Joint Administrators' Proposals

On 20 March 2024, Mark Smith and Stephen Cork were appointed Joint Administrators of the Group.

This report is addressed to the creditors and members of the Group and incorporates the Joint Administrators' Proposals. All known creditors have been informed that future documentation relating to the Administration would be placed on the Cork Gully website portal without further notice. However, should you require a hard copy please contact our office and it will be sent to you.

These Proposals are provided in relation to the Group, which comprises the following four companies:

―    RGP;

―    RL;

―    RHL; and

―    RUKL.

The Group has two other subsidiaries, ReNeuron Ireland and ReNeuron Inc., domiciled in Ireland and the US respectively. The Joint Administrators understand that both of these subsidiaries are dormant and hold no assets with the exception of a small rental refund due to the US entity. The Joint Administrators will determine whether these subsidiaries will be closed or maintained on a going concern basis depending on the outcome of their discussions with potential investors or other interested parties. A Group structure chart can be found in Appendix I.

1.    Statutory Information

The statutory information relating to the Group is attached at Appendix I.

2.    Circumstances Leading to the Appointment of the Joint Administrators

2.1.  Background of the Group

Creditors should note that, unless otherwise stated, this section of the proposals has been prepared based on information provided by the Directors of the Group and from the books and records of each company, as opposed to the personal knowledge of the Joint Administrators.

The Group originally operated from premises in Guildford in England. However, in 2013, the Company secured equity investment and a grant package from the Welsh Government. The repayable grant, up to a maximum of £500,000, stipulated the creation of 43 jobs, which was subsequently revised down to 40 jobs. On this basis RL was to receive a grant amount of £457,423.00, which was paid on 15 January 2019.

The total headcount reached a peak of 49, subsequently reducing primarily due to the Covid-19 pandemic. The Group's headcount averaged 37 for the period April 2016 to January 2024.

As part of this support from the Welsh Government, the Group announced its intention in 2014 to relocate to a purpose-built premise in Pencoed, Wales containing its headquarters, laboratories and manufacturing facilities. The Group eventually completed this move in 2016. The Group's key focus as at the date of the Administrations is on the CustomEx Exosome Technology Platform, producing Exosomes with unique tissue targeting tropisms to deliver a payload of choice to a preferred cell type. 

Its strategy is to develop Exosome therapeutics for diseases with significant unmet needs, such as:

―    Disability as a result of stroke; and

―    The blindness causing disease, retinitis pigmentosa.

The Group uses unique stem cell technologies to develop cell-based therapies for disease conditions where cells can be readily administered "off-the-shelf" to eligible patients without the need for additional immunosuppressive drug treatments.

Within the Group, each of the companies currently in Administration has the following functions:

―    RGP

Funds were raised by public investment into RGP and, as part as the normal course of business, monies were transferred in the form of intercompany loans to RGP's subsidiaries to fund their operations.

―    RL

RL is the operating entity of the Group, where a substantial majority of the assets, other than cash, and employees are held. Its operations were funded by RGP as described above.

―    RUKL and RHL

Both companies are dormant with no significant assets or known liabilities. RHL had initially been incorporated with the intention of acting as the holding company of the Group. However, this did not come to fruition.

2.2. Reason for Insolvency

The Group has been loss-making since incorporation, being funded by way of public investment and a government grant through RGP. The other companies in the Group were funded by intercompany loans from RGP, which would then be written off on an annual basis.

In July 2021, Iain Ross was appointed Non-Executive Chairman of the Group and, following Olav Hellebø's resignation as CEO in February 2022, he became Interim Executive Chairman until the appointment of Catherine Isted as CEO in September 2022. Also, in September 2022, there was a number of changes to the senior management team. John Hawkins assumed the role of CFO and joined the Group's Boards; Dr Randolph Corteling assumed the role of CSO; Suzanne Hancock was appointed COO; and Simon Dew joined the Group as CBO. In December 2022, following Catherine Isted's resignation, Iain Ross was appointed Executive Chairman and a new lower operating cost model was implemented. More information on this can be found in Section 4.

In January 2023, the Group undertook a restructuring of the business, reducing the headcount by approximately 40% and lowering the costs of business, which it forecast would enable it to continue to operate until mid-2024. At the same time, there was a strategic shift away from clinical development programmes to the exosome platform.

During 2023, the Boards regularly reviewed the consolidated financial position and undertook solvency assessments. Efforts were concurrently focused on garnering pre-clinical data for the exosome platforms. The intention was to raise equity funds from interest in positive pre-clinical data. Such data became available in October 2023 and, in November 2023, the Group entered discussions with advisers and potential investors to gauge interest. However, it became clear that the market was not receptive at the time, so it was agreed by the board and its advisers to postpone raising funds until early 2024.

In March 2024, further funding had yet to be secured and, as a result of the continued uncertainty over the valuation of certain consolidated accruals for liabilities, the board took the decision to place the Group into Administration.

The Joint Administrators understand from the Group's Boards and management team that the two key factors leading to the Group being placed into Administration are as follows:

―    An inability to secure funding from potential investors; and

―    An inability to confirm potential legacy liabilities.

2.3. Summary of the Group's Recent Trading Performance

A summary of the Group's recent trading performance is at Appendix II.

2.4. Pre-appointment considerations

Cork Gully were approached by the Boards on 25 January 2024 to have preliminary discussions as to the Group's current financial position. The following work was undertaken prior to the appointment of the Joint Administrators:

―    Advisory Work

Prior to the decision to place the Group into Administration, Cork Gully provided the following advisory services:

-      Advising the board as to the duties and responsibilities of the Directors, the range of options available to the Group, including Administration and other alternatives;

-      Recommendations as to the appropriate action to be taken should access to additional funding not be possible;

-      General advice on an ad-hoc basis to address concerns regarding liquidity; and

-      Attendance of meetings of the Boards, upon request.

