Celadon
Pharmaceuticals Plc
("Celadon", the "Company" or the "Group")
Final
Results for the year ended 31 December 2023
London, 14 May 2024
- Celadon Pharmaceuticals Plc (AIM: CEL), a
UK-based pharmaceutical company focused on the development,
production and sale of breakthrough cannabis-based medicines, today
announces its audited final results for the
year ended 31 December 2023.
Strategic and operational
highlights
·
Registration of the Group's Midlands facility with
the UK Medicines and Healthcare products Regulatory Agency ("MHRA")
for the Good Manufacturing Practice ("GMP") manufacturing of its
cannabis Active Pharmaceutical Ingredients (APIs)
·
Successful Home Office licence update to allow
commercial sale of the Group's high Δ-9
tetrahydrocannabinol ("THC")
product
·
Three customer contracts signed:
o The first two, estimated to have an annual value of c.£1.4m,
expected to utilise most of the capacity of Phase 1. Additional
letter of intent signed with the first customer for up to a further
£7m of annual revenue
o First supplies on both contracts undertaken in December
2023
o Third customer contract signed with a European pharmaceutical
distributor worth up to £26m over three years, and expected to be
delivered from Phase 2
·
Receipt of Research Ethics Committee ("REC")
approval for the Group's chronic pain study
·
Fit out of Phase 2 underway, with insights
gathered from Phase 1 informing heating, ventilation and air
conditioning optimisations
Financial highlights
·
Revenue of £75k (FY22: £24k)
·
Operating loss of £5,931k (FY22: loss of
£5,381k)
·
Loss before tax of £7,523k (FY22: loss of
£18,118k)
·
Cash at 31 December 2023 of £1,259k (FY22:
£5,061k)
o Cash balance at 10 May 2024 of £0.5m, with £0.7m of VAT and
R&D tax credits due from HMRC
·
Committed credit facility for £7.0m signed on 29
May 2023 with an initial 2-year term, which has since been extended
to 30 November 2025
·
£5.1m of equity raised from new and existing
shareholders, with £3.0m raised in Q4 FY23 and a further £2.1m
raised in May 2024
James Short, CEO of Celadon,
commented:
"2023 was another year of strong
strategic progress for Celadon. The Group received its full set of
regulatory licences, making it the first UK company to obtain these
approvals since the law changed in 2018. Following the update of
our Home Office licence, we signed sales contracts worth up to £10
million in annual revenue, and have since begun supplying product
to our first two customers.
"The sales pipeline for our
pharmaceutical-grade, high-THC cannabis products continues to be
strong, and we are progressing well with the fit out of Phase 2 of
our indoor facility. The significant progress we have made this
year, and the promising early data from our chronic pain study,
give me huge confidence in the potential of our cannabis-based
medicines to transform patients' lives. Finally, I would like to
thank our shareholders for their continued support as we pursue our
primary aim of helping patients."
Investor
Presentation: 2:00pm BST Thursday 16 May 2024
Management will be hosting a live presentation and Q&A session
relating to the Final Results at 2:00pm BST on Thursday 16 May 2024
via the online platform Investor Meet Company. Investors can sign
up to Investor Meet Company for free and attend the presentation
via the following link:
https://www.investormeetcompany.com/celadon-pharmaceuticals-plc/register-investor
The presentation is open to all existing and potential
shareholders. Questions can be submitted pre-event via your
Investor Meet Company dashboard up until 15 May 2024, 09:00 BST, or
at any time during the live presentation.
A copy of the presentation will be published
on the Company's website at www.celadonpharma.co.uk
Investors who already follow Celadon on the
Investor Meet Company platform will automatically be
invited.
Enquiries:
Celadon
Pharmaceuticals Plc
James Short
Via Powerscourt
Jonathan Turner
Canaccord Genuity Limited
(Nominated Adviser and Broker)
Bobbie Hilliam / Andrew
Potts
+44 (0)20 7523 8000
Global Investment Strategy UK Limited (Joint
Broker)
Callum Hill
|
+44 (0)20 7048 9400
|
Powerscourt Group
|
|
Sarah MacLeod / Sam Austrums / Nick
Johnson
|
+44 (0)20 7250 1446
|
This announcement contains inside
information for the purposes of article 7 of the Market Abuse
Regulation (EU) 596/2014 as amended by regulation 11 of the Market
Abuse (Amendment) (EU Exit) Regulations 2019/310. With the
publication of this announcement, this information is now
considered to be in the public domain.
CELADON PHARMACEUTICALS
PLC
Group Strategic
Report
For the year ended 31
December 2023
Chairman's Statement
I am pleased to present the full
year results of Celadon Pharmaceuticals plc ("Celadon" and with its
subsidiaries, the "Group") for the year ended 31 December
2023.
I am proud of the role Celadon
plays in striving to improve the quality of life of patients with
chronic pain and other conditions and of its aim to produce a
reliable and safe source of pharmaceutical grade cannabis-based
products.
Significant Milestones
Although it has been over five
years since medical cannabis was legalised in the UK, the
regulatory framework for domestic cultivation has taken some time
to develop. Celadon has been working closely with the Home
Office and the Medicines and Healthcare products Regulatory Agency
("MHRA") to create a workable solution and became the first
business to obtain approval to supply domestically produced high
Δ-9-tetrahydrocannabinol ("THC") cannabis products
commercially. The MHRA awarded the Celadon facility in the
Midlands its Good Manufacturing Practices ("GMP") registration in
January 2023, with the Home Office subsequently removing the
restrictions from its licence. Following these events Celadon
has been able to sell its products from March
2023.
Celadon swiftly capitalised on
these regulatory approvals, signing two sales contracts with UK
customers in May and September 2023. These two contracts are
anticipated to generate approximately £1.4m of annual
revenue. A third contract with a European pharmaceutical
distributor, which has potential annual revenues of £8.7m, was
signed in November 2023. These contracts, signed so soon
after receipt of manufacturing certification and approvals, are
evidence of the strong demand for domestically produced, high
quality medical cannabis products.
In addition, in August 2023, the
National Health Service's Research Ethics Committee ("Ethics
Committee") approved the feasibility study requested by the MHRA
for patient onboarding for the Group's chronic pain study.
This feasibility study was run in the final three months of 2022
and had been requested to ensure that Celadon's innovative data
collection and product supply methods were effective and capable of
adapting to the 5,000 patients who could be enrolled on the
study.
In March 2024, the Group published
an independent Early Economic Analysis of the preliminary results
obtained during the feasibility study. This analysis, which
was prepared by York Health Economics Consortium, shows that the
treatment regime contained in the trial protocol is more cost
effective than the current standard of care for reducing pain
scores and improving health outcomes. In addition, a number of
additional potential benefits have been identified, such as
improved sleep and increased incidences of returning to work, both
of which will be examined further when the study
recommences.
Additional opportunities
Active Pharmaceutical Ingredient ("API")
Manufacturing
The Group has continued the fit
out of the second phase of its 100,000 sq ft production facility in
the Midlands, UK, with the capacity anticipated to become available
in 2025.
Development of Therapeutics
Following approval to roll out the
Celadon's 5,000 patient chronic pain study in August 2023, the
Group has been in discussions with a number of potential partners
to enable rapid enrolment onto the programme, through being able to
offer subsidised or free treatment for a period of
time.
The approval of the trial
protocol, and in particular the data capture and dosage control
methodologies, has also led to further exploration of the potential
use of the protocol to treat other conditions. Discussions
are ongoing with a healthcare provider about a novel application
for the protocol.
The Board established a Scientific
Sub-Committee in late 2023 to help review Celadon's strategy and
achievements against objectives.
Fundraising
Celadon raised £3m of capital
through equity issuances in late 2023 to existing and new
shareholders. In May 2024, it raised a further £2.1m through
a further equity issuance.
These funds will allow the Group
to continue the fit out of Phase 2 of its facility to capitalise on
the significant market opportunities that are available.
Our employees
Following full regulatory approval
allowing Celadon to sell its products, it has strengthened the
Sales and GMP Manufacturing teams.
The Board is extremely grateful
for the commitment, innovation and perseverance of
our employees in their approach to maintaining and growing the
business despite the many challenges faced from an emerging
regulatory landscape. We thank them for embracing new approaches to
working and for adapting quickly to new ways of supporting the
Group and its anticipated patients and customers.
Advancing our sustainability agenda
The Group's transition to a
sustainable energy supplier in December 2022 and its anticipated
installation of solar panels capable of generating 1MW of renewable
energy demonstrates its commitment to operating
sustainably.
Dividend
Given that Celadon is continuing
to invest in growing the business, the Board does not recommend the
payment of a dividend (2022: nil).
Looking ahead
Celadon has made significant
progress during 2023 having successfully obtained the required
regulatory licences to allow it to begin the commercial supply of
its cannabis-based products. The subsequent signing of three
sales contracts in 2023, with potential annual sales revenues of
more than £10m, demonstrates the sizeable and growing appetite for
Celadon's products.
The recent Early Economic Analysis
of the results from the CANPAIN feasibility study give the Board
further confidence that Celadon's cannabis-based medicinal products
have the potential to improve patients' quality of life. The
results also provide valuable initial data to refine the design of
future studies.
Alexander Anton
Chairman
13 May 2024
Chief Executive Officer's Report
Introduction & Overview
I am delighted to report on the significant strategic progress the
Group has made in the last year.
These results are for the Group's
first full year as a public company following its successful
readmission to AIM in March 2022, when it became one of a small
number of medical cannabis companies to be admitted to trading on
AIM.
The regulatory landscape for
medical cannabis has changed significantly in the two decades since
Canada became the first G7 and G20 nation to legalise medical
cannabis in 2001. Australia legalised cannabis for medical
use in 2016 and a number of European nations including Austria
(2008), Italy (2013), Romania (2013), Czech Republic (2013),
Germany (2017), Greece (2017), Luxembourg (2017) and Portugal
(2018) had all legalised medical cannabis before the UK did so in
November 2018.
The experiences of the Australian
and German cannabis-based medicine markets are instructive as they
have shown significant growth over recent years. Between 2016
and 2019 just 1,011 prescriptions for medical cannabis were issued
in Australia, but this number grew to 295,515 between 2020 and
2022. More recently, Australian medical cannabis patient
numbers have been estimated at 400,000. In Germany, it is
estimated that there were over 230,000 medical cannabis patients in
2023.
The fifth anniversary of
legalisation in the UK has prompted a number of news outlets to
explore the comparatively low numbers of UK medical cannabis
patients with an estimated 32,000 in the UK in 2023. Celadon
is pleased to have contributed to a number of articles on this
subject and our growing facilities have been filmed by all the
major UK broadcast television networks, with the BBC, ITV and Sky
all having visited and reported from our 100,000 sq ft cultivation
facility in the Midlands.
As can been seen from the examples
of Australia and Germany, the use of cannabis-based medicines is
expanding rapidly internationally with increasing volumes of
evidence for their efficacy being reported across a number of
conditions. Our aim is to position Celadon as a leader in
breakthrough cannabis-based medicines, building on our early-mover
advantage in a highly regulated market as one of only two UK
companies with the licences to cultivate and manufacture
pharmaceutical-grade cannabis in the UK for commercial
sale.
Our strategy to develop the UK
market combines domestic production of pharmaceutical-grade
medicinal cannabis, clinical trials to generate the data to support
prescriptions by doctors, and research into future breakthrough
cannabis-based medicines. There is a substantial need for
high-quality UK produced medicinal cannabis to reduce the need for
imports from overseas, which incur higher costs and lengthy delays
for patients. The Group completed a feasibility study for its
CANPAIN trial in 2022 and submitted the results to the Research
Ethics Committee in December of that year, with promising early
results for opioid reduction and sleep improvement. There are
ongoing conversations about using the Trial Protocol in different
countries or to treat different conditions.
Looking forward, we believe the
opportunities for cannabis-based medicines in the UK and
internationally are only going to increase. This is due
to:
· Large addressable
market: there are an estimated eight
million people in the UK alone with moderate to severely disabling
chronic pain, with around 50 million in the US. Significant growth
in patient numbers in Australia and Germany demonstrates the pace
with which patients can be treated with medical
cannabis.
· Growing evidence of efficacy
for a number of conditions: there is
increasing evidence showing that cannabis-based medicines are
effective in treating a number of conditions (e.g. chronic pain,
epilepsy and autism). The early results of the Group's
CANPAIN Trial supports the case for cannabis-based medicines being
a cost effective treatment for chronic pain, with significant
improvements in pain scores when compared with the previous
standard of care - opioids - which have been estimated to work for
only 5-10% of patients, and which studies have shown can lead to
harmful side effects when used long term.
Celadon continues to pursue its strategy, with a wholly aligned
mission and set of values which position the Group well for future
growth and success. Fundamentally, our strategy has a patient-first
objective and this sits at the heart of everything we
do.
Mission: to improve quality
of life for patients most in need through developing breakthrough
cannabis-based medicines
Values:
· Patient-first: putting
patients and integrity at the heart of everything we do
· Collaboration:
building close partnerships with doctors,
regulators, innovators and colleagues
· Innovation:
developing industry-leading science and medicines
for patients
· Determination:
never giving up on our goals despite the
challenges
STRATEGY
Celadon's strategy places it in a
strong position to capitalise on the developing market for
cannabis-based medicines, with solid foundations developed over the
last five years across a number of areas of the cannabis-based
medicine supply chain. The regulatory and capital barriers to
entry remain high, and Celadon's successful Good Manufacturing
Practice ("GMP") registration and Home Office licence update puts
it in a strong position to increase the amount of
pharmaceutical-grade product it supplies to the market.
Celadon's focus on patient need and domestic supply has three core
pillars, all of which address the emerging market
opportunity:
· Grow, extract and
sell: create an integrated UK supply
chain that is not reliant on imported and low-quality product
utilising Celadon's licence to cultivate, manufacture and sell to
the market for revenue
· Trials:
conduct clinical trials to demonstrate the
efficacy of cannabis-based medicines, open up the UK market and
support the case for National Health Service ("NHS") reimbursement,
working with teams experienced in bringing new pharmaceutical
products to market.
· Breakthrough
R&D: develop advanced
cannabinoid medicines with novel delivery technologies, led by
Celadon's in-house R&D team and de-risked through industry
partnerships
OPERATIONAL
UPDATE
Throughout 2023 Celadon continued to make progress against its key
operational milestones.
Medicines and Healthcare products Regulatory Agency ("MHRA")
and Home Office Licencing
After years of preparatory work,
Celadon was delighted to obtain confirmation from the MHRA in
January 2023 that it had achieved pharmaceutical standard GMP
certification to manufacture its pharmaceutical-grade cannabis
product.
Upon receipt of MHRA registration,
Celadon requested that the Home Office update the Group's licence
to allow the commercial supply of its cannabis product, with the
Home Office granting the licence extension in March 2023 (and which
was renewed in March 2024). As previously noted, the Directors
believe that Celadon was the first company in the UK to be licensed
to cultivate and sell high-THC EU-GMP grade cannabis product from
its own facility following the changes to pharmaceutical cannabis
licensing in 2018, and one of a small number of EU-GMP facilities
of its kind globally.
Customer Contracts
The recruitment of a Business
Development Director in February 2023 and the obtaining of final
regulatory approval from the Home Office and MHRA in March 2023
allowed the Group to start speaking with potential customers about
the supply of product.
In May and September 2023, the
Group entered into commercial supply agreements with two UK-based
pharmaceutical and medical-cannabis companies to supply them with
cannabinoid Active Pharmaceutical Ingredients ("APIs"). These
contracts are anticipated to generate approximately £1.4 million
per annum. In addition, in November 2023, the Group signed a
new supply contract with a European pharmaceutical distributor
which could generate annual sales of up to £8.7 million annually -
with sales anticipated to commence in the second half of
2024.
The Group continues to receive a
significant number of enquiries from new potential customers for
its pharmaceutical-grade cannabis products, and is currently in
discussions to convert a number of these into commercial
contracts.
Phase 1 Cultivation Facility
Planned maintenance work, including
a number of upgrades, was completed on Phase 1 in the early part of
2023 while Celadon was waiting for the MHRA to confirm the
certification of the Group's GMP registration for the production of
its cannabinoid APIs.
The Group supplied product to its
first two customers in December 2023, with commercial yields
significantly higher than industry averages. These
exceptionally high yields are a testament to the efforts of
Celadon's cultivation team and Research and Development activities
over the last four years which have been fundamental to optimising
facility design and operations.
Phase 2 Facility Fit Out
After completing the build of Phase
2, and certain areas of Phase 3, in 2022, the fitting out of Phase
2 was slowed slightly to allow the Group to re-design the area's
air-handling units to factor in the lessons learnt from Phase 1 and
to ensure an optimal growing environment. These design works
have now been completed, and the Heating, Ventilation and Air
Conditioning ("HVAC") system is anticipated to be installed in the
second half of 2024.
Clinical Trial
CANPAIN Chronic Pain Trial
Following completion of the
Feasibility Study demonstrating the on-boarding experience for a
small cohort of patients, the Group's CANPAIN chronic pain trial,
received Research Ethics Committee approval in August 2023.
