REG - Oxford Cannabinoid - 2022 Final Results
25/07/2022 07:00
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RNS Number : 5270T Oxford Cannabinoid Tech.Holdings 25 July 2022
25 July 2022
Oxford Cannabinoid Technologies Holdings plc
("OCTP", or the "Company")
Final Results for the 11 month period ended 30 April 2022
&
Notice of Annual General Meeting
London, 25 July 2022: Oxford Cannabinoid Technologies Holdings plc (LSE: OCTP,
OTCQB: OCTHF, "OCT or the "Group") the pharmaceutical company developing
prescription cannabinoid medicines for approval by global regulatory agencies
and targeting the US$ multi-billion pain market, is pleased to announce its
final results for the eleven month period ended 30 April 2022 (the "Period")
("Final Results"), which demonstrate the Group is delivering against its
strategic plan set out in its IPO Prospectus in May 2021.
Commenting on the results, Julie Pomeroy, OCTP Non-Executive Chair, said:
"Since the Company's admission to the Official List we have successfully
progressed our research into cannabinoid-based prescription medicines, with
our two lead programmes soon to move forward into first-in-human Phase 1
clinical trials.
"While the pharmaceutical biotech sector as a whole continues to be impacted
by worldwide economic and geo-political events, internally we continue to
focus on increasing shareholder value by delivering against our strategic plan
which should deliver key value inflection points within 11 months as
Programmes 1 and 2 are due to complete phase 1 clinical trials."
Operational Highlights
· Successfully progressed all four current drug development
programmes.
· Group's lead-compound, OCT461201 (Programme 1) a cannabinoid-like
compound for neuropathic and visceral pain, on track to enter phase 1 clinical
trials in Q1 2023.
· OCT130401 (Programme 2), a combination of inhaled
phytocannabinoids for Trigeminal Neuralgia, on course for phase 1 clinical
trials in Q4 2022.
· Current timescales for both programmes to enter phase 2 clinical
trials remain on target.
· New agreements and partnerships signed with well-regarded
organisations during the period including Aptuit (Verona) SRL (a subsidiary
of Evotec SE), Oxford Stemtech Ltd., Dalriada Drug Discovery Inc., Canopy
Growth Corporation and Charles Rivers Laboratories.
· Commencement of trading in the Company's shares on the US OTC QB
market in December 2021, with the aim of improving liquidity and widening the
shareholder base.
· Appointment of Harbor Access LLC as US investor relations
advisers.
Financial Highlights
· Robust balance sheet, debt-free with cash reserves of
approximately £9.2m at period-end (31 May 2021: £14.6m). Cash is forecast to
be fully utilised by March/April 2023.
· Cash absorbed by operations of £5.4m (31 May 2021: £1.9m); Loss
for period of £4.7m (31 May 2021: £3.2m);
· Basic and diluted loss per share of (0.49p) (31 May 2021: 0.50p
loss)
· Cost savings continued, including closure of London office,
expected to generate savings of approximately £130k p.a.
· Research costs (excluding salary costs) increased in line with
budget to £2.9m (31 May 2021: £445k), of which £1.5m relates to OCT461201
and £473k on OCT130401. A further £783k was spent on Programme 3 mainly
relating to the acquisition of the cannabinoid derivative library from Canopy
Growth Corporation.
· Operational costs increased from £1.5m to £2.3m including
salaries and associated costs of £1.1m).
· Exceptional items of £292k (31 May 2021: £1.4m) relate to share
based (non-cash) payment charges (31 May 2021: £1.0m).
· R&D tax credit in the period of £760k (31 May 2021: £139k)
and a £31k positive adjustment from the prior period, with tax losses
surrendered for the R&D tax credit payment.
· Early repayment of £50k government Bounce-Back loan in November
2021.
· Change of accounting year-end to 30 April.
· Establishment of Scientific Advisory Board
Post Period-end highlights
· Appointment of Axis Capital Markets Limited as Corporate Broker
· Master Service Agreement and Work Order signed with Simbec
Research Limited in preparation for the commencement of phase 1 clinical
trials.
On current trading and prospects, John Lucas, CEO, added:
"The Group has continued to deliver against its objective of developing
non-addictive cannabinoid-based licensed prescription medicines for patients
who have been left behind by the opioid crisis. The work that's been completed
during the period means that we will be in phase 1 clinical trials with our
two lead programmes in Q1 2023 which is hugely exciting for both the Group and
our shareholders."
Analyst Briefing, 2:00pm, Today 25 July 2022
A briefing for Analysts will be held at 2:00pm BST today. Analysts interested
in attending should contact Walbrook PR by emailing oxcantech@walbrookpr.com
(mailto:oxcantech@walbrookpr.com) or by calling 020 7933 8780.
Investor Presentation, 4.30pm, Today 25 July 2022
A live online presentation via the Investor Meet Company platform will also be
held at 4.30pm (BST) today, which is open to all existing and potential
shareholders. Questions can be submitted at any time during the live
presentation.
Investors can sign up to Investor Meet Company for free and add to meet Oxford
Cannabinoid Technologies Holdings plc via:
https://www.investormeetcompany.com/oxford-cannabinoid-technologies-holdings-plc/register-investor
(https://www.investormeetcompany.com/oxford-cannabinoid-technologies-holdings-plc/register-investor%20%0d)
Investors who follow OCTP on the Investor Meet Company platform will
automatically receive an invitation to the event.
Notice of Annual General Meeting ("AGM")
The Company's AGM will be held at the offices of Penningtons Manches Cooper
LLP at 125 Wood Street, London on 28 September 2022 at 11.30am.
The following documents will be posted to shareholders in due course:
1. Notice of 2022 AGM;
2. Form of Proxy for the 2022 AGM; and
3. The annual report and accounts for the period ended 30 April 2022.
An announcement will be made regarding the posting of these documents as
appropriate. Once published, hard copies will be available to shareholders
upon request to the Company Secretary at Prama House, 267 Banbury Road, Oxford
OX2 7HT and soft copies will be available for download and inspection from the
Company's website at www.oxcantech.com (http://www.oxcantech.com) and from the
FCA's National Storage Mechanism at
www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism
(http://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism)
.
The financial information set out below does not constitute the Company's
statutory financial statements for the period ended 30 April 2022. The
financial information for 2022 is derived from the statutory accounts for that
period. The auditors, Moore Kingston Smith LLP, have audited the 2022
financial statements. Their report was unmodified but included a material
uncertainty relating to going concern.
The announcement has been prepared on the basis of the accounting policies as
stated in the financial statements for the period ended 30 April 2022. The
information included in this announcement is based on the Company's financial
statements which are prepared in accordance with International Financial
Reporting Standards ("IFRS"). The Company will publish full financial
statements that comply with IFRS on its website in due course.
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 (which forms part of domestic UK law pursuant to the
European Union (Withdrawal) Act 2018).
The Directors of the Company accept responsibility for the content of this
announcement.
Enquiries:
Oxford Cannabinoid Technologies Holdings plc +44 (0)20 3034 2820
Dr John Lucas (CEO) john@oxcantech.com (mailto:john@oxcantech.com)
Clarissa Sowemimo-Coker (COO) clarissa@oxcantech.com
Cairn Financial Advisers
Emily Staples +44 (0)20 7213 0897
Jo Turner +44 (0) 20 7213 0885
Walbrook PR Limited +44 (0)20 7933 8780
Paul Vann +44 (0)7768 807631
Nick Rome oxcantech@walbrookpr.com (mailto:oxcantech@walbrookpr.com)
Harbor Access LLC (US/OTCB enquiries)
Jonathan Paterson +1 (203) 862 0492
Richard Leighton Richard.Leighton@harboraccessllc.com
(mailto:Richard.Leighton@harboraccessllc.com)
About Oxford Cannabinoid Technologies Holdings Plc
Oxford Cannabinoid Technologies Holdings plc is the holding company of Oxford
Cannabinoid Technologies Ltd (together the "Group"), a pharmaceutical Group
developing prescription cannabinoid medicines for approval by key medicines
regulatory agencies worldwide and targeting the U$ multi-billion pain market.
Cannabinoids are compounds found in the cannabis plant that have been shown to
have a range of therapeutic effects on the body, including pain relief. The
Group has a clearly defined path to commercialisation, revenues, and growth.
The Group is developing drug candidates through clinical trials to gain
regulatory approval (FDA/MHRA/EMA) that will enable medical professionals to
prescribe them with confidence.
The Group's portfolio aims to balance risk, value and time to market, whilst
ensuring market exclusivity around all its key activities. The Group's lead
compound, OCT461201, is a highly potent and selective CB2 agonist and is being
developed in a solid oral dosage form. OCTP is conducting pre-clinical testing
and development with clinical trials scheduled for Q1 2023. The Group's
product pipeline also uses a balanced drug product strategy that employs both
natural and synthetic compounds for the treatment of rare diseases and
includes chemically modified phytocannabinoids with improved drug-like
characteristics and a proprietary library of cannabinoids.
OCTP operates a partnership model with external academic and commercial
partners.
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'', ''could'', "should" ''envisage'',
''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect",
''will'' or the negative of those, variations or comparable expressions,
including references to assumptions. These forward-looking statements are not
based on historical facts but rather on the Directors' current expectations
and assumptions regarding the Company's future growth, results of operations,
performance, future capital and other expenditures (including the amount,
nature and sources of funding thereof), competitive advantages, business
prospects and opportunities. Such forward looking statements reflect the
Directors' current beliefs and assumptions and are based on information
currently available to the Directors.
Chair's Statement
I am delighted to present my first Annual Report as Chair of Oxford
Cannabinoid Technologies Holdings Plc ('OCTP' or the 'Group' or the
'Company'). Since the Company's admission to the Official List and to
trading on the Main Market of the London Stock Exchange in May 2021, we have
successfully progressed our research into cannabinoid-based prescription
medicines, with our two lead programmes (OCT461201 and OCT130401) soon to move
forward to the next stage of the development to becoming licensed prescription
medicines in the multi-billion US$ pain market.
We have experienced various challenges over the past 11 month period which the
Board and senior management team have dealt with in a positive and
professional manner. Whilst the pharmaceutical biotech sector as a whole
continues to be impacted by worldwide economic and geo-political events,
internally we continue to focus on increasing shareholder value by delivering
against the strategic plan which we set out in our prospectus dated 17 May
2021 ('IPO Prospectus'), maximising our research and development and learning
from past events, whilst managing the risks that the Group faces.
During the period, we have continued to extend our partnerships with
organisations recognised as amongst the "best-in-class", signing new
agreements with companies including Aptuit (Verona) SRL (a subsidiary of
Evotec SE) and Oxford Stemtech Ltd. In July 2022, we entered into an
agreement with Simbec Research Limited for the Group's first-in-human Phase 1
clinical trial for lead compound OCT461201, due to commence in Q1 2023. We
also acquired a library of cannabinoid assets from Canopy Growth Corporation
('Canopy') which is opening up opportunities for future programmes. In
December 2021, the Company's shares commenced trading on the OTC QB market in
the United States, a move designed to enhanced investor benefits, including
easier access to trading for investors based in the United States and
increased liquidity provided by a broader pool of potential investors. As part
of that process, we appointed Harbor Access LLC as our North American investor
relations advisers, further assisting in raising interest in the OCTP stock in
the United States and in the medium term helping to diversify the Company's
shareholder base. Working alongside Harbor Access are Walbrook PR whom we
appointed last summer to strengthen our investor and public relations
activities. In May this year we were delighted to announce the appointment of
Axis Capital Markets Limited as our corporate brokers.
We are now planning for the next round of funding, previously signalled to
support our current drug development programmes through to their next stage of
development and key value inflection points. Cash remains well-managed and
in-line with our IPO Prospectus, with the next round of fundraising due to
take place by the end of Q1 of 2023, market permitting. In the absence of,
or delay in obtaining any further debt or equity funding, the existing cash
funds will be fully utilised by March / April 2023 (if current forecast levels
of project expenditure continue, or by December 2023 if certain project costs
are curtailed or expenditure on certain projects ceases) and the Group will be
unable to meet its liabilities as they fall due for at least twelve months
from the date of approval of these financial statements. As such, the auditors
have noted that a material uncertainty exists that may cast significant doubt
on the Group's and Parent Company's ability to continue as a going concern.
However, the directors are confident that the Group will be able to obtain
further debt or equity financing, but there can be no certainty in this
respect and a failure to obtain such debt or equity financing would be
material to the Group. A reallocation of resources to focus purely on the
highest value-adding programme is an alternative option available to the Board
to extend resources beyond December 2023, and as with other companies in our
sector suitable business combinations are regularly being considered.
Further details on this are given in the Directors' Report.
To further support our development we have established a Scientific Advisory
Board comprised of experts in their field who will be able to provide
independent assurance to the Board that the focus and direction of our
programmes remains that which will ultimately maximise shareholder value and
deliver on our mission to improve the lives of patients with chronic pain.
As a pharmaceutical company developing prescription cannabinoid medicines,
OCTP takes corporate governance very seriously as it is vitally important in
maintaining the integrity of our business. I am therefore pleased to report
that we are now benchmarking ourselves against the higher standards required
under the Corporate Governance Code, published by the Financial Reporting
Council ('UK Corporate Governance Code'), superseding the QCA Corporate
Governance Code 2018, published by the Quoted Companies Alliance.
Notwithstanding general market and sector conditions which have had a
disproportionate impact on the Company's share price since IPO last year, the
fundamentals of the Group remain strong, and we remain on track to enter phase
1 clinical trials with our two lead programmes, OCT130401 and OCT461201,
in Q4 2022 and Q1 2023 respectively. I am proud of the work we are doing
and the ambition of our people to really make a difference. I am grateful to
the executive team and everyone at the Group for their efforts and I thank you
for your continued support and shared belief in the successful future of the
Group.
Julie Pomeroy
Non-Executive Chair
22 July 2022
Chief Executive Officer's Review
The Group (comprised of OCTP and its wholly owned subsidiary Oxford
Cannabinoid Technologies Ltd ("OCT")) has successfully progressed all four
programmes in the period, to develop drug products aimed at the multi-billion
dollar pain market. We have continued to expand our capabilities by partnering
with world-class providers of products and services in the pharmaceutical drug
development industry. We are excited to be working with some of the
"best-in-class" partners such as Evotec SE, Oxford Stemtech Ltd and Dalriada
Drug Discovery Inc, and we are very much looking forward to seeing two of our
lead programmes enter phase 1 clinical trials by Q1 2023.
Following the Company's admission to the Official List (by way of a Standard
Listing) and to trading on the Main Market of the London Stock Exchange in May
last year, the Group commenced trading on the OTC QB market in the United
States in December 2021 and Harbor Access LLC have supported the Board in
raising the Group's profile amongst investors in the United States. We
recently announced the appointment of Axis Capital Markets Limited as our
brokers in the UK, joining our network of experienced and knowledgeable
external advisers who support the Board in ensuring that we deliver against
our strategy. In June 2021, we dissolved the wholly owned Greek subsidiary
of OCT (namely OCT Hellas Pharmaceuticals Research & Development
Laboratory S.A). Whilst the period to 30 April 2022 saw some challenges for
the Group from both internal and external sources, we believe that we are
stronger as a result and are committed to increasing shareholder value by
delivering against our strategy of developing approved, prescription
non-addictive pain medication with market exclusivity.
Our Business Model and Programmes
We aim to develop a portfolio of drug candidates for approval as licensed pain
medicines and remain on track to receive approval of our first prescription
cannabinoid product anticipated to be in 2027. The combined experience and
expertise of the Company's Board and senior management team has enabled the
Company to build a cannabinoid pharmaceutical company with a robust pipeline
of drug candidates and a substantial and growing network of commercial and
academic partners.
In a cannabis market where unlicensed medicines remain abundant and unproven,
our underlying philosophy remains unchanged: that it is only the development
of cannabinoid-based medicines through existing channels of licensed drug
development that allows the medical community to prescribe drugs with
confidence and in volume and which gives us patent protection and market
exclusivity.
Our drug development strategy involves the development of three types of
compound - novel chemical entities ('NCEs'), proprietary cannabinoid
derivatives and phytocannabinoids (plant-based cannabinoids). The NCEs are
normally identified using high-throughput screening of pharmaceutical compound
libraries. This approach enables the discovery of drug candidates that are
highly selective and potent for a single cannabinoid receptor. Our lead
product, OCT461201, is an example of an NCE identified using this approach.
Another is to use a phytocannabinoid structure, such as CBD, as a starting
basis for creating cannabinoid derivatives. The chemical modifications made to
the cannabinoid derivatives are aimed at improving drug-like properties while
retaining the safety of the parent phytocannabinoid.
Both NCEs and cannabinoid derivatives may be patentable, thereby providing
long-term market exclusivity to an approved drug product. Phytocannabinoids
are natural, unmodified compounds. As such, they are generally not patentable.
Nevertheless, regulatory exclusivity is available for these compounds if
approved as drug products. This regulatory exclusivity can be extended from 5
to 7 years in the United States if the indication has orphan designation.
Regulatory exclusivity in Europe is 10 years. This exclusivity is not
available to unlicensed medical cannabis. In addition, OCT also in-licenses
compounds falling into one of the three categories above.
By utilising three different types of compounds, we are creating a portfolio
that balances long-term market value, time to market and risk.
