REG - Celadon Pharma. PLC - Full year results
29/04/2022 07:00
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RNS Number : 7914J Celadon Pharmaceuticals PLC 29 April 2022
29 April 2022
Celadon Pharmaceuticals Plc (formerly Summerway Capital Plc)
("Celadon", the "Company" or the "Group")
Results for the period ended 31 December 2021
The Board of Celadon Pharmaceuticals Plc present the financial results for
Summerway Capital Plc for the 16 month period ended 31 December 2021, prior to
its change of name to Celadon Pharmaceuticals Plc, and following the change
in the Company's financial year end to 31 December as announced on 29 November
2021.
Following completion of the acquisition of Vertigrow Technology Ltd
("Vertigrow", t/as "Celadon"), Celadon Pharmaceuticals Plc is now a UK-based
pharmaceutical company targeting the research, cultivation, manufacturing and
supply of cannabinoid-based medicines.
Highlights for the period ended 31 December 2021
· Loss before tax of £720,369 (2020: £174,511)
· Cash at 31 December 2021 of £4,462,965 (2020: £5,487,991) after
taking into account a loan made to Vertigrow in the period of £2,125,000
· Unaudited cash at 22 April 2022 of £12.1 million following
completion of the placing associated with the Vertigrow acquisition
· A number of Board changes occurred during the period and post the
period end, to reflect the change in investing policy and latterly the
acquisition of Vertigrow
· Change in investing policy in September 2021 to focus on the
healthcare and pharmaceutical sector, specifically, emerging therapeutic areas
· Announcement in October 2021 of the proposed £80 million
acquisition of Vertigrow, which subsequently completed post the period end on
28 March 2022
Enquiries:
Celadon Pharmaceuticals Plc
Tony Morris
020 7440 7520
Canaccord Genuity Limited (Nominated Adviser and
Broker)
Andrew Potts / Patrick Dolaghan 020 7523 8000
About Celadon Pharmaceuticals Plc
Following completion of the acquisition of Vertigrow Technology Ltd
("Celadon"), Celadon Pharmaceuticals Plc is a UK based pharmaceutical company
targeting the research, cultivation, manufacturing and supply of
cannabinoid-based medicines. Its primary focus is on improving quality of life
for chronic pain sufferers, as well as exploring the potential of
cannabinoid-based medicines for other conditions such as autism. Its UK
facility comprises a laboratory designed to meet UK-GMP standards, and
capacity for a large indoor hydroponic growing facility that has received a
Home Office Licence to legally grow high THC medicinal cannabis for the
purpose of producing test batches of cannabis oil to support its application
to the MHRA. The Company's subsidiary, LVL, owns a MHRA conditionally approved
cannabis trial using cannabis based medicinal products to treat chronic pain
in the UK.
For further information please visit our website www.celadonpharma.com
STRATEGIC REPORT
INTRODUCTION
We are pleased to present the financial results for Summerway Capital Plc
("Summerway" or the "Company") for the 16 month period ended 31 December 2021,
following the change in the Company's financial year end to 31 December as
announced on 29 November 2021, and prior to its change of name to Celadon
Pharmaceuticals Plc, which occurred post period end on 28 March 2022.
The financial period ended 31 December 2021 has been one of significant change
for the Company, culminating in the completion of its inaugural acquisition
post the period end in March 2022 of Vertigrow Technology Ltd ("Vertigrow"
t/as "Celadon"). Vertigrow is one of the first pharmaceutical companies in
the UK to receive a Home Office licence to grow high tetrahydrocannabinol
("THC") cannabis for the purpose of producing test batches of cannabis oil to
support its application to the Medicines and Healthcare products Regulatory
Agency for registration as a manufacturer of medicinal product active
pharmaceutical ingredients, which will be used in medicinal products,
initially focusing on chronic pain. The acquisition provides the Company
with an exciting entry point into the growing, highly regulated UK market for
medicinal cannabis and a compelling foundation from which accretive and
complementary M&A opportunities can be executed alongside Vertigrow's
existing organic growth initiatives.
Since establishing the Company on AIM in 2018, as a team we have remained
focused and determined in seeking to secure high quality management teams and
exciting opportunities with the potential to deliver significant value for our
loyal Shareholders, most of whom have supported us since our IPO.
In January 2021, we amended the Company's then investing policy to focus on
investment and acquisition opportunities across the software,
Software-as-a-Service and digital technologies and services sectors. In
conjunction with the change in strategy, a number of directorate changes
occurred, including the appointment of Vin Murria as Chairman of the Company,
and Paul Gibson and Tony Morris as Non-Executive Directors, and the
resignations of Alexander Anton and Mark Farmiloe. The Company also raised
an additional £1.7 million through a placing at that time.
During the period, it became clear that securing a technology asset of
sufficient size and scale, and at an appropriate valuation level was going to
be challenging in the near term given the prevailing market conditions.
Whilst this was disappointing, certain other sector opportunities presented
themselves to the Directors, which despite being outside of the Company's
technology focus, were attractive options for the Company's existing
Shareholders to consider. Specifically, opportunities across the healthcare
and pharmaceutical sector, and in particular, the emerging therapeutic areas.
As a result, in September 2021 the Company proposed a further change in its
strategic direction away from the technology sector. The Company announced
the resignations of Vin Murria, Paul Gibson and Tony Morris, with Benjamin
Shaw taking over as interim Chairman of the Summerway, and the appointment of
Liz Shanahan as independent Non-Executive Director. Liz is a life sciences
entrepreneur with extensive experience advising leading global pharmaceutical
and healthcare organisations, and her skill set continues to be a valuable
addition to the Board as we execute the Company's new growth strategy. At
the same time, trading in Summerway's shares were suspended as a result of
discussions with an immediate opportunity within the healthcare and
pharmaceutical sector, that if successful, would be classified as a reverse
takeover under the AIM Rules and therefore subject to shareholder consent.
In October 2021, Summerway Shareholders approved the Company's new investment
policy and the pivot towards the healthcare and pharmaceutical sector. On 28
October 2021, the Company announced the proposed acquisition of Vertigrow for
£80 million consideration and a proposed placing. Concurrently, the Company
also made available a loan of up to £4.25 million to Vertigrow in order to
accelerate its capital expenditure in its Midlands based facility ahead of
completion of the proposed acquisition.
