NOTES TO THE INTERIM RESULTS

For the six-months ended 30 June 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 (called Summerway Capital Plc until 25 March 2022) is a public limited company incorporated in England and Wales and domiciled in the United Kingdom (company number: 11545912). It is a public company listed on the AIM market of the London Stock Exchange. The registered address is 32-33 Cowcross Street, London, EC1M 6DF.

On 28 March 2022, the Company completed the acquisition of Vertigrow Technology Limited (and its subsidiaries Celadon Pharma Limited and Harley Street (CPC) Limited) and the settlement of the Vertigrow Technology Limited convertible loan notes via an issuance of new shares.  Vertigrow Technology Limited was renamed Celadon Property Co Limited on 3 January 2023 - the company's new name will be used in the following.  Further details on this transaction and the subsequent Group structure is included at note 5.

2.            Basis of preparation

These interim Condensed Consolidated Financial Statements and accompanying notes have neither been audited nor reviewed by the auditor, do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and do not include all the information and disclosures required in annual statutory financial statements. They should be read in conjunction with the Group's Annual Report and Accounts for the year ended 31 December 2022 which are available on the Group's website. Those statutory accounts were approved by the Board of Directors on 2 June 2023 and have been filed with Companies House. The report of the auditors in those accounts was unqualified and also did not contain a statement under section 498(2) or (3) of the Act.

The interim financial information has been prepared under the historical cost convention except for certain items that are shown at fair value as disclosed in the accounting policies.

The financial statements are presented in Sterling which is the functional currency of the group and all values are rounded to the nearest Pound Sterling Thousand (£000s).

The accounting policies applied by the Group in these interim condensed consolidated financial statements are the same as those applied by the Group in the audited consolidated financial statements for the year ended 31 December 2022 and those which will form the basis of the 2023 Annual Report.

These interim Condensed Consolidated Financial Statements were approved by the Board of Directors on 27 September 2023.

a.            Basis of consolidation

The interim condensed 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 interim condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will continue in operational existence for the foreseeable future. 

The Group currently consumes cash resources and will continue to do so as it completes the construction of its growing facilities and until sales revenues are sufficiently high enough to generate net cash inflows.

In assessing whether the going concern assumption is appropriate, the Directors have taken into account all relevant information about the current and future position of the Group and including the current level of resources. 

At 30 June 2023 the Group had £1.6 million of cash and net assets of £3.0 million.  In addition on 29 May 2023, the Group entered into a 2 year £7.0 million Revolving Credit Facility to provide additional liquidity for operating and capital expenditure.

Taking these matters into consideration, the Directors consider that the continued adoption of the going concern basis is appropriate having prepared cash flow forecasts for the coming 12 months. The financial statements do not reflect any adjustments that would be required if they were to be prepared on a non going concern basis.

3. Accounting policies

 Details of significant accounting policies are set out below.

a.            Reverse Acquisition of Summerway Capital Plc and creation of the Celadon Pharmaceuticals Plc group of companies

On 28 March 2022 the Company, then named Summerway Capital Plc, became the legal parent of Celadon Property Co Limited.

Summerway Capital Plc was renamed Celadon Pharmaceuticals Plc.

The results for the six months ended, and as at 30 June 2023 are those of the Celadon Pharmaceuticals Plc group. The comparative results for the six months ended 30 June 2022 represent the consolidated position of the Celadon Property Co Limited group of companies prior to the reverse acquisition with the inclusion of the Celadon Pharmaceuticals Plc group from the acquisition date of 28 March 2022 through to 30 June 2022.  The position as at 30 June 2022 represents the consolidated position of the Celadon Pharmaceuticals Plc group.

This transaction was deemed outside the scope of IFRS 3 Business Combinations (Revised 2008) ("IFRS 3") and not considered a business combination because the directors 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 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 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 £500k was paid in cash and £1,500k 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 £1,500k contingent consideration payment was estimated to have an acquisition date fair value of £375k 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 £375k 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 £661k was made to the retained reserves to release the non-controlling interest share of the accumulated losses.

c.             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 IAS 17: Insurance Contracts (effective 1 January 2023)

·    Amendments to IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 1 January 2023)

·    Amendments to IAS 12: Income Taxes (effective 1 January 2023)

·    Amendments to IAS 1: Presentation of Financial Statements (effective 1 January 2023)

The Company has considered the IFRS's in issue but not yet effective and do not consider any to have a material impact on the Company.

4. Use of critical judgements and key accounting estimates

In preparing the financial 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.            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.

Key Accounting Estimates

b.            Research & Development Tax Credits

The Group has submitted its first R&D tax credit application to HMRC totalling £269k relating to 2021 activities.  Elements of the R&D claims required judgement by management.  At the date of these financial statements £269k had been received by the company in respect of the year to 31 December 2021.  Using the same methodology, the estimated R&D claim for the year to 31 December 2022 is £412k. 

