donation and prudently manage the
statement of financial position by reducing slow moving inventory.
Those transfers will not recur in future periods. In addition, the
Group experienced supply chain driven price increases in the
period. A price increase was put in place in the BioRinse(R)
division to address the cost pressures.
Included in costs of sales is cost of product $10,348k (2020:
$7,699k) and third-party commissions $922k (2020: $ 1,204k).
Administrative expenses
During 2021 administrative expenses before exceptional items
decreased by $351k to $12,574k (2020: $12,925k).
Exceptional items
Exceptional items decreased by $7,969k to $355k primarily driven
by the impairment charge in 2020 (2020: $8,324k). Restructuring
costs of $52k related to a redundancy in the Central segment were
charged in the year.
Restructuring costs of $183k were charged to the DCell(R)
division as a result of a restructuring of that division in January
2021.
The February 2021 winter storm event in Texas resulted in a
charge of $120k at the BioRinse(R) division relating to
non-productive time and spoilage.
Finance income/charges
Finance income of $3k (2020: $3k) represented interest earned on
cash deposits. Finance charges for the year were reported at $692k
(2020: $571k) and related primarily to interest charges and
associated costs for the MidCap loan arrangement.
Loss for the year
The loss for the year was $4,985k (2020 loss: $12,465k)
resulting in a basic loss per share of (0.07 cents) (2020 loss:
0.28 cents).
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 2021, a refund of $534k was
receivable (2020: $1,120k). 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 $0k (2020: $0k). A
corporation tax credit of $157k (2020: $684k) was recognized in the
period. Gross tax losses carried forward in the UK were $73,643k
(2020: $69,399k). 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 2021, the Group had net assets of $33,392k (2020:
$37,817k) of which cash in hand totalled $7,709k (2020:
$12,968k).
Inventory remained stable at $9,719k (2020: $9,604k) as the
BioRinse(R) and DCell(R) segments managed stock levels closely to
increase inventory turnover while also keeping adequate stock
levels to meet customer demand.
Intangible assets increased slightly to $15,064k (2020:
$14,845k) in the year. A further $497k of development costs were
capitalised in the year. The balance of movements in this account
relate to amortisation.
A full impairment test was performed on each of the Group's CGUs
to determine whether the property, plant and equipment,
right-of-use, or intangible assets have suffered an impairment
loss. This assessment resulted in no indication of impairment and
no charges were recognized for the year.
Working capital increased slightly in the year to $9,992k (2020:
$9,882k), driven by an increase to inventory from continued growth
in manufacturing activities. The statement of financial position
included corporation tax receivable of $534k (2020: $1,120k) in
respect of UK research and development tax credits.
Borrowings/Lease liability
Non-current liabilities include the $4,465k debt facility
through MidCap and the $3,072k lease liability related to the
Group's leasehold in San Antonio, TX (2020: $3,788k and $3,084k
respectively). The MidCap debt facility includes $2,000k of the
term loan and $2,465k of the revolving credit facility, net of
$184k of capitalised debt issue costs.
Dividend
No dividend has been proposed for the year to 31 December 2021
(2020: Nil).
Accounting policies
Following the departure from the EU, 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 2023 (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 $7.7m at 31 December 2021 and
the ongoing support of MidCap Financial Trust ("MidCap")
(borrowings of $4.5m at 31 December 2021) to meet its working
capital requirements, capital investment programme and other
financial commitments. Repayment on the MidCap borrowings is
scheduled to begin in July 2023.
The COVID-19 pandemic continued to affect most healthcare
businesses in 2021, as the emergence of the Delta and Omicron
variants extended the timeline for a return to normal healthcare
procedure volumes. Given the uncertainty around the level and
duration of disruption from COVID-19, it is difficult to determine
how long the current situation may last, and the time taken to
catch-up any postponed surgical procedures thereafter.
However, the Board, in compiling the Cash Flow Projections, has
considered a downside scenario regarding the effect of reduced and
delayed revenues due to COVID-19 and has undertaken market
soundings regarding the likely timeframe for the recommencement of
procedures. It has concluded that there will not be a significant
long-lasting impact on the ability of the business to carry out its
commercial activities. 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 also assume that the MidCap
facilities are available throughout the forecast period as the
repayment is not due to start until H2 2023. 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 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. On the basis
of their assessment, they have concluded that the going concern
basis remains appropriate for use in these financial
statements.
Subsequent development
In January 2022 the Group elected to exercise its option to
increase its current revolving credit facility from $3.0m to $5.0m.
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 to provide additional
cash resources in the face of future risks posed by COVID-19.
Future development
The emergence of the Omicron variant in late 2021 has caused
disruptions in the US healthcare system and supply chains
worldwide. Although Omicron appears to have milder complications
than prior variants, it remains difficult to predict at what pace a
return to pre-pandemic procedural levels will occur.