The Group currently has four key programmes that can be summarised as follows:
Programme 1: OCT 461201
This programme is a NCE, a cannabinoid-like compound for neuropathic and
visceral pain conditions.
During the period, the Group has carried out some pre-clinical studies which
show that OCT461201 is well positioned for small fibre neuropathies, as it
successfully reduced pain in a model of chemotherapy-induced peripheral
neuropathy ("CIPN"), a market valued globally at US$1.61bn in 2020 and
forecasted to reach US$2.37bn by the year 2027.
CIPN is a peripheral neuropathy resulting from the neurotoxic effects of
common chemotherapeutic drugs. The hallmarks of CIPN are pain, numbness and
tingling in the extremities. On average, an estimated 60% of people undergoing
chemotherapy are affected by CIPN at three months. CIPN can be progressive
and enduring, leading to years of debilitation and suffering.
In response to this encouraging data in CIPN, the Company's strategy in
neuropathic pain, is to focus on a clinical development programme aimed to
benefit patients with small fibre neuropathies, such as cancer patients
suffering from nerve damage caused by treatment with chemotherapy, and
potentially, patients suffering from diabetic neuropathy.
Globally, there is an urgent need for new therapies to treat CIPN as there are
currently no approved therapies for this condition. The current standard of
care is the off-label use of gabapentinoids (gabapentin and pregabalin) and
antidepressants (e.g. duloxetine), drugs associated with serious side effects.
Furthermore, in some cases their overall clinical effectiveness is inadequate,
leaving cancer patients in pain, with a reduced quality of life and the
prospect of having to change or stop their chemotherapy altogether.
The large unmet medical need in patients suffering from CIPN is estimated to
have a global market valued at US$1.61bn in 2020 and forecast to reach
US$2.37bn by the year 2027, which, in the view of the Directors, could grow to
over US$7bn once combined with other small fibre neuropathies.
In July 2021, OCT entered into a £2.6 million contract research agreement
with Aptuit (Verona) SRL, a subsidiary of Evotec SE (together "Evotec"). This
work is being completed via Evotec's INDiGO programme, an integrated drug
development process for accelerating early drug candidates to clinical trial
stage. The INDiGO programme will provide the comprehensive manufacturing,
safety, and toxicology packages necessary for regulatory submission to the UK
Medicines & Healthcare products Regulatory Agency ("MHRA") and the United
States Food and Drug Administration ("FDA"). We believe the INDiGO programme
will increase development speed and optimise the chances of successfully
progressing OCT461201 through clinical phases. Phase 1 clinical trials are
expected to begin in Q1 2023, with phase 2 ready to begin in Q2 2023.
The Group's development work with Voisin Consulting SARL ("VCLS") remains on
track. VCLS has generated the risk analysis and the clinical roadmap to
support the ongoing pre-clinical package for Programme 1 and preparation for
the commencement of phase 1 clinical trials.
Programme 2: OCT 130401
This programme is the development of natural phytocannabinoids ('pCBs') for
the effective, safe, and non-addictive treatment of chronic and severe pain
conditions. In October 2021, the Group announced trigeminal neuralgia ("TN")
as the initial target for OCT130401. TN is a chronic pain condition that
causes an excruciating, stabbing, electric shock-like facial pain. It has a
fast and unexpected onset and because of this has been difficult to treat.
Each episode may only last a few seconds, but some people will suffer multiple
(up to 100) episodes during one day. It is on the rise with between
approximately 10,000 and 15,000 new cases diagnosed each year. We estimate
that in 2021 there were over 65,000 people living with the condition in the
UK.
The pCBs will be delivered to the lungs via inhalation - a simple pressurised
metered dose inhaler ('pMDI') similar to an asthma inhaler. This alternative
route of administration bypasses issues associated with oral delivery of
cannabinoids (e.g., onset time, poor bioavailability and high first-pass
metabolism). Fast onset of the medicine is particularly important for
indications where the pain is sudden and severe, as is the case with TN. The
low-dosage administration is aimed at achieving a therapeutic effect while
controlling side effects and managing the risk of abuse.
VCLS is providing the Group with regulatory support to address immediate
priorities for filing and registration of OCT130401's pMDI in the UK and US
markets. pMDIs have a long history of use, they take into account the human
factor to optimise compliance, and have a straightforward regulatory pathway.
Doctors and patients alike are familiar with the device and this, together
with an easy to carry and easy to use design, is expected to facilitate uptake
and compliance.
In January 2022, OCT entered into a drug development agreement with Charles
Rivers Laboratories Edinburgh Ltd ("Charles Rivers"). Charles Rivers is
completing the preclinical safety and pharmacological work for the pDMI
developed with Purisys LLC, which provides the current Good Manufacturing
Practice ("cGMP") active product ingredients, and Oz UK Ltd, which is
developing the formulation and the device, as the Company prepares OCT130401
for phase 1 clinical trials anticipated to commence in Q4 2022.
Programmes 3 and 4
The Group initially held a library of 93 proprietary cannabinoid derivatives,
with preliminary data from a selection of these derivatives suggesting that
the library contains compounds that could become candidate drug assets for a
range of pain indications. To supplement this library, in September 2021 OCT
signed an exclusive license agreement with Canopy Growth Corporation
('Canopy') for their entire pharmaceutical cannabinoid derivative library,
including 335 derivatives and intellectual property rights including 14 patent
families and associated research data.
This enlarged library of cannabinoid derivatives is at the centre of
Programmes 3 and 4. OCTP has started multiple screening programmes for the
drug-like compounds with the aim of targeting multiple therapeutic areas,
including pain, neurology, immune-inflammation and oncology.
OCTP is working with Dalriada Drug Discovery Inc ("Dalriada"), to screen the
expanded library, comprising both the Canopy compounds and OCT's existing
proprietary cannabinoid derivatives. Dalriada previously designed,
synthesised, and experimentally tested all of the compounds in the Canopy
library which means we are able to leverage Dalriada's existing knowledge and
experience as it continues its experimental research on our behalf. The aim is
to develop one programme to the lead compound stage and another to drug
candidate selection (ready for pre-clinical development) by the end of 2022.
The drug development agreement signed in September 2021 with Oxford Stemtech
Ltd ("Stemtech"), led by Professor Cader of the University of Oxford, is
supporting R&D for all the Company's drug development programmes, with a
particular focus on Programmes 3 and 4. Stemtech's cutting-edge
"pain-in-a-dish" model replicates human pain using stem cells from healthy
volunteers that are re-programmed into pain neurons. We are delighted and
privileged to be able to continue working with Professor Cader in a commercial
capacity and this agreement with Stemtech also marks the important evolution
of OCTP's relationship with the University of Oxford.
Managing the Impact of COVID-19
The impact on our business from the COVID-19 pandemic has reduced from the
peak of 2020, however repercussions are still being felt across the Group.
The work in the laboratories of our collaborators, for example, is still
delayed as they continue to recover from the impact of successive lockdowns.
There is also still some disruption in the movement of goods that is causing
worldwide delays in a number of activities performed by contract research
organisations ('CROs') on behalf of many companies, including their abilities
to sign large contractual agreements.
To mitigate the risks for our lead programme (OCT461201), rather than engaging
in multiple CROs to perform different parallel activities, we decided to sign
a single commercial agreement with one top-tier CRO (Evotec) and use their
fully integrated developmental INDiGO platform. This agreement helps to ensure
the right degree of prioritisation for the Group's activities, but crucially
it should also minimise the risk of delays and downsides (compared to
splitting the tasks aver several different CROs).
Establishment of a Scientific Advisory Board
In April 2022, the Company announced the formation of its Scientific Advisory
Board ("SAB"), which underpins the next stage of its development and
highlights its commitment to grow a best-in-class network of partners -
scientific, academic and commercial.
With the Group's current focus on the treatment of neuropathic pain
conditions, the composition of the SAB will initially comprise Professor
Robert Dworkin, Professor Anthony Dickenson, and Doctor Giorgio Lambru, who
together are a team of innovators and clinicians with an emphasis on linking
pre-clinical research, clinical trials and the care of patients.
The SAB will work closely with OCTP's Chief Scientific Officer, Doctor
Valentino Parravicini, to provide scientific guidance on the Group's strategy
and overall approach to clinical trials. With the SAB's first meeting due to
take place in July 2022, its initial focus will be to advise on the design of
the upcoming phase 1 clinical trials for OCT130401 and OCT461201, anticipated
in Q4 2022 and Q1 2023 respectively, to help the Group best address the needs
of patients. The SAB will also help to shape the Group's approach as it looks
beyond phase 1, to phase 2 clinical trials, in patients affected by
debilitating pain conditions.
Professor Robert Dworkin is a professor in the departments of Anaesthesiology
and Perioperative Medicine, Neurology, and Psychiatry at the University of
Rochester Medical Center School of Medicine and Dentistry, New York State. He
is also a Director of ACTTION (Analgesic, Anaesthetic, and Addiction Clinical
Trial Translations, Innovations, Opportunities, and Networks) a public-private
partnership with the FDA. Professor Dworkin's major research interests are the
methodologic aspects of analgesic clinical trials and the treatment and
prevention of chronic neuropathic and musculoskeletal pain. Through ongoing
studies, he is evaluating the research designs and methods, clinical outcome
assessments, and statistical analyses used in clinical trials of treatments
for acute and chronic pain.
Doctor Giorgio Lambru is a Consultant Neurologist at Guy's & St Thomas'
NHS Foundation Trust, London, and Honorary Senior Lecturer at King's College
London. An expert in headache and facial pain conditions, including
neuropathic pain and general neurology conditions, he has authored a number of
scientific publications on these conditions and has a clinic dedicated to
complex headache and facial pain disorders.
Professor Anthony Dickenson is Emeritus Professor of Neuropharmacology at
University College, London. His research is focused on understanding the
mechanisms of pain including how pain can be controlled in both normal and
patho-physiological conditions and how to translate basic science to patients.
He is an Honorary Member of the British Pain Society, a member of the council
of the International Association for the Study of Pain, was a founding member
of the London Pain Consortium (Welcome Trust) and is involved in many advisory
boards.
Building Relationships with Patient Advocacy Groups
All of the experts involved in the SAB will have a prominent role in the
interaction of their scientific institutions with the Patient Advocacy
groups. The Board firmly believe that no one is in a better position to
understand the unmet medical needs of people suffering from pain than the
patients themselves. Patient Advocacy groups have the in-depth knowledge of
the patients they represent and of their disorders. Accordingly, they are in
the prime position to support the Group's clinical effort not only in
identifying better ways to include the experience of patients in the design of
the trials but in the identification and interpretation of outcome
measurements, and by actively participating in the recruitment of patients.
We are beginning to build the foundations of strong relationships with a
number of relevant Patient Advocacy groups who support individuals suffering
from neuropathic pain and neuralgias.
Financial Risk Management
Research activities are carried out through commercial and academic partners
in an outsourced model that allows the Group to minimise central costs.
Wider discussions are ongoing with other academic and commercial partners
about additional future activities. Further details of the Group's Financial
Risk Management are detailed in note 22.
Outlook
The Group has continued to deliver against its objective of bringing
non-addictive cannabinoid-based licensed prescription medicines to patients
who have been left behind by the opioid crisis. The work that's been completed
during the period means we will be in phase 1 clinical trials with our two
lead programmes by Q1 2023 which is hugely exciting for both the Group and our
shareholders.
Whilst successfully delivering against the strategy set out in our IPO
Prospectus, the Board believe that the market has not yet fully recognised the
true value of the Group. Whilst we appreciate that worldwide economic and
political events are impacting the whole of our sector at the moment, we also
understand and share the frustrations regarding share price performance since
IPO in May 2021, especially in the context of everything that has been
delivered by the OCTP team. Internally, we have dealt with the challenges that
we have faced in the first 11 months of trading head on, and we have welcomed
the opportunity to engage with different groups of shareholders, to hear
feedback on our strategy and progress during the period. We are stronger as a
result of that work.
We recently announced the appointment of Axis Capital Markets as our new
brokers. Trading on the OTC QB market since December 2021 has increased
recognition of our name in the United States. With an exceptional team of
advisers to support us, and as we rapidly approach value inflection points in
two of our programmes, the Board remains confident that the markets will
reflect the progress that we make as we reach a time when the Company will
need to raise equity funds to carry our programmes forward towards regulatory
approval anticipated to be in 2027.
I would like to thank everyone at OCTP, and our advisers and partners, who are
all key to our ultimate success. We are hugely grateful to our shareholders
for their support and engagement, and it has been an honour to be able to meet
some of you in person during the period. I thank you for your constructive
feedback and continued confidence in our long-term goal of revenue generation
and growth in the multi-billion US$ pain market.
Dr John Lucas
Chief Executive Officer
22 July 2022
Principal Risks and Uncertainties
The Group identifies, evaluates and manages the principal risks to the Group
strategy in accordance with the corporate governance framework set out in the
Corporate Governance Report. A bottom-up assessment of principal risks by
the senior management team is aggregated and validated to produce an overall
assessment of those risks.
We evaluate each principal risk at least twice per year based on the
probability of the risk crystalising and the potential impact on the Group
level. We consider both the inherent risk (i.e. level of risk before
internal controls) and the residual risk (i.e. the remaining risk after the
effect of existing controls is considered). Based on that assessment, we
then determine whether any further actions are required to reduce the risk to
within the risk appetite approved by the Board.
The Board is responsible for the overall stewardship of our system of risk
management. The Board has completed its assessment of the Group's principal
and emerging risks and concludes that the current risk profile is within its
tolerance range.
Below are our principal risks and a summary of key mitigating factors:
Risk Relevance to our Strategy Mitigation
Impact Likelihood
Unsuccessful development Any termination of any phase in development, of our drug candidates, risks Problems and delays are frequently encountered in connection with developing · We are running multiple programmes across several value
harming the commercial prospects of the drug candidates and the Group's and expanding early-stage businesses, especially biopharmaceutical inflection points.
ability to generate product revenues will be delayed. companies.
· An experienced Chief Scientific Officer ("CSO") is engaged, and
In common with other pre-revenue pharmaceutical development companies, there we work with leading specialists in the field to complete testing and
is a risk that we fail to develop a drug product that can be approved by the
screening on our behalf.
regulatory agencies and marketed. Failure can occur at any time during the The failure to develop an approved drug product could ultimately lead to the There is a high rate of failure amongst these companies for drug candidates
research and development process. cessation of the business. proceeding through clinical trials. · A Science Advisory Board of leading specialists has been
established to oversee the clinical development plan.
· There are strong communication channels with the regulatory
bodies with early engagement prior to moving to clinical trials.
Delayed development Any significant delays would lengthen the time to revenue generation and
profitability.
· Contracts with our research partners are drafted to minimise the
impact to the Group of any unforeseen delays in the screening and testing
There is a risk that the development of one or more drug products is delayed
process.
during the research and development process. Overhead costs would still be incurred whilst delays in a programme were dealt
with, and hence also impact the risk of insufficient cash resources to bring · We are running multiple programmes across several value
drug candidates to market. inflection points.
Fund raising Raising funds at unfavourable rates and / or at a level that causes There are certain external factors (eg macro-economic) that cannot be · Efforts have been made and are continuing to strengthen
significant dilution of value for current shareholders could further reduce influenced, but strenuous efforts are being made to explore or feasible engagement with shareholders and potential future investors.
the overall value of the Group. solutions, and short-term options have been identified to extend existing
resources. The Board is confident that funds to progress the next stages of · Alternative sources of short- and medium-term financing are being
With the funds raised from the IPO expected to be fully utilised by March / development will be obtainable. considered.
April 2023, there is a risk that we will be unable to raise funds at
appropriate rates. A failure to raise sufficient funds at favourable rates could lead to one or · A new UK broker was recently announced.
more programmes being delayed, if not terminated, thereby ultimately
threatening the on-going viability of the Group. · Additional resources have been allocated to help strengthen
public relations.
There has been, and continues to be, significant volatility in the Group's
share price. In the sector as a whole, market caps have reduced and · The Group's shares are traded on both the LSE and the OTC QB in
macro-economic conditions are also contributing to low levels of trading in the US, and we have a dedicated US investor relations adviser to help access
the sector. funds from the US market where the understanding of the cannabinoid
pharmaceutical market is well established.
· The Board continues to review the potential for business
Unsupportive shareholders may impact the ability to raise further funding if combinations with entities that will ultimately increase shareholder value.
they sell large quantities of their shares and hence further drive down share
price in a relatively flat market. · Financial forecasting is closely monitored by the Board and
strong financial controls operate over all areas of spend in efforts to extend
existing resources.
Cash management · As above with regards to financial forecasting.
The probability of this risk crystallising is considered by the Board to be · Core financial controls are operated over budgeting and
medium due to the amount of mitigating controls that are in operation. procurement to prevent and detect any over-spends.
Linked to the point above, there is a risk that the Group will fully utilise
all of its cash ahead of being able to raise further funding and hence be · Scheme of delegation approved by the Board is operated and any
unable to meet its liabilities as they fall due and to be able to continue as breaches of this are reported to and scrutinised by the Audit & Risk
a going concern (see Directors' Report). This in turn could increase the Committee.
risk of additional funds not being available at favourable rates if there is
less time for the Group share price and external market factors to improve · Alternative short to medium-term funding options are being
from their current position. explored with various third parties and the Board is confident that additional
investment could be obtained at short notice if required.