This was the final requirement needed to obtain approval from the
MHRA for the roll-out of a trial of medical cannabis in patients
with non-cancer chronic pain and allows the enrolment of up to
5,000 patients.
Feedback from patients who received
treatment as part of the Feasibility Study was positive, with
improvements in quality of life including pain reduction and sleep
improvement. Significant reductions in other medications were also
reported with some respondents seeing a reduction in their opioid
usage, being reported. In addition, Early Economic Analysis
of the Feasibility Study, undertaken by York Health Economic
Consulting, was announced in March 2024 and showed:
- Patients included in the
feasibility study recorded an almost 50% (49.6%) reduction in pain
scores in the first month of using cannabis-based medicines, with
this reduction being sustained for the duration of the three-month
study;
- Patients saw a
significant improvement in their mean quality of sleep scores of
1.6 (p=0.01) and a reduction in the use of opioids and associated
medicines;
- When assessed using the
economic framework recommended by NICE, adding cannabis-based
medicines to the Standard of Care was found to deliver a
cost-effective solution - with potential cost savings for the NHS;
and
- Patients'
quality-adjusted life years also increased.
The full trial carries a number of
advantages, most notably its fully approved status but also, and
the permission granted to General Practitioners ("GPs") to refer
patients to the trial. Currently, only doctors on the General
Medical Council's Specials Register can prescribe medical
cannabis. Expanding this to include GPs is key to unlocking
the UK's medicinal cannabis market, and it is hoped that the full
trial will provide further evidence of the benefits of allowing GPs
to prescribe medical cannabis. The trial's regulatory
approval and GP referral authorisation are expected to
substantially increase the recruitment of patients and sponsoring
organisations.
A number of additional benefits
have come from the full approval of the trial protocol. The
Group has been approached by organisations in a number of different
jurisdictions who are interested in launching the approved protocol
to help improve patients' quality of lives, but the use of the
protocol to dispense measured doses of cannabinoids under the
control of physicians has interested specialists looking for an
effective treatment for other conditions.
Breakthrough R&D
Led by Celadon's Chief Scientific Officer and in line with the
Group's strategy, the in-house R&D team commenced work in 2022
to explore opportunities to broaden Celadon's product range of
advanced medicines, using its proprietary cannabinoid API.
This work continued throughout 2023 and patent applications have
been / are in the process of being submitted.
Funding
It is widely recognised that given
the current geo-political landscape and high levels of inflation
that it is a difficult time for companies to be raising
funds. As such, it is particularly heartening that new and
existing shareholders have continued to provide funding to the
business to allow its continued expansion, by providing £5.1m of
additional equity capital between October 2023 and May
2024.
ESG
At the heart of Celadon's approach
to ESG is a conviction that society will benefit significantly from
addressing the UK's 'silent epidemic' of chronic pain (and opioid
misuse), as well as other unmet patient conditions. Celadon's
mission to improve quality of life for patients most in need
through breakthrough cannabis-based medicines is one way of
achieving this positive societal outcome.
Celadon, which is aiming to develop
medicines that will be reimbursed by the UK's NHS is also working
to align with the NHS's requirement that by 2027 suppliers report
emissions and publish a carbon reduction plan aligned with its 2045
net zero targets.
Celadon is taking measures now to
reduce the impact that it has on the environment. The Group
has continued to only purchase energy from renewable sources and
anticipates solar panels capable of generating 1MW of power being
installed on its facility during the course of 2024.
Outlook
While the UK market for cannabis-based medicines is still in its
infancy, there are signs that it is beginning to mature. We
remain confident of the medium to long-term sector outlook and the
prospects for Celadon within this market. The Group has started to
deliver on its commercial Supply Agreements and has several
additional customer contracts in negotiation demonstrating the
continuing and increasing demand for high-quality UK grown cannabis
products.
The Early Economic Analysis of the
CANPAIN trial feasibility study data supports the Group's view that
cannabis-based medicines offer a cost-effective alternative to
opioids for the treatment of chronic pain. The Group is looking
forward to launching the CANPAIN trial at scale, in order to start
improving the lives of patients and collecting the real-world
evidence sought by the NHS and NICE to evaluate the possibility of
reimbursement.
The prospect of the CANPAIN
protocol being used in other jurisdictions, as well as for the
treatment of other conditions, further demonstrates the vast
potential that cannabis-based medicines offer Celadon, national
health providers, and most importantly, patients.
James Short
CEO
FINANCIAL OVERVIEW
Financial presentation of the
Celadon Pharmaceuticals Plc Group results
The year to 31 December 2023 is the first full year for the
operations of the consolidated Celadon Pharmaceuticals Plc group of
companies (the "Group"). The Group was formed on 28 March
2022, following the acquisition of Vertigrow Technology Limited
("Vertigrow") (Vertigrow was renamed as Celadon Property Co Limited
on 3 January 2023) by Celadon Pharmaceuticals plc - given that
former Vertigrow shareholders comprised 86% of the Company's
enlarged share capital, Vertigrow was treated as the accounting
acquirer and the legal parent company, Celadon Pharmaceuticals Plc
was treated as the accounting subsidiary.
Accordingly:
- the Consolidated balance sheets at 31 December 2023 and 2022
show the acquisition of Celadon Pharmaceuticals Plc by
Vertigrow;
- the income statement and statement of cash flows shows for the
year ended 31 December 2023 are the results of the Group as a
whole; and,
- the income statement and cash flow for the year ended 31
December 2022 are the results of Vertigrow with the inclusion of
Celadon Pharmaceuticals Plc from 28 March 2022.
The Reverse Acquisition
Accounting is described in more detail in note 5 to these
financial statements.
Revenues - in the year
ended 31 December 2023, the Group signed its first supply contracts
to provide cannabis-based products to UK pharmaceutical and medical
cannabis companies. The Group recorded revenues from its
first supplies in December 2023 of £64k (2022: -). Revenues
from the conclusion of the Harley Street (CPC) Limited feasibility
study reduced to £11k (2022: £24k). The Group is currently
investigating ways to ensure a rapid uptake in patient numbers when
the clinical trial is formally launched.
Cost of sales - includes
all costs for cultivation and finished of pharmaceutical-grade
cannabis and the Harley Street (CPC) Limited study patients,
including initial suitability tests, medical consultation and
onboarding of all patients.
Fair value movement on biological assets and agricultural
produce - as the Group's activities
involve the cultivation of pharmaceutical-grade cannabis UK-adopted
International Accounting Standards require the Group to determine
the fair value of the produce being cultivated at each reporting
date. Whilst they are being cultivated the cannabis plants
are considered as being "biological assets". After the plants
have been harvested, they become the raw material for manufacturing
processes, such as drying and cannabinoid extraction. After
harvesting the plants are treated as "agricultural produce".
The fair value of the plants at the time of their harvest becomes
the carrying value for the inventory at the inception of these
manufacturing processes.
Movements in the fair value of the
biological assets between reporting dates are required to be
disclosed in the Group Income Statement. The net fair value
movement in the year to 31 December 2023 was £74k (2022: - ).
This figure comprised the movement in the fair value of biological
assets of £40k (2022: -) and the fair value of agricultural produce
being finished for sale at the balance sheet date of £34k (2022: -
).
This net movement of £40k in
respect of biological assets is the increase in fair value of £108k
(2022: -) due to cultivation activity, reduced by the transfer of
£68k (2022: -) to the carrying value of agricultural produce at the
time of harvest.
The net movement in the fair value
of agricultural produce was £34k (2022: -), being the £68k (2022:
-) valuation at the time of harvest, less £34k (2022: -) which was
subsequently transferred to cost of sales for the products when
they were sold.
Gross profit - for the year
ended 31 December 2023, the Group reported a gross margin of £75k
(2022: loss of £66k), though this figure includes the effect of the
fair value movements outlined above. Without the fair value
adjustments, the gross margin was £1k (2022: gross margin loss of
£66k).
A gross profit of £35k (2022: -)
arose on the sale of pharmaceutical-grade cannabis products, but is
reduced by a gross margin loss £34k (2022: gross margin loss of
£74k) on Harley Street (CPC) Limited's Feasibility Study, which was
impacted by the mix of paying and non-paying patients and the lower
patient numbers meaning that expected operational efficiencies were
not available.
Operating costs - include all
people costs, property costs (including utilities, repairs and
maintenance), marketing, and legal and professional costs. These
totalled £5.5 million in the year ended 31 December 2023 (2022:
£4.9 million). The increase in operating costs reflects the
scale up in the Group's people, operations and cost base pursuant
to our enlarged Group business plan, and reflects the full year of
costs arising from Celadon Pharmaceuticals Plc compared with just
nine months in 2022.
Operating loss - is gross
margin less operating costs, depreciation and amortisation. The
operating loss for the year ended 31 December 2023 was £5.9 million
(2022: £5.4 million).
Long term incentive plans -
the Group has a share based long term incentive plan for certain
directors, advisors and employees. In the year ended 31 December
2023, the Group recognised a £43k charge (2022: £910k) for this
Subsidiary Incentive Scheme. A number of awards were made under a
separate long term incentive plan to key members of the Group's
management and an external advisor in February 2023, a fair value
charge of £242k was made in respect of these awards in the year to
31 December 2023 (2022: -). A further £146k charge related to
the March 2022 grant of warrants to an advisor in respect of
services to be provided between April 2022 and March 2024 (See note
28).
Finance charges on leased assets - Celadon has a Right Of Use lease on its production facility
with almost 21 years remaining. There is also 15 months remaining
on a 3 year Right Of Use lease for a biodigester. The finance
charge on these leased assets is £581k (2022: £531k). The charge
has increased on the prior periods as (a) the lease on the
production facility was varied in February 2022 to extend the
initial rent free period.
Loan interest charges - The
Group had two loans in the period;
(a) a UK Government backed COVID
related Bounce Back loan; and,
(b) a Revolving Credit
Facility.
Non Current Assets -
decreased by £0.2 million in the year ended 31 December 2023 (2022:
an increase of £2.2 million), the spend on limited works fitting
out the Group's facility has been offset by repayments on its
facility lease, meaning that the Right of Use asset (and associated
lease liability) reduced by £0.2 million and amortisation of the
Chronic Pain Clinical Trial related intangible assets of £0.1
million (2022: (£0.1 million)).
Current Assets - were
£2,500k (2022: £6,330k). Inventory and biological assets of
£100k (2022: £18k) increased due to commercial cultivation
commencing offset by operating cashflow and by reductions in the
amount of VAT and refundable R&D Tax Credits due following the
UK Government's reduction in the Small and Medium Enterprises
R&D relief. Cash balances at 31 December 2023 were £1.3 million
(2022: £5.1 million).
Current Liabilities - were
£955k (2022: £1,197k). The reduction of £0.2 million was
caused by a reduction in trade and other payables of £0.2
million.
Non-current liabilities -
were £5,085k (2022: £5,017k). The increase of £0.1 million
was due to the lease liability increased by £0.1 million (2022:
£1.6 million).
Shareholders' Equity -
Share Capital including Share Premium and the Merger Relief Reserve
total £91.3 million at 31 December 2023 (2022: £88.3 million); the
Reverse Acquisition Reserve of £59.2 million (which is the
consolidation reserve created on the reverse acquisition of
combining Celadon Pharmaceuticals Plc with Vertigrow) remained
constant; the Retained losses (increased to £31.0 million)
increased with losses in the year ended 31 December 2023. The
Non-controlling Interest reduced to £23k (2022: retained loss
£638k) due to the acquisition of all of the shares of Harley Street
(CPC) Limited that the Group did not own in May 2023.
Cash outflows from operating
activities - for the year ended 31 December 2023 were £6.0
million (2022: £6.1 million). The main spend items include people,
advisers and utility costs.
Investing activities - in the
year ended 31 December 2023 capex items totalled £0.3 million
(2022: £2.1 million).
Financing activities - in the
year ended 31 December 2023, the Group raised £3.0 million (2022:
£7.5 million) of new equity financing (net of allocated issue
costs, which were specifically related to the fundraise
process).
Funding line - on 29 May 2023,
the Group obtained £7.0m of
funding via a 2-year fixed
rate Revolving Credit Facility Agreement. Interest accrues at
a rate of 10% on balances drawn under the Facility Agreement.
At 31 December 2023, £10k of the Facility had been drawn (2022:
-). The Revolving Credit Facility's termination date was
extended to 30 November 2025 in April 2024. The Revolving Credit
Facility Agreement will be repayable in the event that the Group
obtains sufficient alternative funding to allow the Revolving
Credit Facility Agreement to be repaid in full.
Going Concern - now that the
Group has commenced products sales and has access to the £7.0m
Revolving Credit Facility and further to the issuance of £5.1m of
equity between October 2023 and May 2024, the Directors consider
that the Group is able to meet its financial liabilities as they
fall due for the period of at least 12 months from the date of this
report.