Cautionary statement
The strategic report, containing the strategic and financial
reports of the Group contain forward-looking statements that are
subject to risk factors associated with, amongst other things,
economic and business circumstances occurring from time to time
within the markets in which the Group operates. The expectations
expressed within these statements are believed to be reasonable but
could be affected by a wide variety of variables beyond the Group's
control. These variables could cause the results to differ
materially from current expectations. The forward-looking
statements reflect the knowledge and information available at the
time of preparation.
David Cocke
Chief Financial Officer
14 March 2022
Financial Statements
Consolidated Statement of Income
For the year ended 31 December 2021
2021 2020
USD USD
'000 '000
--------------------------------------------- --------- ---------
Revenue 19,746 16,473
Cost of sales (11,270) (8,903)
---------------------------------------------- --------- ---------
Gross profit 8,476 7,570
Administrative expenses before exceptional
items (12,574) (12,925)
Exceptional items (355) (8,324)
---------------------------------------------- --------- ---------
Total administrative expenses (12,929) (21,249)
---------------------------------------------- --------- ---------
Grant Income - 1,098
---------------------------------------------- --------- ---------
Operating loss (4,453) (12,581)
Finance income 3 3
Finance charges (692) (571)
---------------------------------------------- --------- ---------
Loss on ordinary activities before taxation (5,142) (13,149)
Taxation 157 684
---------------------------------------------- --------- ---------
Loss for the year (4,985) (12,465)
---------------------------------------------- --------- ---------
Loss for the year attributable to:
Equity holders of the parent company (4,792) (12,466)
Non-controlling interest (193) 1
---------------------------------------------- --------- ---------
(4,985) (12,465)
--------------------------------------------- --------- ---------
Loss per ordinary share attributable to
equity holders of the parent
company
Basic and diluted, cents per share (0.07) (0.28)
---------------------------------------------- --------- ---------
The loss for the year arises from the Group's continuing
operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
USD USD
'000 '000
------------------------------------------------- ---------- ---------
Loss for the year (4,985) (12,465)
------------------------------------------------- ---------- ---------
Other comprehensive income
Items that may be subsequently reclassified to
profit or loss:
Foreign currency translation differences (4) 970
Total comprehensive loss for the year (4,989) (11,495)
Total comprehensive loss for
the year attributable to:
Equity holders of the parent
company (4,796) (11,496)
Non-controlling interest (193) 1
------------------------------------------------- ---------- ---------
(4,989) (11,495)
------------------------------------------------ ---------- ---------
Consolidated Statement of Financial Position
As at 31 December 2021
2021 2020
USD USD
'000 '000
Assets
Non-current assets
Property, plant and equipment 5,708 4,417
Right-of-use assets 3,388 3,337
Intangible assets 15,064 15,299
------------------------------------------- ---------- ----------
24,160 23,053
------------------------------------------ ---------- ----------
Current assets
Inventory 9,719 9,604
Trade and other receivables 4,101 3,589
Corporation tax receivable 534 1,120
Cash and cash equivalents 7,709 12,968
------------------------------------------- ---------- ----------
22,063 27,281
------------------------------------------ ---------- ----------
Total assets 46,223 50,334
------------------------------------------- ---------- ----------
Liabilities
Non-current liabilities
Loans and borrowings (4,465) (3,788)
Deferred tax (640) (760)
Lease liability (3,364) (3,084)
------------------------------------------- ---------- ----------
(8,469) (7,632)
------------------------------------------ ---------- ----------
Current liabilities
Trade and other payables (4,244) (4,084)
Lease liability (118) (347)
------------------------------------------- ---------- ----------
(4,362) (4,431)
------------------------------------------ ---------- ----------
Total liabilities (12,831) (12,063)
------------------------------------------- ---------- ----------
Net assets 33,392 38,271
------------------------------------------- ---------- ----------
Equity
Share capital 15,947 15,947
Share premium 134,173 134,173
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 1,573 1,463
Cumulative translation reserve (1,305) (1,301)
Retained deficit (120,432) (115,640)
------------------------------------------- ---------- ----------
Equity attributable to equity holders of
the parent company 34,342 39,028
Non-controlling interest (950) (757)
------------------------------------------- ---------- ----------
Total equity 33,392 38,271
------------------------------------------- ---------- ----------
The consolidated financial statements were approved by the Board
of Directors and authorised for issue on 14 March 2022 and were
signed on its behalf by:
Daniel Lee
Chief Executive Officer
Company number: 05969271
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Attributable to equity holders of parent
Share Share Merger Reserve Reserve Share Cumulative Retained Total Non-controlling Total
capital premium reserve acquisition for based translation Deficit USD'000 interest equity
USD'000 USD'000 USD'000 reserve own payment reserve USD'000 USD'000 USD'000
USD'000 shares reserve USD'000
USD'000 USD'000
--------------- --------- ---------- --------- ------------ ---------- -------- ------------ ------------ ----------- ---------------- -----------
At 31 December
2019 8,478 124,118 16,441 (10,798) (1,257) 1,500 (2,271) (103,174) 33,037 (758) 32,279