Key staff recruitment and dependency The loss of one or more key employees and / or the inability to fill new roles All organisations experience staff turnover and there can be no absolute · The notice period of key staff has been increased from 6 to 9
on a timely basis could have material adverse consequences for the business guarantee that the Group will be able to retain its key scientific and months.
operations, prospects and financial stability, impeding the achievements of management personnel, nor guarantee the recruitment into new roles as the lead
its research and development objectives. programmes progress through to clinical trials. · Share option schemes are operated to help to recruit and retain
There is a small management team, with the scientific and legal specialists
key staff, and the overall reward and recognition packages are competitive
critical in leading the drug development programmes and maintaining its within the sector.
licences.
· Forward planning of staffing needs and recruitment strategies are
Any growth in the business may place a significant strain on the Group's in place.
management, increasing the risk of staff resigning. Equally it may be
difficult to find experienced and suitable personnel to fill new key positions
as the programmes progress through to clinical trials, particularly if
competition between pharmaceutical companies increases.
Quality assurance If CROs fail to comply with applicable current good clinical practices cGCPs are the industry standard that CROs work to in order to maintain their · Only experienced partners with a successful track record in
("cGCPs"), the clinical data generated in our clinical trials may be deemed reputation and standing in the market. CROs have in-house quality assurance performing clinical trials to the right cGCPs are used to assist the Group in
unreliable. The regulatory authorities may require the Group to perform processes to make the likelihood of any failure of quality standards extremely its development programmes.
additional clinical trials before approving marketing applications, causing low.
We rely on third parties, including CROs, to perform clinical trials in a significant delays to commercialisation and requiring significantly greater · Quality assurance processes are operated by the CSO over the work
satisfactory manner. There is a risk that the quality of this research is expenditures, thereby increasing the risk of insufficient cash resources. performed by CROs.
below the required standard for the results to be relied on as part of the
Group's applications to the regulatory agencies for their drugs to be · There is early engagement by the CSO with the regulatory
licensed. authorities to confirm the required cGCPs.
· Contractual obligations and penalties for the quality of services
are agreed at the outset of each business relationship with partners.
Culture, Values and Ethics
We are passionate about our mission to improve lives using cannabinoids and
know that our people are the key to unlocking success. We encourage and
celebrate diversity and have established an open and collaborative culture
that allows great people to do what they do best. Our values, listed below,
were created by our people, for our people.
Respect
• We treat each other with dignity
• We demonstrate high regard for everyone - each other, our
stakeholders and the wider community
• We ensure our company is a safe space, where we can take risks and
be vulnerable
Integrity
• We do the right thing, even when no one is watching
• We are reliable - we get things done on time without compromising
quality
• We keep our promises
• If something has gone wrong, we put our hands up and work together
to resolve it
Collaboration
• We believe we're better together
• We are generous with our time, care and expertise
• We are happy to help each other
• We learn from our mistakes
Fairness
• Our company is free of discrimination and dishonesty
• We value authenticity - we are real
• We look out for each other's health and wellbeing
• We listen and evolve together
Excellence
• We pay attention to the details, and strive to get things right
the first time
• We own our contributions and celebrate our successes
• We care deeply about our company's mission
Animal Care and Welfare
Our purpose is to research, develop and manufacture innovative pharmaceutical
products. Due to scientific and regulatory requirements, animal studies remain
a small but crucial part of our work to deliver safe and efficacious
therapies, which benefit patients' health and wellbeing.
The Group is actively engaging with partners, which develop and validate
experimental methods that can provide alternatives to the use of animals in
research. However, even though the Group, its scientific and business
partners, and affiliates are eagerly adopting cutting-edge technology and
coordinating efforts with legislators, regulators, and scientific institutions
to completely eliminate the need for animal studies in their work, at present
this is not possible, either due to lack of suitable alternatives, or because
animal studies are required by regulatory authorities.
The Group ensures that any collaborator follows international and local
legislation and regulatory guidelines and does not perform procedures which
are deemed unethical or illegal under The Animal Welfare Act 2006. The Group
also enforces a voluntary ban on the testing on great apes (i.e., chimpanzees)
in research, even in countries where it is legal to do so.
We recognise the ethical responsibility to treat all animals respectfully,
while striving to minimise their pain or distress, and to avoid it completely
when possible. To this end, we are committed to following the high standards
of internationally recognised practices on the humane treatment of animals. We
uphold and embrace the "3Rs" of animal research, namely the:
- replacement of animals when possible and/or acceptable;
- reduction of the numbers of experiments and of animals required by
each experiment; and
- minimisation of pain and distress, by means of refinement of animal
studies procedures.
All animals used in the Group's studies are specifically bred for research. In
addition, all facilities where animals are bred, housed, or undergo procedures
are accredited by the Association for Assessment and Accreditation of
Laboratory Animal Care (i.e., AAALAC-accredited) or are in the process of
first accreditation and undergo regular visits by AAALAC. This ensures that
all animal staff are competent, trained, continuously educated and assessed.
The Group ensures that qualified veterinarians are available at all times for
advice and help in the care of animals.
We do not work with or test cosmetics, food, or drink supplements.
Environmental, Social and Governance Considerations
Environmental
During the period all staff continued to work from home, and with the closure
of the leased London office in March 2022, all staff will be permanently home
based. Staff are encouraged to use renewable energy sources in their homes
and, where practical, we are adopting energy efficient and low carbon
technologies with all new applicable purchases.
The Group paid a service charge for the office space which included a
space-apportioned charge for the overall energy usage in the shared
building. Based on actual headcount and energy consuming devices and using
guidance from industry experts it is estimated that the Group's total actual
energy usage over the period was between 15,000kWh - 20,000kWh. As this is
below the 40,000kWh threshold of the Streamlined Energy and Carbon Reporting
(SECR) requirements, we are considered to be a low energy user.
Despite falling below the reporting threshold, as a Group researching the use
of natural products for pain relief, we are committed to supporting the
Government's net-zero carbon targets. As our environmental, social and
governance ("ESG") strategy for the Group evolves, we are proactively taking
positive steps such as revising the travel policy with a greater emphasis on
prioritising the use of public transport over private cars, and minimising all
travel (particularly overseas) wherever possible by using alternative
technologies instead. We donated £1,500 to the Woodland Trust in the period
as part of the Board's support for efforts to conserve the UK's woodland.
Social
We recognise the benefits that creating an inclusive and diverse workforce
brings. Having a diverse range of experiences and identities within our team
helps us to better understand and cater for the needs of a wider stakeholder
base. Having staff and directors with roots in other countries or cultures
helps us build better cross-cultural relations with diverse range of partners,
shareholders and other stakeholders. Furthermore, we appreciate that
encouraging equality and diversity in our workplace will help to attract,
motivate and retain our team members.
We are proud that our Board of eight members is diverse, with an equal split
by sex and a rich ethical mix. This is reflective of the team of six staff
in the Group too. Our equality and diversity policy is aligned to our values
as detailed below.
The Board is committed to promoting equality of opportunity for all employees
and job applicants. We aim to create an environment, free from
discrimination and harassment in which cultural diversity and individual
differences are positively valued and where decisions are based on merit. We
do not discriminate against employees on the basis of age, disability, gender
reassignment, gender identity, marital or civil partner status, pregnancy or
maternity, race, colour, nationality, ethnic or national origin, religion or
belief, sex or sexual orientation. These principles of non-discrimination and
equality of opportunity also apply to the way in which we treat partners,
shareholders and stakeholders.
As part of the closure of the London office, we donated office furniture to
the British Heart Foundation, our chosen charity for the financial period.
Governance
We are committed to high ethical standards and compliance with all applicable
laws, regulations and our own internal policies. Our partners are members of
industry associations including ABPI, AAALAC, AALAS, Bioindustry Association,
CDP, DA4S, NC3Rs and the Scottish Lifesciences Association, and adhere to
their professional codes and have the relevant regulatory approvals and
licences (inc. MHRA and AIFA).
Details of our Anti-Slavery and Human Trafficking Policy can be found on the
Group website www.oxcantech.com (http://www.oxcantech.com) . We do not
tolerate bribery or any other form of corruption. As an operational risk,
bribery and corruption form part of our third-party risk management process
and our business development due diligence procedures.
Governance matters form part of the annual training plan for Board members.
More details on our governance framework can be found in the full annual
report.
Clarissa Sowemimo-Coker
Chief Operating Officer and General Counsel
22 July 2022
Financial Review
Finance Strategy
Our financial strategy is to support, and expedite where possible, the overall
Group aim of developing and commercialising licensed prescription medicines by
maximising the financial resources available for direct investment in our drug
programmes. This is achieved by operating cost-effective and risk-based
financial and operational controls over all areas of expenditure and
investment into research and development.
Financial Performance
Following the Group's Admission to the Official List and to trading on the
London Stock Exchange in May 2021 where £14.8m net of costs was raised,
research costs increased in line with budget in the period from £445k to
£2.9m. These costs mainly relate to OCT461201 where £1.5m was spent on
pre-clinical activity, ahead of the clinical trials due to commence by the end
of Q1 2023. Across the remaining three programmes, £783k was spent on
programme 3 mainly relating to the acquisition of the cannabinoid library from
Canopy Growth Corporation and the screening of the subsequently enlarged
cannabinoid library. A further £473k was spent on OCT130401 and £56k was
spent on programme 4.
Alongside the additional research activity, operational costs increased from
£1.5m to £2.3m, with the main costs relating to salaries and associated
expenses (£1.1m).
A complete review of costs was undertaken in the period to identify areas of
potential savings to maximise the financial resources available for research.
The closure of the London office in March 2022 and a move to virtual-office
working generates savings of over £130k p.a. The move from a London-centric
approach has extended to professional advisers, generating further actual and
potential savings in the next financial year. No bonuses have been paid to
the executive team in the period, and remuneration for the C-Suite and
Non-Executive Directors has been frozen at prior year rates. No new share
options have been granted in the period.
Exceptional items of £292k (2021: £1.4m) in the period relate to share based
payment charges (2021: £1m) being prior year share options (to staff and
Board members) and warrants issued to advisers as part of the IPO process.
The Group benefited from a Research and Development ("R&D") tax credit of
£760k in the period, with tax losses surrendered for the R&D tax credit
payment. Due to changes in the criteria for R&D tax credits, research
costs have been recognised in the Company rather than the subsidiary. There
was a debtor of £930k at the period end relating to R&D tax credits
(2021: £169k). A granular review of the initial 2021 claim resulted in a
£31k uplift in the submission, improving recognition of eligible spend.
Both direct and indirect costs are now embedded within the finance systems in
order to optimise the claim amount.
Cash absorbed by operations was £5.4m (2021: £1.9m). The loss for the
period was £4.7m (2021: £3.2m). Basic and diluted loss per share was
0.491p (2021: 0.504p). Note 22 of the financial statements details the
Board's exposure to, and management of, credit, liquidity and cashflow risk.
The Group is not exposed to any significant interest rate or foreign exchange
risks and therefore it does not require any formal hedging policies to be in
place (as detailed in note 22 of the financial statements).
Assets
From the net proceeds raised from the fundraising on IPO in May 2021, cash
reserves stood at £9.2m at 30 April 2022 (31 May 2021: £14.6m) and remain
forecast to have been fully utilised by March / April 2023. The Group repaid
a £50k government Bounce-Back loan in November 2021 and is now debt-free.
The licence agreement for OCT461201 held as an intangible asset by the Group
was impaired by £20,000 in the period (2021: £nil), in addition to an
amortisation charge of £35,577 (2021: £39,042) in the period, resulting in a
closing net book value ("NBV") of £46,080 (31 May 2021: £101,657).
The lease on the London office (held as a right-of-use asset) was terminated
in the period and all property, plant and equipment disposed of, generating a
total loss on disposal of £32,183 (2021: £nil).
Prepayments of £1.472m (31 May 2021: £85k) largely relate to a CRO invoicing
in advance of works to conclude pre-clinical phase on Programme 1.
On 9 June 2021, the dormant Greek subsidiary (OCT Hellas Pharmaceuticals
Research & Development Laboratory S.A) was formally dissolved.
Trade and Other Payables
Trade payables of £1.8m (31 May 2021: £500k) form the majority of current
liabilities of £2m (31 May 2021: £951k). Accruals of £174k (31 May 2021:
£193k) largely relate to professional services and advisers.
Key Performance Indicators
The Group has three core KPI's:
KPI 2022 Outcome
Non-financial The timescales set out for all four programmes remain on target, with
regulatory approval expected to be achieved in 2027.
Delivery of milestones detailed in the IPO prospectus for the four core
programmes
Financial The Group has a cash runway until March / April 2023, which is consistent with
that detailed in the IPO prospectus.
Cash runway (i.e. the length of time that the cash balance will last given the
current cash burn rate)
Financial At 30 April 2022, the Group's current ratio was 5.8 (31 May 2021: 15.8), as a
result of a £9.2m cash balance and current liabilities more than doubling.
Current ratio (i.e. the ability of the Group to meet its liabilities due
within 12 months with its current assets) is calculated by dividing current
assets by current liabilities
In addition to these three key performance indicators analysed by the Board,
wider financial information is reviewed to ensure the most important and
relevant aspects of the Group's performance are measured and communicated,
including research expenditure (as described above under Financial Performance
with a focus on best value is achieved and costs remain within budget).
Karen Lowe
Finance Director
22 July 2022
Section 172(1) Statement
The directors are required to include a separate statement in the annual
report that explains how they have had regard to wider stakeholder needs when
performing their duty under Section 172(1) of the Companies Act 2006. This
duty requires that a director of a company must act in the way he or she
considers, in good faith, would be most likely to promote the success of the
company for the benefit of its members as a whole, and in doing so have regard
(amongst other matters) to the:
· likely consequences of any decision in the long term;
· interests of the company's employees;
· need to foster the company's business relationships with
consultants, research partners, suppliers, customers and others;
· impact of the company's operations on the community and the
environment;
· desirability of the company maintaining a reputation for high
standards of business conduct; and
· need to act fairly as between members of the company.
The Board recognises that its primary role is the representation and promotion
of shareholders' interests. The Board makes every effort to understand the
interests and expectations of the Group's shareholders and other stakeholders,
and to reflect these in the choices it makes in its effort to create long-term
sustainable value. Governed by the Companies Act 2006, the Company has
adopted the Corporate Governance Code, published by the Financial Reporting
Council, as amended from time to time ('UK Corporate Governance Code') as set
out in the annual report. The Board recognises the importance of maintaining a
good level of corporate governance, which, together with the requirements of a
main market listing, ensures that the interests of the Company's stakeholders
are safeguarded.
The Board made three key decisions during the period ended 30 April 2022. The
first was to admit the Company to the OTC QB trading platform in the United
States in December 2021 as described in the CEO's Review. Second was to
enter into a service agreement with Aptuit (Verona) SRL, a subsidiary of
Evotec SE, to use Evotec's technology platform to expedite the development of
one of the Group's lead compounds (OCT461201) towards phase 1 clinical
trials. The third key decision was to enter into a licensing agreement with
Canopy Growth Corporation for its entire cannabinoid derivative library.
Our employees are one of the critical assets of the business. The Group is
passionate abouts its mission to improve lives using cannabinoids and knows
its people are key to unlocking success. We encourage and celebrate diversity
(with half of the Board members female, and 55% of the total workforce
female). The Group has established an open and collaborative culture that
allows great people to do what they do best. An experienced and highly
skilled team has been formed, balancing deep technical and sector knowledge
with experience brought from wider fields. In addition to annual pay and
benefit reviews, a bonus scheme and share option scheme are in place to
attract and retain the very best candidates. As detailed in the annual
report, a Remuneration Committee oversees and makes recommendations of
executive remuneration and option awards and a Nominations Committee oversees
the appointment of new members to the Board.
The Board values the strategic partnerships that it forms with "best-in-class"
organisations that can drive quality and shareholder value as they work
towards the delivery of the Group's strategy and goals. The University of
Oxford was the first strategic partnership when OCT was established in 2017.
Since then, agreements have been signed with international organisations who
are amongst the leaders in their field.
Underpinning all of these key areas are the Group's values of respect,
integrity, collaboration, fairness and excellence. These values form the
foundation of all actions and decisions across the Group and whilst created by
our people, for our people, they also form the basis of our successful
relationships with all of our highly valued stakeholders.
Corporate Governance Report
The Board recognises its responsibility for the proper management of the
Company and is fully committed to maintaining a high standard of corporate
governance. Good governance is a fundamental of the Group's culture and
business values, and with the intention of further strengthening the corporate
framework that exists at present, the Board has elected to voluntarily move
from following the Quoted Company Alliance (QCA) Corporate Governance Code,
which is aimed at growing companies, to the more demanding UK Corporate
Governance Code as followed by premium listed companies. A copy of the UK
Corporate Governance Code can be found on the Financial Reporting Council's
website, www.frc.org.uk (http://www.frc.org.uk/) . The UK Corporate
Governance Code is compulsory for all premium listed companies.
The UK Corporate Governance Code places greater emphasis on relationships
between companies, shareholders and stakeholders. It also promotes the
importance of establishing a corporate culture that is aligned with the
Group's purpose, business strategy, promotes integrity and values diversity.