In February 2022, the Company published its Admission Document and posted the
circular to Shareholders calling the general meeting pertaining to the
proposed acquisition of Vertigrow and a proposed placing. At the same time,
trading in Summerway's shares was restored.
In March 2022 at the Company's general meeting, Shareholders of Summerway
approved the acquisition of Vertigrow, the associated placing (which raised
gross proceeds of £8.5 million) and issuance of consideration shares to the
Vertigrow vendors, among other matters. On 28 March 2022, the acquisition of
Vertigrow completed, the Company's name was changed to Celadon Pharmaceuticals
Plc, and the enlarged share capital of the Company was admitted to trading on
AIM.
As part of the Company's re-admission process to AIM, we reconstituted the
Board of the Company, and we would like to take this opportunity to welcome
fellow new executive and non-executives to the Board, including Jim Short,
Founder and CEO of Vertigrow to the Board as Chief Executive Officer, Katie
Long as Chief Financial Officer, Robbie Barr as Senior Independent
Non-Executive Director and Steve Hajioff as Independent Non-Executive
Director, working alongside Alexander Anton as Chairman, and our existing
Independent Non-Executive Directors, David Firth and Liz Shanahan.
We would also like to thank Ben Shaw for his role as a director of Summerway
from our initial AIM IPO in 2018, and his recent stewardship of the Company as
Interim Chairman, which has been invaluable as we have navigated this critical
period in the Company's development.
BUSINESS REVIEW
For the financial period ended 31 December 2021, the Group has actively
pursued its investment policy, which culminated in the announcement of its
proposed acquisition of Vertigrow on 28 October 2021, which subsequently
completed on 28 March 2022.
During the period, Summerway recorded a loss of £720,369 (2020: £174,511)
and the loss per share was 9.60p (2020: 2.85p). The Company had cash
reserves at the end of the period (and therefore prior to the recently
completed placing) of £4,462,965 (2020: £5,487,991) after taking into
account a loan made to Vertigrow in the period of £2,125,000. The step up
in losses were as a result of increased M&A activity and a portion of
transaction expenses being incurred and settled in pursuit of the Company's
inaugural acquisition which completed on 28 March 2022.
Following completion of the placing associated with the Vertigrow acquisition
and after costs, Summerway held unaudited cash balances of £12.1 million as
at 22 April 2022.
Post the period end, and following completion of the acquisition of Vertigrow,
the Company ceased to be an investing company under the AIM Rules, and as
such, is no longer required to seek approval for its investing policy annually
from Shareholders at its AGM.
FUTURE DEVELOPMENTS
Following the completion of the acquisition of Vertigrow, as a Board we are
committed to executing the ambitious growth plan for Group, as well as
remaining cognisant of accretive investment and acquisition opportunities,
which can augment organic growth and provide for tangible operational
synergies.
Key Performance Indicators, Risk Management and Section 172 of the Companies
Act 2006 are included in the Group's audited annual financial statements.
Consolidated Statement of Comprehensive Income for the period ended 31
December 2021
16 months ended Year ended
31 December 2021 31 August 2020
Note
£ £
Administrative expenses 7 (722,384) (186,552)
Operating loss (722,384) (186,552)
Finance income 9 2,015 12,041
Loss before income tax 10 (720,369) (174,511)
Income tax 11 - -
Loss for the period (720,369) (174,511)
Total other comprehensive income -
Total comprehensive loss (720,369) (174,511)
Attributable to:
Ordinary equity holders of the Company (720,369) (174,511)
Loss per ordinary share
Basic and diluted loss per share attributable to ordinary equity holders of 12 (9.60)p (2.85)p
the Company
Consolidated Statement of Comprehensive Income for the period ended 31
December 2021
As at As at
31 December 31 August
2021 2020
Note
£ £
Assets
Current assets
Cash and cash equivalents 4,462,965 5,487,991
Other receivables 13 2,144,950 9,779
Total current assets 6,607,915 5,497,770
Total assets 6,607,915 5,497,770
Current liabilities
Trade and other payables 15 176,929 29,715
176,929 29,715
Non-current liabilities
Incentive shares 16 20,300 12,000
Total liabilities 197,229 41,715
Net Assets 6,410,686 5,456,055
Capital and reserves attributable to equity holders of the parent
Share capital 14 80,334 61,300
Share premium reserve 7,367,052 5,711,086
Capital redemption reserve 49,500 49,500
Accumulated losses (1,086,200) (365,831)
Total Equity 6,410,686 5,456,055
Consolidated Statement for Changes in Equity for the period ended 31 December
2021
Notes Share Share Capital Accumulated Total
capital Premium Redemption losses equity
reserve reserve
£ £ £ £ £
Balance as at 31 August 2019 61,300 5,711,086 49,500 (191,320) 5,630,566
Loss for the year - - - (174,511) (174,511)
Balance as at 31 August 2020 61,300 5,711,086 49,500 (365,831) 5,456,055
Loss for the period - - (720,369) (720,369)
Transactions with owners in their capacity as owners
Issue of shares 19,034 1,655,966 - - 1,675,000
Balance as at 31 December 2021 80,334 7,367,052 49,500 (1,086,200) 6,410,686
Consolidated Statement Cash Flows for the period ended 31 December 2021
Period ended Year ended
31 December 2021 31 August 2020
Note
£ £
Cash flows from operating activities
Operating loss (722,384) (186,552)
Adjustments to reconcile loss before income tax to operating cash flows:
(Increase) / decrease in other receivables 13 (2,135,171) 5,891
Increase in trade and other payables 15,16 147,214 8,774
Bank interest received 2,015 12,041
Net cash used in operating activities (2,708,326) (159,846)
Cash flows from financing activities
Proceeds from issue of share capital 14 1,675,000 -
Proceeds from issue of Subsidiary share capital 16 20,300 -
Buyback of Subsidiary share capital 16 (12,000) -
Net cash generated from financing activities 1,683,300 -
Net decrease in cash and cash equivalents (1,025,026) (159,846)
Cash and cash equivalents at beginning of the period 5,487,991 5,647,837
Cash and cash equivalents at the end of the period 4,462,965 5,487,991
Notes to the Financial Statements for the period ended 31 December 2021
1. GENERAL INFORMATION
Summerway Capital plc, which was renamed Celadon Pharmaceuticals Plc post the
period end on 25 March 2022, was an investing company (for the purposes of the
AIM Rules for Companies) during the period. On completion of the acquisition
of Vertigrow, which occurred on 28 March 2022, the Company ceased to be an
investing company under the AIM Rules. The Company is incorporated in
England and Wales and domiciled in the United Kingdom (company number:
11545912). It is a public limited company and the address of the registered
office is 32-33 Cowcross Street, London EC1M 6DF. The Company is the parent
company of Summerway Subco Limited (company number: 11565845). During the
period, the activity of the Company was the investment, acquisition and
subsequent development of companies where the Directors believe there were
tangible opportunities to drive strategic, operational and performance
improvement, either as a standalone entity or as a result of broader
initiatives.
