UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F/A
(Amendment No. 1)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number:
Tiziana Life Sciences Ltd
(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)
Bermuda
(Jurisdiction of incorporation or organization)
Clarendon House,
2 Church Street,
Hamilton HM 11,
Bermuda
(Address of principal executive offices)
Keeren Shah
Chief Financial Officer
14-15 Conduit Street, LondonW1S 2XJ United Kingdom
+44 20 7495 2379
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Copies to:
Ed Lukins
Orrick, Herrington & Sutcliffe (UK) LLP
107 Cheapside
London EC2V 6DN
United Kingdom
Jeffrey Fessler
Sheppard, Mullin, Richter & Hampton LLP
30 Rockefeller Plaza
New York, NY 10112-0015
(212) 653 8700
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered | |
| Common Shares | NASDAQ Capital Market |
| (*) | Not for trading, but only in connection with the listing of the American Depositary Shares |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2022: 102,272,614 common shares.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.
☒ Yes ☐ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☐ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☐ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging growth company ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If the securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
TABLE OF CONTENTS
| Explanatory Note | |||
| PART III | |||
| Item 16C | Principal Accountant Fees and Services | 1 | |
| Item 16F | Change in Registrant’s Certifying Accountant | ||
| Item 18 | Financial Statements | 1 | |
| Item 19 | Exhibits | 2 | |
| Signatures | 3 | ||
i
EXPLANATORY NOTE
Tiziana Life Sciences Ltd. (the “Company”) is filing this Amendment No. 1 to its annual report on Form 20-F for the fiscal year ended December 31, 2022 (the “Amendment No. 1”), which was originally filed with the Securities and Exchange Commission (the “SEC”) on April 26, 2023 (the “Original Filing”). The purpose of this Amendment No. 1 is to (i) include the audit report issued by our predecessor auditor Mazars LLP for the year ended December 31, 2021 which was inadvertently not included in the Original Filing, (ii) correct an error in the prior year numbers for Item 16C: Principal Accountant fees and services, (iii) include the omitted Consolidated Statement of Shareholders’ Equity for the year to December 31, 2020 along with any associated notes, (iv) a correction and additional disclosure added to Note 21. Related Parties and (v) a presentational adjustment to Note 22. Leases.
In order to comply with certain requirements of the SEC’s rules in connection with this filing, this Amendment No. 1 includes Item 18. Financial Statements. Consistent with the rules of the SEC, the certifications of the Company’s principal executive officer and principal financial officer as of the date of this Amendment No. 1 are attached as exhibits to this Amendment No. 1.
Except as described above, no other changes have been made to the Original Filing. This Amendment No. 1 speaks as of the filing date of the Original Filing. Other than as stated otherwise, this Amendment No. 1 does not, and does not purport to, amend, update or restate any other information or disclosure included in the Original Filing, or reflect any events that have occurred since the date thereof. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and any documents filed with or furnished to the SEC by the Company subsequent to April 26, 2023.
PART III
ITEM 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth, for each of the years indicated, the aggregate fees billed to us for services rendered by PKF, our independent registered public accounting firm and Mazars, our previous independent registered public accounting firm.
| Year Ending December 31, | ||||||||
| Mazars LLP | 2022 | 2021 | ||||||
| (in thousands) | ||||||||
| Audit fees | 98 | 203 | ||||||
| Other assurance services | 21 | 13 | ||||||
| Total | 119 | 216 | ||||||
| Year Ending December 31, | ||||||||
| PKF Littlejohn LLP | 2022 | 2021 | ||||||
| (in thousands) | ||||||||
| Audit fees | 196 | - | ||||||
| Other assurance services | 10 | - | ||||||
| Total | 206 | - | ||||||
ITEM 18: FINANCIAL STATEMENTS
See the Financial Statements beginning on page F-1.
1
ITEM 19: EXHIBITS
| * | Filed Herewith |
2
SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.
| Tiziana Life Sciences LTD | ||
| By: | /s/ Gabriele Cerrone | |
| Gabriele Cerrone | ||
| Acting Chief Executive Officer | ||
| Date: June 13, 2023 | ||
3
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TIZIANA LIFE SCIENCES LTD
Consolidated Financial Statements and Notes to Financial Statements to be provided under separate cover.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Opinion on the Consolidated Financial Statements
We have audited the accompanying Consolidated Statements of financial position of Tiziana Life Sciences Limited its subsidiaries (the “Group”) as of December 31, 2022 and the related Consolidated Statements of comprehensive income, Consolidated Statements of cash flow and Consolidated Statements of changes in equity for the year ended December 31, 2022 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group as of December 31, 2022 and the results of its operations and its cash flows for the year ended December 31, 2022 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
PKF Littlejohn LLP
We have served as the Group’s auditor since 2022.
London, England
April 26, 2023
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Opinion on the Consolidated Financial Statements
We have audited the accompanying Consolidated Balance Sheets of Tiziana Life Sciences Ltd and its subsidiaries (the Group) as of December 31, 2021 and 2020, together with the related Consolidated Statements of Operations and Comprehensive Loss, Consolidated Statements of Shareholders’ Equity, and Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as “the consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Mazars LLP
Mazars LLP
We have served as the Group’s auditor since 2016.
London, England
May 20, 2022
F-3
TIZIANA LIFE SCIENCES LTD
Consolidated Balance Sheets
(In thousands)
| Year ended December 31, | |||||||||||
| Notes | 2022 | 2021 | |||||||||
| $ | $ | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | 18,122 | 42,186 | |||||||||
| Prepayments and other receivables | 12 | 300 | 1,301 | ||||||||
| Taxation receivable | 10 | 4,246 | 4,736 | ||||||||
| Related party receivables | 21 | 1,614 | 456 | ||||||||
| Total current assets | 24,282 | 48,679 | |||||||||
| Non – Current Assets: | |||||||||||
| Property and equipment, net | 17 | 17 | |||||||||
| Right of use asset | 22 | 372 | - | ||||||||
| Intangible asset | - | 130 | |||||||||
| Investment in related party | 19 | 1,806 | - | ||||||||
| Total non-current assets | 2,195 | 147 | |||||||||
| Total assets | 26,477 | 48,826 | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Liabilities: | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | 18 | 6,532 | 6,181 | ||||||||
| Lease Liability | 22 | 122 | - | ||||||||
| Related party payable | - | 1,355 | |||||||||
| Other liabilities | 9 | 10 | |||||||||
| Total current liabilities | 6,663 | 7,546 | |||||||||
| Lease Liability (Non-Current) | 22 | 243 | - | ||||||||
| Total liabilities | 6,906 | 7,546 | |||||||||
| Shareholders’ Equity: | |||||||||||
| Called up share capital (102,272,614 shares are issued and outstanding; 2021: 102,272,614) | 102 | 102 | |||||||||
| Share premium | 15,596 | 15,596 | |||||||||
| Share based payment reserve – Options | 5,190 | 13,797 | |||||||||
| Share based payment reserve – warrants | 697 | 697 | |||||||||
| Merger relief reserve | 118,697 | 118,697 | |||||||||
| Treasury shares | (1,320 | ) | - | ||||||||
| Translation reserve | (3,128 | ) | 454 | ||||||||
| Retained earnings | (116,263 | ) | (108,063 | ) | |||||||
| Total shareholders’ equity | 19,571 | 41,280 | |||||||||
| Total liabilities and shareholders’ equity | 26,477 | 48,826 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
TIZIANA LIFE SCIENCES LTD
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except loss per share)
| Year ended December 31, | |||||||||||||||
| Notes | 2022 | 2021 | 2020 | ||||||||||||
| $ | $ | $ | |||||||||||||
| Operating Expenses | |||||||||||||||
| Research and Development | (12,955 | ) | (13,208 | ) | (5,993 | ) | |||||||||
| Operating expenses | (1,631 | ) | (13,311 | ) | (11,203 | ) | |||||||||
| Realization bonus | - | (855 | ) | (13,214 | ) | ||||||||||
| Impairment of other non-current asset | - | - | (279 | ) | |||||||||||
| Gain from disposal of intellectual property | - | - | 2,663 | ||||||||||||
| Total operating expenses | (14,586 | ) | (27,374 | ) | (28,026 | ) | |||||||||
| Loss from operations | (14,586 | ) | (27,374 | ) | (28,026 | ) | |||||||||
| Other income/(expense): | |||||||||||||||
| Finance Income/(expense) | 9 | (7 | ) | (176 | ) | (312 | ) | ||||||||
| Other income/(losses) | 4 | (804 | ) | 893 | - | ||||||||||
| Total other income/(expense) | (811 | ) | 717 | (312 | ) | ||||||||||