Jonathan Turner
CFO
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 31 December 2023
|
|
2023
|
|
2022
|
|
Notes
|
£'000
|
|
£'000
|
|
|
|
|
|
Revenue
|
7
|
75
|
|
24
|
Cost of sales
|
|
(74)
|
|
(90)
|
Fair value adjustments
|
8
|
74
|
|
-
|
Gross Profit
|
|
75
|
|
(66)
|
|
|
|
|
|
Operating costs
|
|
(5,472)
|
|
(4,849)
|
|
|
|
|
|
Depreciation and
amortisation
|
14, 15,
16
|
(534)
|
|
(466)
|
|
|
|
|
|
Operating loss
|
|
(5,931)
|
|
(5,381)
|
|
|
|
|
|
Share-based payment costs for reverse
acquisition
|
|
-
|
|
(6,400)
|
Other acquisition costs
|
|
(741)
|
|
(1,465)
|
Finance costs
|
11
|
(566)
|
|
(23)
|
Non-cash movements relating to
Harley Street (CPC) Limited
|
|
-
|
|
(264)
|
Finance charge on convertible loan
note
|
|
-
|
|
|
- Interest and
charges
|
|
-
|
|
(43)
|
- Redemption
|
|
-
|
|
(3,406)
|
Long term incentive plans
|
30
|
(285)
|
|
(1,136)
|
|
|
(1,592)
|
|
(12,737)
|
|
|
|
|
|
Loss
before taxation
|
|
(7,523)
|
|
(18,118)
|
|
|
|
|
|
Taxation
|
12
|
261
|
|
707
|
|
|
|
|
|
Loss
for the period, being total comprehensive loss for the
period
|
|
|
|
|
|
(7,262)
|
|
(17,411)
|
|
|
|
|
|
|
|
|
|
|
Loss
attributable to:
|
|
|
|
|
Controlling Interest
|
|
(7,140)
|
|
(17,006)
|
Non controlling interest
|
|
(122)
|
|
(405)
|
|
|
(7,262)
|
|
(17,411)
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
13
|
(11.5p)
|
|
(29.7p)
|
The Group's activities derive from
continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
As at 31 December 2023
|
|
2023
|
|
2022
|
|
Notes
|
£000
|
|
£000
|
Non-current assets
|
|
|
|
|
Intangible assets
|
14
|
328
|
|
428
|
Property, plant and
equipment
|
15
|
2,984
|
|
2,921
|
Right of use assets
|
16
|
3,191
|
|
3,354
|
Investments
|
17
|
218
|
|
218
|
Total non-current assets
|
|
6,721
|
|
6,921
|
|
|
|
|
|
Current assets
|
|
|
|
|
Inventories
|
19
|
60
|
|
20
|
Biological assets
|
20
|
40
|
|
-
|
Trade and other
receivables
|
21
|
1,141
|
|
1,249
|
Cash and cash equivalents
|
22
|
1,259
|
|
5,061
|
Total current assets
|
|
2,500
|
|
6,330
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
23
|
(856)
|
|
(1,106)
|
Loans and borrowings
|
24
|
(20)
|
|
(10)
|
Lease liabilities
|
24
|
(54)
|
|
(56)
|
Deferred tax liability
|
25
|
(25)
|
|
(25)
|
Total current liabilities
|
|
(955)
|
|
(1,197)
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Loans and borrowings
|
24
|
(14)
|
|
(24)
|
Lease liabilities
|
24
|
(4,629)
|
|
(4,542)
|
Provisions
|
27
|
(405)
|
|
(389)
|
Deferred tax liability
|
25
|
(37)
|
|
(62)
|
Total non-current liabilities
|
|
(5,085)
|
|
(5,017)
|
|
|
|
|
|
Net
assets
|
|
3,181
|
|
7,037
|
|
|
|
|
|
Shareholders' funds
|
|
|
|
|
Share capital
|
28
|
642
|
|
617
|
Share premium
|
28
|
25,504
|
|
22,553
|
Merger Reserve
|
28
|
65,082
|
|
65,082
|
Reverse Acquisition
Reserve
|
28
|
(59,200)
|
|
(59,200)
|
Warrant Reserve
|
28
|
617
|
|
471
|
Capital Redemption
Reserve
|
28
|
49
|
|
49
|
Share Based Payment
Reserve
|
30
|
1,195
|
|
910
|
Retained earnings
|
|
(30,731)
|
|
(22,807)
|
Equity attributable to owners of the Group
|
|
3,158
|
|
7,675
|
Non-controlling interest
|
29
|
23
|
|
(638)
|
Total Equity
|
|
3,181
|
|
7,037
|
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
For the year ended 31 December 2023
|
Share
Capital
|
Share
Premium
|
Merger
Reserve
|
Reverse Acquisition
Reserve
|
Warrant
Reserve
|
Capital Redemption
Reserve
|
Share Based Payment
Reserve
|
Retained
Earnings
|
Equity attributable to owners
of the parent
|
Non-controlling
interest
|
Total
Equity
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2021
|
80
|
7,367
|
-
|
(5,835)
|
-
|
49
|
-
|
(5,801)
|
(4,140)
|
(256)
|
(4,396)
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition of PLC Net Assets at
acquisition date
|
-
|
-
|
-
|
5,751
|
-
|
-
|
-
|
-
|
5,751
|
-
|
5,751
|
Issue of shares for acquisition of
subsidiary
|
433
|
-
|
65,082
|
(65,515)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Subsidiary Incentive Share
issue
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
23
|
23
|
Share-based payment charge
|
-
|
-
|
-
|
6,399
|
226
|
-
|
910
|
-
|
7,535
|
-
|
7,535
|
Settlement of convertible loan notes
of Vertigrow Technology Ltd
|
52
|
7,765
|
-
|
-
|
-
|
-
|
-
|
-
|
7,817
|
-
|
7,817
|
Issue of shares for cash
|
52
|
8,448
|
-
|
-
|
-
|
-
|
-
|
-
|
8,500
|
-
|
8,500
|
Cost of share issue
|
-
|
(1,009)
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,009)
|
-
|
(1,009)
|
Warrants issued
|
-
|
(18)
|
-
|
-
|
245
|
-
|
-
|
-
|
227
|
-
|
227
|
Loss for the period
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(17,006)
|
(17,006)
|
(405)
|
(17,411)
|
Total movement for the
period
|
537
|
15,186
|
65,082
|
(53,365)
|
471
|
-
|
910
|
(17,006)
|
11,815
|
(382)
|
11,433
|
Balance at 31 December 2022
|
617
|
22,553
|
65,082
|
(59,200)
|
471
|
49
|
910
|
(22,807)
|
7,675
|
(638)
|
7,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payment charge
|
-
|
-
|
-
|
-
|
146
|
-
|
285
|
-
|
431
|
-
|
431
|
Acquisition of 42.5% of Harley Street
(CPC) Limited
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(784)
|
(784)
|
784
|
-
|
Issue of shares for cash
|
25
|
2,975
|
-
|
-
|
-
|
-
|
-
|
-
|
3,000
|
-
|
3,000
|
Cost of share issue
|
-
|
(24)
|
-
|
-
|
-
|
-
|
-
|
-
|
(24)
|
-
|
(24)
|
Loss for the period
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(7,140)
|
(7,140)
|
(122)
|
(7,262)
|
Total movement for the
period
|
25
|
2,951
|
-
|
-
|
146
|
-
|
285
|
(7,924)
|
(4,517)
|
661
|
(3,856)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2023
|
642
|
25,504
|
65,082
|
(59,200)
|
617
|
49
|
1,195
|
(30,731)
|
3,158
|
23
|
3,181
|
CONSOLIDATED CASH FLOW
STATEMENT
For the year ended 31 December 2023
|
|
2023
|
|
2022
|
|
|
£'000
|
|
£'000
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Loss for the Period
|
|
(7,262)
|
|
(17,411)
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
Depreciation and
amortisation
|
|
534
|
|
466
|
Loss on disposal of
fixed assets
|
|
6
|
|
-
|
Finance charges on
leased assets
|
|
597
|
|
532
|
Finance charge on
convertible loan notes
|
|
-
|
|
43
|
Final conversion of
convertible loan notes
|
|
-
|
|
3,406
|
Fair value gain/(loss)
on derivative liability
|
|
-
|
|
(556)
|
Finance charge on
loans
|
|
-
|
|
53
|
Long term incentive
plan
|
|
285
|
|
910
|
Warrant costs
|
|
146
|
|
471
|
Reverse acquisition
share-based payment
|
|
-
|
|
6,400
|
Non-cash movements in
respect of Harley Street (CPC) Limited
|
|
-
|
|
264
|
Net IAS 41 valuation
movement on Biological assets
|
|
(74)
|
|
-
|
Release of deferred tax
liability on intangible assets
|
|
(25)
|
|
(25)
|
Other finance cost
(net)
|
|
(31)
|
|
(5)
|
Operating cash flow before working capital
movements
|
|
(5,824)
|
|
(5,452)
|
|
|
|
|
|
Decrease/(Increase) in trade and
other receivables
|
|
108
|
|
(985)
|
(Decrease)/Increase in trade and
other payables
|
|
(250)
|
|
355
|
(Increase) in inventories -
excluding fair value movements disclosed above
|
|
(6)
|
|
(18)
|
|
|
|
|
|
Cash
(outflow) from operating activities
|
|
(5,972)
|
|
(6,100)
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Cash received on reverse
acquisition
|
|
-
|
|
3,494
|
Net expenditure on purchase of
property, plant and equipment
|
|
(341)
|
|
(2,086)
|
Purchase of investments
|
|
-
|
|
(18)
|
|
|
|
|
|
Net
cash (outflow)/inflow from investing activities
|
|
(341)
|
|
1,390
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
32
|
|
17
|
Repayment of Lease
Liabilities
|
|
(496)
|
|
(8)
|
Supplier loan - interest
payment
|
|
-
|
|
(41)
|
Supplier loan -
(repayment)
|
|
-
|
|
(1,500)
|
Third party loan received
|
|
10
|
|
-
|
Bounce back Loan repayment
|
|
(11)
|
|
(11)
|
Proceeds from issuing share capital,
net of issue costs
|
|
2,976
|
|
7,491
|
|
|
|
|
|
Net
cash inflow from financing activities
|
|
2,511
|
|
5,948
|
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents
|
|
(3,802)
|
|
1,238
|
Cash and cash equivalents at
beginning of period
|
|
5,061
|
|
3,823
|
Cash
and cash equivalents at 31 December
|
|
1,259
|
|
5,061
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ended 31 December 2023
1. About
Celadon Pharmaceuticals Plc
Celadon Pharmaceuticals Plc (the
"Company") and its subsidiaries (together "the Group") are a UK
based pharmaceutical group with a primary focus on growing indoor
hydroponic high-quality cannabis initially for use within the
chronic pain market.
The Company is a public limited
company incorporated in England and Wales and domiciled in the
United Kingdom (company number: 11545912). It is a public company
listed on the AIM market of the London Stock Exchange. The
registered address is 32-33 Cowcross Street, London, EC1M
6DF.
On 28 March 2022, the Company
completed the acquisition of Vertigrow Technology Limited (and its
subsidiaries Celadon Pharma Limited and Harley Street (CPC)
Limited) and the settlement of the Vertigrow Technology Limited
convertible loan notes via an issuance of new shares.
Vertigrow Technology Limited was renamed Celadon Property Co
Limited on 3 January 2023. Further details on this
transaction and the subsequent Group structure is included at note
5.
2. Basis of
preparation
The financial information for the
year ended 31 December 2023 has been extracted from
the Group's audited statutory financial statements which were
approved by the Board of Directors on 13 May 2024 which
will be delivered to the Registrar of Companies for England and
Wales. The report of the auditor on these financial statements
was unqualified, did not contain a statement under Section 498(2)
or Section 498(3) of the Companies Act 2006. The information
included in this announcement has been prepared on a going concern
basis under the historical cost convention and in accordance with
UK-adopted International Accounting Standards. The information in
this announcement has been extracted from the audited statutory
financial statements for the year ended 31 December
2023 and as such, does not constitute statutory financial
statements within the meaning of section 435 of the Companies Act
2006 as it does not contain all the information required to be
disclosed in the financial statements prepared in accordance with
UK-adopted International Accounting Standards. This announcement
was approved by the board of directors and authorised for issue via
RNS on 14 May 2024.
The financial information is
presented in Pound Sterling (£) which is the functional currency of
the Company and the presentation currency of the Group and all
values are rounded to the nearest Pound Sterling thousand
(£000s).
a. Basis of
consolidation
The consolidated financial
statements incorporate the financial statements of the Company and
entities controlled by the Company (its subsidiary
undertakings). Where necessary, adjustments are made to the
financial statements of the subsidiaries to bring their accounting
policies in line with those of the Group. All intra-Group
transactions, balances, income and expenses are eliminated on
consolidation.
Subsidiaries are entities
controlled by the Group. The Group "controls" an entity when it is
exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through
its power over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date
on which control commences until the date on which control
ceases.
Non-controlling interests are
measured initially at their proportionate share of the acquiree's
identifiable net assets at the date of acquisition.
b. Going
concern
These consolidated financial
statements have been prepared on a going concern basis, which
assumes that the Group will continue in operational existence for
the foreseeable future.
The Group currently consumes cash
resources and will continue to do so as it completes the fit out
and construction of its growing facilities and until sales revenues
are sufficiently high enough to generate net cash
inflows.
In assessing whether the going
concern assumption is appropriate, the Directors have taken into
account all relevant information about the current and future
position of the Group and including the current level of
resources.
At 31 December 2023 the Group had
£1.3 million (2022: £5.1 million) of cash and net assets of £3.2
million (2022: £7.1 million). In addition on 29 May 2023, the
Group entered into a 2 year £7.0m Revolving Credit Facility to
provide additional liquidity for operating and capital
expenditure. On 11 April 2024 this Revolving Credit Facility
was extended for a further 6 months. On 10 May 2024, the
Group announced that it had raised £2.1 million through the
issuance of 2,000,000 ordinary shares of 1p at a subscription price
of £1.05 each.
Having prepared budgets and cash
flow forecasts covering the going concern until June 2025 which
have been stress tested, by creating a number of different
scenarios in which a number of the assumptions were adversely
tweaked down - such as to assume: a) a 6 month delay in revenue
arising; b) cost increases of more than 10% and c) a combination of
the two, the Directors believe the Group has sufficient
resources to meet its obligations for a period of at least 12
months from the date of approval of these financial
statements.
Taking these matters into
consideration, the Directors consider that the continued adoption
of the going concern basis is appropriate having prepared cash flow
forecasts for the coming 12 months.
3.
Accounting policies
Details of significant accounting
policies are set out below.
a. Creation
of the Celadon Pharmaceuticals Plc group of companies
On 28 March 2022 the Company became
the legal parent of Celadon Property Co Limited.
The results for the year ended, and
as at 31 December 2023 are those of Celadon Property Co Limited
group with the inclusion of the Celadon Pharmaceuticals Plc group.
The comparative results for the
year ended, and as at 31 December 2022 are those of Celadon
Property Co Limited group from 1 January 2022 to 31 December 2022
with the inclusion of the Celadon Pharmaceuticals Plc group at the
acquisition date of 28 March 2022 through to 31 December
2022.
This transaction is deemed outside
the scope of IFRS 3 Business
Combinations (Revised 2008) ("IFRS 3") and not considered a
business combination because the directors have made a judgement
that prior to the transaction, that Celadon Pharmaceuticals Plc was
not a business under the definition of IFRS 3 Appendix A and the
application guidance in IFRS 3.B7-B12 due to that company being a
company that had no processes or capability for outputs (IFRS
3.B7).
On this basis, the Directors have
developed an accounting policy for this transaction, applying the
principles set out in IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors ("IAS 8") paragraphs 10-12, in that the
policy adopted:
§ Provides more relevant financial information to users of these
statements;
§ Is
more representative of the performance, financial position, and
cash flows of the Group;
§ reflects the economic substance of the transaction, not merely
the legal form; and
§ Is
free from bias, prudent and complete in all material
aspects.
The accounting policy adopted by
the Directors applies certain principles of IFRS 3 in identifying
the accounting acquirer
(Celadon Property Co Limited) and the presentation of the
consolidated financial statements of the legal acquirer (Celadon
Pharmaceuticals Plc) as a continuation of the accounting acquirer's financial
statements (Celadon Property Co Limited).
This policy reflects the commercial
substance of this transaction as:
§ the
original shareholders of Celadon Property Co Limited are the most
significant shareholders after the business combination and initial
public offering, owning 86 per cent of the issued share capital;
and
§ the
executive management team of Celadon Property Co Limited became the
executive management of Celadon Pharmaceuticals Plc.
Accordingly, the following
accounting treatment and terminology has been applied in respect of
the reverse acquisition:
§ the
assets and liabilities of the legal subsidiary Celadon Property Co
Limited group are recognised and measured in the group financial
statements at the pre-combination carrying amounts, without
reinstatement to fair value;
§ the
retained earnings and other equity balances recognised in the group
financial statements reflect the retained earnings and other equity
balances of the Celadon Property Co Limited group immediately
before the business combination; and
§ the
results of the period from 1 January 2022 to 28 March 2022 are
those of the Celadon Property Co Limited group.
However, in the Group financial
statements:
§ the
equity structure presented, reflects the equity structure of the
legal parent (Celadon Pharmaceuticals Plc), including the equity
instruments issued under the share-for-share exchange to effect the
business combination; and
§ the
cost of the combination has been determined from the perspective of
Celadon Property Co Limited group.
Transaction costs of equity
transactions relating to the issue and re-admission of the
Company's shares, are accounted for as a deduction from equity
where they relate to the issue of new shares, and listing costs are
charged to the consolidated statement of comprehensive
income. See note 5 for further explanation.
b.
Acquisition of controlling shareholding in Harley Street (CPC)
Limited
On 14 July 2021, Celadon Property
Co Limited acquired a 57.5% shareholding in Harley Street (CPC)
Limited for £2.0 million, of which £500,000 was paid in cash and
£1,500,000 of contingent consideration was to be paid in shares in
December 2022 (subject to certain targets being
achieved).
In addition to acquiring the share
ownership Celadon Property Co Limited had the ability to appoint
four directors to the board of Harley Street (CPC) Limited compared
with two from the other investor. Celadon also exercised
operational control of the business. Given the degree of
control, it is appropriate to include Harley Street (CPC) Limited
as part of the consolidation and reflect the ownership by third
parties as a non-controlling interest.
The £1,500,000 contingent
consideration payment was estimated to have an acquisition date
fair value of £375,000 based upon a 6.2% discount rate and
management's probability estimate of the payment criteria being
satisfied.
In June 2022, the Directors
reassessed that the targets for the contingent consideration
payment would not be met within the time frame set, and released
the contingent liability of £375,000 back to the consolidated
statement of comprehensive income.
On 31 May 2023, Celadon Property Co
Limited acquired the remaining 42.5% shareholding for £1. An
adjustment of £661,000 was made to the retained reserves to release
the non-controlling interest share of the accumulated losses which
is comprised of the non-controlling interest shares of the loss for
the 5 months to 31 May 2023 of £122k and a transfer to retained
earnings of the accumulated non-controlling interest's share of the
losses of £783k.
c. Revenue
recognition
Revenues relate to the provision of
services and products to patients engaged on the feasibility study
in advance of the clinical trial with Harley Street (CPC) Limited
and to the supply of dried cannabis flower and cannabis-based
products.
Patients engaged on this
feasibility study are required to pay an initial fee on joining the
trial and a monthly fee thereafter in relation to the subsequent
provision of clinical products.
Revenue is measured based on the
completion of the performance obligations that are identified and
satisfied as outlined below:
- for the initial fees paid by patients on joining the study,
the performance obligations are to provide an initial suitability
screening test and to determine if the patient is suitable.
Revenue is recognised, at a point in time, on provision of the
screening test kit to the patient, with the related costs of test
kits recognised in cost of sales.
- for the subsequent monthly fees paid by patients on the study,
the performance obligation is to provide monthly supplies of filled
cartridges containing medicinal cannabis. Revenue is
recognised on delivery of these supplies to the patient. The
contracts with patients do not include any fixed term or locked in
periods, so monthly fees are only recognised on provision of the
monthly supplies.
Revenue from the supply of cannabis
flower and cannabis-based products is recognised at the point in
time when the performance conditions in the contract with the
customer are met, which is when the products have been shipped or
made available to the customer.
d.
Financial instruments
Recognition and initial measurement
Financial assets and liabilities
are recognised in the statement of financial position when the
Group becomes a party to the contractual provisions of the
instrument. The Group's financial instruments comprise cash,
trade and other receivables, unlisted investments, trade and other
payables, convertible loan notes and embedded derivative,
contingent consideration, and long-term incentive
arrangements.
Financial instruments are initially
measured at fair value which is deemed to be the transaction price.