2. BASIS OF PREPARATION
These financial statements have been prepared in accordance with International
Accounting Standards in conformity with the requirements of the Companies Act
2006. The financial statements have been prepared under the historical cost
convention.
The financial statements are presented in Pounds Sterling. All amounts,
unless otherwise stated, have been rounded to the nearest Pound.
The financial information set out in this preliminary announcement does not
constitute the Group's statutory financial statements for the periods ended 31
December 2021 or 31 August 2020. The financial information has been extracted
from the Group's statutory financial statements for the period ended 31
December 2021. The auditors have reported on those financial statements; their
report was unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis and did not contain a statement
under Section 498(2) or (3) of the Companies Act 2006.
The statutory accounts for the period ended 31 December 2021 will be filed
with the Registrar of Companies following the Company's Annual General
Meeting. The statutory accounts for the period ended 31 August 2020 have been
filed with the Registrar of Companies. The report of the auditors on those
statutory accounts was also unqualified, and also did not contain a statement
under section 498(2) or (3) of the Act.
The preparation of financial statements in compliance with adopted
International Accounting Standards in conformity with the requirements of the
Companies Act 2006 requires the use of certain critical accounting
estimates. It also requires management to exercise judgement in applying
those accounting policies. The areas where significant judgements and
estimates have been made in preparing these financial statements and their
effect are disclosed in Note 5.
The principal accounting policies adopted in the preparation of the financial
statements are set out below. The policies have been consistently applied to
all periods presented unless otherwise stated. As a result of the change in
accounting reference date for the Company during the period to the 31
December, the results for 31 December 2021 include 16 months of trading,
whereas the results for the comparative period, being 31 August 2020, only
include 12 months of trading for that financial year ended 31 August 2020.
3. PRINCIPAL ACCOUNTING POLICIES
3.1 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS
The Group applied standards, amendments and interpretations which are
effective for annual periods commencing on or after 1 September 2020. There
were no material effects of adopting these. There are a number of standards,
amendments to standards, and interpretations which have been issued by the
IASB that are effective in future accounting periods that the group has
decided not to adopt early. The most significant of these are:
· Amendments to IFRS 3: Business Combinations (applicable for
accounting periods beginning on or after 1 January 2022);
· IAS 8: Accounting Policies, Changes in Accounting Estimates and
Errors (applicable for accounting periods beginning on or after 1 January
2023);
· IAS 12: Income Taxes (applicable for accounting periods beginning
on or after 1 January 2023); and
· IAS 37: Provisions, Contingent Liabilities and Contingent Assets
(applicable for accounting periods beginning on or after 1 January 2022).
The Group does not currently expect any material impact of the above standards
or any other standards issued by the IASB, but not yet effective.
3.2 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.
3.3 GOING CONCERN
The Group's unaudited cash balance as at 22 April 2022 was £12.1 million,
which was subsequent to the recently completed placing announced on 28 March
2022 that raised gross equity placing proceeds of £8.5 million concurrently
with the completion the acquisition of Vertigrow. As part of the Company's
readmission to AIM, substantial working capital sensitivity analysis was
performed by the Company to model various scenarios under which the Company's
performance may deviate from its plan. The resultant analysis was presented
to the Board of the Company and included scenarios whereby the Company was
unable to generate revenue at the rate it expected to do so, or indeed at all,
as well as modelling theoretical cost overruns. The Company's unaudited cash
balance was shown to be sufficient in funding the ongoing expenditure
requirements of the Company and its subsidiaries under all of the modelled
scenarios, and as such, the Company has adequate resources to continue in
business for at least twelve months from approval of this financial
information.
For this reason, they continue to adopt the going concern basis in preparing
the financial information.
3.4 SEGMENT REPORTING
The accounting policy for identifying segments is based on internal management
reporting information which is reviewed by the chief operating decision
maker. The Group is considered to have a single business segment, being the
identification and acquisition of companies or businesses.
3.5 FOREIGN CURRENCIES
Assets and liabilities in foreign currencies are translated into Sterling at
the rates of exchange ruling at the statement of financial position date.
Transactions in foreign currencies are translated into Sterling at the rates
of exchange ruling at the date of the transaction. Exchange differences are
taken into account in arriving at the operating result.
3.6 TAXATION
Current taxes are based on the results shown in the financial statements and
are calculated according to local tax rules, using tax rates enacted or
substantively enacted by the statement of financial position date.
The tax currently payable is based on the taxable profit for the year.
Taxable profit/(loss) differs from the net profit/(loss) reported in the
statement of comprehensive income as it excludes items of income or expense
that are taxable or deductible in other years and it further excludes items
that are never taxable or deductible.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which the deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary differences arise from the initial recognition
(other than in a business combination) of other assets or liabilities in a
transaction that affects neither the tax profit nor the accounting profit.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax
is charged or credited in the statement of comprehensive income, except when
it relates to items charged or credited directly to equity, in which case
deferred tax is also dealt with in equity.
3.7 CURRENT VERSUS NON-CURRENT CLASSIFICATION
The Group present assets and liabilities in the statement of financial
position based on current/non-current classification. An asset is current
when it is:
· expected to be realised or intended to be sold or consumed in the
normal operating cycle; or
· held primarily for the purpose of trading; or
· expected to be realised within twelve months after the reporting
period; or
· cash or cash equivalents unless restricted from being exchanged
or used to settle a liability for at least twelve months after the reporting
date.
All other assets are classified as non-current.
A liability is current when:
· it is expected to be settled in the normal operating cycle; or
· it is held primarily for the purpose of trading; or
· it is due to be settled within twelve months after the reporting
period; or
· there is no unconditional right to defer the settlement of the
liability for at least twelve months after the reporting date.
The Group classify all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and
liabilities.