―    Pre-appointment work to place the Group into Administration

Following the decision to place the Group into Administration, the Joint Administrators undertook the following services:

-      Advising and assisting the board in relation to the Group's affairs and business prior to the Joint Administrators' appointment;

-      Liaising with relevant professional advisors to advise on matters relating to how to best further the purpose of Administration;

-      Advising and assisting the Group in relation to discussions and negotiations with potential investors and purchasers of the Group's business and/or assets; and

-      Assisting the Board in dealing with the formalities of compiling the relevant documentation to place the Company into Administration and liaising with solicitors instructed to assist in completing such formalities.

Having considered the extent of their prior involvement with the Group in light of the Insolvency Code of Ethics, the Insolvency Practitioners of Cork Gully had not, prior to their appointment as Administrators, identified any threats to their objectivity and were, therefore, able to act objectively as Joint Administrators.

3.    Objectives of the Administration and the Joint Administrators' Strategy for Achieving them

The Joint Administrators are officers of the Court and must perform their duties in the interests of the creditors as a whole in order to achieve the purpose of the Administrations. The purpose of the Administrations is to achieve one of the three objectives set out in insolvency legislation to:

a)     rescue the Group as a going concern; or

b)    achieve a better result for the Group's creditors as a whole than would be likely if the Group were wound up (without first being in Administration); or

c)     realise property in order to make a distribution to one or more secured or preferential creditors.

The Joint Administrators have a wide range of powers, as set out in insolvency legislation, and must perform their functions as efficiently as is reasonably practicable.

The Joint Administrators are required to act in the interests of the creditors of the Group as a whole, unless the third objective is being pursued. In that instance, the Joint Administrators must ensure they do not unnecessarily harm the interests of the creditors of the Group as a whole.

The primary purpose of the Administrations is objective a) above, i.e. rescue the Group as a going concern. The Joint Administrators aim to achieve this by raising sufficient funds to rescue the, or part of the, Group.

If discussions with interested parties do not progress sufficiently to achieve objective a), the Joint Administrators have set a contingency plan to seek to achieve objective b) by facilitating a sale of the business and/or assets out of Administration. This is expected to yield a better return for the benefit of creditors compared to a piecemeal asset sale.

If, however, there is no suitable interest in acquiring the business and/or assets out of Administration, the Joint Administrators will take steps to achieve objective c) by realising assets on a piecemeal basis to make a distribution to one or more preferential creditors.

It should be highlighted that, despite being dormant companies, RHL and RUKL were placed into Administration alongside RGP and RL, as opposed to separate liquidation processes, to preserve value for the Group as a whole. It was unclear whether there was material value in the two companies prior to the Administration, whilst the Joint Administrators did not wish to render them inaccessible for any interested parties that would potentially want to invest in or acquire the entire Group. It was thus deemed that this approach would increase the probability of achieving objective a) as outlined above.

The insolvency legislation has set a 12-month maximum duration for Administrations, unless the duration is extended by the Court or creditors. If the Joint Administrators are unable to complete the Administration of any of the Companies within the Group within 12 months, then they will either apply to the Court, or seek a decision from the creditors to extend the duration of the Administration(s).

4.    Implementation of the Joint Administrators' Strategy

4.1. Raising sufficient funds to rescue the, or part of the, Group as a going concern

Following their appointment, the Joint Administrators took steps to liaise with the Group's Boards and senior management to determine the viability of raising investment to facilitate the Group exiting Administration and continue as a going concern.

The Joint Administrators also took steps to discuss the position with the Group's corporate broker, Allenby, as well as its corporate advisers, WG.

During the course of these discussions, it was made clear to the Joint Administrators that there was a consistent view that, in order to achieve this outcome, the Group would need to:

―    Present a clear, new business plan (2.0) outlining the Group's funding requirement, its key goals, and its data inflection point for investors;

―    Lower its current operating costs which were deemed to be unviable going forward; and

―    Obtain visibility of the actual quantum of legacy debts such that new investors could obtain comfort to the level of funding required to focus on the core business development as opposed to new monies being utilised against historic debt.

New Business Plan
In relation to the above, the Joint Administrators have worked extensively with the Chairman of the Group, the CSO and other senior management who remain supportive of the business and continuing to develop the Group's market-leading technology.

The Joint Administrators have discussed the 2.0 plan extensively and have reviewed and commented upon financial forecasts which have been prepared.

The Joint Administrators, working alongside the Group and its advisers, have identified potential cornerstone investors. The Joint Administrators are currently progressing negotiations with the potential cornerstone investors. Related discussions with the Group's corporate advisers have been positive in terms of obtaining the necessary funding to achieve the outcome following agreement with a cornerstone investor.

An update on the progress of this matter will be provided as soon as reasonably practicable.

Lower Operating Costs
In recognition of significant cash burn within the Group, the Joint Administrators have reduced the staff headcount. Further details of this are provided in Section 5.4.

The Joint Administrators have worked extensively with the Group's finance and operating teams to review and undertake a supplier rationalisation program. The Joint Administrators have engaged with critical suppliers only to ensure continuation of supplies during the Administration period.

The Joint Administrators have taken steps to terminate all non-critical suppliers and to prepare cash flow forecasts underpinning the Administration trading period.

Legacy Creditors
As at the date of Administration, there was uncertainty regarding the quantum of debt owed to key creditors of the Group.

The Joint Administrators have reviewed underlying agreements and financial records for such creditors and have proactively held discussions with such creditors.

As such, the Group now has improved visibility on the true quantum of its legacy debts which is being utilised to facilitate the investor negotiations as outlined in Section 4.1.          

4.2. Facilitating a sale of the business and/or assets of the Group

Notwithstanding the progress as outlined in Section 4.1, the Joint Administrators recognise that there is no guarantee that this option will be successful.

As such, the Joint Administrators have been working on marketing the business and assets of the Group for sale in the post-Administration period should the prospect of not being able to rescue the Group as a going concern materialise.

The Joint Administrators worked with the Group's CSO to prepare an initial teaser document and populate a data room for interested parties.

A potential interested party list was populated utilising contacts from the Joint Administrators' proprietary databases and existing contacts, as well as potential parties identified by the Group's senior management.