| Loss from operations before income taxes | (15,397 | ) | (26,657 | ) | (28,338 | ) | |||||||||
| Income tax credit | - | 3,240 | 2,207 | ||||||||||||
| Loss for the year | (15,397 | ) | (23,417 | ) | (26,131 | ) | |||||||||
| Other Comprehensive loss: | |||||||||||||||
| Gain/(Loss) on currency translation | (3,582 | ) | (4,478 | ) | 3,474 | ||||||||||
| Comprehensive loss | (18,979 | ) | (27,895 | ) | (22,657 | ) | |||||||||
| Basic and diluted loss per share attributable to common shareholders | $ | (0.15 | ) | $ | (0.24 | ) | $ | (0.16 | ) | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
TIZIANA LIFE SCIENCES LTD
Consolidated Statements of Shareholders’ Equity
(In thousands)
| Share Capital | Share Premium | Share Based Payment Reserve (Options) | Share Based Payment Reserve (warrants) | Convertible Loan Note Reserve | Merger Reserve | Treasury Shares | Retained Earnings | Shares to be issued Reserve | Translation Reserve | Total Equity | ||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Balance at 1 January 2020 | 97 | - | 5,163 | 2,419 | 1,357 | 118,697 | - | (60,044 | ) | - | 1,940 | 69,629 | ||||||||||||||||||||||||||||||||
| Issue of Share Capital (Loan conversion) | - | - | - | - | (2,304 | ) | - | - | - | - | - | (2,304 | ) | |||||||||||||||||||||||||||||||
| Convertible loan note issued | - | - | - | - | 163 | - | - | - | - | - | 163 | |||||||||||||||||||||||||||||||||
| Convertible loan note interest | - | - | - | - | 272 | - | - | - | - | - | 272 | |||||||||||||||||||||||||||||||||
| Share based payments charge (warrants) | - | - | - | 324 | (298 | ) | - | - | - | - | - | 26 | ||||||||||||||||||||||||||||||||
| Share based payment (options) | - | - | 5,105 | - | - | - | - | - | - | - | 5,105 | |||||||||||||||||||||||||||||||||
| Options forfeited in the year | - | - | (35 | ) | - | - | - | - | - | - | - | (35 | ) | |||||||||||||||||||||||||||||||
| Exercise of options | - | - | (1,609 | ) | - | - | - | - | 1,529 | - | - | (80 | ) | |||||||||||||||||||||||||||||||
| Exercise of warrants | - | - | - | (2,046 | ) | 810 | - | - | - | - | - | (1,236 | ) | |||||||||||||||||||||||||||||||
| Shares to be issued in lieu of cash realization bonus | - | - | - | - | - | - | - | - | 13,503 | - | 13,503 | |||||||||||||||||||||||||||||||||
| Total transactions with owners | - | - | 3,461 | (1,722 | ) | (1,357 | ) | - | - | 1,529 | 13,503 | - | 15,414 | |||||||||||||||||||||||||||||||
| Comprehensive Loss | ||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | - | - | - | - | - | - | - | (26,131 | ) | - | - | (26,131 | ) | |||||||||||||||||||||||||||||||
| Translation | - | - | - | - | - | - | - | - | - | 3,474 | 3,474 | |||||||||||||||||||||||||||||||||
| Total comprehensive Loss | - | - | - | - | - | - | - | (26,131 | ) | - | 3,474 | (22,657 | ) | |||||||||||||||||||||||||||||||
| Balance at 31 December 2020 | 97 | - | 8,624 | 697 | - | 118,697 | - | (84,646 | ) | 13,503 | 5,414 | 62,386 | ||||||||||||||||||||||||||||||||
| Issue of share capital | 2 | 759 | - | - | - | - | - | - | - | - | 761 | |||||||||||||||||||||||||||||||||
| Share based payment charge (options) | - | - | 5,173 | - | - | - | - | - | - | - | 5,173 | |||||||||||||||||||||||||||||||||
| Shares issued in lieu of cash realization bonus | 3 | 14,837 | - | - | - | - | - | - | (13,503 | ) | (482 | ) | 855 | |||||||||||||||||||||||||||||||
| Total transactions with owners | 5 | 15,596 | 5,173 | - | - | - | - | - | (13,503 | ) | (482 | ) | 6,789 | |||||||||||||||||||||||||||||||
| Comprehensive loss | ||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | - | - | - | - | - | - | - | (23,417 | ) | - | - | (23,417 | ) | |||||||||||||||||||||||||||||||
| Translation | - | - | - | - | - | - | - | - | (4,478 | ) | (4,478 | ) | ||||||||||||||||||||||||||||||||
| Total comprehensive loss | - | - | - | - | - | - | - | (23,417 | ) | - | (4,478 | ) | (27,895 | ) | ||||||||||||||||||||||||||||||
| Balance at 31 December 2021 | 102 | 15,596 | 13,797 | 697 | - | 118,697 | - | (108,063 | ) | - | 454 | 41,280 | ||||||||||||||||||||||||||||||||
| Treasury Shares | - | - | - | - | - | - | (1,320 | ) | - | - | - | (1,320 | ) | |||||||||||||||||||||||||||||||
| Share based payment charge (options) | - | - | 1,811 | - | - | - | - | - | - | - | 1,811 | |||||||||||||||||||||||||||||||||
| Options forfeited/cancelled in the year | - | - | (3,221 | ) | - | - | - | - | - | - | - | (3,221 | ) | |||||||||||||||||||||||||||||||
| Reclass of FV for options forfeited/Cancelled | - | - | (7,197 | ) | - | - | - | - | 7,197 | - | - | - | ||||||||||||||||||||||||||||||||
| Total transactions with owners | - | - | (8,607 | ) | - | - | - | - | 7,197 | - | - | (1,410 | ) | |||||||||||||||||||||||||||||||
| Comprehensive loss | ||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | - | - | - | - | - | - | - | (15,397 | ) | - | - | (15,397 | ) | |||||||||||||||||||||||||||||||
| Translation | - | - | - | - | - | - | - | - | - | (3,582 | ) | (3,582 | ) | |||||||||||||||||||||||||||||||
| Total comprehensive loss | - | - | - | - | - | - | - | (15,397 | ) | - | (3,582 | ) | (18,979 | ) | ||||||||||||||||||||||||||||||
| Balance at 31 December 2022 | 102 | 15,596 | 5,190 | 697 | - | 118,697 | (1,320 | ) | (116,263 | ) | - | (3,128 | ) | 19,571 | ||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
TIZIANA LIFE SCIENCES LTD
Consolidated Statements of Cash Flows
(In thousands)
| Year ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Loss from operations before income taxes | $ | (15,397 | ) | $ | (26,657 | ) | $ | (28,338 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Convertible loan interest accrued | - | 163 | 272 | |||||||||
| Shares issued in lieu of fees | - | - | 466 | |||||||||
| Share based payment – options | 1,811 | 5,173 | 5,070 | |||||||||
| Share based payment – warrants | - | - | 26 | |||||||||
| Fair value loss on investment | 869 | - | - | |||||||||
| Loss on disposal of asset | 129 | - | - | |||||||||
| Bonus to be settled in equity | - | 855 | 13,503 | |||||||||
| Depreciation | 1 | 8 | 5 | |||||||||
| (Gain)/ loss on foreign exchange | (3,183 | ) | (1,899 | ) | 237 | |||||||
| Options forfeited during the year | (3,221 | ) | - | - | ||||||||
| Depreciation of right-of-use asset | 50 | 133 | 86 | |||||||||
| (Gain)/loss on disposal of right of use asset | - | (28 | ) | - | ||||||||
| Proceeds from finance lease reclassified as an investing activity | - | (152 | ) | - | ||||||||
| Cash inflow from taxation | 490 | 1,415 | - | |||||||||
| Impairment of SharDNA SPA | - | - | 296 | |||||||||
| Gain from disposal of intellectual property | - | - | (2,663 | ) | ||||||||
| Net (increase) in related party receivables | (1,158 | ) | (88 | ) | (31 | ) | ||||||
| Net (decrease)/increase in related party payables | (1,355 | ) | (685 | ) | 1,145 | |||||||
| Net (increase)/decrease in operating assets/other receivables | 1,002 | 516 | (437 | ) | ||||||||
| Net increase/(decrease) in operating liabilities /other liabilities | 347 | (516 | ) | (972 | ) | |||||||
| Net cash used in operating activities | (19,615 | ) | (21,762 | ) | (11,335 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Purchase of PPE | - | (22 | ) | (3 | ) | |||||||
| Purchase of Act D | - | - | (120 | ) | ||||||||
| Proceeds from finance lease | - | 152 | - | |||||||||
| Investment in Related Party | (2,676 | ) | - | - | ||||||||
| Purchase of Treasury Shares | (1,320 | ) | - | - | ||||||||
| Net cash used in Investing activities | (3,996 | ) | 130 | (123 | ) | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Proceeds from issuance of ordinary shares | - | - | 71,157 | |||||||||
| Proceeds from issuance of convertible loan notes | - | - | 163 | |||||||||
| Proceeds from issuance of warrants | - | 129 | 3,364 | |||||||||
| Proceeds from issuance of options | - | - | 939 | |||||||||
| Repayment of leasing liabilities | (55 | ) | (152 | ) | (277 | ) | ||||||
| Net cash (used in)/provided by financing activities | (55 | ) | (23 | ) | 75,346 | |||||||
| Net decrease in cash and cash equivalents | (23,666 | ) | (21,655 | ) | 63,888 | |||||||
| Cash and cash equivalent, beginning of year | 42,186 | 65,824 | 200 | |||||||||
| Exchange difference on cash and cash equivalents | (398 | ) | (1,983 | ) | 1,736 | |||||||
| Cash and cash equivalent, end of year | 18,122 | 42,186 | 65,824 | |||||||||
F-7
TIZIANA LIFE SCIENCES LTD
Notes to Consolidated Financial Statements
1. GENERAL INFORMATION
Tiziana Life Sciences Ltd, (the “company”) is a public limited company incorporated in Bermuda and at the year end is quoted on the NASDAQ Capital Market (NASDAQ: TLSA). The previous parent, Tiziana Life Sciences PLC, delisted from the main market of the London Stock Exchange (LSE: TILS) on October 21, 2021. The address of its registered office is given on page 1. The principal activities of the Company and its subsidiaries (the Group) are that of a clinical stage biotechnology company that specializes in the development of transformative therapies for neurodegenerative and lung diseases. Our clinical pipeline includes drug assets for Secondary Progressive Multiple Sclerosis, ALS. Alzheimer's, Crohn's Disease and KRAS+ NSCLC.