Under the Listing Rules, all companies with a Premium Listing of equity shares
in the UK are required to report in their annual report and accounts on how
they have applied the UK Corporate Governance Code. The UK Corporate
Governance Code focusses on the application of the UK Corporate Governance
Code's principles ("Principles") and reporting on outcomes achieved. With a
Standard Listing on the Main Market of the LSE, the Group is not obliged to
follow the UK Corporate Governance Code but has elected to do so on a
voluntary basis, recognising that whilst not all of the optional provisions
below may yet be suitable for the Group to implement, the Board should strive
to implement all of the Principles.
Our first statement of compliance against this higher standard describes how
we applied the Principles set out in the UK Corporate Governance Code for the
period ended 30 April 2022. The Board believe that all of the Principles
contained within the Code are being complied with, other than the requirement
to have an internal audit function which the Group has not adopted, given its
size. Some further work is required to fully embed the Principles within the
Group going forward and various work streams are planned for implementing more
of the provisions in the UK Corporate Governance Code that are proportionate
to the growth and development of the Group.
All shareholders holding 3% or more of the issued share capital of the Company
are listed in the Directors' Report. No shareholder's securities carry
special rights and none of the shares granted under the employee share-option
scheme (as detailed in note 26 to the financial statements) have rights with
regards to control of the Company that are not exercisable directly by the
employees. There are no restrictions on voting rights.
Directors may be appointed and replaced by the Company by ordinary resolution
or by the Board (as delegated to the Nominations Committee). If appointed by
the Board, a Director holds office only until the next annual general meeting
where they shall automatically retire and be eligible for re-election. At
each annual general meeting of the Company, one-third of the Directors or, if
their number is not three or a multiple of three, the number nearest to but
not exceeding one-third shall retire from office by rotation. If there are
fewer than three Directors, one Director shall retire from office.
Any changes to the Articles of Association require the approval of
shareholders by way of a special resolution.
There are no significant agreements to which the Company is a party that take
effect, alter or terminate upon a change of control of the company following a
takeover bid.
For completeness, compliance against the QCA code is detailed in the annual
report.
This Corporate Governance Report forms part of the Directors' Report.
The Company's Corporate Governance Practices can be found at
www.oxcantech.com.
1. Board leadership and company purpose
A. Board's role
The Board's role is to promote the long-term sustainable success of the Group
and Company. To ensure an effective and entrepreneurial Board, there is a
diverse range of skills, knowledge and experience across the Directors, and a
common ability to exercise independent and objective judgement. The Board
maintain oversight of the delivery of the Group's strategy, with the aim of
generating shareholder value and contributing to the wider society.
The Board are aware that as the programmes move closer to commercialisation,
the required skill set of the Board will change in order to ensure the
ultimate delivery of the strategy.
Underpinning the Board's effective operation is a sound governance structure,
as detailed on pages 32 to 34 of the annual report. The Board and Committees
meet regularly throughout the year to ensure that the strategy is delivered
and that risks that could impact the success of that delivery are effectively
managed and adequate resources are appropriately allocated. The Directors
regularly receive information on progress of the four drug development
programmes, financial performance and any key risks.
B. Purpose, culture and strategy
The purpose of the Group is to develop cannabinoid-based medicines that will
radically improve the quality of life of people across the globe who currently
live with chronic pain, positioning the Group for long-term and sustainable
success. Details of our culture, values and ethics can be found on page 13
of the annual report.
The Board is responsible for setting the strategy and key policies, ensuring
strong corporate governance is operated, and that risks are effectively
identified and managed, whilst continuing to monitor progress in relation to
the achievement of our objectives and plans. The strategy is reviewed at
least twice per year by the Board.
Regular training is delivered to Board members on corporate governance related
matters throughout the year, and there are candid discussions at Board level
when events highlight that there are lessons to be learned in this area.
Action plans are developed and followed up to minimise the risk of a
reoccurrence.
C. Resources and controls
The Board ensures that the necessary resources are in place to help the
Company meet its objectives and the Board measures performance against them.
Additional resources in the form of a Scientific Advisory Board being
established have recently been announced and the Board are reviewing the
assurance provided over the key risks to identify where potential additional,
or reallocated, resources may be required. The Board recognise the risk of
having a small management team (see page 10 of the annual report) and there
are plans to increase those resources as programmes enter clinical trials.
The Audit & Risk Committee meet frequently throughout the period, and are
provided with information on front line controls and assurance from the
external auditor. A half yearly probity report is taken to the Committee to
report any known key breaches of the control framework. See page 32 of the
annual report for more information on the Audit & Risk Committee. There is
a formal system for declarations of interest and for gifts and hospitality.
D. Stakeholder engagement
The Board recognises the importance of effective engagement with shareholders
and stakeholders, and have sought to strengthen this engagement during the
period, as demonstrated by the recent Investor Meet Company Q&A webinar on
our programmes update and resourcing plans. Increasing engagement with our
shareholders and wider stakeholder groups is a key objective of the Group in
2022/23.
E. Workforce policies
The Group has a portfolio of workforce policies and practices reflecting the
Group's values (as detailed on page 13 of the annual report), with key
policies requiring Board approval. All three Committees (Audit & Risk,
Remuneration, and Nominations as detailed on page 32-35 of the annual report)
play a key part in ensuring that those practices are being embedded, and plans
for 2022/23 include reviewing how well the Group's values are being actioned
via the workforce policies and practices that are currently in place. As the
Group grows in line with the programmes' progression, this area will become of
increasing importance and be subject to regular scrutiny. An online 'speak
up' facility has recently been created, offering a further channel for the
workforce (or external parties) to raise any matters of concern.
2 Division of responsibilities
F. Chair
The transition from an Executive to a Non-Executive Chair (Julie Pomeroy) in
February 2022 demonstrates the Board's desire to ensure complete objectivity
of the Chair, and allows the Group to further embed a culture of openness and
debate. Julie was initially engaged as a Non-Executive Director in April
2021 and is considered to be independent. Having initially chaired the Audit
Committee and Remuneration Committee, a change to Remuneration Committee Chair
is planned for 2022/23 to further strengthen the independence of her position
whilst recognising the size of the Company and Board.
The first annual internal evaluation process was held during the period, with
the aim of widening and strengthening the process in 2022/23 and commissioning
an external review of the entire Board performance within the next two
years. Lessons identified from the initial internal review continue to be
implemented, including for example, allocation of time to strategic issues and
skills mix of Board membership as clinical trials progress.
G. Board composition, independence and division of responsibilities
The composition of the Board is set out on page 28 of the annual report.
During the period, the number of Non-Executive Directors on the Board of
eight, increased from four to five, and within those figures the number of
independent Non-Executive Directors increased from two to three. One of the
two founding members of OCT left the Group during the period.
A skills matrix is used to help ensure an appropriate combination of
specialist knowledge exists across the Board. The composition of the Board is
expected to change as the programmes move towards commercialisation and
different Board knowledge and experience is required.
The Directors are collectively responsible for the success of the Group. The
roles of the Board, Board Committees, Chair and CEO are documented, as are the
Board's reserved powers and delegated authorities. The Board's
responsibilities and the governance structure by which it delegates authority
are outlined on page 26 of the annual report. Further efforts are being made
to operate a clearer division between the leadership of the Board and the
executive leadership of the Group's operations.
The Scheme of Delegation sets out matters that are reserved to, and can only
be approved by, the Board. These include approval of the annual budget, risk
appetites, budgeted expenditure over £200k, changes to and the remuneration
of Directors, any merger or acquisition proposals, and key policies. The key
matters delegated to the Committees of the Board are detailed on pages 32-35
of the annual report.
H. Non-Executive directors' role and time commitment
Other commitments of the Non-Executive Directors were considered when the
Group listed and remain under constant review by the Company Secretary. When
considering taking up additional appointments, Non-Executive Directors consult
the Chair and Company Secretary to ensure thought is given to any potential
impact on their time commitment to the Group and any conflict of interest.
Executive Directors may accept external appointments as non-executive
directors of other companies, provided that such appointments are not
considered by the Board to prevent or reduce the ability of the Executive to
perform his or her role within the Group to the required standard.
Commitments of new Non-Executive Directors are considered prior to any
appointment. Attendance across all Board and Committee meetings during the
period averaged 99%.
As well as their work in relation to formal Board and Board Committee
meetings, the Non-Executive Directors commit time throughout the year to
meetings and telephone calls with various levels of executive management and
other key stakeholders. Therefore the Board members' actual time commitments
exceed the minimum expectation of 12 days a year, particularly for the Chair
and Chairs of Board Committees.
The Non-Executive Directors offer strategic guidance and constructive
challenge. They bring objective judgement in respect of Board decisions,
providing scrutiny and challenge so as to hold management to account.
Non-Executive Directors regularly meet without the Executive Directors or
management present, and Executive Directors' performance was reviewed for the
first time as part of an internal review process during the period. This
process will become more rigorous in the new financial year, both for
Non-Executive and Executive Directors.
I. Company Secretary
The Company Secretary is responsible to the Chair for ensuring that all Board
and Committee meetings are properly conducted, that the Board receive
appropriate information prior to meetings to enable them to make an effective
contribution and that governance requirements are considered and implemented.
This area was considered in the period as part of the first internal review
as referred to above, and initial feedback was positive noting an improvement
during the period.
3. Composition, succession and evaluation
J. Appointments and succession planning
Having formed in May 2021, the Board reviewed its composition for the first
time during the period and compared it to those of its peers including those
at a similar stage of research and development, and those who had advanced to
commercialisation. The output of, and learnings from, the review are
currently being considered by the Board, with no immediate changes expected
beyond those that have already been announced.
The Nominations Committee met once during the period as detailed on page 30 of
the annual report, and there is a formal and transparent procedure for Board
appointments, including enhanced due diligence being carried out by external
specialists on all new Board and C-Suite appointments. Details of changes in
the Board membership can be found at page 38 of the annual report.
The Committee recognises the importance of diversity when considering any
potential appointments, and there is a diversity policy to support that as
detailed on page 14 of the annual report. The Committee encourages and
celebrates diversity (with half of the Board members female, and 55% of the
total workforce female). The Committee does not discriminate against
employees on the basis of age, disability, gender reassignment, gender
identity, marital or civil partner status, pregnancy or maternity, race,
colour, nationality, ethnic or national origin, religion or belief, sex or
sexual orientation. The equality and diversity policy requires role profiles
to be to the requirements that are necessary for the effective performance of
the job, with objective assessment of candidates against those criteria and
making any reasonable adjustments that may be required for those with a
disability. The policy helps the Company to ensure that there is no
discrimination in the workplace and that diversity is celebrated.
A corporate risk of operating with a small C-Suite has been recognised by the
Board and is included in the corporate risk register detailed on page 10 of
the annual report. Whilst there is a natural successor to the CEO, there are
no succession plans for the other Executive Directors or C-Suite members due
to the small size of the team.
In line with the Company's Articles of Associations, at each annual general
meeting ("AGM") of the Company, one-third of the Directors retire from office
(by rotation) and may offer themselves for re-election by shareholders. The
Notice of AGM will be issued shortly (and will be made available at
www.oxcantech.com (http://www.oxcantech.com) ) providing details of those
Directors seeking election or re-election.
K. Skills, experience and knowledge
The composition of the Board was considered ahead of the Company's listing on
21 May 2021. Full biographical details of the Directors are detailed on
pages 28 to 31 of the annual report and are detailed on the Group website
www.oxcantech.com.
During the period, an internal review of both the skills matrix and current
Board composition of knowledge and experience was completed. There is a
recognition that cannabinoid experience needs to be strengthened across the
Board and further refocussing of required skill sets will be needed as the
programmes progress through to commercialisation. The Board are currently
reviewing the transition plan to adapt the Board composition over the next 2-3
years.
Directors are encouraged to keep their skills up to date by attending
appropriate courses or by being members of other boards where new skills and
ideas can be learned. The Board also keep under review the strength and
depth of its senior management.
L. Board evaluation
The Group is still transitioning to the specific requirement of the UK
Corporate Governance Code with regard to having an annual evaluation of the
Board's composition and diversity, and how effectively members work together
to achieve objectives. An initial internal review was completed with no
external input towards the period end. Based on individual Directors'
responses to a skills self-assessment questionnaire and questions on
opportunities for improvement, together with 360 degree assessments on Board
members by their peers and, for the Executive Directors, the full operational
team, responses were collated and analysed. Actions identified from the review
included opportunities to broaden the range of regular training topics for
Board members (extending to technical updates as well as general
pharmaceutical sector changes) as well as strengthening the format and
changing the timing of Board papers and meetings. The actions from the
review are still being considered and a more rigorous review will be completed
in the next financial year, with an external review due to be completed within
the next two years. Individual evaluations were completed on the Executive
Directors and Chair. A wider evaluation of individual performance is planned
for the year ending 30 April 2023.
4 Audit, risk and internal control
M. Internal and external audit
Given the small size of the Group, there is no internal audit function at
present although the potential need for this is regularly considered by the
Audit & Risk Committee as part of the overall review of the assurance
framework over the Group's strategy and key risks.
The Audit & Risk Committee is responsible for reviewing the relationship
and independence of our external auditor, Moore Kingston Smith LLP. As part
of the Scheme of Delegation, in order to ensure that the independence of the
external auditor is not impaired, the Committee is responsible for the
pre-approval of all audit and audit-related services undertaken by them.
The terms of reference of the Audit & Risk Committee are detailed on page
32 of the annual report.
N. Fair, balanced and understandable assessment
The Board considers this Annual Report, taken as a whole, to be fair, balanced
and understandable, and are satisfied that it provides the information
necessary for shareholders to assess the Group's strategy, business model, and
position and performance in the first 11 months since listing on the London
Stock Exchange. The Board's overall assessment is detailed on page 38 of the
annual report.
The Board and the Audit & Risk Committee review the Group's annual and
interim financial results announcements to ensure that they present a fair and
balanced and understandable assessment of the Company's position and prospects
to shareholders.
O. Risk management
The Board is responsible for the Group's risk management system and internal
control framework. Whilst the risk register is regularly brought to the Board,
the Board delegates some responsibilities for risk management oversight to the
Audit & Risk Committee, including more detailed consideration of the
composition of the risk register and the overall risk ratings, as well as
reviewing the assurance map against corporate risks. It is recognised that
risk management should be more embedded within the Group, and this is a
particular area of focus for the Executive Directors in the new financial
year.
The Directors believe that the Group maintains an effective, system of
internal controls, and is working towards full compliance with the FRC's
guidance document on this area ('Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting').
5 Remuneration
P. Remuneration policies and practices
The Remuneration Committee is responsible for determining, approving and
reviewing the Group's remuneration procedures to ensure that they support the
Group's strategy and support long-term sustainable success. More details of
the Executive and Non-Executive remuneration can be found on pages 34 to 37 of
the annual report.
Q. Developing executive remuneration policy
The Remuneration Committee routinely reviews the Directors' Remuneration
Policy to ensure they continue to promote the delivery of the long-term
strategy and support the Group's ability to recruit and retain executive
talent to deliver against that strategy. No Director is involved in
determining their own remuneration arrangements or outcomes. The wider
workforce pay and overall remuneration is considered by the Board as part of
the annual budget process.
R. Remuneration outcomes and independent judgement
In order to maintain independent judgement and discretion when determining
remuneration outcomes, the Remuneration Committee considers a range of data
including the business and individual performance information and 360 degree
feedback from all Board members and the wider workforce.
Compliance Against the QCA Code of Governance
Below is a summary of the Group's statement of compliance against the QCA's
Corporate Governance Code, linked to the UK Corporate Governance Code above
where appropriate.
QCA Code Requirements How the Group complies
1 Establish a strategy and business model which promote long-term As outlined in the CEO's review, the Group aims to develop a portfolio of drug
value for shareholders candidates for approval as licensed medicines, with the commercialisation of
its first drug currently anticipated to be in 2027. The Group's drug
development strategy includes the development of proprietary cannabinoid
derivatives, phytocannabinoids and novel chemical entities.
Further details of the strategy and progress made in the period are outlined
in the Chair's Statement and CEO's review. The principal risks of delivering
the strategy, and how they are managed, are detailed in the CEO's Review.
There is regular reporting to Board on progress against the strategy.
Through the CEO, the Executive Directors have responsibility for the execution
of the strategy approved by the Board.
2 Seek to understand and meet shareholder needs and expectations The Board is accountable to shareholders for the long-term performance and
success of the Group, having as its primary role the representation and
promotion of shareholders' interests.
The CEO and other members of the Board meet with shareholders throughout the
period to discuss the Group's performance in delivering its strategy. The
Non-Executive Directors are also available to meet with shareholders. The
feedback from those meetings is invaluable in helping to shape the future of
the business. The Board has sought to strengthen this engagement during the
period, as demonstrated by the recent Investor Meet Company Q&A webinar on
our programmes update and resourcing plans. Increasing engagement with our
shareholders and wider stakeholder groups is a key objective of the Group in
2022/23.
3 Take into account wider stakeholder and social responsibilities The Board recognises its primary responsibility under UK corporate law is to
and their implications for long-term success promote the success of the Group for the benefit of its members as a whole.
Engaging with our stakeholders improves our relationships and helps us to make
more informed decisions in order to fulfil that responsibility.
Aside from our shareholders, research partners and the medical community, our
small team of employees is one of our most important groups. Consequently, the
Board encourages engagement and feedback through both formal and informal
channels. We hold regular meetings to ensure that all staff are aware of the
direction of the business, results and any key matters. With such a small
team, communication is frequent and often informal. We give our team a say in
the selection of our chosen charity, this year the British Heart Foundation.
We are a Living Wage Employer.
