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Oxeco PLC (OXE)

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Thursday 03 June, 2010

Oxeco PLC

Acquisition

RNS Number : 9864M
Oxeco PLC
03 June 2010
 



 

Oxeco Plc (the "Company")

 

 

Proposed acquisition of Tissue Regenix Limited

Proposed 1 for 5 Share Consolidation

Proposed placing of 106,712,800 New Ordinary Shares

at 5 pence per share

Proposed change of name to Tissue Regenix Group Plc

Adoption of New Articles of Association

Application for Admission to AIM

and

Notice of General Meeting

 

Transaction highlights:

 

·       Conditional acquisition of Tissue Regenix, a company engaged in the production of biocompatible
 regenerative tissue implants using its proprietary platform dCELL® Technology

·       The consideration for the Acquisition is to be satisfied by the issue of 240 million New Ordinary Shares to
 the shareholders of
Tissue Regenix

·       Gross proceeds of the placing of £4.5 million following which the Enlarged Group will have net funds of
 approximately £7.4 million

·       The Acquisition constitutes a reverse takeover under the AIM Rules

·       Following Admission, the Continuing Board will comprise John Samuel as Executive Chairman, Antony 
 Odell as Managing Director, Michael Bretherton as Finance Director and Alan Miller, Alex Stevenson and
 Alan Aubrey as Non-Executive Directors.
 

·       It is expected that dealings in the New Ordinary Shares of the Enlarged Group will become effective on 29
 June 2010

·       The Enlarged Issued Share Capital on Admission will be 466,712,800 New Ordinary Shares

 

The Company is pleased to announce that terms have been agreed for the conditional acquisition of Tissue Regenix, a company engaged in the production of biocompatible regenerative tissue implants using its proprietary platform dCELL® Technology. The aggregate consideration for the Acquisition is £12 million to be satisfied by the allotment of 240,000,000 New Ordinary Shares to be issued and credited as fully paid at 5 pence per New Ordinary Share.

 

The Company also announces that it has conditionally raised £4.5 million (before expenses) by way of a Placing. The funds from the Placing will be used to meet the costs of the Proposals and to provide additional working capital for the Enlarged Group.

In view of the size of Tissue Regenix in relation to the Company, the Acquisition is classified as a reverse takeover under the AIM Rules and is therefore conditional, inter alia, on the approval of Shareholders in general meeting. A copy of the Admission document along with the notice of General Meeting is being sent out to shareholders today and will be available on the Company's website  www.oxecoplc.com.

Information on Tissue Regenix

Tissue Regenix was incorporated in May 2006 to commercialise the academic research of Professor Eileen Ingham and Professor John Fisher of the University of Leeds in the field of tissue decellularisation.

The dCELL® Technology comprises a patented process which removes cells and other components from animal and human tissue allowing it to be used without anti-rejection drugs to replace worn out or diseased body parts. The potential applications of this process are diverse and address many critical clinical needs such as vascular disease, heart valve replacement and knee repair. Of the range of potential applications, Tissue Regenix is currently focused on delivering its lead product, the dCELL® Vascular Patch, onto the market and the current timetable envisages Tissue Regenix making its final submission for a CE Mark shortly. It is the Continuing Board's intention to use the proceeds of the Placing to complete the application process and commence the marketing of the dCELL® Vascular Patch and to develop further follow-on products in the vascular, cardiac and orthopaedic areas.

 

The Continuing Board believe that medical products based on the dCELL® Technology have the potential to deliver long term solutions to major clinical problems due to their ability to regenerate inside the human body using the patient's own cells thereby avoiding the need for re-treatment.

 

John Samuel, Tissue Regenix Chairman, commented:

 "This acquisition represents the next milestone in Tissue Regenix's development.   Admission to the AIM Market of the London Stock Exchange allows Tissue Regenix to continue to strengthen its shareholder base and balance sheet and gives the company the resources needed to fund the further development of the dCELL® Technology and the securing of regulatory approval for marketing for its dCELL® Vascular Patch."

Michael Bretherton, Oxeco Chairman, Commented: 

"The opportunity with Tissue Regenix will provide an exciting new start for the Company." 

 

Admission Statistics

Number of Existing Ordinary Shares                                                                                                                600,000,000

(post Share Consolidation)                                                                                                                                  120,000,000

Number of Consideration Shares proposed to be issued                                                                             240,000,000

Number of Placing Shares proposed to be issued*                                                                                       106,712,800

Placing Price                                                                                                                                                                    5 pence

Enlarged Issued Share Capital                                                                                                                           466,712,800

Gross proceeds of the Placing*                                                                                                                           £4.5 million

Net proceeds of the Placing available to the Company*                                                                            £4.03 million

Market capitalisation of the Company immediately following Admission                                              £23.3 million

International Security Identification Number (ISIN)                                                                              GB00B5SGVL29

TIDM Symbol                                                                                                                                                                                                                                                                    TRX

                     

 

 

Percentage                                      Percentage

of Enlarged                              of  fully diluted

Issued                                     Enlarged Issued

Share Capital                         Share Capital

 

%

%

Percentage of Enlarged Issued Share Capital and fully diluted

 

 

Enlarged Issued Share Capital represented by:

 

 

Existing Ordinary Shares

25.71

24.93

Consideration Shares

51.42

49.86

Placing Shares

22.86

22.17

 

* Includes 16,712,800 Placing Shares proposed to be issued to the Tissue Regenix Group Plc Employee Benefit Trust in respect of which the £835,640 of subscription monies will be loaned to the EBT by the Company and which monies are therefore excluded from the proceeds of the Placing.

 

Expected Timetable of Principal Events

Event

Publication date of the Admission Document                                                                                                 3 June 2010

Latest time and date for receipt of Forms of Proxy in respect

of the General Meeting                                                                                                          10.00 a.m. on 26 June 2010

Record Date for Consolidation                                                                                                6.00 p.m. on 28 June 2010

General Meeting                                                                                                                      10.00 a.m. on 28 June 2010

Completion of the Acquisition, Admission and dealings in the Enlarged

Issued Share Capital expected to commence on AIM                                                                                29 June 2010

Expected crediting of CREST accounts (where applicable) by                                                                  29 June 2010

Expected despatch of definitive share certificates (where applicable) by                                                6 July 2010

 

 

For further details of the transaction please see below. For the full admission document, please visit the Company's website: www.oxecoplc.com.

 

The terms used in this announcement have the same meaning as in the admission document.

 

Contact 

Michael Bretherton  

Oxeco plc

www.oxecoplc.com

 

+44 (0) 20 7099 7266

Graeme Thom/ Sarang Shah

ZAI Corporate Finance Ltd

 

+44 (0) 20 7060 2220

 

LETTER FROM THE CHAIRMAN OF OXECO PLC

Oxeco Plc

Proposed acquisition of Tissue Regenix Limited
Proposed 1 for 5 Share Consolidation
Proposed placing of 106,712,800 New Ordinary Shares
at 5 pence per share
Proposed change of name to Tissue Regenix Group Plc
Adoption of New Articles of Association
Application for Admission to AIM
and
Notice of General Meeting

1. INTRODUCTION

The Company has today announced that terms have been agreed for the conditional acquisition of Tissue Regenix, a company engaged in the production of biocompatible regenerative tissue implants using its proprietary platform dCELL® Technology. The aggregate consideration for the Acquisition is £12 million to be satisfied by the allotment of 240,000,000 New Ordinary Shares to be issued and credited as fully paid at 5 pence per New Ordinary Share.

