Final Results

Celadon Pharmaceuticals PLC

14 May 2024

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.

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Celadon Pharmaceuticals (CEL)

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