3.8 FINANCIAL INSTRUMENTS
Financial assets and liabilities are recognised in the Group's statement of
financial position when the Company and Group becomes a party to the
contractual provisions of the instrument. The Group's financial instruments
comprise cash, trade and other receivables and trade and other payables.
Trade, group and other receivables
For purposes of subsequent measurement, trade and other receivables are
classified as financial assets measured at amortised cost.
The Group does not have any financial assets classified as measured at fair
value through OCI or financial assets at fair value through profit or loss.
These financial assets of the Group 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 therefor, 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 manage 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.
Impairment of financial assets
An impairment loss 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.
The Group does not currently have trade receivables. For group and other
receivables, the measurement of impairment losses depends on whether the
financial asset is 'performing', 'underperforming' or 'non-performing' based
on the company's assessment of increases in the credit risk of the financial
asset since its initial recognition and any events that have occurred before
the year-end which have a detrimental impact on cash flows. The financial
asset moves from 'performing' to 'underperforming' when the increase in credit
risk since initial recognition becomes significant.
In assessing whether credit risk has increased significantly, the company
compares the risk of default at the year-end with the risk of a default when
the investment was originally recognised using reasonable and supportable past
and forward-looking information that is available without undue cost.
The risk of a default occurring takes into consideration default events that
are possible within 12 months of the year-end ("the 12-month expected credit
losses") for 'performing' financial assets, and all possible default events
over the expected life of those receivables ("the lifetime expected credit
losses") for 'underperforming' financial assets.
Impairment losses and any subsequent reversals of impairment losses are
adjusted against the carrying amount of the receivable and are recognised in
profit or loss.
Financial liabilities and equity
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.
Trade, group and other payables
Trade and other payables are initially measured at fair value, net of direct
transaction costs and subsequently measured at amortised cost.
Derecognition of financial assets (including write-offs) and financial
liabilities
A financial asset (or part thereof) is derecognised when the contractual
rights to cash flows expire or are settled, or when the contractual rights to
receive the cash flows of the financial asset and substantially all the risks
and rewards of ownership are transferred to another party.
When there is no reasonable expectation of recovering a financial asset it is
derecognised ('written off'). The gain or loss on derecognition of financial
assets measured at amortised cost is recognised in profit or loss.
A financial liability (or part thereof) is derecognised when the obligation
specified in the contract is discharged, cancelled or expires.
3.9 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;
· Retained deficit represent accumulated net gains and losses from
incorporation recognised in the Statement of Comprehensive Income
4 CAPITAL MANAGEMENT
The Company defines capital as the total equity of the Company. The
objective of the Company's capital management is to ensure that it makes the
maximum use of its capital to support its business and to maximise shareholder
value. There are no external constraints on the Company's capital.
5 CRITICAL JUDGEMENTS AND ACCOUNTING ESTIMATES
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
expenditure may differ from these estimates and assumptions. The estimates
and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial
year are discussed below:
Valuation and classification of incentive share scheme
The Board amended its previously implemented incentive scheme on the 15
January 2021. This resulted in the buyback and cancellation of the 999,999 B
shares of £0.01 in the subsidiary undertaking, to the Executive Directors of
the Company at a price of £0.012 per share, and the issuance of 1,450,000 new
B shares of £0.01 in the subsidiary undertaking to certain new participants,
including Directors and advisers to the Company.
Critical judgements and accounting estimates have been exercised by management
in respect of the incentive shares:
· in determining the classification of the incentive shares as a
financial liability rather than equity in the statement of financial position,
as the B shares issued in the subsidiary do not contain any voting rights and
are not permitted to participate in any ordinary dividends declared by the
Company;
· in presenting the financial liability as non-current in the
statement of financial position as the valuation mechanism in the incentive
share arrangement is measured over a three-year and five-year period; and
· in assessing the most appropriate valuation method to apply to
estimate the fair value of the incentive share liability as at 31 December
2021. See Note 16 for further details.
Valuation and classification of warrant instrument
On 15 January 2021, the Company issued Vin Murria with 3,246,062 warrants
which provided for a right to subscribe for an addition 3,246,062 additional
new ordinary shares of the Company at an exercise price of 88 pence per share.
The warrants were exercisable in whole or in part during an exercise period
commencing on the date of issue of the warrants and terminating 18 months
after the date of issue.
Critical judgements and accounting estimates have been exercised by management
in respect of the warrant in estimating the fair value of the Company's
underlying share price at the date of issue of the warrant instrument and
calculation of any share-based payments charge as at 31 December 2021.
Specifically, management calculated the fair value of the Company's underlying
share price to be 88 pence per share as at 15 January 2021, which is in line
with the exercise price of 88 pence per share. This management judgement was
based upon the following factors:
· 88 pence per share equated to the net asset value per share for
the Company at the time of issue of the warrants;
· Vin Murria, the then holder of the warrants, concurrently with
the issue of the warrants acquired shares from an existing shareholder in the
Company for 85 pence per share and subscribed for new shares in the Company at
88 pence per share; and
· The warrant exercise price was determined prior to the
announcement of the proposed directorate changes on 15 December 2020 where
such undisturbed pre-announcement price per share was 85 pence per share.
As a result of management determining that the exercise price of 88 pence per
share was in line with the fair market value price of 88 pence per share at
the time of the warrant issue, the share-based payment charge attaching to the
warrant is nil.
6 SEGMENTAL REPORTING
For management purposes, the Group is considered to have one single business
segment, being the identification and acquisition of companies and
businesses. The Group comprises Celadon Pharmaceuticals Plc (formerly
Summerway Capital Plc) and its subsidiary company Summerway SubCo Limited.
The two companies do not transact with each other. Further segment
information is therefore not presented in these financial statements.
7 ADMINISTRATION EXPENSES
Period ended 31 December Year ended 31 August
2021 2020
£ £
Group expenses by nature
Staff related costs 135,974 54,780
Office costs - 21,890
NOMAD, registrar and Stock Exchange costs 52,801 46,391
Audit, accountancy & professional costs 516,051 50,997
Other expenses 17,558 12,494
722,384 186,552
8 EMPLOYEES AND DIRECTORS
31 December 2021 31 August 2020
£ £
Wages and salaries 135,945 54,000
Social security costs - -
Other pension costs - -
135,945 54,000
The average monthly number of employees during the period year, including the
Directors, was 4.
