Annual report and Financial Statements
For the year ended 31 March 2020
Registration number: 65220
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OKYO Pharma Limited
Contents
Management and administration
Strategic report
Directors’ report
Directors’ remuneration report
Statement of Directors’ responsibilities
Independent Auditor’s report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Company statement of financial position
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated statement of cash flows
Company statement of cash flows
Notes to the financial statements
1
OKYO Pharma Limited
Management and Administration
Directors
Registered office
Willy Simon (Chairman, Executive Director)
Dr Kunwar Shailubhai (Non-executive Director)
John Brancaccio (Non-executive Director)
Martello Court
Admiral Park
St. Peter Port
Guernsey
GY1 3HB
Company Secretary
Orrick, Herrington & Sutcliffe (UK) LLP,
107 Cheapside,
London,
EC2V 6DN
Broker
Registrar
Auditor
Legal advisors
Depositary
Optiva Securities Limited,
49 Berkeley Square,
London,
W1J 5AZ
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1DB
Mazars LLP
Tower Bridge House
St Katharine’s Way
London
E1W 1DD
Orrick, Herrington & Sutcliffe (UK) LLP,
107 Cheapside,
London,
EC2V 6DN
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol
BS13 8AE
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OKYO Pharma Limited
Strategic report
Directors
The
OKYO Pharma Limited (“OKYO” or the “Company”) and its subsidiary, (together the “Group”) for the year ended 31
March 2020.
statements
financial
present
report
their
and
the
the
for
Company,
Introduction
OKYO Pharma Limited (LSE: OKYO) is a biopharmaceutical company developing next-generation therapeutics to
improve the lives of patients with inflammatory eye diseases and chronic pain. Our goal is to develop first in class drug
candidates that prevent the disease instead of controlling it, and we achieve this through our collaboration with pioneer
scientists in the field.
Pre-clinical programmes
The Group focuses on novel GPCR based therapeutics for eye diseases of high unmet need and non-opioid analgesics
for chronic pain, where large market potential exists. Specifically, OKYO is developing first-in-class drug candidates for
the treatment of dry-eye, uveitis, ocular and chronic pain.
Dry eye is a multifactorial disease caused by an underlying inflammation resulting in the lack of lubrication and moisture
in the surface of the eye. Symptoms of dry eye include constant discomfort and irritation accompanied by inflammation
of the ocular surface, visual impairment and potential damage to the ocular surface. The disease affects over 35% of the
population aged 50+, with women representing approximately two-thirds of those affected. Prevalence of dry eye is
expected to increase substantially in the near future due to an aging population and dry eye syndrome represents a major
economic burden to public healthcare.
The Group’s therapeutic approach is to develop first-in-class drug candidates that target inflammatory pathways. Using
membrane-tethered ligand technology, we developed our lead candidate OKYO-101. Thus far OKYO-101
has decreased dry eye symptoms in mice with no local irritation in rabbits.
Uveitis is the third leading cause of blindness worldwide. The most common type of uveitis is an inflammation of the iris
called iritis (anterior uveitis). Uveitis can damage vital eye tissue, leading to permanent vision loss. Uveitis is currently
treated with corticosteroid eyedrops and injections that reduce inflammation, however, the long-term use of
corticosteroids causes risk of cataract and glaucoma, requiring close monitoring for their potential side effects.
The Group’s focus is to suppress the inflammation associated with the uveitis using our anti-inflammatory lead compound
OKYO-101.
Allergic conjunctivitis, often called “pink eye” is an inflammation of conjunctiva, caused by an allergic reaction to pollen,
mould, smoke, dust etc. Up to 40% of the global population suffers from allergic conjunctivitis, which is mostly treated
with antihistamines and corticosteroids. However, a significant number of patients do not respond to antihistamines that
leads to overuse of corticosteroids in these patients.
The Group’s focus is to determine the efficacy of OKYO-101 in diminishing ocular redness, the most common symptoms
of allergic conjunctivitis.
Chronic pain is a health crisis due to its high prevalence. More than 20% of adults suffer from chronic pain globally. The
use of opioid medications, such as OxyContin®, Percocet®, Vicodin® and Percodan®, is the most common therapy in
the management of acute and chronic pain. Misuse and overdose of opioid medication has created a worldwide opioid
epidemic.
The Group’s current focus is to develop first-in-class drug candidates as non-opioid analgesics for pain management
without side effects and abuse potential associated with the opioid medications.
Ocular pain, which is typically treated with topical steroid, is highly prevalent in patients suffering from dry eye, uveitis,
glaucoma, intraocular or orbital tumour, trigeminal neuralgias, ocular migraine etc. Damage to the ocular surface
(nociceptive pain) or to the somatosensory nervous system (neuropathic pain) due to the underlying pathogenesis of eye
disease is the main cause of pain.
