TIDMCEL
RNS Number : 5715B
Celadon Pharmaceuticals PLC
05 June 2023
Celadon Pharmaceuticals Plc (formerly Summerway Capital Plc)
("Celadon", the "Company" or the "Group")
Final Results for the year ended 31 December 2022
London, 5 June 2023 - Celadon Pharmaceuticals Plc (AIM: CEL)
today announces its audited final results for the year ended 31
December 2022.
Strategic and operational highlights for the year and post year
end
-- Achieved AIM readmission following the reverse takeover of
Vertigrow Technology Limited in March 2022 and raised gross
proceeds of GBP8.5m.
-- Registration of the Group's Midlands facility with UK
Medicines and Healthcare products Regulatory Agency ("MHRA") for
the Good Manufacturing Practice ("GMP") manufacturing of its
cannabis Active Pharmaceutical Ingredient (API) in January
2023.
-- Home Office licence successfully updated in March 2023 to
allow commercial sale of the Group's high <DELTA>-9
tetrahydrocannabinol ("THC") product.
-- Successfully completed seven harvests from Phase 1 grow
facility, with independent third-party testing of the select test
batches confirming high quality, consistent pharmaceutical grade
cannabis with high THC profile.
-- Results of the Feasibility Study for the Group's chronic pain
study submitted to the Research Ethics Committee ("REC") in
December 2022. Anticipate REC meeting to formally approve
commencement of Clinical Trial in H2 FY23.
-- Construction of Phase II facility in 2022 and Q1 FY23;
initial footprint operational with capacity, and further fitting
requirements, expected to ramp up in line with demand during
2023.
-- Inaugural product sale, for a minimum of GBP3m over three
years, to a leading UK Medical Cannabis company announced on 24 May
2023, with first shipments anticipated in Q4 2023. Letter of intent
with same customer for a further GBP7m of product annually.
-- Cash balance at 31 May 2023 of GBP1.8m, with GBP1.0m of VAT
and Research & Development tax credits due from HM Revenue and
Customs.
-- Committed credit facility for GBP7.0m signed on 29 May 2023
with a 2-year term, providing additional balance sheet flexibility
to meet increasing demand for Celadon's product.
Financial highlights for the period
-- Revenue of GBP24k (December 2021: GBP2k)
-- Operating loss of GBP5,381k (December 2021: GBP2,713k)
-- Loss before tax of GBP18,118k (December 2021: GBP4,796k)
-- Cash at 31 December 2022 of GBP5,061k (December 2021: GBP3,823k)
James Short, CEO of Celadon, commented:
"2022 was a strong year for Celadon following our readmission to
AIM and GBP8.5m equity fundraising, cementing our place as a leader
in the field of developing breakthrough cannabis-based medicines.
The start of this year has now seen Celadon successfully achieve
our Good Manufacturing Practices registration from the UK's
Medicines and Healthcare products Registration Agency and an update
to our Home Office licence to allow commercial supply of our
product. We believe that we are the first UK company of our kind to
obtain these approvals since regulations changed in 2018 which
positions Celadon to supply the UK market with our
pharmaceutical-grade product.
"Following the update of our Home Office licence, we have been
contacted by a number of potential customers expressing interest in
entering into long-term supply agreements, to allow them to source
high-quality, locally produced medical cannabis. We are aiming to
provide the first product to customers during the course of Q4
2023. The progress we have made this year, and the promising early
data from our chronic pain study, give me further conviction of the
potential of our cannabis-based medicines to transform patients'
lives.
"Finally, I would like to thank our shareholders for their
continued support as we pursue our primary aim of helping patients.
"
Analyst briefing: 10.00am today
James Short, Chief Executive Officer, and Jonathan Turner, Chief
Financial Officer, will host a virtual analyst presentation
followed by a Q&A session at 10.00am BST today.
Analysts wishing to join should register their interest by
contacting Powerscourt at celadon@powerscourt-group.com , or by
calling +44 (0) 20 7250 1446.
A copy of the presentation will be published on the Company's
website at www.celadonpharma.co.uk
Investor Presentation: 3.30pm today
Management will be hosting a live presentation and Q&A
session today at 3.30pm BST via the online platform Investor Meet
Company. Investors can sign up to Investor Meet Company for free
and attend the presentation via the following link:
https://www.investormeetcompany.com/celadon-pharmaceuticals-plc/register-investor
Questions can be submitted pre-event and at any time during the
live presentation via the Investor Meet Company platform.
Enquiries:
Celadon Pharmaceuticals Plc
James Short Via Powerscourt
Arthur Wakeley
Jonathan Turner
Canaccord Genuity Limited (Nominated Adviser and Broker)
Bobbie Hilliam / Andrew Potts /
Patrick Dolaghan +44 (0)20 7523 8000
Powerscourt Group
Sarah MacLeod / Nick Johnson /
Sam Austrums / +44 (0)20 7250 1446
Ibrahim Khalil celadon@powerscourt-group.com
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014 as
amended by regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement,
this information is now considered to be in the public domain.
CELADON PHARMACEUTICALS PLC
(FORMERLY SUMMERWAY CAPITAL PLC)
Group Strategic Report
For the year ended 31 December 2022
Chairman's Statement
I am pleased to present the first full year results of Celadon
Pharmaceuticals plc (the "Company" and together with its
subsidiaries, the "Group"). Summerway Capital plc (which was
renamed Celadon Pharmaceuticals plc on 25 March 2022) acquired
Vertigrow Technology Limited ("Celadon") and was re-admitted to
trading on AIM with effect from 28 March 2022. The results are for
the year ended 31 December 2022.
I am proud of the role the Group plays in striving to make a
positive impact on the lives of patients and its aim to produce a
reliable and safe source of pharmaceutical grade cannabis-based
products available to them and to the pharmaceutical Research &
Development community in the UK.
Significant Milestones
The law changed in the UK in 2018 allowing medical cannabis to
be prescribed to patients. Since that time Celadon has been working
with the UK Home Office and the Medicines and Healthcare products
Regulatory Agency ("MHRA") to be approved to provide a high-quality
and consistent domestic supply of high
<DELTA>-9-tetrahydrocannabinol ("THC") cannabis products.
A significant amount of work and capital has been invested over
the last four years that culminated in January 2023 with the
Group's facility being awarded its Good Manufacturing Practices
("GMP") registration in March 2023 and the Home Office authorising
the commercial supply of the Group's product.
Clear opportunities ahead
The initial data from participants on the Group's chronic pain
feasibility study show the potential benefits pharmaceutical
cannabis can bring to patients and their quality of life.
Whilst the market is clearly developing, the reliance until now
for cannabis products to be imported on a named patient basis has
caused significant additional cost and delays for the patients who
need the products the most.
The Group's achievements in obtaining regulatory approvals means
that the UK now has a domestic supplier who in is in time expected
to be able to meet the needs of this significant underserved
patient base.
Advancing our sustainability agenda
The Group's transition to a sustainable energy supplier in
December 2022 and its ongoing investigation of solar power as a
means of reducing the Group's impact on the environment
demonstrates the Board and Group's commitment to wherever possible
operating in a sustainable fashion.
Board changes
As a result of the acquisition of Celadon and readmission of the
Company to trading on AIM on 28 March 2022, there was a significant
amount of change in the composition of the Board during 2022, and
into 2023.
I was re-appointed as Chairman on 28 March 2022, replacing Ben
Shaw who had been Interim Chairman and stood down from the Board in
advance of the acquisition of Celadon.
At the time of the acquisition Jim Short and Katie Long became
the Group's CEO and CFO respectively and Robbie Barr and Dr Steven
Hajioff took up the roles of Senior Independent Director and
Non-Executive Director.
Latterly, Katie Long stood down as CFO on 17 January 2023 and
was replaced by Jonathan Turner.
I would like to thank Ben and Katie for their contributions to
the Group and the Board.
Our employees
The Board is extremely grateful for the commitment and
innovation of our employees in their approach to maintaining and
growing the business despite the many challenges faced whether
Covid related lockdowns, or an emerging regulatory landscape. We
thank them for embracing new approaches to working and for adapting
quickly to new ways of supporting the Group and its anticipated
patients and customers.
Dividend
Given the Group is continuing to invest in growing the business,
the Board does not recommend the payment of a dividend (2021:
nil).
Looking ahead
Despite the macroeconomic and political challenges over the past
two years, the Group has made significant progress, and in January
and March 2023 successfully obtained the required regulatory
licences to allow it to begin the commercial supply of its
cannabis-based products. The signing of the inaugural supply
contract in May 2023 and the multiple expressions of interest
demonstrates the appetite for the Group's product. This commitment
underpins our mission to place the patient at the heart of
everything that we do. The Board remains confident in the Group's
strategic direction as a platform to improve the quality of life
for the patients who desperately need the Group's products whilst
delivering sustainable growth and in time, profitability for our
investors.
Alexander Anton
Chairman
2 June 2023
Chief Executive Officer's Report
Introduction & Overview
I am delighted to report on the significant number of
achievements and strategic progress for the Group in the last
year.
These results are the Group's first as a public company
following the Group's successful readmission to AIM in March 2022
as a result of the reverse takeover of Vertigrow Technology Limited
by Summerway Capital Plc (renamed Celadon Pharmaceuticals Plc),
where we raised GBP8.5 million of equity capital to support our
organic growth plans. On readmission, we became one of a small
number of medicinal cannabis companies to be admitted to AIM, one
of the world's leading growth markets for small and mid-cap
companies.
In the past few years, cannabis-based medicinal products
("CBMPs") have expanded rapidly in several international
geographies, with a growing evidence base for their efficacy across
a number of conditions (e.g. chronic pain, epilepsy, autism). In
the UK, it is estimated that there are eight million people with
moderate to severely disabling chronic pain, and around 50 million
in the US. The interest in CBMPs as medicines to treat pain has
grown against the backdrop of the opioid crisis in the US, and the
recommendations of UK regulators in 2021 to reduce their
prescription for chronic pain.
Our aim is to position Celadon as a leader in breakthrough
cannabis-based medicines, capitalising on our early-mover advantage
in a highly regulated market as one of what the Board believes are
only two UK companies of our kind with the licences to cultivate
and manufacture pharmaceutical-grade cannabis in the UK for
commercial sale.
Our strategy to open up the UK market combines domestic
production of pharmaceutical-grade medicinal cannabis, clinical
trials to generate the data to support prescriptions by doctors,
and research into future breakthrough medicines. There is a
substantial need for high-quality UK produced cannabis to reduce
the need for imports from overseas, with the associated
unacceptable costs and delays often faced by patients. Our
subsidiary, Harley Street (CPC) Limited, trading as LVL Health
("LVL"), completed the initial feasibility phase of its chronic
pain study in 2022, with promising early results from the data for
pain reduction, opioid reduction and sleep. A number of parties
have since approached us about using the Trial Protocol for
different medicines and in new jurisdictions. We anticipate
approval for the LVL trial being given in H2 FY23, and remain
confident of the trial's ability to provide a robust data set that
may enable The National Institute for Health and Care Excellence
("NICE") to recommend the re-imbursement for the type of
cannabis-based medicinal product studied in the clinical trial for
prescription on the NHS for the uses studied in the clinical
trial.
We believe the opportunity for CBMPs in the UK and
internationally remains compelling for the following reasons:
-- Large addressable market: there are an estimated eight
million people in the UK with moderate to severely disabling
chronic pain, with around 50 million in US. CBMPs are expanding
rapidly internationally across a number of territories, including
Germany and Australia.
-- Growing evidence of efficacy for a number of conditions:
there is a growing evidence base for the efficacy of CBMPs (e.g.
chronic pain, epilepsy, autism), which we are experiencing through
the early results from the first patients on LVL's chronic pain
study. The previous standard of care - opioids - has been estimated
to work for only 5-10% of patients [1] , with widespread evidence
noting the harmful side effects of long-term opioid use. A recent
study of the prescription of anti-depressants to treat chronic pain
has suggested a "'shocking' lack of long-term data" [2] and further
highlighting the need for evidence-based alternatives.
To unlock this opportunity, Celadon continues to pursue its
strategy, with a mission and values aligned to deliver this.
Critically, our strategy has a patient-first objective at the heart
of everything we do as an organisation.
-- Mission: to improve quality of life for patients most in need
through developing breakthrough cannabis-based medicines
-- Values: patient-first, collaboration, innovation,
determination
STRATEGY
Celadon's strategy places the Group in a strong position to open
up the UK market, having successfully built a strong foundation
over the past four years, and to develop breakthrough
cannabis-based medicines for patients. The regulatory and capital
barriers to entry remain high, and Celadon's successful GMP
registration and Home Office licence update puts it in a strong
position to supply its pharmaceutical-grade product to the
market.
With a strategy based around patient needs and an initial focus
on chronic pain, Celadon has three core pillars to unlock the
emerging market opportunity, which we continue to pursue:
-- Grow, extract and sell: create an integrated UK supply chain
that is not reliant on imported, costly product; licenced to
cultivate, manufacture and sell to the market for revenue
-- Trial: conduct clinical trials to demonstrate the efficacy of
cannabis-based medicines, open up the UK market and support the
case for NHS reimbursement
-- Breakthrough R&D: develop advanced cannabinoid medicines
with novel delivery technologies, led by Celadon's in-house R&D
team and de-risked through industry partnerships
OPERATIONAL UPDATE
Since readmission to AIM in March 2022, Celadon has continued to
make progress against its key operational milestones.
Phase 1 Cultivation Facility
In August 2022, the Company completed its seventh harvest of
high THC medicinal cannabis from the Phase 1 grow rooms. The
harvested cannabis flower product underwent rigorous internal and
independent testing to assess its consistency, quality and
cannabinoid profile. The results of the independent third-party
testing confirmed that the cannabis flower tested consistently met
Good Agricultural and Collection Practice ("GACP"), pharmaceutical
grade standards for medical cannabis, demonstrating a consistent
and high level of THC, well within all testing tolerances. The
product supported the Company's application to the MHRA, with GMP
registration achieved in January 2023. In addition to tight
batch-to-batch consistency, the specification of Celadon's indoor
hydroponic cultivation and smart environmental monitoring has
driven high levels of yield.
Phase 1 has since undergone planned maintenance improvements,
with a genetics and pheno-hunting programme underway.
Phase 2 Facility Fit Out
The Company has made significant progress in the development and
fit out of its second cannabis cultivation space (Phase 2) during
the period and post period end. The Company has taken the decision
to ramp-up Phase 2 capacity - and the underlying operations - in
phases, in line with demand. At full capacity, Phase 2 will have
the potential to achieve an annualised yield of approximately three
tonnes of high THC pharmaceutical cannabis in the form of dry
flower.
The Company took a few key decisions to alter and improve the
construction of the Phase 2 build in 2022. This was partly in
response to additional cost pressures, which the Group is clearly
not immune to. To mitigate the inflationary environment, the
decision was taken to in-house the management of the build, which
generated substantial savings. The Group spent approximately GBP2.0
million on the construction of the grow rooms during the period.
Certain works were also undertaken on Phase 3, ahead of the
original schedule, on the recommendation of the regulatory
auditors, in order to avoid disrupting Phase 2 operations at a
later date.
Commercialisation
Since announcing its GMP and Home Office licencing updates in
early 2023, Celadon has held a number of positive discussions
regarding commercial supply of its pharmaceutical-grade cannabis
products.
The Company has received multiple expressions of interest in the
sale of its pharmaceutical-grade product. The Company is currently
in discussions to convert these into commercial contracts, and
whilst there is no guarantee around if or when these will convert,
if successful they would be expected to move the Company to a cash
generative position. The discussions include a further contract
from the inaugural customer worth in excess of GBP7 million of
annual supply.
The level of interest in Celadon's product further confirms
management's belief that UK production, combined with indoor,
fully-controlled hydroponic cannabis cultivation, has a significant
advantage over imported product, with the associated frustrations
for patients of supply delays and increased cost.
MHRA and Home Office Licencing
The Celadon team worked hard over the period to prepare the
Group for its MHRA inspection, with a successful inspection in Q4
22 and the submission of the results of independently verified
testing of its cannabis product.
Celadon was delighted to obtain confirmation from the MHRA in
January 2023 that it had achieved GMP certification to manufacture
its pharmaceutical-grade cannabis product.
On the basis of the successful MHRA registration, Celadon
requested that the Home Office update the Group's licence to allow
the commercial supply of its cannabis product. As disclosed at the
time, the Home Office extended the Group's licence in March 2023.