The functional currency for the Company is also US dollars ($) indicative of the primary economic environment in which the Company operates. These consolidated financial statements are presented in thousands of dollars ($’000) which is the presentational currency of the Company.
2. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been applied consistently to all the years presented unless otherwise stated.
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and International Financial Reporting Interpretations Committee IFRIC interpretations as applicable to companies reporting under IFRS. These accounts have been prepared under the historical cost convention except for the following items:
| - | Financial instruments – fair value through profit or loss |
| - | Financial instruments – fair value through other comprehensive income |
Going Concern
The Group incurred losses during the year and has net assets at the year end.
The Group is in the early stages of developing its business focusing on the discovery and development of novel molecules that treat human disease in oncology and immunology. As the Group is pre-revenue, the Directors expect the Group to incur further losses and to require significant capital expenditure in continuing to develop clinical stage development therapeutic candidates in both oncology and immunology. The Group has successfully funded clinical trials to date and going forward will need to continue to secure additional investment to fund the clinical trials.
The Directors have prepared cash flow projections that include the costs associated with the continued clinical trials and additional investment to fund that operation. Based on those projections, the directors conclude that the company will be able to meet its liabilities as they fall due until at least April 2024, with a cash surplus of approximately $1m projected at this date. Accordingly, the Directors believe it appropriate that the consolidated financial statements have been prepared on a going concern basis.
New and Revised Standards
Standards in effect in 2022
There are no new IFRS standards, amendments to standards or interpretations that are mandatory for the financial year beginning on January 1, 2022, that are relevant to the Group and that have had any impact in the year to December 31, 2022. New standards, amendments to standards and interpretations that are not yet effective, which have been deemed by the Group as currently not relevant and are not listed here.
F-8
Basis of consolidation
Subsidiary undertakings are all entities over which the Group exercises control. The Group has control when it can demonstrate all of the following: (a) power over the investee; (b) exposure, or rights, to variable returns from its involvement with the investee; and (c) the ability to use its power over the investee to affect the amount of the investor’s return.
The existence and effect of both current voting rights and potential voting rights that are currently exercisable or convertible are considered when assessing whether control of an entity is exercised. Subsidiaries are consolidated from the date at which the Group obtains control and are de-consolidated from the date at which control ceases.
Business combination
The Group undertook a group reorganisation exercise during the year to December 31, 2021. As part of this process, Tiziana Life Sciences Ltd (a Bermudan entity) was inserted above Tiziana Life Sciences Limited (formerly Tiziana Life Sciences Plc) in the Group’s structure. As both entities were under common control of Planwise Ltd, the transaction does not constitute a business combination under IFRS 3 ‘Business combinations’ and instead has been accounted for as a group reorganization, using the pooling of interest method. This results in assets and liabilities being measured at their carrying amount in Tiziana Life Sciences Limited (formerly Tiziana Life Sciences Plc) but share capital being that of Tiziana Life Sciences Ltd (a Bermudan entity). Merger accounting has been used to account for this transaction (See note 15 for details).
On 21 October 2021, Tiziana Life Sciences Ltd. (the ‘Company’) acquired the entire shareholding of the former Tiziana Life Sciences Plc and its related subsidiaries, by a way of a share for share exchange with Tiziana Life Sciences Ltd becoming the Group’s immediate parent company.
On 21 October 2021, the Company was admitted for listing on the NASDAQ Capital Market Exchange and the former Tiziana Life Sciences Plc was delisted from the London Stock Exchange.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Board. The Board considers there to be only one operating segment being the research and development of biotechnological and pharmaceutical products.
F-9
Taxation
The tax expense for the year represents the total of current taxation and deferred taxation. The charge in respect of current taxation is based on the estimated taxable profit for the year. Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and expected to apply when the related deferred tax is realized, or the deferred liability is settled. Deferred tax assets are recognized to the extent that it is probable that the future taxable profit will be available against which the temporary differences can be utilized.
Research and Development tax credits are provided for in the year that the costs are incurred. These are estimated based on eligible research and development expenditure. Any differences that are rebated are recognized in the following year, when the cash is received from the UK tax authorities.
Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in US dollars, which is the Group’s presentational currency.
Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the Consolidated statements of operations and comprehensive loss.
The financial statements of overseas subsidiary undertakings are translated into US dollars on the following basis:
| ● | Assets and liabilities at the rate of exchange ruling at the year-end date. | |
| ● | Profit and loss account items at the average rate of exchange for the year. |
Exchange differences arising from the translation of the net investment in foreign entities, borrowings and other currency instruments designated as hedges of such investments, are taken to equity (and recognized in the Consolidated statements of operations and comprehensive loss) on consolidation.
License fees
Payments made which provide the right to perform research are carefully evaluated to determine whether such payments are to fund research or acquire an asset. “License fees expenses” are recognized as incurred.
Research and development
All on-going research and development expenditure is currently expensed in the period in which it is incurred. Due to the regulatory environment inherent in the development of the Group’s products, the criteria for development costs to be recognized as an asset, as set out in IAS 38 ‘Intangible Assets’, are not met until a product has been granted regulatory approval and it is probable that future economic benefit will flow to the Group. The Group currently has no qualifying expenditure.
Fair Value Measurement
Management have assessed the categorisation of the fair value measurements using the IFRS 13 fair value hierarchy. Categorisation within the hierarchy has been determined on the basis of the lowest level of input that is significant to the fair value measurement of the relevant asset as follows;
Level 1 - valued using quoted prices in active markets for identical assets
Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1;
Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.
F-10
Financial instruments
The Group classifies a financial instrument, or its component parts, as a financial liability, a financial asset or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, a financial asset and an equity instrument.
The Group evaluates the terms of the financial instrument to determine whether it contains an asset, a liability or an equity component. Such components shall be classified separately as financial assets, financial liabilities or equity instruments.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(a) Financial assets, initial recognition and measurement and subsequent measurement
All financial assets not recorded at fair value through profit or loss, such as receivables and deposits, are recognized initially at fair value plus transaction costs. Financial assets carried at fair value through profit or loss (FVTPL) are initially recognized at fair value, and transaction costs are expensed in the consolidated statements of operations and comprehensive loss. The measurement of financial assets depends on their classification. Financial assets such as receivables and deposits are subsequently measured at amortized cost using the effective interest method, less loss allowance. The Group holds an investment in Accustem Inc.as a financial assets at fair value through profit or loss or fair value through other comprehensive income.
(b) Financial liabilities, initial recognition and measurement and subsequent measurement
Financial liabilities are classified as measured at amortized cost or FVTPL.
A financial liability is classified as at FVTPL if it is a derivative. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.
The Group’s financial liabilities include trade and other payables.
Warrants
Warrants are issued by the Group in return for services and as part of a financing transaction.
Warrants issued in return for services.
These warrants fall within the scope of IFRS 2. The Company recognises that the fair value at the date of grant of these warrants should be expensed to the Statement of Income and recognised over the life of the service for which the warrant was provided. These warrants have been valued by reference to the equity instruments granted as they are all tied to Convertible loan notes. The measurement date is therefore the date that the Convertible loan note was entered into.
Warrants issued as part of a financing transaction.
Warrants issued as part of a financing transaction fall outside the scope of IFRS 2. These are classified as equity instruments because a fixed amount of cash is exchanged for a fixed amount of equity. The fair value is recognised within equity and is not remeasured.
F-11
Share capital
Ordinary shares of the Company are classified as equity.
Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Costs include expenditures that are directly attributable to the acquisition of the asset. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised in profit or loss.
(ii) Depreciation
Depreciation is calculated on the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.
Depreciation is recognised in consolidated statements of operations and comprehensive loss on a straight-line basis over the estimated useful life of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term in which case they are depreciated over their useful lives.
The estimated useful lives for the current period and the comparative period are as follows.
| Fixtures and fittings | 5 years |
| IT and equipment | 3 years |
| Right of use asset | Economic life of contractual relationship |
Depreciation methods, useful lives and residual values are reviewed at each reporting date. Depreciation is allocated to the operating expenses line of the Consolidated statements of operations and comprehensive loss.