--------------- --------- ---------- --------- ------------ ---------- -------- ------------ ------------ ----------- ---------------- -----------
Transactions
with owners
in their
capacity
as owners:
Issue of
equity
shares 7,467 11,200 - - - - - - 18,667 - 18,667
Expenses of
issue of
equity
shares - (1,145) - - - - - - (1,145) - (1,145)
Exercise of
share options 2 - - - - - - - 2 - 2
Share-based
payments - - - - - (37) - - (37) - (37)
Total
transactions
with owners
in their
capacity
as owners 7,469 10,055 - - (37) - - 17,487 - 17,487
--------------- --------- ---------- --------- ------------ ---------- -------- ------------ ------------ ----------- ---------------- -----------
Loss for the
year - - - - - - - (12,466) (12,466) 1 (12,465)
--------------- --------- ---------- --------- ------------ ---------- -------- ------------ ------------ ----------- ---------------- -----------
Other
comprehensive
income:
Currency
translation
differences - - - - - - 970 - 970 - 970
--------------- --------- ---------- --------- ------------ ---------- -------- ------------ ------------ ----------- ---------------- -----------
Total other
comprehensive
income for
the year - - - - - - 970 - 970 - 970
--------------- --------- ---------- --------- ------------ ---------- -------- ------------ ------------ ----------- ---------------- -----------
Total
comprehensive
income for
the year - - - - - - 970 (12,466) (11,496) 1 (11,495)
--------------- --------- ---------- --------- ------------ ---------- -------- ------------ ------------ ----------- ---------------- -----------
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
--------------- --------- ---------- --------- ------------ ---------- -------- ------------ ------------ ----------- ---------------- -----------
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
2021 2020
USD USD
'000 '000
------------------------------------------------------- -------- ---------
Operating activities
Loss before taxation (5,142) (13,149)
Adjustments for:
Finance income (3) (3)
Finance charges 692 571
Depreciation of property, plant and equipment 258 245
Depreciation of right-of-use assets 103 78
Amortisation of intangible assets 730 730
Impairment of intangible assets - 7,871
Share-based payments 110 (37)
Amortisation of debt cost 75 75
Unrealised foreign exchange loss 55 834
------------------------------------------------------- -------- ---------
Operating outflow before working capital movements (3,122) (2,785)
------------------------------------------------------- -------- ---------
Increase in inventory (115) (4,115)
Increase in trade and other receivables (512) (259)
Increase in trade and other payables 159 223
------------------------------------------------------- -------- ---------
Cash used in operations (3,590) (6,936)
------------------------------------------------------- -------- ---------
Research & development tax credits received 615 881
------------------------------------------------------- -------- ---------
Net cash used in operating activities (2,975) (6,055)
------------------------------------------------------- -------- ---------
Investing activities
Interest received 3 3
Purchase of property, plant and equipment (1,550) (1,573)
Capitalised development expenditure (497) (293)
------------------------------------------------------- -------- ---------
Net cash used in investing activities (2,044) (1,863)
------------------------------------------------------- -------- ---------
Financing activities
Proceeds from issue of shares - 18,667
Expenses of issue of shares - (1,146)
Proceeds from exercise of share options - 2
Proceeds from new borrowings 602 715
Interest paid on loans and borrowings (391) (317)
Lease liability payments (102) -
Lease interest payments (301) (237)
------------------------------------------------------- -------- ---------
Net cash (used in)/generated from financing
activities (192) 17,684
------------------------------------------------------- -------- ---------
Net (decrease)/increase in cash and cash equivalents (5,211) 9,766
Cash and cash equivalents at beginning of year 12,968 3,121
Effects of movement in exchange rates on cash
held (48) 81
------------------------------------------------------- -------- ---------
Cash and cash equivalents at end of year 7,709 12,968
------------------------------------------------------- -------- ---------
Notes to the financial statements
For the year ended 31 December 2021
1) Significant accounting policies
Basis of preparation
These financial statements have been prepared and approved by
the directors in accordance with UK- adopted International
Accounting Standards (IAS).
The financial statements have been prepared on the historical
basis, other than certain financial assets and liabilities which
are stated at their fair value. Historical cost is generally based
on the fair value of the considerations given in exchange for
assets.
As described below, the Directors continue to adopt the going
concern basis in preparing the consolidated financial
statements.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
financial statements.
Restatement
With effect from 1 January 2021, the Group's presentation
currency changed from pounds sterling ("GBP") to United States
dollar ("USD") as the Directors considered the USD to be more
representative of the sector in which the Group primarily operates.
The functional currency of the Group is pounds sterling
("GBP").
In accordance with International Accounting Standards, this
change has been applied retrospectively and comparatives for the
year ended 31 December 2020 were translated, for all statement of
financial position items except equity, using USD:GBP exchange spot
rate at that date, being USD 1.358, for the income statement using
the average USD:GBP exchange rate during the year, being USD 1.284,
and for the opening balances as at 1 January 2020, except equity,
using the USD spot rate on that date, being USD 1.3116. Share
capital, share premium and other reserves were translated at the
historic rates prevailing at the dates of transactions.