Transaction costs arising on the issue of financial asset or
liability are included in the initial measurement if they are
directly attributable to the acquisition of the instrument, and the
instrument is not measured at FVTPL on an ongoing basis. Where the
financial asset or liability is measured at FVTPL, transaction
costs are immediately recognised in profit or loss.
Classification and subsequent measurement
The Group classifies and
subsequently measures its financial instruments in the following
measurement categories:
· Amortised cost:
· Fair
value through profit or loss ("FVTPL")
· Fair
value through other comprehensive income ("FVTOCI") (financial
assets only)
With the exception of the
convertible loan note and embedded derivative that the Group was
party to in the prior period, all recognised financial assets and
liabilities are subsequently measured in their entirety at either
amortised cost or fair value, depending on their classification
under one of these categories.
Financial
Assets
Trade and other receivables
For purposes of subsequent
measurement, trade and other receivables are classified as
financial assets measured at amortised cost.
They are subsequently measured at
amortised cost using the effective interest method. The amortised
cost is reduced by impairment losses. Any interest income, foreign
exchange gains and losses and impairment are recognised in profit
or loss. Any gain or loss on derecognition is recognised in profit
or loss.
The Group will write-off financial
assets, either in their entirety or a portion thereof, if there is
no reasonable expectation of its recovery. A write-off constitutes
a derecognition of a financial asset.
Cash and cash equivalents
The Group manages short-term
liquidity through the holding of cash and highly liquid
interest-bearing deposits. Only deposits that are readily
convertible into cash with maturities of three months or less from
inception, with no penalty of lost interest, are shown as cash and
cash equivalents.
Unlisted Investments
The Group recognises unlisted
equity investments at transaction cost which management believes
approximates the fair value or measured based on discounted
cashflow models if this is what has been used to determine if there
has been an impairment.
Impairment of financial assets
An impairment loss allowance is
recognised for the expected credit losses on financial assets when
there is an increased probability that the counterparty will be
unable to settle an instrument's contractual cash flows on the
contractual due dates, a reduction in the amounts expected to be
recovered, or both. The probability of default and expected
amounts recoverable are assessed using reasonable and supportable
past and forward-looking information that is available without
undue cost or effort. This impairment loss allowance is
reassessed at each reporting date.
Financial
liabilities
Financial liabilities are
obligations to pay cash or other financial assets and are
recognised when the Group becomes a party to the contractual
provisions of the instrument. All financial liabilities are
subsequently measured at amortised cost using the effective
interest method or at FVTPL.
Financial liabilities are
classified and measured at FVTPL when (i) the financial liability
is a contingent consideration to which IFRS 3 applies, or (ii) it
is a derivative. Financial liabilities at FVTPL are stated at fair
value with any gains or losses arising on changes in fair value
recognised in profit or loss.
Trade and other payables
Trade and other payables are
initially measured at fair value, net of direct transaction costs
and subsequently measured at amortised cost.
Borrowings
Borrowings are classified as
current liabilities unless the Group has an unconditional right and
an intention to defer settlement of the liability for at least 12
months after the reporting date. Borrowings are initially
recognised at fair value, net of transaction costs incurred. They
are subsequently measured at amortised cost using the effective
interest method.
Convertible Loan Notes
Debt and equity instruments are
classified as either financial liabilities or as equity in
accordance with the substance of the contractual
arrangement.
An equity instrument is any
contract that evidences a residual interest in the assets of an
entity after deducting all of its liabilities. Equity
instruments issued by the Group are recognised at the proceeds
received, net of direct issue costs.
The component parts of compound
instruments, such as convertible loan notes, are classified
separately as financial liabilities and equity in accordance with
the substance of the contractual arrangement.
If the conversion feature of a
convertible loan note does not meet the definition of an equity
instrument, that portion is classified as an embedded derivative
and measured accordingly. The debt component of the
instrument is determined by deducting the fair value of the
conversion option at inception from the fair value of the
consideration received for the instrument as a whole. The
debt component amount is recorded as a financial liability on an
amortised cost basis using the effective interest rate method until
extinguished upon conversion or at the instrument's maturity
date.
Where debt instruments issued by
the Group are repurchased or cancelled, the financial liability is
derecognised at the point at which cash consideration is
settled. Upon derecognition, the difference between the
liability's carrying amount that has been cancelled and the
consideration paid is recognised as a gain or loss in the Income
Statement, net of any direct transaction costs.
Derivative financial instruments
Embedded derivatives in financial
instruments or other host contracts that are not financial assets
are treated as separate derivatives when their risks and
characteristics are not closely related to those of the host
contracts and the host contract are not measured at fair value
through the profit or loss ("FVTPL"). Derivatives embedded in
financial instruments that are closely related or other host
contracts that are financial assets are not separated, instead the
entire contract is accounted for either at amortised cost or fair
value as appropriate.
Contingent Consideration
The Group is party to consideration
arrangements in the form of contingent consideration. Contingent
consideration is consideration that is contingent on a future
event, usually the future performance of the acquired business. It
is measured at its discounted present value and remeasured at each
reporting date. The discount unwind and remeasurement of the
liability is recognised in profit or loss as finance
cost.
e.
Equity
An equity instrument is any
contract that evidences a residual interest in the assets of the
company after deducting all of its liabilities. Equity
instruments issued by the Company are recorded at fair value on
initial recognition net of transaction costs.
Equity comprises the
following:
§ Called up share
capital represents the nominal value
of the equity shares.
§ Share Premium
represents the excess over nominal value of the
fair value of consideration received from the equity shares, net of
expenses of the share issue.
§ Capital Redemption
Reserve is a statutory,
non-distributable reserve into which amounts are transferred
following the redemption or purchase of a company's own
shares.
§ Merger Relief
Reserve is a statutory,
non-distributable reserve arising when conditions set out in
section 612 of the Companies Act occur and relate to the
share-premium from shares issued to acquire Celadon Property Co
Limited.
§ Retained
Deficit represents accumulated net
gains and losses from incorporation recognised in the Statement of
Comprehensive Income.
§ Reverse Acquisition
Reserve includes the accumulated
losses incurred prior to the reverse acquisition and the share
capital and share premium of Celadon Pharmaceuticals Plc at
acquisition; the value of the shares issued to acquire all of the
share capital of Celadon Property Co Limited; the value of share
capital and share premium of Celadon Property Co Limited at
acquisition; as well as the reverse acquisition share-based payment
expense.
§ Warrant Reserve
represents the fair value of warrants issued as
part of an equity-based payment.
§ Non-controlling
Interest represents the amounts
subscribed for the B Ordinary Shares of Celadon Subco Limited
pursuant to the Group's Subsidiary incentive plan; and until 31 May
2023, the accumulated net gains and losses of Harley Street (CPC)
Limited attributable to the minority shareholder.
f.
Right-of-use Assets
Initial Recognition
The Group recognises right-of-use
assets at the commencement date of the lease (i.e. the date the
underlying asset is available for use). Right-of-use assets
are measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes the
amount of lease liabilities recognised, initial direct costs
incurred, and lease payments made at or before the commencement
date less any lease incentives received. In addition, at the
lease commencement date the right-of-use asset incorporates the
unavoidable costs to return the asset to its original condition,
for which a corresponding amount is recognised in
provisions.
Depreciation of right-of-use Assets
The right-of-use asset is
depreciated on a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets as:
§ Leasehold property - over 25 years
§ Leased plant and equipment - over 3 to 5 years.
In addition, the right-of-use asset
is periodically reduced by impairment losses, if any, and adjusted
for certain remeasurements of the lease liability.
Lease liabilities
At the commencement date of the
lease, the Group recognises lease liabilities measured at the
present value of lease payments to be made over the lease term. The
lease payments include fixed payments (including in substance fixed
payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate and amounts expected to
be paid under residual value guarantees.
In calculating the present value of
lease payments, the Group uses the incremental borrowing rate at
the lease commencement date. After the commencement date, the
amount of lease liabilities is increased to reflect the accretion
of interest and reduced for the lease payments made. The
carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the lease
payments (e.g. changes to future payments resulting from a change
in an index or rate used to determine such lease payments) or a
change in the assessment of an option to purchase the underlying
asset.
Lease payments are allocated
between principal and finance cost. The finance cost is charged to
profit or loss over the lease period.
Short-term leases and leases of low-value
assets
The Group has elected not to
recognise right-of-use assets and lease liabilities for leases of
low-value assets and short-term leases (of less than 12 months)
including IT equipment. The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis
over the lease term.
Please refer to note 15 for further
information on the Group's lease arrangements.
g.
Property, plant and equipment
Recognition and measurement
Property, plant and equipment are
measured at cost, which includes capitalised borrowing costs, less
accumulated depreciation and any accumulated impairment losses. If
significant parts of an item of property, plant and equipment have
different useful lives, then they are accounted for as separate
items (major components) of property, plant and
equipment.
Assets under construction is stated
at cost, net of accumulated impairment losses, if any. Depreciation
of assets under construction will commence from the date on which
the asset becomes available for use. Any gain or loss on disposal
of an item of property, plant and equipment is recognised in profit
or loss.
Depreciation
Depreciation is calculated to
write-off the cost of items of property, plant and equipment less
their estimated residual values using the straight-line method over
their estimated useful lives, and is generally recognised in profit
or loss.
The estimated useful lives of
property, plant and equipment for current and comparative periods
are as follows:
§ Leasehold improvements - 10 to 25 years
§ Plant and equipment - 3 to 10 years
§ Office equipment and IT - 3 to 5 years
§ Assets under construction - depreciation will commence when
assets brought in to use.
h.
Intangible Assets
Goodwill
Goodwill represents the future
economic benefits arising from a business combination that are not
individually identified and separately recognised. Goodwill is
carried at cost less accumulated impairment loss.
Cost comprises the difference
between the fair value of the consideration given for the
investment and the fair value of the assets and liabilities
acquired as a result of the acquisition, plus the amount of any
non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing
equity interest in the acquiree.
Goodwill is capitalised as an
intangible asset with any impairment in carrying value being
charged to the consolidated statement of comprehensive
income. Impairment tests on Goodwill are undertaken at least
annually at the financial year end, and more frequently if
indicators of impairment exist. Where the carrying value of
goodwill exceeds its recoverable amount an impairment is recognised
and shall not be reversed in later periods.
Other Intangible Assets
Other intangible assets relate to
the Intellectual Property associated with the design of the chronic
pain clinical study protocol devised by the Group's subsidiary
Harley Street (CPC) Limited. The valuation of this intangible
asset was based on the estimated replacement cost for the asset at
the time of the acquisition. The amortisation period for this has
been determined to be 5 years.
i.
Inventory
Production consumables and lab
inventory is measured at the lower of cost and net realisable
value. The cost of inventory is based on the
first‑in,
first‑out
allocation method.
j.
Biological Assets and Agricultural Products
The Group cultivates high-THC
cannabis in a highly controlled indoor environment to a Good
Agricultural and Collection Practices standard. When
harvested the plants are dried and cannabinoid oils are extracted
following Medicines and Healthcare products Regulatory Agency
("MHRA") approved Good Manufacturing Processes.
The Group sells the cannabis
products to pharmaceutical companies engaged in research and
development and to medicinal cannabis companies. It is
recognised that accounting for biological assets is an area which
includes key sources of estimation uncertainty.
Given the relatively short
lifecycle of cannabis plants, with plants growing from cuttings to
mature plants ready for harvesting typically within 14-16 weeks,
none of the Group's biological assets is considered to be a
non-current asset. Drying plants and extracting
cannabinoid oils are production processes rather than a biological
process.
Until the point of harvest, plants
are categorised as Biological Assets, and are valued on the basis
of the cashflows that are expected to arise from the sale of the
finished products less the anticipated cost of getting the plants
to be finished products. After harvest, the plants are
categorised as Agricultural Products.
Plants are therefore transferred to
inventory at their fair value at the point of harvest. This
fair value becomes the deemed cost of the inventory under IAS
2. Inventories are stated at the lower of this deemed cost
and net realisable value.
k.
Taxation
Income tax expense comprises
current and deferred tax. It is recognised in profit or loss except
to the extent that it relates to a business combination, or items
recognised directly in equity or in Other Comprehensive
Income.
Current tax
Current tax comprises the expected
tax payable or receivable on the taxable income or loss for the
year and any adjustment to the tax payable or receivable in respect
of previous years. The amount of current tax payable or receivable
is the best estimate of the tax amount expected to be paid or
received that reflects uncertainty related to income taxes, if any.
It is measured using tax rates enacted or substantively enacted at
the reporting date. Current tax also includes any tax arising from
dividends.
Current tax assets and liabilities
are offset only if certain criteria are met.
Deferred tax
Deferred tax is recognised in
respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The amount of deferred
tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted, or substantively enacted, at the date of the
Statement of Financial Position.
Deferred tax is not recognised
for:
§ temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or
loss;
§ temporary differences related to investments in subsidiaries,
associates and joint arrangements to the extent that the Group is
able to control the timing of the reversal of the temporary
differences and it is probable that they will not reverse in the
foreseeable future; and
§ taxable temporary differences arising on the initial
recognition of goodwill.
Temporary differences in relation
to a right‑of‑use asset
and a lease liability for a specific lease are regarded as a net
package (the lease) for the purpose of recognising deferred
tax.
Deferred tax assets are recognised
for unused tax losses, unused tax credits and deductible temporary
differences to the extent that it is probable that future taxable
profits will be available against which they can be used. Future
taxable profits are determined based on the reversal of relevant
taxable temporary differences. If the amount of taxable temporary
differences is insufficient to recognise a deferred tax asset in
full, then future taxable profits, adjusted for reversals of
existing temporary differences, are considered, based on the
business plans for individual subsidiaries in the Group. Deferred
tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised; such reductions are reversed when the
probability of future taxable profits improves.
The measurement of deferred tax
reflects the tax consequences that would follow from the manner in
which the Group expects, at the reporting date, to recover or
settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities
are offset only if certain criteria are met.
l.
Provisions
A provision is recognised where
there is a present obligation, whether legal or constructive, as a
result of a past event for which it is probable that a transfer of
economic benefits will be required to settle the obligation, and a
reasonable estimate can be made of the amount of the
obligation.
The amount recognised as a
provision is management's best estimate of the consideration
required to settle the present obligation at the reporting date,
considering the risks and uncertainties surrounding the
obligation.
Provisions are determined by
discounting the expected future cash flows at a
pre‑tax rate that
reflects current market assessments of the time value of money and
the risks specific to the liability. The unwinding of the discount
is recognised as finance cost.
m. New and amended
accounting standards
New
and amended standards and interpretations applied
The following accounting standards
and updates were applicable in the reporting period but did not
have a material impact on the Company:
· IFRS
17: Insurance Contracts (effective 1 January 2023)
· Amendments to IFRS 17: Insurance Contracts (effective 1
January 2023)
· Amendments to IAS 8: Accounting Policies, Changes in
Accounting Estimates and Errors (effective 1 January
2023)
· Amendments to IAS 12: Income Taxes (effective 1 January
2023)
· Amendments to IAS 1: Presentation of Financial Statements
(effective 1 January 2023)
New
and amended standards and interpretations not
applied
The following new and amended
standards and interpretations in issue are applicable to the
Company but are not yet effective and therefore, have not been
adopted by the Company:
· Amendments to IAS 1 Classification of Liabilities as Current
or Non Current and Non-current Liabilities with Covenants
(effective 1 January 2024)
· Amendment to IFRS 16 Lease Liability in a Sale and Leaseback
(effective 1 January 2024)
· Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements
(effective 1 January 2024)
The Company has considered the IFRS's
in issue but not yet effective and do not consider any to have a
material impact on the Company.
4. Use of
critical judgements and key accounting estimates
In preparing the financial
statements, management has made judgements and estimates that
affect the application of the Group's accounting policies and the
reported amounts of assets, liabilities, income, expenses,
shareholders' equity and reserves. Actual results may differ
from these estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to estimates are
recognised prospectively. In the process of applying the Group's
accounting policies, management has made the following judgements
and estimates, which have the most significant effect on the
amounts recognised in the financial statements:
Critical Judgements
a. Reverse
Acquisition Accounting
The Celadon Pharmaceuticals Plc
Group of companies was formed by Celadon Property Co Limited
reverse acquiring Celadon Pharmaceuticals Plc (a "reverse
acquisition") on 28 March 2022. The Board used judgment in applying
Reverse Acquisition Accounting principles and used an estimate as
to the average share price of £1.5125 on 28 March 2022, the first
day of trading after the Company was readmitted to trading on AIM,
to value the consideration shares issued by Celadon Pharmaceuticals
Plc to the owners of Celadon Property Co Limited. Further
details are in note 5.
b. Tax
Losses
The Group has significant tax
losses and has incurred significant capital expenditure on
leasehold improvements and plant and machinery. The
corporation tax treatment of these items and the potential
recognition of deferred tax assets requires management
judgement. The Group has decided not to recognise a deferred
tax asset at the balance sheet date, given the uncertainty of when
profits will arise. See note 12.
c.