Tissue Regenix was incorporated in May 2006 to commercialise the academic research of Professor Eileen Ingham and Professor John Fisher of the University of Leeds in the field of tissue decellularisation. Its dCELL® Technology comprises a patented process which removes cells and other components from human and animal tissue allowing it to be used without anti-rejection drugs to replace worn out or diseased body parts.

The Company has also today announced that it has conditionally raised £4.5 million (before expenses) by way of the Placing. The funds from the Placing will be used to meet the costs of the Proposals and to provide additional working capital for the Enlarged Group.

In view of the size of Tissue Regenix in relation to Oxeco, the Acquisition is classified as a reverse takeover under the AIM Rules and is therefore conditional, inter alia, on the approval of Shareholders in general meeting. Such approval is being sought at the General Meeting, notice of which is set out at the end of this document.

Immediately following Admission, the Consideration Shares will comprise approximately 51.42 per cent. of the Enlarged Issued Share Capital.

The purpose of this document is to: (i) provide you with the background to and to set out the reasons for, and details of, the Proposals; (ii) explain why the Directors consider the Proposals are in the best interests of the Company and its Shareholders as a whole; and (iii) seek Shareholder approval for the Proposals. This document also contains the Directors' recommendation that you vote in favour of the Resolutions to be proposed at the GM, notice of which is set out at the end of this document.

This document comprises an Admission Document in respect of the Enlarged Group prepared in accordance with the AIM Rules.

2.      BACKGROUND TO AND REASONS FOR THE PROPOSALS

Oxeco was admitted to AIM in December 2006. At the same time, the Company outlined a strategy of investing in, or acquiring assets, businesses or companies in the technology and science sectors.

On 6 June 2007, the Company completed its acquisition of the entire issued share capital of Oxray, a start up business which had the objective of becoming a provider of molecular structure determination services to both industry and academic institutions. Oxray pursued this objective by developing novel X-ray crystallography structure determination software but, notwithstanding substantial completion of such development, was unable to establish a solid customer base nor had it been able to develop its product service offering by bolt-on acquisitions in the same field as had been envisaged at the time of its acquisition. Further, the Directors were not able to secure a commercial exit from Oxray and thus concluded (as announced on 23 July 2009) to cease any further investment in Oxray. Oxray has since been a dormant subsidiary retaining control of its underlying Intellectual Property Rights and the Company has completed the transfer of an equity stake of 15 per cent. in Oxray to Oxray's former Commercial Manager, Richard Cooper, as an incentive to help potentially realise some future value from such Intellectual Property Rights.

In the announcement relating to Oxray on 23 July 2009, the Company confirmed that it would continue with its outline strategy of seeking investments in the general science and technology sector. In line with such strategy, the Directors have indentified Tissue Regenix as a suitable acquisition for the Company and believe that its platform technology, the dCELL® Technology, has the potential to significantly increase Shareholder value.

3.      INFORMATION ON TISSUE REGENIX

Tissue Regenix was incorporated in May 2006 to commercialise the academic research of Professor Eileen Ingham and Professor John Fisher of the University of Leeds in the field of tissue decellularisation. The Founders commenced their work on the core process comprised within the dCELL® Technology approximately 6 years prior to Tissue Regenix's incorporation and the ensuing discoveries were the result of the combination of their respective expertise in the biology and engineering disciplines, together with their collaboration with leading physicians in the UK and Brazil.

The Institute of Medical and Biological Engineering at the University of Leeds is a recognised centre of excellence in the field of regenerative medicine and advanced biomaterials. During the development of the dCELL® Technology, grants totalling £2 million have been received from the EPSRC, Yorkshire Children's Heart Foundation, BBSRC and others and these have enabled the Founders and their research teams at the IMBE to develop and refine the technology.

In December 2006 and under investment rights vested in it pursuant to the Technology Transfer Framework Agreement, Techtran, together with the White Rose Technology Fund, invested in a seed financing round of £685,000, the proceeds of which were used to progress the dCELL® Technology towards a pre-clinical study that demonstrated the early promise of the underlying process.

Between the end of 2007 and May 2008, Tissue Regenix completed a further funding round raising approximately £3.3 million in aggregate in which John Samuel, the current chairman of Tissue Regenix and proposed Executive Chairman of the Company, participated. The proceeds were used to commence the first clinical trial on the dCELL® Vascular Patch which began in August 2009 and is continuing towards developing the quality systems necessary to securing a CE Mark. In October 2008, Antony Odell was appointed chief executive officer after working as a consultant to Tissue Regenix since early 2008.

The dCELL® Technology comprises a patented process which removes cells and other components from animal and human tissue allowing it to be used without anti-rejection drugs to replace worn out or diseased body parts. The potential applications of this process are diverse and address many critical clinical needs such as vascular disease, heart valve replacement and knee repair. Of the range of potential applications, Tissue Regenix is currently focused on delivering its lead product, the dCELL® Vascular Patch, onto the market and the current timetable envisages Tissue Regenix making its final submission for a CE Mark shortly. It is the Continuing Board's intention to use the proceeds of the Placing to complete the application process and commence the marketing of the dCELL® Vascular Patch and to develop further follow-on products in the vascular, cardiac and orthopaedic areas.

The Continuing Board believe that medical products based on the dCELL® Technology have the potential to deliver long term solutions to major clinical problems due to their ability to regenerate inside the human body using the patient's own cells thereby avoiding the need for re-treatment.

4. THE dCELL® PROCESS AND VASCULAR PATCH

The process comprised within the dCELL® Technology involves the production of biological scaffolds created by taking a piece of animal or human tissue that is equivalent to the diseased or damaged body part which is being replaced, treating such tissue with a series of chemical washes to decellularise it and then sterilising the tissue. The end product is a scaffold which can be stored under normal conditions at room temperature like any synthetic medical device and, when it is implanted into the body, it repopulates with the patient's own cells using natural biological repair mechanisms.

The key benefits of the scaffold include the following:

·       it provides strength and support to the repair site within the body;

·       it is biocompatible, meaning that is compatible with living cells, tissues, organs or systems and posing little risk of injury toxicity or rejection by the immune system; and

·       it incorporates into the patient's tissue allowing it to regenerate and is cell friendly.

·       dCELL® Vascular patch

Tissue Regenix's dCELL® Vascular Patch is a sterile, non-cellular biological scaffold which is intended to be permanently implanted into the human body for vascular repair. An example of its use is as a patch to close a blood vessel after the surgical removal of plaque in an artery that has become narrow or blocked due to peripheral vascular disease. The use of a biological patch for such closure is just one or several clinical options, which include primary closure, use of an autologous vein or use of a prosthetic (synthetic) patch.

Patching has been routinely used as early as 1965 and there is strong evidence that carotid patching provides long-term benefits for patient care.

Tissue Regenix has recently completed the six month follow up to its clinical trial on the dCELL® Vascular Patch and will shortly be submitting its dossier of data from the clinical trial to the regulatory authority as part of its application for a CE Mark in Europe. Subsequent to attaining approval, it is the Continuing Board's intention to start marketing the dCELL® Vascular Patch in Europe and to file for regulatory approval in the US.

5.      THE REGULATORY ENVIRONMENT

Tissue Regenix operates in a highly regulated environment and, as such, all of its products are subject to external governmental approval. In regulatory terms, Tissue Regenix's products are regarded as medical devices by EU and US regulators because they either treat/alleviate disease or because they replace/modify the anatomy in a way that does not achieve its principal intended action in or on the human body by pharmacological, immunological or metabolic means.