Historical differences arising from the retranslation to USD up
to 1 January 2020 have been taken directly to the foreign currency
translation reserve.
The Directors have not presented a third statement of financial
position and associated notes to reflect the change in presentation
currency as they do not believe this additional disclosure is
material. The rate used to confirm the net assets has been included
above and the Statement of Changes in Equity represents the equity
elements of the statement of financial position on a converted
basis. Notes 12, 13, and 14 disclose the impact on the non-current
assets.
All amounts have been rounded to the nearest thousand, unless
otherwise indicated.
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 2023 (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 USD 7.8 million at 31 December
2021 and the ongoing support of MidCap Financial Trust ("MidCap")
(borrowings of USD 4.5 million at 31 December 2021) to meet its
working capital requirements, capital investment programme and
other financial commitments.
The COVID-19 pandemic continued to affect most healthcare
businesses in 2021, as the emergence of the Delta and Omicron
variants extended the timeline for a return to normal healthcare
procedure volumes. Given the uncertainty around the level and
duration of disruption from COVID-19, it is difficult to determine
how long the current situation may last, and the time taken to
catch-up any postponed surgical procedures thereafter.
However, the Board, in compiling the Cash Flow Projections, has
considered a downside scenario regarding the effect of reduced and
delayed revenues due to COVID-19 and has undertaken market
soundings regarding the likely timeframe for the recommencement of
procedures. It has concluded that there will not be a significant
long-lasting impact on the ability of the business to carry out its
commercial activities. 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 also assume that the MidCap
facilities are available throughout the forecast period as
repayment is not due to start until July 2023. 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 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. On the basis of their
assessment, they have concluded that the going concern basis
remains appropriate for use in these financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiary undertakings (together
"the Group") made up to 31 December each year.
Subsidiary undertakings are those entities controlled directly
or indirectly by the Company. Control is achieved when the Company
is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the entity. In assessing control,
the Group takes into consideration potential voting rights. The
acquisition date is the date on which control is transferred to the
acquirer. The financial results of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases. Losses applicable to
the non-controlling interests in a subsidiary are allocated to the
non-controlling interests even if doing so causes the
non-controlling interests to have a deficit balance.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated.
Unrealised gains arising from transactions with equity-accounted
investees are eliminated against the investment to the extent of
the Group's interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
Non-controlling interest
Non-controlling interests are measured at their proportionate
share of the acquiree's identifiable net assets at the date of
acquisition. Changes in the Group's interest in a subsidiary that
do not result in a loss of control are accounted for as equity
transactions. Losses applicable to the non-controlling interests
are allocated to the non-controlling interests even if doing so
causes the non-controlling interests to have a deficit balance.
Controlled Joint Venture
In January 2016, the Group entered a joint venture establishing
GBM-V GmbH, a company incorporated in Germany. The Group controls
the majority of the voting rights and consequently the results for
this entity are consolidated in full within these financial
statements with the recognition of a non-controlling interest
within equity.
Goodwill
Goodwill arising on the acquisition of a subsidiary undertaking
is the difference between the fair value of the consideration
payable and the fair value of the identifiable assets, liabilities
and contingent liabilities acquired. Goodwill is tested annually
for impairment as described below.
Revenue
Revenue is measured as the fair value of the consideration
received or receivable in the normal course of business, net of
discounts, VAT and other sales related taxes and is recognised to
the extent that it is probable that the economic benefits
associated with the transaction will flow in to the Company, which
usually coincides with the despatch of goods
Bill and hold sales
The Group has bill-and-hold arrangements with customers, and
this revenue is recognised when the company considers that
performance obligations have been met and they meet the following
criteria:
-- The reason for the bill-and-hold arrangement must be
substantive (usually the arrangement has been requested by the
customer to facilitate their shipping arrangements)
-- The product must be identified separately as belonging to the
customer (that is, it cannot be used to satisfy other orders)
-- The product must be ready for physical transfer to the customer
-- The Group cannot have the ability to use the product, or to direct it to another customer
Grant Income
Grant income is recognised as earned based on contractual
conditions and is presented as Grant income on the face of the
Consolidated Statement of Income.
Foreign Currencies
The individual financial statements of each Group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purposes of the consolidated financial statements, the results and
the financial position of each Group entity are expressed in United
States dollar, which is the presentation currency for the
consolidated financial statements.
In preparing the financial statements of the individual
companies, transactions in currencies other than the functional
currency of each group company ("foreign currencies") are
translated into the functional currency at the rates of exchange
prevailing on the dates of the transactions. At each reporting
date, monetary assets and liabilities that are denominated in
foreign currencies are retranslated into the functional currency at
the rates prevailing on the reporting date. Non-monetary assets and
liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not
retranslated.