The teaser document has now been sent out to 749 potentially interested parties.

The Joint Administrators are currently negotiating and having positive discussions with multiple parties in relation to their interest in the business and/or assets of the Group.

5.    Other Actions of the Joint Administrators following appointment

A summary of the other main tasks performed by the Joint Administrators since our appointment is as follows.

5.1. Administration and Planning Tasks

This represents the work involved in the routine administrative functions of the case by the Joint Administrators and their staff, together with the control and supervision of the work done on the case by the office holders. It does not necessarily give direct financial benefit to the creditors, but must be undertaken to comply with Insolvency legislation and the Statements of Insolvency Practice, which set out required practice that an office holder must follow.

―    Case planning and devising an appropriate strategy for dealing with the case and giving instructions to staff to undertake the work on the case;

―    Setting up electronic case files;

―    Setting up the case on the practice's electronic case management system and entering data;

―    Issuing the statutory notifications to creditors and others required on appointment as office holders, including placing adverts in the Gazette;

―    Obtaining a specific penalty bond (this is insurance required by statute that every insolvency office holder must obtain for each insolvency appointment);

―    Dealing with all routine correspondence and emails relating to the case;

―    Opening, maintaining and managing the estate bank account;

―    Creating, maintaining and managing a cashbook;

―    Undertaking regular bank reconciliations of the estate bank account;

―    Daily calls with the Group's senior management to discuss and monitor Administration progress and outstanding matters;

―    Liaising with finance team to collate relevant information and assist with preparation of the Group's Statements of Affairs;

―    Liaising with finance team and payroll providers in respect of employee salaries;

―    Liaising with payroll providers to produce relevant employee documents, such as P45s;

―    Preparation of relevant employee FAQs and liaising with Evolve to assist employees with matters relating to termination of employment and redundancy payments;

―    Liaising with employment specialists as regards the extension of employment for certain critical staff members;

―    Liaising with Allenby to produce RNS announcements to advise members of RGP's Administration, the resignation of one of RGP's directors and company secretary, and to provide an update on the process of the Administration in line with AIM requirements;

―    Continuous engagement with Allenby to ensure AIM requirements are met consistently throughout RGP's Administration;

―    Undertaking periodic reviews of the progress of the case; and

―    Overseeing and controlling the work done by case administrators.

5.2. Realisation of Assets

This represents the work involved in the protection and realisation of assets, which is undertaken directly for the benefit of creditors. 

―    Liaised with the bank regarding the closure of the bank account and the transfer of funds held;

―    Instructed valuation agents to undertake ex-situ and in-situ valuation of the Group's tangible assets;

―    Maintained employees to ensure the value of tangible assets on site is preserved;

―    Instructed professional advisors to renew patents owned by RL to ensure protection of asset value;

―    Contacted valuation agents and received a quote to undertake a valuation of intangible assets held by RL. Considerations around merits of formal valuation based. Instructions will follow should a piecemeal sale process for IP be pursued;

―    Liaised with insurance providers to ensure extension of relevant insurance policies relating to the Group's assets. Given the type of assets held by the Group, certain comprehensive insurance policies had to be considered and extended; and

―    Instructed professional advisors to assist with reaching out to interested parties to explore fundraising opportunities.

5.3. Creditors

The Joint Administrators continue to engage extensively with the known creditors of the Company to determine and record claims and establish which suppliers are deemed critical in preserving the value of the Group's business and assets.

For the avoidance of doubt, no creditors should be continuing to perform work on behalf of the Group without direct instruction either from or on behalf of the Joint Administrators.

More information on creditors is presented at Sections 6.3 and 6.5.

5.4. Employees

As at the date of the Administrations, the Group employed 22 full time employees. Immediately following their appointment, the Joint Administrators met with employees to explain the background to their appointment and the next steps in the process. The Joint Administrators have continued to be as transparent as possible with employees in the Administration process, including having daily update calls with senior management to address any operational concerns and employee queries.

The majority of the employees were employed by RL, with the exception of two senior employees whose employment contracts are with RGP.

All employees had been provided with notice to terminate their employment prior to the appointment of the Joint Administrators. A total 3 employees were on six weeks' contractual notice with a termination date of 22 March 2024, being the date of the Administrations and this was therefore their final date of employment. A total of 14 were on three months' contractual notice with a termination date of 7 May 2024, whilst the remaining senior-management employees were on six months' contractual notice with a termination date of 7 August 2024.

The Joint Administrators originally retained all employees, in line with their agreed notice periods, at the date of the Administrations and have paid employees for such work performed. The purpose of this was to ensure continuity of the Group's operations whilst the Administration strategy was determined and subsequently progressed.

As detailed above, the options available to the Group both required retention of a core team of employees:

―    In the event that sufficient investment to facilitate continuing as a going concern is achievable, the Joint Administrators have reduced the headcount to lower the operational costs to a more attractive level for potential investors, following consultation with senior management and professional advisers; or

―    In the event that the sale of the business and/or assets is pursued; key staff will be required to assist with such transfers. This will also be the case if the Joint Administrators are left with no alternative but to pursue a sale of assets on a piecemeal basis and closure of the Group's facility.

Based on the above scenarios, the Joint Administrators worked extensively with senior management to determine the appropriate employees to be retained post 7 May 2024 to assist with the ongoing Administration processes.

As at the date of this report, the Group currently employs 10 staff members (reduced from 22 as at the date of the Joint Administrators' appointment), including Iain Ross (as Chairman) and Randolph Cortelling (as CSO). The majority of these staff members have been temporarily retained until 31 May 2024 from their original termination date of 7 May 2024.

The Joint Administrators will continue to monitor the appropriateness of staffing levels in the Administrations, much of which will be determined by the outcome of investor and/or interested party negotiations.

5.5. Investigations

Insolvency legislation gives the Joint Administrators powers to take recovery action in respect of what are known as antecedent transactions, where assets have been disposed of prior to the commencement of the insolvency procedure, and also in respect of matters such as misfeasance and wrongful trading.