The Group’s current focus is to further improve the potency of OKYO-201 and develop novel formulations and delivery
methods for the treatment of ocular pain
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OKYO Pharma Limited
Strategic report
R&D Pipeline
Chemerin Project (OKYO-101)
On February 21, 2018, the Group announced that it had identified an opportunity to obtain (via assignment from Panetta
Partners Limited, a related party) a license from On Target Therapeutics LLC and a sub-license from Tufts Medical
Center Inc. These licenses gave the Group the right to exploit all of the intellectual property relating to patent
WO2017014605, being claims in; composition of matter and methodology for treating, inter alia, ocular inflammation, dry
eye disease (DED) and ocular neuropathic pain with Chemerin or a fragment of analog thereof and a lipid entity linked
to the Chemerin or fragment or analog thereof (the ‘‘Chemerin Project’’).
DED, also referred to as ”Keratoconjunctivitis Sicca”, is one of the most common ophthalmic conditions encountered in
clinical practice. DED is a multifactorial disorder caused by the lack of lubrication and moisture, significantly lowering the
quality of life of affected individuals. The evidence from over 40 years of scientific literature suggests inflammation as the
most common underlying cause of the disease. DED represents a major economic burden in public healthcare.
Symptoms of dry eye include constant discomfort and irritation accompanied by visual impairment and potential damage
to ocular surface. Increase in the levels of inflammatory cytokines in both conjunctiva and tears is known to cause the
chronic inflammation associated with the DED. Therefore, development of new therapeutic agents that target
inflammatory pathways is crucial in improving symptoms in DED patients.
The Chemerin receptor (CMKLR1 or ChemR23) is a chemokine like G Protein-Coupled Receptor (GPCR) expressed on
select populations of cells including inflammatory mediators as well as epithelial cells. Activation of CMKLR1 has been
shown to resolve the inflammation in animal models of asthma. We investigated the effects of OKYO-101, an agonist of
CMKLR1, in improving dry eye symptoms using murine dry eye model. We also evaluated ocular tolerance of OKYO-
101 following repeated ocular instillation in rabbits followed by clinical ophthalmic observations. Below is the summary of
OKYO-101 studies during the last year.
• Preclinical studies have been performed to ensure the binding of Chem-9 and other related peptides to human
•
•
primary corneal epithelial cell line (ATCC). The binding assays were developed.
This cell line was used to develop an assay for effect of Chem-9 on cytokine production. Cells were exposed to
high osmolarity, conditions similar to that of the dysfunctional tear film found in dry eye disease, and cytokines
expression was measured with or without Chem-9. This assay is being fine-tuned now and it will be used further
preclinical discovery research.
This cell line was used to develop a cell line-based receptor binding assay, which would be used for
characterization of Chem-9 peptide. Our goal is to determine binding affinity of Chem-9. This assay will also be
used to determine sensitivity of Chem-9 to proteolysis with proteases.
• An HPLC assay was developed which will be used for determination of peptide degradation products following
storage at different temperatures and relative humidity (4oC, 250C and 40oC at 50 and 60 RH). This assay will
be used for IND-enabling stability studies.
• Peptide manufacturing process has been scaled up to produce larger quantities of Chem-9 for stability study.
• A dose ranging study in rabbits was performed to evaluate the effect of Chem-9 on corneal permeability and to
assess the local irritation. Chem-9 was found to be effective in reducing corneal permeability and it shown no
sign of local irritation. Potency of Chem-9 in reducing corneal permeability was comparable to cyclosporine
(Restasis®; Allergan).
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OKYO Pharma Limited
Strategic report
•
Rabbit Ocular tolerance tests using Chem-9 showed no adverse signs such as inflammation, chemosis or
hyperemia and no signs of local irritation.
Future Strategy
In the coming year, we will explore novel OKYO-101 analogs to strengthen the IP portfolio by synthesising additional
peptides. Further, we will explore the use of OKYO-101 analogs for other inflammatory diseases such as Uveitis and
Allergic Conjunctivitis in order to expand our portfolio.
BAM8 (OKYO-201)
More than 20% of adults suffer from chronic pain globally. The use of opioid medications, such as OxyContin®,
Percocet®, Vicodin® and Percodan®, is the most common therapy in the management of acute and chronic pain. Misuse
and overdose of opioid medication has created worldwide epidemic. The economic impact of the opioid crisis costs the
US more than $100 billion per year alone.
MAS-Related G Protein-Coupled Receptors (MRGPR) are expressed mainly in sensory neurons and are involved in the
perception of pain. Activation of MRGPR by BAM8 (Bovine adrenal medulla) inhibits pain by modulating Ca2+ influx.
BAM8 has the potential to be developed as a non-opioid analgesic for pain. OKYO recently acquired lipidated cyclised
BAM8, a promising candidate for the treatment of neuropathic and inflammatory pain, from Tuffs University. Our goal is
to further develop this peptide for long-term chronic pain that will provide an alternative to opioid or cannabinoid-based
therapy without side effects and abuse potential associated with the current therapy.