Key management personnel
The Directors are currently considered to be the key management personnel of
the Group. The total remuneration paid to Directors during the period was
£135,945 (2021: £54,000). There were no pension contributions paid on behalf
of the Directors. The breakdown of individual Director's remuneration is shown
in the Report of the Remuneration Committee within the Company's annual report
and accounts.
9 FINANCE INCOME
2021 2020
£ £
Finance income:
Deposit account interest 2,015 12,041
2,015 12,041
10 LOSS BEFORE INCOME TAX
The loss before income tax is stated after charging:
2021 2020
£ £
Auditor's remuneration:
Audit fees 25,467 19,200
Reporting accountant fees 82,000 -
107,467 19,200
11 INCOME TAX
The Group has reported a loss of £720,369 (2020: £174,511). No revenue has
been generated in the period and no significant differences exist between the
tax charge of £Nil recognised in these financial statements and that
calculated by applying the standard rate of United Kingdom corporation tax. No
deferred tax asset is recognised on these losses as at 31 December 2021 due to
uncertainty over the expected timing of future profits with which to offset
the losses.
Following the change announced in the UK Government's 2021 Budget, the
standard rate of UK corporation tax will rise from 19% to 25%, effective from
1 April 2023.
12 LOSS PER SHARE
Basic loss per ordinary share is calculated by dividing the loss attributable
to equity holders of the Company by the weighted average number of ordinary
shares in issue during the period.
Period ended 31 December 2021 Year ended 31 August 2020
Loss attributable to the owners of the Company £ (720,369) £ (174,511)
Weighted average number of ordinary shares in issue 7,501,862 6,130,000
Basic and diluted loss per share (9.60) p (2.85) p
13 OTHER RECEIVABLES
All receivables are current. There is no material difference between the book
value and the fair value of receivables.
As at As at
31 December 31 August
2021 2020
£ £
Amounts falling due within one year
Prepayments 10,301 9,180
Other receivables 2,134,649 599
2,144,950 9,779
14 CALLED UP SHARE CAPITAL
As at As at
31 December 31 August
2021 2020
£ £
Issued
8,033,409 (2019: 6,130,000) ordinary shares of 1p each 80,334 61,300
80,334 61,300
On 15 January 2021 1,903,409 ordinary shares of £0.01 each were issued to Vin
Murria at a placing price of 88 pence per share and were admitted to trading
on AIM.
15 TRADE AND OTHER PAYABLES
There is no material difference between the book value and the fair value of
the trade and other payables.
Group Group
As at As at
31 December 31 August
2021 2020
£ £
Trade payables 41,696 315
Accruals 132,183 28,800
Other tax and social security payables 3,050 600
176,929 29,715
16 NON-CURRENT LIABILITIES
As at As at
31 December 31 August
2021 2020
£ £
Incentive shares issued October 2018 - 12,000
Incentive shares issued January 2021 20,300 -
20,300 12,000
Movement in the period ended 31 December 2021 Movement in the year ended 31 August 2020
£ £
Opening balance 12,000 12,000
Share buyback (12,000) -
Share issuance 20,300 12,000
20,300 12,000
The incentive shares liability is estimated at fair value through profit and
loss using level 3 fair value measurement techniques.
Fair values are categorised into different levels in a fair value hierarchy
based on the degree to which the inputs to the measurement are observable and
the significance of the inputs to the fair value measurement in its entirety:
· Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or liabilities.
· Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
· Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The B shares issued by the subsidiary under the incentive scheme were deemed
to have an implied aggregate subscription price of £20,300, based on the
nominal value per B share plus a premium. The initial subscription price of
the incentive shares remains the best estimate of the fair value of the
liability associated with the incentive shares as none of the criteria for
potential value creation have been met as at 31 December 2021. The fair value
of the liability is assessed at each reporting date with any changes accounted
for as a fair value gain or loss and recognised directly in the statement of
comprehensive income.
Further details regarding the incentive scheme and B shares are included in
Notes 18 and 20.
17 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS - GROUP
Carrying amount of financial assets
The carrying amounts of financial assets by category were:
As at As at
31 December 31 August
2021 2020
£ £
Financial assets measured at amortised cost:
- Cash and cash equivalents 4,462,965 5,487,991
- Other receivables 2,134,648 599
6,597,613 5,488,590
Carrying amount of financial liabilities
The carrying amounts of financial liabilities by category were:
As at As at
31 December 31 August
2021 2020
£ £
Financial liabilities measured at amortised cost:
- Trade and other payables 173,878 29,115
Financial liabilities measured at fair value through profit and loss:
- Incentive shares liability 20,300 12,000
194,178 41,115
The carrying amounts of financial assets and financial liabilities reasonably
approximate to fair value.
Risks arising from financial instruments
Credit risk
The risk that counterparties will fail to settle amounts due to the company
predominantly arises from cash and cash equivalents. Credit risk on cash and
cash equivalents is limited by depositing funds with banks with high credit
ratings assigned by international credit rating agencies.
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting
obligations associated with financial liabilities. The Group closely monitors
its cash position to ensure that it has sufficient funds to meet the
obligations of the Group as they fall due.
18 RELATED PARTY DISCLOSURES
Parties are considered to be related if one party has the ability to control
the other party or exercise significant influence over the other party, or the
parties are under common control or influence, in making financial or
operational decisions.
Service agreements
Between 1 September 2020 and up until 15 January 2021, under the terms of
their respective service agreements, the Executive Directors during the period
were each paid a salary of £1,000 per calendar month, monthly in arrears. The
Non-Executive Director was paid a monthly fee of £1,500 per calendar month.
On 15 January 2021 a number of directorate changes occurred, and from this
date through to 21 September 2021, the Non-Executive Directors were each paid
a monthly fee of £1,500 per calendar month.
On 21 September 2021, a further set of directorate changes occurred, and the
Non-Executive Director fees were increased to £3,333 per calendar month for
David Firth and Liz Shanahan, with Benjamin Shaw entering into a new Interim
Chairman's service agreement, remaining on £1,500 per calendar month.
The Directors holding office as at 31 December 2021 and their connected
persons held a total of 500,000 ordinary shares in the Company, representing
6.2 per cent of the issued share capital of the Company as at 31 December
2021.
Administrative and accounting services
The Company engaged Fraser Real Estate, a company in which Alexander Anton,
the current Chairman of the Company is an indirect shareholder to provide
administrative and accounting services during the period. The Company paid
Fraser Real Estate £2,964 during the period for the provision of these
services.