Biological Assets and Agricultural Products
The Group undertakes agricultural
activities and is required to recognise the fair value of its
biological assets. Judgement is required in determining this
fair value. In the absence of an appropriate comparator in
the market for the Group's biological assets, the Board has used
its judgement in determining the fair value of the biological
assets based on the anticipated cashflows arising from those
biological assets. This judgement requires a judgement to be
exercised of the anticipated yield from the biological assets being
cultivated at the balance sheet date, less the costs that would be
required to get those biological assets to their saleable
state.
Key accounting estimates
d.
Subsidiary incentive scheme
The Group established a Subsidiary
Incentive Scheme in 2018 (in Celadon Subco Limited) in order to
incentivise and retain key employees, directors and advisers to the
Group. The fair value of share-based awards is measured using
the Monte Carlo model which inherently makes use of significant
estimates and assumptions including the share price volatility, an
estimate of exercise date and the number of scheme members that
will achieve the vesting conditions. Further details of the scheme,
and the assumptions used in the Monte Carlo model are given in note
30.
e.
Convertible loan notes
Celadon Property Co Limited raised
£4.13 million through an issue of convertible loan notes in
February and March 2021. The convertible loan notes contained
an embedded derivative (the right to convert in to shares) that was
fair valued at inception and at each reporting date. The fair
value estimate required assumptions on share price volatility, the
expected value of the shares and conversion date. Further
details of the methodology applied and assumptions made are given
in note 24. The convertible loan notes were converted to
equity in March 2022.
f.
Leases and right-of-use assets
In 2019, Celadon Property Co
Limited signed a 25 year lease on a 100,000 square foot production
and head office facility in the UK. The lease was varied in
February of 2022. The fair value accounting for the lease liability
and associated asset value, at inception and the date of variation
requires the estimation of the effective borrowing rate in the
lease. Further details of the assumptions made in calculating the
incremental borrowing cost are provided in note 16.
g. Site
Restoration Obligation provision
In October 2019 Celadon Property Co
Limited signed a 25 year lease which included the option for the
landlord to require the company (at the end of the lease in 2044)
to repair the leasehold property to its original condition.
The fair value of the site restoration obligation provision
requires estimation and judgement of the potential costs to put the
site back in its original state. See note 27 for further
details of the assumptions made.
h. Research
& Development Tax Credits
The Group has submitted its first
R&D tax credit application to HMRC totalling £269k relating to
2021 activities. Elements of the R&D claims required
judgement by management. At the date of these financial
statements £269k had been received by the company in respect of the
year to 31 December 2021. Using the same methodology, the
estimated R&D claim for the year to 31 December 2023 is £236k
(2022: £412k). See note 12.
5. Reverse
Acquisition of Celadon Property Co Limited
On 28 March 2022, Celadon
Pharmaceuticals Plc (previously Summerway Capital Plc) acquired
through a share-for-share exchange, the entire share capital of
Celadon Property Co Limited and its subsidiary companies Celadon
Pharma Limited and Harley Street (CPC) Limited (together the
"Celadon Group"), whose principal activity is growing highly
controlled indoor hydroponic, high THC cannabis for use within
medicinal products used to treat chronic pain.
Although the transaction resulted
in the Celadon Group becoming a wholly-owned subsidiary group of
the Company, the substance of the transaction means it constitutes
a reverse acquisition, as
the previous shareholders of Celadon Property Co Limited own a
substantial majority of the Ordinary Shares of the Company and the
executive management of Celadon Property Co Limited became the
executive management of Celadon Pharmaceuticals Plc.
Furthermore, as Celadon
Pharmaceuticals plc's activities prior to the acquisition were
purely the maintenance of the AIM Listing, acquiring Celadon
Property Co Limited and raising equity finance to provide the
required funding for the operations of the acquisition, it did not
meet the definition of a business in accordance with IFRS
3.
Accordingly, this reverse
acquisition does not constitute a business combination and was
accounted for in accordance with IFRS 2 Share-based Payments ("IFRS 2") and
associated IFRIC guidance.
Although, the reverse acquisition
is not a business combination, the Company has become a legal
parent and is required to apply IFRS 10 Consolidated Financial Statements
("IFRS 10") and prepare consolidated financial statements with
Celadon Pharmaceuticals Plc consolidated as a subsidiary. The
Directors have prepared these financial statements using the
reverse acquisition methodology, but rather than recognising
goodwill, the difference between the equity value given up by the
shareholders of Celadon Property Co Limited and the share of the
fair value of net assets gained by the shareholders of Celadon
Property Co Limited is charged to the statement of comprehensive
income as a share-based payment on reverse acquisition. In
substance, this represents the cost of acquiring an AIM
listing.
In accordance with reverse
acquisition accounting principles, these consolidated financial
statements represent a continuation of the consolidated statements
of Celadon Property Co Limited and its subsidiaries and
include:
a. the
assets and liabilities of Celadon Property Co Limited and its
subsidiaries at their pre-acquisition carrying value amounts and
the results for the periods presented; and
b. the
assets and liabilities of the Company (and its wholly owned
subsidiary Celadon Subco Limited (previously Summerway Subco
Limited)) as at 28 March 2022 and its results from the date of the
reverse acquisition (28 March 2022) to 31 December 2022.
On 28 March 2022, Celadon issued
43,316,201 ordinary shares to acquire the entire share capital of
Celadon Property Co Limited, and issued 5,168,647 ordinary shares
to redeem the Celadon Property Co Limited convertible loan
notes. At 28 March 2022, the average share price of Celadon
for the day was £1.5125.
On consolidation and presentation
of the Group's financial position, performance and cash flows,
Celadon Property Co Limited, was treated as the accounting
acquirer, and the legal parent company, Celadon, was treated as the
accounting acquiree.
The fair value of the shares deemed
to have been issued by Celadon Property Co Limited was calculated
at £12,151k based on an assessment of the purchase consideration
for a 100% holding of Celadon on the reverse acquisition
date.
The fair value of the net assets of
Celadon plc at acquisition was as follows:
|
£000
|
Cash and equivalents
|
3,494
|
Other assets
|
2,285
|
Accounts payable and other
liabilities
|
(28)
|
Net
assets
|
5,751
|
The difference between the deemed
cost £12,151k and the fair value of the net assets assumed per
above of £5,751k resulted in £6,400k being expensed within
"Reverse Acquisition
Expenses" in accordance with IFRS 2, reflecting the economic
cost to the shareholders of Celadon Property Co Limited of
acquiring a quoted entity.
The professional fees in connection
with the reverse acquisition in the period were £- (2022: £2,493k),
of which £- (2022: £1,028k) was charged to the share premium
account, and £- (2022: £1,465k) was expensed in the consolidated
statement of comprehensive income.
Reverse Acquisition
Reserve
The Reverse Acquisition Reserve
which arose from the reverse acquisition is made up as
follows:
|
Note
|
£000
|
Pre-acquisition total retained
earnings of Celadon Pharmaceuticals Plc
|
1
|
(1,746)
|
Celadon Property Co Limited share
capital at acquisition
|
2
|
1,662
|
Investment in Celadon Property Co
Limited, net of convertible loan note charge
|
3
|
(65,516)
|
Reverse acquisition expense
|
4
|
6,400
|
|
|
(59,200)
|
1.
Recognition of pre-acquisition equity of Celadon
Pharmaceuticals Plc.
2. Celadon
Property Co Limited had issued share capital of £1,662k. As these
financial statements present the capital structure of the legal
parent entity, the equity of Celadon Property Co Limited is
eliminated.
3. The
value of the shares issued by the Company in exchange for the
entire share capital of Celadon Property Co Limited.
4. The
reverse acquisition expense represents the
difference between the value of the equity issued by the Company,
and the deemed consideration given by Celadon Property Co Limited
to acquire the Company.
6.
Operating segments
a. Basis of
segmentation
Reportable segment results include
items directly attributable to a segment as well as those which can
be allocated on a reasonable basis. The operating results of each
are regularly reviewed by the Chief Operating Decision Maker, which is deemed to be the Board of
Directors. Discrete financial information is available for each
segment and used by the Board of Directors for decisions on
resource allocation and to assess performance.
The Group has the following
segments:
Reportable segment
|
Operations
|
Celadon
|
Build out of the grow facilities,
growing and selling of medical grade cannabis and research in the
GMP lab
|
Harley Street (CPC)
|
A clinical study into the pain relief
benefits of medicinal cannabis
|
Information related to each
reportable segment is set out below.
2023
|
Celadon
|
Harley
Street
|
Central
Costs
|
Group
|
|
£000
|
£000
|
£000
|
£000
|
External revenue
|
64
|
11
|
-
|
75
|
Cost of sales
|
(29)
|
(45)
|
-
|
(74)
|
Fair value adjustments
|
74
|
-
|
-
|
74
|
Gross margin
|
109
|
(34)
|
-
|
75
|
Operating costs
|
(4,933)
|
(27)
|
(512)
|
(5,472)
|
Depreciation
|
(429)
|
(105)
|
-
|
(534)
|
Operating (loss)
|
(5,253)
|
(166)
|
(512)
|
(5,931)
|
|
|
|
|
|
Unallocated central costs
|
-
|
-
|
(1,026)
|
(1,026)
|
Finance costs
|
-
|
-
|
(566)
|
(566)
|
Group (loss) before tax
|
|
|
|
(7,523)
|
|
|
|
|
|
Segment assets
|
6,613
|
256
|
2,012
|
8,881
|
Segment Capital
expenditure
|
340
|
-
|
-
|
340
|
|
|
|
|
|
Total Group assets
|
|
|
|
9,221
|
|
|
|
|
|
Segment liabilities
|
(5,486)
|
(82)
|
(472)
|
(6,040)
|
|
|
|
|
|
Total Group liabilities
|
|
|
|
(6,040)
|
|
|
|
|
|
2022
|
Celadon
|
Harley
Street
|
Central
Costs
|
Group
|
|
£000
|
£000
|
£000
|
£000
|
External revenue
|
-
|
24
|
-
|
24
|
Cost of sales
|
-
|
(90)
|
-
|
(90)
|
Gross margin
|
-
|
(66)
|
-
|
(66)
|
Operating costs
|
(4,006)
|
(848)
|
-
|
(4,854)
|
Depreciation
|
(360)
|
(6)
|
-
|
(366)
|
Operating (loss)
|
(4,366)
|
(920)
|
-
|
(5,286)
|
|
|
|
|
|
Unallocated central costs
|
-
|
-
|
(12,684)
|
(12,684)
|
Finance costs
|
-
|
-
|
(23)
|
(23)
|
Group (loss) before tax
|
|
|
|
(17,993)
|
|
|
|
|
|
Segment assets
|
4,235
|
400
|
6,314
|
10,949
|
Segment Capital
expenditure
|
2,300
|
2
|
-
|
2,302
|
|
|
|
|
|
Total Group assets
|
|
|
|
13,251
|
|
|
|
|
|
Segment liabilities
|
(4,151)
|
(1,610)
|
(453)
|
(6,214)
|
|
|
|
|
|
Total Group liabilities
|
|
|
|
(6,214)
|
|
|
|
|
| |
The group operates only in the UK
only and has only one geographical area.
7.
Revenue
The Group recorded revenue in the
year ended 31 December 2023 of £75k (2022: £24k). £64k (2022:
£Nil) from the supply of dried cannabis flower and trim product,
£11k (2022: £24k) from patients on the Group's clinical study in
Harley Street (CPC) Limited.
8. Fair
value movements on biological assets and agricultural
products
The Group reflected a fair value
movement of £74k (2022: -) on the revaluation of biological assets
£40k (2022: -) and the initial recognition of agricultural products
£34k (2022: -)
9. Loss for
the year
The loss for the year has been
arrived at after charging (crediting):
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Depreciation of property, plant and
equipment
|
206
|
|
156
|
Depreciation of leasehold
improvements
|
28
|
|
45
|
Depreciation of office
equipment
|
37
|
|
27
|
Depreciation of right-of-use
asset
|
163
|
|
138
|
Amortisation of intangible
assets
|
100
|
|
100
|
Loss on disposal of fixed
assets
|
6
|
|
-
|
Non-cash charge in respect of Harley
Street (CPC) Limited
|
-
|
|
139
|
Fair value charge relating to long
term incentive plans
|
285
|
|
1,136
|
Fair value charge relating to
Canaccord warrants included in Other acquisition costs
|
-
|
|
227
|
Other acquisition costs
|
741
|
|
-
|
Auditor's remuneration
|
122
|
|
130
|
Non-audit Services (IPO related
costs)
|
-
|
|
83
|
Director's remuneration (including
share-based payment charge)
|
777
|
|
888
|
10. Directors and staff
costs
The average number of staff
(including Directors) during the year was 27 (2022: 24).
Staff costs for the year, including
Directors were:
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Salaries
|
2,212
|
|
1,778
|
Bonuses
|
-
|
|
37
|
Pension contributions
|
36
|
|
30
|
Phone allowance
|
14
|
|
11
|
|
2,262
|
|
1,856
|
Social security costs
|
277
|
|
227
|
Share based payments
|
241
|
|
460
|
|
2,780
|
|
2,543
|
The Directors have determined that
there are no key management personnel other than the Directors
during the year.
Management remuneration paid and
other benefits supplied to the Directors during the period plus the
associated social security costs were as follows:
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Salaries
|
642
|
|
474
|
Phone allowance
|
2
|
|
1
|
|
644
|
|
475
|
Social security costs
|
81
|
|
51
|
Share based payments
|
52
|
|
362
|
|
777
|
|
888
|
In accordance with section 412
Companies Act 2006 the table below shows the full amount of
remuneration paid and other benefits supplied to the Directors of
Celadon Pharmaceuticals plc even if those amounts relate to the
period prior to the Reverse Acquisition of Celadon Property Co
Limited.
Director
|
Salary
|
Loss
of
service
|
Benefits
in
kind
|
Pension
|
31 December 2023
Total
|
31
December 2022 Total
|
|
£
|
£
|
£
|
£
|
£
|
£
|
Alexander Anton1
|
50,000
|
-
|
-
|
-
|
50,000
|
38,266
|
Benjamin Shaw2
|
-
|
-
|
-
|
-
|
-
|
4,500
|
James Short3
|
245,000
|
-
|
-
|
-
|
245,000
|
246,150
|
David Firth4
|
45,000
|
-
|
-
|
-
|
45,000
|
44,440
|
Robbie Barr5
|
50,000
|
-
|
-
|
-
|
50,000
|
38,266
|
Dr
Steven Hajioff6
|
35,000
|
-
|
-
|
-
|
35,000
|
34,786
|
Elizabeth Shanahan7
|
40,000
|
-
|
-
|
-
|
40,000
|
40,000
|
Kathleen Long8
|
-
|
-
|
-
|
-
|
-
|
56,154
|
Jonathan Turner9
|
177,410
|
-
|
-
|
-
|
177,410
|
-
|
|
642,410
|
-
|
-
|
-
|
642,410
|
502,562
|
1.
Alexander Anton resigned 15 January 2021 and was re-appointed 28
March 2022
2. Benjamin
Shaw resigned as Interim Chairman on 28 March 2022
3. James
Short was appointed on 28 March 2022 - the figure quoted for 2022
is the combined figure for the services provided to Celadon
Pharmaceuticals plc since March 2022, and Vertigrow from 1 January
2022 to 28 March 2022
4. David
Firth was appointed on 17 September 2018 - of the fees quoted above
for 2022, £11,100 relates to the period 1 January - 28 March
2022
5. Robbie
Barr was appointed on 28 March 2022
6. Dr
Steven Hajioff was appointed on 28 March 2022 - the figure quoted
is the combined figure for services provided to Celadon
Pharmaceuticals plc since March 2022, and Vertigrow from 1 January
2022 to 28 March 2022.
7.
Elizabeth Shanahan was appointed on 21 September 2021 - of the fees
quoted above for 2022, £10,000 relate to the period 1 January -28
March 2022
8. Kathleen
Long was appointed on 28 March 2022 and resigned on 17 January
2023
9. Jonathan
Turner was appointed on 17 January 2023
11. Net finance
costs
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Finance gain on derivative liability
associated with convertible loan notes (note 24)
|
-
|
|
556
|
Finance (charge) on leased assets
(note 24)
|
(581)
|
|
(531)
|
Finance (charge) on related party
loan (note 24)
|
-
|
|
(53)
|
Finance (charge) on external loans
(note 24)
|
(1)
|
|
(7)
|
Unwind of discount on Site
Restoration Obligation
|
(16)
|
|
-
|
Finance income on bank
deposits
|
32
|
|
12
|
|
(566)
|
|
(23)
|
12. Income tax
The Group has had no taxable profits
since incorporation.