The Directors believe that the Group is the first in the UK to be
licensed to cultivate and sell high-THC EU-GMP grade cannabis
product from its own facility following the changes to
pharmaceutical cannabis licensing in 2018, and one of a small
number of EU-GMP facilities of its kind globally.
LVL's Chronic Pain Trial
LVL, the Company's private pain clinic subsidiary, has
conditional approval from the MHRA for a trial of medical cannabis
in patients with non-cancer chronic pain, allowing the enrolment of
up to 5,000 patients. Before the trial commenced, the Research
Ethics Committee ("REC") requested a Feasibility Study, designed to
demonstrate the ability to engage and retain patients. The
operation of the Feasibility Study required the Group to utilise a
Care Quality Commission ("CQC") approved clinic to onboard
patients. LVL's clinic on Harley Street successfully received CQC
authorisation in the year.
This Feasibility Study allowed us to ensure that the onboarding
process was efficient and effective and the Group presented its
results to REC in December 2022. Feedback from patients who
received treatment has been positive, with improvements in quality
of life (including pain and sleep levels), and significant
reduction in other medications (some respondents noted reductions
in their opioid usage by 60%), being reported.
The Group remains confident that permission will be given to
proceed to the full Clinical Trial. The full trial carries a number
of advantages, most notably the clarification of its fully approved
status, which is expected to substantially increase the recruitment
of patients and sponsoring organisations, which had been lower than
anticipated, largely as a result of the "conditionally approved"
nature of the Trial during the Feasibility Study. The Group is
currently exploring potential opportunities to enable a wider
number of people to benefit from the Trial.
Breakthrough R&D
Led by Celadon's Chief Scientific Officer and in line with the
Company's strategy, the in-house R&D team commenced work in
2022 on exploring opportunities to broaden the Company's product
range of advanced medicines, using the Company's proprietary
cannabinoid API.
During the period, the Company increased its stake in Kingdom
Therapeutics, an early-stage biopharmaceutical company focused on
the development of a cannabinoid treatment for Autism Spectrum
Disorder, from 17% to 19%.
The Group also entered into an initial partnership agreement to
collaborate with Phytome Life Sciences Limited on early-stage
R&D projects. Phytome is a leading UK early-stage
biopharmaceutical company conducting R&D into plant derived
therapeutics with a specific focus on pharmaceutical cannabis, for
which it has a UK Government R&D licence. The initial
partnership agreement has explored the potential to develop novel
medicines for the UK pharmaceutical market. By working with a
third-party R&D specialist partner, Celadon's goal is to
accelerate and expand its R&D pipeline with reduced financial
and execution risk. Research has since progressed, with a priority
indication selected.
Recruitment
During 2022 and Q1 23, the Company made significant progress in
building a high-quality management team and strengthening its
operations across all parts of the business. In January 2023,
Jonathan Turner joined as Chief Financial Officer from the FTSE-250
company Oxford Instruments, and we recruited an experienced
Business Development Director and a new Head of Quality to oversee
our GMP operations and interactions with the MHRA. These are three
significant hires for a business at Celadon's stage of growth.
ESG
As a company, we recognise the importance of operating to the
highest standards of compliance across the business, and we have
continued to advance our approach to ESG, focusing on identifying
those issues that are most material to Celadon's business and its
key stakeholders. This work will form part of a comprehensive ESG
strategy.
At the heart of Celadon's approach to ESG is that societal
benefit will flow from addressing the UK's 'silent epidemic' of
chronic pain (and opioid misuse), with eight million people
experiencing moderate or severely disabling chronic pain and
largely not benefiting from current treatments. This is Celadon's
mission - to improve quality of life for patients most in need
through breakthrough cannabis-based medicines.
Furthermore, as a UK pharmaceutical company aiming to develop
medicines that might one day be reimbursed on the UK's National
Health Service ("NHS"), Celadon is working to align with the NHS's
requirement that by 2027 suppliers report emissions and publish a
carbon reduction plan aligned with its 2045 net zero targets.
Where possible the Group is also taking measures now to reduce
the impact that it has on the environment. In Q4 2022, the Group
entered into exclusively renewable energy supply contracts for its
Midlands facility. The Group is also in advanced discussions about
installing solar panels to further reduce its environmental
impact.
Outlook
While the UK market for CBMPs is early in its development, we
remain confident of the medium to long-term sector outlook and the
prospects for Celadon within this market. Having successfully
obtained our Home Office licence to sell the Group's EU-GMP
pharmaceutical cannabis products, we entered into our first Supply
Agreement in May 2023 to supply GBP3m of product over three years
to a leading UK Medical Cannabis company and are in active
discussion with a number of potential partners about entering into
long-term supply agreements.
We look forward to commencing the full Clinical Trial of the
Group's chronic pain trial following the anticipated authorisation
from Ethics Committee, and are currently investigating ways to
enable a wider participation in the Trial.
James Short
CEO
FINANCIAL OVERVIEW
Financial presentation of the Celadon Pharmaceuticals Plc Group
results
On 28 March 2022, Summerway Capital Plc ("Summerway") (renamed
Celadon Pharmaceuticals Plc), completed the acquisition of
Vertigrow Technology Limited ("Vertigrow") and its 100%
shareholding in Celadon Pharma Limited and the 57.5% shareholding
in Harley Street (CPC) Limited to create the Celadon
Pharmaceuticals Plc group. Vertigrow was renamed Celadon Property
Co Limited on 3 January 2023.
Prior to the acquisition, Summerway had 8,033,409 ordinary
shares in issue, and was an investing company under the AIM Rules.
On acquisition, Summerway issued 48,484,848 new ordinary shares to
the Vertigrow shareholders and to redeem GBP4.13m of loan
convertible loan notes that Vertigrow had issued.
After the combination, the Vertigrow shareholders comprised 86%
of the Company's enlarged share capital. On consolidation and
presentation of the Group's financial position, performance and
cash flows, Vertigrow, was treated as the accounting acquirer, and
the legal parent company Summerway Capital Plc (renamed Celadon
Pharmaceuticals Plc), was treated as the accounting subsidiary, as
though Vertigrow had acquired Summerway and its AIM listing. As a
result, and unlike a traditional acquisition, the value of GBP80
million ascribed to Vertigrow has not been capitalised as non-
current asset, but instead recorded in shareholders' equity in the
Company's balance sheet.
Accordingly:
- the Consolidated balance sheet at 31 December 2022 shows the
acquisition of Summerway by Vertigrow, which occurred on 28 March
2022, whilst the Consolidated balance sheet at 31 December 2021 is
the Vertigrow group;
- the income statement and statement of cash flows shows for the
year ended 31 December 2022 are the results of Vertigrow with the
inclusion of Summerway from 28 March 2022; and,
- the income statement and statement of cash flows for the year
ended 31 December 2021 is that of the Vertigrow group only.
In addition, the accounting for the reverse acquisition itself
is deemed to be the issue of shares to the original Summerway
Capital Plc shareholders by Vertigrow and this is accounted for as
a share based payment which gives rise to a non-cash charge in the
income statement of GBP6.4 million, which is included within the
reverse acquisition reserve.
The Reverse Acquisition Accounting is described in more detail
in note 5 to these financial statements.
Revenues - in the year ended 31 December 2022, the Group
recorded revenues from the Harley Street (CPC) Limited clinical
study of GBP24k (2021: GBP2k).
Cost of sales - includes all costs for the Harley Street (CPC)
Limited study patients, including initial suitability tests,
medical consultation and onboarding of all patients.
Gross profit - for the year ended 31 December 2022, the Group
reported a gross loss of GBP66k (2021: loss of GBP2k). The gross
losses were due to the mix of paying and non-paying patients for
LVL's Feasibility Study, and the lower patient numbers meaning that
operational efficiencies were unavailable.
Operating costs - include all people costs, property costs
(including utilities, repairs and maintenance), marketing, and
legal and professional costs. These totalled GBP4.9 million in the
year ended 31 December 2022 (2021: GBP2.4 million), which comprises
all the Vertigrow operating costs, with Summerway's corporate costs
included from 28 March 2022 onwards. The increase in operating
costs reflects the scale up in the Group's people, operations and
cost base pursuant to our enlarged Group business plan.
Operating loss - is gross margin less operating costs,
depreciation and amortisation. The operating loss for the year
ended 31 December 2022 was GBP5.4 million (2021: GBP2.7
million).
One off and non-cash items - in this reporting period there are
a number of non-recurring and non-cash items below Operating
Profit, which are detailed as follows:
Reverse acquisition and listing related costs in the year ended
31 December 2022:
-- Reverse acquisition share based payment and IPO costs - a
GBP6.4 million share based payment charge reflecting the net cost
of Vertigrow acquiring Summerway and the AIM listing. This is a
non-cash cost. In the year ended 31 December 2022 we incurred
GBP1.5 million of advisers costs (2021: GBP0.8 million), included
in the GBP1.5 million was the fair value of GBP245k of warrants
issued to Canaccord Genuity Limited for their work on the
readmission of the Group to AIM. (See note 5).
-- Finance charges on convertible loan notes - in February and
March 2021 Vertigrow raised GBP4.13 million in pre IPO finance via
convertible loan notes (the "CLNs"). These CLNs are categorised at
inception between an Embedded Derivative and a Host Liability,
recognising the optionality in the CLN for the investor to convert
their loan note in Vertigrow shares immediately prior to the
acquisition by Summerway. In the year ended 31 December 2022, the
Group recorded a finance charge of GBP3.4 million on the
convertible loan notes, and a finance credit of GBP556k on the
derivative liability. These are non-cash items as the loan notes
converted into equity on 28 March 2022. (See note 22).
Both of these costs are non-recurring.
Non-cash movements relating to Harley Street (CPC) Limited
The Group has undertaken a Purchase Price Allocation exercise in
the period to allocate the purchase price spent on acquiring the
Group's 57.5% ownership (which provided operational control) to the
underlying assets of the Harley Street (CPC) Limited business. This
lead to an adjustment of the 2021 balance sheet to reflect the
split between Clinical Trial related intangible assets of GBP498k,
deferred tax liabilities of GBP125k and goodwill of GBP639k.
The patient uptake was lower than anticipated as a result of the
Clinical Trial only being conditionally approved, subject to the
results of the initial Feasibility Study being approved by the
Research Ethics Committee ("REC"). In order to operate the
Feasibility Study, the Group needed to operate through a Care
Quality Commission approved clinic, which led to additional
costs.
These factors meant that the whilst the results for patients on
the Trial demonstrated significant improvement in their condition,
the update of the Trial was slower than expected and as a result
the contingent consideration of up to GBP1.5 million (which was
fair valued to GBP375k) was released. In addition, the Goodwill was
impaired. The net result was a charge to the income statement of
GBP264k. (See note 13.)
Long term incentive plan - the Group has a share based long term
incentive plan for certain directors, advisors and employees. In
the year ended 31 December 2022, the Group recognised a GBP910k
charge for this Subsidiary Incentive Scheme. A further GBP226k
charge related to warrants awarded to an advisor in respect of
services to be provided between April 2022 and March 2024 (See note
28).
Finance charges on leased assets - Celadon has a Right Of Use
lease on its production facility with almost 22 years remaining.
There is also a 3 year Right Of Use lease on one item of production
equipment. The finance charge on these leased assets of GBP531k is
a fair valuation charge to unwind the respective balance sheet
lease liabilities. The charge has increased on the prior periods as
(a) the lease on the production facility was varied in February
2022 to extend the initial rent free period; and (b) a 3 year
production equipment leased asset was taken on in the six months
ended 30 June 2022. (See note 15).
Loan interest charges - Vertigrow had three loan funding
lines:
(a) a UK Government backed COVID related Bounce Back loan;
(b) a Supplier Loan; and,
(c) a pre IPO loan from Summerway Capital Plc.
The external loan interest for (b) reduced versus prior period
as the Supplier Loan was repaid in February 2022. The loan interest
on (c) of GBP53k is for the period prior to 28 March 2022, and
after that date is eliminated on consolidation. (See note 22).
Non Current Assets - increased by GBP2.2 million in the year
ended 31 December 2022, the Group continued its facility fit out,
increasing property, plant and equipment by GBP1.9 million, and
increased the Right of Use asset (and associated lease liability)
by GBP1.1 million due to a lease variation on the business property
and entering a new small equipment lease (see note 15). These
increases were offset by the impairment of Harley Street (CPC)
Limited goodwill of (GBP0.6 million) and the amortisation of the
LVL Chronic Pain Clinical Trial related intangible assets of
(GBP0.1 million).
Current Assets - increased with IPO placing proceeds, and
GBP1.0m of additional VAT and refundable R&D Tax Credits due.
Cash balances at 31 December 2022 were GBP5.1 million (2021: GBP3.8
million). Inventories represent the value of consumables for use in
cultivation and the LVL trial. The cannabis grown for validation
and internal research and development purposes has been expensed.
Excess supply from the trial grows has been destroyed.
Current Liabilities - reduced as the GBP4.9 million convertible
loan note and accrued interest converted to equity on 28 March
2022. The GBP2.2 million related party loan between Summerway
Capital Plc and Vertigrow was eliminated on consolidation from 28
March 2022, and the GBP375,000 contingent consideration liability
on the purchase of Harley Street (CPC) Limited has been released
(see note 13).
Non-current liabilities - increased by GBP0.5m as the lease
liability increased (by GBP1.6 million) due to the property lease
variation, and the recognition of a provision in respect of the
property decommissioning costs of GBP0.4 million and a new small
equipment lease which was largely offset by the repayment of the
supplier loan of GBP1.5 million (in February 2022).
Net assets - at 31 December 2022 were GBP7.0 million.
Shareholders' Equity - Share Capital including Share Premium and
the Merger Relief Reserve total GBP88.3 million at 31 December 2022
following the IPO and acquisition of Vertigrow by Summerway Capital
Plc; the Reverse Acquisition Reserve of GBP59.2 million (which is
the consolidation reserve created on the reverse acquisition of
combining Summerway Capital Plc and Vertigrow); the Retained losses
(increased to GBP22.8 million) and the Non-controlling Interest
(GBP638k) increased with the losses in the year ended 31 December
2022.
Cash outflows from operating activities - for the year ended 31
December 2022 were GBP5.5 million (2021: GBP3.2 million). The main
spend items include people, advisers and utility costs.
Investing activities - in the year ended 31 December 2022 capex
items totalled GBP2.1 million. The Group increased its investment
in Kingdom Therapeutics Limited by GBP18k (to GBP218k). The Group
also received GBP3.5 million of cash inflow on the acquisition of
Summerway Capital Plc. In the year ended 31 December 2021 capex
items totalled of GBP542k, and we invested GBP500k acquiring 57.5%
of the issued share capital of Harley Street (CPC) Limited in
addition to our GBP200k investment in Kingdom Therapeutics
Limited.
Financing activities - in the year ended 31 December 2022, the
Group raised GBP7.5 million of new equity financing (net of
allocated issue costs, which were specifically related to the
fundraise process) and repaid a supplier loan of GBP1.5 million
which was not used. In the year ended 31 December 2021 the Group
raised GBP4.1 million of new funding (net of costs) via CLNs, which
were redeemed on 28 March 2022 through the issue of new ordinary
shares of Summerway Capital Plc, as part of the share consideration
paid to Vertigrow's vendors.
Cash balance - at 31 December 2022 the Group had GBP5.1 million
in cash.
New funding line - on 29 May 2023, the Group obtained GBP7.0m of
new funding via a 2-year fixed rate Revolving Credit Facility
Agreement. Interest will accrue at a rate of 10% on balances drawn
under the Facility Agreement. The Revolving Credit Facility
Agreement will be repayable in the event that the Group obtains
sufficient alternative funding to allow the Revolving Credit
Facility Agreement to be repaid in full.
Going Concern - as a result of the access to the GBP7.0m
Revolving Credit Facility, the anticipated refund of GBP0.5 million
of R&D tax credits and the Group's recently won new supply
contract, the Directors consider that the Group is able to meet its
financial liabilities as they fall due for the period of at least
12 months from the date of this report.