Placing agreement and issue of warrants
On 15 January 2021, the Company raised gross proceeds of £1,675,000 through
the issuance of 1,903,409 new ordinary shares of the Company to Vin Murria,
the then Chairman of the Company, at a placing price of 88 pence per share. At
the same time, the Company issued Vin Murria with 3,246,062 warrants which
provided for a right to subscribe for an addition 3,246,062 additional new
ordinary shares of the Company at an exercise price of 88 pence per share. The
warrants were exercisable in whole or in part during an exercise period
commencing on the date of issue of the warrants and terminating 18 months
after the date of issue. Vin Murria also purchased 500,000 existing ordinary
shares at 85 pence per share from a shareholder on 15 January 2021.
Corporate advisory agreements
The Corporate Advisory Agreement entered into between the Company and AFS
Advisors LLP (an entity wholly-owned by Alexander Anton, Benjamin Shaw and
Mark Farmiloe, Directors of the Company during the period) was terminated at
nil cost to the Company on 15 January 2021.
At the same time, the Company entered in a new agreement with Tessera
Investment Management Limited ("Tessera") pursuant to which Tessera has agreed
to provide strategic and general corporate advice, and M&A and capital
raising transaction support services to the Company (the "Tessera Corporate
Advisory Agreement"). Tessera charged £12,500 per month (plus VAT) payable
monthly in arrears from the date of the agreement. On 21 September 2021,
Tessera and the Company entered into a termination agreement under which it
was agreed between the parties that the Tessera Corporate Advisory Agreement
would terminate on 28 March 2022. Tony Morris was a Non-Executive Director of
the Company during the period, and is a director and shareholder of Tessera.
Resignation Letters
On 15 January 2021, Alexander Anton and Mark Farmiloe resigned as directors of
the Company. Under the terms of the resignation letters, each exiting
director received accrued but unpaid directors' fees up to the 15 January
2021.
On 21 September 2021, Vin Murria, Paul Gibson and Tony Morris resigned as
directors of the Company. Under the terms of the resignation letters, each
exiting director received a compensation payment for loss of office of
£9,000. In addition, it was agreed with Vin Murria that the warrant
instrument issued on 15 January 2021 be cancelled. Vin Murria also agreed to
the buyback of her B Shares acquired under the Subsidiary Incentive Scheme.
In addition, Tony Morris agreed to the buyback of 50,000 of his B Shares
acquired under the Subsidiary Incentive Scheme. Both buybacks were completed
at the original subscription cost of £0.014 per B Share.
Irrevocable Undertakings
Vin Murria also entered into an irrevocable undertaking with the Company under
which, as beneficial owner of 1,403,409 ordinary shares of the Company, agreed
to vote those shares in favour of the Company's change of investing policy and
also in favour of the Company's proposed acquisition of Vertigrow and other
related resolutions to be tabled to Shareholders as part of the AIM reverse
takeover transaction approval process.
Benjamin Shaw, Interim Chairman of the Company during the period entered into
an irrevocable undertaking on behalf of himself and Romana Capital LLP under
which he agreed to vote 500,000 ordinary shares of the Company in favour of
the Company's proposed acquisition of Vertigrow and other related resolutions
to be tabled to Shareholders as part of the AIM reverse takeover transaction
approval process.
Subsidiary Incentive Scheme
On 15 January 2021, the Company made certain adjustments to the Subsidiary
Incentive Scheme in order to recognise the proposed change in strategic
direction of the Company at that stage and the expectation that the incoming
team and others would be instrumental in leading the execution of this revised
strategy, and in turn, the anticipated creation of Shareholder Value.
A summary of the key amendments compared to the original Subsidiary Incentive
Scheme are set out in the following table.
Item Previous Subsidiary Incentive Scheme Amended Subsidiary Incentive Scheme
Percentage of Shareholder Value available to Scheme Participants (pre 10 per cent. Up to 20 per cent.
acquisition of, or investment in operating company)
Target compound annual growth rate hurdle 13.5 per cent. 7.5 per cent.
Commencement date On Admission 15 January 2021
Initial Value Market capitalisation on Admission Unchanged
Vesting period Three- to five-year period or upon a change of control of the Company or the Unchanged
Subsidiary
Scheme Participants, respective B Share holdings Alexander Anton - 333,333 Alexander Anton - 75,000
and current aggregate Shareholder Value participation Benjamin Shaw - 333,333 Benjamin Shaw - 75,000
Mark Farmiloe - 333,333 Mark Farmiloe - 75,000
Tony Morris - 175,000
Vin Murria - 1,000,000
Paul Gibson - 50,000
Aggregated - 1,450,000
Under the Subsidiary Incentive Scheme, participants are only rewarded if a
predetermined level of Shareholder value is created over a three-year period,
a five-year period, or upon a change of control of the Company (whichever
occurs first), which is calculated 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.
From 15 January 2021, participants are entitled to up to 20 per cent. of the
Shareholder value created, subject to such Shareholder value having increased
by 7.5 per cent. per annum compounded over a period of between three and five
years from 15 January 2021 or following a change of control of the Company or
the Subsidiary.
Under the amendments to the Subsidiary Incentive Scheme, Alexander Anton's,
Benjamin Shaw's and Mark Farmiloe's original B share allocations were subject
to a buyback by the Company at their original subscription price of £0.012
per B share for a total consideration of £4,000 each (£12,000 in aggregate)
(see Note 16).
Following this buyback, the articles of the Subsidiary were amended in order
to implement the proposed changes to the Subsidiary Incentive Scheme.
Alexander Anton, Benjamin Shaw, Mark Farmiloe, Tony Morris, Vin Murria and
Paul Gibson subscribed for newly issued B shares at a revised subscription
price of £0.014 per B share. Under certain circumstances, the Company is
entitled to buy back the B shares at the price paid by Subsidiary Incentive
Scheme participants. (see Note 16).
The allocation of B shares in issue as at 31 December 2021 are set out below.
Name
B Shares held
Alexander Anton 75,000
Benjamin Shaw
75,000
Mark Farmiloe
75,000
Tony
Morris
175,000
Vin
Murria
1,000,000
Paul
Gibson
50,000
Total
1,450,000
On 21 September 2021, and in conjunction with the resignations of Vin Murria,
Paul Gibson and Tony Morris, Vin Murria (former Chairman of the Company)
agreed with the Company the buyback of her 1,000,000 B Shares at the original
subscription price of £0.014 per B Share. In addition, Tony Morris (former
Non-Executive Director of the Company) agreed with the Company the buyback of
50,000 B Shares at the original subscription price of £0.014 per B Share.