Impairment
Impairment of financial assets measured at amortised cost
At each reporting date the Group recognises a loss allowance for expected credit losses on financial assets measured at amortised cost.
In establishing the appropriate amount of loss allowance to be recognised, the Group applies either the general approach or the simplified approach, depending on the nature of the underlying group of financial assets.
General approach
The general approach is applied to the impairment assessment of refundable lease deposits and other refundable lease contributions, and cash and cash equivalents.
Under the general approach the Group recognises a loss allowance for a financial asset at an amount equal to the 12-month expected credit losses, unless the credit risk on the financial asset has increased significantly since initial recognition, in which case a loss allowance is recognised at an amount equal to the lifetime expected credit losses.
F-12
Simplified approach
The simplified approach is applied to the impairment assessment of trade receivables.
Under the simplified approach the Group always recognises a loss allowance for a financial asset at an amount equal to the lifetime expected credit losses.
Impairment of non-financial assets
Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Non-financial assets are impaired when carrying amounts exceed recoverable amounts. The recoverable amount is measured as the higher of fair value less cost of disposal and value in use. The value in use is calculated as being net projected cash flows based on financial forecasts discounted back to present value at a pre-tax discount rate.
Contingent Liabilities
The Company is required to make judgments about contingent liabilities including the probability of pending and potential future litigation outcomes that, by their nature, are dependent on future events that are inherently uncertain. In making its determination of possible scenarios, management considers the evaluation of outside counsel knowledgeable about each matter, as well as known outcomes in case law.
Leases
All leases are accounted for by recognizing a right-of-use asset and a lease liability except for:
| ● | Leases of low value assets; and |
| ● | Leases with a duration of 12 months or less. |
The Group has leases for its offices. Each lease is reflected on the consolidated balance sheet as a right-of-use asset and a lease liability. The Group does not have any leases of low value assets. Variable lease payments which do not depend on an index or a rate (such as lease payments based on a percentage of Group sales) are excluded from the initial measurement of the lease liability and asset. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see Note 21).
For leases over office buildings and factory premises the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. The expected costs of returning to original condition are considered negligible.
At lease commencement date, the Group recognises a right-of-use asset and a lease liability in its consolidated balance sheets. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the Group’s incremental borrowing rate because as the lease contracts are negotiated with third parties it is not possible to determine the interest rate that is implicit in the lease. The incremental borrowing rate is the estimated rate that the Group would have to pay to borrow the same amount over a similar term, and with similar security to obtain an asset of equivalent value. This rate is adjusted should the lessee entity have a different risk profile to that of the Group.
The Group depreciates the right-of-use asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.
F-13
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced by lease payments that are allocated between repayments of principal and finance costs. The finance cost is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability.
Short term leases exempt from IFRS 16 are classified as operating leases. Payments made under operating leases are recognised in profit and loss on a straight-line basis over the term of the lease.
Share – based payments
The calculation of the fair value of equity-settled share-based awards and the resulting charge to the Consolidated statements of operations and comprehensive loss requires assumptions to be made regarding future events and market conditions. These assumptions include the future volatility of the Company’s share price. These assumptions are then applied to a recognised valuation model in order to calculate the fair value of the awards.
Where employees and directors are rewarded using share-based payments, the fair value of the employees’, directors’ and/or advisers’ services are determined by reference to the fair value of the share options/warrants awarded. Their value is appraised at the date of grant and excludes the impact of any nonmarket vesting conditions (for example, profitability and sales growth targets).
In accordance with IFRS 2, a charge is made to the Consolidated statements of operations and comprehensive loss for all share-based payments including share options based upon the fair value of the instrument used. A corresponding credit is made to an equity reserve, in the case of options/warrants awarded to employees, directors, advisers and other consultants.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options/warrants expected to vest. Non market vesting conditions are included in assumptions about the number of options/warrants that are expected to become exercisable.
Estimates are subsequently revised, if there is any indication that the number of share options/warrants expected to vest differs from previous estimates. No adjustment is made to the expense or share issue cost recognised in prior periods if fewer share options ultimately are exercised than originally estimated.
Upon exercise of share options/warrants, the proceeds received are allocated to share capital with any excess being recorded as share premium. A corresponding debit is made to the share–based payment reserve.
Where share options are cancelled, this is treated as an acceleration of the vesting period of the options. The amount that otherwise would have been recognised for services received over the remainder of the vesting period is recognised immediately within the Consolidated statements of operations and comprehensive loss.
All goods and services received in exchange for the grant of any share – based payment are measured at their fair value.
F-14
Convertible loan notes
The Group issues Convertible loan notes which can be classified as equity or a liability depending on whether the fixed for fixed condition is met or not.
Where the fixed for fixed condition is met
The Group classifies convertible loan notes that meet the fixed for fixed condition as equity instruments and records the principal of the loan note as a equity in a Convertible loan note reserve. The accrued interest on the principal amount is also recorded in the Convertible loan note reserve. Upon redemption of the instrument and the issue of share capital, the amount is reclassified from the convertible loan note reserve to share capital and share premium.
Where the fixed for fixed condition is not met
The Group classifies convertible loan notes that do not meet the fixed for fixed condition as liability instruments and records the principal of the loan note as a debt liability in the liabilities section of the statement of financial position. The accrued interest on the principal amount is recorded in the income statement and as an increase in the debt liability. Upon redemption of the instrument and the issue of share capital, the amount is reclassified from the debt liability to share capital and share premium.
Sub license income
In September 2021 the Company signed a collaboration agreement signed with Precision Biosciences, Inc. under which $750k was recognized as an upfront payment in accordance with the contract for the grant of an exclusive license to use foralumab as a lymphodepletion agent in conjunction with Precision Biosciences, Inc’s allogeneic CAR T therapeutics for the treatment of cancers. Sublicense income is included in other income on the consolidated statements of operations and comprehensive loss.
Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated impairment losses.
At each balance sheet date non-financial assets are assessed to determine whether there is an indication that the asset or the asset’s cash generating unit may be impaired. If there is such an indication the recoverable amount of the asset or asset’s cash generating unit is compared to the carrying amount.
3. CRITICAL ACCOUNTING JUDGEMENT
The preparation of financial information in accordance with generally accepted accounting practice, in the case of the Group being International Financial Reporting Standards as issued by the IASB, requires the directors to make estimates and judgements that affect the reported amount of assets, liabilities, income and expenditure and the disclosures made in the consolidated financial statements. Such estimates and judgements must be continually evaluated based on historical experience and other factors, including expectations of future events.
The following are considered to be critical accounting estimates:
Share-based payments
The Group accounts for share-based payment transactions for employees in accordance with IFRS 2 Share-based Payment, which requires the measurement of the cost of employee services received in exchange for the options on our ordinary shares, based on the fair value of the award on the grant date.
The Company utilizes the Black-Scholes-Merton option pricing model as the most appropriate method for determining the estimated fair value of our share-based awards without market conditions. For performance-based options that include vesting conditions relating to the market performance of our ordinary shares, a Monte Carlo pricing model was used in order to reflect the valuation impact of price hurdles that have to be met as conditions to vesting.
The Company makes estimates as to the useful life of an option award, the expected price volatility of the underlying share, risk free interest rate for the term of the award and correlations and volatilities of the shares of peer group companies. The Company also makes estimates as to the vesting period for awards that have performance – based criteria.
F-15
4. OTHER (EXPENSE)/ INCOME
The Group’s other (expense)/ income is made up of the following:
| Year Ended December 31, | ||||||||||||
| 2022 $’000 | 2021 $’000 | 2020 $’000 | ||||||||||
| Sublicense income | - | 750 | - | |||||||||
| Other | 65 | 143 | - | |||||||||
| Loss on investment at fair value through profit or loss (see note 19) | (869 | ) | - | - | ||||||||
| Total other (expense)/ income | (804 | ) | 893 | - | ||||||||
Sublicense income has been classified as other income as the counterparty is not considered a customer but an entity we are collaborating with.
5. OPERATING LOSS
The Group’s operating losses are stated after charging/(crediting) the following:
| Year Ended December 31, | ||||||||||||
| 2022 $’000 | 2021 $’000 | 2020 $’000 | ||||||||||
| License fee | - | (1,047 | ) | 706 | ||||||||
| Realization bonus | - | 855 | 13,503 | |||||||||
| Foreign exchange gain related to the realization bonus | - | - | (289 | ) | ||||||||
| Depreciation of Property, plant and equipment | 1 | 8 | 5 | |||||||||
| Depreciation (Right-of-use asset) | 50 | 133 | 86 | |||||||||
| Foreign exchange (gains)/losses | (3,183 | ) | (1,899 | ) | 239 | |||||||
License fees relating to 2020 were waived in 2021 as a result of negotiations by the Group.
A realization bonus of $13.5 million became payable during the year ended December 31, 2020 to the chairman of the board upon the Company raising funds in excess of $28m (£20m), which it successfully raised in August 2020. As the bonus was not settled until November 2021, interest of $0.9m was accrued on the amount due in the year to December 31, 2021. No realization bonus is accounted for in year ended December 31, 2022.
