COMPANY REGISTRATION NUMBER CV PHARMA LIMITED CONSOLIDATED ACCOUNTS AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED

Transcription

1 COMPANY REGISTRATION NUMBER CV PHARMA LIMITED CONSOLIDATED ACCOUNTS AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30th JUNE 2018

2 CONSOLIDATED ACCOUNTS AND FINANCIAL STATEMENTS CONTENTS PAGES Officers and professional advisers 1 Director s report 2 to 4 Profit and loss account 5 Note of historical cost profits and losses 6 Group balance sheet 7 Balance sheet 8 Group cash flow statement 9 Notes to the financial statements 10 to 18 Detailed profit and loss account 19

3 OFFICERS AND PROFESSIONAL ADVISERS The board of directors Roger Wood Company secretary Registered office Medical & Scientific Advisers Bankers Lawyers Patent Attorneys Roger Wood High Leybourne Hascombe Road Godalming Surrey GU8 4AD UK link to HSBC Bank PLC Michelmores LLP Withers & Green LLP - 1 -

4 DIRECTOR S REPORT The director presents his report and the consolidated accounts and financial statements of the group for the year from 1st July 2017 to 30th June PRINCIPAL ACTIVITIES AND BUSINESS REVIEW The principal activity of the company and the group is the development of a new treatment for cancer in animals known as CV247 and human patients known as CVTherapy and to undertake the necessary procedures of clinical trials, licensing, manufacturing, distribution, and sales. Having safeguarded the company s assets, we have continued to seek ways to maximise shareholder value. Your director and senior management have done this without cash remuneration, taking share options in lieu to ally our interests with those of the shareholders. We have achieved some growth in sales revenue by broadening awareness of our products. However, we are only allowed to market reactively, which is a very restrictive sales method. To proactively market our medicines, we need a Marketing Authorisation from the veterinary and human pharmaceutical regulators. As a first step, we have started full clinical trials with dogs. The anticipated demand for our products is expected to create sales revenue many times in excess of the cost of the clinical trials. But the clinical trials costs have to be incurred first. These clinical trials with dogs are taking place in Hungary with a leading Veterinary Professor of Medicine at the well-known Veterinary University Hospital in Budapest. The veterinary oncologist has been prescribing CV247 to treat cancer in dogs for many years. Such clinical trials, if successful, are designed to show, inter alia, that our animal cancer treatment, CV247, taken adjunctively with a strong chemotherapy, Cisplatin, acts in such a way that the amount of chemotherapy can be reduced by approximately one-third while maintaining the efficacy of the treatment of various cancers. If such success is achieved, it will be a game-changer in cancer treatment for dogs. And the data and results will lead to an application for a marketing authorisation. We would also wish to start similar clinical trials of our human cancer treatment, CVTherapy, acting adjunctively with Cisplatin. A leading oncologist who is attached to the principal Oncology University Hospital in Budapest will conduct these clinical trials. He carried out a study with rats in 2014 and concluded that the amount of chemotherapy can be reduced by approximately one-third while maintaining the efficacy of the treatment for cancer. Our over the counter Veterinary Substance with Therapeutic Effect in Hungary (EU member) and Romania for CV247 allows it to be freely bought without prescription in Hungary and Romania. However, pan European marketing is not allowed. As an alternative to a full Marketing Authorisation, we are considering applications for Minor Species Minor Uses (MUMS) and/or a Limited Marketing Authorisation (LMA) in the UK, EU and the USA. The object of these applications is so that the Company can proactively market its products as soon as possible. Our focus for growth in sales is on an international basis with distribution throughout the UK, the EU, the USA and other major economies through licensing arrangements. As already explained to shareholders in a circular dated 1 August 2018, and is more fully described in an Information Memorandum to be circulated to shareholders, the director proposes that the Company acquires a similar sized veterinary pharmaceutical company, OncoBioTek SAS. This acquisition is conditional upon our successfully raising new equity of up to 4.0million in cash by the issue of new shares in the Company in a Private Placing. Existing shareholders are being offered the opportunity to participate in this Private Placing alongside new investors. OncoBioTek owns the rights to convert fully authorised human cancer treatments into veterinary treatments. The new funds would be used to carry out the necessary clinical trials which both companies require to create Marketing Authorisations for a substantial expansion in international sales of our cancer treatments in animals. Further circulars will be sent to shareholders describing in detail the commercial rationale and the benefits of this merger and fundraising

