Announcement PDF ReNerve Limited ABN 23 614 848 216 Annual Report - 30 June 2023 ReNerve Limited Corporate directory 30 June 2023 Directors Mr Reginald Stephen Cooper – Independent Chairman & Director Dr Michael Panaccio – Independent Non-Executive Director Dr Julian Chick – Director & Chief Executive Officer Dr David Rhodes – Executive Director & Chief Scientific Office Company secretary Mr David Lilja Registered office Unit 3, 21 Vale Street North Melbourne VIC 3051, Australia Principal place of business 157 Heidelberg Road Northcote VIC 3070, Australia Auditor William Buck Level 20, 181 William Street Melbourne VIC 3000, Australia Solicitors Cornwalls Level 10, 114 William Street Melbourne VIC 3000, Australia Bankers ANZ Ground Floor, 55 Collins Street Melbourne VIC 3000, Australia Bendigo Bank The Bendigo Centre Bendigo VIC 3550, Australia Website https://renerve.com.au 1 ReNerve Limited Directors' report 30 June 2023 The directors of ReNerve Limited (referred to hereafter as the 'company') present their report, together with the financial statements for the year ended 30 June 2023. Directors The following persons were directors of the company during the whole of the financial year and up to the date of this report, unless otherwise stated: Mr Reginald Stephen Cooper – Independent Chairman & Director Dr Michael Panaccio – Independent Non-Executive Director Dr Julian Chick – Director & Chief Executive Officer Dr David Rhodes – Executive Director & Chief Scientific Officer Principal activities ReNerve has received FDA approval for and has commenced initial sales and marketing of its NervAlign® Nerve Cuff product in the US market. ReNerve aims to develop a portfolio of medical devices used in the repair and/or replacement of damaged peripheral nerves, with three further products at various stages of development: a) The NervAlign® Nerve Guide Matrix b) The Dura mater repair scaffold c) The NervAlign® Bionic Replacement Nerve Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The loss for the company after providing for income tax amounted to $1,803,277 (30 June 2022: $1,757,480). During the year the company achieved the first sales of its NervAlign® Nerve Cuff device, as well as the first surgical use of the nerve cuff, in California for a carpal tunnel revision procedure. The procedure demonstrated that the Cuff was simple to implant around the nerve, with no issues during surgery and positive feedback from the surgeon on the product and its handling properties and no post-operative issues for the patient. The company held a soft product launch at the American Society for Surgery of the Hand conference in Boston in October 2022. Following the soft launch, ReNerve has focused on building sales and marketing infrastructure across the more heavily populated areas of the United States. The company has identified five main regions on which it is focussing its sales and marketing efforts, and has appointed several sales agents in these regions. The company has sought sales agents that have existing relationships in the plastic and/or hand and wrist orthopaedic surgery areas as these cross over with peripheral nerve repair. In addition, the company has aimed to secure product approvals in cornerstone hospital systems, where there are strong nerve repair practices with regular cases. These centres will also be used as reference hospitals for surrounding hospitals, to raise awareness of the products. Into the future the company will continue to work with hospitals and centres with strong peripheral nerve repair interests to build its sales and marketing. With the basis of the sales networks in place, ReNerve has been working with surgeons who have used the NervAlign® Nerve Cuff to develop presentations and publications regarding the cuff. These presentations and publications will be used as promotional tools to complement existing sales and marketing efforts, allowing ReNerve to present the positive outcomes already seen with the ReNerve nerve cuff. The first clinical case publication was submitted in July for presentation at the American Association for Hand Surgery conference in January 2024. Over the past year ReNerve has formed its Scientific Advisory Board (SAB), which includes plastic and hand surgeons with strong experience and insight into peripheral nerve repair. The SAB has been providing feedback to ReNerve on its R&D programs, whilst at the same time using the ReNerve NervAlign® Nerve Cuff. Outside the USA, ReNerve continues to support its sales agent in New Zealand to expand the product’s use in that country. ReNerve is also working with Yuan Yu Group, part of Kuo’s Yuan In Enterprises in Taiwan, to gain approval in that country. In Australia the company is working with local surgeons under the special access scheme to undertake clinical use of the product. In September 2023 the first Australian case using the NervAlign® Nerve Cuff was successfully undertaken. 