5. Reverse Acquisition of Vertigrow Technology Group

On 28 March 2022, Celadon Pharmaceuticals Plc (previously Summerway Capital Plc) acquired through a share-for-share exchange, the entire share capital of Celadon Property Co Limited and its subsidiary companies Celadon Pharma Limited and Harley Street (CPC) Limited (together the "Celadon Group"), whose principal activity is growing highly controlled indoor hydroponic, high THC cannabis for use within medicinal products used to treat chronic pain.

Although the transaction resulted in the Celadon Group becoming a wholly-owned subsidiary group of the Company, the substance of the transaction means it constitutes a reverse acquisition, as the previous shareholders of Celadon Property Co Limited own a substantial majority of the Ordinary Shares of the Company and the executive management of Celadon Property Co Limited became the executive management of Celadon Pharmaceuticals Plc.

Furthermore, as Celadon Pharmaceuticals plc's activities prior to the acquisition were purely the maintenance of the AIM Listing, acquiring Celadon Property Co Limited and raising equity finance to provide the required funding for the operations of the acquisition, it did not meet the definition of a business in accordance with IFRS 3.

Accordingly, this reverse acquisition does not constitute a business combination and was accounted for in accordance with IFRS 2 Share-based Payments ("IFRS 2") and associated IFRIC guidance.

Although, the reverse acquisition is not a business combination, the Company has become a legal parent and is required to apply IFRS 10 Consolidated Financial Statements ("IFRS 10") and prepare consolidated financial statements with Caledon Pharmaceuticals Plc consolidated as a subsidiary.  The Directors have prepared this interim financial information 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, this consolidated interim financial information represents 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:

The difference between the deemed cost £12,151k and the fair value of the net assets assumed per above of £5,751k resulted in £6,400k being expensed within "Reverse Acquisition Expenses" in accordance with IFRS 2, reflecting the economic cost to the shareholders of Celadon Property Co Limited of acquiring a quoted entity.

The professional fees in the six months ended 30 June 2022 relating to the reverse acquisition of Vertigrow Technology Limited in the period were £2,493k (year ended 31 December 2022: £2,493k), of which £1,027k (year ended 31 December 2022: £1,027k) was charged to the share premium account, and £1,465k (year ended 31 December 2022: £1,465k) was expensed in the consolidated statement of comprehensive income. 

The Transaction Related Costs in the six months ended 30 June 2023 of £556k relate to the costs incurred in the acquisition of the shares of Harley Street (CPC) Limited that were not already owned, and the post period disposal of that entity, and further costs in related to an aborted transaction.

6. Revenue

The Group recorded revenue in the 6 months ended 30 June 2023 of £8k (6 months ended 30 June 2022: £11k; year ended 31 December 2022: £24k) from patients on the Group's clinical study in Harley Street (CPC) Limited.

7. Net finance costs

8. Loss per share

Basic loss per ordinary share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

9. Acquisitions - Harley Street (CPC) Limited

On 14 July 2021, Vertigrow 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 £2,000,000.

£500,000 was paid in cash on completion with a contingent consideration payment of £1,500,000 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.

The £1,500,000 contingent consideration payment was estimated to have an acquisition date fair value of £374,768 based upon 6.2% discount rate and management's probability estimate of the payment criteria being satisfied.

The Directors completed the assessment of the fair value of net assets acquired in the 31 December 2022 reporting, and therefore the above figures were amended as follows:

At 30 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 back to consolidated statement of comprehensive income.

On 31 May 2023, Celadon Property Co Limited acquired the remaining 42.5% shareholding for £1. An adjustment of £661k was made to the retained reserves to release the non-controlling interest share of the accumulated losses.

10. Investments

In 2021 Vertigrow Technology Ltd invested £200,000 in Kingdom Therapeutics Limited (a 17% holding) and acquired an additional holding for £18,000 in May 2022. At 30 June 2023 Vertigrow Technology Limited has a 19% shareholding in Kingdom Therapeutics Limited.

11. Loans and borrowings

1-    Celadon Pharma Limited has a 6 year £50,000 Bounce Back Loan with Barclays Bank plc with interest fixed at 2.5% pa.

12. Long Term Incentive Plans

The Group operates two different long term incentive plans, the Subsidiary B-Share LTIP Incentive Scheme and the Long Term Incentive Plan.  Both plans were adopted at the time of the Company's readmission to AIM in March 2022, though until January 2023 awards had only been made under the Subsidiary B-Share LTIP Incentive Scheme.  No further awards have been made in 2023, but the first awards under the Company's LTIP Scheme were made in January and February 2023.