Our research partners are critical to the success of the business, and regular
communication is maintained with them throughout the year, both on current
performance and also future requirements and direction of the four core
programmes. We continue to seek out best-in-class suppliers.
We are at the early stages of engaging with Patient Advocacy groups which will
be critical as the programmes advance through to clinical trials. As part of
our planned engagement with patients and the wider community we redesigned our
website to provide more accessible information about our programmes. We have
also appointed a Scientific Advisory Board ("SAB") to help OCTP best address
the needs of patients. The SAB will also help to shape the Company's approach
as it looks beyond phase 1, to phase 2 clinical trials, in patients affected
by debilitating pain conditions as well as assist with patient engagement.
The Board also understands that it has a responsibility to consider, wherever
practical, the social, environmental and economic impact of its approach.
More details on this can be found on page 13 of the annual report.
4 Embed effective risk management, considering both opportunities Risk management is a core part of the business, with the activities of the
and threats, throughout the organisation Group subject to a number of risks (as set out in the CEO's Review). If any of
these risks were to materialise there could be a materially adverse effect to
the Group's business, financial condition and the results of future
operations.
The Board of Directors is responsible for, and regularly reviews, the main
risks that the Group is currently exposed to and any potential future risks
that need to be considered. The discharge of this responsibility is intended
to occur through an ongoing systematic review of the risk management
framework, including the operational effectiveness of internal controls and
procedures, designed to identify, manage and monitor all areas involving
material risks to the Group.
See item 4 (O) under the UK Corporate Governance Code for more details of risk
management by the Board.
5 Maintain the board as a well-functioning, balanced team led by the The Board is responsible for the Group's objectives and business strategy and
Chair its overall supervision. To fulfil these responsibilities the Group has a team
of highly skilled and experienced Board members, with five of the eight
members being Non-Executive Directors at the period end, three of whom are
considered to be 'independent' (using the definition set out in the UK
Corporate Governance Code'), namely Cheryl Dhillon, Bishrut Mukherjee and
Julie Pomeroy. Prior to September 2021, Bishrut Mukherjee was an employee
and representative of Imperial Brands Venture Limited (a subsidiary of
Imperial Tobacco) and hence not independent.
Share options were granted in May 2021 to employees and Non-Executive
Directors (including Cheryl Dhillon and Julie Pomeroy) as detailed in note 26
to the financial statements on page 78 of the annual report.
There is a formal schedule of matters reserved specifically for the Board's
decisions, relating to strategy, finance, risk, operations and governance.
Certain functions are delegated by the Board to three sub-committees (Audit
& Risk, Remunerations and Nominations Committee). All three committees
have formal terms of reference approved by the Board, and are chaired by an
independent Non-Executive Director and other Board members may attend these
meetings by invitation.
The Chair leads the Board, while the Chief Executive Officer is charged with
managing the Group's business. The Board have met frequently throughout this
first period since IPO, and with the initial issues of any newly listed
company now largely resolved the Board will meet at least six times per year
going forward.
Details of the number of, and attendance at, Board and Committee meetings can
be found at pages 32 to 34 of the annual report. The Board reviews operational
and financial performance regularly, with any divergences from expected
performance probed and followed up promptly. The time commitment required for
both Non-Executive and Executive Directors to attend to Board matters has
averaged 15-20 days per annum.
6 Ensure that between them the Directors have the necessary See the response provided under 3(K) of the UK Corporate Governance Code on
up-to-date experience, skills and capabilities page 21 of the annual report, and the background provided on each of the Board
members on page 28 of the annual report.
A skills matrix is maintained and used to inform Board appointments. It is a
contractual commitment of both Executive and Non-Executive Directors to have
and maintain the relevant skills for their roles. Regular refresher training
is provided to Board members, which during the period covered corporate
governance matters, in addition to risk management training being provided to
the Executive Directors. All Directors are supported in maintaining their
skillsets through the provision of training resources and professional
membership budgets for Executive Directors. The output of the internal
assessment of individual Board members during the period is being used to
shape the training programme for the new financial year.
The Company Secretary is available to advise the Board members on regulatory
and corporate governance issues, and can refer to external advisers when
required.
7 Evaluate Board performance based on clear and relevant objectives, See the response provided under 3(L) of the UK Corporate Governance Code on
seeking continuous improvement page 23 of the annual report.
The strength and depth of its senior management is also kept under review.
8 Promote a corporate culture that is based on ethical values and See the response provided under 1 (B) of the UK Corporate Governance Code on
behaviours page 20 of the annual report.
The Board set the tone for the Group's ethical values of respect, integrity,
collaboration, fairness and excellence, further details on which can be found
on page 14 of the annual report. Our highly valued stakeholders are located
across the globe and the Group is mindful that respect of individual cultures
is critical to corporate success.
The Board has an anti-slavery and human trafficking policy, as well as an
anti-bribery policy and has implemented adequate procedures described by the
UK Bribery Act 2010. Controls are operated to prevent the facilitation of
tax evasion. More recently the Group has established on online 'speak up'
facility where stakeholders can raise any concerns (anonymously if they
desire) directly to the General Counsel and a Non-Executive Director.
The Group is aware of its responsibilities under the General Data Protection
Regulation and has implemented appropriate policies, procedures and safeguards
to ensure it is compliant.
9 Maintain governance structures and processes that re fit for See the response provided under 1(C), 2(G) and 2(I) of the UK Corporate
purpose and support good decision-making by the Board Governance Code on pages 20 and 22 of the annual report.
The Board sets the Group's strategic aims and ensures that necessary resources
are in place for the Group to meet its objectives. All members of the Board
take collective responsibility for the performance of the Group and all
decisions are taken in the interest of the Group.
The Chair leads the Board, and the CEO manages the Group's business, two very
distinct roles. The CEO is supported by a COO who also performs the General
Counsel and Company Secretary roles, and the Finance Director.
There are three sub-committees supporting the Board to fulfil their
responsibilities, an Audit & Risk, a Nominations and a Remuneration
Committee with further details of their remit shown on pages 32 to 34 of the
annual report. Matters reserved for the Board can be found on page 21 of the
annual report.
Weekly management meetings are held and are attended by the Executive
Directors and full operational team, including the Chief Science Officer,
Finance Manager and Programme Manager/Pharmaceutical Analyst.
The overall governance framework is regularly being reviewed and developed to
support the Company growth.
10 Communicate how the company is governed and is performing by The Board recognises its primary role of representing and promoting the
maintaining a dialogue with shareholders and other relevant stakeholders interests of the Group's shareholders. The Board is accountable to
shareholders for the long-term performance and success of the Group.
The CEO and other Board members offer regular meetings with shareholders and
brokers to review the Group's progress in delivering its ambitious strategy.
The Board are actively engaged in ensuring that there is regular communication
to the shareholders and wider stakeholders with material information about the
Group's progress.
Details of RNS announcements and copies of annual reports can be found on our
website www.oxcantech.com (http://www.oxcantech.com) . Social media is also
used to provide regular updates to our stakeholders, and a number of webinars
have been held throughout the period in an effort to keep shareholders
informed about the Group's progress.
See also the response provided under 1 (D) of the UK Corporate Governance Code
on page 21 of the annual report.
Matters covered by the Audit Committee during the period included risk
management and internal control framework, in addition to the Annual Report
for 2020/2021 and Interim Report for November 2021, and the Audit Scoping
Report for the audit of the financial statements contained within this Annual
Report. Their main responsibilities are detailed in section 1C (page 20 of
the annual report) and 4M and 4N (page 23 of the annual report), with further
details on page 32 of the annual report.
The Nominations Committee met once in the period to consider the appointment
of Richard Hathaway to the Board as a Non-Executive Director. Further details
are on page 33 of the annual report.
The Remuneration Committee met twice in the period to discuss extending the
notice periods for the Executive Directors and the Chief Scientific Officer.
Its main responsibilities are shown in section 5 on page 24 of the annual
report, and further details are provided on pages 34 to 37 of the annual
report.
The Management Report as required by the Disclosure and Transparency Rules of
the Financial Conduct Authority is covered by the preceding Strategic and
Corporate Governance Reports.
Responsibility statement
The Directors, whose names and functions are set out in this Directors' Report under the sub-heading 'Directors' with the registered office located at Prama House, 267 Banbury Road, Oxford OX2 7HT, accept responsibility for the information contained in this annual report and accounts for the period ended 30 April 2022. To the best of the knowledge of the Directors:
· the financial statements are prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of OCTP and the undertakings included
in the consolidation taken as a whole; and
· the management report includes a fair review of the development and
performance of the business and the position of OCTP and the undertakings
included in the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face.
OCTP acknowledges that it is responsible for all information drawn up and made public in this report and accounts for the period ended 30 April 2022.
Consolidated Statement of Comprehensive Income
Period ended Year ended
30 April 31 May
2022 2021
Notes £ £
Revenue - -
Research costs (2,891,497) (445,400)
Gross loss (2,891,497) (445,400)
Administrative expenses (2,320,292) (1,518,596)
Exceptional items 4 (291,598) (1,381,949)
Operating loss 5 (5,503,387) (3,345,945)
Finance income 6 - 47,021
Finance costs 6 - (67,713)
Loss before taxation (5,503,387) (3,366,637)
Income tax 9 791,058 138,651
Loss for the period (4,712,329) (3,227,986)
Other comprehensive income
Items that may be reclassified to profit or loss - -
Total comprehensive income for the period attributable to owners of the parent (4,712,329) (3,227,986)
company arising from continuing operations
Loss per share attributable to the ordinary equity holders of the company:
Basic loss per share from continuing and total operations 27 (#RANGE!_bookmark90) (0.491p) (0.504p)
Diluted loss per share from continuing and total operations 27 (0.491p) (0.504p)
Consolidated Statement of Financial Position
30 April 31 May
2022 2021
Notes £ £
Non-current assets
Intangible assets 10 46,080 101,657
Property, plant and equipment 11 - 46,826
Right-of-use assets 12 - 10,565
46,080 159,048
Current assets
Trade and other receivables 15 2,606,616 421,909
Cash and cash equivalents 16 9,165,596 14,630,801
11,772,212 15,052,710
Total assets 11,818,292 15,211,758
Current liabilities
Trade and other payables 17 2,025,264 824,114
Lease liabilities 19 - 123,885
Borrowings 18 - 3,136
Total current liabilities 2,025,264 951,135
Non-current liabilities
Borrowings 18 - 46,864
Total non-current liabilities - 46,864
Total liabilities 2,025,264 997,999
Net assets 9,793,028 14,213,759
Equity
Called up share capital 20 9,604,156 9,604,156
Share premium account 20 11,877,466 11,877,466
Share based payment reserve 26 1,449,608 1,158,010
Other reserve 20 643,455 643,455
Retained earnings (13,781,657) (9,069,328)
Total equity 9,793,028 14,213,759
The financial statements were approved and authorised for issue by the Board
of Directors on 22 July 2022 and were signed on behalf by:
Karen Lowe
Finance Director
Company Registration No. 13179529
Company Statement of Financial Position
30 April 31 May
2022 2021
Notes £ £
Non-current assets
Intangible assets 10 46,080 -
Investment in subsidiary 13 7,226,164 7,226,164
7,272,244 7,226,164
Current assets
Cash and cash equivalents 16 2,122,992 -
Trade and other receivables 15 7,819,642 15,002,961
9,942,634 15,002,961
Total assets 17,214,878 22,229,125
Current liabilities
Trade and other payables 17 195,687 136,274
Total current liabilities 195,687 136,274
Net assets 17,019,191 22,092,851
Equity
Called up share capital 20 9,604,156 9,604,156
Share premium account 20 11,877,466 11,877,466
Share based payment reserve 26 1,313,074 1,021,476
Retained earnings (5,775,505) (410,247)
Total equity 17,019,191 22,092,851
As permitted by section 408 of the Companies Act 2006, the parent company's
income statement has not been included in these financial statements. The
loss for the parent Company was £5,365,258 (2021: £410,247).
The financial statements were approved and authorised for issue by the Board
of Directors on 22 July 2022 and were signed on behalf by:
Karen Lowe
Finance Director
Company Registration No. 13179529
Consolidated Statement of Changes in Equity
Notes Share Capital Share Premium Account Share based payment reserve Other Reserve Retained Earnings Total
£ £ £ £ £ £
At 1 June 2020 - - 136,534 6,287,609 (5,841,342) 582,801
Loss for the period - - - - (3,227,986) (3,227,986)
Other comprehensive income - - - - -
Total comprehensive loss - - - - (3,227,986) (3,227,986)
Transactions with owners
Shares issued on incorporation 2 - - - - 2
Share for share exchange with OCT 6,304,154 - - (6,287,609) - 16,545
Reversal adjustment on consolidation - - - 643,455 - 643,455
Share issue on Admission 3,300,000 13,200,000 - - - 16,500,000
Share-based payment charge (warrants) 26 - - 96,550 - - 96,550
Share-based payment charge (options) 26 - - 924,926 - - 924,926
Share issue costs - (1,322,534) - - - (1,322,534)
Total transactions with owners 9,604,156 11,877,466 1,021,476 (5,644,154) - 16,858,944
Balance at 31 May 2021 9,604,156 11,877,466 1,158,010 643,455 (9,069,328) 14,213,759
Notes Share Capital Share Premium Account Share based payment reserve Retained Earnings Total
£ £ £ Other Reserve £ £
£
At 1 June 2021 9,604,156 11,877,466 1,158,010 643,455 (9,069,328) 14,213,759
Loss for the period - - - - (4,712,329) (4,712,329)
Other comprehensive income - - - - - -
Total comprehensive loss - - - - (4,712,329) (4,712,329)
Transactions with owners
Share-based payment charge (warrants) 26 - - 202,953 - - 202,953
Share-based payment charge (options) 26 - - 88,645 - - 88,645
Total transactions with owners - - 291,598 - - 291,598
Balance at 30 April 2022 9,604,156 11,877,466 1,449,608 643,455 (13,781,657) 9,793,028
Company Statement of Changes in Equity
At 1 June 2020 Share Capital Share Premium Account Share Based Payment Reserve Retained Earnings Total
£ £ £ £ £
Notes
Loss for the period - - - (410,247) (410,247)
Total comprehensive loss for the period - - - (410,247) (410,247)
Transactions with owners
Shares issued on incorporation 2 - - - 2
Share issue on Admission 3,300,000 13,200,000 - - 16,500,000
Share for share exchange with OCT 6,304,154 - - - 6,304,154
Share issue costs - (1,322,534) - - (1,322,534)
Share-based payment charge (options) 26 - - 924,926 - 924,926
Share-based payment charge (warrants) 26 - - 96,550 - 96,550
Total transactions with owners 9,604,156 11,877,466 1,021,476 - 22,503,098
Total equity at 31 May 2021 9,604,156 11,877,466 1,021,476 (410,247) 22,092,851
Notes Share Capital Share Premium Account Share Based Payment Reserve Retained Earnings Total
£ £ £ £ £
At 1 June 2021 9,604,156 11,877,466 1,021,476 (410,247) 22,092,851
Loss for the period - - - (5,365,258) (5,365,258)
Other comprehensive income - - - - -
Total comprehensive loss - - - (5,365,258) (5,365,258)
Transactions with owners
Share-based payment charge (warrants) 26 - - 202,953 - 202,953
Share-based payment charge (options) 26 - - 88,645 - 88,645
Total transactions with owners - - 291,598 - 291,598
Balance at 30 April 2022 9,604,156 11,877,466 1,313,074 (5,775,505) 17,019,191
Consolidated Statement of Cash Flows
Notes 2022 2021
£ £
Cash flows from operating activities
Cash absorbed from operations 21a (5,373,021) (1,936,955)
Interest paid 6 - (67,713)
Tax refunded 9 - 225,726
Net cash inflow / (outflow) from operating activities (5,373,021) (1,778,942)
Cash flows from investing activities
Payments for property, plant and equipment 11 (#_bookmark36) - (769)
Proceeds from disposal of property, plant and equipment 11 2,500 571
Interest received 6 - 47,021
Net cash inflow from investing activities 2,500 46,823
Cash flows from financing activities
Proceeds from issues of shares on IPO in May 2021 20 - 16,500,000
Proceeds from issues of shares in January 2020 - 250,000
Proceeds from borrowings - 650,000
Repayment of borrowings 18 (50,000) -
Share issue transaction costs 20 - (1,322,534)
Lease liability payments 12 (44,684) (23,698)
Net cash generated from financing activities (94,684) 16,053,768
Net (decrease)/increase in cash and cash equivalents (5,465,205) 14,321,649
Cash and cash equivalents at the beginning of the period 16 14,630,801 309,152
Cash and cash equivalents at end of the period 16 9,165,596 14,630,801
The share-based payment charge of £291,598 (2021: £1,021,476) is a
significant non-cash transaction.
Company Statement of Cash Flows
2022 2021
Notes £ £
Cash flows from operating activities
Cash absorbed from operations 21a 2,122,992 (15,177,466)
Net cash inflow/ (outflow) from operating activities 2,122,992 (15,177,466)
Cash flows from investing activities
Interest paid - -
Net cash outflow from investing activities - -
Cash flows from financing activities
Proceeds from issues of shares - 16,500,000
Share issue transaction costs - (1,322,534)
Net cash generated from financing activities - 15,177,466
Net increase in cash and cash equivalents 2,122,992 -
Cash and cash equivalents at the beginning of the period - -
Cash and cash equivalents at end of the period 2,122,992 -
The share option charge of the Company, as detailed in note 26, is a
significant non-cash transaction in the period.