The Joint Administrators are required by the Statement of Insolvency Practice 2 to undertake an initial investigation to determine whether there are potential recovery actions for the benefit of creditors. The Joint Administrators are also required to report to the Secretary of State on the conduct of the Directors. 

This work is a statutory obligation, which may result in a direct benefit to the creditors. The work undertaken initially comprises:

―    Recovering and reviewing the Group's books and records to identify any transactions which could lead to the Joint Administrators taking action against a third party in order to recover funds for the benefit of creditors;

―    Requesting and receiving responses and information from the current and former directors of the Group as regards the circumstances that led to the Administrations; and

―    Conducting an initial investigation with a view to identifying potential asset recoveries by seeking and obtaining information from relevant third parties, such as the banks, accountants, solicitors, etc.

6.    Estimated Financial Position of the Group

The Joint Administrators asked the Directors to prepare a summary of the Group's estimated financial position as at 20 March 2024, which is known as a Statement of Affairs.

A copy of RGP's SoA as at 20 March 2024 is provided at Appendix VII.

6.1. Fixed and floating charge assets

No security has been granted by any of the Companies in the Group over any of their assets, so there are no assets subject to a charge within the Group.

6.2. Uncharged Assets

RGP

―    The main asset of RGP comprises cash at bank of £2,023,754. However, this included a Blackrock liquidity fund balance that was paid to RL. As such, a balance of £1,956,529.70 has been realised in this regard;

―    The SoA lists tangible assets with a book value of £190,643 but with an estimated-to-realise value of £0. The nil value arises as a result of all realisable tangible assets being held by RL;

―    The SoA lists a book value of £68,209 for RGP's investment in group companies. However, it does not appear that there is any value to be realised in respect of this. As such, the expected recovery is £0; and

―    Amounts owed by the subsidiaries to RGP have a book value of £4,059,129. This refers to loans that would be issued from RGP to its subsidiaries to facilitate the Group's operations. These loans would then be written off on an annual basis. On the basis of the rest of the UK subsidiaries being in concurrent Administration procedures, expected realisations are uncertain at this point, as they are dependent on the outcome of the Administrations.

RL

RL holds the majority of non-cash assets in the Group comprising:

―    Intangible assets, predominantly IP with a book value of £186,345. It is difficult to ascertain the estimated-to-realise value at this stage due to the nature of the assets held by RL. The Joint Administrators have contacted three specialist third parties and obtained formal quotes for them to provide a valuation of the IP. To avoid incurring unnecessary costs at this stage, the decision on whether to proceed with the valuation is dependent on the outcome of ongoing discussions and negotiations with interested parties;

―    Tangible assets comprising laboratory assets used for stem cell-derived exosome research, as well as office furniture, fixtures and fittings and IT equipment have an estimated-to-realise value of £281,600 on an ex-situ basis. The in-situ valuation obtained produced an estimated-to-realise value of £533,00. These figures were provided by third-party specialist valuation agents, Gordon Brothers;

―    A licence agreement with a third party has given rise to a claim of £1,000,000 in relation to a payment for achieving an hRPC milestone. The estimated-to-realise value is given as £900,000, to account for tax that make become due upon receipt of payment. The Joint Administrators are currently assessing this position and intend to shortly commence action to recover any valid amounts due;

―    Pre-Administration VAT receivable of £55,498 is expected to be recovered in full;

―    Cash at bank of £683,213, which has been recovered in full;

―    A R&D tax claim with a book value of £353,000, which is unlikely to be realisable due to the Administration. However, in the event that objective a) is achieved and RL is rescued as a going concern, the credit would be claimable; and

―    Prepayments of £184,769 which represent amounts paid in advance to various suppliers. This book value was accrued for accounting purposes, but has an estimated-to-realise value of nil.

RHL and RUKL

Neither company has any assets to our knowledge.

6.3. Preferential creditors

-      Ordinary Preferential Creditors

The ordinary preferential claim consists of employee claims for arrears of wages and holiday pay, as well as outstanding pension contributions.

The following ordinary preferential claims are estimated for the Companies in the Group:

―    RGP had 2 employees with estimated preferential claims of £2,600;

―    RL had 20 employees with estimated preferential claims of £24,403; and

―    RHL and RUKL had no employees and no preferential claims are anticipated.

Please note that these figures relate to the arrears and holiday pay owed, as well as outstanding pension contributions, as at the date of the Administration and do not account for employees being retained and paid in full after the Joint Administrators' appointment. There are currently no outstanding preferential claims relating to employees in the Administrations, as all employees have since been paid in full. The only outstanding claim as at the date of these proposals is the pension liability. The Joint Administrators are in correspondence with the Group's pension provider to ascertain the exact pension liability due. Once this has been determined, the cost will be paid as an expense of the Administration.

-      Secondary Preferential Creditors

HMRC are secondary preferential creditors for certain specified debts, such as VAT, PAYE, employee National Insurance Contributions, student loan deductions and Construction Industry Scheme deductions. Secondary preferential debts are payable after all ordinary preferential debts have been paid in full, and before non-preferential unsecured debts.

The SoAs include the following secondary preferential claims owed to HMRC:

―    of £12,993 against RGP;

―    of £45,767 against RL; and

―    no claims against RHL and RUKL.

Please note that these figures are taken as at the date of the Administration and do not account for employees being retained and the requisite PAYE and National Insurance payments being made in full. There are currently no outstanding preferential claims in the Administrations, as all requisite PAYE and National Insurance payments have since been made in full. There are no outstanding VAT liabilities and any VAT payable will be paid as an expense of the Administrations/set off against VAT receivable. RGP and RL are registered as part of a VAT group.

6.4. Prescribed Part

There are provisions of the insolvency legislation that require the Joint Administrators to set aside a percentage of a Company's assets for the benefit of the unsecured creditors in cases where a Company gave a "floating charge" over its assets to a lender on or after 15 September 2003. This is known as the "prescribed part of the net property" ("prescribed part"). 