Foreign exchange differences are recognised in the profit or
loss in the period in which they arise, except for foreign exchange
differences on monetary items receivable from or payable to a
foreign operation for which settlement is neither planned nor
likely to occur and which, therefore, form part of the net
investment in the foreign operation. Foreign exchange differences
arising on the translation of the Group's net investment in foreign
operations are recognised as a separate component of Shareholders'
equity via the statement of other comprehensive income. On disposal
of foreign operations and foreign entities, the cumulative
translation differences are recognised in the income statement as
part of the gain or loss on disposal.
For the purpose of presenting company and consolidated financial
statements, the assets and liabilities of the Company, and the
Group's operations which have a functional currency other than
United States dollar, are translated using exchange rates
prevailing at the end of each reporting period. Income and expense
items are translated at the average exchange rates for the period,
unless exchange rates fluctuate significantly during that period,
in which case the exchange rates at the date of transactions are
used. Foreign exchange differences arising, if any, are recognised
in other comprehensive income and accumulated in equity. Equity
items are translated at the exchange rates at the date of
transactions and foreign exchange differences arising, if any, are
accumulated directly in equity.
On the disposal of a foreign operation (i.e. a disposal of the
Group's entire interest in a foreign operation, a disposal
involving loss of control over a subsidiary that includes a foreign
operation or loss of joint control over a jointly controlled entity
that includes a foreign operation), all of the accumulated exchange
differences in respect of that operation attributable to the Group
are reclassified to profit or loss. Where there is no change in the
proportionate percentage interest in an entity then there has been
no disposal or partial disposal and accumulated exchange
differences attributable to the Group are not reclassified to
profit or loss.
Fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign
operation and translated at the rate of exchange prevailing at the
end of each reporting period. Exchange differences arising are
recognised in equity.
Research and Development
Research costs are charged to profit and loss as they are
incurred. An intangible asset arising from development expenditure
on an individual project is recognised only when all of the
following criteria can be demonstrated:
-- It is technically feasible to complete the product and the
management is satisfied that appropriate regulatory hurdles have
been, or will be achieved
-- Management intends to complete the product and use or sell it
-- There is an ability to use or sell the product
-- It can be demonstrated how the product will generate probable future economic benefits
-- Adequate technical, financial and other resources are
available to complete the development, use or sell the product
-- Expenditure attributable to the product can be reliably measured
Such intangible assets are amortised on a straight-line basis,
from the point at which the assets are ready for use over the
period of the expected benefit and are reviewed for an indication
of impairment at each reporting date. Other development costs are
charged against profit or loss as incurred since the criteria for
capitalisation are not met.
The costs of an internally generated intangible asset comprise
all directly attributable costs necessary to create, produce and
prepare the asset to be capable of operating in the manner intended
by management. Directly attributable costs include employee costs
incurred on technical development, testing and certification,
materials consumed and any relevant third-party cost. The costs of
internally generated developments are recognised as intangible
assets and are subsequently measured in the same way as externally
acquired intangible assets. However, until completion of the
development project, the assets are subject to impairment testing
only.
Exceptional Items
Items which are significant by virtue of their size or nature
and/or which are considered non-recurring are classified as an
exceptional operating item. Such items are included within the
appropriate consolidated income statement category but are
highlighted separately. Exceptional operating items are excluded
from the profit measures used by the Directors to monitor
underlying performance.
Inventories
Inventories are recognised at the lower of cost and net
realisable value. Cost is determined using the first in, first out
method and represents the purchase cost, including transport, for
raw materials, together with a proportion of manufacturing
overheads based on normal levels of activity for work in progress
and finished goods. Appropriate provisions for estimated
irrecoverable amounts are recognised in the income statement when
there is objective evidence that the assets are impaired.
Property, Plant, Equipment and Right-of-use assets
Property, plant and equipment assets are stated at their
historical cost of acquisition less any provision for depreciation
or impairment.
Depreciation is provided on all property, plant and equipment
assets at rates calculated to write each asset down to its
estimated residual value evenly over its expected useful life, as
follows:
Buildings over 39 years
Laboratory equipment over 5-7 years
Computer equipment over 3 years
Fixtures and fittings over 5 years
Land is not depreciated.
A Right-of-use asset is recognised at commencement of the lease
and initially measured at the amount of the lease liability, plus
any incremental costs of obtaining the lease and any lease payments
made at or before the leased asset is available for use by the
Group. The Right-of-use asset is subsequently measured at cost less
accumulated depreciation and any accumulated impairment losses.
Right-of-use assets are depreciated on a straight-line basis over
the lease term (39 years).
Intangible Assets
Intangible assets are stated at fair value at acquisition. They
are subsequently held at cost less any provision for impairment or
amortisation. Intangible assets are amortised through
administrative expenses within the income statement over their
expected useful life as follows
Trademarks over 5 years
Customer relationships over 10 years
Process & IT technology over 10 years
Supplier agreements over 5 years
Impairment of Property, Plant and Equipment, Right-of-use and
intangible assets
At each reporting date, the Group reviews the carrying amounts
of its property, plant and equipment and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). For the purposes of
assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash generating
units).
