Final results for the year ended 31 December 2022
21/03/2023 07:00
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RNS Number : 5982T Tissue Regenix Group PLC 21 March 2023
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
(http://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
(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 www.tissueregenix.com (http://www.tissueregenix.com)
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 2021
USD'000 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 2021
USD'000 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 2021
USD'000 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 Cumulative translation reserve USD'000 Retained deficit USD'000 Total USD'000 Non-controlling interest USD'000 Total equity USD'000
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 2021
USD'000 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 2021
USD'000 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 BioRinse GBM-V Central Total
2022 2022 2022 2022 2022
USD'000 USD'000 USD'000 USD'000 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)
dCELL BioRinse GBM-V Central Total
2021 2021 2021 2021 2021
USD'000 USD'000 USD'000 USD'000 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 BioRinse GBM-V Central Total
2022 2022 2022 2022 2022
USD'000 USD'000 USD'000 USD'000 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 BioRinse GBM-V Central Total
2021 2021 2021 2021 2021
USD'000 USD'000 USD'000 USD'000 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
4. Taxation
2022 2021
USD'000 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 2021
USD'000 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 2021
USD'000 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.
2022 USD'000 2021
Land and buildings 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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