5 DIRECTOR S REPORT Once again, we encourage shareholders and other participants in the Pharma world who wish to access summaries of CV247 clinical trials, studies, testimonials and videos, current and in previous years, to contact the Company for access to a password-protected website as required by UK regulations. These summaries and videos are very informative and demonstrate the exciting opportunities for our products and their treatment. Shareholders and others who wish to obtain the Company s products may do so through the website or ing info@cvpharma.co.uk, or with the telephone number +44 (0) at the Company s UK office. RESULTS AND DIVIDENDS. In the year to 30 June 2018, the Group turnover was 106,000 (2017: 97,000). The Group made a trading profit, before charging Research & Development of 98,000 (2017: 91,000) and a pre-tax loss of 190,000 (2017: loss 584,000). This loss for the year was after charging a substantial cost for Research & Development of 268,000 (2017: 271,000). This sum includes consultants fees of 142,000 (2017: 83,000) to be paid as grants of share options in lieu of cash payments in the year to 30 June As in previous years, this recognises the cost of time spent by consultants who have agreed to be awarded with share options instead of with cash payments. The Company has discretion to settle these fees in cash before the exercise of the share options. More details of the share options are available in Note 18. The director has not recommended a dividend. FINANCIAL INSTRUMENTS Details of the group's financial risk management objectives and policies are included in note 13 to the accounts. DIRECTORS The director who served the company during the period is as follows: Roger Wood POLICY ON THE PAYMENT OF CREDITORS It is the group's normal practice to pay suppliers promptly provided that the suppliers meet their obligations. At the 30 June 2018 creditor days were zero days (2017: zero). DIRECTOR S RESPONSIBILITIES The director is responsible for preparing the Director s Report and the consolidated accounts and financial statements in accordance with applicable law and regulations. Company law requires the director to prepare financial statements for each financial period. Under that law the director has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of - 3 -

6 DIRECTOR S REPORT affairs of the company and the group and of the profit or loss of the group for that period. In preparing these consolidated accounts and financial statements, the director is required to: select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the consolidated accounts and financial statements; prepare the consolidated accounts and financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business. The director is responsible for keeping adequate accounting records that are sufficient to show and explain the group's and company's transactions and disclose with reasonable accuracy at any time the financial position of the group and enable them to ensure that the consolidated accounts and financial statements comply with the Companies Act He is also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Registered office: High Leybourne Hascombe Road Godalming Surrey GU8 4AD Signed on behalf of the director Roger Wood Director Approved by the director on 24 September

7 PROFIT AND LOSS ACCOUNT Notes GROUP TURNOVER Cost of Goods sold (8) (6) TRADING PROFIT Administrative expenses (288) (675) OPERATING LOSS 3 (190) (584) Interest payable and similar charges LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (190) (584) Tax on loss on ordinary activities LOSS FOR THE FINANCIAL PERIOD 7 (190) (584) All of the activities of the group are classed as continuing. The group has no recognised gains or losses other than the results for the period as set out above. The company has taken advantage of section 408 of the Companies Act 2006 not to publish its own Profit and Loss Account

8 NOTE OF HISTORICAL COST PROFITS AND LOSSES Reported loss on ordinary activities before taxation (190) (584) Difference between a historical cost amortisation charge and the actual charge calculated on the revalued amount 1 1 Historical cost loss on ordinary activities before taxation (189) (583) Historical cost loss for the period after taxation (189) (583) - 6 -

9 GROUP BALANCE SHEET 30th JUNE 2018 Notes FIXED ASSETS Intangible assets CURRENT ASSETS Stock Debtors Cash at bank CREDITORS: Amounts falling due within one year 12 (-) (2) NET CURRENT ASSETS/(LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVES Called-up equity share capital Share premium account 16 2,622 2,622 Unissued Shares Share Options granted Revaluation reserve Other reserves Profit and loss account 16 (3,703) (3,596) SHAREHOLDERS' FUNDS For the year ended 30 June 2018 the company was entitled to exemption from audit under s477 of the Companies Act 2006 relating to small companies. The members have not required the company to obtain an audit in accordance with s476 of the Companies Act These accounts were approved by the director and authorised for issue on 24 September 2018 and are signed by: ROGER WOOD - 7 -