Reconciliation of effective tax
rate
|
2023
|
2022
|
|
£000
|
£000
|
Loss
before tax from operations
|
(7,523)
|
(17,993)
|
Tax rate
|
25%
|
19%
|
Tax credit at the standard rate of
corporation tax
|
(1,881)
|
(3,418)
|
Items disallowable for corporation
tax
|
212
|
2,217
|
Additional deduction for R&D
expenditure
|
(-)
|
(303)
|
Surrendered for R&D
purposes
|
591
|
539
|
Capital allowances in excess of
depreciation
|
(34)
|
(33)
|
Impact of unrelieved tax losses
carried forward
|
1,035
|
998
|
Tax
credit before impact of surrender of R&D
expenditure
|
-
|
-
|
Refundable tax credit for surrender
of enhanced R&D expense (at 14.5%):
- current year
- prior year adjustment
|
236
-
|
412
270
|
Release of deferred tax liability on
intangible assets
|
25
|
25
|
Tax
credit for the year
|
261
|
707
|
The Group has estimated tax losses
of £14,894k (2022: £8,811k) which may be available for relief
against future profits from current operations.
For tax years starting on or after
1 April 2023, the rate of corporation tax in the UK is
25%. As it is anticipated that the tax losses will not
be utilised in the year to December 2023, the deferred tax asset
not recognized has been calculated using the rate in force from 1
April 2023. The deferred tax asset not provided for in the
accounts is £3,724k (2022: £2,203k).
The release of the deferred tax
liability on intangible assets reflects the amortisation of the
Clinical Trial related intangible assets.
13. Loss per
share
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Loss attributable to the owners of
the Company
|
(7,140)
|
(17,006)
|
Weighted average number of ordinary
shares in issue
|
61,893,906
|
57,295,086
|
Basic loss per share
|
(11.5p)
|
(29.7p)
|
Diluted loss per share
|
(11.5p)
|
(29.7p)
|
Basic earnings per share is
calculated by dividing the loss/profit after tax attributable to
the equity holders of the group by the weighted average number of
shares in issue during the year.
Diluted earnings per share is
calculated by adjusting the weighted
average number of shares outstanding to assume conversion of all
potential dilutive shares.
Under the Subsidiary Incentive
Scheme certain directors and employees of, and advisers to, the
Group are able to participate in a share of the growth of the
Group's market capitalisation over predetermined thresholds over a
three- to five- year period. The participants can realise
their value from the Subsidiary Incentive Scheme by exercising a
put option to transfer their Celadon Subco Limited shares to
Celadon Pharmaceuticals plc with the consideration satisfied at the
Company's option either in cash or through the issue of ordinary
shares of the Company.
The calculation of earnings per
share is based on the following earnings and number of
shares. In calculating the weighted average number of
ordinary shares outstanding (the denominator of the earnings per
share calculation) during the period in which the reverse
acquisition occurs:
§ The
number of ordinary shares outstanding from the beginning of that
period to the acquisition date shall be computed, on the basis of
the weighted average number of ordinary shares of the legal
acquiree (accounting acquirer) outstanding during the period
multiplied by the exchange
ratio established in the merger agreement; and
§ The
number of ordinary shares outstanding from the acquisition date to
the end of that period shall be the actual number of ordinary
shares of the legal acquirer (the accounting acquiree) outstanding
during that period.
The basic earnings per share for
each comparative period before the acquisition date presented
in the consolidated financial statements following a reverse
acquisition shall be calculated by dividing:
§ the
profit or loss of the legal acquiree attributable to ordinary
shareholders in each of those periods by
§ the
legal acquiree's historical weighted average number of ordinary
shares outstanding multiplied by the exchange ratio established in
the acquisition agreement.
The weighted average number of
ordinary shares for the purpose of calculating the basic and
diluted measures is the same. This is because the outstanding
warrants and other instruments would have the effect of reducing
the loss per ordinary share and therefore would be anti-dilutive
under the terms of IAS 33.
14. Intangible
Assets
|
Clinical Trial Intangible
Asset
|
Goodwill
|
Total
|
|
£000
|
£000
|
£000
|
Cost
|
|
|
|
At 1 January 2022
|
498
|
719
|
1,217
|
Impairment
|
-
|
(639)
|
(639)
|
At
31 December 2022
|
498
|
80
|
578
|
|
|
|
|
Additions
|
-
|
-
|
-
|
At
31 December 2023
|
498
|
80
|
578
|
|
|
|
|
|
|
|
|
Amortisation
|
|
|
|
At 1 January 2022
|
(50)
|
-
|
(50)
|
Charge for the period
|
(100)
|
-
|
(100)
|
At
31 December 2022
|
(150)
|
-
|
(150)
|
|
|
|
|
Charge for the period
|
(100)
|
-
|
(100)
|
At
31 December 2023
|
(250)
|
-
|
(250)
|
|
|
|
|
|
|
|
|
Net
book value
|
|
|
|
At
31 December 2022
|
348
|
80
|
428
|
At
31 December 2023
|
248
|
80
|
328
|
|
|
|
|
Celadon Property Co Limited has
goodwill arising from two acquisitions: (1) the purchase of the
entire share capital of Celadon Pharma Limited (in 2019); and (2)
an initial 57.5% equity investment in Harley Street (CPC) Limited
(in 2021).
Acquisition of Celadon Pharma
Limited - 2020
On 1 January 2020, Celadon Property Co Limited acquired 100% of the
share capital for Celadon Pharma Limited for £2, together with the
assumed liabilities generated goodwill of £80k.
Acquisition of Harley Street
(CPC) Limited - 2021 and 2023
On 14 July 2021, Celadon Property
Co Limited acquired 57.5% of the issued share capital of Harley
Street (CPC) Limited ("HSCPCL"), which is in the advanced stages of
obtaining MHRA and Research Ethics Committee approval for a
UK-based cannabis trial for a maximum consideration of
£2,000k.
£500k was paid in cash on
completion with a contingent
consideration payment of £1,500k due in ordinary shares of
the Company in the event that (a) each of MHRA and REC authorise
the Trial in full; and (b) 5,000 paying patients of the Company's
clinic are accepted onto the Trial and receive their first
prescriptions under the Trial within 18 months of completion of the
acquisition of LVL.
|
|
£000
|
|
|
|
Fair value of initial cash
consideration paid
|
|
500
|
Fair value of contingent
consideration
|
|
375
|
Total consideration
|
|
875
|
Fair value of net liabilities
acquired
|
|
238
|
Non-controlling interest
|
|
(101)
|
Fair value of assets
acquired
|
|
1,012
|
Fair value of
- Intangible Assets acquired
|
|
498
|
- Deferred
tax liability on intangible assets
|
|
(125)
|
Goodwill
|
|
639
|
The £1,500k contingent
consideration payment was estimated to have an acquisition date
fair value of £375k based upon 6.2% discount rate and management's
probability estimate of the payment criteria being
satisfied.
Release of contingent
consideration in 2022
In June 2022, the Directors
reassessed that the targets for the contingent consideration
payment would not be met within the time frame set, and released
the contingent consideration liability of £375k back to
consolidated statement of comprehensive income.
Impairment test
Goodwill is tested for impairment
annually, and whenever there is an indication that it may be
impaired. The annual impairment test is performed as at 31 December
each year. An impairment, if any, that results from that annual
impairment test would be reflected in the 31 December financial
statements.
Goodwill is, for the purposes of
impairment testing, allocated to cash generating units ("CGUs") or
groups of CGUs expected to benefit from the business combination
associated with that goodwill, where a CGU is the smallest
identifiable group of assets that generate independent cash
inflows. Management reviewed business performance, as of 31
December 2023 based on the performance of the various operating
segments identified in note 6, which are also the Group's
CGUs.
An impairment test of goodwill is
performed by comparing the carrying amount of each division (i.e.
CGU or group of CGUs), including the goodwill, with the recoverable
amount of the division. The recoverable amount of a division is the
higher of its fair value less costs of disposal ('FVLCD') and its
value in use ('VIU'), where the VIU of the division is the present
value of its future cash flows.
If the recoverable amount of a
division is lower than its carrying amount, an impairment loss is
recognised. The impairment test of the divisions as at 31 December
2022 resulted in an impairment charge to goodwill in respect of the
Harley Street CGU, the table below shows the position after that
impairment.
The key data is summarised in the
following tables:
|
|
Goodwill
|
Carrying
Amount
|
Recoverable
Amount
|
Headroom
|
Cash
Generating Unit
|
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
Celadon
|
|
80
|
2,384
|
158,000
|
155,616
|
Harley Street
|
|
-
|
191
|
376
|
185
|
|
|
|
|
|
| |
Carrying Amount
The 'Carrying amount' column in the
above table includes the carrying amounts of the CGUs. These
amounts are determined by adding back external debt and lease
liabilities to the net assets of each division and the Corporate
non-operating division, by allocating the resulting adjusted net
assets of the Head Office non-operating division across the
divisions on a pro rata basis to the resulting adjusted net assets
of each division, and by adding these amounts to the goodwill of
the divisions after first grossing that goodwill up for the
non-controlling interest.
Recoverable Amount
The recoverable amount of both CGUs
has been determined on a Value-in-Use basis, being the present
value of board approved forecasted future cash flows of the CGUs
together with an allocation of the cash flows of the Head Office
non-operating division, where the cash flows are based on the most
recent five-year forecast.
These forecasts were derived from
market information, by overlaying it with assumptions to reflect
areas where growth or income improvement is expected, and by taking
into account the expected results of cost management programmes to
which the Group is committed. The 2029 forecast is extrapolated to
subsequent years using a steady growth rate being the CPI inflation
rate of 1.9% per annum, and a terminal value is calculated using
the perpetual growth model. The discount rate of 15.0% that has
been applied to the forecasts is a market participant weighted
average cost of capital. Given that the Celadon CGU only
obtained the requisite regulatory licences to allow it to start
selling it product during the year, its calculation of its value in
use is most sensitive to the anticipated increase in revenue.
Similarly, the revenues generated by the Harley Street CGU have
been lower than anticipated due to its Clinical Study being
conditionally-approved only. The value in use for this CGU is
also sensitive to the anticipated increase in
revenues.
Net impact on income statement
The net impact on income statement
of the impairment of the Goodwill relating to Harley Street and the
release of the deferred consideration is a charge of £Nil (2022:
£264k).
15. Property, plant and
equipment
|
Leasehold
improvement
|
Plant and
machinery
|
Office
equipment
|
Assets under
construction
|
Total
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
Cost
|
|
|
|
|
|
At 1 January 2022
|
465
|
719
|
66
|
-
|
1,250
|
Additions
|
-
|
279
|
36
|
1,987
|
2,302
|
Disposal
|
(216)
|
-
|
-
|
-
|
(216)
|
At
31 December 2022
|
249
|
998
|
102
|
1,987
|
3,336
|
|
|
|
|
|
|
Additions
|
52
|
230
|
34
|
25
|
341
|
Disposal
|
-
|
(10)
|
-
|
-
|
(10)
|
At
31 December 2023
|
301
|
1,218
|
136
|
2,012
|
3,667
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
At 1 January 2022
|
(37)
|
(177)
|
(15)
|
-
|
(229)
|
Charge for the period
|
(45)
|
(156)
|
(27)
|
-
|
(228)
|
Disposals
|
42
|
-
|
-
|
-
|
42
|
At
31 December 2022
|
(40)
|
(333)
|
(42)
|
-
|
(415)
|
|
|
|
|
|
|
Charge for the period
|
(28)
|
(206)
|
(37)
|
-
|
(271)
|
Disposals
|
-
|
3
|
-
|
-
|
3
|
At
31 December 2023
|
(68)
|
(536)
|
(79)
|
-
|
(683)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
book value
|
|
|
|
|
|
At 31 December 2022
|
209
|
665
|
60
|
1,987
|
2,921
|
At
31 December 2023
|
233
|
682
|
57
|
2,012
|
2,984
|
2022: Leasehold improvements with a
cost of £216k were sold for their net book value of £174k
generating no gain or loss on the disposal.
Assets under construction are for
Phase 2 works including waste removal, walls, doors, drainage and
flooring.
16. Right-of-Use
Assets
|
Right-of-use Property
Lease
|
Right-of-use
Equipment
|
Total
|
|
£000
|
£000
|
£000
|
Cost
|
|
|
|
At 1 January 2022
|
2,511
|
-
|
2,511
|
Additions
|
-
|
30
|
30
|
Increase in Restoration
Obligation
|
389
|
-
|
389
|
Lease variation
|
553
|
-
|
553
|
At
31 December 2022
|
3,453
|
30
|
3,483
|
At
31 December 2023
|
3,453
|
30
|
3,483
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation charge
|
|
|
|
At 1 January 2022
|
(226)
|
-
|
(226)
|
Lease variation - interest
reset
|
235
|
-
|
235
|
Amortisation charge
|
(132)
|
(6)
|
(138)
|
At
31 December 2022
|
(123)
|
(6)
|
(129)
|
|
|
|
|
Amortisation charge
|
(153)
|
(10)
|
(163)
|
At
31 December 2023
|
(276)
|
(16)
|
(292)
|
|
|
|
|
|
|
|
|
Net
book value
|
|
|
|
At
31 December 2022
|
3,330
|
24
|
3,354
|
At
31 December 2023
|
3,177
|
14
|
3,191
|
Property
lease
The Group operates from a 100,000
square foot facility in the UK under a 25 year lease signed in
2019, with rent reviews every 5 years, with the first review on 1
October 2024. At the inception, management estimated fair
value of the minimum cash flow payments under the lease to
establish the right-of-use inception value. The incremental
borrowing cost of 13.35% was calculated by using the credit spread
of CCC rated bonds with duration of 13.75 years for bonds issued on
the date the Group entered into the lease.
In February 2022, Celadon Property
Co Limited varied the terms of its long-term property lease by (a)
extending the rent-free period by 12 months to 11 March 2023; and
(b) increasing the un-discounted cash flow payments over the existing lease term
(to 30 September 2044) by £3.9 million. On a
discounted cash flow basis this increased the right-of-use asset and
corresponding lease liability by £553k on the variation date. There
was no change required to the Incremental borrowing rate used to
discount lease payments resulting from this variation.
Included in the Property Lease
Right-of-Use asset is £405k (2022: £389k) for Site Restoration
Obligations (note 27).
17. Unlisted
Investments
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
At 1 January
|
218
|
|
200
|
Investment
|
-
|
|
18
|
At
31 December
|
218
|
|
218
|
In 2021 Celadon Property Co Limited
invested £200k in Kingdom Therapeutics Limited (for a 17%
shareholding) and acquired an additional holding for £18k in May
2022. At 31 December 2023 Celadon Property Co Limited has a
18.5% shareholding in Kingdom Therapeutics Limited. The
ownership does not materially impact on the Group's ability to
control the activities of Kingdom Therapeutics Limited and as a
result it is not appropriate to consolidate the entity with the
Group.
18. Subsidiaries
The Group has five subsidiaries for
the year ended 31 December 2023. All subsidiary companies are
consolidated in the Group's financial statements.
The companies in the Group at 31 December 2023
are:
Name
|
Proportion of Ownership
Interest
|
Proportion of
Control
|
Profit / (Loss) for the
year
|
Capital and
Reserves
|
|
|
|
|
£000
|
£000
|
|
Celadon Subco Limited *
|
100%
|
100%
|
-
|
65,539
|
a
|
Celadon Property Co Limited
*
|
100%
|
100%
|
1,808
|
3,049
|
b
|
Celadon Pharma Limited *
|
100%
|
100%
|
758
|
1,038
|
c
|
Celadon Pharmaceuticals (UK) Limited
*
|
100%
|
100%
|
-
|
-
|
d
|
Harley Street (CPC)
Limited
|
100%
|
100%
|
168
|
(29)
|
e
|
|
|
|
|
|
| |
All companies are incorporated and
operate in the UK. The registered office of all group
companies is 32-33 Cowcross Street, London, EC1M 6DF.
* The financial statements of these
subsidiary undertakings have not been audited for the year ended 31
December 2023 in accordance with Section 479A of the Companies Act
2006 as the Group has opted to take advantage of a statutory
exemption. Strict criteria must be met for this exemption to
be taken and it must be agreed to by the directors of those
subsidiary companies. In order to facilitate the adoption of
this exemption, Celadon Pharmaceuticals plc, the ultimate parent
company of the subsidiaries undertakes to provide a guarantee under
Section 479C of the Companies Act 2006 in respect of those
subsidiaries.
The principal activities of the
companies are:
a. Celadon
Subco Limited - This is an equity incentive
company. The company has A Ordinary Shares and B Ordinary
Shares.
§ The
A Ordinary Shares have full voting rights, full rights to
participate in a dividend and full rights to participate in a
distribution of capital. Celadon Pharmaceuticals plc holds all of
the 80,000,801 issued A Ordinary shares.
§ The
B Ordinary Shares have no voting rights, no rights to participate
in any dividend without the consent of Celadon Pharmaceuticals Plc.
The B Ordinary Shares were created to facilitate a Long Term
Incentive Scheme. See note 28 for more details.
b. Celadon Property Co. Limited -
This is a property holding company of the Group
and holds the 25 year lease on the Group's 100,000 square foot
facility, and following a group reorganization holds the assets
relating to the CANPAIN Trial previously held by Harley Street
(CPC) Limited.
c. Celadon Pharma
Limited - This is an operating company
growing the medicinal cannabis.
d. Celadon Pharmaceuticals (UK) Limited - Is a dormant company.
e. Harley Street (CPC) Limited -
Is operates a CQC registered clinic. The
assets relating to the CANPAIN Trial were transferred to Celadon
Property Co Limited during the year to 31 December
2022.