Both buybacks and certain amendments to the Subsidiary Incentive Scheme were
undertaken in conjunction with the completion of the acquisition of Vertigrow,
and are summarised further in the Company Admission Document which was
published on 28 February 2022, and in Note 20.
19 COMMITMENTS AND CONTINGENT LIABILITIES
There were no commitments or contingent liabilities outstanding at 31 December
2021 that require disclosure or adjustment in these financial statements.
20 POST BALANCE SHEET EVENTS
Placing Agreement
The Company and Canaccord Genuity entered into a placing agreement ("Placing
Agreement") on 28 February 2022. Pursuant to the Placing Agreement, Canaccord
Genuity has agreed, subject to certain conditions, to act as agent for the
Company and to use its reasonable endeavours to procure placees to subscribe
for the placing shares that are not subscription shares as part of the
Enlarged Group's readmission to AIM.
The Placing Agreement contains warranties from the Company and Directors in
favour of Canaccord Genuity in relation to, inter alia, the accuracy of the
information in the Circular and other matters relating to the Company and its
business. In addition, the Company has agreed to indemnify Canaccord Genuity
in respect of certain liabilities it may incur in respect of the placing.
Canaccord Genuity has the right to terminate the Placing Agreement in certain
circumstances prior to completion of the placing and Admission respectively,
in particular, in the event of a material breach of the warranties or a force
majeure event.
The Placing Agreement is governed by English law.
Canaccord Nomad and Broker Agreement
This agreement was mutually amended on 25 February 2022 so as to be replaced
by a new nominated adviser and broker agreement covering Canaccord Genuity's
role as nominated adviser and broker to the Group. The agreement contains
certain undertakings, warranties and indemnities given by the Company to
Canaccord Genuity. The agreement is terminable upon not less than 3 months
prior written notice by either the Company or Canaccord Genuity.
The nominated adviser and broker agreement is governed by English law.
General Meeting and Admission of the Company's enlarged share capital to AIM
On 25 March 2022, the Company held its General Meeting which was called on 28
February 2022 to approve the acquisition of Vertigrow and certain other
related matters including the issuance and allotment of shares pursuant to the
placing, subscription, and consideration shares, as well as the change of name
for Summerway Capital Plc. All resolutions were successfully passed and as
such, the acquisition of Vertigrow completed on 28 March 2022, and the
Company's name was changed to Celadon Pharmaceuticals plc. At the same time,
the Company's enlarged share capital was admitted to trading on AIM.
Placing and issue of equity
On 28 March 2022, the Company raised gross proceeds of £8.5 million through
the issuance of 5,151,516 new ordinary shares of the Company to certain
institutional and high net worth investors at a placing price of 165 pence per
share.
Acquisition
On 28 March 2022, the Company completed the acquisition of Vertigrow for total
consideration of £80 million, which was satisfied through the issuance of
48,484,848 consideration shares to the Vertigrow vendors at a price of 165
pence per share.
The Company are currently in the process of undertaking a valuation exercise
to fair value the acquired assets of Vertigrow and anticipate completing this
process during the new financial year ending 31 December 2022.
Directorate changes
On 28 March 2022, the Company reconstituted its Board of Directors in line
with its Admission Document which was published on 28 February 2022. This
included the resignation of Benjamin Shaw, Interim Chairman of the Company
during the period, and the appointment of a number of new directors to the
Company, including Alexander Anton, Robert Barr and Dr Steven Hajioff as
Non-Executive Directors and James Short and Kathleen Long as Executive
Directors.
Following these directorate changes, the current Board of Directors for the
Company is set out below.
Alexander Anton - Chairman (appointed 28 March 2022)
Robert Barr - Senior Independent Non-Executive Director (appointed 28 March
2022)
David Firth - Independent Non-Executive Director
Elizabeth Shanahan - Independent Non-Executive Director (appointed 21
September 2021)
Dr Steven Hajioff - Independent Non-Executive Director (appointed 28 March
2022)
James Short - Chief Executive Officer (appointed 28 March 2022)
Kathleen Long - Chief Financial Officer (appointed 28 March 2022)
Share capital and Directors' holdings
As a result of the completion of the placing and acquisition of Vertigrow, the
Company issuance of 53,636,364 new ordinary shares, and the Company's total
issued share capital is 61,669,773 ordinary shares of 1p each.
As at 21 April 2022, the Directors and their connected persons hold a total of
27,424,072 ordinary shares in the Company, representing 44.5 per cent. of the
Company's total issued share capital.
Amendments to Subsidiary Incentive Scheme
On 28 March 2022, the Company amended its Subsidiary Incentive Scheme in order
to incentivise and retain certain key employees and directors of, and advisers
to, the Company.
Under the terms of the Subsidiary Incentive Scheme, the principles will remain
in line with the Company's existing scheme such that 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"), and realised by participants through the exercising of
a put option in respect of their Subsidiary B Shares and satisfied either in
cash or by the issue of new Ordinary Shares at the election of the Company.
On 28 March 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. 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.
Overall, therefore, the maximum dilution from the Subsidiary Incentive Plan
will be 16.5 per cent. of the Shareholder Value generated above the specified
threshold amounts (and this is contingent on achieving the specified annual
growth rates) across each individual class of Subsidiary B Share. A summary
of the changes made to the Subsidiary Incentive Scheme post the period end are
set out in the following table.
Item Previous Subsidiary Incentive Scheme Amended Subsidiary Incentive Scheme
Date in place 15 January 2021 to 28 March 2022 From 28 March 2022
Percentage of Shareholder Value available to Scheme Participants (pre Up to 20 per cent. 16.5 per cent.
acquisition of, or investment in operating company)
Target compound annual growth rate hurdle 7.5 per cent. B1 Shares - 7.5 per cent.
B2 / B3 Shares - 17.5 per cent.