Future Strategy
During the coming year, we will explore and identify novel BAM8 (OKYO-201) analogs to strengthen the IP portfolio by
synthesising additional peptides. Further, we will explore the use of OKYO-201 analogs for Ocular Pain, Uveitis
associated pain and Neuropathic pain associated with dry eye in order to expand our portfolio. To support the future
development of this portfolio, the Group established a Scientific Advisory Board in August 2020 which will be led by Dr
A. James Khodabakhsh MD.
Business Review
During the financial period under review, the Group reported a total comprehensive loss of £1.2 million (31 March 2019:
£3.8 million). The loss is detailed in the consolidated statement of comprehensive income on page 29.
The Group expenditure on research and development was £0.4m (2019: £2.2m). The 2019 expenditure included the
acquisition of the Chemrein-101 license for £1.9m.
At the end of the year, the Group cash balance stood at £0.2 million (31 March 2019: £0.5 million). A further £ 0.2m in
respect of the £0.4m capital raising on 19th March 2020, shown in “other receivables” at the year-end, was received
shortly post the balance sheet date. The Group successfully raised an additional £3.9m post year end (see below).
Fund raising
In the period, the Group successfully raised funds to further progress its pre-clinical pipeline.
On 26 April 2019, the Group announced that it had raised £400,000 cash by way of a cash Subscription by Panetta for
36,363,636 Subscription Shares.
On 19 March 2020, the Group announced that it had conditionally placed 112,000,000 new ordinary shares of no-par
value in the Company at a placing price of 0.5 pence each to raise £560,000. The placing was split into two tranches
with 75,825,130 shares placed in March 2020, and the balance in May 2020. The cash raised for the first tranche was
£379,125, of which £179,126 was still receivable at the year end.
On 29 May 2020, the Group announced that it had raised £440,000 through the issue of convertible loan notes ("CLNs").
£50,000 of the CLN’s were issued to Panetta Partners Ltd, the ultimate parent company. The CLNs carry an interest rate
of 20% compounding and have maximum term of 4 years. The CLNs convert into ordinary shares at a price of 0.4p per
share and, if converted, the shares will be issued with a warrant attached at an exercise price of 0.4p (with a maximum
life of 5 years from the date of issue of the CLN, regardless of the conversion date).
On 28 July 2020, the Group announced that it had raised £3.5m through the issuance of CLN’s. The CLNs carry an
interest rate of 2.15% compounding and have maximum term of 4 years. The CLNs convert into ordinary shares at a
price of 8.5p per share. Conversion will be subject to shareholder approval and no conversions may take place prior to
28 February 2021.
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OKYO Pharma Limited
Strategic report
Key performance indicators
The Board monitors the Key Performance Indicators (KPIs) that it considers appropriate for the industry and stage of
development of the Group. The Group is a research and development based biotechnology Group concerned with a
number of pre-clinical assets. These assets require sufficient investment to reach defined milestones by which the Group
and its investors can judge the chances of ultimate success and thereby the value of the Group. At this stage of Group
development significant sources of revenue generation are unlikely and the Group is cash consuming. The Group KPIs
are therefore chosen to monitor the progress of the individual scientific programmes, the external market environment
for the potential drugs being developed and the cash requirements of the Group.
Financial KPIs
Cash consumption
The cash position of the business is measured on a continual basis with reference both to the general and administrative
expenses required to run the Group, and more particularly to the cash required for ongoing research, development and
acquisition of the Group’s scientific assets. During 2020, the main use of the Group’s funds was progressing the animal
model trials for Chemerin and BAM8, which was within the budget. The cash consumption, which refers to cash used in
operating activities of the Group, during the year was £1m. Management monitors its cash consumption on a monthly
basis and a cash projection will be presented at every board meeting.
The Group monitors current and projected cash consumption to ensure that there are sufficient funds available to develop
the Group’s scientific assets. The Group maintains a virtual operating model resulting in low cash consumption for general
and administrative expenses during the period.
Non-financial KPIs
Develop appropriate formulation of Chemerin (OKYO-101) for animal studies and conduct stability studies to
ensure that the formulation is stable for at least 28- days.
The Group is working towards this KPI. Additional preclinical IND-enabling studies have been performed and Peptide
manufacturing process has been scaled up to produce larger quantities of Chemerin for stability study. A dose ranging
study in rabbit was performed to evaluate the effect of Chemerin on corneal permeability and to assess the local irritation.
Chemerin was found to be effective in reducing corneal permeability and it shown no sign of local irritation. Rabbit Ocular
tolerance tests using Chemerin showed no adverse signs such as inflammation, chemosis or hyperemia and no signs of
local irritation.
Other Considerations
External (life sciences) market environment
The Group monitors the life sciences market for a number of factors:
• New developments in drug research and development
• New medical treatment paradigms
• Patent filings by third parties pertinent to the Group’s programmes
• Existing and novel drugs in development by third parties
• Healthcare regulation and policy in the major territories
• Private and public financings of life science companies to indicate investor appetite for life science risk
The Group is developing its scientific assets within the European and US territories, but for potential global application.
The environment for life science companies was positive throughout the year.