Jonathan Turner
CFO
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2022
Unaudited
2022 2021
Note GBP000 GBP000
Revenue 7 24 2
Cost of sales (90) (12)
Gross Loss (66) (10)
Operating costs (4,849) (2,384)
Depreciation and amortisation 13,14,15 (466) (319)
---------- ----------
Operating loss (5,381) (2,713)
Share-based payment costs for reverse acquisition 5 (6,400) -
Other acquisition costs 5 (1,465) (777)
Finance Costs 10 (23) (1,115)
Non-cash movements relating to Harley Street (CPC) Limited 13 (264) -
Finance charge on convertible loan note 22
* Interest and charges (43) (191)
(3,406) -
* Redemption
Long term incentive plans 27 (1,136) -
(12,737) (2,083)
---------- ----------
Loss before taxation (18,118) (4,796)
Taxation 11 707 13
---------- ----------
Loss for the period, being total comprehensive loss for the period (17,411) (4,783)
========== ==========
Loss attributable to:
Owners of the Company (17,006) (4,628)
Non-controlling interests (405) (155)
---------- ----------
(17,411) (4,783)
========== ==========
Basic and diluted loss per share (29.5p) (10.5p)
---------- ----------
The Group's activities derive from continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
Unaudited
2022 2021
Note GBP000 GBP000
--------- ----------
Non-current assets
Intangible assets 13 428 1,167
Property, plant and equipment 14 2,921 1,021
Right-of-Use Assets 15 3,354 2,285
Investments 16 218 200
Total non-current assets 6,921 4,673
--------- ----------
Current assets
Inventories 18 20 2
Trade and other receivables 19 1,249 264
Cash and cash equivalents 20 5,061 3,823
Total current assets 6,330 4,089
--------- ----------
Current liabilities
Trade and other payables 21 (1,106) (751)
Loans and borrowings 22 (10) (2,170)
Convertible loan notes 22 - (4,925)
Lease liabilities 22 (56) (338)
Contingent consideration 13, 5 - (375)
Deferred tax liability 23 (25) (25)
Total current liabilities (1,197) (8,584)
--------- ----------
Non-current liabilities
Loans and borrowings 22 (24) (1,567)
Lease liabilities 22 (4,542) (2,920)
Provisions 25 (389) -
Deferred tax liability 23 (62) (87)
Total non-current liabilities (5,017) (4,574)
--------- ----------
Net assets/liabilities 7,037 (4,396)
========= ==========
Shareholder's Equity
Share capital 26 617 80
Share premium 26 22,553 7,367
Merger relief reserve 26 65,082 -
Reverse acquisition reserve 26 (59,200) (5,835)
Warrant reserve 26 471 -
Capital redemption reserve 26 49 49
Share based payment reserve 28 910 -
Retained earnings (22,807) (5,801)
--------- ----------
Equity attributable to owners of the Group 7,675 (4,140)
Non-controlling interest (638) (256)
--------- ----------
Total Equity 7,037 (4,396)
========= ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Share Equity
Merger Reverse Capital based attributable
Share Share relief acquisition Warrant Redemption payment Retained to owners of Non-controlling Total
Capital premium reserve reserve reserve reserve reserve earnings the parent interest equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------- -------- -------- ------------ -------- ----------- -------- ---------- ------------- ---------------- ---------
Balance at 31 August 2020
(unaudited) 61 5,711 - (4,549) - 49 - (1,173) 99 - 99
Issue of shares in Summerway
Capital Plc 19 1,656 - (1,675) - - - - - - -
Movement on Reverse
Acquisition Reserve - - - 389 - - - - 389 - 389
Acquisition of 57.5% of
Harley Street (CPC) Limited - - - - - - - - - (101) (101)
Loss for the period - - - - - - - (4,628) (4,628) (155) (4,783)
-------- -------- -------- ------------ -------- -----------
Total movement for the period 19 1,656 - (1,286) - - - (4,628) (4,239) (256) (4,495)
Balance at 31 December 2021 80 7,367 - (5,835) - 49 - (5,801) (4,140) (256) (4,396)
(unaudited)
Recognition of PLC Net Assets
at acquisition date - - - 5,751 - - - - 5,751 - 5,751
Issue of shares for
acquisition of subsidiary 433 - 65,082 (65,515) - - - - - - -
Subsidiary Incentive Share
issue - - - - - - - - - 23 23
Share-based payment charge - - - 6,399 226 - 910 - 7,535 - 7,535
Settlement of convertible
loan notes of Vertigrow
Technology Limited 52 7,765 - - - - - - 7,817 - 7,817
Issue of shares for cash 52 8,448 - - - - - - 8,500 - 8,500
Cost of share issue - (1,009) - - - - - - (1,009) - (1,009)
Warrants issued - (18) - - 245 - - - 227 - 227
Loss for the period - - - - - - - (17,006) (17,006) (405) (17,411)
-------- -------- -------- ------------ -------- ----------- -------- ---------- ------------- ---------------- ---------
Total movement for the period 537 15,186 65,082 (53,365) 471 - 910 (17,006) 11,815 (382) 11,433
Balance at 31 December 2022 617 22,553 65,082 (59,200) 471 49 910 (22,807) 7,675 (638) 7,037
======== ======== ======== ============ ======== =========== ======== ========== ============= ================ =========
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2022
Unaudited
2022 2021
Note GBP000 GBP000
----- --------- ----------
Cash flows from operating activities
Loss for the period (17,411) (4,783)
Adjustments for:
Depreciation and amortisation 466 319
Finance charges on leased assets 532 384
Finance charge on convertible loan notes 43 151
Final conversion of convertible loan notes 3,406 -
Convertible loan transaction costs - 40
Fair value (loss) / gain on derivative liability (556) 660
Finance charge on loans 53 71
Long term incentive plan 910 --
Warrant costs 471 -
Reverse acquisition share-based payment 6,400 -
Non-cash movements in respect of Harley Street (CPC) Limited 264 -
Release of deferred tax liability on intangible assets (25) (13)
Other finance cost (net) (5) -
Operating cash flow before working capital movements (5,452) (3,171)
----- --------- ----------
(Increase)/decrease in trade and other receivables (985) 171
Increase/(decrease) in trade and other payables 355 (148)
(Increase)/decrease in inventories (18) --
Cash outflow from operating activities (6,100) (3,148)
----- --------- ----------
Investing activities
Cash acquired on reverse acquisition 5 3,494 -
Acquisition of Harley Street (CPC) Limited - (500)
Net expenditure on purchase of property, plant and equipment (2,086) (542)
Purchase of investments (18) (200)
Net cash inflow /(outflow) from investing activities 1,390 (1,242)
----- --------- ----------
Financing activities
Interest received / (paid) 17 (1)
Repayment of Lease Liabilities (8) -
Proceeds from convertible loan notes (net of costs) - 4,074
Supplier loan - interest payment (41) -
Supplier loan - (repayment) / proceeds (1,500) 1,500
Bounce Back loan - repayment (11) (6)
Proceeds on issuing share capital, net of issue costs 7,491 389
Intercompany funding prior to reverse acquisition - 2,125
Debt repayment - (168)
Net cash inflow from financing activities 5,948 7,913
----- --------- ----------
Net increase in cash and cash equivalents 1,238 3,523
Cash and cash equivalents at 1 January 3,823 300
Cash and cash equivalents at 31 December 5,061 3,823
===== ========= ==========
NOTES TO THE FINANCIAL INFORMATION
For the year ended 31 December 2022
1. About Celadon Pharmaceuticals Plc
Celadon Pharmaceuticals Plc (the "Company") and its subsidiaries
(together "the Group") are a UK based pharmaceutical group with a
primary focus on growing indoor hydroponic high-quality cannabis
initially for use within the chronic pain market.
The Company (called Summerway Capital Plc until 25 March 2022)
is a public limited company incorporated in England and Wales and
domiciled in the United Kingdom (company number: 11545912). It is a
public company listed on the AIM market of the London Stock
Exchange. The registered address is 32-33 Cowcross Street, London,
EC1M 6DF.
On 28 March 2022, the Company completed the acquisition of
Vertigrow Technology Limited (and its subsidiaries Celadon Pharma
Limited and Harley Street (CPC) Limited) and the settlement of the
Vertigrow Technology Limited convertible loan notes via an issuance
of new shares. Vertigrow Technology Limited was renamed Celadon
Property Co Limited on 3 January 2023 - the company's new name will
be used in the following. Further details on this transaction and
the subsequent Group structure is included at notes 5 and 17
respectively.
2. Basis of preparation
The financial information for the year ended 31 December 2022
has been extracted from the Group's audited statutory financial
statements which were approved by the Board of Directors on 2 June
2023 which will be delivered to the Registrar of Companies for
England and Wales . The report of the auditor on these financial
statements was unqualified, did not contain a statement under
Section 498(2) or Section 498(3) of the Companies Act 2006. The
information included in this announcement has been prepared on a
going concern basis under the historical cost convention as
modified by the revaluation of financial assets and financial
liabilities (including derivative instruments) at fair value
through profit or loss, and in accordance with UK-adopted
International Accounting Standards. The information in this
announcement has been extracted from the audited statutory
financial statements for the year ended 31 December 2022 and as
such, does not constitute statutory financial statements within the
meaning of section 435 of the Companies Act 2006 as it does not
contain all the information required to be disclosed in the
financial statements prepared in accordance with UK-adopted
International Accounting Standards. This announcement was approved
by the board of directors and authorised for issue via RNS on 2
June 2023.
The financial information is presented in Pound Sterling (GBP)
which is the functional currency of the Company and the
presentation currency of the Group and all values are rounded to
the nearest Pound Sterling thousand (GBP000s).
a. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiary undertakings). Where necessary, adjustments are
made to the financial statements of the subsidiaries to bring their
accounting policies in line with those of the Group. All
intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
Subsidiaries are entities controlled by the Group. The Group
"controls" an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control
commences until the date on which control ceases.
Non-controlling interests are measured initially at their
proportionate share of the acquiree's identifiable net assets at
the date of acquisition.
b. Going concern
These consolidated financial statements have been prepared on a
going concern basis, which assumes that the Group will continue in
operational existence for the foreseeable future.
The Group currently consumes cash resources and will continue to
do so as it completes the construction of its growing facilities
and until sales revenues are sufficiently high enough to generate
net cash inflows.
In assessing whether the going concern assumption is
appropriate, the Directors have taken into account all relevant
information about the current and future position of the Group and
including the current level of resources.
At 31 December 2022 the Group had GBP5.1 million of cash and net
assets of GBP7.1 million. In addition on 29 May 2023, the Group
entered into a 2 year GBP7.0m Revolving Credit Facility to provide
additional liquidity for operating and capital expenditure.
Having prepared budgets and cash flow forecasts covering the
going concern until June 2024 which have been stress tested, by
creating a number of different scenarios in which a number of the
assumptions were adversely tweaked down - such as to assume: a) a 6
month delay in revenue arising; b) cost increases of more than 10%
and c) a combination of the two, the Directors believe the Group
has sufficient resources to meet its obligations for a period of at
least 12 months from the date of approval of the financial
statements.
Taking these matters into consideration, the Directors consider
that the continued adoption of the going concern basis is
appropriate having prepared cash flow forecasts for the coming 12
months. The financial statements do not reflect any adjustments
that would be required if they were to be prepared on a non going
concern basis.
3. Accounting policies
Details of significant accounting policies are set out
below.
a. Reverse Acquisition of Summerway Capital Plc and creation of
the Celadon Pharmaceuticals Plc group of companies
On 28 March 2022 the Company, then named Summerway Capital Plc,
became the legal parent of Celadon Property Co Limited.
Summerway Capital Plc was renamed Celadon Pharmaceuticals
Plc.
The results for the year ended, and as at 31 December 2022 are
those of Celadon Property Co Limited group from 1 January 2022 to
31 December 2022 with the inclusion of the Celadon Pharmaceuticals
Plc group at the acquisition date of 28 March 2022 through to 31
December 2022.
The comparative results for the year ended and as at 31 December
2021 represent the consolidated position of the Celadon Property Co
Limited group of companies prior to the reverse acquisition.
This transaction is deemed outside the scope of IFRS 3 Business
Combinations (Revised 2008) ("IFRS 3") and not considered a
business combination because the directors have made a judgement
that prior to the transaction, that Celadon Pharmaceuticals Plc was
not a business under the definition of IFRS 3 Appendix A and the
application guidance in IFRS 3.B7-B12 due to that company being a
company that had no processes or capability for outputs (IFRS
3.B7).
On this basis, the Directors have developed an accounting policy
for this transaction, applying the principles set out in IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
("IAS 8") paragraphs 10-12, in that the policy adopted:
-- Provides more relevant financial information to users of
these statements;
-- Is more representative of the performance, financial
position, and cash flows of the Group;
-- reflects the economic substance of the transaction, not
merely the legal form; and
-- Is free from bias, prudent and complete in all material
aspects.
The accounting policy adopted by the Directors applies certain
principles of IFRS 3 in identifying the accounting acquirer
(Celadon Property Co Limited) and the presentation of the
consolidated financial statements of the legal acquirer (Celadon
Pharmaceuticals Plc) as a continuation of the accounting acquirer's
financial statements (Celadon Property Co Limited).
This policy reflects the commercial substance of this
transaction as:
-- the original shareholders of Celadon Property Co Limited are
the most significant shareholders after the business combination
and initial public offering, owning 86 per cent of the issued share
capital; and
-- the executive management team of Celadon Property Co Limited
became the executive management of Celadon Pharmaceuticals Plc.
Accordingly, the following accounting treatment and terminology
has been applied in respect of the reverse acquisition:
-- the assets and liabilities of the legal subsidiary Celadon
Property Co Limited group are recognised and measured in the group
financial statements at the pre-combination carrying amounts,
without reinstatement to fair value;
-- the retained earnings and other equity balances recognised in
the group financial statements reflect the retained earnings and
other equity balances of the Celadon Property Co Limited group
immediately before the business combination; and
-- the results of the period from 1 January 2022 to 28 March
2022 are those of the Celadon Property Co Limited group.
However, in the Group financial statements:
4. the equity structure presented, reflects the equity structure
of the legal parent (Celadon Pharmaceuticals Plc), including the
equity instruments issued under the share-for-share exchange to
effect the business combination; and
5. the cost of the combination has been determined from the
perspective of Celadon Property Co Limited group.
Transaction costs of equity transactions relating to the issue
and re-admission of the Company's shares, are accounted for as a
deduction from equity where they relate to the issue of new shares,
and listing costs are charged to the consolidated statement of
comprehensive income. See note 5 for further explanation.
b. Acquisition of controlling shareholding in Harley Street (CPC) Limited
On 14 July 2021, Celadon Property Co Limited acquired a 57.5%
shareholding in Harley Street (CPC) Limited for GBP2.0 million, of
which GBP500,000 was paid in cash and GBP1,500,000 of contingent
consideration was to be paid in shares in December 2022 (subject to
certain targets being achieved).
In addition to acquiring the share ownership Celadon Property Co
Limited had the ability to appoint four directors to the board of
Harley Street (CPC) Limited compared with two from the other
investor. Celadon also exercised operational control of the
business. Given the degree of control, it is appropriate to include
Harley Street (CPC) Limited as part of the consolidation and
reflect the ownership by third parties as a non-controlling
interest.
c. Revenue recognition
At this stage of the Group's development, revenues relate solely
to the provision of services and products to patients engaged on
the feasibility study in advance of the clinical trial with Harley
Street (CPC) Limited.
Patients engaged on this feasibility study are required to pay
an initial fee on joining the trial and a monthly fee thereafter in
relation to the subsequent provision of clinical products.
Revenue is measured based on the completion of the performance
obligations that are identified and satisfied as outlined
below:
- for the initial fees paid by patients on joining the study,
the performance obligations are to provide an initial suitability
screening test and to determine if the patient is suitable. Revenue
is recognised, at a point in time, on provision of the screening
test kit to the patient, with the related costs of test kits
recognised in cost of sales.
- for the subsequent monthly fees paid by patients on the study,
the performance obligation is to provide monthly supplies of filled
cartridges containing medicinal cannabis. Revenue is recognised on
delivery of these supplies to the patient. The contracts with
patients do not include any fixed term or locked in periods, so
monthly fees are only recognised on provision of the monthly
supplies.
d. Financial instruments
Recognition and initial measurement
Financial assets and liabilities are recognised in the statement
of financial position when the Group becomes a party to the
contractual provisions of the instrument. The Group's financial
instruments comprise cash, trade and other receivables, unlisted
investments, trade and other payables, convertible loan notes and
embedded derivative, contingent consideration, and long-term
incentive arrangements.
Financial instruments are initially measured at fair value which
is deemed to be the transaction price. Transaction costs arising on
the issue of financial asset or liability are included in the
initial measurement if they are directly attributable to the
acquisition of the instrument, and the instrument is not measured
at FVTPL on an ongoing basis. Where the financial asset or
liability is measured at FVTPL, transaction costs are immediately
recognised in profit or loss.