As the Group granted no floating charges, the prescribed part provisions do not apply for any of the Companies in the Group.

6.5. Unsecured creditors

The directors estimate that the Companies in the Group have the following unsecured creditor claims:

―    RGP has estimated unsecured creditor claims totalling £21,203. The Joint Administrators are aware of a debt to the Welsh Government in relation to the grant, rent, and utility arrears. This debt has not been included in the figure for estimated unsecured creditor claims, as it remains uncertain;

―    RL has estimated unsecured creditor claims totalling £613,607; and

―    RHL and RUKL are estimated to have no unsecured creditor claims.

The Joint Administrators do not have the power to declare and pay a dividend to unsecured creditors without obtaining a Court order to do so. As such, the Joint Administrators do not intend to review or agree unsecured creditor claims at this time.

Any unsecured claims relating to wage arrears can now be considered to amount to nil, as all employees have been paid in full as an expense in the Administration.

7.    Joint Administrators' Receipts and Payments Account

Summaries of the Joint Administrators' receipts and payments from 20 March 2024 to 10 May 2024 can be found at Appendix III, which has been reconciled to the financial records that the Joint Administrators are required to maintain. All amounts are shown net of VAT. The Joint Administrators' estate bank accounts are held with Barclays Bank and are interest bearing.   

7.1. Receipts (RGP)

-       Cash at Bank

RGP held a number of bank accounts and the Joint Administrators have realised £1,956,529.70 in this regard. This figure includes a balance held in USD, which has been converted to GBP using Bank of England rates as at the date of Administration.

7.2. Payments (RGP)

―    Notary Fees

Notary fees in the sum of £175.00 were paid to De Pinna LLP in relation to the swearing of the Administration order.

―    Statutory Advertising

The sum of £112.50 was paid to Courts Advertising Limited for advertising the Joint Administrators appointment in the London Gazette.

―    Nomad Fee

Allenby Capital Limited were paid £18,989.07 for services rendered as RGP's nominated advisor and broker.

―    Financial Advisory Services

WG Partners LLP were paid £10,000.00 for financial advisory services provided to assist the Joint Administrators in the fundraising process.

―    Insurance of Assets

Arthur J Gallagher Insurance Brokers Ltd were paid £10,766.33 in relation to the renewal of insurance policies.

7.3. Receipts (RL)

-      Cash at Bank

RL held a number of bank accounts and the Joint Administrators have realised £628,914.97 in this regard.

7.4. Payments (RL)

―    Notary Fees

Notary fees in the sum of £175.00 were paid to De Pinna LLP in relation to the swearing of the Administration order.

―    Statutory Advertising

Statutory advertising in the sum of £112.50 was paid to Courts Advertising Limited for advertising the Joint Administrators' appointment in the London Gazette.

―    Cleaning Services

£20,955.00 was paid to Matrix Workplace Services Limited in relation to cleaning and chemical waste disposal services required to maintain operations.

―    Internet Costs              

£1,260.00 was paid to Virgin Media Business Limited to maintain the provision of internet and broadband services for the site in Pencoed.

―    Administrative Expenses           

Croner Group Ltd were paid £298.08 in relation to the maintenance of the Group's BrightHR employee portal. This portal is used to efficiently distribute employee documentation and track accrued holiday.

―    Employee Benefits      

£6,779.95 was paid to Bupa Insurance Services Ltd for employee private medical cover, in accordance with the employees' existing employment contracts.

―    Patent Attorneys         

£12,697.50 was paid to Elkington and Fife LLP in accordance with their fees for managing patent application matters.

―    Cryostorage 

£4,769.87 was paid to Thermo Electron Ltd in relation to costs incurred in maintaining cryopreserved cell bank stocks, including critical cell bank assets.

―    Valuation Agents         

£3,750.00 was paid to Gordon Brothers for the valuation of RL's tangible assets.

―    IT Costs

IT costs in the sums of £1,098.00 and £6,314.83 were paid to SDT Limited and Host-Un Limited, respectively.

―    Delivery Costs

FedEx Express UK Limited were paid £100.88 in relation to postage services.

―    Gas Supplies

Air Products Plc were paid £3,084.20 for the supply of liquid nitrogen and carbon dioxide. Please refer to section 9.3 for more information.

―    Stationary & Postage

Mailing Answers were paid £452.56 for the printing, packing, fulfilment and postage of the Joint Administrators' communication to creditors.

―    Employee Expenses

£1,790.05 was paid in relation to employee expenses. The Joint Administrators agreed to cover these costs as they were customarily paid in the normal course of business. These include certain employee travel costs and petty cash expenses.

―    Storage Costs

£131.65 was paid to Kelly's Storage in relation to off-site archive documentation storage.

―    Patent Renewals

CPA Global Limited were paid £16,712.11 in relation to essential IP renewals.

―    Laboratory Consumables

Unchained Labs, LLC were paid £2,221.78 in relation to laboratory consumables critical to the exosome programme.

―    Sample Examination

Axis Bioservices Limited were paid £2,000.00 in relation to the completion of critical research for the Group's in vivo studies.

―    Wages & Salaries

£98,906.62 has been paid in employee wages since the commencement of the Administration. The Joint Administrators elected to pay employees in line with the terms of their contracts to preserve the value of the business.

―    H M Revenue and Customs

£59,719.75 has been paid to HMRC in relation to PAYE and NIC liabilities incurred as a result of employee salary payments.

―    Bank Charges

£15.00 has been paid in bank charges to Barclays Bank.

―    Contractor Fees

£8,737.50 has been paid to Amicus Clinical Development Limited in relation to fees incurred in the closure of historic studies.