Principal risks and uncertainties
The Group assesses and monitors the inherent risks in the life sciences industry, as well as other micro and macro-
economic factors that may present risk to the Group’s progression. The Group also considers Group-specific risks such
as research progress, personnel and operational facilities and collaborations.
There are significant risks associated with any life science business. The Board believes that the following risks are the
most significant, however, the risks listed do not necessarily comprise all those associated with an investment in the
Group. In particular, the Group’s performance may be affected by changes in market or economic conditions and in legal,
regulatory and / or tax requirements. The risks listed are not set out in any particular order of priority and this is not an
exhaustive list of risks.
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OKYO Pharma Limited
Strategic report
If any of the following risks were to materialise, the Group’s business, financial condition, results or future operations
could be materially and adversely affected. In such cases, the Group’s share price may decline and an investor may lose
part or all of their investment.
The Board considers that the principal risks and uncertainties facing the Group may be summarised as follows:
•
•
•
•
•
•
Clinical studies fail to generate encouraging data
The Group’s product candidates have not been evaluated in clinical trials and results in the clinic may not be
reproduced in human trials. There is a high degree of failure for product candidates as they progress through clinical
trials and clinical trial data may be interpreted in varying ways which may delay, limit or prevent future regulatory
approvals.
Ability to scale up the Group
Growth may place significant demands on the Group’s management and resources. The Group expects to
experience growth in the number of its employees and the scope of its operations in connection with the continued
development and, in due course, the potential commercialisation of its products. This potential growth could place a
significant strain on its management and operations, and the Group may have difficulty managing this future potential
growth.
Intellectual property risk
The commercial success of the Group depends on its ability to obtain patent protection for its pharmaceutical
discoveries and to preserve the confidentiality of its know-how. There is no guarantee that patent applications will
succeed or be broad enough to provide protection for the Group’s intellectual property rights and exclude competitors
with similar pharmaceutical products. The success of the Group is also dependent on non-infringement of patents,
or other intellectual property rights, held by third parties. Competitors and third parties may hold intellectual property
rights which the Group may not be able to license upon favourable terms, potentially inhibiting the Group’s ability to
develop and exploit its own business. Litigation may be necessary to protect the Group’s intellectual property, which
may result in substantial costs. The Group seeks to reduce this risk by seeking patent attorney advice that patent
protection will be available prior to investing in a project, by seeking patent protection where appropriate, and by
minimising disclosure to third parties.
Competition risk
The Group faces significant competition from pharmaceutical companies. The Group has competitors internationally,
including major multinational pharmaceutical companies, universities and research institutions. In respect of
Chemerin as an indication for the treatment of DED, there are a number of established companies engaged in the
development and marketing of preparations addressing the DED market. In addition, there is a wide range of
products addressing the DED market currently approved and marketed by a number of large and small
pharmaceutical companies.
Funding risk
The Group continues to consume cash resources. The Group only recently committed to its new business and its
chosen product candidates are in the early stages of development and it may be some years until the Group
generates revenue, if at all. The Group remains dependent upon securing funding through the injection of capital
from share issues. The Group may not be able to generate positive net cash flows in the future or attract such
additional funding required at all, or on suitable terms. In such circumstances, the Group’s pre-clinical programmes
may be delayed or cancelled and the business operations curtailed. The Group seeks to reduce this risk through
tight financial control, prioritising programmes which will generate the best returns, and keeping shareholders
informed on progress. Post period-end, the Group raised £3.9 million (before expenses) to fund its pre-clinical
activities and strengthen its balance sheet.
Dependence on key personnel
The loss of one or more of its key personnel could have an adverse impact on the business of the Group.
Furthermore, it may be particularly difficult for the Group to attract and retain suitably qualified and experienced
people, given the competition from other industry participants and the relative size of the Group. The Group has
deliberately pursued a lean headcount policy to conserve financial resources. Failure to continue to attract and
retain such individuals could adversely affect e Group’s ability to conduct and grow its operations effectively. The
Group seeks to reduce this risk by recruiting additional personnel and additionally appropriate incentivisation of
personnel through participation in long term equity incentive schemes.
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OKYO Pharma Limited
Strategic report
Gender of Directors and employees
We recruit individuals who have the skills, experience and integrity needed to perform the roles to make OKYO Pharma
Ltd a successful company. We note that there are no women on the board but that we recruit without regard to sex or
ethnic origin, appointing and thereafter promoting staff based upon merit.
The profile of the Group’s employees at March 31 2020, was as follows:
March 31, 2020
Male
Female
Total
Number or persons who were Directors or
officers of the Group
Number of persons who were other employees
of the Group
Total Directors and employees at March 31,
2020
3
1
4
-
-
-
3
1
4
The lean staffing structure is supported by the outsourcing of some administrative functions and the use of Clinical
Research Organisations.