Classification and subsequent measurement
The Group classifies and subsequently measures its financial
instruments in the following measurement categories:
-- Amortised cost:
-- Fair value through profit or loss ("FVTPL")
-- Fair value through other comprehensive income ("FVTOCI") (financial assets only)
All recognised financial assets and liabilities are subsequently
measured in their entirety at either amortised cost or fair value,
depending on their classification under one of these
categories.
Financial Assets
Trade and other receivables
For purposes of subsequent measurement, trade and other
receivables are classified as financial assets measured at
amortised cost.
They are subsequently measured at amortised cost using the
effective interest method. The amortised cost is reduced by
impairment losses. Any interest income, foreign exchange gains and
losses and impairment are recognised in profit or loss. Any gain or
loss on derecognition is recognised in profit or loss.
The Group will write-off financial assets, either in their
entirety or a portion thereof, if there is no reasonable
expectation of its recovery. A write-off constitutes a
derecognition of a financial asset.
Cash and cash equivalents
The Group manages short-term liquidity through the holding of
cash and highly liquid interest-bearing deposits. Only deposits
that are readily convertible into cash with maturities of three
months or less from inception, with no penalty of lost interest,
are shown as cash and cash equivalents.
Unlisted Investments
The Group recognises unlisted equity investments at transaction
cost which management believes approximates the fair value or
measured based on discounted cashflow models if this is what has
been used to determine if there has been an impairment.
Impairment of financial assets
An impairment loss allowance is recognised for the expected
credit losses on financial assets when there is an increased
probability that the counterparty will be unable to settle an
instrument's contractual cash flows on the contractual due dates, a
reduction in the amounts expected to be recovered, or both. The
probability of default and expected amounts recoverable are
assessed using reasonable and supportable past and forward-looking
information that is available without undue cost or effort. This
impairment loss allowance is reassessed at each reporting date.
Financial liabilities
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group becomes a party
to the contractual provisions of the instrument. All financial
liabilities are subsequently measured at amortised cost using the
effective interest method or at FVTPL.
Financial liabilities are classified and measured at FVTPL when
(i) the financial liability is a contingent consideration to which
IFRS 3 applies, or (ii) it is a derivative. Financial liabilities
at FVTPL are stated at fair value with any gains or losses arising
on changes in fair value recognised in profit or loss.
Trade and other payables
Trade and other payables are initially measured at fair value,
net of direct transaction costs and subsequently measured at
amortised cost.
Borrowings
Borrowings are classified as current liabilities unless the
Group has an unconditional right and an intention to defer
settlement of the liability for at least 12 months after the
reporting date. Borrowings are initially recognised at fair value,
net of transaction costs incurred. They are subsequently measured
at amortised cost using the effective interest method.
Convertible Loan Notes
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recognised
at the proceeds received, net of direct issue costs.
The component parts of compound instruments, such as convertible
loan notes, are classified separately as financial liabilities and
equity in accordance with the substance of the contractual
arrangement.
If the conversion feature of a convertible loan note does not
meet the definition of an equity instrument, that portion is
classified as an embedded derivative and measured accordingly. The
debt component of the instrument is determined by deducting the
fair value of the conversion option at inception from the fair
value of the consideration received for the instrument as a whole.
The debt component amount is recorded as a financial liability on
an amortised cost basis using the effective interest rate method
until extinguished upon conversion or at the instrument's maturity
date.
Where debt instruments issued by the Group are repurchased or
cancelled, the financial liability is derecognised at the point at
which cash consideration is settled. Upon derecognition, the
difference between the liability's carrying amount that has been
cancelled and the consideration paid is recognised as a gain or
loss in the Income Statement, net of any direct transaction
costs.
Derivative financial instruments
Embedded derivatives in financial instruments or other host
contracts that are not financial assets are treated as separate
derivatives when their risks and characteristics are not closely
related to those of the host contracts and the host contract are
not measured at fair value through the profit or loss ("FVTPL").
Derivatives embedded in financial instruments that are closely
related or other host contracts that are financial assets are not
separated, instead the entire contract is accounted for either at
amortised cost or fair value as appropriate.
Contingent Consideration
The Group is party to consideration arrangements in the form of
contingent consideration. Contingent consideration is consideration
that is contingent on a future event, usually the future
performance of the acquired business. It is measured at its
discounted present value and remeasured at each reporting date. The
discount unwind and remeasurement of the liability is recognised in
profit or loss as finance cost.
e. Equity
An equity instrument is any contract that evidences a residual
interest in the assets of the company after deducting all of its
liabilities. Equity instruments issued by the Company are recorded
at fair value on initial recognition net of transaction costs.
Equity comprises the following:
-- Called up share capital represents the nominal value of the equity shares.
-- Share Premium represents the excess over nominal value of the
fair value of consideration received from the equity shares, net of
expenses of the share issue.
-- Capital Redemption Reserve is a statutory, non-distributable
reserve into which amounts are transferred following the redemption
or purchase of a company's own shares.
-- Merger Relief Reserve is a statutory, non-distributable
reserve arising when conditions set out in section 612 of the
Companies Act occur and relate to the share-premium from shares
issued to acquire Celadon Property Co Limited.
-- Retained Deficit represents accumulated net gains and losses
from incorporation recognised in the Statement of Comprehensive
Income.
-- Reverse Acquisition Reserve includes the accumulated losses
incurred prior to the reverse acquisition and the share capital and
share premium of Celadon Pharmaceuticals Plc (previously Summerway
Capital Plc) at acquisition; the value of the shares issued to
acquire all of the share capital of Celadon Property Co Limited;
the value of share capital and share premium of Celadon Property Co
Limited at acquisition; as well as the reverse acquisition
share-based payment expense.
-- Warrant Reserve represents the fair value of warrants issued
as part of an equity-based payment.
-- Non-controlling Interest represents (i) the accumulated net
gains and losses of Harley Street (CPC) Limited attributable to the
minority shareholder; and (ii) the amounts subscribed for the B
Ordinary Shares of Celadon Subco Limited (previously Summerway
Subco Limited) pursuant to the Group's long term incentive
plan.
f. Right-of-use Assets
Initial Recognition
The Group recognises right-of-use assets at the commencement
date of the lease (i.e. the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. In addition,
at the lease commencement date the right-of-use asset incorporates
the unavoidable costs to return the asset to its original
condition, for which a corresponding amount is recognised in
provisions.
Depreciation of right-of-use Assets
The right-of-use asset is depreciated on a straight-line basis
over the shorter of the lease term and the estimated useful lives
of the assets as:
-- Leasehold property - over 25 years
-- Leased plant and equipment - over 3 to 5 years.
In addition, the right-of-use asset is periodically reduced by
impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate and amounts expected to be paid under residual
value guarantees.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date.
After the commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for the
lease payments made. The carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term,
a change in the lease payments (e.g. changes to future payments
resulting from a change in an index or rate used to determine such
lease payments) or a change in the assessment of an option to
purchase the underlying asset.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease
period.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and
lease liabilities for leases of low-value assets and short-term
leases (of less than 12 months) including IT equipment. The Group
recognises the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.
Please refer to note 15 for further information on the Group's
lease arrangements.
g. Property, plant and equipment
Recognition and measurement
Property, plant and equipment are measured at cost, which
includes capitalised borrowing costs, less accumulated depreciation
and any accumulated impairment losses. If significant parts of an
item of property, plant and equipment have different useful lives,
then they are accounted for as separate items (major components) of
property, plant and equipment.
Assets under construction is stated at cost, net of accumulated
impairment losses, if any. Depreciation of assets under
construction will commence from the date on which the asset becomes
available for use. Any gain or loss on disposal of an item of
property, plant and equipment is recognised in profit or loss.
Depreciation
Depreciation is calculated to write-off the cost of items of
property, plant and equipment less their estimated residual values
using the straight-line method over their estimated useful lives,
and is generally recognised in profit or loss.
The estimated useful lives of property, plant and equipment for
current and comparative periods are as follows:
-- Leasehold improvements - 10 to 25 years
-- Plant and equipment - 3 to 10 years
-- Office equipment and IT - 3 to 5 years
-- Assets under construction - depreciation will commence when
assets brought in to use.
h. Intangible Assets
Goodwill
Goodwill represents the future economic benefits arising from a
business combination that are not individually identified and
separately recognised. Goodwill is carried at cost less accumulated
impairment loss.
Cost comprises the fair value of assets given, liabilities
assumed, and equity instruments issued, plus the amount of any
non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing
equity interest in the acquiree.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Impairment tests on Goodwill are
undertaken at least annually at the financial year end, and more
frequently if indicators of impairment exist. Where the carrying
value of goodwill exceeds its recoverable amount an impairment is
recognised and shall not be reversed in later periods.
Other Intangible Assets
Other intangible assets relate to the Intellectual Property
associated with the design of the chronic pain clinical study
protocol devised by the Group's subsidiary Harley Street (CPC)
Limited. The amortisation period for this has been determined to be
5 years.
i. Inventory
Production consumables and lab inventory is measured at the
lower of cost and net realisable value. The cost of inventory is
based on the first--in, first--out allocation method.
j. Taxation
Income tax expense comprises current and deferred tax. It is
recognised in profit or loss except to the extent that it relates
to a business combination, or items recognised directly in equity
or in Other Comprehensive Income.
Current tax
Current tax comprises the expected tax payable or receivable on
the taxable income or loss for the year and any adjustment to the
tax payable or receivable in respect of previous years. The amount
of current tax payable or receivable is the best estimate of the
tax amount expected to be paid or received that reflects
uncertainty related to income taxes, if any. It is measured using
tax rates enacted or substantively enacted at the reporting date.
Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain
criteria are met.
Deferred tax
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes.
Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries,
associates and joint arrangements to the extent that the Group is
able to control the timing of the reversal of the temporary
differences and it is probable that they will not reverse in the
foreseeable future; and
-- taxable temporary differences arising on the initial recognition of goodwill.
Temporary differences in relation to a right--of--use asset and
a lease liability for a specific lease are
regarded as a net package (the lease) for the purpose of
recognising deferred tax.
Deferred tax assets are recognised for unused tax losses, unused
tax credits and deductible temporary differences to the extent that
it is probable that future taxable profits will be available
against which they can be used. Future taxable profits are
determined based on the reversal of relevant taxable temporary
differences. If the amount of taxable temporary differences is
insufficient to recognise a deferred tax asset in full, then future
taxable profits, adjusted for reversals of existing temporary
differences, are considered, based on the business plans for
individual subsidiaries in the Group. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be
realised; such reductions are reversed when the probability of
future taxable profits improves.
The measurement of deferred tax reflects the tax consequences
that would follow from the manner in which the Group expects, at
the reporting date, to recover or settle the carrying amount of its
assets and liabilities.
Deferred tax assets and liabilities are offset only if certain
criteria are met.
k. Provisions
A provision is recognised where there is a present obligation,
whether legal or constructive, as a result of a past event for
which it is probable that a transfer of economic benefits will be
required to settle the obligation, and a reasonable estimate can be
made of the amount of the obligation.
The amount recognised as a provision is management's best
estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and
uncertainties surrounding the obligation.
Provisions are determined by discounting the expected future
cash flows at a pre--tax rate that reflects current market
assessments of the time value of money and the risks specific to
the liability. The unwinding of the discount is recognised as
finance cost.
l. New and amended accounting standards
New and amended standards and interpretations applied
The following accounting standards and updates were applicable
in the reporting period but did not have a material impact on the
Company:
-- Amendments to IFRS 1 and IFRS 9 Annual Improvements to IFRS 2018-2020
-- Amendments to IFRS 3: Business Combinations
-- Amendments to IAS 16: Property, Plant and Equipment
-- Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets
New and amended standards and interpretations not applied
The following new and amended standards and interpretations in
issue are applicable to the Company but are not yet effective and
therefore, have not been adopted by the Company:
-- IFRS 17: Insurance Contracts (effective 1 January 2023)
-- Amendments to IAS 17: Insurance Contracts (effective 1 January 2023)
-- Amendments to IAS 8: Accounting Policies, Changes in
Accounting Estimates and Errors (effective 1 January 2023)
-- Amendments to IAS 12: Income Taxes (effective 1 January 2023)
-- Amendments to IAS 1: Presentation of Financial Statements (effective 1 January 2023)
The Company has considered the IFRS's in issue but not yet
effective and do not consider any to have a material impact on the
Company.
4. Use of critical judgements and key accounting estimates
In preparing the financial information, management has made
judgements and estimates that affect the application of the Group's
accounting policies and the reported amounts of assets,
liabilities, income, expenses, shareholders' equity and reserves.
Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to estimates are recognised prospectively. In the process of
applying the Group's accounting policies, management has made the
following judgements and estimates, which have the most significant
effect on the amounts recognised in the financial information:
Critical Judgements
a. Reverse Acquisition Accounting
The Celadon Pharmaceuticals Plc Group of companies was formed by
Celadon Property Co Limited (previously Vertigrow Technology
Limited) reverse acquiring Summerway Capital Plc (a "reverse
acquisition") on 28 March 2022. Summerway Capital Plc was then
renamed Celadon Pharmaceuticals Plc. The board used judgment in
applying Reverse Acquisition Accounting principles and used an
estimate as to the average share price of GBP1.5125 on 28 March
2022, the first day of trading after the Company was readmitted to
trading on AIM, to value the consideration shares issued by Celadon
Pharmaceuticals Plc to the owners of Celadon Property Co Limited.
Further details are in note 5.
b. Tax Losses
The Group has significant tax losses and has incurred
significant capital expenditure on leasehold improvements and plant
and machinery. The corporation tax treatment of these items and the
potential recognition of deferred tax assets requires management
judgement. The Group has decided not to recognise a deferred tax
asset at the balance sheet date, given the uncertainty of when
profits will arise. See note 11.
Key accounting estimates
c. Subsidiary incentive scheme
The Group established a Subsidiary Incentive Scheme in 2018 (in
Celadon Subco Limited (previously Summerway Subco Limited)) in
order to incentivise and retain key employees, directors and
advisers to the Group. The fair value of share-based awards is
measured using the Monte Carlo model which inherently makes use of
significant estimates and assumptions including the share price
volatility, an estimate of exercise date and the number of scheme
members that will achieve the vesting conditions. Further details
of the scheme, and the assumptions used in the Monte Carlo model
are given in note 28.
d. Convertible loan notes
Celadon Property Co Limited raised GBP4.13 million through an
issue of convertible loan notes in February and March 2021. The
convertible loan notes contained an embedded derivative (the right
to convert in to shares) that was fair valued at inception and at
each reporting date. The fair value estimate required assumptions
on share price volatility, the expected value of the shares and
conversion date. Further details of the methodology applied and
assumptions made are given in note 22.
e. Leases and right-of-use assets
In 2019, Celadon Property Co Limited signed a 25 year lease on a
100,000 square foot production and head office facility in the UK.
The lease was varied in February of 2022. The fair value accounting
for the lease liability and associated asset value, at inception
and the date of variation requires the estimation of the effective
borrowing rate in the lease. Further details of the assumptions
made in calculating the incremental borrowing cost are provided in
note 15.
f. Acquisition of controlling shareholding in Harley Street
(CPC) Limited and measurement period adjustment
The acquisition date fair value accounting required an
estimation by management. The fair value accounting for the
contingent consideration required an estimation of the appropriate
discount rate at inception and at reporting dates.
The likelihood of the targets being delivered to trigger the
contingent consideration payment required judgement by management.
Further details of the assumptions made in those calculations are
set out in note 13.
Subsequent changes to the fair value of contingent consideration
are recognised in accordance with IFRS 9 Financial Instruments as
described above.
Measurement Period Adjustment
The figures included in the consolidated accounts of Celadon
Property Co Limited for the period ended 31 December 2021 were
based on initial estimates of the fair value of the assets
acquired. The accounts have been adjusted to include the split
between goodwill and intangible assets following the completion of
a fair value exercise.
Impact on 31 December 2021 unaudited financial statements:
Adjusted As Stated Impact
2021 2021
--------- ---------- -------
GBP000 GBP000 GBP000
--------- ---------- -------
Statement of Financial Position
Goodwill 719 1,092 (373)
Intangible Assets 448 - 448
Deferred tax liability in
respect of intangible asset (112) - (112)
--------- ---------- -------
Net impact on equity 1,055 1,092 (37)
--------- ---------- -------
Statement of Comprehensive
Income
Impact on depreciation and
amortisation (50) - (50)
Impact on operating loss (50) - (50)
--------- ---------- -------
Impact on loss before tax (50) - (50)
Earnings per share (0.0p) (0.0p) (0.0p)
--------- ---------- -------
g. Site Restoration Obligation provision
In October 2019 Celadon Property Co Limited signed a 25 year
lease which included the option for the landlord to require the
company (at the end of the lease in 2044) to repair the leasehold
property to its original condition. The fair value of the site
restoration obligation provision requires estimation and judgement
of the potential costs to put the site back in its original state.