2 ReNerve Limited Directors' report 30 June 2023 During the year ReNerve has achieved two very significant milestones with its Nerve guide matrix program. Firstly, the company had a very productive meeting with the FDA and now has clear guidelines for it to achieve submission for its NervAlign® Nerve guide program. Based on the FDA meeting, ReNerve believes that it does not need to undertake a formal clinical study ahead of an initial FDA submission. In addition, following extensive discussions and site visits, in July 2023 the company signed a strategic alliance agreement with Collagen Solutions, LLC for the development and commercial scale contract manufacturing of its nerve graft product. The partnership with Collagen Solutions will enable ReNerve to progress its nerve guide product from the current lab-based production to GMP production in an FDA registered and ISO13485 certified facility. The two companies will collaborate across four phases of the project in preparation for the FDA submission. In June 2023 the company partnered with 3D BioFibR to further develop its ‘bionic nerve’ product. 3D BioFibR are experts in the area of biopolymer fibre spinning technologies and the two companies will work together to develop the ideal fibres that can be incorporated into the ReNerve ‘bionic nerve’. Business risks ● ● ● Operating losses: the entity is not currently profitable and will continue to incur operating losses until such time as its revenues grow to a level sufficient to offset its growing expenditures. There can be no assurance that expected revenue growth will be achieved, or even if it is, that it will result in the company being profitable. Consideration needs to be given to the considerable risks and challenges that are encountered by early-stage medical technology companies in their early commercialisation. Adequacy of funding: the entity is not yet in a position to generate sufficient positive operating cash flow, and nor does it have sufficient capital to fully fund the development and commercialisation of its businesses. Accordingly, in the near term, the company is reliant on securing equity, debt, or other funding (e.g. licensing) within acceptable timelines, or of a sufficient amount and on terms acceptable to it. However, there can be no assurances given that future funding will be available as and when required or on terms that are acceptable. Government and R&D funding incentives: R&D and other incentives are an important source of funding for the entity. No assurance can be given that future funding will continue to be available from the R&D tax incentive program or that the company will continue to access it. Losing access to R&D refunds would adversely impact the group’s financial performance, delay or stop the development of the company's Nerve Cuff, Nerve Guide matrix, Dura mater repair and Bionic Replacement Nerve products and future business expansion, and likely require the raising of additional capital. Significant changes in the state of affairs In December 2022, ReNerve the company completed a successful capital raise of $2,205,000 before costs, through the issue of [11,025,000] shares at $0.20 per share ("capital raise"). These funds have been used to progress the nerve guide project and support the Company’s marketing program for the NervAlign® Nerve Cuff. In January 2023, Julian Chick, existing Director, moved to a fulltime role as the Chief Executive Officer of the company with a salary package of $350,000 per annum. In the 2022 financial year the company entered into a services and consultancy agreements with two Scientific Advisory Board members. As part of this agreement, the two consultants agreed to be issued shares in lieu of cash payment for their services and consultancy activities. The first tranche of these shares, 75,000 for each consultant, were issued on 22 December 2022, with the second tranche to be issued in financial year ending 30 June 2024. In January 2023 the company entered into a sales agent and market development agreement with Emerging Surgical, a San Diego based company. As part of this agreement, Emerging Surgical agreed to be issued shares in lieu of cash payment as part payment for sales activities. The first tranche of 150,000 shares was issued on 22 May 2023, with the second tranche to be issued in the financial year ending 30 June 2024. On 17 April 2023, a total pool of 100,000 options were granted to several employees at an exercise price of $0.25, for an estimated fair value of $14,726, which was determined using a Black-Scholes option valuation model. On 15 June 2023, 500,000 options were granted to Emerging Surgical at exercise prices of $0.35 and $0.50, for a total estimated fair value of $49,199, which was determined using a Black-Scholes option valuation model. There were no other significant changes in the state of affairs of the company during the financial year. 3 ReNerve Limited Directors' report 30 June 2023 Matters subsequent to the end of the financial year In July 2023 the company issued shares in lieu of cash payment to three Scientific Advisory Board members, as part payment for their services and consultancy activities, in which 300,000 shares were issued. In July 2023 the company also issued the second tranche of shares, 150,000 to Emerging Surgical, as payment in lieu of cash as part payment for sales activities. No other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the company's operations, the results of those operations, or the company's state of affairs in future financial years. Likely developments and expected results of operations The company’s key milestones in the coming 12 to 24 months are expected to be: ● ● ● ● ● Growth in sales of the NervAlign® Nerve Cuff in the USA . NervAlign clinical case publications Progression of the NervAlign® Nerve Graft / Nerve Guide Matrix (NGM) project into formal