Discounted cash flow valuation techniques are generally applied
for assessing recoverable amounts using Board approved five-year
forward- looking cash flow projections and terminal value
estimates, together with discount rates appropriate to the risk of
the related cash generating units.
If the recoverable amount of an asset is estimated to be less
than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. An impairment loss is recognised
as an expense immediately.
Share-based Payments
Share options
Equity settled share-based payment transactions are measured
with reference to the fair value at the date of grant, recognised
on a straight-line basis over the vesting period, based on the
Company's estimate of shares that will eventually vest.
Historically, the fair value of the options granted have been
measured using the Binomial model, however, the fair value of the
options issued in the current year have been measured using the
Monte Carlo model. The performance conditions of previous grants
were generally market based whereas current grants are now issued
with multiple performance conditions and therefore the Monte Carlo
model is considered to be a more appropriate model.
At each reporting date before vesting, the cumulative expense is
calculated, representing the extent to which the vesting period has
expired and management's best estimate of the achievement or
otherwise of non- market conditions and the number of equity
instruments that will ultimately vest. The movement in cumulative
expense since the previous reporting date is recognised in the
consolidated statement of comprehensive income, with a
corresponding entry in equity.
The grant by the Company of options and share-based compensation
plans over its equity instruments to the employees of subsidiary
undertakings in the Group is treated as a capital contribution. The
fair value of employee services received, measured by reference to
the grant date fair value, is recognised over the vesting period as
an increase to investment in subsidiary undertakings, with a
corresponding credit to equity in the parent entity accounts.
Jointly held shares
Where an employee acquires an interest in shares in the Company
jointly with the Tissue Regenix Employee Share Trust, the fair
value of the option at the purchase date is recognised on a
straight-line basis over the vesting period. The fair value benefit
is measured using a binomial valuation model, taking into account
the terms and conditions upon which the jointly owned shares were
purchased.
Financial Assets and Liabilities
Trade and other receivables
Trade and other receivables do not carry any interest and are
initially recognised at fair value. They are subsequently measured
at amortised cost using the effective interest rate method, less
any provision for impairment.
An expected credit loss ('ECL') model, as introduced under IFRS
9, broadens the information that an entity is required to consider
when determining its expectations of impairment. Under this model,
expectations of future events must be taken into account and this
will result in the earlier recognition of larger impairments
against trade and other receivables.
In applying the ECL model the company considered the probability
of a default occurring over the contractual life of its trade
receivables balances on initial recognition of those assets.
Impairment provisions are recognised for the group as follows,
representing the expected credit losses over the contracted life of
these balances.
Not overdue 0% of aged receivables
0 to 3 months overdue 0% of aged receivables
to 4 months overdue 25% of aged receivables
to 5 months overdue 50% of aged receivables
Over 5 months 100% of aged receivables
overdue
Trade and other payables
Trade and other payables are not interest bearing and are
initially recognised at fair value. They are subsequently measured
at amortised cost using the effective interest method.
Borrowings
Borrowings are interest bearing and are initially recognised at
fair value less the directly attributable costs of issue. They are
subsequently measured at amortised cost using the effective
interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash at hand and deposits on
a term of not greater than six months.
Share capital
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its
liabilities. Equity instruments issued by the Group are recognised
at the proceeds received, net of direct issue costs.
The costs of an equity transaction are accounted for as a
deduction from equity to the extent they are incremental costs
directly attributable to the equity transaction that would
otherwise have been avoided.
Leases
On commencement of a contract which gives the Group the right to
use assets for a period of time in exchange for consideration, the
Group recognises a right-of-use asset and a lease liability unless
the lease qualifies as a 'short-term' lease (term is 12 months or
less with no option to purchase the lease asset) or a 'low-value'
lease (where the underlying asset is USD 5,000 or less when
new).
The lease liability is initially measured at the present value
of the lease payments during the lease term discounted using the
interest rate implicit in the lease, or the incremental borrowing
rate if the interest rate implicit in the lease cannot be readily
determined. The lease term is the non-cancellable period of the
lease plus extension periods that the Group is reasonably certain
to exercise and termination periods that the Group is reasonably
certain not to exercise. Lease payments include fixed payments,
less any lease incentives receivable, variable lease payments
dependent on an index or a rate and any residual value
guarantees.
The lease liability is subsequently increased for a constant
periodic rate of interest on the remaining balance of the lease
liability and reduced for lease payments. Interest on the lease
liability is recognised in profit or loss. Variable lease payments
not included in the measurement of the lease liability as they are
not dependent on an index or rate, are recognised in profit or loss
in the period in which the event or condition that triggers those
payments occurs.
