REG - Celadon Pharma. PLC - Final Results for the year ended 31 December 2022
05/06/2023 07:00
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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
£8.5m.
· 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 Δ-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 £3m 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 £7m of product annually.
· Cash balance at 31 May 2023 of £1.8m, with £1.0m of VAT and
Research & Development tax credits due from HM Revenue and Customs.
· Committed credit facility for £7.0m 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 £24k (December 2021: £2k)
· Operating loss of £5,381k (December 2021: £2,713k)
· Loss before tax of £18,118k (December 2021: £4,796k)
· Cash at 31 December 2022 of £5,061k (December 2021: £3,823k)
James Short, CEO of Celadon, commented:
"2022 was a strong year for Celadon following our readmission to AIM and
£8.5m 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 (http://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
(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 (mailto: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
Δ-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 £8.5 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 (#_ftn1) , 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 (#_ftn2) 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
£2.0 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 £7 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 £3m 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 £4.13m 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 £80 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 £6.4 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 £24k (2021: £2k).
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 £66k (2021: loss of £2k). 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 £4.9 million in the year ended 31 December 2022 (2021:
£2.4 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 £5.4
million (2021: £2.7 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 £6.4 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 £1.5 million of advisers costs
(2021: £0.8 million), included in the £1.5 million was the fair value of
£245k 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 £4.13 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 £3.4
million on the convertible loan notes, and a finance credit of £556k 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 £498k, deferred tax liabilities of £125k and goodwill of £639k.
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 £1.5 million (which was fair valued to £375k) was released. In
addition, the Goodwill was impaired. The net result was a charge to the
income statement of £264k. (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 £910k charge for this Subsidiary
Incentive Scheme. A further £226k 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 £531k 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 £53k 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 £2.2 million in the year ended 31 December
2022, the Group continued its facility fit out, increasing property, plant and
equipment by £1.9 million, and increased the Right of Use asset (and
associated lease liability) by £1.1 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 (£0.6 million) and the amortisation of the LVL Chronic Pain
Clinical Trial related intangible assets of (£0.1 million).
Current Assets - increased with IPO placing proceeds, and £1.0m of additional
VAT and refundable R&D Tax Credits due. Cash balances at 31 December 2022
were £5.1 million (2021: £3.8 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 £4.9 million convertible loan note and
accrued interest converted to equity on 28 March 2022. The £2.2 million
related party loan between Summerway Capital Plc and Vertigrow was eliminated
on consolidation from 28 March 2022, and the £375,000 contingent
consideration liability on the purchase of Harley Street (CPC) Limited has
been released (see note 13).
Non-current liabilities - increased by £0.5m as the lease liability increased
(by £1.6 million) due to the property lease variation, and the recognition of
a provision in respect of the property decommissioning costs of £0.4 million
and a new small equipment lease which was largely offset by the repayment of
the supplier loan of £1.5 million (in February 2022).
Net assets - at 31 December 2022 were £7.0 million.
Shareholders' Equity - Share Capital including Share Premium and the Merger
Relief Reserve total £88.3 million at 31 December 2022 following the IPO and
acquisition of Vertigrow by Summerway Capital Plc; the Reverse Acquisition
Reserve of £59.2 million (which is the consolidation reserve created on the
reverse acquisition of combining Summerway Capital Plc and Vertigrow); the
Retained losses (increased to £22.8 million) and the Non-controlling Interest
(£638k) increased with the losses in the year ended 31 December 2022.
Cash outflows from operating activities - for the year ended 31 December 2022
were £5.5 million (2021: £3.2 million). The main spend items include people,
advisers and utility costs.
Investing activities - in the year ended 31 December 2022 capex items totalled
£2.1 million. The Group increased its investment in Kingdom Therapeutics
Limited by £18k (to £218k). The Group also received £3.5 million of cash
inflow on the acquisition of Summerway Capital Plc. In the year ended 31
December 2021 capex items totalled of £542k, and we invested £500k acquiring
57.5% of the issued share capital of Harley Street (CPC) Limited in addition
to our £200k investment in Kingdom Therapeutics Limited.