8.    Proposed future actions of the Administrators to achieve the objective of the Administration and anticipated exit

The actions that the Joint Administrators anticipate undertaking are as follows, and are based on rescuing the Group, or certain companies in the Group, as a going concern:

―    Complying with our statutory duties as Joint Administrators, including an investigation into the Company's affairs and the conduct of the Directors prior to the Administrations;

―    Reporting to the Committee, in the event that one is formed, and complying with statutory reporting requirements;

―    Resolving any taxation/VAT issues and submitting post-appointment returns;

―    Pursuing the outstanding book debt due to RL;

―    Liaising with key stakeholders to support a strategy for the refinancing or sale of the Group;

―    Continuing to reach out to potential interested parties to pursue the refinancing of the Group, allowing for an exit from Administration as a going concern, in line with objective a);

―    To account for the possibility that this is deemed to not be feasible, a sale process for all, or part, of the Group is being run concurrently, as such a sale would allow for the Group's, or part of the Group's, continuation on a going concern basis, thereby achieving objective a);

―    A sale of the assets and/or business is also being considered should the above processes fail to materialise, though this would be in relation to achieving statutory objective b) instead of a); and

―    An asset sale on a piecemeal basis is deemed to be a last resort solution and will only be pursued should it be determined that the only achievable statutory object is c).

9.    Pre-Administration costs

Statute requires the Joint Administrators to seek separate and specific approval for pre-appointment costs outstanding, in accordance with Rule 3.52 of the Insolvency Rules 2016.

If a Creditors' Committee is appointed, it will be for the Committee to approve payment of the outstanding pre-Administration costs. If a Committee is not appointed, the Joint Administrators will seek a decision from the creditors.

The costs incurred prior to the Administration are as follows:

9.1. Cork Gully LLP's time costs

Cork Gully LLP was initially instructed to provide professional advice to the Company for which it was paid £10,000.00 plus VAT.

Cork Gully provided advice and assistance to prepare the Group for Administration. The Board approved remuneration on a time costs basis. Cork Gully LLP's Fee Practice Recovery Policy, including charge out rates, can be found at http://corkgully.com/wp-content/uploads/2023/03/Practice-Fee-Recovery-February-2023.pdf.

An outline of the work undertaken prior to Administration can be found in Section 2.4.

Attached at Appendix IV is a schedule summarising the time spent by Cork Gully LLP in the period prior to the Administration. The pre-Administration time costs incurred (excluding VAT) amount to £55,846.

The Joint Administrators are seeking creditors' approval that the above amounts be recovered in full.

9.2. Pre-Administration Expenses

Covington provided services to assist the Boards in placing the Group in Administration. Their total outstanding costs amount to £6,290 (excluding VAT).

The Joint Administrators are seeking creditors' approval that the above amount plus VAT be paid from RGP's Administration estate, as RGP was the contracted party.

10.  Joint Administrators' Remuneration and Expenses

10.1        Joint Administrators' Remuneration

Insolvency legislation allows different fee bases to be used for different tasks within the same appointment. The fee bases, or combination of bases, set for a particular appointment is/are subject to approval, either by a committee, if one is appointed, or the creditors or the Court.  

The alternate bases by which an office holder may charge their fees are any of, or a combination of, the following:

―    by reference to the time spent on attending to particular matters; or

―    a fixed fee; or

―    as a percentage of realisations /distributions. 

Those responsible for approving an office holder's remuneration and the remuneration of their associates must be provided with sufficient information to make an informed judgement about the reasonableness of the office holder's requests. This report is therefore written to comply with this requirement.

The Joint Administrators are seeking to be remunerated on a fixed fee basis as regards the work undertaken and expected to be undertaken in the Administration in respect of the following categories of work: Administration, Realisation of Assets, Creditors, Investigations, Trading, and Case Specific Matters.

The Joint Administrators are seeking a fixed fee of £300,000 plus VAT for the work undertaken and expected to be undertaken in respect of RGP and £300,00 plus VAT for the work undertaken and expected to be undertaken in respect of RL.

As highlighted by the information provided above, this is a complex case. Following consideration of the nature and value of the assets involved, the Joint Administrators are of the opinion that the fixed fees proposed are expected to produce a fair and reasonable reflection of the work that they anticipate will be necessarily and properly undertaken in the Administrations.

At present, the value likely to be achieved through fundraising activities or the sale of the Group/business and assets is uncertain. However, the Joint Administrators anticipate that the fixed fees will be drawn in full.

In addition to the fixed fees outlined above, the Joint Administrators are seeking to be remunerated on a percentage of realisations basis, in respect of the work undertaken and expected to be undertaken to realise intangible assets. The Joint Administrators are thus seeking a fee of 5% plus VAT of all gross intangible asset realisations in RL.

The Joint Administrators believe that this percentage reflects the risk that is being taken, the nature of the assets involved and the complexity of the case. As such, they are of the opinion that the percentage proposed is expected to produce a fair and reasonable reflection of the work that is to be necessarily and properly undertaken.

Details about how an administrator's fees may be approved is available in a Guidance Note issued with Statement of Insolvency Practice 9, and they can be accessed at https://www.r3.org.uk/technical-library/england-wales/technical-guidance/fees/more/29114/page/1/liquidation-a-guide-for-creditors-on-insolvency-practitioner-fees/. There are different versions of these Guidance Notes, and in this case please refer to the most recent version. 

Please note that we have also provided further details in our practice fee recovery sheet which can be found at http://corkgully.com/wp-content/uploads/2023/03/Practice-Fee-Recovery-February-2023.pdf.

10.2        Joint Administrators' Expenses

When requesting the basis of our fee authority, we are required to estimate the anticipated expenses likely to be incurred in administering the estate. Such expenses are categorised as either Category 1 or Category 2 expenses.

―    Category 1 expenses

Category 1 expenses are directly referable to an invoice from a third party which is either in the name of the estate or Cork Gully LLP. In the case of the latter, the invoices make reference to, and can therefore be directly attributed to, the estate. These disbursements are recoverable in full from the estate without prior approval of creditors either by a direct payment from the estate or, where the firm has made payment on behalf of the estate, by a recharge of the amount invoiced by the third party.

Examples of category 1 disbursements are statutory advertising, external meeting room hire, external storage, specific bond insurance and company search fees.