10 BALANCE SHEET 30th JUNE 2018 Notes FIXED ASSETS Intangible assets CURRENT ASSETS Stock Debtors Cash at bank CREDITORS: Amounts falling due within one year 12 (-) (2) NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVES Called-up equity share capital Share premium account 16 2,622 2,622 Unissued Shares Share Options granted Other reserves Profit and loss account 16 (3,694) (3,587) SHAREHOLDERS' FUNDS These accounts were approved by the director and authorised for issue on 24 September 2018 and are signed by: ROGER WOOD Company Registration Number:

11 GROUP CASH FLOW STATEMENT Notes NET CASH OUTFLOW FROM OPERATING ACTIVITIES (14) RETURNS ON INVESTMENTS AND SERVICING OF FINANCE CASH OUTFLOW BEFORE FINANCING 37 (14) FINANCING INCREASE/(DECREASE) IN CASH (14) - 9 -

12 NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES Basis of accounting The financial statements have been prepared under the historical cost convention, modified to include the revaluation of intangible fixed assets, and in accordance with the FRS for Smaller Entities effective April Going concern The group is dependent upon the continued support of the director and some shareholders to provide it with short-term funding whilst it establishes its products in the market. The director and some shareholders have expressed their willingness to continue to support the company and hence the financial statements have been prepared on the going concern basis. Basis of consolidation The group financial statements incorporate the financial statements of the company and of its subsidiaries. The profits and losses of subsidiary undertakings are consolidated from the date of acquisition to the date of disposal using the acquisition method of accounting. The parent company's accounting policies are consistently applied throughout the group. Intercompany balances and transactions have been eliminated. Turnover The turnover shown in the profit and loss account represents amounts invoiced during the period, exclusive of Value Added Tax. Turnover is recognised when title to goods passes to the customer. Intangible fixed assets Intangible fixed assets are stated at valuation less amortisation to date. Amortisation is provided on intangible fixed assets at rates calculated to write off the carrying value of the assets over their anticipated useful economic lives. The useful economic life is the period over which the company expects to derive economic benefits from the assets. There are two types of intangible fixed assets: - Licence agreements: various patents of CV247 for different purposes exist in different countries with expiry dates from 2020 to The original cost of these patent applications has been amortised over many years to a net book value of 4,000 as at 30 June 2018 (2017: 6,000). - Research & Development: while considerable research and development has been carried out for many years, the company has stepped up this expenditure significantly in the past two years. Much of this has been focused on the preparation for and the implementation of clinical trials with dogs in Budapest, Hungary, as described in the Director s Report. R&D costs of 539,000 have been invested in these trials in the past two years. As with previous years R&D costs, this expenditure has been written off in the years incurred. Amortisation Amortisation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Licence agreements - As in previous years, the Director has continued to assess the useful economic life of the licence agreements as a further 7 years from 30 June However, a reassessment of the appropriate carrying value of the patents remaining after 2021 will be made at that time

13 NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES (continued) Research & Development - Until the current clinical trials with dogs is completed, the director proposes that the company will continue to write off the R&D expenditure in each year in which it is incurred. When the current clinical trials with dogs is completed, the useful economic life of such expenditure will be reassessed. At that time, such expenditure may be treated as an intangible fixed asset to be amortised over its useful economic life. Stock Stock is stated at cost after deducting write-downs in value. Financial instruments Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. Share based payments The group issues equity-settled share-based payments to certain employees, consultants, and directors, through the group's share option scheme. Equity-settled share-based payments are measured at fair value using the Black-Scholes pricing model at the date of grant and are expensed at that value and at that date. Convertible instruments Convertible instruments are financial instruments issued by the company, which the company, not the holder, has the choice to settle as either equity or debt. The settlement of these is dependent upon future events or future market based vesting conditions outside of the control of the Company. Convertible instruments are accounted for once the future event or market-based conditions have been met. 2. TURNOVER The turnover and loss before tax are attributable to the one principal activity of the group. An analysis of turnover is given below: United Kingdom OPERATING LOSS Operating loss is stated after charging: Directors' remuneration - - Amortisation of intangible assets

14 NOTES TO THE FINANCIAL STATEMENTS 4. PARTICULARS OF EMPLOYEES The average number of staff employed by the group during the financial period amounted to: No No Number of employees and directors INTEREST PAYABLE AND SIMILAR CHARGES Interest payable on bank borrowing TAXATION ON ORDINARY ACTIVITIES Factors affecting current tax charge The tax assessed on the loss on ordinary activities for the period is lower than the standard rate of corporation tax in the UK of 19% ( %). Loss on ordinary activities before taxation (190) (584) Tax credit for Research & Development expenditure = 83 = - Loss on ordinary activities after taxation 107 (584) Loss on ordinary activities by rate of tax (20) (117) Increase in tax losses available for future periods Amortisation of intangible fixed assets not deductible for tax 2 1 Total current tax - - Factors that may affect future tax charges The group has approximately 3.1m of trading losses available to set against future profits of the same trade. 7. LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY The loss before taxation dealt with in the financial statements of the parent company was (190,000) (2017 : (584,000))