See note 25 for further details of the assumptions made.
h. Research & Development Tax Credits
The Group has submitted its first R&D tax credit application
to HMRC totalling GBP269k relating to 2021 activities. Elements of
the R&D claims required judgement by management. At the date of
these financial statements GBP269k had been received by the company
in respect of the year to 31 December 2021. Using the same
methodology, the estimated R&D claim for the year to 31
December 2022 is GBP412k. See note 11.
5. Reverse Acquisition of Celadon Property Co Limited
On 28 March 2022, Celadon Pharmaceuticals Plc (previously
Summerway Capital Plc) acquired through a share-for-share exchange,
the entire share capital of Celadon Property Co Limited and its
subsidiary companies Celadon Pharma Limited and Harley Street (CPC)
Limited (together the "Celadon Group"), whose principal activity is
growing highly controlled indoor hydroponic, high THC cannabis for
use within medicinal products used to treat chronic pain.
Although the transaction resulted in the Celadon Group becoming
a wholly-owned subsidiary group of the Company, the substance of
the transaction means it constitutes a reverse acquisition, as the
previous shareholders of Celadon Property Co Limited own a
substantial majority of the Ordinary Shares of the Company and the
executive management of Celadon Property Co Limited became the
executive management of Celadon Pharmaceuticals Plc.
Furthermore, as Celadon Pharmaceuticals plc's activities prior
to the acquisition were purely the maintenance of the AIM Listing,
acquiring Celadon Property Co Limited and raising equity finance to
provide the required funding for the operations of the acquisition,
it did not meet the definition of a business in accordance with
IFRS 3.
Accordingly, this reverse acquisition does not constitute a
business combination and was accounted for in accordance with IFRS
2 Share-based Payments ("IFRS 2") and associated IFRIC
guidance.
Although, the reverse acquisition is not a business combination,
the Company has become a legal parent and is required to apply IFRS
10 Consolidated Financial Statements ("IFRS 10") and prepare
consolidated financial statements with Caledon Pharmaceuticals Plc
consolidated as a subsidiary. The Directors have prepared these
financial statements using the reverse acquisition methodology, but
rather than recognising goodwill, the difference between the equity
value given up by the shareholders of Celadon Property Co Limited
and the share of the fair value of net assets gained by the
shareholders of Celadon Property Co Limited is charged to the
statement of comprehensive income as a share-based payment on
reverse acquisition. In substance, this represents the cost of
acquiring an AIM listing.
In accordance with reverse acquisition accounting principles,
these consolidated financial statements represent a continuation of
the consolidated statements of Celadon Property Co Limited and its
subsidiaries and include:
a. the assets and liabilities of Celadon Property Co Limited and
its subsidiaries at their pre-acquisition carrying value amounts
and the results for the periods presented; and
b. the assets and liabilities of the Company (and its wholly
owned subsidiary Celadon Subco Limited (previously Summerway Subco
Limited)) as at 28 March 2022 and its results from the date of the
reverse acquisition (28 March 2022) to 31 December 2022.
On 28 March 2022, Celadon issued 43,316,201 ordinary shares to
acquire the entire share capital of Celadon Property Co Limited,
and issued 5,168,647 ordinary shares to redeem the Celadon Property
Co Limited convertible loan notes. At 28 March 2022, the average
share price of Celadon for the day was GBP1.5125.
On consolidation and presentation of the Group's financial
position, performance and cash flows, Celadon Property Co Limited,
was treated as the accounting acquirer, and the legal parent
company, Celadon, was treated as the accounting acquiree.
The fair value of the shares deemed to have been issued by
Celadon Property Co Limited was calculated at GBP12,151k based on
an assessment of the purchase consideration for a 100% holding of
Celadon on the reverse acquisition date.
The fair value of the net assets of Celadon Pharmaceuticals plc
at acquisition was as follows:
GBP000
---------------------------------------- ----------------
Cash and equivalents 3,494
Other assets 2,285
Accounts payable and other liabilities (28)
Net assets 5,751
---------------------------------------- ----------------
The difference between the deemed cost GBP12,151k and the fair
value of the net assets assumed per above of GBP5,751k resulted in
GBP6,400k being expensed within "Reverse Acquisition Expenses" in
accordance with IFRS 2, reflecting the economic cost to the
shareholders of Celadon Property Co Limited of acquiring a quoted
entity.
The professional fees in the period were GBP2,493k (2021:
GBP777k), of which GBP1,028k (2021: GBPnil) was charged to the
share premium account, and GBP1,465k (2021: GBP777k) was expensed
in the consolidated statement of comprehensive income.
Reverse Acquisition Reserve
The Reverse Acquisition Reserve which arose from the reverse
acquisition is made up as follows:
Note GBP000
-------------------------------------------------------------------------------- ----- ---------
Pre-acquisition total retained earnings of Celadon Pharmaceuticals Plc 1 (1,746)
Celadon Property Co Limited share capital at acquisition 2 1,662
Investment in Celadon Property Co Limited, net of convertible loan note charge 3 (65,516)
Reverse acquisition expense 4 6,400
-------------------------------------------------------------------------------- ----- ---------
(59,200)
-------------------------------------------------------------------------------- ----- ---------
1. Recognition of pre-acquisition equity of Celadon Pharmaceuticals Plc .
2. Celadon Property Co Limited had issued share capital of
GBP1,662k. As these financial statements present the capital
structure of the legal parent entity, the equity of Celadon
Property Co Limited is eliminated.
3. The value of the shares issued by the Company in exchange for
the entire share capital of Celadon Property Co Limited.
4. The reverse acquisition expense represents the difference
between the value of the equity issued by the Company, and the
deemed consideration given by Celadon Property Co Limited to
acquire the Company.
6. Operating segments
a. Basis of segmentation
Reportable segment results include items directly attributable
to a segment as well as those which can be allocated on a
reasonable basis. The operating results of each are regularly
reviewed by the Chief Operating Decision Maker, which is deemed to
be the Board of Directors. Discrete financial information is
available for each segment and used by the Board of Directors for
decisions on resource allocation and to assess performance.
The Group has the following segments:
Reportable segment Operations
-------------------- --------------------------------------------------------------------------------------------
Celadon Build out of the grow facilities, growing of medical grade cannabis and research in the GMP
lab
Harley Street (CPC) A clinical study into the pain relief benefits of medicinal cannabis
Information related to each reportable segment is set out
below.
2022 Celadon Harley Street Central Costs Group
GBP000 GBP000 GBP000 GBP000
----------------------------- -------- -------------- -------------- ---------
External revenue - 24 - 24
Cost of sales - (90) - (90)
----------------------------- -------- -------------- -------------- ---------
Gross margin - (66) - (66)
----------------------------- -------- -------------- -------------- ---------
Operating costs (4,006) (848) - (4,854)
Depreciation (360) (6) - (366)
----------------------------- -------- -------------- -------------- ---------
Operating (loss) (4,366) (920) - (5,286)
----------------------------- -------- -------------- -------------- ---------
Unallocated central costs - - (12,684) (12,684)
Finance costs - - (23) (23)
----------------------------- -------- -------------- -------------- ---------
Group (loss) before tax (17,993)
----------------------------- -------- -------------- -------------- ---------
Segment assets 4,235 400 6,314 10,949
Segment Capital expenditure 2,300 2 - 2,302
----------------------------- -------- -------------- -------------- ---------
Total Group assets 13,251
----------------------------- -------- -------------- -------------- ---------
Segment liabilities (4,151) (1,610) (366) (6,127)
----------------------------- -------- -------------- -------------- ---------
Total Group liabilities (6,127)
----------------------------- -------- -------------- -------------- ---------
2021 (unaudited) Celadon Harley Street Central costs Group
GBP000 GBP000 GBP000 GBP000
--------------------------- -------- -------------- -------------- ---------
External revenue - 2 - 2
Cost of sales - (4) - (4)
--------------------------- -------- -------------- -------------- ---------
Gross margin - (2) - (2)
--------------------------- -------- -------------- -------------- ---------
Operating costs (1,848) (544) - (2,392)
Depreciation (318) (1) - (319)
--------------------------- -------- -------------- -------------- ---------
Operating (loss) (2,166) (547) - (2,713)
--------------------------- -------- -------------- -------------- ---------
Unallocated central costs (968) (968)
Finance costs (1,115) (1,115)
--------------------------- -------- -------------- -------------- ---------
Group (loss) before tax (4,796)
--------------------------- -------- -------------- -------------- ---------
Segment assets 3,871 1,026 2,719 7,616
Capital expenditure 996 25 - 1,021
--------------------------- -------- -------------- -------------- ---------
Total Group Assets 8,637
Segment liabilities (3,687) (2,274) (7,085) (13,046)
--------------------------- -------- -------------- -------------- ---------
Total Group liabilities (13,046)
--------------------------- -------- -------------- -------------- ---------
The group operates only in the UK only and has only one
geographical area.
7. Revenue
The Group recorded revenue in the year ended 31 December 2022 of
GBP24k (2021: GBP2k) from patients on the Group's clinical study in
Harley Street (CPC) Limited.
8. Profit for the year
The loss for the year has been arrived at after charging
(crediting):
Unaudited
2022 2021
GBP000 GBP000
-------------------------------------------------------------------------------------- ------- ----------
Depreciation of property, plant and equipment 156 122
Depreciation of leasehold improvements 45 31
Depreciation of office equipment 27 15
Depreciation of right-of-use asset 138 100
Amortisation of intangible assets 100 50
Non-cash charge in respect of Harley Street (CPC) Limited 139 -
Fair value charge relating to long term incentive plans 1,136 -
Fair value charge relating to Canaccord warrants included in Other acquisition costs 227 -
Auditor's remuneration 130 -
Non-Audit Services (IPO related costs) 83 213
Director's remuneration (including share-based payment charge) 888 351
-------------------------------------------------------------------------------------- ------- ----------
9. Directors and staff costs
The avera ge number of staff (including Directors) during the
year was 24 (2021: 9).
Staff costs for the year, including Directors were:
Unaudited
2022 2021
GBP000 GBP000
----------------------- ------- ----------
Salaries 1,778 745
Bonuses 37 -
Pension contributions 30 19
Phone allowance 11 5
------- ----------
1,856 769
Social security costs 227 82
Share based payments 460 -
----------------------- ------- ----------
2,543 851
----------------------- ------- ----------
The Directors have determined that there are no key management
personnel other than the Directors during the year.
Management remuneration paid and other benefits supplied to the
Directors during the period plus the associated social security
costs were as follows:
Unaudited
2022 2021
GBP000 GBP000
----------------------- ------- ----------
Salaries 474 312
Phone allowance 1 -
------- ----------
475 312
Social security costs 51 39
Share based payments 362 -
----------------------- ------- ----------
888 351
----------------------- ------- ----------
In accordance with section 412 Companies Act 2006 the table
below shows the full amount of remuneration paid and other benefits
supplied to the Directors of Celadon Pharmaceuticals plc even if
those amounts relate to the period prior to the Reverse Acquisition
of Celadon Property Co Limited.
Director Salary Loss of Benefits Pension 31 December 31 December
service in 2022 Total 2021 Total
kind
GBP GBP GBP GBP GBP GBP
Alexander
Anton(1) 38,266 - - - 38,266 4,508
Benjamin Shaw(2) 4,500 - - - 4,500 21,723
James Short(3) 246,150 - - - 246,150 -
David Firth(4) 44,440 - - - 44,440 30,161
Robbie Barr(5) 38,266 - - - 38,266 -
Dr Steven
Hajioff(6) 34,786 - - - 34,786 -
Elizabeth
Shanahan(7) 40,000 - - - 40,000 11,111
Kathleen Long(8) 56,154 - - - 56,154 -
Jonathan Turner(9) - - - - - -
------------------- ------- -------- -------- ------- ----------- -----------
502,562 - - - 502,562 67,503
------------------- ------- -------- -------- ------- ----------- -----------
1. Alexander Anton resigned 15 January 2021 and was re-appointed 28 March 2022
2. Benjamin Shaw resigned as Interim Chairman on 28 March 2022 -
all the fees quoted above relate to the period 1 January - 28 March
2022
3. James Short was appointed on 28 March 2022 - the figure
quoted is the combined figure for the services provided to Celadon
Pharmaceuticals plc since March 2022, and Verigrow from 1 January
2022 to 28 March 2022
4. David Firth was appointed on 17 September 2018 - of the fees
quoted above, GBP11,100 relates to the period 1 January - 28 March
2022
5. Robbie Barr was appointed on 28 March 2022
6. Dr Steven Hajioff was appointed on 28 March 2022 - the figure
quoted is the combined figure for services provided to Celadon
Pharmaceuticals plc since March 2022, and Vertigrow from 1 January
2022 to 28 March 2022.
7. Elizabeth Shanahan was appointed on 21 September 2021 - of
the fees quoted above, GBP10,000 relate to the period 1 January -28
March 2022
8. Kathleen Long was appointed on 28 March 2022 and resigned on 17 January 2023
9. Jonathan Turner was appointed on 17 January 2023
10. Net finance costs
2022 2021
GBP000 GBP000
---------------------------------------------------------------------------------------------- ------- --------
Finance gain / (charge) on derivative liability associated with convertible loan notes (note
22) 556 (660)
Finance (charge) on leased assets (note 15) (531) (384)
Finance (charge) on related party loan (note 22) (53) (35)
Finance (charge) on external loans (note 22) (7) (36)
Finance income on bank deposits 12 -
(23) (1,115)
---------------------------------------------------------------------------------------------- ------- --------
11. Income tax
The Group has had no taxable profits since incorporation.
Reconciliation of effective tax rate
Unaudited
2022 2021
GBP000 GBP000
------------------------------------------------------------------------- --------- ----------
Loss before tax from operations (17,993) (4,796)
Tax rate 19% 19%
Tax credit at the standard rate of corporation tax (3,418) (911)
Items disallowable for corporation tax 2,217 353
Additional deduction for R&D expenditure (303) -
Surrendered for R&D purposes 539 353
Capital allowances in excess of depreciation (33) (251)
Impact of unrelieved tax losses carried forward 998 456
------------------------------------------------------------------------- --------- ----------
Tax credit before impact of surrender of R&D expenditure - -
Refundable tax credit for surrender of enhanced R&D expense (at 14.5%):
- current year
- prior year adjustment 412 -
270 -
Release of deferred tax liability on intangible assets 25 13
------------------------------------------------------------------------- --------- ----------
Tax credit for the year 707 13
------------------------------------------------------------------------- --------- ----------
The Group has estimated tax losses of GBP8,811k (2021:
GBP4,895k) which may be available for relief against future profits
from current operations.
For tax years starting on or after 1 April 2023, the rate of
corporation tax in the UK is 25%. As it is anticipated that the tax
losses will not be utilised in the year to December 2023, the
deferred tax asset not recognized has been calculated using the
rate in force from 1 April 2023. The deferred tax asset not
provided for in the accounts is GBP2,203k (2021: GBP1,224k).
The release of the deferred tax liability on intangible assets
reflects the amortisation of the Clinical Trial related intangible
assets.
12. Loss per share
Unaudited
2022 2021
GBP000 GBP000
----------------------------------------------------- ----------- -----------
Loss attributable to the owners of the Company (16,906) (4,641)
Weighted average number of ordinary shares in issue 57,295,086 44,324,386
Basic loss per share (29.5p) (10.5p)
Diluted loss per share (29.5p) (10.5p)
----------------------------------------------------- ----------- -----------
Basic earnings per share is calculated by dividing the
loss/profit after tax attributable to the equity holders of the
group by the weighted average number of shares in issue during the
year.
Diluted earnings per share is calculated by adjusting the
weighted average number of shares outstanding to assume conversion
of all potential dilutive shares.
