SKIN.L Regulatory News (SKIN)

5 March 2019

Integumen plc

("Integumen" or "the Company")

Acquisition of specialist equipment for Labskin's enlarged laboratory

Integumen plc (AIM: SKIN), is pleased to announce that the Company has entered into an agreement with Cellulac Limited to acquire hi-tech laboratory test equipment, to be installed into the enlarged Labskin UK laboratories in York.

The new laboratory, recently completed, will house this range of specialised test equipment ("Equipment"), which includes Gas Chromatography-Mass Spectrometry and High-Performance Liquid Chromatography units and ancillary equipment.

This extends Labskin's capability beyond skin care test services by monitoring the molecular growth and odour causing bacteria on lab-grown human skin. The cost of the Equipment is £400,000 which will be satisfied by the issue of a loan note (see below).

The Equipment, all with digital output readings, connects directly to the Labskin AI integrated 'laboratory to market' services platform, (see RNS announcement of 8 February 2019) and will transform many of the current manual testing services into high-speed fully automated processes.

The consideration comprises a two-year nil coupon convertible, redeemable loan note ("Loan Note") in the sum of £400,000. The Loan Note is secured on the Equipment and is repayable on the earliest of the following events:

· February 26, 2021;

· the completion of a transaction whereby any person or group of persons acting in concert acquires a controlling interest of 50% or more in the Company; or

· the sale of all or substantially all of the assets of the Company thereof (whether in a single transaction or a series of transactions).

It has been agreed that, in the six months following the acquisition of the Equipment, any costs of service, calibration and commission in excess of £20,000 will be offset against the Loan Note principal.

In addition, Cellulac Limited has the right to convert the loan note into new ordinary shares in the Company within 5 business days following announcement of the next corporate transaction that involves the issue of new ordinary shares in the Company (this includes an acquisition, placing or subscription for cash by the issue of shares) ("Corporate Transaction") in the period to 26 February 2021, in the event that one takes place. The exercise price will be at a price per new ordinary share equal to the higher of (i) the lowest subscription price payable per new ordinary share issued in the next Corporate Transaction and (ii) not less than 1.5p per new ordinary share.

Cellulac Limited is a subsidiary of Cellulac PLC (together, members of Cellulac Group") and is treated as a related party under the AIM Rules for Companies ("AIM Rules"), as both Gerard Brandon and Camillus Glover, directors of Integumen, are directors of Cellulac Limited and shareholders and directors of Cellulac PLC. As such, they are not regarded as independent and have taken no part in the Board's consideration of the terms of the acquisition of the Equipment, with Cellulac Limited, including the terms of the Loan Note. Tony Richardson, Chairman, and Ross Andrews, Non-Executive Director, are regarded as independent directors ("Independent Directors") for the purpose of Rule 13 of the AIM Rules.

The Independent Directors, having consulted with SPARK Advisory Partners Limited, the Company's Nominated Adviser, considers that the terms of the acquisition of the Equipment, and the terms of the Loan Note to be fair and reasonable in so far as shareholders are concerned.

Gerard Brandon (Chief Executive Officer) commented:

"Our Labskin 'wet lab' is enabled by automation of the digital laboratory equipment connected to the Labskin AI system, delivering a seamless transfer of analysed data in the cloud, from the Labskin test bed straight to the display screens of our growing list of clients.

The provision of the Equipment financing at this time, together with the working capital loan facility (announced on 1 November 2018 for £320,000) exceeds £700,000 in financial support from the Cellulac Group. In addition, new management have invested personal assets and cash to the value of £758,000 since August 2018 (via a subscription for cash, and a share swap of Integumen shares for Cellulac PLC shares as per the RNS of 1 November 2018) which illustrates their high level of confidence and commitment to the Integumen growth strategy."

About Integumen:

Integumen is a vertically integrated business, collaborating their Labskin technology platform with partners in artificial intelligence, clinical research, medical device and life science. These collaborators are building their own technology on top of the Labskin AI backbone. Labskin allows skin-care, health-care, pharmaceutical manufacturers and cosmetic companies to test their products on human-like skin in a real-world environment with full access to multiple state-of-the-art partner technologies.

The Company combines data analytics with access to therapeutic operational expertise and offers solutions to our clients, from regulatory approvals, right through to marketing fully tested ingredients that have been certified on our Laboratory grown living human tissue.