Environmental matters
We currently outsource our research, development, testing and manufacturing activities. These activities are subject to
various environmental, health and safety laws and regulations, which govern, among other things, the controlled use,
handling, release and disposal of and the maintenance of a registry for hazardous materials and biological materials. If
we or our partners fail to comply with such laws and regulations, we could be subject to fines or other sanctions.
As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our
current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials.
Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur
substantial expenses in connection with future environmental compliance or remediation activities, in which case, our
production and development efforts may be interrupted or delayed.
Greenhouse gas emissions
We are a Group with a small number of employees. We have serviced offices and we currently outsource our research,
development, testing and manufacturing activities. As a result we do not emit greenhouse gases from our own activities,
nor do we purchase electricity, heat or steam for our own use. (Scope 1 and scope 2 disclosures).
However, we are aware that our activities do have an impact on GHG emissions through the work of our partners and
our activities such as business travel. (Scope 3 disclosures). We have discussed with our partners the impact of our
operations on emissions but they have not been able to provide the information for us to provide a meaningful analysis.
Willy Simon
Chairman
14 August 2020
Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3HB
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OKYO Pharma Limited
Director’s report
Directors
The
Company,
OKYO Pharma Limited (“OKYO” or the “Company”) and its subsidiary, together the “Group” for the year ended 31 March
2020.
statements
financial
present
report
their
and
the
the
for
Principal activity
The Group’s focus is to develop drugs for inflammatory dry eye diseases and chronic pain by targeting G protein-coupled
receptors (GPCRs). GPCRs is the largest family of membrane proteins involved in many biological processes. Targeting
GPCR is proven to be an innovative approach for treatment of a wide range of conditions including cardiovascular
disease, cancer and diabetes. Approximately 1/3 of all Food and Drug Administration (FDA) approved drugs target
members of this family.
Results and transfers to reserves
The results and transfers to reserves for the period are set out on pages 29 to 55.
The Group made a total comprehensive loss for the period after taxation of £1,210,745 (31 March 2019: loss £3,759,619).
Dividend
No dividends were declared or paid in the year (2019: £nil).
Directors
The Directors who served during the period and to date are:
Willy Simon
Executive Chairman
Dr Kunwar Shailubhai
Non-Executive director
Leopoldo Zambeletti
Non-Executive director (resigned December 18, 2019)
Gregor MacRae
Non-Executive director (appointed December 18, 2019, resigned June 9, 2020)
John Brancaccio
Non-Executive director (appointed June 9, 2020)
Significant shareholdings
No director has an interest of 3% or more of the ordinary share capital of the company at 31st March 2020.
The following shareholders hold an interest of 3% or more in the Company:
Panetta Partners Ltd
Quilter PLC
Veneto Seed Ventures Ltd
No of Shares
348,458,027
119,770,088
40,000,000
% Holding
51.81%
22.85%
5.95%
Resignations
Non-Executive Directors
On 19 December 2019, the Group announced the resignation of Mr Leopoldo Zambeletti as a non-executive director.
The Group simultaneously announced the appointment of Mr Gregor MacRae as a non-executive director.
On 9 June, 2020, the Group announced the resignation of Mr Gregor MacRae as a non-executive director and the
appointment of a new non-executive director, Mr John Brancaccio.
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OKYO Pharma Limited
Director’s report
Staff policy
The Group is committed to a policy of recruitment and promotion on the basis of aptitude and ability. Applications for
employment by disabled persons are given full and fair consideration having regard to their particular aptitudes and
abilities. Where existing employees become disabled, it is the Group’s policy, wherever possible, to provide continuing
employment under normal terms and conditions and to provide training, career development and promotion wherever
appropriate.
Corporate governance
The Group has implemented a corporate governance structure which is fit for purpose for this stage of the Group’s
lifecycle. This includes a 3-member boards, with two independent Non-Executive Directors and an executive team of the
Finance Director and the Senior Director of Research & Development. The Board has established the corporate
governance values of the Group and has overall responsibility for setting the Group’s strategic aims, defining the business
plan and strategy and managing the financial and operational resources of the Group. The role of the Board is to provide
strategic leadership to the Group within a framework of sensible and effective controls, which enables risk to be assessed
and managed. The Board sets the Group’s strategic aims, ensures that the necessary financial and human resources
are in place for the Group to meet its objectives, and reviews executives’ performance. The Board make certain that its
obligations to its shareholders and others are understood and met.
The Board will hold board meetings periodically as issues arise that require the Board’s attention. Willy Simon, in addition
to acting as Chairman, in conjunction with the Executive team is charged with the day-to-day responsibility for the
implementation of the Group’s strategy. The Executive team is supported by the wider team and external service
providers as required. The Board intends to comply, so far as it is practicable, with certain Main Principles of the UK
Corporate Governance Code. On joining the standard segment of the official list, the company adopted the Corporate
Governance Code.
The Board will be responsible for taking all proper and reasonable steps to ensure compliance with the Corporate
Governance Code.