Taxation
Tax on the profit or loss for the year comprises current and
deferred tax. Tax is recognised in the profit and loss account
except to the extent that it relates to items recognised directly
in equity or other comprehensive income, in which case it is
recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the statement of financial position date,
and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the statement of financial position
date.
Segmental 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 and making strategic decisions, has been identified as the
Board of Directors.
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 value 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
on-going basis. Revisions to accounting estimates are recognized 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.
Recoverability of non-current assets
Determining whether an asset is impaired requires an assessment
of whether there are any indicators of impairment. If there is any
indication of potential impairment, an impairment test is required
based on the recoverable amount of the asset.
At 31 December 2021, the Directors determined that there were
indicators of impairment in respect of the Group's non-current
assets and that there was a requirement to perform an impairment
test. The assets were assessed for impairment based on value in use
which requires the Group to estimate the future cash flows expected
to arise from the cash-generating unit using a suitable discount
rate in order to calculate present value. The future cash flows
expected to arise was calculated using a discount rate of 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 no provision for impairment was
required (2020: USD 7.9 million impairment of Goodwill).
The carrying amount of non-current assets at the 31 December
2021 was USD 24.2 million (2020: USD 23.1 million) and the
Directors did not consider that it was appropriate to make a
provision for impairment in respect of these assets.
3) Segmental reporting
The following table provides disclosure of the Group's revenue
by geographical market based on location of the customer:
2021 2020
USD USD
'000 '000
----------------- ------- -------
USA 16,883 13,733
Rest of world 2,863 2,740
----------------- ------- -------
19,746 16,473
----------------- ------- -------
Analysis of revenue by customer
During the year ending 31 December 2021, the Group had one
customer who individually exceeded 10% of revenue. This customer
generated 14% of revenue (2020: one customer who generated 13% of
revenue).
Operating segments
At 31 December 2020, the Group was organised into 3 operating
divisions for internal management, reporting and decision-making
purposes. These divisions were, BioSurgery, Orthopaedics &
Dental, and GBM-V & Cardiac and were the operating segments
reported in accordance with IFRS 8 "Operating Segments".
The Directors have now determined that it would be more
appropriate to the Group's operations to disclose its divisions as,
dCELL (formerly BioSurgery and now including Cardiac and the UK
side of the Ortho & Dental segment), BioRinse (formerly the US
side of the Ortho & Dental segment), and GBM-V.
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.
Central overheads, which primarily relate to operations of the
Group function, are not allocated to the business unit.
Segmental information about these divisions is presented below.
We have not restated the prior year with the changes as the
information was not readily available and the value added was
considered to be minimal.
Income Statement dCELL BioRinse GBM-V Central Total
2021 2021 2021 2021 2021
---------------------- -------- --------- ------ -------- --------
USD USD USD USD USD
'000 '000 '000 '000 '000
---------------------- -------- --------- ------ -------- --------
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) (1,118) (154) (1,945) (4,453)
---------------------- -------- --------- ------ -------- --------
Net Finance charges 1 (682) - (8) (689)
---------------------- -------- --------- ------ -------- --------
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)
---------------------- -------- --------- ------ -------- --------
Income Statement Biosurgery Ortho & GBM-V & Central Total
dental Cardiac
-------------------------- ----------- --------- --------- -------- ---------
2020 2020 2020 2020 2020
USD USD USD USD USD
'000 '000 '000 '000 '000
-------------------------- ----------- --------- --------- -------- ---------
Revenue 4,247 9,562 2,664 - 16,473
Cost of sales (2,374) (4,942) (1,587) - (8,903)
-------------------------- ----------- --------- --------- -------- ---------
Gross Profit 1,873 4,620 1,077 - 7,570
Administrative expenses (3,415) (6,390) (1,418) (1,702) (12,925)
Exceptional items:
Impairment of intangible
assets - (7,871) - - (7,871)
Restructuring costs - (18) (129) (306) (453)
Grant Income 417 629 - 52 1,098
-------------------------- ----------- --------- --------- -------- ---------
Operating loss (1,125) (9,030) (470) (1,956) (12,581)
Net Finance charges - (568) - - (568)
-------------------------- ----------- --------- --------- -------- ---------
Loss before taxation (1,125) (9,598) (470) (1,956) (13,149)
Taxation (28) 547 166 - 684
-------------------------- ----------- --------- --------- -------- ---------
Loss for the year (1,153) (9,051) (304) (1,956) (12,465)
Revenue from all operating segments derives from the sale of
biologic medical devices.