6. SEGMENTAL REPORTING
During the year under review Management identified the Group’s only operating segment as the research and development of biotechnological and pharmaceutical products. This one segment is monitored and strategic decisions are made based upon it and other non-financial data collated from industry intelligence. The form of financial reporting reported to the Board is consistent with those presented in the annual consolidated financial statements.
An analysis of the Group’s sublicence income by location is shown below:
| Year ended December 31, | ||||||||||||
| 2022 $’000 | 2021 $’000 | 2020 $’000 | ||||||||||
| UK | - | 750 | - | |||||||||
| US | - | - | - | |||||||||
| Total sublicence income | - | 750 | - | |||||||||
F-16
7. EMPLOYEES
| Year ended December 31, | ||||||||||||
| 2022 $’000 | 2021 $’000 | 2020 $’000 | ||||||||||
| Staff costs comprised: | ||||||||||||
| Directors’ salaries (including bonus) | 554 | 2,526 | 14,666 | |||||||||
| Employees’ wages, salaries and bonus | 2,014 | 1,856 | 1,058 | |||||||||
| Social security costs | 135 | 176 | 194 | |||||||||
| Recruitment fees | 197 | 242 | 17 | |||||||||
| Share based payment charge | (1,410 | ) | 5,173 | 5,105 | ||||||||
| 1,242 | 9,973 | 21,040 | ||||||||||
| The average monthly number of employees, including directors, employed by the group during the year was: | ||||||||||||
| Research and development | 3 | 8 | 3 | |||||||||
| Corporate and administration | 6 | 5 | 8 | |||||||||
| 9 | 13 | 11 | ||||||||||
8. REMUNERATION OF KEY MANAGEMENT PERSONNEL
| $’000 | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Director | Directors’ fee | Bonus | Salary | Share based payments | Directors’ fee | Bonus | Salary | Share based payments | Directors’ fee | Bonus | Salary | Share based payments | ||||||||||||||||||||||||||||||||||||
| G. Cerrone (1) | 296 | 148 | - | - | 330 | 855 | - | 624 | 170 | 13,588 | - | 155 | ||||||||||||||||||||||||||||||||||||
| Willy Simon | 55 | 83 | 59 | 93 | 49 | - | - | 31 | ||||||||||||||||||||||||||||||||||||||||
| Gregor MacRae | - | - | - | - | - | - | - | - | 27 | - | - | - | ||||||||||||||||||||||||||||||||||||
| J Brancaccio | 55 | -- | - | 83 | 59 | -- | - | 93 | 22 | - | - | 31 | ||||||||||||||||||||||||||||||||||||
| K. Shailubhai | - | - | 379 | (145 | ) | - | 210 | 600 | 492 | - | 210 | 600 | 2,069 | |||||||||||||||||||||||||||||||||||
| T Adams | - | - | - | (1,967 | ) | - | - | 413 | 2,197 | - | - | - | - | |||||||||||||||||||||||||||||||||||
| 406 | 148 | 379 | (1,946 | ) | 448 | 1,065 | 1,013 | 3,499 | 268 | 13,798 | 600 | 2,286 | ||||||||||||||||||||||||||||||||||||
| (1) | Gabriele Cerrone’s 2021 bonus is the interest charged on his 2020 bonus due to delayed issuance of shares; his 2020 bonus includes a $13.2m realization bonus. |
F-17
All bonuses are short term. No post-employment or termination payments were made.
The following share options were granted to directors in the following periods:
| Year ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| Number of options | Number of options | Number of options | ||||||||||
| G. Cerrone | - | - | 1,800,000 | |||||||||
| K. Shailubhai | - | - | - | |||||||||
| L. Zanbeletti | - | - | - | |||||||||
| W.Simon | - | - | 250,000 | |||||||||
| J. Brancaccio | - | - | 250,000 | |||||||||
| T Adams | - | 3,500,000 | - | |||||||||
| - | 3,500,000 | 2,300,000 | ||||||||||
Key management personnel of the Group are comprised of directors and officers of the Company.
No share options were exercised by directors during the years ended December 31, 2022 and 2021. 2,319,225 share options were exercised by directors in the year to 31 December 2020 for an intrinsic gain of $4.1m.
The Company made payments totaling approximately $32K, $24K, and $10K to defined contribution pension schemes on behalf of directors or employees during 2022, 2021, and 2020, respectively.
9. FINANCE COSTS
| Year ended December 31, | ||||||||||||
| 2022 $’000 | 2021 $’000 | 2020 $’000 | ||||||||||
| Group | ||||||||||||
| Finance Income | ||||||||||||
| Finance income received on net investment in lease | - | - | 8 | |||||||||
| Total finance income | - | - | 8 | |||||||||
| Finance Expense | ||||||||||||
| Finance charge accrued on convertible loan notes | - | 163 | 303 | |||||||||
| Interest expense on lease liabilities | 7 | 13 | 17 | |||||||||
| Total finance expenses | 7 | 176 | 320 | |||||||||
| Net finance expense recognized in Consolidated statements of operations and comprehensive loss | 7 | 176 | 312 | |||||||||
F-18
10. TAXATION
| Year Ended December 31, | ||||||||||||
| 2022 $’000 | 2021 $’000 | 2020 $’000 | ||||||||||
| Group | ||||||||||||
| Current year tax (credit) | - | (3,255 | ) | (1,546 | ) | |||||||
| Adjustments due to prior periods | - | (15 | ) | (661 | ) | |||||||
| Total tax (credit) for the period | - | (3,240 | ) | (2,207 | ) | |||||||
| The tax charge for the year is different from the standard rate of corporation tax in the United Kingdom of 19%. The difference can be reconciled as follows: | ||||||||||||
| Loss before taxation | (15,397 | ) | (26,657 | ) | (28,337 | ) | ||||||
| Loss charged at standard rate of corporation tax 19% | (2,926 | ) | (5,065 | ) | (5,384 | ) | ||||||
| Movement in unrecognized deferred tax | 2,319 | 1,722 | 1,316 | |||||||||
| Expenses not deductible for taxation | 1,036 | 1,550 | 4,986 | |||||||||
| Adjustments due to prior periods | - | (15 | ) | (661 | ) | |||||||
| Research and development claim | - | (1,401 | ) | (665 | ) | |||||||
| Income not taxable for tax purposes | (495 | ) | (61 | ) | (1,741 | ) | ||||||
| Fixed asset differences | (1 | ) | - | - | ||||||||
| Adjustments to brought forward values | 67 | - | - | |||||||||
| Consolidation adjustment in relation to foreign exchange movements | - | - | (58 | ) | ||||||||
| - | (3,313 | ) | (2,207 | ) | ||||||||
The Research and Development claim has been calculated in accordance with the R&D tax relief available to small and medium sized entities, whereby the entity is able to claim a cash tax credit (if loss making), worth up to 14.5% of the surrenderable losses.
The adjustments due to prior periods relates to R&D tax relief claims for the prior period. Under UK tax legislation, a 2 year window is available under which R&D tax relief can be claimed.
No deferred tax asset has been recognized in respect of trading losses carried forward because of uncertainty as to when these losses will be recoverable.
The amount of tax losses for which no deferred tax assets has been recognized for the year ended December 31, 2022 is $15,011k (2021 is $11,591k; 2020; $6,182k).
11. LOSS PER SHARE
Basic loss per 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 year.
| Year ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| (Loss) attributable to equity holders of the company ($000) | (15,397 | ) | (23,417 | ) | (26,131 | ) | ||||||
| Weighted average number of ordinary shares in issue | 101,526,389 | 97,932,055 | 97,306,144 | |||||||||
| Basic loss per share (cents per share) | (15.2 | ) | (23.9 | ) | (26.9 | ) | ||||||
As the Group is reporting a loss from continuing operations for the year then, in accordance with IAS 33, share options, warrants and convertible loan notes are not considered dilutive because the exercise of the share options would have an anti-dilutive effect. The basic and diluted earnings per share as presented on the face of the income statement are therefore identical. All earnings per share figures presented above arise from continuing and total operations and therefore no earnings per share for discontinued operations are presented. The weighted average number of ordinary shares in issuance is stated as net excluding Treasury shares.
F-19
12. OTHER RECEIVABLES
| $000 | Year ended December 31, | |||||||
| 2022 | 2021 | |||||||
| VAT Receivable | - | 80 | ||||||
| Security deposits receivable | 130 | 35 | ||||||
| Prepayments | 170 | 1,186 | ||||||
| 300 | 1,301 | |||||||
There are no differences between the carrying amount and fair value of any of the trade and other receivables above.