15 NOTES TO THE FINANCIAL STATEMENTS 8. INTANGIBLE FIXED ASSETS Group & Company Licence agreements 000 COST At 1 July Disposals At 30 June = AMORTISATION At 1 July Charge for the period 2 On disposals At 30 June = NET BOOK VALUE At 30 June = At 30 June = Intangible fixed assets consist of licence agreements in respect of the company's products, which were gifted to the group by the late John Carter, the Company's founding director, in The licences were valued by the directors in 1999 on the basis of the costs incurred by the late John Carter. The licences were transferred from a subsidiary company to the parent company at net book value. 9. FIXED ASSET INVESTMENTS The company has a 100 per cent interest in the equity share capital of two companies, both of which are dormant: - Ivy Medical Chemicals Development Limited, incorporated in England and Wales. The principal activity of the subsidiary was the development of cancer treatments, but that activity is now conducted by CV Pharma Limited. - Ivy Medical Chemicals Limited (previously CV Pharma Limited), incorporated in England and Wales. 10. STOCK Group Company Stock of CV247 & CVTherapy DEBTORS Group Company Trade debtors VAT recoverable Prepayments and accrued income

16 NOTES TO THE FINANCIAL STATEMENTS 12. CREDITORS: Amounts falling due within one year Group Company Trade creditors Director loan accounts Other creditors Accruals and deferred income VAT payable FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CV Pharma Limited uses financial instruments comprising cash, trade creditors and trade debtors, that arise directly from its operations. The main purpose of these financial instruments is to fund working capital. 14. RELATED PARTY TRANSACTIONS The director considers there to be no single controlling party of the company. The day-to-day management of the company is under the control of the director. No transactions with related parties were undertaken as are required to be disclosed under FRS 8 Related Party Transactions. 15. SHARE CAPITAL Allotted, called up and fully paid: No 000 No 000 Ordinary shares of each 15,590, ,590, New Ordinary shares of each 19,756, ,756, ,347, ,347, Both the Ordinary shares and the New Ordinary shares rank pari-passu in all respects with each other

17 NOTES TO THE FINANCIAL STATEMENTS 16. RESERVES Group Share premium account Unissued Shares Share Options granted Revaluation reserve Share based payments reserve Profit and loss account 000 Balance brought forward 2, (3,596) Loss for the period (107) Share Options granted 145 New equity share capital subscribed Balance carried forward 2, (3,703) Company Share premium account Unissued Shares Share Options granted Share based payments reserve Profit and loss account Balance brought forward 2, (3,596) Loss for the period (107) Share Options granted 145 New equity share capital subscribed Balance carried forward 2, (3,703) 17. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS ======= = Loss for the financial period (107) (584) New equity share capital subscribed - - Premium on new share capital subscribed Transfer to Unissued Shares Transfer to profit and loss account - - Net addition to / (reduction in) shareholders' funds 38 (18) Opening shareholders' funds Closing shareholders' funds