Within the EU, medical devices must be compliant to the European Council Directive 93/42/EEC of 14 June 1993 which concerns medical devices, plus a range of subsequent amendments to the Directive. Devices are regulated by EU member state competent authorities, which in the UK is the Medicines & Healthcare Regulatory Agency. These competent authorities in turn designate notified bodies to audit medical device manufacturing facilities and to assess product information dossiers. Tissue Regenix's notified body is Intertek, formerly known as Amtac Certification Services Ltd. Council Directive 93/42/EEC includes non-viable animal tissue devices in its scope and thus covers Tissue Regenix's products. Specifically, Tissue Regenix's dCELL® products are Class III medical devices in the EU and are regarded as higher risk medical devices due to their animal derived nature (Class III being the highest risk medical device class). As such, Tissue Regenix operates under stringent controls and its registration design dossier (a comprehensive product information package) for the dCELL® Vascular Patch product is currently being examined by Intertek to enable Tissue Regenix to gain approval to place the product on the market and to affix a CE mark to the product. As part of the approval process, Tissue Regenix's manufacturing facilities have also been assessed by Intertek and Tissue Regenix will gain certification to the ISO 13485: 2003 medical devices quality management systems standard as part of the approval process.

Within the US, medical devices must be compliant to the Federal Food, Drug and Cosmetic Act. Procedural regulations relating to medical devices in the US are documented in the Code of Federal Regulations 21 Part 800-898 for Medical Devices (Sub Chapter H). Devices in the US are all regulated by the FDA. Specifically, Tissue Regenix's dCELL® products are either Class II or Class III products in the US (with Class III being the highest risk medical device class). Classification is generally dependent on the intended purpose of the device and also whether the devices are substantially equivalent to other Class II devices already cleared by the FDA (rather than being based on whether the material is of animal origin). Both Class II and III products require a data package submission to the FDA prior to placing the product on the market, however, the types of submission (and data requirements) differ depending on the class. The Proposed Directors believe that the dCELL® Vascular Patch is substantially equivalent to other products on the US market place and will be a Class II product.

To help ensure that Tissue Regenix's products will meet global regulatory standards, it designs its devices to meet a number of key medical device standards, including but not limited to ISO 10993 (biological evaluations), ISO 14971 (application of risk management), ISO 22442 (animal tissues and their derivatives) and ISO EN ISO 14160 (sterilisation).

6.      INTELLECTUAL PROPERTY RIGHTS

The Tissue Regenix patent portfolio is based around the two initial patent filings made by the University of Leeds in 2001 and 2003 and covering the basic methodology of preparing tissue matrices for subsequent implantation. The method patent covers (i) the use of single low concentration of an anionic detergent "SDS" and (ii) the use of ultra-sound energy for recellularisation. Both of these inventions have now progressed through the International PCT Phase and are granted in certain jurisdictions. The detailed status of each of these patents in the various jurisdictions in which they have been filed, referred to as Patent Family 1 and Patent Family 2, is set out in paragraphs 1 and 2 of Part II of this document.

Since the initial two patents were filed, applications for two further patent families have been filed demonstrating improvements to the basic methodology in order to prepare specific tissues with unique properties. The detailed status of each of these patent applications in the various jurisdictions in which they have been filed, referred to as Patent Family 3 and Patent Family 4, is set out in paragraphs 3 and 4 of Part II of this document.

Each of Patent Family 1, Patent Family 2 and Patent Family 3 have been filed in the name of the University of Leeds and licensed to Tissue Regenix on an exclusive world-wide royalty free basis for the lifetime of: the granted patents; any further patents granted pursuant to the pending patent applications; and any further applications made claiming priority from these. Further details of the IPR Licence are set out in paragraph 12 of Part VII of this document.

Patent Family 4 was originally filed in 2006 jointly in the names of the University of Leeds and the University of York. The patents and patents applications comprised within this family were assigned to Tissue Regenix on 28 May 2010. Further details of this assignment are set out in paragraph 12 of Part VII of this document.

In addition to the Owned Patents and Licensed Patents, the Know How forms an integral part of the Intellectual Property Rights of Tissue Regenix.

Tissue Regenix also have a European Community Trade Mark registration for the trade mark "dCELL®". An application for this trade mark is also currently pending in the US.

As Tissue Regenix grows and further develops its dCELL® Technology and products using the technology, it will continue with its strategy of filing patents to protect any improvements to existing methods and also to file specific product patents.

7. STRATEGY OF THE ENLARGED GROUP AND USE OF PROCEEDS

The strategy of the Enlarged Group will be to continue to use its core dCELL® Technology as a platform to develop a range of products using the established medical device regulatory pathway to deliver solutions to unmet clinical needs. The three priority markets for the application of the technology are:

·       Vascular (e.g. vascular patches);

·       Cardiac (e.g. heart valves); and

·       Orthopaedics (e.g. meniscus).

The lead product is the dCELL® Vascular Patch which is described further in paragraph 4 above. The Continuing Board's intention with the dCELL® Vascular Patch is to secure regulatory approval in Europe and, subsequently, the US in order for it to commence marketing in these jurisdictions and also to explore other potential applications of the dCELL® Vascular Patch in addition to the vascular application, for example, in neurosurgery and hernia repair. Each of these new applications will increase the available market opportunity for the product.

The next product on which the Enlarged Group intends to focus following Admission is the dCELL® Meniscus. The dCELL® Meniscus is a device made from porcine meniscus which possesses the biomechanics and structure of human meniscus which the Continuing Board believes will assist in restoring normal function. Key benefits of the dCELL® Meniscus include that it is acellular and biocompatible and the dCELL® process results in a cell friendly scaffold which regenerates with the patient's own cells and remaining tissue. The complex organisation of collagen in meniscal tissue means the structure is virtually impossible to replicate with synthetic materials, a problem that is overcome by using meniscus as the starting material to manufacture the implantable scaffold. The dCELL® Meniscus product has already been the subject of more than 3 years of background research at the IMBE. The Continuing Board intends to apply a significant proportion of the aggregate cash resources of the Enlarged Group following completion of the Placing towards the further development of the dCELL® Meniscus and the securing of regulatory approval for marketing.

·       Cardiology - dCELL® Aortic Valve;

·       Vascular - dCELL® Graft;

·       Orthopaedic- dCELL® Ligament; and

·       Urology - dCELL® Bladder and dCELL® Patch.

As mentioned above, the Enlarged Group's commercial strategy relies on discovering and developing products from its novel process and improvements to that process. In addition, the commercial strategy will involve (i) seeking and obtaining regulatory and pricing and reimbursement approval for the products developed; and (ii) convincing surgeons that they should be using the Enlarged Group's products. All of these steps involve degrees and elements of uncertainty. The market segments addressed by the Enlarged Group's products differ in a number of factors including size and complexity of the target application/mechanism. The Enlarged Group's products may not be appropriate for certain potential applications. The route to market for a particular product is also a critical factor in determining how widely adopted that product might be and obtaining pricing and reimbursement for that product can also be crucial to its success and use. The Enlarged Group may not be able to obtain regulatory approval and/or pricing and reimbursement approval for its products. Even after regulatory approval is obtained, medical devices rely on clinical evidence for their success and also the use of surgeon recommendation, neither of which the Proposed Directors are able to predict with any certainty. To some extent the commercial success of the Enlarged Group may depend on its ability to protect and enforce its Intellectual Property Rights (and in particular, at this point in time, Patent Family 1) so as to preserve its exclusive rights in respect of the dCELL® Technology and to preserve the confidentiality of its Know-How. The Enlarged Group may not be able to protect and preserve its Intellectual Property Rights or to exclude competitors with competing technologies or competing products made through different processes. Patent Families 1 and 2 claim processes for the production of products and do not contain any product claims. Enforcement of process related claims can be difficult.