studies for FDA filing Further research and development in relation to the NervAlign® Bionic Replacement Nerve Further research and development in relation to the Dura mater repair matrix The company will continue to progress its NervAlign® Nerve Graft/ nerve guide matrix program. The technology is based on proprietary methods for preparation of novel nerve scaffolds and will initially target repair of discontinuities in nerves with diameters in the 1mm to 5mm range. In partnership with Collagen Solutions, ReNerve has successfully transferred its development process and completed an initial product production run. It has also held a meeting with its surgeon advisory group on the final product, resulting in a clear understanding of the characteristics of the final product. The next step for ReNerve will be to progress the project to clinical grade product and scale manufacturing of the nerve guide matrix. The company intends to progress its Dura Mater program during the year. It will target development of two Dura Mater products for the market, one in the near term based on the supercritical CO2 technology and the other being a completely novel multi-layer tissue based product, as part of the company’s approach to continue to develop new intellectual property in products that are focused on bringing better outcomes for patients. ReNerve will continue to aim to grow its revenue through sales of the NervAlign® Nerve Cuff product as well as building its product portfolio through research and development. The company continues to establish relationships with US distributors that will assist with product promotion and distribution. The company will also be aiming to enter other markets across Europe and Australasia. In expanding into additional countries and territories the company will aim to work with local distributors. Environmental regulation The company is not subject to any significant environmental regulation under Australian Commonwealth or State law. Information on directors Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Interests in shares: Interests in options: Reginald Stephen Cooper Independent Chairman & Non-Executive Director BCom (Hons) Mr Stephen Cooper is a director of Grant Samuel, a leading independent Australian investment banking business. Stephen has over 25 years of experience in investment banking and has been responsible for numerous corporate advisory assignments including public company takeovers, mergers, business sales and acquisitions, schemes of arrangement, capital raisings and business valuations. He has served as the chairman of an ASX-listed biotechnology company Avexa. N/A N/A 9,485,000 ordinary shares NIL 4 ReNerve Limited Directors' report 30 June 2023 Name: Title: Qualifications: Experience and expertise: Dr Michael Panaccio Independent Non-Executive Director BSc (Hons), MBA, PhD Michael is one of the founders of Starfish Ventures, a venture capital firm that invests in early-stage technology companies and plays an active role in the management of its portfolio. Michael has been a director of numerous technology businesses in Australia and the USA including SIRTeX Medical Ltd, Engana Pty Ltd (now part of Finisar Corporation), Energy Response (sold to EnerNoc Inc), ImpediMed Ltd, and Protagonist Therapeutics Inc. He currently serves on the boards of dorsaVi Ltd, Armaron Bio Ltd, and Cylite Pty Ltd. Other current directorships: dorsaVi (ASX:DVL) Former directorships (last 3 years): N/A Interests in shares: 3,562,250 ordinary shares Interests in options: NIL Name: Title: Qualifications: Experience and expertise: Dr Julian Chick Director & Chief Executive Officer BSc, PhD Julian is an experienced healthcare executive with over 25 years of experience in senior management and board positions including in ASX listed companies Avexa and Admedus. His roles have included Chief Executive Officer, COO, Head of Business Development, as well as running early and late-stage R&D projects. Julian has launched medical devices into the global markets. Julian while COO at Admedus Ltd was involved in the R&D development, regulatory approval, and launch of several tissue products in North America, Europe, and Asia. He has 10 years of investment banking experience and has also held a role as an analyst reviewing healthcare and biotechnology investment opportunities for private equity investors and venture capitalists. Julian has a PhD in Muscle Physiology. Other current directorships: Former directorships (last 3 years): Interests in shares: Interests in options: Cann Group (ASX:CAN) N/A 13,125,000 ordinary shares NIL 5 ReNerve Limited Directors' report 30 June 2023 Name: Title: Qualifications: Experience and expertise: Dr David Rhodes Director & Chief Scientific Officer PhD David has more than 24 years of experience in healthcare and biotechnology industries, where he has held numerous senior management and executive level roles and developed technologies through to market approval. Previous roles include Chief Scientific Officer of the medical devices company Admedus Ltd, Senior Executive and Head of Drug Discovery, and Senior Vice President Biology at Avexa Ltd. Admedus and Avexa were all ASX listed companies. David has successfully led diverse technology development programs from discovery through preclinical stages, manufacturing and commercialisation and has attracted significant levels of funding from many State