―    Category 2 Expenses

Category 2 expenses are incurred by the firm and recharged to the estate; they are not attributed to the estate by a third-party invoice and/or they may include a profit element. These disbursements are only recoverable from the estate with the approval of creditors. Examples of category 2 disbursements are photocopying, internal room hire, internal storage and mileage.

Cork Gully LLP will not seek to charge or recover any category 2 disbursements incurred in respect of work undertaken on this assignment.  

10.3 Agents and Professional Advisors

The following professional advisors have been instructed, or are anticipated to be instructed, during the course of the Administration:

―    Elkington and Fife LLP

The Joint Administrators were advised by senior management of the Group that much of the value of the Group's business is held in its IP. As such, the Joint Administrators consider it imperative to maintain the services of Elkington, the incumbent patent attorneys. During the Administration, Elkington have assisted in conducting a review of the Group's IP assets and facilitating further patent applications and renewals.

―    Gordon Brothers International, LLC

Gordon Brothers were engaged to provide a desktop valuation of the tangible assets held by RL, on in-situ and ex-situ bases. The valuation report was prepared by Josh Chivers MRICS and Simon Bamford MRICS. This valuation was deemed necessary to allow the Joint Administrators to make an informed assessment of any offers received in respect of the acquisition of the Group as a whole or offers to acquire specific tangible assets out of the Administration. The Joint Administrators will consider utilising Gordon Brothers to facilitate an auction sale of the tangible assets, should this be required.

―    Allenby Capital Limited

Allenby have been retained by the Joint Administrators to 30 May 2024 as nominated advisor ("Nomad") and broker in relation to RGP's AIM listing. Allenby's previous experience in assisting RGP was deemed essential for progressing the objective of the Administrations.

―    WG Partners LLP

WG were retained by the Joint Administrators to assist in the fundraising/merger and acquisition ("M&A") process. Prior to the Administrations, WG were engaged as the Group's corporate advisers, supporting previous fundraising efforts. During the Administrations, WG have assisted in progressing certain interested party discussions and introducing potential purchasers.

―    Evolve IS Limited

The Joint Administrators have engaged employment specialist, Evolve, as a sub-contractor to assist with the handling of employee correspondence and communications with the Redundancy Payments Service. Evolve are on hand to assist employees directly in making applications for redundancy pay. Evolve will also assist with any preferential employee claims, should they arise.

―    Courts Trustees Limited

The Joint Administrators have engaged pension specialist, Courts Trustees, as a sub-contractor to assist in communicating with the Group's pension provider and ensure the Joint Administrators' statutory obligations are met.

―    Arthur J Gallagher Insurance Brokers Ltd

The Joint Administrators have engaged insurance brokers, Gallagher, to renew insurance premia in line with the cover required to preserve the value of assets. Prior to the Joint Administrators' appointment, insurance brokers were contracted with RGP. As such, the Joint Administrators have paid, and intend to pay, post-appointment insurance premia out of the RGP estate.

―    De Pinna LLP

The Joint Administrators engaged De Pinna to assist in the notarisation of statutory appointment documents. De Pinna charge a competitive market rate and offer a professional service.

―    Matrix Workplace Services Limited

Matrix was engaged prior to the Joint Administrators' appointment to provide essential cleaning and chemical waste disposal services. Due to the bio-hazardous nature of the Group's business, the Joint Administrators intend to maintain Matrix's cleaning services on an agreed reduced level of service. This reduced level of service was negotiated by the Joint Administrators to reflect the reduced cleaning/disposal requirement arising from the decommissioning of a number of the Group's laboratories.

―    Thermo Electron Ltd

Prior to the appointment of the Joint Administrators, Thermo Electron were utilised by the Group in relation to the maintenance and storage of cryopreserved cell bank stocks. The Joint Administrators consider this to be a critical expense, necessary to preserve the value of the Group's assets.

―    SDT Limited and Host-Un Limited

Much of the Group's value is held in data stored and managed by SDT and Hosts. As such, the Joint Administrators consider it critical that SDT and Hosts are paid for services rendered. Namely: maintenance of servers, backups, and data storage.

―    Air Products Plc

The continuation of Air Products' services is considered critical, as it relates to the supply of liquid nitrogen and carbon dioxide necessary to maintain on-site cryostorage of critical laboratory assets.

―    CPA Global Limited

As previously noted, the Group's IP holds significant value. As such, the Joint Administrators have continued CPA's services to facilitate the renewal of an essential piece of IP protecting the Group's exosome platform. This is imperative to ensure no value is lost whilst discussions with interested parties are ongoing.

―    Unchained Labs, LLC

As previously noted, the Joint Administrators have taken steps to preserve the value of the Group's exosome platform. Unchained Labs provide laboratory consumables that are instrumental to this platform.

―    Axis Bioservices Limited and Amicus Clinical Development Limited

At the date of the Joint Administrators' appointment, there remained certain outstanding research and studies which were required to be completed to achieve the maximum value for the Group's historic studies. The Joint Administrators have maintained the services of Axis and Amicus to complete these studies, report their findings, and provide valuable data.

―    Isadore Goldman Limited

The Joint Administrators engaged IG to assist in the preparation of appointment documentation. Services may be retained during the Administrations, should it be deemed necessary and in the interest of creditors.

―    Fox Williams LLP

The Joint Administrators engaged FW to provide advice in relation to ad hoc employee matters. The Joint Administrators may continue to engage FW, should it be deemed necessary and in the interest of creditors.

Expenses and professional advisor fees do not have to be approved, but when reporting to any Committee and the creditors during the course of the Administration, the actual expenses incurred will be compared with the original estimate and an explanation of any material differences will be provided.

The choice of professionals was based on our perception of their experience and ability to perform this type of work and the complexity and nature of the assignment.  The Joint Administrators also considered that the basis on which they will charge their fees represented fair value for money.