Under the Subsidiary Incentive Scheme certain directors and
employees of, and advisers to, the Group are able to participate in
a share of the growth of the Group's market capitalisation over
predetermined thresholds over a three- to five- year period. The
participants can realise their value from the Subsidiary Incentive
Scheme by exercising a put option to transfer their Celadon Subco
Limited shares to Celadon Pharmaceuticals plc with the
consideration satisfied at the Company's option either in cash or
through the issue of ordinary shares of the Company. As a result it
is not possible to accurately predict the number of shares that
might be issued, and as such it is not possible to calculate a
fully diluted basis, though in practical terms the maximum dilution
from the Subsidiary Incentive Scheme is likely to be less than
16.5%.
The calculation of earnings per share is based on the following
earnings and number of shares. In calculating the weighted average
number of ordinary shares outstanding (the denominator of the
earnings per share calculation) during the period in which the
reverse acquisition occurs:
-- The number of ordinary shares outstanding from the beginning
of that period to the acquisition date shall be computed, on the
basis of the weighted average number of ordinary shares of the
legal acquiree (accounting acquirer) outstanding during the period
multiplied by the exchange ratio established in the merger
agreement; and
-- The number of ordinary shares outstanding from the
acquisition date to the end of that period shall be the actual
number of ordinary shares of the legal acquirer (the accounting
acquiree) outstanding during that period.
The basic earnings per share for each comparative period before
the acquisition date presented in the consolidated financial
statements following a reverse acquisition shall be calculated by
dividing:
-- the profit or loss of the legal acquiree attributable to
ordinary shareholders in each of those periods by
-- the legal acquiree's historical weighted average number of
ordinary shares outstanding multiplied by the exchange ratio
established in the acquisition agreement.
The weighted average number of ordinary shares for the purpose
of calculating the basic and diluted measures is the same. This is
because the outstanding warrants and other instruments would have
the effect of reducing the loss per ordinary share and therefore
would be anti-dilutive under the terms of IAS 33.
13. Intangible Assets
Clinical Trial Intangible Asset Goodwill Total
GBP000 GBP000 GBP000
--------------------------------- -------------------------------- --------- -------
Cost
At 1 January 2021 - 80 80
Additions 498 639 1,137
At 31 December 2021 (Unaudited) 498 719 1,217
Impairment - (639) (639)
At 31 December 2022 498 80 578
-------------------------------- --------- -------
Amortisation
At 1 January 2021 - - -
Charge for period (50) - (50)
At 31 December 2021 (Unaudited) (50) - (50)
Charge for period (100) - (100)
At 31 December 2022 (150) - (150)
-------------------------------- --------- -------
Net book value
At 31 December 2021 448 719 1,167
At 31 December 2022 348 80 428
--------------------------------- -------------------------------- --------- -------
Celadon Property Co Limited has goodwill arising from two
acquisitions: (1) the purchase of the entire share capital of
Celadon Pharma Limited (in 2019); and (2) an initial 57.5% equity
investment in Harley Street (CPC) Limited (in 2021).
Acquisition of Celadon Pharma Limited - 2020
On 1 January 2020, Celadon Property Co Limited acquired 100% of
the share capital for Celadon Pharma Limited for GBP2, together
with the assumed liabilities generated goodwill of GBP80k.
Initial acquisition of Harley Street (CPC) Limited - 2021
On 14 July 2021, Celadon Property Co Limited acquired 57.5% of
the issued share capital of Harley Street (CPC) Limited ("HSCPCL"),
which is in the advanced stages of obtaining MHRA and Research
Ethics Committee approval for a UK-based cannabis trial for a
maximum consideration of GBP2,000k.
GBP500k was paid in cash on completion with a contingent
consideration payment of GBP1,500k due in ordinary shares of the
Company in the event that (a) each of MHRA and REC authorise the
Trial in full; and (b) 5,000 paying patients of the Company's
clinic are accepted onto the Trial and receive their first
prescriptions under the Trial within 18 months of completion of the
acquisition of LVL.
GBP000
----------------------------------------------- -------
Fair value of initial cash consideration paid 500
Fair value of contingent consideration 375
-------
Total consideration 875
Fair value of net liabilities acquired 238
Non-controlling interest (101)
------------------------------------------------ -------
Fair value of assets acquired 1,012
Fair value of
- Intangible Assets acquired 498
- Deferred tax liability on intangible assets ( 125)
------------------------------------------------ -------
Goodwill 63 9
------------------------------------------------ -------
The GBP1,500k contingent consideration payment was estimated to
have an acquisition date fair value of GBP375k based upon 6.2%
discount rate and management's probability estimate of the payment
criteria being satisfied.
Release of contingent consideration in 2022
In June 2022, the Directors reassessed that the targets for the
contingent consideration payment would not be met within the time
frame set, and released the contingent consideration liability of
GBP375k back to consolidated statement of comprehensive income.
Impairment test
Goodwill is tested for impairment annually, and whenever there
is an indication that it may be impaired. The annual impairment
test is performed as at 31 December each year. An impairment, if
any, that results from that annual impairment test would be
reflected in the 31 December financial statements.
Goodwill is, for the purposes of impairment testing, allocated
to cash generating units ("CGUs") or groups of CGUs expected to
benefit from the business combination associated with that
goodwill, where a CGU is the smallest identifiable group of assets
that generate independent cash inflows. Management reviewed
business performance, as of 31 December 2022 based on the
performance of the various operating segments identified in note 6,
which are also the Group's CGUs.
An impairment test of goodwill is performed by comparing the
carrying amount of each division (i.e. CGU or group of CGUs),
including the goodwill, with the recoverable amount of the
division. The recoverable amount of a division is the higher of its
fair value less costs of disposal ('FVLCD') and its value in use
('VIU'), where the VIU of the division is the present value of its
future cash flows.
If the recoverable amount of a division is lower than its
carrying amount, an impairment loss is recognised. The impairment
test of the divisions as at 31 December 2022 resulted in an
impairment charge to goodwill in respect of the Harley Street CGU,
the table below shows the position after that impairment.
The key data is summarised in the following tables:
Goodwill Carrying Amount Recoverable Amount Headroom
Cash Generating Unit GBP000 GBP000 GBP000 GBP000
---------------------- ------------- ---------------- ------------------- ---------
Celadon 80 6,748 121,000 114,252
Harley Street - 376 376 -
Carrying Amount
The 'Carrying amount' column in the above table includes the
carrying amounts of the CGUs. These amounts are determined by
adding back external debt and lease liabilities to the net assets
of each division and the Corporate non-operating division, by
allocating the resulting adjusted net assets of the Head Office
non-operating division across the divisions on a pro rata basis to
the resulting adjusted net assets of each division, and by adding
these amounts to the goodwill of the divisions after first grossing
that goodwill up for the non-controlling interest.
Recoverable Amount
The recoverable amount of both CGUs has been determined on a
Value-in-Use basis, being the present value of board approved
forecasted future cash flows of the CGUs together with an
allocation of the cash flows of the Head Office non-operating
division, where the cash flows are based on the most recent
five-year forecast.
These forecasts were derived from market information, by
overlaying it with assumptions to reflect areas where growth or
income improvement is expected, and by taking into account the
expected results of cost management programmes to which the Group
is committed. The 2028 forecast is extrapolated to subsequent years
using a steady growth rate being the CPI inflation rate of 1.9% per
annum, and a terminal value is calculated using the perpetual
growth model. The discount rate of 15.0% that has been applied to
the forecasts is a market participant weighted average cost of
capital. Given that the Celadon CGU only obtained the requisite
regulatory licences to allow it to start selling it product after
the year end, its calculation of its value in use is most sensitive
to the anticipated increase in revenue. Similarly, the revenues
generated by the Harley Street CGU have been lower than anticipated
due to its Clinical Study being conditionally-approved only. The
value in use for this CGU is also sensitive to the anticipated
increase in revenues.
Net impact on income statement
The net impact on income statement of the impairment of the
Goodwill relating to Harley Street and the release of the deferred
consideration is a charge of GBP264k (2021: nil).
14. Property, plant and equipment
Assets under
Leasehold improvement Plant and machinery Office equipment construction Total
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ---------------------- -------------------- ----------------- --------------------- -------
Cost
At 1 January 2021 201 506 - - 707
Additions 264 213 66 - 543
At 31 December 2021 465 719 66 - 1,250
Additions - 279 36 1,987 2,302
Disposal (216) - - - (216)
---------------------- -------------------- ----------------- --------------------- -------
At 31 December 2022 249 998 102 1,987 3,336
---------------------- -------------------- ----------------- --------------------- -------
Depreciation
At 1 January 2021 (6) (55) - - (61)
Charge for period (31) (122) (15) - (168)
At 31 December 2021 (37) (177) (15) - (229)
Charge for period (45) (156) (27) - (228)
Disposals 42 - - - 42
---------------------- -------------------- ----------------- --------------------- -------
At 31 December 2022 (40) (333) (42) - (415)
---------------------- -------------------- ----------------- --------------------- -------
Net book value
At 31 December 2021 428 542 51 - 1,021
At 31 December 2022 209 665 60 1,987 2,921
--------------------- ---------------------- -------------------- ----------------- --------------------- -------
Leasehold improvements with a cost of GBP216k were sold for
their net book value of GBP174k generating no gain or loss on the
disposal.
Assets under construction are for Phase 2 works including waste
removal, walls, doors, drainage and flooring.
15. Right-of-Use Assets
Right-of-use Right-of-use
Property Lease Equipment Total
GBP000 GBP000 GBP000
------------------------------------ --------------- ------------- -------
Cost
At 1 January 2021 2,511 - 2,511
At 31 December 2021 2,511 - 2,511
Additions - 30 30
Increase in Restoration Obligation 389 - 389
Lease variation 553 - 553
--------------- ------------- -------
At 31 December 2022 3,453 30 3,483
--------------- ------------- -------
Amortisation charge
At 1 January 2021 (126) - (126)
Amortisation charge (100) - (100)
--------------- ------------- -------
At 31 December 2021 (226) - (226)
Lease variation - interest reset 235 - 235
Amortisation charge (132) (6) (138)
At 31 December 2022 (123) (6) (129)
--------------- ------------- -------
Net book value
At 31 December 2021 2,285 - 2,285
At 31 December 2022 3,330 24 3,354
------------------------------------- --------------- ------------- -------
Property lease
The Group operates from a 100,000 square foot facility in the UK
under a 25 year lease signed in 2019, with rent reviews every 5
years, with the first review on 1 October 2024. At the inception,
management estimated fair value of the minimum cash flow payments
under the lease to establish the right-of-use inception value. The
incremental borrowing cost of 13.35% was calculated by using the
credit spread of CCC rated bonds with duration of 13.75 years for
bonds issued on the date the Group entered into the lease.
In February 2022, Celadon Property Co Limited varied the terms
of its long-term property lease by (a) extending the rent-free
period by 12 months to 11 March 2023; and (b) increasing the
un-discounted cash flow payments over the existing lease term (to
30 September 2044) by GBP3.9 million. On a discounted cash flow
basis this increased the right-of-use asset and corresponding lease
liability by GBP553k on the variation date. There was no change
required to the Incremental borrowing rate used to discount lease
payments resulting from this variation.
Included in the Property Lease Right-of-Use asset is GBP389k
(2021: GBPnil) for Site Restoration Obligations (note 25).
16. Unlisted Investments
Unaudited
2022 2021
GBP000 GBP000
---------------- ------- ----------
At 1 January 200 -
Investment 18 200
---------------- ------- ----------
At 31 December 218 200
---------------- ------- ----------
In 2021 Celadon Property Co Limited invested GBP200k in Kingdom
Therapeutics Limited (for a 17% shareholding) and acquired an
additional holding for GBP18k in May 2022. At 31 December 2022
Celadon Property Co Limited has a 18.8% shareholding in Kingdom
Therapeutics Limited. The small increase in ownership does not
materially impact on the Group's ability to control the activities
of Kingdom Therapeutics Limited and as a result it is not
appropriate to consolidate the entity with the Group.
17. Subsidiaries
The Group has five subsidiaries for the year ended 31 December
2022. All subsidiary companies are consolidated in the Group's
financial statements. The companies in the Group at 31 December
2022 are:
Proportion Profit /
of Ownership Proportion (Loss) for Capital
Name Interest of Control the year and Reserves
GBP000 GBP000
------------------------- -------------- ------------ ------------ --------------
Celadon Subco Limited
(formerly Summerway
Subco Limited)
* 100% 100% (13,928) 65,539 a
Celadon Property
Co Limited (formerly
Vertigrow Technology
Limited) * 100% 100% 2,819 1,241 b
Celadon Pharma
Limited * 100% 100% 2,675 280 c
Celadon Pharmaceuticals
(UK) Limited * 100% 100% - - d
Harley Street (CPC)
Limited 57.5% 57.5% (953) (1,556) e
------------------------- -------------- ------------ ------------ --------------
All companies are incorporated and operate in the UK. The
registered office of Harley Street (CPC) Limited is The Walbrook
Building, 25 Walbrook, London, EC4N 8AF. The registered office of
all other group companies is 32-33 Cowcross Street, London, EC1M
6DF.
* The financial statements of these subsidiary undertakings have
not been audited for the year ended 31 December 2022 in accordance
with Section 479A of the Companies Act 2006 as the Group has opted
to take advantage of a statutory exemption. Strict criteria must be
met for this exemption to be taken and it must be agreed to by the
directors of those subsidiary companies. In order to facilitate the
adoption of this exemption, Celadon Pharmaceuticals plc, the
ultimate parent company of the subsidiaries undertakes to provide a
guarantee under Section 479C of the Companies Act 2006 in respect
of those subsidiaries.
The principal activities of the companies are:
a. Celadon Subco Limited - This is an equity incentive company.
The company has A Ordinary Shares and B Ordinary Shares.
-- The A Ordinary Shares have full voting rights, full rights to
participate in a dividend and full rights to participate in a
distribution of capital. Celadon Pharmaceuticals plc holds all of
the 80,000,801 issued A Ordinary shares.
-- The B Ordinary Shares have no voting rights, no rights to
participate in any dividend without the consent of Celadon
Pharmaceuticals Plc. The B Ordinary Shares were created to
facilitate a Long Term Incentive Scheme. See note 28 for more
details.
b. Celadon Property Co. Limited - This is a property holding
company of the Group and holds the 25 year lease on the Group's
100,000 square foot facility.
c. Celadon Pharma Limited - This is an operating company growing the medicinal cannabis.
d. Celadon Pharmaceuticals (UK) Limited - Is a dormant company.
e. Harley Street (CPC) Limited - Is a UK company conducting a
clinical study into the benefits of medicinal cannabis in pain
management.
18. Inventories
2022 2021
GBP000 GBP000
------------------------ ------- -------
Production consumables 20 2
------------------------ ------- -------
The inventories were consumed in the validation runs to obtain
the Group's EU-GMP licence.
19. Trade and other receivables
2022 2021
GBP000 GBP000
-------------------------------- ------- -------
Gross Trade receivables - 60
Less Expected Credit Allowance - -
------- -------
Net Trade Receivables - 60
Prepayments 186 160
VAT receivable 381 44
R&D tax receivable 682 -
1,249 264
-------------------------------- ------- -------
20. Cash & Cash Equivalents
2022 2021
GBP000 GBP000
--------------------------- ------- -------
Cash and cash equivalents 5,061 3,823
--------------------------- ------- -------
Cash at bank comprises of balanced held by the Group in current
bank accounts. The carrying amount of these assets approximated to
their fair value.
21. Trade and other payables
2022 2021
GBP000 GBP000
--------------------------------------- ------- -------
Trade payables 539 160
Accruals 476 517
Other taxes and social security costs 91 74
1,106 751
--------------------------------------- ------- -------
In the event of payment in line with agreed payment terms, trade
payables are non-interest bearing. Normal payment terms vary
between suppliers but are typically settled in 30-60 days.