Subsidiary B-Shares LTIP Incentive Scheme

On 28 March 2022, the Company amended its Subsidiary Incentive Scheme in order to incentivise and retain certain key employees and directors of, and advisers to, the Company.

Under the terms of the Subsidiary Incentive Scheme, the principles will remain in line with the Company's existing scheme such that participants are entitled to subscribe for Subsidiary B Shares. Subsidiary B Shares provide the holder with a right to participate in any Shareholder value that is created over a predetermined level and over a three- to five-year period (or upon a change of control of the Company or the Subsidiary, whichever occurs first). This is calculated on a formula basis by reference to the growth in market capitalisation of the Company, following adjustments for the issue of any new Ordinary Shares and taking into account dividends and capital returns ("Shareholder Value"), and realised by participants through the exercising of a put option in respect of their Subsidiary B Shares and satisfied either in cash or by the issue of new Ordinary Shares at the election of the Company.

On 28 March 2022, the Subsidiary Incentive Scheme was amended to create three classes of Subsidiary B Shares in issue under the Subsidiary Incentive Scheme:

The 400,000 Subsidiary B Shares held by participants under the current Subsidiary Incentive Scheme (which commenced on 15 January 2021) were converted into B1 Shares. These B1 Shares will participate in up to 4 per cent. of Shareholder Value created above a current threshold of £96,305,000 ("B1 Initial Value"), being the initial market cap of the Company, plus the amount of funds raised on 15 January 2021, plus the total subscription value of the Consideration Shares and the Placing Shares. The B1 Shares will only participate in that Shareholder Value, however, if the individual elements of the B1 Initial Value grow at an annual rate of 7.5 per cent. (compounded), measured over a period of three to five years commencing on 15 January 2021.

650,000 B2 Shares were issued to advisers of Celadon. These B2 Shares will participate in up to 6.5 per cent. of Shareholder Value created above a current threshold of £81,755,125 ("B2 Initial Value"), being the pre-Acquisition value of the Company plus a discounted value of the Celadon Group (to reflect pre-agreed incentive arrangements and the advisers' contribute to date) plus the total subscription value of the Placing Shares. The B2 Shares will only participate in that Shareholder Value, however, if the individual elements of the B2 Initial Value grow at an annual rate of 17.5 per cent. (compounded), measured over a period of three to five years commencing on 28 March 2022.

600,000 B3 Shares were issued to selected management of Celadon. These B3 Shares will participate in up to 6 per cent. of Shareholder Value created above a current threshold of £101,755,125 ("B3 Initial Value"), being the pre-Acquisition value of the Company plus the total subscription value of the Consideration Shares and the Placing Shares. The B3 Shares will only participate in that Shareholder Value, however, if the individual elements of the B3 Initial Value grow at an annual rate of 17.5 per cent. (compounded), measured over a period of three to five years commencing on 28 March 2022.

Overall, therefore, the maximum dilution from the Subsidiary Incentive Plan could be 16.5 per cent. of the Shareholder Value generated above the specified threshold amounts (and this is contingent on achieving the specified annual growth rates) across each individual class of Subsidiary B Share.  A summary of the changes made to the Subsidiary Incentive Scheme are set out in the following table.

If a participant ceases to be employed or engaged by the Company for a 'bad leaver' reason (fraud or gross negligence), the Company Subsidiary will have the right to buy-back their Subsidiary B Shares for a price equal to the original subscription price paid by the participant. In relation to the new awards of B3 Shares to selected members of the Celadon management team, the Subsidiary B Shares will also be subject to time-based annual vesting over 3 years. If a participant ceases to be employed by the Company (not as a 'bad leaver') then the Company will also have the right to buy-back their unvested Subsidiary B Shares for a price equal to the original subscription price paid by the participant.

The charge to the income statement in the six months ended 30 June 2023 in respect of the Subsidiary B-Share Incentive Scheme was £76k (six months ended 30 June 2022: £768k). 

Long Term Incentive Plan

Under the terms of the Long Term Incentive Plan, the Company is permitted to award share options to employees and advisors.  These option awards provide the holder with a right to acquire Ordinary Shares of the Company in exchange for a payment of the nominal value of the shares.  This right is exercisable subject to the satisfaction of either personal or Company Performance Conditions.  In January and February 2023, five awards were made; one to an advisor to the Company with the remaining four awards being made to a director and employees.

The vesting periods for the Long Term Incentive Plan awards varied from awards that immediately vested due to the satisfaction of Performance Conditions prior to the option award being made, to three years from the date of the award.  In the case of the award to a director, there is a requirement to hold the shares for a further two years after vesting.