18 NOTES TO THE FINANCIAL STATEMENTS 18. SHARE BASED PAYMENTS The group's share-based payments are all equity settled and include an Employment Management Incentive (EMI) scheme. In accordance with FRS 20 'Share-based payments' the fair value of equity settled share-based payments to employees, consultants, and directors is determined at the date of grant and is expensed on a straightline basis over the vesting period based on the group's estimate of options that will eventually vest. On 27th February 2007 the group set up an EMI scheme, under which the following share options have been awarded: - On 27th February ,050,000 share options were granted, exercisable at a price of 25 pence and with an option life of 10 years. Of these, all have subsequently been forfeited or expired. - On 17th February ,000 share options were granted, exercisable at a price of 7 pence and with an option life of 10 years. Of these, all have subsequently expired except for 25, The investors who subscribed for New Ordinary Shares in May 2013 and in January 2014 are represented by one director and three consultants, who entered into consultancy agreements with the parent company. They have agreed to receive share options in respect of all or part of their consultancy fees, at the company s discretion: - 2,256,500 share options exercisable at a price of 5 pence per share in lieu of remuneration in the year ended 30th June 2014, - 2,028,000 share options exercisable at a price of 10 pence per share in lieu of remuneration in the year ended 30th June 2015, and - 1,582,600 share options exercisable at a price of 15 pence per share in lieu of remuneration in the years ended 30th June 2016 and 2017, - 2,860,000 share options exercisable at a price of 5 pence per share in lieu of remuneration in the year ended 30 th June 2018, within 10 years of grant, conditional upon the Group achieving certain performance targets. These performance targets of a share price of 15 pence per share have been achieved. Accordingly, the share options granted in respect of the years ended 2014 to 2017 have been granted at 30 June 2017 and the cumulative expense was charged to the Profit & Loss account in the year to 30th June The parent company can decide whether to pay the consultants fees in cash prior to exercise in full or in part. The balance of consultants fees outstanding in that event may be converted into shares. The investors cumulative consultants fees at 30th June 2018 total 696,015 or 8,727,100 share options (2017: 553,015 or 5,867,100 share options) which are accounted for as Unissued Share Capital. - On 2nd May 2013, 100,000 share options were granted to the shareholders of AD Astra-Ivy Medical Chemicals Hungary Kft, as a non-emi scheme member exercisable at a price of 25 pence per share at any time. - On Ist July 2014, 17,905 share options were granted to two members of staff under the EMI scheme, being consultancy fees outstanding of 1,791 exercisable at 10 pence per share within 10 years of grant. - On Ist July 2015, share options were granted to three members of staff under the EMI scheme and to a third party clinician, being consultancy fees outstanding of 7,450 exercisable at 10 pence per share within 10 years of grant. - On 30th June 2017, 31,666 share options were granted to a member of staff under the EMI scheme being consultancy fees outstanding of 4,750 exercisable at 15 pence per share within 10 years of grant. - On 30th June 2018, 34,260 share options were granted to a member of staff under the EMI scheme being consultancy fees outstanding of 1,713 exercisable at 5 pence per share within 10 years of grant

19 NOTES TO THE FINANCIAL STATEMENTS 18. SHARE BASED PAYMENTS (continued) Details of the share options outstanding at 30th June 2018 are as follows: EMI scheme Non-EMI scheme number number. At beginning of period 6,012, ,000 Granted 2,894,260 - Forfeited or Lapsed - At end of period 8,906, , NOTES TO THE CASH FLOW STATEMENT RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES Operating loss (107) (584) Amortisation 2 1 Decrease/(Increase) in stock 1 28 Decrease/(Increase) in debtors (2) 4 (Decrease)/Increase in creditors (2) (29) Unissued Shares Net cash inflow / (outflow) from operating activities 37 (14) RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest paid - - Net cash outflow from returns on investments and servicing of finance - - FINANCING Issue of equity share capital - - Net cash inflow from financing

20 NOTES TO THE FINANCIAL STATEMENTS 19. NOTES TO THE CASH FLOW STATEMENT (continued) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS (Decrease)/Increase in cash in the period 37 (14) Movement in net funds in the period 37 (14) Net funds at 30 June 2017 = 37 = 51 Net funds at 30 June ANALYSIS OF CHANGES IN NET FUNDS At 30 Jun 2017 Cash flows At 30 Jun Net cash: Cash in hand and at bank Net funds =

21 DETAILED PROFIT AND LOSS ACCOUNT This page does not form part of the consolidated accounts and financial statements. TURNOVER Cost of Goods sold (8) (6) TRADING PROFIT ADMINISTRATIVE EXPENSES excluding Research & Development and Consultancy Fees in respect of prior years (20) (56) OPERATING PROFIT Consultancy Fees in respect of prior years - (348) OPERATING PROFIT / (LOSS) before Research & Development 78 (313) Research & Development (268) (271) TOTAL OPERATING LOSS (190) (584) Bank interest payable - - LOSS ON ORDINARY ACTIVITIES (190) (584) ADMINISTRATIVE EXPENSES General expenses Consultancy fees - Current year 3 43 Travel 7 2 Telephone - 1 PR & Media - - Website 1 1 Office Rent - - Office expenses 2 1 Printing, stationery and postage 2 5 Legal and professional fees - 1 Accountancy & Tax fees 3 1 Auditors remuneration - - Amortisation Consultancy fees - Prior years - _