Notes to the Financial Statements
The final results were authorised for issue by the Board of Directors on 22
July 2022. The financial information set out herein does not constitute the
Group's statutory consolidated financial statements for the 11 month period
ended 30 April 2022 of for the year ended 31 May 2021, but is derived from
those accounts. Statutory consolidated financial statements for 2022 will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting. The auditors have reported on those accounts; their report was
unmodified and did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006, but did include a material uncertainty relating to going
concern.
1 General Information
Oxford Cannabinoid Technologies Holdings Plc is a public limited company
limited by shares, incorporated and domiciled in England and Wales. Its
registered office and principal place of business is Prama House, 267 Banbury
Road, Oxford OX2 7HT. Incorporated on 4 February 2021, the Company's shares
were admitted to trading on the London Stock Exchange on 21 May 2021.
All press releases, financial reports and other information are available at
our Shareholder Centre on our website: www.oxcantech.com
(http://www.oxcantech.com) .
The consolidated financial statements are presented in Pound Sterling (£) and
have been rounded to the nearest pound.
The accounting period for the Company and Group is from 1 June 2021 to 30
April 2022, the financial year having been shortened during the period with
the aim of delivering efficiencies in the financial reporting and audit
process. As a consequence of this change, the prior year amounts are not
comparable with the 2021 figures covering 12 months and the 2022 figures
covering 11 months.
2 Summary of Significant Accounting Policies
2(a) Basis of preparation
Compliance with IFRS
The consolidated and company financial statements of the Group have been
prepared in accordance with UK adopted International Accounting Standards and
interpretations issued by the IFRS Interpretations Committee (IFRIC)
applicable to companies reporting under IFRS. The financial statements comply
with IFRS as issued by the International Accounting Standards Board (IASB).
Historical cost convention
The financial statements have been prepared on a historical cost basis, unless
stated otherwise in the accounting policies below.
2(b) Principles of consolidation and equity accounting
The consolidated financial statements consolidate the Company and its
subsidiary undertakings drawn up to 30 April (having previously been to 31 May
in the prior year). Subsidiaries are all entities over which the Company has
control. The Group controls an entity where the Group 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 to direct the activities of
the entity. Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are deconsolidated from the date that
control ceases.
The acquisition method of accounting is used to account for business
combinations by the Group as detailed in note 2(c), except as otherwise
detailed. Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated on consolidation.
Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies
adopted by the Group.
2(c) Business combinations
The acquisition method of accounting is used to account for all business
combinations, regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a subsidiary
comprises the:
· fair values of the assets transferred;
· liabilities incurred to the former owners of the acquired
business;
· equity interests issued by the Group;
· fair value of any asset or liability resulting from a contingent
consideration arrangement; and
· fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date. Acquisition-related costs are expensed as incurred.
On 17 May 2021, in connection with the pre-IPO group restructuring, the
existing OCT shareholders entered into a Share Exchange Agreement with OCTP,
with OCTP becoming the legal acquirer of OCT. The Group restructuring does not
constitute a business combination and consequently it is not a reverse
acquisition as defined in IFRS 3. However, although the transaction is
outside of the scope of IFRS 3 it has been accounted for on a similar basis,
as detailed in guidance issued by the IFRS Interpretations Committee. Other
reserves represent the value of shares obtained in excess of the par value
under the share for share exchange agreement.
2(d) Going concern
The Directors are required to satisfy themselves that it is reasonable for
them to conclude whether it is appropriate to prepare the financial statements
on a going concern basis, and as part of that process they have followed the
Financial Reporting Council's guidelines ("Guidance on the Going Concern Basis
of Accounting and Reporting on Solvency and Liquidity Risk" issued April
2016).
The Group's business activities together with factors that are likely to
affect its future development and position are set out in the Chair's
Statement, the CEO's Review and Financial Review. Budgets and detailed
cashflow forecasts that look beyond twelve months from the date of these
consolidated financial statements have been prepared and used when considering
the Group's ability to meet its liabilities as they fall due, without raising
further funding. The Directors have made various assumptions in preparing
these forecasts, using their view of both the current and future economic
conditions that may impact on the Group during the forecast period.
As detailed in the Directors' Report, the Board have, however, identified that
a material uncertainty exists on the Company's ability to continue as a going
concern. The Company's cash runway will only extend nine months beyond
signing these financial statements and therefore, the Company may be unable to
realise its assets and discharge its liabilities in the normal course of
business without a further fundraise within the next nine months. As set out
in the IPO Prospectus, the Board is planning on raising additional funds
within this period to provide further financial resources in order to progress
with the next stages of the research programmes. Whilst preparations are in
progress for this fundraise, alternative options for short to medium term
financing are also being considered. Further controls over discretionary spend
will be implemented to extend the current cash resources if required. Given
the mitigating controls that are in place for a successful fundraise and the
strength of controls that exist over cash management (as detailed in Principal
Risks and Uncertainties), the Board are confident that preparing the financial
statements on a going concern basis remains appropriate.
Key risks and potential scenarios that could negatively impact on the Group's
ability to continue to research and ultimately develop and retail prescribed
medicines within the timescale detailed within the IPO prospectus have been
considered. The signing of the agreement with Evotech for one of the Group's
leading drug candidates (OCT 461201) is an example of where the Directors have
actively managed some key external risk factors by selecting a partner who
offers an integrated drug development process, with acceleration through to
clinical trial stage.
The Directors have also considered the continued impact of the COVID-19
pandemic and the impact of the measures taken to contain it, on the Group. Due
to the nature of the Group's activities, there has not been a significant
on-going impact on the business (as detailed in the CEO's Review).
Nonetheless, the Directors have taken steps to mitigate the impact including
entering into agreements with CROs that, where possible, place responsibility
for any delays with the other party. The Directors have therefore successfully
taken steps to safeguard the assets of the Group during the pandemic.
After making enquiries including detailed consideration of the Group's
cashflow, solvency and liquidity position, the Board has a reasonable
expectation that OCTP, OCT and the Group as a whole have adequate resources to
continue in operational existence for at least twelve months (with significant
changes to the programme spend or with further fundraising) from the date of
signing of these financial statements. As such, the Board continues to adopt
the going concern basis in preparing the consolidated financial statements and
annual report.
2(e) Foreign currency translation
Items included in the consolidated financial statements of each of the Group's
entities are measured using Pound Sterling, which is the Group's functional
and presentation currency.
Foreign currency transactions are translated into the functional currency
using the exchange rates at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions, and from
the translation of monetary assets and liabilities denominated in foreign
currencies at period end exchange rates, are generally recognised in the
Statement of Comprehensive Income.
2(f) Research & development costs
Prior to achieving regulatory approval, all expenditure on research activities
is recognised as an expense in the period in which it is incurred. Once such
approval is obtained, expenditure can then be recorded as an internally
generated intangible asset arising from the Group's development activities if
the following conditions can be demonstrated, in accordance with IAS 38
Intangible Assets:
· the technical feasibility of completing the intangible asset so
that it will be available for use or sale;
· the intention to complete the intangible asset and use or sell
it;
· the ability to use or sell the intangible asset;
· how the intangible asset will generate probable future economic
benefits;
· the availability of adequate technical, financial and other
resources to complete the development and to use or sell the intangible asset;
and
· the ability to measure reliably the expenditure attributable to
the intangible asset during its development.
2(g) Tax
Income tax
Current tax payable is based on taxable profit for the period. The Group's
liability for current tax is calculated using the main corporation tax rate
for the period.
The Group is entitled to claim special tax deductions for qualifying
expenditure (i.e. the Research and Development Tax Incentive regime in the
UK). The Group accounts for such allowances as tax credits, which reduces
income tax payable and current tax expense.
Tax expense recognised in profit or loss comprises the sum of deferred tax and
current tax not recognised in other comprehensive income or directly in
equity.
Deferred tax
Deferred income taxes are calculated using the liability method on temporary
differences. This involves the comparison of the carrying amount of assets and
liabilities in the consolidated financial statements with their respective tax
bases used in the computation of taxable profit.
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 deductible
temporary differences can be utilised. However, deferred tax is not provided
on the initial recognition of goodwill, or on the initial recognition of an
asset or liability unless the related transaction is a business combination or
affects tax or accounting profit. Deferred tax on temporary differences
associated with investments in subsidiaries is not provided if reversal of
these temporary differences can be controlled by the Group and it is probable
that reversal will not occur in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of
recovery or settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net
basis.
Given the Company and Group are several years away from generating a taxable
profit, no deferred tax asset is recognised in respect of trading losses.
Deferred tax liabilities are always provided for in full and are calculated at
tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at the balance
sheet date.
2(h) Leases
Until 2 April 2022, the Group leased the head office in London under a five
year lease period and office equipment. The latter are short term leases of
low value assets and are as such accounted for as operating leases, all of
which had ended by 31 March 2022.
Contracts may contain both lease and non-lease components. The Group allocates
the consideration in the contract to the lease and non-lease components based
on their relative stand-alone prices. However, for the lease of premises for
which the Group is a lessee, it has elected not to separate lease and
non-lease components and instead has accounted for this as a single lease
component.
Lease terms are negotiated on an individual basis. The lease agreements do not
impose any covenants other than the security interests in the leased assets
that are held by the lessor. Leased assets are not used as security for
borrowing purposes.
The lease payments are discounted using the Group's incremental borrowing
rate, being the rate that the individual lessee would have to pay to borrow
the funds necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms, security and
conditions.
To determine the incremental borrowing rate the Group:
· uses the monthly average of UK resident banks' sterling weighted
interest rate on 'other loans, new advances to SMEs' as a basis;
· uses a build-up approach adjusting for credit and any currency
risk, economic factors and property yields for commercial property in the
local area;
· benchmarks against similar companies that are also pre-revenue,
of a similar scale and sector; and
· makes adjustments specific to the lease, e.g. term and currency.
An incremental borrowing rate of 5.31% (2021: 5.31%) was calculated and
applied in determining right-of-use costs and asset value.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
fixed payments (including in-substance fixed payments), less any lease
incentives receivable. Lease payments to be made under reasonably certain
extension options are also included in the measurement of the liability.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period.
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of lease liability;
· any lease payments made at or before the commencement date less
any lease incentives received;
· any initial direct costs, and
· restoration costs.
Right-of-use assets are depreciated over the shorter of the asset's useful
life and the lease term on a straight-line basis. The Group has chosen not to
revalue right-of-use assets held by the Group.
The lease term is reassessed if an option is actually exercised (or not
exercised) or the Company becomes obliged to exercise (or not exercise) it.
The assessment of reasonable certainty is only revised if a significant event
or a significant change in circumstances occurs, which affects this
assessment, and that is within the control of the lessee.
2(i) Impairment of assets
Intangible assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment, or more frequently if
events or changes in circumstances indicate that they might be impaired. Other
assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount, and is recorded as an exceptional item. The recoverable
amount is the higher of an asset's fair value less costs of disposal and value
in use.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets
(cash-generating units). Non-financial assets that suffered an impairment are
reviewed for possible reversal of the impairment at the end of each reporting
period.
2(j) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash
equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term, and highly liquid investments with original
maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in
value. There are no bank overdraft arrangements.
2(k) Other financial assets
The Group classifies its financial assets in the following measurement
categories:
· those to be measured subsequently at fair value (either through
Other Comprehensive Income or through profit or loss); and
· those to be measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in
profit or loss or Other Comprehensive Income. For investments in equity
instruments that are not held for trading, this will depend on whether the
Group has made an irrevocable election at the time of initial recognition to
account for the equity investment at fair value through other comprehensive
income (FVOCI).
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
At initial recognition, the Group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or
loss (FVTPL), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
carried at FVTPL are expensed in profit or loss.
2(l) Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation.
Historical cost includes expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognised when replaced. All other
repairs and maintenance are charged to profit or loss during the reporting
period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate the cost
(or, if applicable, revalued amounts) of the assets, net of any residual
values, over the lease term for leasehold improvements and estimated useful
lives for office and computer equipment:
Leasehold improvements 5 years
Office equipment 5 years
Computer equipment 5 years
Each year, the difference between depreciation based on the cost (or, if
applicable, revalued carrying amount) of the asset charged to profit or loss
and depreciation based on the asset's original cost, net of tax, is
reclassified from the property, plant and equipment revaluation surplus to
retained earnings.
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with
carrying amount. These are included in profit or loss.
2(m) Intangible assets
Intangible assets are stated at cost less amortisation and are reviewed for
impairment whenever there is an indication that the carrying value may be
impaired.
Intangible assets are comprised of licence fees paid for the use of trademarks
on compounds being developed. Such assets are defined as having finite useful
lives and the Group amortises the costs using the straight-line method over
the estimated useful life of five years. The charge for amortisation is
included within administrative expenses.
2(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the
Group prior to the end of the financial period which are unpaid. The amounts
are unsecured and are usually paid within 30 days of recognition. Trade and
other payables are presented as current liabilities unless payment is not due
within 12 months after the reporting period. They are recognised initially at
their fair value and subsequently measured at amortised cost using the
effective interest method.
2(o) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using
the effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw-down occurs. To the extent there is
no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in
the contract is discharged, cancelled or expired. The difference between the
carrying amount of a financial liability that has been extinguished or
transferred to another party and the consideration paid, including any non-
cash assets transferred or liabilities assumed, is recognised in profit or
loss as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
2(p) Provisions
Provisions for any legal claims are recognised when the Group has a present
legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation, and
the amount can be reliably estimated. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations, the likelihood that an
outflow will be required in settlement is determined by considering the class
of obligations as a whole. A provision is recognised even if the likelihood of
an outflow with respect to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of management's best estimate of
the expenditure required to settle the present obligation at the end of the
reporting period. The discount rate used to determine the present value is a
pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the liability. The increase in the provision
due to the passage of time is recognised as interest expense.
2(q) Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual
leave and accumulating sick leave that are expected to be settled wholly
within 12 months after the end of the period in which the employees render the
related service are recognised in respect of employees' services up to the end
of the reporting period and are measured at the amounts expected to be paid
when the liabilities are settled. Leave obligations are calculated by
multiplying the average days of outstanding leave at the period end by the
daily salary rate of the employee concerned. The liabilities are presented
as current employee benefit obligations in the balance sheet.
Other long-term employee benefit obligations
There are no other long-term employee benefit obligations.
Post-employment obligations
The Group operates one post-employment scheme, a defined contribution pension
plan available to all employees. The Group pays contributions to publicly or
privately administered pension insurance plans on a mandatory, contractual or
voluntary basis. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as employee
benefit expense when they are due. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in the future payments
is available.
Share-based payments
Share-based compensation benefits are provided to employees via the Group
Employee Option Plan, an employee share scheme, the executive short-term
incentive scheme and share appreciation rights. Information relating to these
schemes is set out in note 26. (#_bookmark84)
Employee options
The fair value of options granted under the Group Employee Option Plan is
recognised as an employee benefit expense, with a corresponding increase in
equity. The total amount to be expensed is determined by reference to the fair
value of the options granted:
· including any market performance conditions (e.g. the Company's
share price);
· excluding the impact of any service and non-market performance
vesting conditions (e.g. profitability, sales growth targets and remaining an
employee of the entity over a specified time period); and
· including the impact of any non-vesting conditions (e.g. the
requirement for employees to save or hold shares for a specific period of
time).
The total expense is recognised over the vesting period, which is the period
over which all of the specified vesting conditions are to be satisfied. At the
end of each period, the entity revises its estimates of the number of options
that are expected to vest based on the non-market vesting and service
conditions. It recognises the impact of the revision to original estimates, if
any, in profit or loss, with a corresponding adjustment to equity.
The Employee Option Plan is accounted for as detailed in note 26.
(#_bookmark95) When the options are exercised, the appropriate amount of
shares are transferred to the employee. The proceeds received, net of any
directly attributable transaction costs, are credited directly to equity.
Bonus plans
Where contractually obliged or where there is a past practice that has created
a constructive obligation to give staff bonuses, the Group recognises a
liability and an expense for bonuses based on a formula that takes into
consideration certain financial and operational objectives.
2(r) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. The excess of the proceeds from
share issues over the par value is classified as a share premium account.
The other reserve represents the difference on consolidation between the value
of the shares issued and the value of shares acquired by the Company in its
acquisition of OCT in May 2021. The shared based payment reserve represents
the fair value of equity-settled share-based payment transactions as detailed
in note 26.
2(s) Dividends
Provision is made for the amount of any dividend declared, being appropriately
authorised and no longer at the discretion of the entity, on or before the end
of the reporting period but not distributed at the end of the reporting
period.
2(t) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
· the profit or loss attributable to owners of the Group, excluding
any costs of servicing equity other than ordinary shares;
· by the weighted average number of ordinary shares outstanding
during the financial period, adjusted for bonus elements in ordinary shares
issued during the period.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account:
· the after-income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares; and
· the weighted average number of additional ordinary shares that
would have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
2(u) Exceptional items
Exceptional items comprise costs that are considered by the Directors not to
relate to the day to day financial performance of the Group. These are costs
incurred by the Group that are considered by the Directors to be material in
size and are unusual or infrequent in occurrence which require separate
disclosure within the consolidated financial statements. They include one-off
transactions and non-cash items such as the share-based payment charge.