13 SHARE CAPITAL AND SHARE PREMIUM
Group
On 21 October 2021, the Company acquired the entire shareholding of Tiziana Life Sciences Plc and its subsidiaries through a share for share exchange transaction. On this date Tiziana Life Sciences Ltd became the Group’s parent company. This transaction does not constitute a business combination under IFRS 3 “Business combinations” and has been accounted for as a group reorganization. Merger accounting has been applied to account for the insertion of the new company. Due to a share consolidation, the effect of this was a decrease in share capital of the Company with an offset posted to the merger reserve. As a common control transaction, the Group has elected to present the comparative information as if this transaction had occurred before the start of the comparative period. The share capital arising on the share for share exchange has been presented as share capital in the comparative period.
| Nominal Value | Share Capital | Share Premium | Merger Reserve | |||||||||||||||||
| £/$ | Shares | $000 | $000 | $000 | ||||||||||||||||
| At January 1 2021 per 20-F annual report | £ | 0.03 | 194,612,289 | 10,794 | 111,821 | - | ||||||||||||||
| Group Reorganization | ||||||||||||||||||||
| Elimination of share capital in Tiziana Life Sciences Plc | £ | 0.03 | (194,612,289 | ) | (10,794 | ) | (111,821 | ) | 122,615 | |||||||||||
| Shares issued pursuant to share for share exchange and consolidation | $ | 0.001 | 97,306,144 | 97 | - | (97 | ) | |||||||||||||
| Elimination of other reserves in Tiziana Life Sciences Plc | (3,821 | ) | ||||||||||||||||||
| Restated at 1 January 2021 | $ | 0.001 | 97,306,144 | 97 | - | 118,697 | ||||||||||||||
| Shares issued in the period: | ||||||||||||||||||||
| Conversion of warrants | $ | 0.001 | 136,854 | - | 156 | - | ||||||||||||||
| Conversion of Loan | $ | 0.001 | 1,866,907 | 2 | 603 | - | ||||||||||||||
| Issued in lieu of cash bonus | $ | 0.001 | 2,962,709 | 3 | 14,837 | - | ||||||||||||||
| At 31 December 2021 | 102,272,614 | 102 | 15,596 | 118,697 | ||||||||||||||||
| Shares issued in the period: | ||||||||||||||||||||
| At 31 December 2022 | 102,272,614 | 102 | 15,596 | 118,697 | ||||||||||||||||
Ordinary Shares
Ordinary shares have a par value of $0.001. They entitle the holder to participate in dividends, and to share in the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares include 1,683,544 of shares that are held in treasury which the Company has purchased pursuant to a share buyback but which are not cancelled upon delivery back to the Company. The Company has 102,272,614 shares in issue and holds 1,683,544 shares in treasury. The 1,683,544 treasury shares carry no voting rights and do not rank for dividends or return of capital whilst held in treasury.
F-20
14. SHARE BASED PAYMENTS
Group and Company Options
The Company operates share-based payment arrangements to remunerate directors and key employees in the form of a share option scheme. The exercise price of the option is normally equal to the market price of an ordinary share in the Company at the date of grant. The Company is currently operating two plans (Tiziana Life Sciences PLC) Share Option Plan which is closed for any new issuances and the Tiziana Life Sciences Ltd 2021 Equity Incentive Plan.
Tiziana Life Sciences PLC Share Option Plan
| 2022 | 2021 | 2020 | ||||||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||||||
| Average exercise price (cents) | Options (’000) | Average exercise price (cents) | Options (’000) | Average exercise price (cents) | Options (’000) | |||||||||||||||||||
| Outstanding at 1 January | 90 | 22,234 | 67 | 17,024 | 113 | 16,379 | ||||||||||||||||||
| Granted | - | - | 166 | 5,210 | 111 | 3,870 | ||||||||||||||||||
| Forfeited/Cancelled | 176 | (6,910 | ) | - | - | (52 | ) | (300 | ) | |||||||||||||||
| Exercised | - | - | - | - | (25 | ) | (2,925 | ) | ||||||||||||||||
| Outstanding at 31 December | 49 | 15,324 | 90 | 22,234 | 67 | 17,024 | ||||||||||||||||||
| Exercisable at 31 December | 48 | 6,249 | 54 | 7,616 | 65 | 6,249 | ||||||||||||||||||
No options were exercised during 2022 or 2021. 2,925,725 options were exercised during the year ending 31 December 2020.
The total outstanding fair value charge of the share option instruments is deemed to be approximately $242k (2021: $12,339k, 2020: $7,046k).
Under the Tiziana Life Sciences PLC Share Option Plan, the total expense recognized for the year ending 31 December 2022 arising from share – based payment transactions under the Tiziana Life Sciences PLC Share Option Plan is ($1,479k) of which $3,221k was forfeiture during the year (2021 $5,173k, 2020: $5,105k).
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
| Grant Date | Expiry Date | Exercise Price | Share Options at 31 December 2022 (‘000) | |||||||
| 26 June 2014 | 26 June 2024 | $ | 0.47 | 1,831 | ||||||
| 30 April 2018 | 30 April 2028 | $ | 1.10 | 500 | ||||||
| 6 May 2020 | 5 May 2028 | $ | 0.47 | 12,393 | ||||||
| 23 July 2020 | 26 July 2030 | $ | 2.11 | 100 | ||||||
| 25 August 2020 | 24 August 2030 | $ | 1.98 | 500 | ||||||
| Total | 15,324 | |||||||||
Fair value of options granted
The Directors have used the Black-Scholes-Merton option pricing model to estimate the fair value of all of the options granted during the year to December 31, 2021, applying the assumptions below.
Historical volatility is based on the historical volatility of the Company itself.
F-21
The Company has estimated a forfeiture rate of zero.
The model inputs for options granted during the year ended 31 December 2021 valued under the Black-Scholes-Merton model included:
| 2 February 2021 | 8 October 2021 | |||||||
| Grant date share price | $ | 2.116 | $ | 0.719 | ||||
| Exercise share price | $ | 1.357/1.983 | $ | 0.719 | ||||
| Risk free rate | -0.10% to -0.02 | % | 0.32% to 0.65 | % | ||||
| Expected volatility | 101% to 162 | % | 83% to 122 | % | ||||
| Option life | 10 years | 10 years | ||||||
| Weighted average share price | $ | 1.818 | $ | 0.719 | ||||
| Weighted average fair value per share option | $ | 0.862 | $ | 0.319 | ||||
For the options issued in August 2020 with a market condition attached, the Directors have used the Monte Carlo simulation to estimate the fair value of these options. The Company uses the following methods to determine its underlying assumptions:
| ● | expected volatilities are based on the historical volatilities of the market; |
| ● | the expected term of the award is 4 years and is based on managements’ assessment of when the market condition is likely to be achieved; and |
| ● | a range of fair values per share were produced and management have determined the most appropriate value based on their knowledge of the market and vesting conditions being fulfilled. |
Modification of share – based payments.
In May 2020, the Company reduced the exercise price for options issued to employees and directors to $0.48 (£0.35). This was approved by shareholders at a General Meeting held on May 6, 2020.
The fair value of the modified options at the date of modification was determined using the option pricing models as described above. The incremental fair value was recognised as an expense over the period from the modification date to the end of the vesting period. The expense for the original option grant will continue to be recognised as if the terms had not been modified.
The fair value of the modified options was determined using the same models and principles as described above.
Tiziana Life Sciences Ltd 2021 Equity Incentive Plan
| 2022 | ||||||||
| Weighted | ||||||||
| Average exercise price (cents) | Options (’000) | |||||||
| Outstanding at 1 January | - | - | ||||||
| Granted | 69 | 2,575 | ||||||
| Forfeited/Cancelled | - | - | ||||||
| Exercised | - | - | ||||||
| Outstanding at 31 December | 69 | 2,575 | ||||||
| Exercisable at 31 December | - | - | ||||||
F-22
The model inputs for options granted during the year ended 31 December 2022 valued under the Black-Scholes-Merton Valuation model included:
| 4 November 2022 | 1 August 2022 | |||||||
| Grant date share price | $ | 0.679 | $ | 0.741 | ||||
| Exercise share price | $ | 0.679 | $ | 0.741 | ||||
| Risk free rate | -0.10% to -0.02 | % | 0.32% to 0.65 | % | ||||
| Expected volatility | 99% to 122 | % | 90% to 126 | % | ||||
| Option life | 10 years | 10 years | ||||||
| Weighted average share price | $ | 0.67 | $ | 0.741 | ||||
| Weighted average fair value per share option | $ | 0.690 | $ | 0.690 | ||||
During the year ending 31 December 2022 no options were exercised.
The total outstanding fair value charge of the share option instruments is deemed to be approximately $1,176k.
Under the Tiziana Life Sciences Ltd 2021 Equity Incentive Plan, the total expenses recognized for the year ending 31 December 2022 arising from share based payment transactions is $332k.