With the dCELL® Vascular Patch, the dCELL® Meniscus and subsequent products which may be developed by the Enlarged Group, it is the Continuing Board's intention, once the requisite regulatory approvals are obtained, to pursue a combined commercialisation strategy of both licensing the dCELL® Technology to third parties and entering into co-marketing and/or distribution agreements with third parties relating to the underlying products.

Alongside the activities described above, it is the Continuing Board's intention for the Enlarged Group to continue to work with and strengthen the existing links which Tissue Regenix already has with major academic centres in Europe, North and South America in order to leverage their resource and expertise to enhance the value of the dCELL® Technology and to facilitate the development and introduction of additional products/processes using it.

Additionally, the Continuing Board believes that the dCELL® Technology may be enhanced by the strategic acquisition of complimentary technologies to strengthen its technology base and Intellectual Property Rights in the Regenerative Medicine sector.

Following Admission, the Enlarged Group will have net funds of approximately £6.8 million. These funds will be applied towards the execution of the Enlarged Group's strategy.

8. MARKETS

The market for human therapeutic products employing tissue engineering and Regenerative Medicine technologies is one of the most rapidly growing sectors within the medical products market, offering a permanent cure rather than an ongoing therapeutic treatment. The range and complexity of Regenerative Medicine products is significant, but the market can be broadly categorised into two main segments:

 

•              Scaffolds - including gels, foams, membranes and fibres; and

•             Cells - including cultivated adult and embryonic stem cells, autogenous and differentiated cells.

The general global healthcare medical devices market further sub-divides along surgical specialty lines.

 

As the Regenerative Medicine market is a relatively new and emerging market, current estimates of its total value are variable with many of the sub-segments of the market being in their infancy and a number still in development. There is, however, general agreement amongst market researchers and governmental bodies in the UK and the US that the potential markets are significant and, according to a report produced in early 2009, the global market potential for Regenerative Medicine will exceed $118bn by 2013 with an estimated compound annual growth rate of 4.8 per cent. Substantial growth is generally expected in multiple product segments. The Enlarged Group's target procedure areas with high volume and/or high growth potential and in which the dCELL® Technology has applicability (which will only be a proportion of the Regenerative Medicine market) include neurologic, orthopaedic, cardiovascular, urologic and wound care.

9. COMPETITION

Decellularisation is an emerging concept and the published scientific literature shows that there are different techniques used to achieve it. The Proposed Directors are aware of several research groups who are using decellularisation technology and the Continuing Board will continue to monitor new publications to ascertain the development status of these and any new decellularisation technologies which are developed.

The main commercial competitors of which the Proposed Directors are aware, are:

·       CryoLife - CryoLife develops human derived grafts and tissue engineered heart valves, as well as a proprietary process for preserving non-human tissue for human implantation. Most relevant to the dCELL® Technology is Cryolife's SynerGraft technology, a decellularising method for denuding a human valve of its living cells to create an acellular valvular construct that may function as a scaffold for repopulation by the patient's own cells. Cryolife is currently applying Synergraft to human tissues only.

·       LifeCell - LifeCell develops and markets tissue repair products for use in orthopedic, reconstructive and urogynecologic surgical procedures. In June 2007, LifeCell received marketing clearance from the FDA for its StratticeTM product, a sterile porcine-derived tissue matrix processed using Lifecell's proprietary technology which was launched in 2008. The Continuing Board believes that the process underpinning the dCELL® Technology is more efficient at removing immunogenic components that Lifecell's StratticeTM.

·       Synovis Life Technologies Inc. (NASDAQ: SYNO) - Synovis' Veritas product range of patches is one of the newest product ranges in the current market and represents a benchmark for the Enlarged Group's products since they are gaining acceptance and sales amongst users of patches. Unlike porcine based devices being developed by Tissue Regenix, these are bovine derived implants.

·       Cook Biotech - Cook Biotech's SISTM technology is an existing product on the market. As with Lifecell's StratticeTM product, the Proposed Directors believe that the dCELL® process is more efficient at removing immunogenic components than Cook Biotech's SISTM technology.

·       Covidien Inc. - Covidien acquired Tissue Science Laboratories plc ("TSL") in 2008. TSL has a porcine based product called Permacol, but, unlike the dCELL® Technology, its process uses fixation chemicals.

10. DETAILS OF THE ACQUISITION

Under the terms of the Acquisition Agreement, the Company has conditionally agreed to acquire the Tissue Regenix Share Capital for £12 million. The consideration for the Acquisition, which is payable on Admission, is to be satisfied by the allotment and issue by the Company to the Vendors of the Consideration Shares, credited as fully paid up at the Placing Price. The Consideration Shares will, when issued, represent 51.42 per cent. of the Enlarged Issued Share Capital and will rank pari passu in all respects with the New Ordinary Shares then in issue, including all rights to receive all dividends and other distributions declared, made or paid following Admission. Application will be made for the admission of the Consideration Shares to trading on AIM and dealings are expected to commence following completion of the Acquisition.

As part of the Acquisition, the Tissue Regenix Options will be replaced by the Company granting the Replacement Options. The Replacement Options will be granted on the similar terms as the Tissue Regenix Options. Further details of the number and terms of exercise of the Replacement Options to be granted under the EMI Scheme and the Unapproved Option Scheme are set out in paragraph 11 of Part VII of this document.

The Acquisition Agreement is conditional, inter alia, upon the passing of the Resolutions and Admission. The Company has the right to rescind the Acquisition Agreement if a material adverse change occurs in relation to the assets or financial position of Tissue Regenix prior to Admission. The Vendors also have a similar right should there be a material adverse change in Oxeco prior to Admission.

The Acquisition Agreement contains a variety of restrictive covenants from the Covenantors (which includes the Founders). The Acquisition Agreement also contains certain warranties from the Warrantors on the business of Tissue Regenix. The other Vendors are only giving warranties as to their respective ownership of their Tissue Regenix Shares. All warranties are given on a several basis and are subject to an aggregate financial cap on each Vendors' liability by reference to the value of his/its Consideration Shares as at the date of a claim being made for breach of warranty.

Further details of the Acquisition Agreement are set out in paragraph 12 of Part VII of this document.

11.    RELATED PARTY TRANSACTIONS

The Acquisition will constitute a related party transaction under the AIM Rules by reason of ORA Guernsey holding 45.25 per cent. of the issued share capital of the Company and 18.85 per cent. of the Tissue Regenix Share Capital. Furthermore, Michael Bretherton (a director of the Company) is a director of ORA Guernsey and a director and shareholder of ORA, the holding company of ORA Guernsey. Gordon Hall and Graham Richards, as independent directors for this purpose, having consulted with ZAICF, consider the Acquisition to be fair and reasonable insofar as Shareholders of the Company are concerned.

The placing of 29,892,989 Placing Shares at the Placing Price to ORA Guernsey and 200,000 Placing Shares at the Placing Price to Michael Bretherton, a Director, will also constitute a related party transaction under the AIM Rules. Gordon Hall and Graham Richards, as independent directors for this purpose, having consulted with ZAICF, consider the participation of ORA Guernsey and Michael Bretherton in the Placing to be fair and reasonable insofar as Shareholders of the Company are concerned.

12.    GRANT OF REPLACEMENT OPTIONS AND NEW OPTIONS AND RIGHTS UNDER THE JOINT OWNED SHARE SCHEME

The Continuing Board recognises the importance of ensuring that employees of the Enlarged Group are well motivated and identify closely with its future success. They therefore regard employee share ownership as a key incentive and it is proposed that the Company adopt the Share Schemes at Admission.