19. Inventories
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Production consumables
|
26
|
|
20
|
Agricultural Produce
|
34
|
|
-
|
|
60
|
|
20
|
The production consumables are
utilised in cultivating pharmaceutical-grade cannabis and the
agricultural produce is the fair value of the biological assets at
the time of harvest. £59k (2022: £99k) of production
consumables were utilized during the year.
20. Fair value of biological
assets and agricultural products
IAS 41 "Agriculture" requires the
carrying value of biological assets to be shown on the Group
Balance Sheet. This carrying value is determined in
accordance with IAS 41's provisions and show the net valuation
movement in the Income Statement.
The fair value of biological assets
Is based on the net cash flows anticipated to be received from
selling the cannabis products. A number of assumptions need
to be made when calculating the fair values, including the
anticipated yield of dried plant material, the expected market
price for the cannabis products and the anticipated costs of drying
and finishing the produce.
Cuttings are not valued given the
limited biological transformation that has taken place. The Group
does not currently recognise a value in respect of the strains it
has access to given the limited revenue generated to date from
these strains.
Given that the Group did not
receive all necessary regulatory licences to allow it to sell its
cannabis products until March 2023 it was not cultivating plants,
and there were no biological assets at 1 January 2022 or 31
December 2022.
|
£'000
|
|
|
Fair value of biological
assets
|
|
At 1
January 2022
|
-
|
Changes in fair value less estimated
sale costs
|
-
|
Decreases attributable to
harvest
|
-
|
At
31 December 2022
|
-
|
Changes in fair value less estimated
sale costs
|
108
|
Decreases attributable to
harvest
|
(68)
|
At
31 December 2023
|
40
|
|
£'000
|
Changes in fair value of biological
assets
|
108
|
Inventory transferred to cost of
sales at fair value
|
(34)
|
Biological assets transferred to
agricultural products at fair value
|
(34)
|
Net
IAS 41 valuation movement on biological assets
|
40
|
21. Trade and other
receivables
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Gross Trade receivables
|
75
|
|
-
|
Less Expected Credit
Allowance
|
-
|
|
-
|
Net
Trade Receivables
|
75
|
|
-
|
Prepayments
|
300
|
|
186
|
VAT receivable
|
118
|
|
381
|
R&D tax receivable
|
648
|
|
682
|
|
1,141
|
|
1,249
|
22. Cash & Cash
Equivalents
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Cash and cash equivalents
|
1,259
|
|
5,061
|
Cash at bank comprises of balanced
held by the Group in current bank accounts. The carrying amount of
these assets approximated to their fair value.
23. Trade and other
payables
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Trade payables
|
327
|
|
539
|
Accruals
|
446
|
|
476
|
Other taxes and social security
costs
|
83
|
|
91
|
|
856
|
|
1,106
|
In the event of payment in line with
agreed payment terms, trade payables are non-interest
bearing. Normal payment terms vary between suppliers but are
typically settled in 30-60 days.
24. Loans and
borrowings
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
|
|
|
|
Current liabilities
|
|
|
|
Bounce back bank loan
|
(10)
|
|
(10)
|
Revolving credit facility
|
(10)
|
|
-
|
Loans and borrowings
|
(20)
|
|
(10)
|
Lease liabilities
|
(54)
|
|
(56)
|
|
(74)
|
|
(66)
|
|
|
|
|
Non-current liabilities
|
|
|
|
Bounce back bank loan
|
(14)
|
|
(24)
|
Lease liabilities
|
(4,629)
|
|
(4,542)
|
|
(4,643)
|
|
(4,566)
|
a. Bounce
back bank loan
Celadon Pharma Limited has a £50k
bounce back loan with Barclays Bank plc. The loan was taken
out on 31 May 2020, has a 6-year term, an interest rate of 2.5% pa
and is repayable in monthly instalments of £833 until 31 May
2026. The loan is unsecured.
b.
Revolving credit facility
On 29 May 2023, the Group obtained
£7 million of new funding via a 2-year fixed rate Revolving Credit
Facility Agreement. Interest will accrue at a rate of 10% on
balances drawn under the agreement. The Revolving Credit
Facility Agreement will be repayable in the event that the Group
obtains sufficient alternative funding to allow the Revolving
Credit Facility Agreement to be repaid in full. At 31
December 2023, £10k had been drawn.
c. Related
party loan
On 28 October 2021 Vertigrow
Technology Limited entered a £2,125k loan from Summerway Capital
Plc (renamed Celadon Pharmaceuticals Plc), drawing down this amount
in full. Interest accrued at 10% per annum. This has been
eliminated on consolidation on 28 March 2022 in the reverse
acquisition. In the year to 31 December 2023, this loan was
eliminated.
d.
Convertible loan note and embedded derivative
In February and March 2021,
Vertigrow Technology Limited issued £4,130k convertible loan notes,
the notes carried interest at 8% pa and were issued without a
redemption date, but were anticipated to be converted to ordinary
shares on the Company's Initial Public Offering.
The Company estimated the fair
value of the equity component of the convertible loan notes as
embedded derivates totalling £1,998,000 (at inception), and
remeasured this fair value at each reporting date, with the
movement recording in the statement of comprehensive
income.
The inputs used in the Black Scholes
valuation model to calculate those fair values were:
|
|
At
Inception
|
31 December
2021
|
28 March
2022
|
Risk free rate
|
|
-0.03%
|
0.02%
|
0.51%
|
Volatility
|
|
54.2%
|
51.0%
|
48.0%
|
Dividend yield
|
|
0%
|
0%
|
0%
|
Volatility was estimated using the
Summerway Capital Plc share prices for the periods shown. The
balance sheet values of the host liability and embedded derivative
were:
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Amount classified as Host
Liability
|
-
|
-
|
Amount classified as Embedded
Derivative
|
-
|
-
|
Net
|
-
|
-
|
On 28 March 2022, the convertible
loan notes balance of £4,412k (comprising: £2,103k of derivative
liability and £2,309k of host liability and accrued interest) was
redeemed through the issuance of 5,168,647 Summerway Capital Plc
shares worth £8,528,268.
e. The
amounts charged to the statement of comprehensive income
were:
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Convertible loan note finance
charge
|
-
|
43
|
Finance charge on redemption of
convertible loan notes
|
-
|
3,406
|
|
-
|
3,449
|
f.
Lease liabilities
The Group has leases for its premises and also for
plant and equipment assets, and has the following undiscounted
minimum lease payment commitments under right-of-use leases as at
31 December 2023:
|
Leasehold
Property
|
Plant &
Equipment
|
Total
|
|
£000
|
£000
|
£000
|
Less than 1 year
|
550
|
11
|
561
|
1 to 2 years
|
650
|
11
|
661
|
2 to 3 years
|
650
|
3
|
653
|
3 to 4 years
|
650
|
-
|
650
|
4 to 5 years
|
650
|
-
|
650
|
More than 5 years
|
10,086
|
-
|
10,086
|
Total
|
13,236
|
25
|
13,261
|
The movement in carrying value in
the lease liabilities is summarised as follows:
|
|
|
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Leasehold Property
|
|
|
Start of period
|
4,575
|
3,258
|
Variation (note 15)
|
-
|
787
|
Lease payments
|
(485)
|
-
|
Finance charge - lease discount
unwind
|
580
|
530
|
End of period
|
4,670
|
4,575
|
|
|
|
Plant & Machinery
|
|
|
Start of period
|
23
|
-
|
Inception of lease
|
-
|
30
|
Lease payments
|
(11)
|
(8)
|
Finance charge - lease discount
unwind
|
1
|
1
|
End of period
|
13
|
23
|
|
|
|
Total
|
4,683
|
4,598
|
Due within 12 months
|
54
|
56
|
Due after 12 months
|
4,629
|
4,542
|
g.
Reconciliation of movements on liabilities to cash flows arising
from financing activities
|
Bounce Back
Loan
|
Third Party
Loan
|
Supplier
Loan
|
Related Party
Loan
|
Convertible Loan
Note
|
Embedded
Derivatives
|
Lease
Liabilities
|
Share capital /
premium
|
Total
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
At 1
January 2022
|
44
|
-
|
1,535
|
2,160
|
2,266
|
2,659
|
3,258
|
7,447
|
19,369
|
Cash Flows
|
(11)
|
-
|
(1,541)
|
-
|
-
|
-
|
22
|
8,500
|
6,970
|
Non-cash flows:
|
|
|
|
|
|
|
|
|
|
Charge to income statement
|
1
|
-
|
6
|
53
|
43
|
(556)
|
531
|
-
|
78
|
Lease variation
|
-
|
-
|
-
|
-
|
-
|
-
|
787
|
-
|
787
|
Loan offset in
consolidation
|
-
|
-
|
-
|
(2,213)
|
-
|
-
|
-
|
-
|
(2,213)
|
Transaction costs
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,009)
|
(1,009)
|
Fair value of Canaccord warrants
charged to share premium
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(18)
|
(18)
|
Issued for purchase of Celadon
Property Co Limited
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
433
|
433
|
Redemption of loan notes
|
-
|
-
|
-
|
-
|
(2,309)
|
(2,103)
|
-
|
7,817
|
3,406
|
|
|
|
|
|
|
|
|
|
|
At
31 December 2022
|
34
|
-
|
-
|
-
|
-
|
-
|
4,598
|
23,170
|
27,802
|
Cash Flows
|
(11)
|
10
|
-
|
-
|
-
|
-
|
(496)
|
2,976
|
2,479
|
Non-cash flows:
|
|
|
|
|
|
|
|
|
|
Charge to income statement
|
1
|
-
|
-
|
-
|
-
|
-
|
581
|
-
|
582
|
|
|
|
|
|
|
|
|
|
|
At
31 December 2023
|
24
|
10
|
-
|
-
|
-
|
-
|
4,683
|
26,146
|
30,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25. Deferred tax
liability
|
Current
Liability
|
Non-Current
liability
|
Total
|
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
|
|
At 1 January 2022
(Unaudited)
|
(25)
|
(87)
|
(112)
|
Recognised in the income
statement
|
-
|
25
|
25
|
At
31 December 2022
|
(25)
|
(62)
|
(87)
|
Recognised in the income
statement
|
-
|
25
|
25
|
At
31 December 2023
|
(25)
|
(37)
|
(62)
|
26. Financial instrument and
risk management
The Group's financial instruments
comprise primarily cash and various items such as trade debtors and
trade creditors which arise directly from its operations. The main
purpose of these financial instruments is to provide working
capital for the Group's operations.
The Group does not utilise complex
financial instruments or hedging mechanisms in respect of its
non-sterling payments.
A description of each category of
financial assets and liabilities and the related accounting
policies can be found in note 3. The carrying amounts of the
Group's financial assets and liabilities in each category are
summarised below. For financial liabilities measured at fair value,
the level within which these are on the IFRS 13 fair value
hierarchy, are also presented:
a.
Financial assets by category
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Financial assets measured at
amortised cost
|
|
|
Cash and cash equivalents
|
1,259
|
5,061
|
Trade receivables
|
-
|
-
|
|
1,259
|
5,061
|
Financial assets measured at
FVTOCI
|
|
|
Unlisted Investments
|
218
|
218
|
|
218
|
218
|
All trade receivable amounts are
short-term and none are past due.
b.
Financial liabilities by category
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Financial Liabilities
measured at amortised cost
|
|
|
Trade payables
|
327
|
539
|
Accruals
|
446
|
476
|
Bounce back bank loan
|
24
|
34
|
Revolving credit facility
|
10
|
-
|
Lease liabilities
|
4,683
|
4,598
|
|
5,490
|
5,647
|
|
|
|
Fair Value
Measurement
The following valuation techniques
were used for valuing instruments categorised in Levels 2 and
3.
Contingent Consideration (Level 3)
Contingent consideration payments
are generally contingent on the post-acquisition performance of the
acquired business and achievement of certain performance
thresholds. The fair value of contingent consideration is
determined based on actual and forecast business performance of the
acquired business, discounted using the Group WACC as the discount
rate. For further information please see Note 14.
Long-term incentive Scheme (Level 2)
The current Subsidiary Incentive
Scheme participants and their respective holdings of B Share
holdings are described in note 30 below. These shares are not
traded on an active market, but the fair value is determined using
valuation techniques and available market data, by reference to the
Celadon Pharmaceutical plc share price and comparable
entities.
Unlisted equity investments (Level 3)
Unlisted investments are
categorised within level 3 of the fair value hierarchy. The
valuation technique applied, except where specific market price
information is available, is cost less any provision for
impairment.
Fair value of financial instruments measured at amortised
cost
The Directors consider the carrying
amounts for trade and other receivables, trade and other payables,
and the current portion of financial liabilities that are not
measured at fair value, to approximate their fair
values.
Reclassifications between fair value
categories
No reclassifications between the
three fair value categories took place during the year.
Credit and Liquidity
Risk
Credit risk is managed on a Group
basis. Funds are deposited with Barclays Bank plc in instant
access accounts. All financial liabilities (except for the
bounce-back loan, revolving credit facility and lease liabilities)
are payable in the short term (normally between 0 and 3 months) and
the Group maintains adequate liquid bank balances to meet those
liabilities as they fall due.
Capital
Management
The Group considers its capital to
be equal to the sum of its total equity. The Group monitors
its capital using cash flow projections. The Group's
objective when managing its capital is to ensure it obtains
sufficient funding for continuing as a growing concern.
Interest Rate
Risk
The maximum exposure to interest
rate risk at the reporting date by class of financial asset was
£766k (2022: £1,063k) of VAT receivables and estimated R&D tax
credit refunds.
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Cash and cash equivalents
|
1,259
|
5,061
|
The Group uses liquid resources to
meet the cost of future development activities. Consequently, it
seeks to minimize risk in the holding of its bank deposits. The
Group is not financially dependent on the small rate of interest
income earned on these resources and therefore the risk of interest
rate fluctuations is not significant to the business and the
Directors have not performed a detailed sensitivity
analysis.
Nonetheless, the Directors take
steps when possible and cost effective to secure rates of interest
which generate a return for the Group by depositing sums which are
not required to meet the immediate needs of the Group in
interest-bearing deposits. Other balances are held in
interest-bearing, instant access accounts. All deposits are placed
with main clearing banks to restrict both credit risk and liquidity
risk. The deposits are placed for the short term, between one and
three months, to provide flexibility and access to the funds and to
avoid locking into potentially unattractive interest
rates.
Market Risk
Market risk arises from changes in
interest rates, foreign exchange rates and equity prices, as well
as in their correlations and volatility levels. Market risk is
managed on a Group basis in the ordinary course of the Group's
activities.
Currency
Risk
The Group currently operates in the
UK market. All revenues are currently in GBP. The
majority of the operating costs and capital expenditure items are
incurred in GBP. The Group does not hedge potential future
cashflows.
27. Provisions - Site
Restoration Obligation
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
1
January
|
(389)
|
-
|
Provision made during the
year
|
-
|
(389)
|
Unwind of discount
|
(16)
|
-
|
31
December
|
(405)
|
(389)
|
In 2019 Celadon Property Co Limited
signed a 25 year lease which included the option for the landlord
to require the company (at the end of the lease in 2044) to repair
the leasehold property to its original condition. The fair
value of the site restoration obligation provision requires
estimation and judgement.
The company estimated the site
restoration total costs to be £480,675 at 31 December 2023 after
factoring the impact of inflation (2022: £435,000). The
provision has been calculated using a discount rate of 4.04% which
is the risk-free rate in the UK.
The site restoration obligation has
been debited to Right of Use assets in the Group's non-current
assets (note 16).
28. Share capital and
reserves
a. Ordinary
Shares
|
2023
|
2022
|
|
Number
|
Number
|
|
|
|
1 January
|
61,669,773
|
8,033,409
|
Issued for cash
|
2,539,130
|
5,151,516
|
Issued for purchase of Vertigrow
Technology Limited
|
-
|
43,316,201
|
Issued to redeem convertible loan
notes in Vertigrow Technology Limited
|
-
|
5,168,647
|
31 December
|
64,208,903
|
61,669,773
|
|
|
|
Authorised (at par value per share of
£0.01p each)
|
642,089
|
616,698
|
At 31 December 2023, 100,000 of
these shares had been unpaid. At the date of this report, all
amounts have been paid up.
Holders of these shares are
entitled to dividends as declared from time to time and are
entitled to one vote per share at general meetings of the
Company.
b. Issue of
ordinary shares
On 15 January 2021, the company
issued 1,903,409 new ordinary shares and raised gross proceeds of
£1.67 million (before fees).
During March 2022 the company
issued:
§ 43,316,201 new ordinary shares to acquire the entire share
capital of Vertigrow Technology Limited
§ 5,168,647 new ordinary shares to redeem the Vertigrow
Technology Limited convertible loan notes
§ 5,151,516 new ordinary shares and raised gross proceeds of
£8.5 million (before fees) at £1.65.