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
| Grant Date | Expiry Date | Exercise Price | Share Options as at 31 December 2022 (‘000) | |||||||
| 01 August 2022 | 01 August 2032 | $ | 0.74 | 725 | ||||||
| 04 November 2022 | 04 November 2022 | $ | 0.67 | 1,850 | ||||||
| Total | 2,575 | |||||||||
Group and Company Warrants
No warrants were issued in 2022 or 2021. For warrants issued in 2020, the Directors have estimated the fair value of the warrants using the Black-Scholes valuation model and assumptions below:
| 21 January 2020 | 21 January 2020 | 1 June 2020 | ||||||||||
| Grant date share price | £ | 0.43 | £ | 0.43 | £ | 1.15 | ||||||
| Exercise share price | £ | 0.42 | £ | 0.35 | £ | 0.70 | ||||||
| Risk free rate | 0.64 | % | 0.40 | % | 0.04 | % | ||||||
| Expected volatility | 61.7 | % | 84.7 | % | 111 | % | ||||||
2022 $000 | 2021 $000 | 2020 $000 | ||||||||||
| Outstanding at 1 January | 697 | 697 | 2,418 | |||||||||
| Granted | - | - | 324 | |||||||||
| Transfer to share premium on exercise of warrants | - | - | (2,045 | ) | ||||||||
| Outstanding at 31 December | 697 | 697 | 697 | |||||||||
No share-based payment charges relating to warrants were recorded during 2022 or 2021. Approximately $26K of share-based payment charges are included in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.
F-23
15. RESERVES
The share-based payment reserve for warrants represents the cost to issue warrants in the future based on their grant date fair value.
The share-based payment reserve for options represents the cost to issue share-based compensation, primarily share options, based on their grant date fair value.
Retained earnings represent the cumulative profits/(losses) of the entity which have not been distributed to shareholders. This reserve has been credited as part of the capital reduction exercise described below.
The translation reserve represents the unrealised gains or losses from the foreign currency translation of Companies within the Group.
The merger reserve arises on consolidation as a result of the share for share exchange transaction that took place this year described in note 13. It represents the difference between the share capital issued and the aggregate carrying value of assets and liabilities and other reserves of the previous parent on the merger date.
16. FINANCIAL INSTRUMENTS
The main risks arising from the Group’s financial instruments are liquidity risk, foreign currency risk and credit risk. The directors regularly review and agree policies for managing each of these risks which are summarised below.
Market risk
Market risk encompasses three types of risk, being foreign currency exchange risk, price risk and fair value interest rate risk. The Group policies for managing fair value interest rate risk are considered along with those for managing cash flow interest rate risk and are set out in the subsection entitled “interest rate risk” below. The Directors do not consider the Group’s exposure to price risk to be significant. The Group’s risk management is coordinated by the Directors and focuses on actively securing the Group’s short to medium term cash flows by minimising the exposure to financial markets. The Group does not engage in the trading of financial assets for speculative purposes.
Credit risk
Credit risk is managed on a Group basis. Credit risk arises principally from cash and cash equivalents and deposits with banks and financial institutions as well as credit exposure to customers including committed transactions and outstanding receivables. The Group reviews its banking arrangements carefully to minimise such risks and currently has no customers and therefore this risk is viewed as minimal. Management monitor loans between members of the Group as part of their internal reporting and assess outstanding receivables for ability to be repaid.
Liquidity risk
The Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and long term. The Group ordinarily finances its activities through cash generated from by private and public offerings of equity and debt securities.
The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:
| 2022 | ||||||||||||
| $000 | Less than 3 months | 3 to 12 months | Total | |||||||||
| Trade payables | 1,230 | 3,732 | 4,962 | |||||||||
| Lease liabilities | 32 | 98 | 130 | |||||||||
| Related party payables | - | - | - | |||||||||
| Total | 1,262 | 3,830 | 5,092 | |||||||||
| 2021 | ||||||||||||
| $000 | Less than 3 months | 3 to 12 months | Total | |||||||||
| Trade payables | 2,873 | 1,533 | 4,406 | |||||||||
| Related party payables | 1,355 | - | 1,355 | |||||||||
| Total | 4,228 | 1,533 | 5,761 | |||||||||
F-24
Interest rate risk
The Group has limited exposure to interest-rate risk arising from its bank deposits. These deposit accounts are held at variable interest rates based on Bank of America base rate.
The Directors do not consider the impact of possible interest rate changes based on current market conditions to be material to the net result for the year or the equity position as of year-end for either the year ended 31 December 2022 or 31 December 2021.
Foreign currency risk
The Group operates internationally although the majority of its operations are based in the United Kingdom and the United States, and the majority of assets and liabilities are denominated in US Dollars, with a small amount denominated in Pound Sterling. It therefore is exposed to some foreign exchange risk arising from exposure to various currencies primarily the Pound Sterling. The Group monitors currency exchange rates and makes judgments as to whether to enter into currency hedging contracts. Currently no such hedging contracts are in place.
Sensitivity analysis
A reasonably possible strengthening (weakening) of the US dollar or Sterling against all other currencies at 31 December 2022 would have affected the measurement of the financial instruments denominated in a foreign currency and affected equity and profit and loss by the amounts shown below. This analysis assumes that all other variables remain constant.
| Profit or loss and equity | ||||||||
| December 31, 2022 | Strengthening | Weakening | ||||||
| USD (5% movement) | 415 | (415) | ||||||
17. CAPITAL RISK MANAGEMENT
For the purpose of the Group’s capital management, capital includes called up share capital, share premium, share – based payments for options, share - based payments for warrants, convertible loan note reserve, and all other equity reserves attributable to the equity holders of the parent as reflected in the consolidated statement of financial position.
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern and to maximize shareholder value through the optimization of the equity balance.
The Group adjusts its capital structure in light of changes in economic conditions and expected business demands on capital. The Group may also return capital to shareholders or issue additional shares.
18. TRADE AND OTHER PAYABLES
| Year ended December 31, | ||||||||
| Group | 2022 | 2021 | ||||||
| $000 | $000 | |||||||
| Trade payables | 4,962 | 4,406 | ||||||
| Accruals | 1,570 | 1,775 | ||||||
| 6,532 | 6,181 | |||||||
F-25
19. INVESTMENT IN RELATED PARTY
| Year ended December 31, | ||||||||
| Group | 2022 | 2021 | ||||||
| $000 | $000 | |||||||
| Investment in Accustem Sciences Inc | 2,675 | - | ||||||
| Movement in fair value | (869 | ) | - | |||||
| 1,806 | - | |||||||
During the year the company purchased One Million Three Hundred Thirty Seven Thousand Nine Hundred Seventy (1,337,970) shares of the Accustem Sciences Inc's Common Stock, with a par value of $0.001, at a price per share of $2.00, for an aggregate purchase price of $2,675,940. The share price of Accustem as of December 31, 2022 was $1.35, which has resulted in the recognition of a fair value loss of $869k. This has been measured using the Level 1per IFRS 13 fair value hierarchy. Accustem Sciences Inc is listed on the OTC markets and is run by a separate management team which is independent of the Tiziana management team. Tiziana is therefore not able to assert significant influence over Accustem Sciences Inc.
20. TREASURY SHARES
The company acquired 1,683,544 of its own shares through purchases on the NASDAQ stock exchange during the year ended December 31, 2022. The amount paid to acquire the shares totaled $1,320k, and the shares are held as “treasury shares”. The Company has the right to reissue these shares at a later date. All shares issued by the Company are fully paid.
21. RELATED PARTY TRANSACTIONS
The ultimate controlling party of the Group is Planwise Group Ltd.
Rasna Therapeutics Inc is a related party as the entity is controlled by a person that has significant influence over the Group. Rasna is also party to a Shared Services agreement with Tiziana whereby Rasna is charged for shared services such as the payroll and rent. During 2020, Tiziana extended a loan to Rasna for $72,000 at an interest rate of 8% per annum. During 2022, Tiziana extended a further loan to Rasna for $85,000 at an interest rate of 16% per annum. As of December 31, 2022, $206k (2021: $106, 2020: $78k) was owed to Tiziana Life Sciences Ltd in respect of the loan, accrued interest and the shared services agreement. The total charged under the shared services agreement in the year ending 31 December 2022 was $7k (2021: $11k, 2020: $6k).
In addition to the above, on April 16, 2020, Tiziana also acquired all of the intellectual property relating to a nanoparticle-based formulation of Actinomycin D (Act D; a.k.a. Dactinomycin), from Rasna to expand its pipeline for a consideration of an initial $120k upfront payment and milestone payments of up to an additional aggregate $630k. There were no milestone payments due in the year ending 31 December 2022.
OKYO Pharma Ltd is a related party as the entity is controlled by a person that has significant influence over the Group. OKYO is also party to a Shared Services agreement with Tiziana whereby OKYO is charged for shared services such as the payroll and rent. As of December 31, 2022 $274k (2021, $42k, 2020: $27k) was owed to Tiziana Life Sciences Ltd in respect of this agreement. The total charged under the shared services agreement in the year ending 31 December 2022 was $125k (2021: $98k, 2020: $20k).
In August 2022, the Group issued a short-term credit facility to OKYO Pharma, a related party, for $2,000k in order to support short term liquidity. The loan is available for a period of 6 months upon first draw-down and carries an interest rate of 16% per annum, with additional default interest of 4% if the loan is not repaid after the 6-month period. As at December 31, 2022 $1,056k had been drawn down against the loan and $19k of interest had been accrued.
Gensignia Lifesciences Inc is a related party as the entity is controlled by a person that has significant influence over the Group. As of December 31, 2022 $ 295k was written off to bad debt after management assessment and deemed the balance to be irrecoverable (2021, $295k, 2020: $348k).