The EMI Scheme will allow the grant of options over New Ordinary Shares to eligible employees of the Enlarged Group, which include executive directors and employees. It is proposed that Replacement Options under the EMI Scheme will be granted, at Admission, to replace the Tissue Regenix Options currently held by Antony Odell and other employees. In addition, it is proposed that additional New Options under the EMI Scheme will be granted, at Admission, to Antony Odell and John Samuel which will only vest subject to meeting agreed performance criteria. Further details of the number of Replacement Options and New Options to be granted under the EMI Scheme, the exercise price, and final exercise date are set out in paragraph 11 of Part VII of this document.

In respect of the Replacement Options to be granted under the EMI Scheme to replace the Tissue Regenix Options, confirmation is being sought from the Shares and Assets Division of HM Revenue and Customs that such replacement options will be of equivalent value and as such will continue to be treated as qualifying for EMI.

The Unapproved Scheme will allow the grant of options over New Ordinary Shares to all directors and employees of the Enlarged Group. It is proposed that Replacement Options under the Unapproved Scheme will be granted, at Admission, to replace the Tissue Regenix Options currently held by directors, employees and consultants over shares in Tissue Regenix. Further details of the number of Replacement Options to be granted under the Unapproved Scheme, the exercise price, and final exercise date are set out in paragraph 11 of Part VII of this document.

A summary of the Tissue Regenix Options that have been granted and of the Replacement Options to be granted in substitution for the Tissue Regenix Options, together with the additional New Options to be granted to Antony Odell and John Samuel, is set out below:

Total

  Number of                                                Replacement

Number of Tissue            Replacement                 Number of              Options and

Regenix Options at            Options to be             New Options            New Options

the date of this                  granted in           to be granted          to be granted

report                   substitution                   on Admission           on Admission

EMI options

 

 

 

 

Antony Odell

379

8,307,608

1,187,200

9,494,808

John Samuel

0

0

2,400,000

2,400,000

Other employees

145

3,178,370

0

3,178,370

Total EMI Options

524

11,485,978

3,587,200

15,073,178

Other employees and consultants

129

3,105,241

0

3,105,241

Total options

653

14,591,219

3,587,200

18,178,419

 

The Joint Owned Share Scheme will offer executives and selected senior employees of the Company the opportunity to purchase an interest in New Ordinary Shares jointly with the Oxeco Plc Employee Benefit Trust. The executive's or employee's interest will entitle him or her to participate in the future growth in share value above the market value, at the date of award, of a New Ordinary Share subject to meeting agreed performance criteria. The balance of any benefit will accrue to the EBT which may use its shares for future employee incentivisation as well as, if appropriate, to repay loans to the Company covering the subscription monies owed by the EBT for purchase of its initial interest in the New Ordinary Shares. It is proposed that, at Admission, John Samuel will acquire an interest in 10,740,000 New Ordinary Shares through the EBT, that Antony Odell will acquire an interest in 5,372,800 New Ordinary Shares through the EBT and that Michael Bretherton will acquire an interest in 600,000 New Ordinary Shares through the EBT. Further details of the terms of the Joint Owned Share Scheme and the interests to be acquired by John Samuel, Antony Odell and Michael Bretherton are set out in paragraph 11 of Part VII of this document.

13. CURRENT TRADING

Historical audited financial information of the Oxeco Group for the 12 months to 31 January 2008, 12 months to 31 January 2009 and 12 months to 31 January 2010 is set out in the Company's latest published statutory accounts which are available from the Company's website www.oxecoplc.com. The consolidated trading loss for the year ended 31 January 2010 from continuing operations was £0.12 million, increasing to a loss of £0.23 million after incorporating the discontinued activities of the Oxray business, compared to a loss in the previous year of £0.03 million before impairment of goodwill which increased to a loss of £2.15 million after the impairment, and £2.35 million after incorporating discontinued activities. Consolidated net assets at 31 January 2010 amounted to £2.30 million, including cash balances of £2.32 million compared with net assets of £2.52 million and cash balances of £2.53 million a year earlier at 31 January 2009. The Oxeco Group has, subsequent to 31 January 2010, traded in line with expectations.

Historical audited financial information of Tissue Regenix for the 15 months from 5 May 2006 to 31 July 2007, 12 months to 31 July 2008, 12 months to 31 July 2009 and 6 months to 31 January 2010 is set out in Section B of Part V of this document. Tissue Regenix made a loss before tax of £0.15 million in the 15 months to 31 July 2007, a loss before tax of £0.58 million in the 12 months to 31 July 2008, a loss before tax of £1.42 million in the 12 months to 31 July 2009 and a loss before tax of £0.74 million in the 6 months to 31 January 2010. The net equity attributable to shareholders was £0.54 million as at 31 July 2007, £3.17 million as at 31 July 2008, £1.95 million as at 31 July 2009 and £1.29 million as at 31 January 2010. Tissue Regenix has, subsequent to 31 January 2010, traded in line with expectations.

14.    FINANCIAL EFFECTS OF THE ACQUISITION AND PLACING

The Acquisition and the Placing are expected to strengthen the Company's balance sheet and provide the Enlarged Group with funding to pursue its proposed strategy as outlined in paragraph 7 above.

A Pro Forma Statement of Net Assets is set out in Section B of Part VI of this document and discloses that the Enlarged Group will have pro-forma net assets of £7.6 million inclusive of cash and cash equivalent balances of £7.4 million and after paying the estimated expenses of the Proposals.

15.    CITY CODE ON TAKEOVERS AND MERGERS

The terms of the Proposals give rise to certain considerations under the City Code. Brief details of the Panel, the City Code and the protection they afford are given below.

The City Code does not currently have the full force of law. It has, however, been acknowledged by both government and other regulatory authorities that those who seek to take advantage of the facilities of the securities markets in the United Kingdom should conduct themselves in matters relating to takeovers (and related transactions) in accordance with high business standards and according to the City Code.

The City Code is issued and administered by the Panel. The City Code applies to all listed or unlisted public companies registered in the United Kingdom (and to private companies in certain circumstances) and, where not listed on a regulated market, are considered by the Panel to have their place of central management and control in the United Kingdom. The Company is a public company registered in the United Kingdom and managed and controlled in the United Kingdom and as such its Shareholders are therefore entitled to the protections afforded by the City Code.

Under Rule 9 of the City Code, where any person acquires, whether by a single transaction or a series of transactions over a period of time, an interest in shares which (taken together with shares in which persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company, that person is normally required by the Panel to make a general offer, in cash, to the shareholders of that company to acquire the balance of the equity share capital and any other class of transferable security carrying voting rights of the company at the highest price paid by that person or any person acting in concert with him in the previous 12 months.

Rule 9 of the City Code further provides that, inter alia, where any person who, together with persons acting in concert with him is interested in shares which in aggregate carry, not less than 30 per cent. of the voting rights of a company but does not hold shares carrying not more than 50 per cent. of such voting rights and such person, or any such person acting in concert with him, acquires an interest in additional shares which increase his percentage of shares carrying voting rights, such person is normally required by the Panel to make a general offer to the shareholders of that company to acquire the balance of the equity share capital and every other class of transferable security carrying voting rights of the company at the highest price paid by that person or any person acting in concert with him in the previous 12 months.

Under the City Code, a concert party arises when persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control of that company. Under the City Code, control means an interest, or aggregate interests, in shares carrying 30 per cent. or more of the voting rights of a company, irrespective of whether the interest or interests gives de facto control.