22. Loans and borrowings
Unaudited
2021
2022
GBP000 GBP000
---------------------------------------------- -------- ----------
Current liabilities
Bounce back bank loan (10) (10)
Related party loan - (2,160)
Loans and borrowings (10) (2,170)
-------- ----------
Convertible loan note - (2,266)
Embedded derivative of convertible loan note - (2,659)
-------- ----------
Convertible loan notes - (4,925)
Lease liabilities (56) (338)
---------------------------------------------- -------- ----------
(66) (7,433)
Non-current liabilities
Bounce back bank loan (24) (34)
Supplier loan - (1,533)
Lease liabilities (4,542) (2,920)
---------------------------------------------- -------- ----------
(4,566) (4,487)
---------------------------------------------- -------- ----------
a. Bounce back bank loan
Celadon Pharma Limited has a GBP50k bounce back loan with
Barclays Bank plc. The loan was taken out on 31 May 2020, has a
6-year term, an interest rate of 2.5% pa and is repayable in
monthly instalments of GBP833 until 31 May 2026. The loan is
unsecured.
b. Supplier loan
On 16 January 2021, Harley Street (CPC) Limited had a GBP1,500k
loan from a supplier with interest at 5% pa. The loan and interest
were repaid in full on 4 February 2022.
c. Related party loan
On 28 October 2021 Vertigrow Technology Limited entered a
GBP2,125k loan from Summerway Capital Plc (renamed Celadon
Pharmaceuticals Plc), drawing down this amount in full. Interest
accrued at 10% per annum. This has been eliminated on consolidation
on 28 March 2022 in the reverse acquisition.
d. Convertible loan note and embedded derivative
In February and March 2021, Vertigrow Technology Limited issued
GBP4,130k convertible loan notes, the notes carried interest at 8%
pa and were issued without a redemption date, but were anticipated
to be converted to ordinary shares on the Company's Initial Public
Offering.
The Company estimated the fair value of the equity component of
the convertible loan notes as embedded derivates totalling
GBP1,998,000 (at inception), and remeasured this fair value at each
reporting date, with the movement recording in the statement of
comprehensive income.
The inputs used in the Black Scholes valuation model to
calculate those fair values were:
At Inception 31 December 2021 28 March 2022
---------------- ------------- ----------------- --------------
Risk free rate -0.03% 0.02% 0.51%
Volatility 54.2% 51.0% 48.0%
Dividend yield 0% 0% 0%
----------------- ------------- ----------------- --------------
Volatility was estimated using the Summerway Capital Plc share
prices for the periods shown. The balance sheet values of the host
liability and embedded derivative were:
Unaudited
2022 2021
GBP000 GBP000
------------------------------------------ ------- ----------
Amount classified as Host Liability - (2,266)
Amount classified as Embedded Derivative - (2,659)
------------------------------------------ ------- ----------
Net - (4,925)
------------------------------------------ ------- ----------
On 28 March 2022, the convertible loan notes balance of
GBP4,412k (comprising: GBP2,103k of derivative liability and
GBP2,309k of host liability and accrued interest) was redeemed
through the issuance of 5,168,647 Summerway Capital Plc shares
worth GBP8,528,268.
e. The amounts charged to the statement of comprehensive income were:
2022 2021
GBP000 GBP000
-------------------------------------------------------- ------- -------
Convertible loan note finance charge 43 151
Finance charge on redemption of convertible loan notes 3,406 -
Arrangement fee - 40
3,449 191
-------------------------------------------------------- ------- -------
f. Lease liabilities
The Group has leases for its premises and also for plant and
equipment assets, and has the following undiscounted minimum lease
payment commitments under right-of-use leases as at 31 December
2022:
Leasehold Property Plant & Equipment Total
GBP000 GBP000 GBP000
------------------- ------------------- ------------------ -------
Less than 1 year 486 11 497
1 to 2 years 550 11 561
2 to 3 years 650 3 653
3 to 4 years 650 - 650
4 to 5 years 650 - 650
More than 5 years 10,735 - 10,735
------------------- ------------------- ------------------ -------
Total 13,721 25 13,746
------------------- ------------------- ------------------ -------
The movement in carrying value in the lease liabilities is
summarised as follows:
Unaudited
2022 2021
GBP000 GBP000
---------------------------------------- ------- ----------
Leasehold Property
Start of period 3,258 2,874
Variation (note 15) 787 -
Finance charge - lease discount unwind 530 384
End of period 4,575 3,258
---------------------------------------- ------- ----------
Plant & Machinery
Start of period - -
Inception of lease 30 -
Lease payments (8) -
Finance charge - lease discount unwind 1 -
End of period 23 -
---------------------------------------- ------- ----------
Total 4,598 3,258
---------------------------------------- ------- ----------
Due within 12 months 56 338
Due after 12 months 4,542 2,920
g. Reconciliation of movements on liabilities to cash flows arising from financing activities
Share
Bounce Supplier Related Convertible Embedded Lease capital /
Back Loan Loan Party Loan Loan Note Derivative Liabilities premium Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ----------- ----------- ----------- ------------ ----------- ------------- ---------- --------
At 1 January
2021
(unaudited) 50 - - - - 5,772 5,822
Cash Flows (7) 1,500 2,125 2,115 1,999 2,874 1,675 12,281
Non-cash
flows:
Charge to
income
statement 1 35 35 151 660 384 - 1,266
At 31 December
2021
(unaudited) 44 1,535 2,160 2,266 2,659 3,258 7,447 19,369
Cash Flows (11) (1,541) - - - 22 8,500 6,970
Non-cash
flows:
Charge to
income
statement 1 6 53 43 (556) 531 - 78
Lease
variation - - - - - 787 - 787
Loan offset in
consolidation - - (2,213) - - - (2,213)
Transaction
costs - - - - - (1,009) (1,009)
Fair value of
Canaccord
warrants
charged to
share premium - - - - - - (18) (18)
Issued for
purchase of
Celadon
Property Co
Limited - - - - - - 433 433
Redemption of
loan notes - - - (2,309) (2,103) - 7,817 3,406
At 31 December
2022 34 - - - - 4,598 23,170 27,802
--------------- ----------- ----------- ----------- ------------ ----------- ------------- ---------- --------
23. Deferred tax liability
Current Liability Non-Current liability Total
GBP000 GBP000 GBP000
------------------------------------ ------------------ ---------------------- -------
At 1 January 2021 - - -
Recognised on business combination (25) (100) (125)
Recognised in the income statement - 13 13
At 31 December 2021 (Unaudited) (25) (87) (112)
Recognised in the income statement - 25 25
At 31 December 2022 (25) (62) (87)
------------------ ---------------------- -------
24. Financial instrument and risk management
The Group's financial instruments comprise primarily cash and
various items such as trade debtors and trade creditors which arise
directly from its operations. The main purpose of these financial
instruments is to provide working capital for the Group's
operations.
The Group does not utilise complex financial instruments or
hedging mechanisms in respect of its non-sterling payments.
A description of each category of financial assets and
liabilities and the related accounting policies can be found in
note 3. The carrying amounts of the Group's financial assets and
liabilities in each category are summarised below. For financial
liabilities measured at fair value, the level within which these
are on the IFRS 13 fair value hierarchy, are also presented:
a. Financial assets by category
Unaudited
2022 2021
GBP000 GBP000
--------------------------------------------- ------- ----------
Financial assets measured at amortised cost
Cash and cash equivalents 5,061 3,823
Trade receivables - 60
5,061 3,883
--------------------------------------------- ------- ----------
Financial assets measured at FVTOCI
Unlisted Investments 218 200
218 200
--------------------------------------------- ------- ----------
All trade receivable amounts are short-term and none are past
due.
b. Financial liabilities by category
Unaudited
2022 2021
GBP000 GBP000
-------------------------------------------------- ------- ----------
Financial Liabilities measured at amortised cost
Trade payables 539 160
Accruals 476 517
Bounce back bank loan 34 44
Supplier loan - 1,533
Related party loan - 2,160
Convertible loan - liability component - 2,266
Lease liabilities 4,598 3,258
5,647 9,938
-------------------------------------------------- ------- ----------
Financial Liabilities measured at FVTPL
Convertible loan - derivative component 2,659
Contingent Consideration (Level 3) - 375
- 3,034
-------------------------------------------------- ------- ----------
Fair Value Measurement
The following valuation techniques were used for valuing
instruments categorised in Levels 2 and 3.
Contingent Consideration (Level 3)
Contingent consideration payments are generally contingent on
the post-acquisition performance of the acquired business and
achievement of certain performance thresholds. The fair value of
contingent consideration is determined based on actual and forecast
business performance of the acquired business, discounted using the
Group WACC as the discount rate. For further information please see
Note 13.
Long-term incentive Scheme (Level 2)
The current Subsidiary Incentive Scheme participants and their
respective holdings of B Share holdings are described in note 28
below. These shares are not traded on an active market, but the
fair value is determined using valuation techniques and available
market data, by reference to the Celadon Pharmaceutical plc share
price and comparable entities.
Unlisted equity investments (Level 3)
Unlisted investments are categorised within level 3 of the fair
value hierarchy. The valuation technique applied, except where
specific market price information is available, is cost less any
provision for impairment.
Fair value of financial instruments measured at amortised
cost
The Directors consider the carrying amounts for trade and other
receivables, trade and other payables, and the current portion of
financial liabilities that are not measured at fair value, to
approximate their fair values.
Reclassifications between fair value categories
No reclassifications between the three fair value categories
took place during the year.
Credit and Liquidity Risk
Credit risk is managed on a Group basis. Funds are deposited
with Barclays Bank plc in instant access accounts. All financial
liabilities are payable in the short term (normally between 0 and 3
months) and the Group maintains adequate liquid bank balances to
meet those liabilities as they fall due.
Capital Management
The Group considers its capital to be equal to the sum of its
total equity. The Group monitors its capital using cash flow
projections. The Group's objective when managing its capital is to
ensure it obtains sufficient funding for continuing as a growing
concern.
Interest Rate Risk
The maximum exposure to interest rate risk at the reporting date
by class of financial asset was GBP1,063k of VAT receivables and
estimated R&D tax credit refunds.
Unaudited
2022 2021
GBP000 GBP000
--------------------------- ------- ----------
Cash and cash equivalents 5,061 3,823
--------------------------- ------- ----------
The Group uses liquid resources to meet the cost of future
development activities. Consequently, it seeks to minimize risk in
the holding of its bank deposits. The Group is not financially
dependent on the small rate of interest income earned on these
resources and therefore the risk of interest rate fluctuations is
not significant to the business and the Directors have not
performed a detailed sensitivity analysis.
Nonetheless, the Directors take steps when possible and cost
effective to secure rates of interest which generate a return for
the Group by depositing sums which are not required to meet the
immediate needs of the Group in interest-bearing deposits. Other
balances are held in interest-bearing, instant access accounts. All
deposits are placed with main clearing banks to restrict both
credit risk and liquidity risk. The deposits are placed for the
short term, between one and three months, to provide flexibility
and access to the funds and to avoid locking into potentially
unattractive interest rates.
Market Risk
Market risk arises from changes in interest rates, foreign
exchange rates and equity prices, as well as in their correlations
and volatility levels. Market risk is managed on a Group basis in
the ordinary course of the Group's activities.
Currency Risk
The Group currently operates in the UK market. All revenues are
currently in GBP. The majority of the operating costs and capital
expenditure items are incurred in GBP. The Group does not hedge
potential future cashflows.
25. Provisions - Site Restoration Obligation
Unaudited
2022 2021
GBP000 GBP000
--------------------------------- ------- ----------
1 January - -
Provision made during the year (389) -
Finance charge -discount unwind - -
31 December (389) -
--------------------------------- ------- ----------
In 2019 Vertigrow Technology Limited signed a 25 year lease
which included the option for the landlord to require the company
(at the end of the lease in 2044) to repair the leasehold property
to its original condition. The fair value of the site restoration
obligation provision requires estimation and judgement.
The company estimated the site restoration total costs to be
GBP435,000 at 31 December 2022. The provision has been calculated
using a discount rate of 4.04% which is the risk-free rate in the
UK.
The site restoration obligation has been debited to Right of Use
assets in the Group's non-current assets (note 15).
26. Share capital and reserves
a. Ordinary Shares
2022 Unaudited
2021
Number Number
------------------------------------------------------------------------- ----------- ----------
1 January 8,033,409 6,130,000
Issued for cash 5,151,516 1,903,409
Issued for purchase of Vertigrow Technology Limited 43,316,201 -
Issued to redeem convertible loan notes in Vertigrow Technology Limited 5,168,647 -
------------------------------------------------------------------------- ----------- ----------
31 December 61,669,773 8,033,409
------------------------------------------------------------------------- ----------- ----------
Authorised (at par value per share of GBP0.01p each) 616,698 80,334
------------------------------------------------------------------------- ----------- ----------
Holders of these shares are entitled to dividends as declared
from time to time and are entitled
to one vote per share at general meetings of the Company.
b. Issue of ordinary shares
On 15 January 2021, the company issued 1,903,409 new ordinary
shares and raised gross proceeds of GBP1.67 million (before
fees).
During March 2022 the company issued:
-- 43,316,201 new ordinary shares to acquire the entire share
capital of Vertigrow Technology Limited
-- 5,168,647 new ordinary shares to redeem the Vertigrow
Technology Limited convertible loan notes
-- 5,151,516 new ordinary shares and raised gross proceeds of
GBP8.5 million (before fees) at GBP1.65p
c. Ordinary share capital and share premium account
Unaudited Unaudited
2022 2022 2021 2021
Share capital Share Premium Share capital Share Premium
GBP000 GBP000 GBP000 GBP000
------------------------------------------------------ -------------- -------------- -------------- --------------
1 January 80 7,367 61 5,711
Issued for cash 52 8,448 19 1,656
Share issue expenses - (1,009) - -
Warrants issued - (18) - -
Issued for purchase of Vertigrow 433 - - -
Issued to redeem Convertible Loan Notes in Vertigrow 52 7,765 - -
31 December 617 22,553 80 7,367
------------------------------------------------------ -------------- -------------- -------------- --------------
d. Merger relief and Reverse acquisition relief reserves
Unaudited Unaudited
2022 2022 2021 2021
Merger relief reserve Reverse acquisition Merger relief reserve Reverse acquisition
reserve reserve
GBP000 GBP000 GBP000 GBP000
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
1 January - (5,835) - (4,549)
Issue of shares by
Summerway Capital
Plc - - - (1,675)
PLC net assets at - 5,751 - -
acquisition date (i)
Issued for purchase (ii) 65,082 (iii) (65,516) - -
of Vertigrow
Technology Limited
Share based payment - 6,400 - -
charge (iv)
Movement in year (i) - - - 389
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
31 December 65,082 (59,200) - (5,835)
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Reverse Acquisition Reserve
The reserve, arising on consolidation only, includes:
(i) the accumulated losses incurred prior to the reverse
acquisition and the share capital and share premium of Summerway
Capital Plc (renamed Celadon Pharmaceuticals Plc) at
acquisition;
(ii) the value of the share premium on the shares issued to
acquire all of the share capital of Vertigrow Technology
Limited;
(iii) the value of share capital and share premium of Celadon
Pharmaceuticals plc at acquisition;
(iv) the reverse acquisition share-based payment expense.
Merger Relief Reserve
Is a statutory, non-distributable reserve arising when
conditions set out in section 612 of the Companies Act occur and
relate to the share-premium from shares issued to acquire Celadon
Property Co Limited.
e. Warrant reserve and capital redemption reserve
Unaudited Unaudited
2022 2022 2021 2021
Warrant reserve Capital Redemption reserve Warrant reserve Capital Redemption reserve
GBP000 GBP000 GBP000 GBP000
----------------- ---------------- --------------------------- ---------------- ---------------------------
1 January - 49 - 49
Warrants issued 471 - - -
31 December 471 49 - 49
----------------- ---------------- --------------------------- ---------------- ---------------------------
Capital Redemption Reserve
This is a statutory, non-distributable reserve into which
amounts are transferred following the redemption or purchase of a
Company's own shares.
The Company was incorporated on 31 August 2018 with 50,000
Ordinary Shares of GBP1.
On 12 October 2018, those shares underwent a sub-division to
create 50,000 Ordinary Shares of GBP0.01 and 50,000 Ordinary Shares
of GBP0.99, and the GBP0.99 Ordinary Shares were re-designated as
Deferred Shares.
On 19 October 2018, 6,080,000 Ordinary Shares of GBP0.01 were
issued and the 50,000 Deferred Shares of GBP0.99 were
cancelled.
Warrant Reserve
This reserve represents the fair value charge of warrants issued
pursuant to equity-based payments in the form of warrants. The
charge of GBP245k (GBP2021: GBPnil) represents the fair value of
warrants issued to the Company's NOMAD Canaccord Genuity Limited
for the 2022 IPO listing work, and GBP226k in respect of warrants
issued to an advisor
27. Non-Controlling Interests
The Group has non-controlling interests from:
a. the minority 42.5% holding in Harley Street (CPC) Limited
attributable to the minority shareholder; and
b. the amounts subscribed for the B Ordinary Shares of Celadon
Subco Limited pursuant to the Group's long term incentive plan.