Financing activities - in the year ended 31 December 2022, the Group raised
£7.5 million of new equity financing (net of allocated issue costs, which
were specifically related to the fundraise process) and repaid a supplier loan
of £1.5 million which was not used. In the year ended 31 December 2021 the
Group raised £4.1 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 £5.1 million in cash.
New funding line - on 29 May 2023, the Group obtained £7.0m 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 £7.0m Revolving Credit
Facility, the anticipated refund of £0.5 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 £000 £000
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)
- Redemption (3,406) -
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 £000 £000
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 Capital Share premium Merger relief reserve Reverse acquisition reserve Warrant reserve Capital Redemption reserve Share based payment reserve Retained earnings Equity attributable to owners of the parent Non-controlling interest Total equity
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
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)
- - - - - - - (4,628) (4,628) (155) (4,783)
Loss for the period
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 £000 £000
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 (£) 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 (£000s).
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 £5.1 million of cash and net assets of
£7.1 million. In addition on 29 May 2023, the Group entered into a 2 year
£7.0m 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 £2.0 million, of which £500,000 was paid in
cash and £1,500,000 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 £1.5125 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 £4.13 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
£000 £000 £000
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 £269k relating to 2021 activities. Elements of the R&D claims
required judgement by management. At the date of these financial statements
£269k 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 £412k. 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
£1.5125.
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 £12,151k 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:
£000
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 £12,151k and the fair value of the net
assets assumed per above of £5,751k resulted in £6,400k 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 £2,493k (2021: £777k), of which
£1,028k (2021: £nil) was charged to the share premium account, and £1,465k
(2021: £777k) 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 £000
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 £1,662k. 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
£000 £000 £000 £000
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
£000 £000 £000 £000
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 £24k (2021:
£2k) 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
£000 £000
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 227 -
costs
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
£000 £000
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
£000 £000
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 in Pension 31 December 2022 Total 31 December 2021 Total
service
kind
£ £ £ £ £ £
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, £11,100 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, £10,000 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
£000 £000
Finance gain / (charge) on derivative liability associated with convertible 556 (660)
loan notes (note 22)
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
£000 £000
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 £8,811k (2021: £4,895k) 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 £2,203k (2021: £1,224k).
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
£000 £000
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
£000 £000 £000
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 £2, together with the assumed
liabilities generated goodwill of £80k.
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 £2,000k.
£500k was paid in cash on completion with a contingent consideration payment
of £1,500k 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.
£000
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 639
The £1,500k contingent consideration payment was estimated to have an
acquisition date fair value of £375k 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 £375k 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 £000 £000 £000 £000
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
£264k (2021: nil).
14. Property, plant and equipment
Leasehold improvement Plant and machinery Office equipment Assets under construction Total
£000 £000 £000 £000 £000
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 £216k were sold for their net book
value of £174k 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
£000 £000 £000
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 £3.9 million. On a
discounted cash flow basis this increased the right-of-use asset and
corresponding lease liability by £553k 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 £389k (2021: £nil) for
Site Restoration Obligations (note 25).
16. Unlisted Investments
Unaudited
2022 2021
£000 £000
At 1 January 200 -
Investment 18 200
At 31 December 218 200
In 2021 Celadon Property Co Limited invested £200k in Kingdom Therapeutics
Limited (for a 17% shareholding) and acquired an additional holding for £18k
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:
Name Proportion of Ownership Interest Proportion of Control Profit / (Loss) for the year Capital and Reserves
£000 £000
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
£000 £000
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
£000 £000
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
£000 £000
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
£000 £000
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
£000 £000
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 £50k 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 £833 until 31 May 2026.