Before Admission, the Concert Party will, in aggregate, be interested in 352,500,000 Existing Ordinary Shares, representing approximately 58.75 per cent. of the then issued ordinary share capital of the Company. Following completion of the Acquisition and the Placing, the Concert Party will, in aggregate, be interested in 169,708,809 New Ordinary Shares, representing approximately 36.36 per cent. of the voting rights attaching to the Enlarged Issued Share Capital. The table below shows the interests of each member of the Concert Party in the Existing Ordinary Shares and in the New Ordinary Shares following completion of the Acquisition, Placing and Admission.

 

 

 ORA Concert Party

 

 

No. of New Ordinary

 

 

 

 

 

 

 

Shares post
issue of the

%. of New Ordinary

 

No. of New

 

Number of

%. of

 

Consideration

Shares post

 

Ordinary

% of

Existing

Existing

Number of

Shares and

issue of the

Number of

Shares

Enlarged

Ordinary

Ordinary

Consideration

the Share

Consideration

Placing

following

Issued

Shares

Shares

Shares

Consolidation

Shares

Shares

Admission

Share Capital

ORA

271,500,000

45.25

226,212,439

99,542,487

27.65

29,892,989

129,435,476

27.73

Robert Quested

55,000,000

9.17

-

11,000,000

3.06

1,833,333

12,833,333

2.75

Richard Griffiths(1)

22,000,000

3.67

-

4,400,000

1.22

20,000,000

24,400,000

5.23

Michael Bretherton(2)

2,000,000

0.33

-

400,000

0.11

800,000

1,200,000

0.26

Beatrice Hollond

500,000

0.08

-

100,000

0.03

200,000

300,000

0.06

Annnabel Ede-Golightly

1,500,000

0.25

-

300,000

0.08

-

300,000

0.06

James Ede-Golightly

-

0.00

-

-

0.00

200,000

200,000

0.04

William Orgee

-

0.00

-

-

0.00

1,000,000

1,000,000

0.21

Nikki Cooper

-

0.00

-

-

0.00

40,000

40,000

0.01

 

----- -----

 

-----

----- -----

 

-----

----- -----

 

 

352,500,000

58.75

226,212,439

115,742,487

32.15

53,966,322

169,708,809

36.36

 

1.   Includes 20,000,000 New Ordinary Shares to be held through a derivative financial instrument with Cantor Index Limited.

2.   Includes 600,000 New Ordinary Shares to be held jointly by Michael Bretherton and the EBT.

The Panel has been consulted and has agreed that it will not require the Concert Party, individually or collectively, to make a general offer for shares in the Company as a result of the issue of the Placing Shares or the Consideration Shares on the basis that on 25 June 2007 the independent Shareholders at that time approved a waiver of such obligation on the Concert Party in accordance with the provisions of the City Code as part of the acquisition of Oxray by the Company and because the aggregate percentage holding of the Concert Party will, following the completion of the Proposals, fall from 58.75 per cent. to 36.36 per cent.

Following completion of the Acquisition, the Placing and Admission, the Concert Party will continue to be considered to be acting in concert by the Panel and so, as outlined above, if any member of the Concert Party acquires an interest in additional New Ordinary Shares which increases that person's percentage of shares carrying voting rights, the Concert Party will normally be required by the Panel to make a general offer to the shareholders of the Company to acquire the balance of the equity share capital in the Company and every other class of transferable security carrying voting rights of the Company at the highest price paid by any member of the Concert Party in the previous 12 months.

Further details on the individual members of the Concert Party and their holdings is set out in Part IV of this document.

16. INFORMATION ON THE DIRECTORS AND PROPOSED DIRECTORS

The Directors of the Company as at the date of this document are Michael Bretherton, Gordon Hall and Professor Graham Richards. It is proposed that, with effect from Admission, Gordon Hall and Professor Graham Richards will resign from the Board, Michael Bretherton will assume the role as Finance Director and John Samuel, Antony Odell, Alan Miller, Alex Stevenson and Alan Aubrey will join the Board as Executive Chairman, Managing Director and Non-Executive Directors respectively.

Details of the Continuing Board are set out below:

John Andrew Walter Samuel, Executive Chairman, aged 58

John Samuel joined Tissue Regenix as Chairman in March 2008. John qualified as a Chartered Accountant with Price Waterhouse and has held a number of senior finance positions in industry, including as Financial Director of Whessoe plc and Ellis & Everard plc. He was formerly the CEO of the Molnlycke Health Care Group, a global provider of single use surgical and wound care products to the healthcare sector. Until January 2010 he was a partner with Apax Partners LLP.

 

Antony Ruben Odell, Managing Director, aged 48

Antony Odell joined Tissue Regenix as a consultant from January 2008. Antony was made chief executive officer of Tissue Regenix in October 2008. Antony has extensive commercial experience in the medical technology sector. As well as working as co-director of Xeno Medical, a medical technology consultancy, he was CEO for a UK NHS cardiovascular device spin-out, Tayside Flow Technologies Ltd. Antony has a strong corporate sector background having worked for J&J Medical for almost 10 years in European business development roles for Drug Delivery & Vascular Access and General Manager (UK) for Fresenius (Critical Care & Diagnostics).

Michael Anthony Bretherton, Finance Director, aged 54

Michael Bretherton graduated in Economics from the University of Leeds and then worked as an accountant and manager with Pricewaterhouse for 7 years in both London and the Middle East. Michael subsequently worked for the Plessey Company Plc before being appointed finance director of the fully listed Bridgend Group Plc in 1988 where he held the position for 12 years. More recently, he has worked at the property and services company, Mapeley Limited, and at the entertainment software games developer, Lionhead Studios Limited. Michael has a depth of business experience and has been involved in the strategic evaluation and commercial implementation of a broad range of business initiatives, including acquisitions, disposals, restructurings, company start-ups, venture capital fundings and IPO flotations. He is currently also a director of ORA, which he joined at its inception in early 2006, as well as of Nanoco Group Plc, Obtala Resources Plc, Oxford Advanced Surfaces Group Plc and Oxford Nutrascience Group Plc, all of which are AIM listed. Michael's services to the Company are provided pursuant to a consultancy agreement with the ORA Group, details of which are described in paragraph 12 of Part VII of this document.

Alan Jonathan Richard Miller, Non-Executive Director, aged 46

Alan Miller is a founding partner of SCM Private, the wealth management company, which was set up in early 2009 and which recently was awarded "New Firm of the Year" by Spears magazine. He was formerly the chief investment officer and founding shareholder of New Star Asset Management from early 2001 until early 2007. Prior to that, he was a director at Jupiter Asset Management in charge of their specialist high performance division between 1994 and 2000. Earlier he was a senior fund manager at Gartmore Investment Management between 1988 and 1994. Alan is also a non-executive director of several private companies including Pharminox Ltd, a pharmaceutical company specialising in cancer research, and Leigh Cottage Childcare, a children's nursery near Bradford-upon-Avon providing home from home childcare. Alan's qualifications include a degree in Commerce (Accounting) from Birmingham University, the London Business School Investment Management Programme, the Society of Investment Analysts exams, and the Chartered Institute of Management Accountants exams.

Alexander James Stevenson, Non-Executive Director, aged 39

Alex Stevenson joined Tissue Regenix as a non-executive director in December 2007. Alex is a director of Aquarius Equity Partners, one of the investors in Tissue Regenix. He began his career as a scientist, before focusing on identification, establishment and growth of high value technology businesses. Alex worked for Techtran from formation through to its sale to main market listed IP Group in 2005. Following the acquisition, Alex worked in a variety of roles within IP Group and managed investments in portfolio companies including Avacta and Syntopix (where he was also CEO), both of which listed on AIM in 2006. Most recently, Alex was a founder and chief operating officer of Modern Biosciences plc, the drug development subsidiary of IP Group.