2(v) Segmental Reporting
Operating segments are reported in a manner consistent with the internal
reporting to the chief operating decision-maker (CODM). The CODM, who is
responsible for allocating resources and assessing performance, has been
identified as the Board of Directors. The Directors consider that, as the
Group is non-revenue generating, there is only one operating segment and
consequently no segmental analysis is required.
2(w) Government grants
Government grants are recognised in the Consolidated Statement of
Comprehensive Income so as to match with the related expenses that they are
intended to compensate. It is considered whether there are any conditions for
the funding to be refunded. The amount allocated as a government grant (in the
form of a tax credit) is determined by reference to the specific agreed costs
and activities identified as meeting the criteria under the government scheme
for research and development expenditure. Government grants are recorded as an
offset to the relevant expense in the Consolidated Statement of Comprehensive
Income and are capped to match the relevant costs incurred.
2(x) New and forthcoming standards and interpretations
There were no new or amended standards adopted by the Group in the period.
New standards and interpretations not yet adopted
A number of new accounting standards, amendments to accounting standards and
interpretations have been issued by the International Accounting Standards
Board with an effective date after the date of these financial statements. The
Directors have chosen not to early adopt these standards and interpretations,
and the Directors do not expect them to have a material impact on the entity
in the current or future reporting periods and on foreseeable future
transactions.
Effective date
IFRS 3 Reference for conceptual framework 1 January 2022
IFRS 9 Financial Instruments - amendments resulting from Annual Improvements to IFRS
Standards 2018-2020 (fees in the "10 per cent" test for derecognition of
financial liabilities) 1 January 2022
IAS 16 Proceeds before intended use 1 January 2022
IAS 37 Provisions, Contingent Liabilities and Contingent Assets - amendments
regarding the costs to include when assessing whether a contract is onerous
1 January 2022
IAS 1 Presentation of Financial Statements - amendments regarding the classification 1 January 2023
of liabilities
IAS 1 Presentation of Financial Statements - amendments regarding the disclosure of
accounting policies
1 January 2023
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - amendments
regarding the definition of accounting estimates
1 January 2023
IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction
3 Critical Estimates and Judgements
The preparation of financial statements requires the use of accounting
estimates which, by definition, will seldom equal the actual results.
Management also needs to exercise judgement in applying the Group's accounting
policies. However uncertainty about these assumptions and estimates could
result in outcomes that would require a material adjustment to the carrying
amount of the asset or liability in future periods.
Estimates and judgements are continually evaluated. They are based on
historical experience and other factors, including expectations of future
events that may have a financial impact on the entity and that are believed to
be reasonable under the circumstances. The areas involving significant
estimates or judgements which management consider may have a significant risk
of causing a material adjustment to the reported amounts in the period were:
Going concern basis
As outlined in note 2(d), judgement has been applied in accounting for the
Group as a going concern. In reaching the decision the Directors have
considered current cash reserves and forecast cashflows, solvency and
liquidity, particularly with regard to the cash resources expected to be fully
utilised by March / April 2023. The forecasts are based on various
assumptions including a successful fundraising within the next 9 months,
charges from research partners, rate of progression through to
commercialisation, and external economic conditions.
There is a material uncertainty over the Group's ability to realise its assets
and discharge its liabilities in the normal course of business, without a
further fundraise within the next 9 months. Given the level of mitigating
controls in place over the risks involving fundraising and cash management (as
detailed in Principal Risks and Uncertainties), the Board currently believe
that preparing the financial statements on a going concern basis remains
appropriate.
Research & development costs
Judgement is used in the classification and hence treatment of costs incurred
in the research and development of the core programmes outlined in the CEO's
Review. During the period all of the £2,891,497 costs incurred were
accounted for as research costs and expensed to profit or loss, on the basis
that none of the programmes were yet at a stage of having gained regulatory
approval for commercialisation (and hence having a measurable future economic
benefit).
R&D tax credits receivable
Judgement is applied in calculating the tax credits that the Group consider to
be receivable from HMRC in relation to research costs incurred. Evidence is
retained to support the methodology adopted by the Group in calculating
R&D tax relief claims, part of which involves the judgement of experienced
senior managers and directors in articulating the scientific advancements and
uncertainties for the wider market of the Group's research programmes based on
contemporaneous evidence. The tax credit receivable of £929,709 is detailed
in note 15.
Impairment of intangible fixed assets
Judgement is involved in determining the useful economic life and potential
impairment of the licence intangible asset held by the Group at a net book
value of £46,080 (31 May 2021: £101,657). This includes consideration of the
continuing likelihood of the asset to generate value to the Group and the
adherence to the terms of the agreement or any other event which may have a
detrimental effect on the carrying value of the asset. The Directors have
carried out an impairment review of the asset during the period with a
£20,000 impairment charge considered necessary.
Warrants and share options
The Black-Scholes model is used to calculate the appropriate charge of the
warrants and share options. The calculation involves a number of estimates
and judgements to establish the appropriate inputs to be entered into the
model, including the use of an appropriate interest rate, expected volatility,
exercise restrictions and behavioural considerations. A significant element of
judgement is therefore involved in the calculation of the charge.
4 Exceptional Items
The Consolidated Statement of Comprehensive Income includes exceptional items
totalling £291,598 (2021: £1,381,949) comprised of:
Period ended Year ended
30 April 31 May
2022 2021
Note £ £
Share-based payment charge 26 291,598 1,021,476
IPO costs - 360,473
291,598 1,381,949
Share-based payment charge
As detailed in note 26, the Group operates two share option schemes for its
Directors and senior employees one relating to options transferred from OCT
and a new scheme for OCTP. In addition, warrants were issued as part of the
listing in May 2021, a charge of £202,953 (2021: £96,550) which is included
within the total charge for the current period.
IPO costs
A total of £1,683,007 costs were incurred in respect of the OCTP IPO in May
2021, of which £1,322,534 were set off against the share premium account and
£360,473 were expensed in the prior period.
5 Operating Loss
Operating loss is stated after charging / (crediting):
Period ended Year ended 31 May
30 April 2021
2022
£ £
Depreciation of property, plant and equipment 12,143 15,463
Amortisation of right-of-use assets 10,565 110,189
Amortisation of intangible assets 35,577 39,042
Impairment of intangible assets 20,000 -
Gain on release of right-of-use assets (79,202) -
Operating lease rentals 2,494 889
Share based payment charge 291,598 1,021,476
Foreign exchange loss / (gain) 25,694 (6,295)
6 Finance Income and Finance Costs
Period ended Year ended
30 April 31 May
2022 2021
£
£
Finance income - (47,021)
Finance costs - 67,713
- 20,692
Finance income
This relates to lease interest on the right-of-use asset held in relation to
the leased London office (that was terminated on 2 April 2022). During the
period no COVID-19 rent rebates were received (2021: £55,537).
7 Employees
The monthly average number of employees was 7 (2021: 6), which excludes
Non-Executive Directors.
2022 2021
Number Number
Research 2 2
Management 5 4
Total number of employees 7 6
Their aggregate remuneration, including Executive Directors' remuneration,
comprised:
Period ended Year ended
30 April 31 May
2022 2021
£ £
Wages and salaries 817,671 444,636
Pension 85,634 45,917
Social security costs 121,564 56,115
Share based payments 88,645 924,926
1,113,514 1,471,594
The Group has received the benefit of payments under the furlough scheme of
£3,125 (2021: £34,369) which has been netted against the above figures.
Details of Directors' emoluments, share options and pension entitlements are
given in the Directors' Remuneration Report.
Employee Benefit Obligations
30 April 31 May
2022 2021
£ £
Leave obligations 11,731 13,617
Total employee benefit obligations 11,731 13,617
The leave obligations cover the Group's liabilities for annual leave which are
classified as short-term benefits, as explained in note 2(q). The liability
comprises all of the accrued annual leave, with the entire amount of the
provision presented as current, since the Group does not have an unconditional
right to defer settlement. However, based on past experience, the Group does
not expect all employees to take the full amount of accrued leave or require
payment within the next 12 months.
The Group operates a defined contribution pension plan which receives fixed
contributions from Group companies. The Group's legal or constructive
obligation for these plans is limited to the contributions. The expense
recognised in the current period in relation to these contributions was
£85,634 (2021: £45,917).
Medical insurance is provided to all current employees. The expense recognised
in the current period in relation to these costs was £4,970 (2021: £5,661).
There are no post-employment obligations.
8 Auditor's Remuneration
During the period, the Group incurred the following costs in respect of
services provided by the auditor:
Period ended 30 April Year ended 31 May
2022 2021
£ £
Fees payable to the Company auditor for the audit of the parent company 72,500 75,000
Fees payable to the Company auditor for further services:
- audit of Company's subsidiaries pursuant to legislation 12,500 10,000
- other services pursuant to legislation 10,475 -
- corporate finance services - 64,000
The corporate finance services in the prior period were provided as part of
the IPO process prior to the appointment of Moore Kingston Smith LLP as
auditor.
9 Income Tax
The Group is pre-revenue generating, but on target to gain regulatory approval
of its first product in 2027. The Group benefits from research and development
corporation tax relief in both the current period and prior years claimed on
allowable research expenditure.
A deferred tax asset of approximately £2,215,737 (2021: £1,453,000) relating
to carried forward losses of £8,502,949 (2021: £5,810,000) has not been
recognised due to the uncertainty of the timing of future taxable profits.
The deferred tax assets have been calculated at 25% (2021:25%).
Period ended Year ended 31 May
30 April 2021
2022
£ £
Current tax credit
UK corporation tax on loss for the current period (759,726) (138,651)
Adjustment from previous periods (31,332) -
UK corporation tax on loss (791,058) (138,651)
The income tax credit differs from the theoretical credit arising from
applying UK corporate tax rates to the losses for the reasons below:
Loss before taxation (5,503,387) (3,366,637)
Expected tax based on a corporation tax rate of 19% (2021: 19%) (1,045,644) (677,292)
Effect of expenses not deductible in determining taxable profit 94,423 309,519
Effect of income not taxable in determining taxable profit (16,265) -
Depreciation in excess of capital allowances 13,165 -
Losses carried forward 403,865 245,751
Enhanced research and development relief utilised (550,456) (102,689)
Losses surrendered for R&D tax credit 973,884 181,681
Research and development tax credit (759,726) (138,651)
Adjustment from previous periods (31,332) -
Rate difference between CT rate and R&D repayment rate 127,028 43,030
Taxation credit for the period (791,058) (138,651)
10 Intangible Assets
Licences
Group 30 April 2022 31 May 2021
£ £
Cost
At 1 June 2021/ 1 June 2020 155,245 155,245
Additions - -
At 30 April 2022 / 31 May 2021 155,245 155,245
Amortisation
At 1 June 2021/ 1 June 2020 53,588 14,546
Charge in year 35,577 39,042
Impairment 20,000 -
At 30 April 2022 / 31 May 2021 109,165 53,588
Net book value at 30 April 2022 / 31 May 2021 46,080 101,657
Licences
Company 30 April 2022 31 May 2021
£ £
Cost
At 1 June 2021 / 1 June 2020 - -
Transfer from subsidiary 155,245 -
Additions - -
At 30 April 2022 / 31 May 2021 155,245 -
Amortisation
At 1 June 2021 / 1 June 2020 - -
Transfer from subsidiary 53,588 -
Charge in year 35,577 -
Impairment 20,000 -
At 30 April 2022 / 31 May 2021 109,165 -
Net book value at 30 April 2022 / 31 May 2021 46,080 -
The intangible asset was transferred from the subsidiary to the Company at the
beginning of the period.
The Directors have undertaken a detailed impairment review in the current
period. Having considered the work undertaken on the assets accessible to
the Group under the terms of the licence that the intangible asset covers, an
impairment of £20,000 has been made as at 30 April 2022.
11 Property, Plant and Equipment
Leasehold Office equipment Computer Total
improvements equipment
Group £ £ £ £
Cost
At 1 June 2020 57,182 14,772 7,160 79,114
Additions - - 769 769
Disposals - (571) - (571)
At 31 May 2021 57,182 14,201 7,929 79,312
Disposals (57,182) (14,201) (7,929) (79,312)
At 30 April 2022 - - - -
Depreciation
At 1 June 2020 11,041 3,886 2,096 17,023
Charge in year 11,372 2,633 1,458 15,463
At 31 May 2021 22,413 6,519 3,554 32,486
Charge in period 8,812 2,142 1,189 12,143
Disposals (31,225) (8,661) (4,743) (44,629)
At 30 April 2022 - - - -
Net book value at 31 May 2021 34,769 7,682 4,375 46,826
Net book value at 30 April 2022 - - - -
The Company held no fixed assets at 30 April 2022 or 31 May 2021.
All fixed assets were disposed of as part of the termination of the lease on
the London office on 2 April 2022, with a net loss on disposal of £32,183
(2021: £nil).
12 Right-of-Use Assets
This note provides information for leases where the Group is a lessee. The
Group does not act as a lessor in any capacity.
30 April 2022 31 May 2021
Group £ £
Cost
At 1 June 2021/ 1 June 2020 174,116 141,029
Adjustment to IFRS 16 recognition - 33,087
Disposals (174,116) -
At 30 April 2022 / 31 May 2021 - 174,116
Amortisation
At 1 June 2021/ 1 June 2020 163,551 53,362
Charge in period 10,565 110,189
Disposals (174,116) -
At 30 April 2022 / 31 May 2021 - 163,551
Net book value at 30 April 2022 / 31 May 2021 - 10,565
The right-of-use asset was comprised of one lease on the head office building,
which commenced in April 2019 for five years and was terminated on 2 April
2022.
The Consolidated Statement of Comprehensive Income shows the following amounts
relating to leases:
Notes 30 April 2022 31 May 2021
£ £
Amortisation charge of right-of-use assets
Leased head office 5 10,565 110,189
Interest expense (included in finance costs) 6 (#_bookmark23) - 4,258
The total cash outflow for leases in the period was £44,684 (2021: £23,698).
COVID-19-related rent concessions
During the period the Group received no rent concessions (2021: £55,537) as a
direct consequence of the COVID‑19 pandemic.
Short term and low value leases
Under IFRS 16 short term and low value leases can be accounted for as
operating leases. As such, costs for short term leases for low value office
equipment have therefore been expensed in the period, as detailed in note 5.
13 Investments
Company
30 April 30 May
2022 2021
£ £
Cost and net book value at 1 June 2021/ 1 June 2020 7,226,164 -
Additions - 6,304,154
Share option charge of subsidiary - 922,010
Cost and net book value at 30 April 2022 / 31 May 2021 7,226,164 7,226,164
The Group's subsidiaries at 30 April 2022 are set out below. The share capital
consists of ordinary shares that are held directly by the Group, and the
proportion of ownership interests held equals the voting rights held by the
Group. The country of incorporation or registration is also their principal
place of business. All subsidiaries are tax resident in their country of
residence.
Place of business / country of incorporation Ownership
Name and address of Entity Interest held by Group Indirect or Indirect Principal Activity
%
Oxford Cannabinoid Technologies Ltd UK 100 Direct Pharmaceutical drug research
Prama House, 267 Banbury Rd,
Oxford OX2 7HT
The Directors have undertaken a detailed impairment review in the current
period and as a result of this process no impairment has been identified as
being required as at 30 April 2022.
14 Financial Assets and Financial Liabilities
The Group holds the following financial instruments: Notes 30 April 31 May
2022 2021
£
£
Financial assets at amortised cost
Cash and cash equivalents 16 9,165,596 14,630,801
Other receivables 35,996 6,998
9,201,592 14,637,799
Liabilities at amortised cost
Trade and other payables 17 2,025,264 824,114
Lease liabilities 19 - 123 885
Borrowings 18 - 50,000
2,025,264 997,999
The maximum exposure to credit risk at the end of the reporting period is the
carrying amount of each class of financial assets mentioned above.
15 Trade and Other Receivables
Group Company
30 April 31 May 30 April 31 May
2022 2021 2022 2021
£ £ £ £
Prepayments and accrued income 1,472,316 85,323 1,472,310 57,360
Tax credit receivable (note 3) 929,709 138,651 759,726 -
VAT recoverable 168,595 190,937 105,313 52,524
Amounts due from group undertakings - - 5,446,307 14,893,075
Other receivables 35,996 6,998 35,986 2
2,606,616 421,909 7,819,642 15,002,961
The inter-company balance between OCTP and its subsidiary OCT is unsecured,
interest free and repayable on demand. The balance includes a provision as
detailed in note 25.
16 Cash and Cash Equivalents
Group Company
30 April 31 May 30 April 31 May
2022 2021 2022 2021
£ £ £ £
Cash at bank and in hand 9,165,596 14,630,801 2,122,992 -
Neither the Group nor the Company have a bank overdraft facility.
17 Trade and Other Payables
Group Company
30 April 31 May 30 April 31 May
2022 2021 2022 2021
£ £ £ £
Trade payables 1,798,291 500,390 9,146 50,900
Accruals and deferred income 174,088 192,953 134,438 47,702
Other taxation and social security 52,885 47,830 52,103 37,672
Other payables - 82,941 - -
2,025,264 824,114 195,687 136,274
18 Borrowings
Group Company
30 April 31 May 30 April 31 May
Unsecured: 2022 2021 2022 2021
£
£
£
£
Government 'Bounce Back' Loan
Current - 3,136 - -
Non-current - 46,864 - -
- 50,000 - -
In November 2021, the Group repaid the Bounce Back Loan obtained by OCT from
Metro Bank Plc ahead of the repayments that were scheduled to commence on 14
February 2022.