Commencement date 15 January 2021 B1 Shares - 15 January 2021
B2 / B3 Shares - 28 March 2022
Initial Value £7.6 million B1 - £96.3 million
B2 - £81.8 million
B3 - £101.8 million
Vesting period 3 to 5 years from 15 January 2021 B1 - 3 to 5 years from 15 January 2021
B2 / B3 - 3 to 5 years from 28 March 2022
Scheme Participants, respective B Share holdings Alexander Anton - 75,000 Alexander Anton - 241,666
and current aggregate Shareholder Value participation Benjamin Shaw - 75,000 Benjamin Shaw - 241,667
Mark Farmiloe - 75,000 Mark Farmiloe - 241,667
Tony Morris - 175,000 Tony Morris - 125,000
Vin Murria - 1,000,000 Paul Gibson - 50,000
Paul Gibson - 50,000 James Short - 200,000
Aggregated - 1,450,000 Kathleen Long - 150,000
Arthur Wakeley - 300,000
Iqbal Gill - 100,000
Aggregated - 1,650,000
If a participant ceases to be employed or engaged by the Company for a 'bad
leaver' reason (fraud or gross negligence), the Company Subsidiary will have
the right to buy-back their Subsidiary B Shares for a price equal to the
original subscription price paid by the participant. In relation to the new
awards of B3 Shares to selected members of the Celadon management team, the
Subsidiary B Shares will also be subject to time-based annual vesting over 3
years. If a participant ceases to be employed by the Company (not as a 'bad
leaver') then the Company will also have the right to buy-back their unvested
Subsidiary B Shares for a price equal to the original subscription price paid
by the participant.
Related Party Disclosures
In conjunction with the completion of the acquisition of Vertigrow and the
admission of the Company's enlarged share capital to AIM on 28 March 2022, the
Company has entered into, amended and terminated a number of related party
arrangements. These are set out below.
Service agreements
On 25 February 2022 the Company entered into a service agreement with James
Short. The contract provides for James Short to act as Chief Executive Officer
of the Company at a salary of £245,000 per annum. The service agreement is
terminable by either party giving not less than six months' prior notice in
writing. Under the service agreement, James Short is entitled to 25 paid
working days' holiday each year in addition to public holidays in England and
Wales, to participate in a discretionary bonus scheme, participate in the
Enlarged Group's pension scheme, and to participate in any benefit schemes
provided by the Company, including medical and employee life insurance. James
Short is subject to non-competition and non-solicitation covenants for a
period of 12 months following termination of his employment with the Company
and to a confidentiality undertaking.
On 25 February 2022 the Company entered into a service agreement with Kathleen
Long. The contract provides for Kathleen Long to act as Chief Financial
Officer of the Company at a salary of £100 per hour, capped at £750 per day
and £3,750 per week. The service agreement is terminable by either party
giving not less than six months' prior notice in writing. Under the service
agreement, Kathleen Long is entitled on a pro rata basis to 25 paid working
days' holiday each year in addition to public holidays in England and Wales,
to participate in a discretionary bonus scheme, participate in the Group's
pension scheme, and to participate in any benefit schemes provided by the
Company, including medical and employee life insurance. Kathleen Long is
subject to non-competition and non-solicitation covenants for a period of 12
months following termination of her employment with the Company and to a
confidentiality undertaking.
Alexander Anton is engaged by the Company as a Non-Executive Director on the
terms of a letter of appointment dated 25 February 2022 for an initial term of
12 months or until the first annual general meeting of the Company, terminable
thereafter on not less than three months' prior written notice. Alexander
Anton receives a fee of £50,000 per annum and is subject to confidentiality
undertakings. He is not entitled to any payment on termination of his
appointment by the Company, other than for fees due in respect of his notice
period and reimbursement of any expenses properly incurred before the date of
termination.
Robert Barr is engaged by the Company as a Non-Executive Director on the terms
of a letter of appointment dated 25 February 2022 for an initial term of 12
months or until the first annual general meeting of the Company, terminable
thereafter on not less than three months' prior written notice. Robert Barr
receives a fee of £50,000 per annum and is subject to confidentiality
undertakings. He is not entitled to any payment on termination of his
appointment by the Company, other than for fees due in respect of his notice
period and reimbursement of any expenses properly incurred before the date of
termination.
Dr Steven Hajioff is engaged by the Company as a Non-Executive Director on the
terms of a letter of appointment dated 25 February 2022 for an initial term of
12 months or until the first annual general meeting of the Company, terminable
thereafter on not less than three months' prior written notice. Steven Hajioff
receives a fee of £35,000 per annum and is subject to confidentiality
undertakings. He is not entitled to any payment on termination of his
appointment by the Company, other than for fees due in respect of his notice
period and reimbursement of any expenses properly incurred before the date of
termination.
Subsidiary Incentive Scheme
On the 11 April 2022, and pursuant to the amended Subsidiary Incentive Scheme,
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
Kathleen Long (Chief Financial Officer) - - 150,000 150,000
Issued to other employees / consultants - - 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.
Irrevocable undertakings
During February 2022, Alexander Anton and Benjamin Shaw entered into
irrevocable undertakings pursuant to which they each agreed to vote their
direct and indirect holdings in favour of the resolutions being tabled to the
Company's General Meeting which was held on 25 March 2022.
Subscription agreements
During February 2022, David Firth and Robert Barr entered into subscription
agreements with the Company pursuant to which they agreed to subscribe for
12,121 and 45,454 ordinary shares respectively as part of the Company's
placing, which completed on 28 March 2022.
Relationship agreement
The Company has entered into a relationship agreement dated 25 February 2022
with James Short to regulate aspects of the continuing relationship between
the Company and James Short. In particular, for so long as James Short and his
associates (within the meaning of the AIM Rules for Companies) hold an
aggregate interest in voting rights representing at least 20 per cent. of the
voting rights of the issued ordinary share capital of the Company, James Short
has agreed to ensure that, amongst other matters, the Company is capable at
all times of carrying on its business independently and that transactions
between the parties are on arm's length basis terms and on normal commercial
terms.
Lock-ins
The Directors who held ordinary shares following admission of the enlarged
share capital of the Company to AIM, entered into an undertaking to Canaccord
Genuity and the Company not to dispose of any interests in ordinary shares
owned by them (subject to, and to the extent permitted by Rule 7 of the AIM
Rules, certain limited exceptions) without the prior consent of Canaccord
Genuity for one year from the date of admission, with such shares remaining
subject to a further 12 month orderly market provision thereafter.
Market purchases
On 10 March 2022, Alexander Anton acquired 10,000 ordinary shares of the
Company 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 Company to Vertigrow
shareholders, 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.
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