Accustem Sciences Inc is a related party as the entity is controlled by a person that has significant influence over the Group. Accustem is also party to a Shared Services agreement with Tiziana whereby the Company is charged for shared services such as payroll and rent As of December 31, 2022 $72K (2021, ($1,341k) (2020: ($1,346k)) was the net amount owed from Accustem, including shared service costs of $72k.
F-26
22. LEASES
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
| ● | Leases of low value assets; and | |
| ● | Leases with a duration of 12 months or less. |
The Group has leases for its offices. Each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. The Group does not have leases of low value assets. Variable lease payments which do not depend on an index or a rate (such as lease payments based on a percentage of Group sales) are excluded from the initial measurement of the lease liability and asset. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment.
For leases over office buildings and factory premises the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease.
During the course of 2022, the Group entered into a new lease agreement for its London office. Any leases that have a term shorter than 12 months the Group has applied the exemption allowed by paragraph 5a in IFRS16 in respect of short – term leases.
| Right-of-use assets | 31 Dec 2022 | 31 Dec 2021 | ||||||
| $000 | $000 | |||||||
| At 1 January 2022 | - | 357 | ||||||
| Additions | 448 | - | ||||||
| Depreciation | (50 | ) | (133 | ) | ||||
| Disposal of lease | - | (224 | ) | |||||
| Exchange differences | (26 | ) | - | |||||
| 372 | - | |||||||
| Lease Liabilities | 31 Dec 2022 | 31 Dec 2021 | ||||||
| $000 | $000 | |||||||
| At 1 January 2022 | - | 555 | ||||||
| Additions | 448 | - | ||||||
| Interest expense | 6 | 13 | ||||||
| Lease payments | (61 | ) | (174 | ) | ||||
| Exchange differences | (28 | ) | - | |||||
| Disposal of lease | - | (394 | ) | |||||
| 365 | - | |||||||
Lease liabilities are presented in the consolidated statement of financial; position as follows:
| 31 Dec 2022 | 31 Dec 2021 | |||||||
| $000 | $000 | |||||||
| Current | 122 | - | ||||||
| Non-current | 243 | - | ||||||
| 365 | - | |||||||
The lease liabilities are secured by the related underlying assets. Future minimum lease payments as of 31 December 2022 were as follows:
| Minimum lease payment due | ||||||||||||||||||||
| Within 1 year | 1-2 years | 2-5 years | Over 5 years | Total | ||||||||||||||||
| Lease payments | 139 | 139 | 104 | - | 382 | |||||||||||||||
| Finance Charges | (9 | ) | (6 | ) | (2 | ) | - | (17 | ) | |||||||||||
| Net Present Values | 130 | 133 | 102 | - | 365 | |||||||||||||||
The total net cash outflow for leases in the year to 31 December 2022 was $55k..
F-27
23. FINANCIAL COMMITMENTS
The Group’s main financial commitments relate to the contractual payments in respect of its licensing agreements. Due to the uncertain nature of scientific research and development and the length of time required to reach commercialisation of the products of this research and development, pre-clinical, clinical and commercial milestone obligations are not detailed until there is a reasonable certainty that the obligation will become payable.
| ● | Milciclib project research future payments relate to the achievement of clinical milestones or the payment of royalties. |
We are obligated to pay Nerviano the following additional amounts in respect of the first licensed product or service which achieves the stated development milestones:
| (a) | $1,000,000 upon initiation of the first Phase II clinical trial, this is currently being negotiated with BMS. |
| (b) | $4,000,000 upon FPD of the first Phase 3 registration trial in HCC. |
| (c) | $3,600,000 upon first patient enrollment into a Phase II human clinical trial |
| (d) | Upon the first NDA equivalent in: thymic carcinoma, $900,000; HCC, $9,000,000; breast cancer, $15,000,000. |
| ● | Foralumab project – Future payments relate to the achievement of clinical milestones or the payment of royalties. Diligence obligations are payable to BMS/Medarex should the project continue to commercialisation. $750,000 has been recoded as other income in respect of diligence obligations due to Medarex for 2021. |
We are obligated to pay BMS the following additional amounts in respect of the first licensed product or service which achieves the stated development milestones:
| (a) | $300,000 upon enrollment of first patient in a Phase I human clinical trial of the first Phase II Clinical trial, this is currently being negotiated with BMS. |
| (b) | $1,500,000 upon initiation of the first Phase III clinical trial |
| (c) | $2,000,000 upon filing of the first BLA, or equivalent |
| (d) | $2,000,000 upon approval of the first BLA, or equivalent |
We are obligated to pay Brighams Womens Hospital the following hospital milestone payments:
| (a) | $300,000 upon first patient enrollment into a Phase I human clinical trial |
| (b) | $300,000 upon first patient enrollment into a Phase II human clinical trial |
| (c) | $1,500,000 upon first patient enrollment into a Phase III human clinical trial |
| (d) | $3,000,000 upon first commercial sale of a product |
| ● | ACT D - Tiziana will need to make milestone payments of up to $630k depending on the issuance of a US patent from any US patent application in Transferred IP relating to nanoparticle formulations of Act D and upon the successful completion of a Phase II clinical efficacy trial. |
24. CONTINGENT LIABILITIES
The group from time to time is involved in legal proceedings, none of which have given rise to contingent liabilities. Contingencies arising in the ordinary course of business, for which no security has been given, are not expected to result in any material financial loss.
F-28
25. CONVERTIBLE DEBT INSTRUMENT CLASSIFIED AS A LIABILITY
Group and Company Convertible Loan Notes 2016
A convertible loan note of $273k was in existence as detailed in the Admission Document dated 31 March 2014. Proceeds of the subscriptions for the notes are to be used exclusively to finance the Company’s on-going working capital requirements. The terms of the loan note are that the loan notes, plus accrued interest at a rate of 4 per cent above Bank of England base rate per annum, will convert into ordinary shares in the Company at a price of £0.10 per share at the election of the Noteholder any time after the second anniversary of the readmission to AIM on 24 April 2014. The Company considers this to be a Convertible Debt Instrument as detailed in the policy described at note 2 as a result of the fact that the Company is obligated to repay the capital amount and the interest of the loan, and the Noteholder has the right to settle the obligation via a cash settlement and is not limited to settling the obligation in shares in the Company. The loan note was converted during the course of the year to December 31, 2021, with accelerated interest until October 2028 recognized by board approval.
Accounting for the convertible debt instrument
The net proceeds received from the issue of the Convertible Loan Note have been recorded as a debt liability in the balance sheet and the accrued interest charged to the income statement and the debt liability. The loan was converted in November 2021. The liability for the convertible debt instrument is;
Convertible Loan Note Classified as a Liability
| 2022 | 2021 | 2020 | ||||||||||
| Convertible loan notes b/f | - | - | 324 | |||||||||
| Accrued interest | - | - | 163 | |||||||||
| Conversion of loan note | - | - | 487 | |||||||||
| - | - | - | ||||||||||
26. CONVERTIBLE INSTRUMENTS CLASSIFIED AS EQUITY
On October 31, 2019, the Company decided to raise convertible equity finance from supportive existing shareholders. $1,850,000 was raised from the issuance of Convertible Loan Notes. The Loan Notes are short term instruments and carry a coupon of 16% per annum and are convertible (together with all accrued interest) into ordinary shares of nominal value £0.03 each in the capital of the Company at a conversion price of 42p, they are not convertible into cash. The Loan Notes are convertible on the third anniversary of the date of issue of the Notes, or at the election of the noteholder on completion of the next non-qualifying equity financing or on the making of a takeover offer for the Company(as defined in the City Code on Takeovers and Mergers), and such election may be made on an immediate basis or conditional on any such takeover offer being declared, or becoming, unconditional. The warrants issued in connection with the Loan Notes entitle the holders to subscribe for one additional share per conversion share at the same price of 42p. The warrants may be exercised for a period of up to 5 years from their date of issue. The principal amount of the Convertible Equity Instrument that was recorded as in the convertible loan note reserve prior to conversion is as follows:
| 2022 | 2021 | 2020 | ||||||||||
| Par value of Convertible loan notes issued | - | - | 1,850 | |||||||||
| Less: Fair value of warrants issued to note holders | - | - | (545 | ) | ||||||||
| Exchange rate adjustment | - | - | 209 | |||||||||
| - | - | 1,514 | ||||||||||
| Accrued interest | - | - | 348 | |||||||||
| Less: convertible loan note conversion | - | - | (2,523 | ) | ||||||||
| Exercise of warrants | - | - | 661 | |||||||||
| - | - | - | ||||||||||
27. POST BALANCE SHEET EVENTS
On March 20, 2023, the Company announced the grant of 857,500 share options to directors and members of senior management.
In August 2022, the Group issued a short-term credit facility to Okyo Pharma, a related party, for $2,000k in order to support short term liquidity. As at December 31, 2022 $1,056k had been drawn down against the loan and the remaining amount was drawn down by January 17, 2023. The company further extended its loan facility by $500k on February 13, 2023, as of March 2023 the $500k was fully repaid to the company.
F-29