Alan John Aubrey, Non-Executive Director, aged 48

Alan is the chief executive officer of IP Group plc, a company that specialises in commercialising intellectual property originating from research intensive institutions. He is a non-executive director of PROACTIS Holdings PLC and Energetix Group PLC, and is a non-executive director of Avacta Group plc. Previously, Alan was the founder and CEO of Techtran that was sold to IP Group in 2005. He was also a partner at KPMG where he specialised in providing corporate finance advice to fast growing technology businesses. He is a fellow of the Institute of Chartered Accountants.

17.    LOCK-IN AGREEMENT

The Warrantors who, following Admission, will be interested, in aggregate, in 356,309,631 New Ordinary Shares (including those New Ordinary Shares which may be issued on the exercise of New Options to be granted conditional on Admission or New Ordinary Shares held under the JOSS), representing approximately 74.45 per cent. of the Enlarged Issued Share Capital (as diluted by the exercise in full of the Replacement Options and New Options held by Antony Odell and John Samuel) have each undertaken to the Company and ZAICF that they will not, save in certain limited circumstances, (namely (a) as permitted by the AIM Rules and (b) in order to meet warranty claims under the Acquisition Agreement), sell or dispose of any interest in New Ordinary Shares held by them on Admission for a period of eighteen months following Admission, and that, for a further period of six months, they will only dispose of any interest in such New Ordinary Shares through ZAICF (or the Company's broker from time to time) in accordance with ZAICF's (or the relevant broker's) requirements for the maintenance of an orderly market in the New Ordinary Shares.

In addition, each of the Michael Bretherton and Antony Odell (as those members of the Continuing Board who are not also Warrantors), who will, on Admission, be interested, in aggregate, in 16,267,608 New Ordinary Shares (including those shares which may be issued on the exercise of New Options and Replacement Options to be granted conditional on Admission or New Ordinary Shares held under the JOSS), representing approximately 3.4 per cent. of the Enlarged Issued Share Capital (as diluted by the exercise in full of the Replacement Options and New Options held by Antony Odell and John Samuel) of the Company, have each undertaken to the Company and ZAICF not to dispose of the same for a period of (a) eighteen months following Admission save as permitted by the AIM Rules and (b) then for a further six months thereafter only in accordance with ZAICF's (or the relevant broker's) requirements for the maintenance of an orderly market in the New Ordinary Shares.

Further details of the Lock-In Agreement are set out in paragraph 12 of Part VII of this document.

18.    RELATIONSHIP AGREEMENT

On 12 December 2006, the Company entered into a relationship agreement with ORA Capital in connection with the Company's admission to AIM. The purpose of the relationship agreement was to ensure that it would exercise its rights as a Shareholder to ensure that all transactions, relationships and agreements between the Company and the ORA Group would be on arm's length terms. The Company and ORA have, conditional on Admission, entered into the Restated Relationship Agreement. Further details of the Restated Relationship Agreement are set out in paragraph 12 of Part VII of this document.

19.    DETAILS OF THE PLACING

The Company is proposing to raise £4.5 million (before expenses of approximately £0.47 million) by the issue of 106,712,800 Placing Shares at the Placing Price. Certain of the Directors and Proposed Directors are participating in the Placing as follows: Michael Bretherton, John Samuel, Antony Odell and Alan Miller will be subscribing for 200,000, 1,731,665, 200,000 and 4,192,258 Placing Shares respectively at the Placing Price. In addition, 16,712,800 Placing Shares are to be issued to the EBT, in respect of which the £835,640 of subscription monies will be loaned to the EBT by the Company (and which monies are therefore excluded from the proceeds of the Placing). The Placing Shares will represent, in aggregate, approximately 22.9 per cent. of the Enlarged Issued Share Capital. The Placing Shares will be issued credited as fully paid and will, upon issue, rank pari passu in all respects with the New Ordinary Shares then in issue, including all rights to receive all dividends and other distributions declared, made or paid following Admission. The Placing has not been underwritten or guaranteed. The Placing Shares have not been marketed in whole or in part to the public in connection with the application for Admission.

The Placing is conditional, inter alia, on the Placing Agreement becoming unconditional (save for any condition as to Admission) on or before 16 July 2010 (or such later time as ZAICF and the Company may agree). Further details of the Placing Agreement are set out in paragraph 12 of Part VII of this document.

20.    SHARE CONSOLIDATION

The Company proposes to consolidate its existing share capital on the basis of 1 (one) New Ordinary Share for every 5 (five) Existing Ordinary Shares held by Shareholders on the register of members of the Company at the close of business on the Record Date. The Share Consolidation is to become effective on the Record Date.

The Directors and Proposed Directors believe that the Share Consolidation will be beneficial to the Company as it may facilitate trading in, increase liquidity and potentially reduce the volatility of the price of the New Ordinary Shares on AIM. Other than the change in nominal value, the New Ordinary Shares arising on implementation of the Share Consolidation will have the same rights as the Existing Ordinary Shares, including voting, dividend and other rights.

No Shareholder shall be entitled to receive a fraction of a New Ordinary Share and so where, as a result of the Share Consolidation, any Shareholder would be entitled to a fraction of a New Ordinary Share in respect of their holding of Existing Ordinary Shares at the Record Date (a "Fractional Shareholder"), such fractions shall be aggregated with the fractions of New Ordinary Shares to which other Fractional Shareholders of the Company may be entitled so as to form full New Ordinary Shares and shall be sold for the benefit of the Fractional Shareholder for the best price then reasonably available for such shares.

The proceeds of such sale (net of all costs and expenses) will then be distributed to the Fractional Shareholders in proportion to the fractions of New Ordinary Shares held by each of them.

However, any cash proceeds of less than £5 will not be distributed to Fractional Shareholders but will be retained for the benefit of the Company. In view of the current share price, the Directors and Proposed Directors do not believe that the due proportion of the proceeds of the sale of any fractional entitlements will amount to £5 and consider it unlikely that any sums will be paid to the Fractional Shareholders concerned.

If a Shareholder holds a share certificate in respect of an Existing Ordinary Share, the certificate will no longer be valid from the time the proposed Share Consolidation becomes effective. If a Shareholder holds 5 or more Existing Ordinary Shares at the Record Date, such Shareholder shall be sent a new share certificate evidencing the New Ordinary Shares to which such Shareholder is entitled to under the Share Consolidation. Such certificates are expected to be despatched no later than 7 days after Admission. Upon receipt of the new certificate, Shareholders should destroy any old certificates. Pending the despatch of new certificates, transfers of certificated New Ordinary Shares will be certified against the Company's share register.

21.    CHANGE OF NAME

It is proposed that the name of the Company be changed to Tissue Regenix Group Plc. A special resolution, being Resolution 7, will be proposed at the GM to this effect.

22.    DIVIDEND POLICY

It is the intention of the Continuing Board to achieve Shareholder capital growth. In the short term, the Continuing Board intends to reinvest any future profits in the Company and, accordingly, are unlikely to declare dividends in the foreseeable future. However, the Continuing Board will consider the payment of dividends out of the distributable profits of the Company when they consider it is appropriate to do so.

23.    CORPORATE GOVERNANCE

The Directors and the Proposed Directors recognise the importance of sound corporate governance and intend that the Enlarged Group will observe the provisions of the Combined Code and the main provisions of the QCA Guidelines, insofar as they are appropriate given the Enlarged Group's size, stage of development and financial resources.