The loan is unsecured.
b. Supplier loan
On 16 January 2021, Harley Street (CPC) Limited had a £1,500k 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 £2,125k 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 £4,130k
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 £1,998,000 (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
£000 £000
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 £4,412k (comprising:
£2,103k of derivative liability and £2,309k of host liability and accrued
interest) was redeemed through the issuance of 5,168,647 Summerway Capital Plc
shares worth £8,528,268.
e. The amounts charged to the statement of comprehensive income were:
2022 2021
£000 £000
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
£000 £000 £000
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
£000 £000
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
Bounce Back Loan Supplier Loan Related Party Loan Convertible Loan Note Embedded Derivative Share capital / premium Total
Lease Liabilities
£000 £000 £000 £000 £000 £000 £000 £000
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
£000 £000 £000
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
£000 £000
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
£000 £000
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 £1,063k of VAT receivables and estimated R&D tax
credit refunds.
Unaudited
2022 2021
£000 £000
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
£000 £000
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 £435,000 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 £0.01p 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 £1.67 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 £8.5 million
(before fees) at £1.65p
c. Ordinary share capital and share premium account
Unaudited Unaudited
2022 2022 2021 2021
Share capital Share Premium Share capital Share Premium
£000 £000 £000 £000
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 reserve Merger relief reserve Reverse acquisition reserve
£000 £000 £000 £000
1 January - (5,835) - (4,549)
Issue of shares by Summerway Capital Plc - - - (1,675)
PLC net assets at acquisition date (i) - 5,751 - -
Issued for purchase of Vertigrow Technology Limited (ii) 65,082 (iii) (65,516) - -
Share based payment charge (iv) - 6,400 - -
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
£000 £000 £000 £000
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
£1.
On 12 October 2018, those shares underwent a sub-division to create 50,000
Ordinary Shares of £0.01 and 50,000 Ordinary Shares of £0.99, and the £0.99
Ordinary Shares were re-designated as Deferred Shares.
On 19 October 2018, 6,080,000 Ordinary Shares of £0.01 were issued and the
50,000 Deferred Shares of £0.99 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 £245k (£2021:
£nil) represents the fair value of warrants issued to the Company's NOMAD
Canaccord Genuity Limited for the 2022 IPO listing work, and £226k 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
£000 £000
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 £23,300 (2021: £nil). 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
£000 £000
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 £96,305,000 ("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 £81,755,125 ("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 £101,755,125 ("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 2024 to 29 March 2025 to 29 March 2025 to
15 January 2026
29 March 2027
29 March 2027
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 £58.9 million £58.9 million £58.9 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 £910k (2021: £nil) 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 £0.01 per share.
The fair value of this award was calculated as £226k.
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, £8,000 of consulting fees were charged to the company
(2021: £11,000). At 31 December 2022, £nil was unpaid (2021: £nil).
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 £200,000. On 5 May 2022 Celadon Property Co Limited purchased
an additional shareholding in Kingdom from a selling shareholder for £18,000.
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, £2,125,000 had been drawn down.
Interest of £53,125 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 £350,000 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 £580,000 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, £350,000 of fees were charged to the
Company (2021: £nil). At 31 December 2022 £nil was unpaid (2021: £nil).
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 £30,000 per month
(plus VAT) payable in arrears. At 31 December 2022, £nil 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 £12,500 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, £235,236
of fees were charged to the Company (2021: £165,000). At 31 December 2022
£50,763 was unpaid (2021: £nil).
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
£5,000 (plus VAT).
In the year ended 31 December 2022, £54,783 of advisory fees were charged to
the Company (2021: £150,000). At 31 December 2022 £nil was unpaid (2021:
£nil).
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 £0.0139
to £0.0144 per B Share. The current allocation of B shares in issue to
former and current Directors of the Company are set out below.
Name Previous B Shares held Agreed buybacks New B Shares issued pursuant to amended Scheme Current B Shares 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
£14,000 and £700 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
£nil (2021: £nil).
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 Δ9-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 £3m worth of product over 3 years, with
first shipments due in Q4 2023.
On 29 May 2023, the Group signed a 2 year £7.0m 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 £1.
1 Stannard et al, 2016
2 https://www.bbc.co.uk/news/health-65532464
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