Statement of Financial dCELL BioRinse GBM-V Central Total
Position
------------------------- ------- --------- ------ -------- ---------
2021 2021 2021 2021 2021
USD USD USD USD USD
'000 '000 '000 '000 '000
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 - (8,056) - (121) (8,177)
Current liabilities (428) (3,421) (249) (556) (4,654)
------------------------- ------- --------- ------ -------- ---------
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
------------------------- ------- --------- ------ -------- ---------
Statement of Financial Biosurgery Ortho & GBM-V Central Total
Position dental
------------------------- ----------- --------- ------- -------- ---------
2020 2020 2020 2020 2020
USD USD USD USD USD
'000 '000 '000 '000 '000
------------------------- ----------- --------- ------- -------- ---------
Non-current assets - 22,322 5 272 22,599
Current assets 2,807 10,613 1,079 12,782 27,281
------------------------- ----------- --------- ------- -------- ---------
Total assets 2,807 32,935 1,084 13,054 49,880
------------------------- ----------- --------- ------- -------- ---------
Non-current liabilities - (7,415) - (217) (7,632)
------------------------- ----------- --------- ------- -------- ---------
Current liabilities (390) (3,073) (236) (732) (4,431)
------------------------- ----------- --------- ------- -------- ---------
Total liabilities (390) (10,488) (236) (949) (12,063)
------------------------- ----------- --------- ------- -------- ---------
Net assets 2,417 22,447 848 12,105 37,817
------------------------- ----------- --------- ------- -------- ---------
Capital expenditure 13 4,692 4 278 4,987
------------------------- --- ------ ---- ------
Additions to intangible
assets - 293 - - 293
------------------------- --- ------ ---- ------
4) Taxation
Tax on loss on ordinary activities
2021 2020
USD USD
'000 '000
========================================================= ===== =====
Current tax:
UK R&D tax credit (37) (564)
(37) (564)
Deferred tax:
Origination and reversal of temporary timing differences (120) (120)
========================================================= ===== =====
Tax credit on loss on ordinary activities (157) (684)
========================================================= ===== =====
The credit for the year can be reconciled to the loss per the
income statement as follows:
2021 2020
USD USD
'000 '000
-------------------------------------------------------- -------- ---------
Loss on ordinary activities before tax (5,142) (13,149)
Tax at the standard rate of corporation tax 19% (2020:
19%) (977) (2,499)
Effects of:
Research and development tax credits received (124) (403)
Surrender of research and development relief for
repayable tax
credit including enhancement 74 555
Unutilised tax losses 870 1,663
-------------------------------------------------------- -------- ---------
Tax credit for the period (157) (684)
-------------------------------------------------------- -------- ---------
Unrelieved tax losses carried forward 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.
2021 2020
USD USD
'000 '000
------------------------------------------------------ ------- -------
Tax losses
Losses available to carry forward against future
trading profits 73,643 69,399
------------------------------------------------------ ------- -------
Unrecognised deferred tax asset - at 25% (2020: 19%) 18,411 13,186
------------------------------------------------------ ------- -------
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.
5) Loss per ordinary share
Basic loss per ordinary share is calculated by dividing the net
loss attributable to equity holders 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 share is calculated by adjusting the weighted
average number of ordinary shares in issue during the year to
assume conversion of all dilutive potential ordinary shares.
The calculation of the basic and diluted loss per ordinary share
is based on the following data:
2021 2020
USD USD
'000 '000
----------------------------------------------- -------- ---------
Total loss attributable to the equity holders
of the parent (4,792) (12,466)
----------------------------------------------- -------- ---------
No. No.
----------------------------------------------------- -------------- --------------
Weighted average number of ordinary shares in issue
during the year 7,033,077,499 4,447,666,932
----------------------------------------------------- -------------- --------------
Loss per ordinary share
Basic and diluted, cents per share (0.07) (0.28)
----------------------------------------------------- -------------- --------------
The Company has options issued over 106,832,872 (2020:
50,803,039) ordinary shares and there are 16,112,800 (2020:
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
2021 2020
USD USD
'000 '000
--------------------------- ------- --------
Current Lease liabilities 118 347
Non-current liabilities 3,364 3,084
--------------------------- ------- ------
3,482 3,431
--------------------------- ------- ------
Maturity analysis of lease liabilities
The maturity of the gross contractual undiscounted cashflows due
on the Group's lease liabilities is set out below based on the
period between31 December 2021 and the contractual maturity
date.
Land and buildings 2021 2020
USD USD
'000 '000
--------------------- ------ ------
Less than 6 months 202 181
6 months to 1 year 208 181
1 year to 2 years 420 390
2 years to 5 years 3,518 4,002
5 or more years - -
4,348 4,754
--------------------- ------ ------
Effect of leases on financial performance
2021 2020
USD USD
'000 '000
------------------------------------------------- ------ ------
Depreciation on right-of-use assets 103 78
Interest expense 301 254
------------------------------------------------- ------ ------
Total effect of leases on financial performance 404 332
------------------------------------------------- ------ ------
The Group leases properties used for its operations in the
United Kingdom ("UK") and United States ("US").
UK Property: 5-year fixed lease which includes a break clause in
2023.
US property: 5-year fixed which includes an option to purchase
up to 2025.
The Group average effective borrowing rate for leases at 31
December 2021 was 9% (2020: 9%).
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END
FR EADDLFENAEAA
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March 15, 2022 03:00 ET (07:00 GMT)
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