19 Lease Liabilities
Group Company
30 April 31 May 30 April 31 May
2022 2021 2022 2021
£
£
£
£
Current - 123,885 - -
Non-current - - - -
- 123,885 - -
Lease liabilities were measured at the present value of the remaining lease
payments, discounted using the rate implicit in the lease, or if that rate
cannot be readily determined, at the Group's calculated incremental borrowing
rate (5.31%).
20 Equity
Share Capital
30 April 31 May 30 April 31 May
2022 2021 2022 2021
Number Number £ £
Ordinary Shares
Issued and fully paid of £0.01 each 960,415,644 960,415,644 9,604,156 9,604,156
Total 960,415,644 960,415,644 9,604,156 9,604,156
Authorised share capital is £10,084,364.
Reconciliation of Ordinary Shares Number Par Value Share Premium Total
of Shares £ £ £
Opening balance 1 June 2021 960,415,644 9,604,156 11,877,466 21,481,622
Balance 30 April 2022 960,415,644 9,604,156 11,877,466 21,481,622
Other Reserve
On 17 May 2021, pursuant to a share for share exchange, OCTP unconditionally
acquired the shares of OCT, prior to the admission of the Group onto the
Official List and to trading on the main market of the London Stock Exchange
on 21 May 2021. Although the transaction was not a reverse acquisition as
defined in IFRS 3, the Directors accounted for the transaction on a similar
basis as detailed in guidance issued by the IFRS Interpretation Committee.
The value of shares obtained in excess of the par value under the share for
share exchange agreement has been included as an other reserve of £643,455
(2021: £643,455). This reserve is not distributable.
21 Cash Flow Information
21(a) Cash used in operations
Group Company
Note 30 April 31 May 30 April 31 May
2022 2021 2022 2021
£ £ £ £
Loss after income tax from:
Continuing operations (4,712,329) (3,227,986) (5,365,258) (410,247)
Loss after income tax (4,712,329) (3,227,986) (5,365,258) (410,247)
Adjustments for:
Research and Development tax credit 9 (791,058) (138,651) (759,726) -
Release of Greek subsidiary assets 49,653 - -
Depreciation and amortisation 5 (#_bookmark22) 78,285 164,694 55,577 -
Loss on disposal of property, plant and equipment 32,183 - - -
Share-based charge 26 291,598 1,021,476 291,598 99,466
Finance costs - net 6 - 20,692 - -
(Increase) / decrease in trade receivables (1,393,649) 31,437 7,943,045 (15,002,959)
Increase in trade and other payables 1,072,296 191,383 (42,244) 136,274
Cash used in operations (5,373,021) (1,936,955) (2,122,992) (15,177,466)
21(b) Non-cash investing and financing activities
Non-cash investing and financing activities disclosed in other notes are the
options and shares issued to employees under the OCT Employee Option Plan and
warrants issued to advisers (see note 26). (#_bookmark84)
21(c) Net debt reconciliation
The analysis of net debt and the movements in net debt for each of the periods
presented is detailed below:
Group Company
30 April 31 May 30 April 31 May
Net debt 2022 2021 2022 2021
£ £ £ £
Cash and cash equivalents (note 16 (#_bookmark30) ) 9,165,596 14,630,801 2,122,992 -
Borrowings (note 18 (#_bookmark32) ) - (50,000) - -
Lease liabilities (note 19 (#_bookmark37) ) - (123,885) - -
Net cash and cash equivalents 9,165,596 14,456,916 2,122,992 -
22 Financial Risk Management
This note explains the Group's exposure to financial risks and how these risks
could affect the Group's future financial performance.
As a pre-revenue Group, the core financial risks that the Group are exposed to
are credit and liquidity risks. The Group's financial risk management is
predominantly controlled by the finance team under policies approved by the
Board of Directors. Financial risks are identified, evaluated and managed in
close co‑operation with the Executive Directors.
Liquidity risk
The Group has cash and cash equivalents at bank of £9,165,596 as at 30 April
2022. The Group does not operate a bank overdraft facility, and was debt
free at 30 April 2022.
The Group manages liquidity risk through rolling cash flow forecasts and
budgetary controls, ensuring sufficient cash is available to meet obligations
when due, predominantly those relating to the research of the four drug
programmes. Rolling cash flow forecasts and liquidity performance indicators
are monitored by management, and reported to and overseen by the board of
directors on a quarterly basis, as part of the overall risk management
framework.
As detailed in note 2(d) and in the Directors' Report, the current cash
reserves are expected to be fully utilised by March / April 2023. The Board
have considered various options that would allow the Group to extend its cash
a further three months beyond that in the event that there was a delay in the
next round of fundraising. The Board has taken into consideration the level
and timing of the Group's working capital requirements (which takes into
account reductions in overhead costs and controls over discretionary spending
to preserve cash flow). Consideration has been given to ongoing discussions
around further third-party investment on a short to medium term basis, and the
extent to which these discussions are advanced. The Board remains confident
that it will be able to raise funds to progress its strategy beyond the end of
March / April 2023. However, no such funding has been unconditionally
committed at the date of approval of these financial statements.
As set out in the Prospectus, following the IPO in May 2021 the Group are able
to issue a further 5% of ordinary shares without having to seek additional
shareholder consent. As at the 30 April 2022, none of this headroom had been
used.
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group
has a policy of only dealing with creditworthy counterparties, principally
involving banks and their wholly-owned subsidiaries with a credit rating in
excess of B (as defined by at least one credit rating agency) when placing
cash on deposit. In addition, at the period-end there were no trade
receivables in the Statement of Financial Position. The other receivables
relate to R&D tax credit, VAT receivable from HMRC and related parties
(see note 25). The exposure to credit risk is therefore currently limited to
the carrying amount of cash and cash equivalents of £9,165,596 (31 May 2021:
£14,630,801).
Foreign currency exchange risk
All assets are held in Pound Sterling and the main foreign currencies used to
pay suppliers are Euro and US Dollar. Consequently, foreign exchange risk is
not considered to be material to the Group. Whilst the loss on foreign
currency transactions rose in the period (albeit still immaterial), this was
partly due to the change in foreign currency payment facilities and overall
the foreign exchange risk is not considered to be material to the Group.
Maturities of financial liabilities
The tables below analyse the Group's financial liabilities into relevant
maturity groupings based on their contractual maturities for all
non-derivative financial liabilities (the Group does not hold any derivative
financial instruments at the current or prior financial period end).
The amounts disclosed in the table are the contractual undiscounted cash
flows. Balances due within 12 months equal their carrying balances as the
impact of the discounting is not significant.
Contractual maturities at 30 April 2022 <6 months 6 to 12 1 to 2 years 2 to 5 years Total contractual cash flows and carrying amounts
months
£ £ £ £ £
Trade and other payables 2,025,264 - - - 2,025,264
Total non-derivatives 2,025,264 - - - 2,025,264
Contractual maturities at 31 May 2021 <6 months 6 to 12 1 to 2 years 2 to 5 years Total contractual cash flows and carrying amounts
months
£ £ £ £ £
Trade and other payables 824,114 - - - 824,114
Lease liabilities 68,424 55,461 - - 123,885
Borrowings - 3,136 10,614 36,250 50,000
Total non-derivatives 892,538 58,597 10,614 36,250 997,999
Despite the £50,000 Bounce Back Loan disclosed in borrowings having a term of
72 months, with the first repayment due in February 2022, the Group repaid
this debt in full in November 2021.
23 Capital Management
The Group's objectives when managing capital are to: safeguard its ability to
continue as a going concern, and maintain an optimal capital structure to
reduce the cost of capital, in order that the Group can continue to research
and develop the four drug programmes that could ultimately be commercialised
and generate profits available for distribution to the shareholders.
In order to achieve this, the Group may issue new shares and sell assets.
Consistent with others in the industry, the Group monitors capital on the
basis of the following gearing ratio:
Net debt as per note 21(c) divided by Total 'Equity' (as shown in the
Consolidated Statement of Financial Position).
30 April 31 May
2022 2021
£ £
Debt - (173,885)
Cash 9,165,596 14,630,801
Net cash 9,165,596 14,456,916
Total equity 9,793,028 14,213,759
Gearing 93.6% 101.7%
The movement in gearing is as a result of the draw down of the £14.8m net
proceeds raised from the IPO in May 2021. There remain no financial covenants
in place over the Group.
No dividends are proposed for the current financial period as the Group
remains pre-revenue (2021: £nil).
24 Events Occurring After the Reporting Period
On 16 May 2022, the Group announced the appointment of Axis Capital Markets
Limited as its new brokers. On 19 July 2022, OCTP entered into a master
service agreement and work order with Simbec Research Limited for its
first-in-human Phase 1 clinical trial for lead compound OCT461201, due to
commence in Q1 2023.
25 Related Party Transactions
The Group is headed by Oxford Cannabinoid Technologies Holdings Plc, the
ultimate parent entity. There is no ultimate controlling party.
Key management personnel compensation
Detailed remuneration disclosures are provided in full in the Directors'
Remuneration Report on pages 34 to 37 of the annual report. The Directors
received dividends paid by the Company of £nil (2021: £nil).
The amounts outstanding at the period end due to key management was £nil
(2021: £nil).
The following transactions occurred with other related parties:
2022 2021
£ £
Purchase of management services from related party (a) 35,000 196,067
Amounts owed by a related party (b) 35,994 -
Intercompany loan (c) (d) 5,446,307 14,893,075
Payments by OCT on behalf of OCTP (c) 2,122,789 79,197
Payments by OCTP on behalf of OCT (c) 2,071,983 -
(a) Until 31 December 2021 a management service agreement was in place
between the Group and Kingsley Capital Partners LLP ('KCP'), with the
Executive Chair of the Group (Neil Mahapatra, until 11 February 2022) also
being the Managing Partner of KCP.
(b) Between December 2021 and January 2022, the Group paid £35,994 for
professional services, which KCP agreed to reimburse the Group for. This was
included as a receivable in the Statement of Financial Position at the period
end.
(c) Due to a delay in the opening of a bank account for OCTP, until November
2021 all cash was held in the bank account of OCT, who made payments on behalf
of OCTP during the period. That position was reversed from December 2021.
(d) A provision of £678,325 has been made against the intercompany loan,
representing the net liabilities balance in OCT as at 30 April 2022.
26 Share-Based Payments
Share-based payment reserve:
Group Company
30 April 31 May 30 April 31 May
Share Options 2022 2021 2022 2021
£ £ £ £
As at 1 June 2021/ 1 June 2020 1,061,460 136,534 924,926 -
Share options: Old Scheme (OCT) - 922,010 - 922,010
Share options: New Scheme (OCTP) 88,645 2,916 88,645 2,916
As at 30 April 2022 / 31 May 2021 1,150,105 1,061,460 1,013,571 924,926
Group Company
30 April 31 May 30 April 31 May
Warrants 2022 2021 2022 2021
£ £ £ £
As at 1 June 2021 / 1 June 2020 96,550 - 96,550 -
Warrants issued May 202,953 96,550 202,953 96,550
2021
As at 30 April 2022 /31 May 2021 299,503 96,550 299,503 96,550
Total share-based payment reserve 1,449,608 1,158,010 1,313,074 1,021,476
Employee Option Plan
The Group operates an equity-settled share-based remuneration scheme for
employees. The only vesting condition is that the individual remains an
employee of the Group over the vesting period.
During the period, the Group recognised share-based payment expense of
£88,645 (2021: £924,926) in relation to options.
Share Options Issued
OCT issued 89,523 share options to four employees on 24 February 2020, that
were exercisable at a price of £18.88 per share under the original OCT Option
Scheme.
On 14 May 2021, the Board adopted the Group's Replacement Option Scheme to
facilitate the grant of replacement options in OCTP by the Company to option
holders who held options over shares of OCT under the original OCT Option
Scheme. No new grants or options will take place under the Replacement Option
Scheme and all of the options vested on 21 May 2021 when the Group listed. A
total of 69,584,356 options were issued to three current and two previous
employees, with an expiry date of 10 years from the original grant date. Two
of the employees (both of whom are directors) given replacement options are
subject to a lock-in period of one year as part of the IPO (expired 21 May
2022).
On 17 May 2021, the Board adopted the Group's New Employee Share Option Scheme
to incentivise certain of the Group's employees and directors. This new scheme
provides for the grant of both Enterprise Management Incentives (EMI) options
and non-tax advantaged options. Options granted under the new scheme are
subject to certain conditions, the key elements of which are as follows:
· The Remuneration Committee may grant options to any employee,
executive or non-executive director of the Group;
· No consideration will be payable for the grant of options;
· The Remuneration Committee determines the exercise price of
options before they are granted, which shall be 30% above the 10-day
volume-weighted average price ("VWAP") of the Ordinary Shares at the date of
grant of the option; and
· Options can normally only be exercised on satisfaction of the
exercise conditions determined by the Remuneration Committee at grant,
including any performance conditions which may be set.
On 21 May 2021, 86,437,408 options were granted to 5 employees (4 of whom were
Directors, 1 who switched to a Non-Executive director role on 11 February
2022) and 7,203,117 were granted to three Non‑Executive directors under the
new scheme. Each of the options have an exercise price equal to 30% over the
Placing price, being £0.065. They are exercisable from May 2022, on a
straight line basis over a period of 3 years. There are no vesting conditions.
During the period, no options were exercised, forfeited or expired.
Share options issued under the Replacement Option Scheme, all of which were
outstanding at the end of the period, have the following expiry dates and
exercise prices:
Grant date Expiry date Exercise price Share options
30 April 2022
14 May 2021 24 February 2030 £0.042 40,590,874
14 May 2021 24 February 2030 £0.05 28,993,482
Vested and exercisable at 30 April 2022 69,584,356
The assessed fair value at grant date of options converted or granted during
the period ended 30 April 2022 was £0.019 for £0.05 replacement options,
£0.0209 for £0.042 replacement options, and £0.003 for the new options. The
fair value at grant date is independently determined using an adjusted form of
the Black-Scholes model which includes a Monte Carlo simulation model that
takes into account the exercise price, the term of the option, the impact of
dilution (where material), the share price at grant date and expected price
volatility of the underlying share (informed by the volatilities of peer group
companies), the expected dividend yield and the risk-free interest rate for
the term of the option.
An expense of £88,645 for the New Employee Share Option Scheme was recognised
during the period ended 30 April 2022 (2021: £2,916). Expenses for the
Old Employee Share Option Scheme recognised during the period were £nil
(2021: £922,010).
The inputs into the option pricing model, calculated using the model described
above, for the options issued under the new scheme in May 2021 included:
Share price (trading price as at 28 May 2021 on LSE) £0.04
Exercise price £0.065
Expected volatility 32.28%
Expected life 3 years
Risk free interest rate 0.4638%
Warrants
On 21 May 2021, OCTP issued a total of 33,307,275 warrants all with an
exercise price of £0.05 and a 5 year exercise period, vesting on the day of
issue. None of the warrants had been exercised by 30 April 2022.
The Black-Scholes model is used to calculate the appropriate charge for the
warrants. The use of this model to calculate a charge involves using a number
of estimates and judgements to establish the appropriate inputs to be entered
into the model, covering areas such as the use of an appropriate interest
rate, expected volatility, exercise restrictions and behavioural
considerations. A significant element of judgement is therefore involved in
the calculation of the charge. During the period, the Group recognised total
share- based payment expenses for warrants of £202,953 (2021: £96,550).
The inputs into the warrants pricing model are as follows:
Share price (trading price as at 28 May 2021 on LSE) £0.04
Exercise price £0.05
Expected volatility 34.43%
Expected life 5 years
Risk free interest rate 0.5353%
Volatility was based on that of a company in the same sector as the Group,
experienced at a similar stage in the Group's development, and is within the
average banding for the Western European pharmaceutical sector.
27 Loss Per Share
Period ended Year ended
30 April 2022 31 May 2021
£ £
27(a) Basic loss per share
Basic loss per share attributable to the ordinary equity holders of the (0.00491) (0.00504)
Company
27(b) Diluted loss per share
From continuing operations attributable to the ordinary equity holders of the (0.00491) (0.00504)
Company
Total diluted loss per share attributable to the ordinary equity holders of (0.00491) (0.00504)
the Company
27(c) Reconciliations of loss used in calculating loss per share
Period ended Year ended
30 April 2022 31 May 2021
£ £
Basic loss per share
Loss attributable to the ordinary equity holders of the Company used in (4,712,329) (3,227,986)
calculating basic loss per share:
Diluted loss per share
Loss from continuing operations attributable to the ordinary equity holders of
the Company:
Used in calculating basic loss per share (4,712,329) (3,227,986)
Used in calculating diluted loss per share (4,712,329) (3,227,986)
Loss attributable to the ordinary equity holders of the Company used in (4,712,329) (3,227,986)
calculating diluted loss per share
27(d) Weighted average number of shares used as the denominator
2022 2021
Number Number
Weighted average number of ordinary shares used as the denominator in
calculating basic loss per share
960,415,644 640,378,738
Adjustments for calculation of diluted loss per share: - -
Weighted average number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted loss per share
960,415,644 640,378,738
The conditions relating to the issued share options and warrants are such that
they are anti-dilutive.
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