and Federal Government initiatives and Research Institute programs. He publishes in high-impact peer-reviewed journals and is an inventor on numerous patents. David is an Adjunct Associate Professor in the Faculty of Engineering at Monash University. David has a PhD in Biochemistry. Other current directorships: Former directorships (last 3 years): Interests in shares: Interests in options: N/A N/A 11,527,500 ordinary shares NIL Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Former directorships (last three years) quoted above are directorships held in the last three years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Company secretary David Lilja (Appointed 27 August 2020) David Lilja (B.Bus, MBA, CTA, MIPA) is a qualified accountant and experienced company secretary with over 20 years' experience within the professional services industry working across a wide range of industries. David supplies his services through his firm, DLK Advisory, which provides a breadth of support to its clients including outsourced CFO and Company Secretary services. Meetings of directors The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June 2023, and the number of meetings attended by each director, were: Attended Reginald Stephen Cooper Michael Panaccio Julian Chick David Rhodes 11 11 11 11 Held 11 11 11 11 Held: represents the number of meetings held during the time the director held office. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the company are set out in the following tables. The key management personnel of the company consisted of the following directors and other personnel of the company: ● Reginald Stephen Cooper – Independent Chairman & Non-Executive Director ● Michael Panaccio – Independent Non-Executive Director ● Julian Chick – Director & CEO ● David Rhodes – Director & CSO 6 ReNerve Limited Directors' report 30 June 2023 2023 Short-term benefits Postemployment benefits Long-term benefits and Cash salary and fees $ Superannuation $ Long service Equity-settled leave options $ $ Non-Executive Directors: Reginald Stephen Cooper Michael Panaccio Executive Directors: Julian Chick David Rhodes 2022 Non-Executive Directors: Reginald Stephen Cooper Michael Panaccio Executive Directors: Julian Chick David Rhodes Share-based payments Total $ - - - - - 295,099 235,523 530,622 24,215 25,604 49,819 2,125 3,743 5,868 - 321,439 264,870 586,309 Short-term benefits Postemployment benefits Long-term benefits and Share-based payments Cash salary and fees $ Superannuation $ Long service Equity-settled leave options $ $ Total $ - - - - - 209,947 242,998 452,945 19,178 22,420 41,598 1,169 2,721 3,890 - 230,294 268,139 498,433 Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: 7 ReNerve Limited Directors' report 30 June 2023 Name: Title: Agreement commenced: Terms of agreement: DR Julian Chick Director and Chief Executive Officer 1 January 2019 (a) Remuneration: Fixed annual salary $350,000 (inclusive of director's fees) including statutory employer superannuation contribution; (b) Termination: the company and Dr Chick may terminate the Executive Services Agreement without cause giving the other party three months' notice. Name: Title: Agreement commenced: Terms of agreement: David Rhodes Chief Scientific Officer & Executive Director 24 April 2017 (a) Remuneration: Fixed annual salary $260,000 (inclusive of director's fees) including statutory employer superannuation contribution; (b) Non-cash benefits: the Board may, at its discretion, determine that Dr Rhodes may participate in the company's share plan, subject to shareholder and regulatory approval; (c) Termination: the company and Dr Rhodes may terminate the Executive Services Agreement without cause giving the other party nine months' notice. As at 30 June 2023, no other key management personnel have any service agreement with the entity. Share-based compensation Issue of shares There were no shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2023. Options There were no options over ordinary shares issued to directors and other key management personnel as part of compensation that were outstanding as at 30 June 2023. There were no options over ordinary shares granted to or vested by directors and other key management personnel as part of compensation during the year ended 30 June 2023. Additional disclosures relating to key management personnel Shareholding The number of shares in the company held during the financial year by each director and other members of key management personnel of the company, including their personally related parties, is set out below: Ordinary shares Reginald Stephen Cooper Michael Panaccio Julian Chick David Rhodes Balance at the start of the year Received as part of remuneration 8,485,000 3,437,250 13,000,000 11,527,500 36,449,750 - Additions 1,000,000 125,000 125,000 1,250,000 Balance at the end of the year Disposals / other - 9,485,000 3,562,250 13,125,000 11,527,500 37,699,750 During the financial year ended 30 June 2023, the entity did not employ or use the services of remuneration consultants. 