The Group is subject to the UK City Code on Takeovers and Mergers (the “Takeover Code”) as it is incorporated in
Guernsey. The Takeover Code obliges a person or persons acquiring at least 30 per cent of voting rights in a Group to
which the Takeover Code applies to make an offer to acquire the rest of the voting rights.
The Board has three separate committees as follows:
Audit Committee
The Audit Committee of the Board comprises of John Brancaccio and Willy Simon. It is chaired by Mr Brancaccio, and is
responsible for:
i.
ii.
iii.
iv.
v.
Monitoring the quality of internal controls and ensuring the financial performance of the Group is properly
measured and reported on;
consideration of the Directors’ risk assessment and suggesting items for discussion at the full Board;
receipt and review of reports from the Group's management and auditors relating to the interim and annual
accounts, including a review of accounting policies, accounting treatment and disclosures in the financial
reports;
consideration of the accounting and internal control systems in use throughout the Company and its
subsidiaries; and
overseeing the Group’s relationship with external auditors, including making recommendations to the Board as
to the appointment or re-appointment of the external auditors, reviewing their terms of engagement, and
monitoring the external auditors’ independence, objectivity and effectiveness.
The audit committee meets not less than twice in each financial year and has unrestricted access to the Group's auditors.
Risk and Disclosure Committee
The Risk and Disclosure Committee will operate as part of the Audit Committee and will review the operational risks that
the business faces and monitor and report upon the Company’s obligations under the Disclosure Guidance and
Transparency Rules regarding continuous disclosure.
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Director’s report
Nomination Committee
The Nomination Committee of the Board comprises of Willy Simon and John Brancaccio. It is chaired by Willy Simon,
and is responsible for:
i.
ii.
iii.
iv.
v.
Reviewing succession plans for Directors;
drawing up selection criteria and appointment procedures for Directors;
recommending nominees for election to our board of Directors and its corresponding committees;
assessing the functioning of individual members of our board of Directors and executive officers and reporting
the results of such assessment to the board of Directors; and
developing corporate governance guidelines.
Remuneration Committee
The Remuneration Committee of the Board comprises of Willy Simon and John Brancaccio. It is chaired by Willy Simon,
and is responsible for:
i.
ii.
iii.
The review of the performance of the executive Directors;
recommendations to the Board on matters relating to the remuneration and terms of service of the executive
Directors; and
recommendations to the Board on proposals for the granting of share options and other equity incentives
pursuant to any share option scheme or equity incentive scheme in operation from time to time.
In making their recommendations the Remuneration Committee will have due regard to the interests of the Shareholders
and the performance of the Group.
Requirements of the Listing Rules
The following table provides references to where the information required by the Listing Rule 9.8.4R is disclosed.
Listing Rule requirement
Details of any long-term incentive schemes as required
by LR 9.4.3R
Details of any arrangements under which a Director of the
Group has waived or agreed to waive any emoluments
from the Group or any subsidiary undertaking. Where a
director has agreed to waive future emoluments, details
of such waiver together with those relating to emoluments
which were waived during the period under review.
Directors indemnity
Directors’ remuneration report page 16
No such waivers
The Group’s Articles of Association provide, subject to the provisions of Companies (Guernsey) Law 2008, an indemnity
for Directors and officers of the Group in respect of liabilities they may incur in the discharge of their duties or in the
exercise of their powers, including any liabilities relating to the defence of any proceedings brought against them which
relate to anything done or omitted, or alleged to have been done or omitted, by them as officers or employees of the
Group.
Appropriate Directors and officer’s liability insurance cover is in place in respect of all Group Directors.
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Director’s report
Stakeholder engagement
The Board seeks to understand and consider the views of the Group’s key stakeholders in Board discussions and
decision making.
Key Stakeholders and concerns
Board Considerations
Key Outcomes
Employees
Our present and future employees are
key for the future success of the
business.
Staff turnover has been very low.
Executive Directors update the Board
with details of employee changes,
concerns and recruitment prospects. An
open, collaborative working
environment with attractive
remuneration packages aligns
employees’ with shareholders’ goals.
Shareholders
Our shareholders have been highly
supportive. We are actively encouraging
retention of their
investment whilst
trying to secure new Shareholders and
funding.
The Board is in regular communication
with its Shareholders via press releases,
Annual and Interim Report.
The Group meets periodically with its
Shareholders. Summary of these
events are below:
•
•
AGM, 2 March 2020
Regular RNS
announcements
Business Partners
We have worked closely with our
suppliers to set up new commercial
and development agreements .
The Board is aware of the importance of
maintaining good relationships with key
suppliers while safeguarding the Group’s
assets. It receives regular updates on main
supply agreements.
New supplier agreements above a material
threshold need to be approved by at least
contracts
two Directors.
generally include milestones and milestone
related payments.
Research
Research and Development
Community
The Group seeks to interact with the research
and development community.
The Board seeks
to support as many
interactions with research and development
community as possible
regular
meetings and continuous collaborations.
through
Interaction with
the
development community.
research and
Environment
The Group is conscious of the need to
protect the environment.