The members of both the audit committee and the remuneration committee as at the date of this document are Gordon Hall and Graham Richards, with Gordon Hall as the chairperson of each committee.

It is intended that, conditional upon Admission, each of Gordon Hall and Graham Richards will resign from both the audit and remuneration committees. In their place, Alex Stevenson, Alan Miller and Alan Aubrey will be appointed to each committee, with Alex Stevenson chairing the remuneration committee and Alan Miller the audit committee.

At the present time, given its stage of development, the Board does not feel it is appropriate to have a nomination committee. However, the Continuing Board will review this decision in the future as appropriate.

Share Dealing

The Company has adopted a code for directors' dealings in securities of the Company which is appropriate for an AIM quoted company. The Directors comply and the Continuing Board will continue to comply with Rule 21 of the AIM Rules relating to directors' dealings and will, in addition, take all reasonable steps to ensure compliance by the Enlarged Group's "applicable employees" (as defined in the AIM Rules).

24. NEW ARTICLES OF ASSOCIATION

The final provisions of CA 2006 came into force on 1 October 2009. It is now proposed that the New Articles be adopted to reflect the provisions of CA 2006 and to ensure consistency with CA 2006. Some of the principal provisions of CA 2006 that are reflected in the New Articles are as follows:

·       CA 2006 abolishes the requirement for a company to have an authorised share capital and the New Articles reflect this. Directors will still be limited as to the number of shares they can at any time allot because allotment authority continues to be required under CA 2006, save in respect of employee share schemes;

·       the New Articles are in line with the provisions of CA 2006 regarding the convening of and notice periods for general meetings. The effect of this is that at least 14 days notice is required for all general meetings, save for Annual General Meetings where at least 21 days notice will be required;

·       CA 2006 provides that when a company has given an electronic address in a notice of meeting or form of proxy, it is treated as having accepted that a communication in relation to that notice of meeting or form of proxy can be sent to that electronic address. The New Articles will enable the Company to receive appointments of proxies in electronic form subject to the conditions or limitations which are specified in the notice of meeting;

·       provisions have been included in the New Articles to provide the Company with a general power to send or give any notice, document or information to any shareholder in electronic form (such as by email), or by making it available on the Company's website, in accordance with the provisions of CA 2006. If the Company gives any notice or sends any document or information to its shareholders by making it available on the Company's website, it must comply with the requirements of CA 2006 and the notice provisions in the New Articles. The Company will be able to ask each individual shareholder for his or her consent to receive communications from the Company via its website. Shareholders can also revoke their consent to receive electronic communications at any time;

·       provisions have been included in the New Articles in order to clarify the methods by which shareholders can communicate with the Company. Apart from hard copy documents or information sent or supplied by hand or by post, this can, pursuant to the new electronic communication provisions in CA 2006, also be by electronic communication to an address specified for the purpose by the Company for the purposes of receiving such communication; and

·       CA 2006 significantly reduces the constitutional significance of a company's memorandum of association. Under CA 2006 the objects clause and all other provisions which are contained in a company's memorandum, for existing companies at 1 October 2009, are deemed to be contained in the company's articles of association but the company can remove these provisions by special resolution. Further, CA 2006 states that unless a company's articles provide otherwise, a company's objects are unrestricted. This abolishes the need for companies to have objects clauses. The adoption of the New Articles confirms the removal of these provisions for the Company.

25.    ADMISSION TO AIM

Application will be made to the London Stock Exchange for the Enlarged Issued Share Capital to be admitted to trading on AIM. It is expected that Admission will become effective and dealings in the Enlarged Issued Share Capital will commence on AIM on 29 June 2010.

If the Resolutions are not passed or the Acquisition is not completed, the Existing Ordinary Shares will continue to be traded on AIM.

26.    CREST

CREST is a computerised paperless share transfer and settlement system which allows shares and other securities to be held in electronic rather than paper form and transferred otherwise than by written instrument. The New Articles permit the New Ordinary Shares to be issued and transferred in uncertified form in accordance with the CREST Regulations. The Existing Ordinary Shares are currently enabled for settlement through CREST. Accordingly, settlement or transactions in the New Ordinary Shares following Admission may take place within CREST if relevant Shareholders so wish. CREST is a voluntary system and Shareholders who wish to hold their shares in certificated form will be able to do so.

27.    TAXATION

Information regarding taxation in the UK with regard to holdings of Ordinary Shares is set out in paragraph 18 of Part VII of this document. These details are, however, intended only as a general guide to the current tax position under UK taxation law. Shareholders who are in any doubt as to their tax position or who are subject to tax in jurisdictions other than the UK are strongly advised to consult their own independent financial adviser immediately.

28.    RISK FACTORS

Shareholders should consider carefully the risk factors set out in Part III of this document in addition to the other information presented.

29.    ADDITIONAL INFORMATION

Your attention is drawn to the further information set out in Parts II to VII of this document.

30.    GENERAL MEETING

The General Meeting has been convened for 10.00 a.m. on 28 June 2010 to be held at the offices of Fasken Martineau LLP, 17 Hanover Square, London W1S 1HU. You will find set out at the end of this document the Notice of GM convening the GM for the purposes of considering and, if thought fit, approving the following resolutions:

·       Resolution 1 is an ordinary resolution to approve the Acquisition for the purposes of the AIM Rules;

·       Resolution 2 is an ordinary resolution to approve the Share Consolidation;

·       Resolution 3 is an ordinary resolution to authorise the Directors under section 551 of the CA 2006 to allot relevant securities up to an aggregate nominal value of £2,506,589.30;

·       Resolution 4 is an ordinary resolution to approve the Share Schemes;

·       Resolution 5 is a special resolution to dis-apply statutory pre-emption rights;

·       Resolution 6 is a special resolution to approve the adoption of the New Articles; and

·       Resolution 7 is a special resolution to approve the change of name of the Company to Tissue Regenix Group Plc.

31.    ACTION TO BE TAKEN

Shareholders will find enclosed with this document a Form of Proxy, for use in connection with the GM. Whether or not you intend to be present at the GM, you are asked to complete and return the Form of Proxy in accordance with the instructions printed thereon as soon as possible but in any event so as to arrive no later than 10.00 a.m. on 26 June 2010, being 48 hours before the time appointed for the holding of the GM. Completion and posting of a Form of Proxy will not prevent you from attending and voting in person at the GM if you so wish.

32.    RECOMMENDATION

As I am a member of the Concert Party and a director and shareholder of ORA, the holding company of ORA Guernsey, which is, in turn, a significant shareholder of the Company and of Tissue Regenix, I have not, in my capacity as a Director, taken any part in the consideration by the Board of the Acquisition. As Graham Richards is a director and a shareholder of IP Group (the holding company of Techtran and IP2IPO Nominees Limited, both Vendors), he has also not, in his capacity as a Director, taken part in the consideration by the Board of the Acquisition.

The Directors, who have been so advised by ZAICF, believe that the Proposals are fair and reasonable and in the best interests of the Company and the Shareholders as a whole. In providing advice to the Directors, ZAICF has taken account of the information supplied by the Directors and their commercial assessments. Accordingly, the Directors recommend the Shareholders to vote in favour of the Resolutions to be proposed at the GM (save that, to the extent that the Resolutions are necessary to implement the Placing, I make no recommendation as the Placing constitutes a related party transaction with me for the purposes of the AIM Rules). The Directors intend to vote in favour of the Resolutions in respect of their own beneficial holdings of, in aggregate, 3,000,000 Ordinary Shares representing 0.5 per cent. of the issued share capital of the Company at the date of this document.

Yours faithfully

MICHAEL BRETHERTON 
Executive Chairman

 


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