10.4 Estimated expenses

The following schedule outlines the expenses the Joint Administrators estimate will be incurred. The total estimated expense is listed uncertain where the cost is dependent on the duration of occupation of the premises and/or the outcome of objective a):

RGP

RL

11.  Joint Administrators' Investigations

Further to Section 4.4, the Joint Administrators have a duty to consider the conduct of those who have been Directors of the Group at any time in the three years preceding the Administration. The Joint Administrators are also required to investigate the affairs of the Group in order to consider whether any civil proceedings should be taken on its behalf.

The Joint Administrators should be pleased to receive any information you may have that you consider will assist them in this duty. It should be stressed that this request for information forms part of their normal investigation procedure.

12.  Joint Administrators' Proposals

In order to achieve the objectives set out at Section 3, the Joint Administrators formally propose to creditors that:

―    The Joint Administrators continue to manage the business, affairs and property of the Group in order to achieve the purpose of the Administrations. In particular they:

1.     Will continue to engage with interested parties with the view to refinancing the Group or achieving a sale of, or part of, the Group on a going concern basis to achieve statutory objective a);

2.     If the above is not achievable, will continue to explore interest in the acquisition of the business and/or assets out of Administration with a view to achieving statutory objective b); and

3.     Will consider a sale of assets on a piecemeal basis to pursue statutory objective c), but only if the above options have been exhausted first.

―    If statutory objective a) is achieved, the Administration(s) will end by making an application to Court for an order that the Administration(s) ceases;

―    If statutory objective a) is not achievable and the Group does continue operating on a going concern basis, then the companies where sufficient assets have been realised to allow for a distribution to be made to unsecured creditors will be placed into Creditors' Voluntary Liquidation for this purpose;

―    The Group companies that do not have sufficient assets to allow for such a distribution to be made will be dissolved instead; and

―    Generally, exercise all powers as Joint Administrators as we consider desirable or expedient at our discretion in order to achieve the purpose of the Administration or protect and preserve the assets of the Company or maximise the realisations of those assets, or of any purpose incidental to these proposals.

13.  Approval of Proposals

RUKL and RHL

In reference to RUKL and RHL, the Joint Administrators do not intend to seek a decision from the creditors to approve their proposals as there are no creditors and no assets from which to issue a distribution. As such, pursuant to paragraph 52(1) of Schedule B1 of the Insolvency Act 1986, there is no requirement for the Joint Administrators to seek creditor approval for their Proposals in respect of the two companies.

However, creditors whose debts amount to at least 10% of the total debts of RUKL or RHL, respectively, can require the Joint Administrators to seek a decision from the creditors. Creditors must make such a request to the Joint Administrators in writing to c/o Cork Gully LLP, 40 Villiers Street, London, WC2N 6NJ or by email to reneuron@corkgully.com within 8 business days from the delivery of these proposals. Any request must be accompanied by a statement of decisions creditors may wish to be considered by the rest of the creditors, together with a statement of their claim. If necessary to achieve the requisite percentage of creditors to requisition the decision, a creditor's request should also be accompanied by a list of the creditors concurring with the request, the amounts of their claims, the statements of their claims, and a confirmation of their concurrence. If a decision is not requisitioned within that time period, then the Joint Administrators' proposals will be deemed to have been approved.

RGP and RL

The Joint Administrators are seeking a decision by correspondence from the creditors in relation to RGP and RL.

Please note that I must receive at least one vote by the decision date or the decision will not be made. I would, therefore, urge you to respond promptly.

Should any creditor or group of creditors wish to request a physical meeting of creditors, they must do so within 5 business days of the delivery of the notice that accompanies this letter. Such requests must be supported by proof of their debt, if not already lodged. I will convene a meeting if creditors requesting a meeting represent a minimum of 10% in value or 10% in number of creditors or simply 10 creditors, where "creditors" means "all creditors."

The Group

You are also invited to determine whether to form a Committee ("the Committee") and a notice of invitation to form a Committee and further instructions are enclosed. Please note that if a Committee is appointed, it will still fall to the creditors to approve or reject my request for a fee increase.

To enable you to make an informed decision as to whether you wish to either seek to form a Committee, or to nominate yourself to serve on a Committee, further information about of the role of the Committee and what might be expected from its members has been prepared by R3 and can be found at the link https://www.r3.org.uk/technical-library/england-wales/technical-guidance/creditor-guides/more/29111/page/1/liquidation-creditors-committees-and-commissioners/.

The following documents are also available on the web-site:

―    Notice of decisions by correspondence;

―    Notice of invitations to form a Committee;

―    Voting forms;

―    Proposals;

―    Proof of Debt Forms; and

―    Statements of Affairs.

Further information about creditors' rights can be obtained by visiting the creditors' information micro-site published by the Association of Business Recovery Professionals (R3) at www.r3.org.uk/technical-library/england-wales/technical-guidance/creditor-guides/. A copy of 'A Creditors Guide to Administrators Fees' published by the R3 is available at https://www.r3.org.uk/technical-library/england-wales/technical-guidance/fees/more/29113/page/1/administration-a-guide-for-creditors-on-insolvency-practitioner-fees/. An explanatory note which shows Cork Gully's fee policy is available at http://corkgully.com/wp-content/uploads/2023/03/Practice-Fee-Recovery-February-2023.pdf.  Please note that there are different versions of the Guidance Notes and, in this case, you should refer to the most recent version.

14.   Further information

To comply with the Provision of Services Regulations, some general information about Cork Gully LLP, including about our complaints policy and Professional Indemnity Insurance, can be found at http://corkgully.com/wp-content/uploads/2022/12/Provision-of-Services-Regulations-Summary-September-2022-002.pdf.

If creditors have any queries regarding these proposals or the conduct of the Administration in general, or if they want hard copies of any of the documents made available on-line, they should contact the Joint Administrators by email at reneuron@corkgully.com, or by phone on 020 7268 2150.

For and on behalf of the Group

Mark Smith

Joint Administrator

The affairs, business and property of the Group are being managed by the Joint Administrators, who act as the Group's agents and without personal liability. Mark Smith and Stephen Cork are authorised to act as Insolvency Practitioners in the United Kingdom by the Institute of Chartered Accountants in England and Wales.