Reputation
Maintaining a strong reputation and
acting within laws and regulations
impacts the Group’s relationships with
all stakeholder
.
Relationship with Shareholders
OKYO Pharma’s operations are relatively
During the year, employees reduced
low in their impact on the environment.
Policies and procedures approved by the Board
are concentrated on maintaining the strong
reputation of the Group within its employees,
Shareholders, suppliers, regulators and other
key stakeholders.
their travel wherever reasonably
practical, using virtual and telephone
conferencing facilities instead.
OKYO Pharma continuously monitors
and
regulatory
that any
developments
issues are being addressed in decision
making.
to ensure
assesses
all
The Group endeavours to maintain a two-way communication between both institutional and private investors, this is to
resolve any queries as quickly as possible and to meet and understand the needs and expectations of the shareholders.
The Chairman regularly updates the Group’s major shareholders on the financial and operational performance as well
as the Group’s future strategies. The Chairman ensures their views are communicated with the Board. The Board
recognises it is accountable to shareholders and ensures that their views are taken into account in agreeing the Group’s
strategy and other operational matters.
The Board recognises the importance of annual AGMs, as this is an opportunity to meet private investors, the Directors
are available to address any issues immediately following the AGM. If the voting at the AGM is not as the Board expected,
the Directors will engage with these shareholders to understand and address their concerns. The company secretary is
the first point of contact for such matters.
The Group’s website provides financial information as well as historical news releases and matters relating to corporate
governance. Annual and interim results are communicated by regulatory news services as are ad hoc operational and
regulatory releases.
In addition to recognising the importance of the Group’s relationship with the shareholders, the Board acknowledges the
significance of its employees and consistently evolves to align with their well-being.
12
OKYO Pharma Limited
Director’s report
Internal control and risk management
The Directors are responsible for the Group’s internal control and reviewing its effectiveness. The Directors confirm that
the Board has acknowledged this responsibility. The Directors confirm that there is an ongoing process for reviewing
internal controls and effectiveness as well as identifying, evaluating, and managing the significant risks facing the Group
and its subsidiaries. This process has been in place from 1 January 2017 and continues to be in place, the internal
controls are reviewed on a regular basis.
The Group’s system of internal control is designed to provide the Directors with reasonable assurance that the Group’s
assets are safeguarded, that transactions are authorised and properly recorded, and that material errors and irregularities
are either prevented or would be detected within a timely period. However, no system of internal control can eliminate
the risk of failure to achieve business objectives or provide absolute assurance against material misstatement or loss.
The key elements of the internal control system in operation are:
•
•
The Board meets regularly with an agenda of matters reserved for their decision and has put in place an
organisational structure with clear lines of responsibility defined and with appropriate delegation of authority.
The Board receives periodic updates from both the Audit and Remuneration Committees.
The Management team is responsible for the identification and evaluation of significant risks and for the design,
implementation and monitoring of appropriate internal controls, including, but not limited to, financial and
computer systems, business operations, and compliance.
• Management regularly reports to the Board on the key risks inherent in the business and on the way in which
•
•
•
these risks are managed.
There are established procedures for planning, approving, and monitoring large expenditures, including capital
expenditures, as well as processes for monitoring the Group’s financial performance.
A comprehensive forecasting process is completed prior to each board meeting, which is reviewed and
approved by the Board. Detailed management accounts are produced on a monthly basis, with all significant
variances investigated promptly. The management accounts are reviewed and commented on a monthly basis
by the management team.
The Group maintains appropriate insurance cover, including in respect of actions taken against the Directors
because of their roles, as well as against material loss or claims against the Group. The insured values and
type of cover are comprehensively reviewed on an annual basis.
Whistle-blowing
The Group has formal arrangements in place to facilitate “whistle-blowing” by employees. If a complaint is made, the
content is sent anonymously by email to the Group’s Compliance Officer, so that appropriate action can be taken.
Employment
The Group endeavours to appoint employees with appropriate skills, knowledge and experience for the roles they
undertake and thereafter to develop, incentivise and retain staff. The Board recognises its legal responsibility to ensure
the well-being, safety and welfare of the Group's employees and maintain a safe and healthy working environment for
them and our visitors. If an employee has a concern about unsafe conditions or tasks, they are encouraged to report
their concerns immediately to their manager.
Diversity Policy
The Group is fully committed to the elimination of unlawful and unfair discrimination and values the
differences that a diverse workforce brings to the organisation. The Group endeavours to not discriminate
because of age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race (which
includes colour, nationality and ethnic or national origins), religion or belief, sex or sexual orientation. The Group will
undertake an annual review of its policies and procedures to establish its position about compliance and best practice
and monitor and promote a healthy corporate culture.
COVID-19
We remain cognisant of the potential impact of coronavirus (COVID-19) on our operations and have taken the steps
necessary to maintain the integrity of the Group's assets and the health and wellbeing of our employees. We believe that
COVID-19 will not have a material impact on the capability of our research partners ability to commence the next stage
of our pre-clinical pipeline. Although it remains unclear at this stage what the medium and long term impact will be on
the wider economy and how this will affect the Group, the Group is well financed, resilient and well positioned to weather
any financial downturn occurring as a result of the outbreak. Indeed, the Group has raised additional funds post the year
end.