During 2023 the Company
issued:
· 800,000 new ordinary shares on 18 October 2023 at £1.25 per
share; and,
· 1,739,130 new ordinary shares on 18 December 2023 at £1.15 per
share.
c. Ordinary
share capital and share premium account
|
2023
|
2023
|
2022
|
2022
|
|
Share
capital
|
Share
Premium
|
Share
capital
|
Share
Premium
|
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
1 January
|
617
|
22,553
|
80
|
7,367
|
Issued for cash
|
25
|
2,975
|
52
|
8,448
|
Share issue expenses
|
-
|
(24)
|
-
|
(1,009)
|
Warrants issued
|
-
|
-
|
-
|
(18)
|
Issued for purchase of
Vertigrow
|
-
|
-
|
433
|
-
|
Issued to redeem Convertible Loan
Notes
|
-
|
-
|
52
|
7,765
|
31 December
|
642
|
25,504
|
617
|
22,553
|
d. Merger
relief and Reverse acquisition relief reserves
|
2023
|
2023
|
2022
|
2022
|
|
Merger relief
reserve
|
Reverse acquisition
reserve
|
Merger relief
reserve
|
Reverse acquisition
reserve
|
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
1 January (i)
|
65,082
|
(59,200)
|
-
|
(5,835)
|
PLC net assets at acq'n date
(ii)
|
-
|
-
|
-
|
5,751
|
Issued for purchase of Vertigrow
Technology Limited (iii)
|
-
|
-
|
65,082
|
(65,516)
|
Share based payment charge
(iv)
|
-
|
-
|
-
|
6,400
|
31 December
|
65,082
|
(59,200)
|
65,082
|
(59,200)
|
Reverse Acquisition
Reserve
The reserve, arising on
consolidation only, includes:
(i)
the accumulated losses incurred prior to the reverse acquisition
and the share capital and share premium of Summerway Capital Plc
(renamed Celadon Pharmaceuticals Plc) at acquisition;
(ii)
the value of the shares issued to acquire all of the share capital
of Vertigrow Technology Limited;
(iii)
the value of share capital and share premium of Celadon plc at
acquisition;
(iv) the
reverse acquisition share-based payment expense.
Merger Relief
Reserve
Is a statutory, non-distributable
reserve arising when conditions set out in section 612 of the
Companies Act occur and relate to the share-premium from shares
issued to acquire Celadon Property Co Limited.
e. Warrant
reserve and capital redemption reserve
|
2023
|
2023
|
2022
|
2022
|
|
Warrant
reserve
|
Capital Redemption
reserve
|
Warrant
reserve
|
Capital Redemption
reserve
|
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
1 January
|
471
|
49
|
-
|
49
|
Fair value charge for warrants
issued
|
146
|
-
|
471
|
-
|
31 December
|
617
|
49
|
471
|
49
|
Capital Redemption
Reserve
This is a statutory,
non-distributable reserve into which amounts are transferred
following the redemption or purchase of a Company's own
shares.
The Company was incorporated on 31
August 2018 with 50,000 Ordinary Shares of £1.
On 12 October 2018, those shares
underwent a sub-division to create 50,000 Ordinary Shares of £0.01
and 50,000 Ordinary Shares of £0.99, and the £0.99 Ordinary Shares
were re-designated as Deferred Shares.
On 19 October 2018, 6,080,000
Ordinary Shares of £0.01 were issued and the 50,000 Deferred Shares
of £0.99 were cancelled.
Warrant
Reserve
This reserve represents the fair
value charge of warrants issued pursuant to equity-based payments
in the form of warrants. The charge of £146k (2022: £226k) in
respect of warrants issued to an advisor in March 2022 and £Nil
(£2022: £245k) represents the fair value of warrants issued to the
Company's NOMAD Canaccord Genuity Limited for the 2022 IPO listing
work.
29. Non-Controlling
Interests
The Group has non-controlling
interests from:
a.
the minority 42.5% holding in Harley Street (CPC)
Limited attributable to the minority shareholder for the period
until 31 May 2023 when this was acquired by Celadon Property Co
Limited; and
b.
the amounts subscribed for the B Ordinary Shares
of Celadon Subco Limited pursuant to the Group's long term
incentive plan.
Harley Street (CPC) Limited
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
NCI percentage
|
0%
|
42.5%
|
Non-current assets
|
-
|
21
|
Current assets
|
-
|
33
|
Current liabilities
|
-
|
(1,610)
|
Non-current liabilities
|
-
|
-
|
Net
assets (liabilities)
|
-
|
(1,556)
|
Net assets (liabilities) attributed
to NCI
|
-
|
(661)
|
Revenue
|
8
|
24
|
Operating loss
|
(277)
|
(920)
|
Net
loss
|
(288)
|
(953)
|
Net loss attributable to
NCI
|
(122)
|
(405)
|
Cash flow from operating
activities
|
|
(78)
|
Cash flow from investment
activities
|
|
(2)
|
Cash flows from financing
activities
|
|
(1,541)
|
Net increase (decrease) in cash and
cash equivalents
|
|
(1,621)
|
Celadon Subco Limited
In the year ended 31 December 2022,
there were subscriptions for B Ordinary Shares totalling £23,300
(2021: £nil). The B Ordinary Shareholders have no entitlement
to vote or any interest in the profits of Celadon Subco
Limited. The B Ordinary Shares of Celadon Subco Limited have
been issued as part of the Subsidiary Incentive Scheme (see note
30). The Subsidiary Incentive Scheme includes certain
performance criteria with respect to the market capitalisation of
the Group. As these performance criteria have not currently
been met the Non-Controlling Interest arising from the B Ordinary
Shares has been valued at the cost to repurchase the B Ordinary
Shares.
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
Non Controlling Interest
|
23
|
23
|
|
|
|
30. Long Term Incentive
Plans
Subsidiary Incentive
Scheme
On 17 September 2018, the Company
established its Subsidiary Incentive Scheme (using the B Ordinary
Shares of Celadon Subco Limited) in order to incentivise and retain
certain key employees and directors of, and advisers to, the
Company. On 11 April 2022, the Company amended its Subsidiary
Incentive Scheme following the acquisition of Celadon Property Co
Limited and a number of directorate and personnel changes to the
enlarged Group.
Under the terms of the Subsidiary
Incentive Scheme, participants are entitled to subscribe for
Subsidiary B Shares. Subsidiary B Shares provide the holder with a
right to participate in any Shareholder value that is created over
a predetermined level and over a three- to five-year period (or
upon a change of control of the Company or the Subsidiary,
whichever occurs first). This is calculated on a formula basis by
reference to the growth in market capitalisation of the Company,
following adjustments for the issue of any new Ordinary Shares and
taking into account dividends and capital returns ("Shareholder
Value").
On 11 April 2022, the Subsidiary
Incentive Scheme was amended to create three classes of Subsidiary
B Shares in issue under the Subsidiary Incentive Scheme:
§ The
400,000 Subsidiary B Shares held by participants under the current
Subsidiary Incentive Scheme (which commenced on 15 January 2021)
were converted into B1 Shares. These B1 Shares will participate in
up to 4 per cent of Shareholder Value created above a current
threshold of £96,305,000 ("B1 Initial Value"), being the initial
market cap of the Company, plus the amount of funds raised on 15
January 2021, plus the total subscription value of the
Consideration Shares and the Placing Shares. The B1 Shares will
only participate in that Shareholder Value, however, if the
individual elements of the B1 Initial Value grow at an annual rate
of 7.5 per cent (compounded), measured over a period of three to
five years commencing on 15 January 2021.
§ 650,000 B2 Shares were issued to advisers of Celadon. These B2
Shares will participate in up to 6.5 per cent of Shareholder Value
created above a current threshold of £81,755,125 ("B2 Initial
Value"), being the pre-Acquisition value of the Company plus a
discounted value of the Celadon Group (to reflect pre-agreed
incentive arrangements and the advisers' contribute to date) plus
the total subscription value of the Placing Shares. The B2 Shares
will only participate in that Shareholder Value, however, if the
individual elements of the B2 Initial Value grow at an annual rate
of 17.5 per cent (compounded), measured over a period of three to
five years commencing on 28 March 2022.
§ 600,000 B3 Shares were issued to selected management of
Celadon, subject to a Call Option allowing the B3 Shares to be
repurchased by the Company for the shares' nominal value in certain
circumstances. The number of B3 Shares subject to the Call
Option is reduced in three equal instalments on the first, second
and third anniversaries of the acquisition of Celadon. These B3
Shares will participate in up to 6 per cent of Shareholder Value
created above a current threshold of £101,755,125 ("B3 Initial
Value"), being the pre-Acquisition value of the Company plus the
total subscription value of the Consideration Shares and the
Placing Shares. The B3 Shares will only participate in that
Shareholder Value, however, if the individual elements of the B3
Initial Value grow at an annual rate of 17.5 per cent (compounded),
measured over a period of three to five years commencing on 28
March 2022.
The current Subsidiary Incentive
Scheme participants and their respective holdings of B Share
holdings are noted below.
Name
|
B1
|
B2
|
B3
|
Total
|
|
|
|
|
|
Alexander Anton
(Chairman)
|
75,000
|
166,666
|
-
|
241,666
|
Benjamin Shaw (former
Director)
|
75,000
|
166,667
|
-
|
241,667
|
Mark Farmiloe (former
Director)
|
75,000
|
166,667
|
-
|
241,667
|
Tony Morris (former
Director)
|
125,000
|
-
|
-
|
125,000
|
Paul Gibson (former
Director)
|
50,000
|
-
|
-
|
50,000
|
James Short (Chief Executive
Officer)
|
-
|
-
|
200,000
|
200,000
|
Katie Long (former Chief Financial
Officer)
|
-
|
150,000
|
-
|
150,000
|
|
|
|
|
|
Issued to other employees /
consultants
|
-
|
-
|
400,000
|
400,000
|
|
|
|
|
|
Total
|
400,000
|
650,000
|
600,000
|
1,650,000
|
A summary of the B Shares are as
follows:
Tranche
|
B1
|
B2
|
B3
|
Shares in issue
|
400,000
|
650,000
|
600,000
|
Subscription price
|
1.4p
|
1.44p
|
1.39p
|
Compound Growth
|
7.5%
pa
|
17.5%
pa
|
17.5%
pa
|
Exercise period
|
15
January 2024 to
15 January 2026
|
29 March
2025 to
29 March 2027
|
29 March
2025 to
29 March 2027
|
The B Shares are financial
instruments and have been fair valued using a Monte Carlo
simulation with inputs of:
Tranche
|
B1
|
B2
|
B3
|
Risk free rate
|
1.99%
|
1.89%
|
1.89%
|
Volatility
|
33.0%
|
33.0%
|
33.0%
|
Dividend yield
|
0%
|
0%
|
0%
|
Market cap at measurement
|
£58.9
million
|
£58.9
million
|
£58.9
million
|
Volatility was estimated using the
Celadon Pharmaceutical Plc share prices. Due to the limited share
price history of the Company, volatility has been assessed against
an international peer group of comparative entities. An annualised
volatility range of 33% - 127% was developed within the peer group.
Management estimated a volatility of 33%, reflecting the low
volatility of the Celadon Pharmaceuticals Plc share price data post
the reverse acquisition transaction.
The Long-Term Incentive Plan charge
in the income statement for the year ended 31 December 2023 was
£121k (2022: £910k) in respect of the Subsidiary Incentive
Scheme.
Long Term Incentive
Plan
A separate Long Term Incentive Plan
was agreed at the time of Celadon's listing. This allows the
company to issue key personnel with share options. The first
awards of such options were made in January and February
2023. In total, five awards were made to different
individuals, each award was made with performance conditions based
on satisfaction of either personal objectives or in line with the
performance required for the B3 Subsidiary Incentive Scheme to
vest. The total amount charged in the income statement for
the year ended 31 December 2023 was £242k (2022: -).
Advisor
Warrants
In March 2022, warrants were issued
to one of the Company's advisors over 262,626 ordinary shares, to
be issued in equal instalments in March 2023 and March 2024 as
consideration for provision of services over that period.
These warrants are to be issued at the nominal value of £0.01 per
share. The fair value of this award was calculated as
£226k.
31. Related Party
Transactions
Tessera Investment Management Limited
("Tessera")
Tony Morris (a former Director of
Celadon Pharmaceuticals Plc), and Katie Long (the former Chief
Financial Officer of Celadon Pharmaceuticals Plc) are the directors
and shareholders of Tessera.
On 15 January 2021, Summerway
Capital Plc entered into an agreement with Tessera pursuant to
which Tessera agreed to provide strategic and general corporate
advice, and M&A and capital raising transaction support
services.
Tessera charged £12,500 per month
(plus VAT) payable monthly in arrears from the date of the
agreement. The agreement terminated on readmission of the Group to
AIM on 28 March 2022. In the year ended 31 December 2022,
£235,236 of fees were charged to the Company (2021:
£165,000). At 31 December 2022 £50,763 was unpaid (2021:
£nil). This agreement was terminated on 28 March
2022.
On 3 March 2021, Vertigrow
Technology Limited entered into an agreement with Tessera pursuant
to which Tessera agreed to provide strategic and general corporate
advice, and M&A and capital raising transaction support
services. Under the agreement, Tessera was to participate in
the Celadon Subco Limited share incentive scheme to be implemented
in the region of 1.5 per cent of additional shareholder value
created through such scheme, by way of an allocation to Katie Long
on her appointment as CFO.
This entitlement was replaced by
Katie Long's participation in the Subsidiary Incentive Scheme (note
30) at re-admission on comparable terms.
In the year ended 31 December 2023,
£97,890 (2022: £54,783) of advisory fees were charged to the
Company. At 31 December 2023 £nil was unpaid (2022:
£nil).
Subsidiary Incentive Scheme
On the 11 April 2022, and pursuant
to the amended Subsidiary Incentive Scheme detailed in note 30, a
number of new B Shares were issued to former and current Directors
of the Company at subscription prices ranging from £0.0139 to £0.0144 per B Share. The current
allocation of B shares in issue to former and current Directors of
the Company are set out below.
Name
|
Previous B Shares
held
|
Agreed
buybacks
|
New B Shares issued pursuant
to amended Scheme
|
Current B Shares
held
|
|
|
|
|
|
Alexander Anton (Chairman)
|
75,000
|
-
|
166,666
|
241,666
|
Benjamin Shaw (former
Director)
|
75,000
|
-
|
166,667
|
241,667
|
Mark Farmiloe (former
Director)
|
75,000
|
-
|
166,667
|
241,667
|
Tony Morris (former
Director)
|
175,000
|
(50,000)
|
-
|
125,000
|
Vin Murria (former
Director)
|
1,000,000
|
(1,000,000)
|
-
|
-
|
Paul Gibson (former
Director)
|
50,000
|
-
|
-
|
50,000
|
James Short (Chief Executive
Officer)
|
-
|
-
|
200,000
|
200,000
|
Katie Long (former Chief Financial
Officer)
|
-
|
-
|
150,000
|
150,000
|
|
|
|
|
|
Issued to other employees /
advisors
|
-
|
-
|
400,000
|
400,000
|
|
|
|
|
|
Total
|
1,450,000
|
(1,050,000)
|
1,250,000
|
1,650,000
|
Shortly after the issuance of the
new B Shares detailed above, in accordance with the terms of the
resignation letters of Vin Murria and Tony
Morris, all of Vin Murria's B Shares and 50,000 of Tony Morris' B
Shares were bought back from the Subsidiary on 11 April 2022 at
their original subscription cost of £14,000 and £700
respectively.
Market purchases
On 10 March 2022, Alexander Anton
acquired 10,000 ordinary shares of Celadon Pharmaceuticals Plc as
part of a secondary market transaction, which was announced on 10
March 2022. Following this and 209,569 ordinary shares
held indirectly as a result of the share
consideration paid by the Celadon Pharmaceuticals Plc to the
shareholders of Celadon Property Co
Limited, Alexander Anton's shareholding in
the Company increased to 1,319,569
ordinary shares, representing 2.1 per cent of the
Company's share capital.
32. Commitments and
Contingencies
Commitments
At 31 December 2023 the Group had
committed capital expenditure amounts of £nil (2022:
£nil).
33. Subsequent
events
On 8 March 2024, the Group disposed
of its investment in Harley Street (CPC) Limited for a
consideration of £500,000 payable over three years. At the
time of the disposal, the only activity conducted by Harley Street
(CPC) Limited was the operation of a CQC registered clinic.
The assets relating to the CANPAIN Trial had been transferred to
Celadon Property Co Limited during 2023.
On 11 April 2024, the Group
extended the maturity date of its £7.0 m Revolving Credit Facility
to 30 November 2025.
On 10 May 2024, the Group raised
£2.1m of additional equity, through the issuance of 2,000,000
ordinary shares of 1p each at a subscription price of £1.05 per
share.