The charge to the income statement in the period in respect of the Long Term Incentive Plan was £248k (2022: nil)

13. Related Party Transactions

Dr. Steve Hajioff

Dr. Steve Hajioff provided consultancy services to Harley Street (CPC) Limited prior to the Vertigrow's acquisition of its interest in that company.

Vertigrow Technology Ltd entered a consulting agreement with Dr. Steve Hajioff from 1 June 2021, which terminated on 28 March 2022 when he was appointed to the Board of Celadon Pharmaceuticals Plc. In the period ended 30 June 2023 no consulting fees were charged (2022: £8,000). At 30 June 2023, £nil was unpaid (30 June 2022: £nil).

Kingdom Therapeutics Limited ("Kingdom")

Liz Shanahan is a Director and shareholder of Kingdom, and has been a Director of Celadon Pharmaceuticals Plc since September 2021.

On 7 June 2021, Vertigrow Technology Ltd subscribed for a 17% shareholding in Kingdom for £200,000.

On 5 May 2022 Vertigrow Technology Ltd purchased an additional 2.5% shareholding in Kingdom from a selling shareholder for £18,000.

Related Party Loan (between Summerway Capital Plc and Vertigrow Technology Ltd)

In October 2021 Summerway Capital Plc provided Vertigrow Technology Ltd with a secured short term working capital loan with 10% interest pa. At 31 December 2021 and 28 March 2022, £2,125,000 had been drawn down. Interest of £53,125 was incurred by Vertigrow Technology Ltd in the period from 31 December 2021 up to 28 March 2022. After 28 March 2022 the loan interest and balance have been eliminated on consolidation.

AFS Advisors LLP

AFS Advisors LLP is an entity indirectly and directly owned by Alexander Anton (Chairman of the Company) and Benjamin Shaw (a Director of the Company until 28 March 2022).

On 1 February 2021, Vertigrow Technology Ltd entered into an agreement with AFS Advisors LLP for the provision of strategic and general corporate advice, including IPO services. Under the terms of the agreement with Vertigrow Technology Ltd, AFS Advisors LLP were entitled to 5 per cent. of shareholder value created over certain market capitalisation thresholds. Pursuant to the agreement, this entitlement was replaced by AFS Advisors LLP's participation in the Company's Subsidiary Incentive Scheme as described further in note 12.

On 14 January 2022, AFS Advisors LLP and Vertigrow Technology Ltd entered into an agreement under which AFS Advisors LLP would be entitled to receive an initial contingent transaction success fee of £350,000 on Admission for corporate finance and strategic advisory services provided as part of the transaction. Furthermore, under the terms of the agreement, Vertigrow Technology Ltd may at its election, award AFS Advisors LLP a discretionary fee of a further £580,000 within 12 months of Admission, which if paid, would equate to a total success fee of 1 per cent. of the pre-money value of the Enlarged Group.  No discretionary payment has been made.

In the six months ended 30 June 2023 £nil was charged to the Company (2022: £350k).  At 30 June 2023 £nil was unpaid (30 June 2022: £nil).

Tessera Investment Management Limited ("Tessera")

Tony Morris (a former Director of Summerway Capital 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.  The agreement was subsequently varied on 15 August 2022 and 23 March 2023, with initially a lower retainer of £5,000 (plus VAT) with additional fees chargeable for work outside the scope of the agreement, then a capped fee of £10,000 (plus VAT).

On 3 March 2021, Vertigrow Technology Ltd entered into an agreement with Tessera pursuant to which Tessera has 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 Vertigrow Technology Ltd 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 15) at re-admission on comparable terms. In the six months ended 30 June 2022, £54,783 of advisory fees were charged to the Company (six months ended 30 June 2021: £60,000; year ended 31 December 2021: £150,000). At 30 June 2022 £nil was unpaid (30 June 2021: £nil; at 31 December 2021: £nil). This agreement was terminated on 28 March 2022.

In the six months ended 30 June 2023, £63k (2022: £55k) of fees were charged to the Company. At 30 June 2023 £6k was unpaid (30 June 2022: £nil).

14. Subsequent Events

On 1 August 2023, the Research Ethics Committee ("REC") of the Medicines and Healthcare products Regulatory Agency ("MHRA") approved the roll-out of the Group's non-cancer chronic pain clinical trial for up to 5,000 patients.  The Group conducted a feasibility study to demonstrate its ability to onboard patients during the latter half of 2022 and submitted its results to REC on 30 December 2022.  The Group is able to use the data generated from the feasibility study as part of its data set from the clinical trial.  The Group is working with its partners to finalise the plan for the optimal and timely roll-out of the trial.

On 5 September 2023, the Group announced its second sales contract, to provide the commercial sale of its cannabis product to a UK pharmaceuticals company, that the Group anticipates could generate up to £1.2 million in revenue over three years, with the option to extend the contract for a further two years.