Harley Street (CPC) Limited
Unaudited
2022 2021
GBP000 GBP000
------------------------------------------------------ -------- ----------
NCI percentage 42.5% 42.5%
------------------------------------------------------ -------- ----------
Non-current assets 21 25
Current assets 33 1,645
Current liabilities (1,610) (2,274)
Non-current liabilities - -
Net assets (liabilities) (1,556) (604)
------------------------------------------------------ -------- ----------
Net assets (liabilities) attributable to NCI (661) (257)
------------------------------------------------------ -------- ----------
Revenue 24 2
Operating loss (920) (547)
Net loss (953) (592)
------------------------------------------------------ -------- ----------
Net loss attributable to NCI (405) (155)
------------------------------------------------------ -------- ----------
Cash flow from operating activities (78) (338)
Cash flow from investment activities (2) (26)
Cash flows from financing activities (1,541) (2,000)
------------------------------------------------------ -------- ----------
Net increase (decrease) in cash and cash equivalents (1,621) 1,636
------------------------------------------------------ -------- ----------
Celadon Subco Limited
In the year ended 31 December 2022, there were subscriptions for
B Ordinary Shares totalling GBP23,300 (2021: GBPnil). The B
Ordinary Shareholders have no entitlement to vote or any interest
in the profits of Celadon Subco Limited. The B Ordinary Shares of
Celadon Subco Limited have been issued as part of the Subsidiary
Incentive Scheme (see note 28). The Subsidiary Incentive Scheme
includes certain performance criteria with respect to the market
capitalisation of the Group. As these performance criteria have not
currently been met the Non-Controlling Interest arising from the B
Ordinary Shares has been valued at the cost to repurchase the B
Ordinary Shares.
Unaudited
2022 2021
GBP000 GBP000
-------------------------- ------- ----------
Non Controlling Interest 23 -
-------------------------- ------- ----------
28. Long Term Incentive Plans
Subsidiary Incentive Scheme
On 17 September 2018, the Company established its Subsidiary
Incentive Scheme (using the B Ordinary Shares of Celadon Subco
Limited) in order to incentivise and retain certain key employees
and directors of, and advisers to, the Company. On 11 April 2022,
the Company amended its Subsidiary Incentive Scheme following the
acquisition of Celadon Property Co Limited and a number of
directorate and personnel changes to the enlarged Group.
Under the terms of the Subsidiary Incentive Scheme, participants
are entitled to subscribe for Subsidiary B Shares. Subsidiary B
Shares provide the holder with a right to participate in any
Shareholder value that is created over a predetermined level and
over a three- to five-year period (or upon a change of control of
the Company or the Subsidiary, whichever occurs first). This is
calculated on a formula basis by reference to the growth in market
capitalisation of the Company, following adjustments for the issue
of any new Ordinary Shares and taking into account dividends and
capital returns ("Shareholder Value").
On 11 April 2022, the Subsidiary Incentive Scheme was amended to
create three classes of Subsidiary B Shares in issue under the
Subsidiary Incentive Scheme:
-- The 400,000 Subsidiary B Shares held by participants under
the current Subsidiary Incentive Scheme (which commenced on 15
January 2021) were converted into B1 Shares. These B1 Shares will
participate in up to 4 per cent of Shareholder Value created above
a current threshold of GBP96,305,000 ("B1 Initial Value"), being
the initial market cap of the Company, plus the amount of funds
raised on 15 January 2021, plus the total subscription value of the
Consideration Shares and the Placing Shares. The B1 Shares will
only participate in that Shareholder Value, however, if the
individual elements of the B1 Initial Value grow at an annual rate
of 7.5 per cent (compounded), measured over a period of three to
five years commencing on 15 January 2021.
-- 650,000 B2 Shares were issued to advisers of Celadon. These
B2 Shares will participate in up to 6.5 per cent of Shareholder
Value created above a current threshold of GBP81,755,125 ("B2
Initial Value"), being the pre-Acquisition value of the Company
plus a discounted value of the Celadon Group (to reflect pre-agreed
incentive arrangements and the advisers' contribute to date) plus
the total subscription value of the Placing Shares. The B2 Shares
will only participate in that Shareholder Value, however, if the
individual elements of the B2 Initial Value grow at an annual rate
of 17.5 per cent (compounded), measured over a period of three to
five years commencing on 28 March 2022.
-- 600,000 B3 Shares were issued to selected management of
Celadon, subject to a Call Option allowing the B3 Shares to be
repurchased by the Company for the shares' nominal value in certain
circumstances. The number of B3 Shares subject to the Call Option
is reduced in three equal instalments on the first, second and
third anniversaries of the acquisition of Celadon. These B3 Shares
will participate in up to 6 per cent of Shareholder Value created
above a current threshold of GBP101,755,125 ("B3 Initial Value"),
being the pre-Acquisition value of the Company plus the total
subscription value of the Consideration Shares and the Placing
Shares. The B3 Shares will only participate in that Shareholder
Value, however, if the individual elements of the B3 Initial Value
grow at an annual rate of 17.5 per cent (compounded), measured over
a period of three to five years commencing on 28 March 2022.
The current Subsidiary Incentive Scheme participants and their
respective holdings of B Share holdings are noted below.
Name B1 B2 B3 Total
----------------------------------- ------- ------- ------- ---------
Alexander Anton (Chairman) 75,000 166,666 - 241,666
Benjamin Shaw (former Director) 75,000 166,667 - 241,667
Mark Farmiloe (former Director) 75,000 166,667 - 241,667
Tony Morris (former Director) 125,000 - - 125,000
Paul Gibson (former Director) 50,000 - - 50,000
James Short (Chief Executive
Officer) - - 200,000 200,000
Katie Long (former Chief Financial
Officer) - 150,000 - 150,000
Issued to other employees
/ consultants - - 400,000 400,000
Total 400,000 650,000 600,000 1,650,000
----------------------------------- ------- ------- ------- ---------
A summary of the B Shares are as follows:
Tranche B1 B2 B3
-------------------- ------------ --------------- ---------------
Shares in issue 400,000 650,000 600,000
Subscription price 1.4p 1.44p 1.39p
Compound Growth 7.5% pa 17.5% pa 17.5% pa
Exercise period 15 January 29 March 2025 29 March 2025
2024 to to to
15 January 29 March 2027 29 March 2027
2026
-------------------- ------------ --------------- ---------------
The B Shares are financial instruments and have been fair valued
using a Monte Carlo simulation with inputs of:
Tranche B1 B2 B3
--------------------------- ---------------- ---------------- ----------------
Risk free rate 1.99% 1.89% 1.89%
Volatility 33.0% 33.0% 33.0%
Dividend yield 0% 0% 0%
Market cap at measurement GBP58.9 million GBP58.9 million GBP58.9 million
--------------------------- ---------------- ---------------- ----------------
Volatility was estimated using the Celadon Pharmaceutical Plc
share prices. Due to the limited share price history of the
Company, volatility has been assessed against an international peer
group of comparative entities. An annualised volatility range of
33% - 127% was developed within the peer group. Management
estimated a volatility of 33%, reflecting the low volatility of the
Celadon Pharmaceuticals Plc share price data post the reverse
acquisition transaction.
The Long-Term Incentive Plan charge in the income statement for
the year ended 31 December 2022 was GBP910k (2021: GBPnil) in
respect of the Subsidiary Incentive Scheme.
Advisor Warrants
In March 2022, warrants were issued to one of the Company's
advisors over 262,626 ordinary shares, to be issued in equal
instalments in March 2023 and March 2024 as consideration for
provision of services over that period. These warrants are to be
issued at the nominal value of GBP0.01 per share. The fair value of
this award was calculated as GBP226k.
29. Related Party Transactions
Dr. Steve Hajioff
Dr. Steve Hajioff provided consultancy services to Harley Street
(CPC) Limited prior to Celadon Property Co Limted's acquisition of
its interest in that company.
Celadon Property Co Limited entered a consulting agreement with
Dr. Steve Hajioff from 1 June 2021, which terminated on 28 March
2022 when he was appointed to the Board of Celadon Pharmaceuticals
Plc. In the period ended 31 December 2022, GBP8,000 of consulting
fees were charged to the company (2021: GBP11,000). At 31 December
2022, GBPnil was unpaid (2021: GBPnil).
Kingdom Therapeutics Limited ("Kingdom")
Liz Shanahan is a Director and shareholder of Kingdom, and has
been a Director of Celadon Pharmaceuticals Plc since September
2021.
On 7 June 2021, Celadon Property Co Limited subscribed for a 17%
shareholding in Kingdom for GBP200,000. On 5 May 2022 Celadon
Property Co Limited purchased an additional shareholding in Kingdom
from a selling shareholder for GBP18,000. At 31 December 2022,
Celadon Property Co Limited held a 18.8% total shareholding.
Related Party Loan (between Summerway Capital Plc and Vertigrow
Technology Limited)
In October 2021, Celadon Pharmaceuticals Plc provided Celadon
Property Co Limited with a secured short-term working capital loan
with 10% interest pa. At 31 December 2021 and 28 March 2022,
GBP2,125,000 had been drawn down. Interest of GBP53,125 was
incurred by Celadon Property Co Limited in the period from 31
December 2021 up to 28 March 2022. After 28 March 2022 the loan
interest and balance have been eliminated on consolidation.
AFS Advisors LLP
AFS Advisors LLP is an entity indirectly and directly owned by
Alexander Anton (Chairman of the Company) and Benjamin Shaw (a
Director of the Company until 28 March 2022).
On 1 February 2021, Celadon Property Co Limited entered into an
agreement with AFS Advisors LLP for the provision of strategic and
general corporate advice, including IPO services. Under the terms
of the agreement with Celadon Property Co Limited, AFS Advisors LLP
were entitled to 5 per cent of shareholder value created over
certain market capitalisation thresholds. Pursuant to the
agreement, this entitlement was replaced by AFS Advisors LLP's
participation in the Company's Subsidiary Incentive Scheme as
described further in note 28.
On 14 January 2022, AFS Advisors LLP and Celadon Property Co
Limited entered into an agreement under which AFS Advisors LLP
would be entitled to receive an initial contingent transaction
success fee of GBP350,000 on Admission for corporate finance and
strategic advisory services provided as part of the transaction.
Furthermore, under the terms of the agreement, Celadon Property Co
Limited may at its election, award AFS Advisors LLP a discretionary
fee of a further GBP580,000 within 12 months of Admission, which if
paid, would equate to a total success fee of 1% of the pre-money
value of the Enlarged Group. No discretionary payment has been
made.
In the year ended 31 December 2022, GBP350,000 of fees were
charged to the Company (2021: GBPnil). At 31 December 2022 GBPnil
was unpaid (2021: GBPnil).
Long Drive Advisors LLP ("Long Drive")
Mark Farmiloe (a former Director of Celadon Pharmaceuticals Plc)
is the LLP Designated Member of Long Drive.
On 9 July 2022, Celadon Pharmaceuticals plc entered into an
agreement with Long Drive under which Long Drive agreed to provide
general strategic and corporate financial advice.
In the year ended 31 December 2022, Long Drive charged GBP30,000
per month (plus VAT) payable in arrears. At 31 December 2022,
GBPnil was unpaid.
Tessera Investment Management Limited ("Tessera")
Tony Morris (a former Director of Celadon Pharmaceuticals Plc),
and Katie Long (the former Chief Financial Officer of Celadon
Pharmaceuticals Plc) are the directors and shareholders of
Tessera.
On 15 January 2021, Summerway Capital Plc entered into an
agreement with Tessera pursuant to which Tessera agreed to provide
strategic and general corporate advice, and M&A and capital
raising transaction support services.
Tessera charged GBP12,500 per month (plus VAT) payable monthly
in arrears from the date of the agreement. The agreement terminated
on readmission of the Group to AIM on 28 March 2022. In the year
ended 31 December 2022, GBP235,236 of fees were charged to the
Company (2021: GBP165,000). At 31 December 2022 GBP50,763 was
unpaid (2021: GBPnil).
On 3 March 2021, Vertigrow Technology Limited entered into an
agreement with Tessera pursuant to which Tessera agreed to provide
strategic and general corporate advice, and M&A and capital
raising transaction support services. Under the agreement, Tessera
was to participate in the Celadon Subco Limited share incentive
scheme to be implemented in the region of 1.5 per cent of
additional shareholder value created through such scheme, by way of
an allocation to Katie Long on her appointment as CFO. This
agreement was terminated on 28 March 2022.
This entitlement was replaced by Katie Long's participation in
the Subsidiary Incentive Scheme (note 28) at re-admission on
comparable terms.
On 28 July 2022, Celadon Pharmaceuticals plc reappointed Tessera
as a strategic advisor to the Group. Under the new agreement
Tessera agreed to continue to provide general corporate and
strategic advice to the Company on the basis of four days support
per month for a fixed monthly retainer of GBP5,000 (plus VAT).
In the year ended 31 December 2022, GBP54,783 of advisory fees
were charged to the Company (2021: GBP150,000). At 31 December 2022
GBPnil was unpaid (2021: GBPnil).
Subsidiary Incentive Scheme
On the 11 April 2022, and pursuant to the amended Subsidiary
Incentive Scheme detailed in note 28, a number of new B Shares were
issued to former and current Directors of the Company at
subscription prices ranging from GBP0.0139 to GBP0.0144 per B
Share. The current allocation of B shares in issue to former and
current Directors of the Company are set out below.
New B Shares
issued pursuant Current
Previous to amended B Shares
Name B Shares held Agreed buybacks Scheme held
-------------------------------- -------------- --------------- ---------------- ---------
Alexander Anton (Chairman) 75,000 - 166,666 241,666
Benjamin Shaw (former Director) 75,000 - 166,667 241,667
Mark Farmiloe (former Director) 75,000 - 166,667 241,667
Tony Morris (former Director) 175,000 (50,000) - 125,000
Vin Murria (former Director) 1,000,000 (1,000,000) - -
Paul Gibson (former Director) 50,000 - - 50,000
James Short (Chief Executive
Officer) - - 200,000 200,000
Katie Long (former Chief
Financial Officer) - - 150,000 150,000
Issued to other employees
/ advisors - - 400,000 400,000
Total 1,450,000 (1,050,000) 1,250,000 1,650,000
-------------------------------- -------------- --------------- ---------------- ---------
Shortly after the issuance of the new B Shares detailed above,
in accordance with the terms of the resignation letters of Vin
Murria and Tony Morris, all of Vin Murria's B Shares and 50,000 of
Tony Morris' B Shares were bought back from the Subsidiary on 11
April 2022 at their original subscription cost of GBP14,000 and
GBP700 respectively.
Market purchases
On 10 March 2022, Alexander Anton acquired 10,000 ordinary
shares of Celadon Pharmaceuticals Plc as part of a secondary market
transaction, which was announced on 10 March 2022. Following this
and 209,569 ordinary shares held indirectly as a result of the
share consideration paid by the Celadon Pharmaceuticals Plc to the
shareholders of Celadon Property Co Limited , Alexander Anton's
shareholding in the Company increased to 1,319, 569 ordinary
shares, representing 2.1 per cent of the Company's share
capital.
30. Commitments and Contingencies
Commitments
At 31 December 2022 the Group had committed capital expenditure
amounts of GBPnil (2021: GBPnil).
31. Subsequent events
On 16 January 2023, the Group announced that its Midlands UK
facility had been registered by the UK Medicines and Healthcare
products Regulatory Agency ("MHRA") for the Good Manufacturing
Practice ("GMP") manufacturing of its cannabis Active
Pharmaceutical Ingredient.
On 14 March 2023, the Group announced that its Home Office
Licence had been successfully updated to allow the commercial sale
of its high <DELTA>9-tetrahydrocannabinol product following
the registration as a GMP manufacturer by the MHRA.
On 24 May 2023, the Group announced its Inaugural Supply
Contract under which the Group will sell a minimum of GBP3m worth
of product over 3 years, with first shipments due in Q4 2023.
On 29 May 2023, the Group signed a 2 year GBP7.0m Revolving
Credit Facility. The borrowings are available to fund the Group's
operating and capital expenditure. The Term Loan Agreement is
repayable in the event that the Group finds an alternative source
of funding which is sufficient to allow the repayment of the Term
Loan Agreement.
On 31 May 2023, the Group purchased the 42.5% of the shares of
Harley Street (CPC) Limited that it did not already own for a
purchase price of GBP1.
[1] Stannard et al, 2016
[2] https://www.bbc.co.uk/news/health-65532464
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FR UPUCPQUPWGPC
(END) Dow Jones Newswires
June 05, 2023 02:00 ET (06:00 GMT)
Celadon Pharmaceuticals (LSE:CEL)
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