8 ReNerve Limited Directors' report 30 June 2023 Performance rights over ordinary shares There were no performance rights issued over ordinary shares during the financial year. Shares under option and performance rights Unissued ordinary shares of ReNerve Limited under option at the date of this report are as follows: Grant date Expiry date 01/02/2021 25/03/2022 25/03/2022 15/06/2023 15/06/2023 17/04/2023 17/04/2023 01/02/2024 25/03/2025 25/03/2025 15/06/2026 15/06/2026 17/04/2028 17/04/2028 Exercise price $0.20 $0.40 $0.50 $0.50 $0.40 $0.25 $0.25 Number under option 1,000,000 750,000 750,000 250,000 250,000 60,000 40,000 3,100,000 Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. Indemnity and insurance of officers The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. Non-audit services Officers of the company who are former partners of William Buck There are no officers of the company who are former partners of William Buck. Auditor William Buck continues in office in accordance with section 327 of the Corporations Act 2001. Officers of the company who are former partners of William Buck There are no officers of the company who are former partners of William Buck. Non-audit services There were no non-audit services provided during the financial year by the auditor. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. 9 ReNerve Limited Directors' report 30 June 2023 This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ 1 November 2023 10 AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF RENERVE LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2023 there have been: — no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and — no contraventions of any applicable code of professional conduct in relation to the audit. William Buck Audit (Vic) Pty Ltd ABN 59 116 151 136 N. S. Benbow Director Melbourne, 1 November 2023 Level 20, 181 William Street, Melbourne VIC 3000 +61 3 9824 8555 William Buck is an association of firms, each trading under the name of William Buck across Australia and New Zealand with affiliated offices worldwide. Liability limited by a scheme approved under Professional Standards Legislation. vic.info@williambuck.com williambuck.com.au ReNerve Limited Contents 30 June 2023 Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors' declaration Independent auditor's report to the members of ReNerve Limited 13 14 15 16 17 29 30 General information The financial statements cover ReNerve Limited as an entity. The financial statements are presented in Australian dollars, which is ReNerve Limited's functional and presentation currency. ReNerve Limited is a public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business are: Registered office Principal place of business Unit 3, 21 Vale Street North Melbourne VIC 3051, Australia 157 Heidelberg Road Northcote VIC 3070, Australia A description of the nature of the company's operations and its principal activities are included in the directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 1 November 2023. The directors have the power to amend and reissue the financial statements. 12 ReNerve Limited Statement of profit or loss and other comprehensive income For the year ended 30 June 2023 Note Revenue Sales Other income 3 4 Expenses Administration expenses Depreciation and amortisation expense Employee benefits expense Finance costs Marketing Professional fees Research and development cost 5 Loss before income tax expense 2023 $ 2022 $ 128,494 399,870 528,364 578,171 578,171 (605,563) (146,242) (854,681) (6,965) (338,378) (82,017) (297,795) (553,101) (19,983) (557,881) (1,490) (163,718) (1,039,478) (1,803,277) (1,757,480) - - (1,803,277) (1,757,480) - - (1,803,277) (1,757,480) Cents Cents Income tax expense Loss after income tax expense for the year attributable to the owners of ReNerve Limited Other comprehensive income for the year, net of tax Total comprehensive loss for the year attributable to the owners of ReNerve Limited Basic earnings per share Diluted earnings per share 24 24 (2.04) (2.04) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 13 (2.28) (2.28) ReNerve Limited Statement of financial position As at 30 June 2023 Note 2023 $ 2022 $ 1,679,480 400,123 511,552 14,239 81,425 2,686,819 1,710,186 577,730 17,540 2,305,456 90,958 101,929 9,439 44,165 246,491 113,549 180,026 12,670 44,165 350,410 2,933,310 2,655,866 62,455 17,764 152,907 83,093 316,219 148,171 50,165 90,496 76,011 364,843 21,835 21,028 42,863 104,928 14,665 119,593 359,082 484,436 2,574,228 2,171,430 7,842,383 294,034 (5,562,189) 5,700,233 230,109 (3,758,912) 2,574,228 2,171,430 Assets Current assets Cash and cash equivalents Trade and other receivables Term deposit Prepayments Monies held in trust Total current assets 6 7 Non-current assets Plant and equipment Right-of-use assets Intangibles Other deposits Total non-current assets 8 9 10 Total assets Liabilities Current liabilities Trade and other payables Accrued expenses Employee benefits Lease liabilities Total current liabilities 11 13 12 Non-current liabilities Lease liabilities Employee benefits Total non-current liabilities 12 13 Total liabilities Net assets Equity Issued capital Reserves Accumulated losses 14 Total equity The above statement of financial position should be read in conjunction with the accompanying notes 14 ReNerve Limited Statement of changes in equity For the year ended 30 June 2023 Issued capital $ Balance at 1 July 2021 Reserves Accumulated losses Total equity $ $ $ 4,298,672 91,331 (2,001,432) 2,388,571 Loss after income tax expense for the year Other comprehensive income for the year, net of tax - - (1,757,480) - (1,757,480) - Total comprehensive loss for the year - - (1,757,480) (1,757,480) Contributions of equity, net of transaction