13
OKYO Pharma Limited
Director’s report
Disclosure of information to auditor
So far as the Directors are aware, there is no relevant audit information of which the Group’s auditor is unaware, and
they have taken all steps that they ought to have taken as Directors in order to make themselves aware of any relevant
audit information and to establish that the Group’s auditors are aware of that information.
Auditor
Mazars LLP have indicated their willingness to continue in office as auditor for another year. In accordance with section
257 of the Companies (Guernsey) Law 2008, a resolution proposing that Mazars LLP be reappointed as auditors of the
Group will be put to the Annual General Meeting.
Future developments
The Strategic Report on pages 3 to 8 provides a summary of future developments of the Group.
Research and development activities
The research and development activities of the Group are described in Strategic Report on pages 3 to 8.
Post balance sheet events
Events after the year end are outlined in note 23 to the financial statements.
Financial instruments
The use of financial instruments is considered by the Board and the exposure of the Group to price, credit, liquidity and
cash flow risks are considered. Details of the risks and mitigation can be found in the Strategic Report on pages 3 to 8,
and at note 2 to the financial statements.
Going concern
As stated in Note 2, the Board has considered the Group’s ability to continue as a going concern.
The directors have prepared financial forecasts to estimate the likely cash requirements of the Group over the next twelve
months, given its stage of development and lack of recurring revenues. In preparing these financial forecasts, the
directors have made certain assumptions with regards to the timing and amount of future expenditure over which they
have control.
After due consideration of these forecasts and current cash resources, the directors consider that the Company and the
Group have adequate financial resources to continue in operational existence for the foreseeable future (being a period
of at least twelve months from the date of this report), and for this reason, the financial statements have been prepared
on a going concern basis.
By order of the Board
Willy Simon
Director
14 August 2020
Martello Court
Admiral Park
St. Peter Port
Guernsey
GY1 3HB
14
OKYO Pharma Limited
Directors’ Remuneration report
Letter from the Chair of the Remuneration Committee
Dear Shareholders,
On behalf of the Remuneration Committee, I am pleased to present our Directors’ Remuneration Report for the
year ended March 31, 2020 which will be subject to an advisory vote under a resolution to be proposed at the 2020
Annual General Meeting (“AGM”). Shareholders approved the Remuneration Policy at the 2019 AGM.
I hope that you will be supportive of our remuneration approach and will vote in favour of the Directors'
Remuneration Report.
Key activities and decisions in the year ended March 31 2020:
The Board decided that no amendments were to be made to executive and non-executive compensation, so no
remuneration committee meetings were required during the year.
The Group has made progress during the financial year in the pre-clinical development on Chemerin and BAM8.
Yours faithfully,
Willy Simon
Chair of the Remuneration Committee
14 August, 2020
15
OKYO Pharma Limited
Directors’ Remuneration report
Single total figure of remuneration of each Director
The Directors received the following remuneration for the years ended 31 March 2020 and 31 March 2019:
Year ended March 31
2020
Executive
Willy Simon
Non - Executive
Kunwar Shailubhai
Leopoldo Zambeletti(1)
Gregor MacRae(2)
Total
Year ended March 31
2019 £’000
Executive
Willy Simon
Non - Executive
Kunwar Shailubhai
Leopoldo Zambeletti
Total
Base Salary
£’000
Share-based
payment (3)
£’000
2020 Total
£’000
32
31
27
6
96
3
24
5
-
32
35
55
32
6
128
Base Salary
£’000
Share-based
payment (3)
£’000
2019 Total
£’000
32
30
37
99
3
28
6
37
35
58
43
136
(1) Resigned 18th December 2019.
(2) Resigned 9th June 2020
(3) Share based payments represent the fair value of options that vested during the years ended March 31
2019 and March 31 2020.
A £510 payment was made towards a pension plan for our executive and non- executive Directors.
Statement of Directors’ shareholding and share interests
The table below details the total number of shares owned (including their beneficial interests), the total number of
share options held and the number of share options vested but not yet exercised as at March 31 2020:
Year ended March 31
2020
Executive
Willy Simon
Non - Executive
Kunwar Shailubhai
Leopoldo Zambeletti
Gregor MacRae
Shares
Options – not yet
vested
Options – vested
not yet exercised
Total (Shares and
options)
307,100
1,000,000
1,000,000
2,307,100
-
-
-
8,250,000
1,750,000
-
8,250,000
1,750,000
-
16,500,000
3,500,000
-
Total
307,100
11,000,000
11,000,000
22,307,100
16
OKYO Pharma Limited
Directors’ Remuneration report
The interests of the Directors in the Company’s share options are as follows:
Director
Granted
Date of grant Price
per
Vesting Criteria
Expiry Date
Willy Simon
2,000,000
6 July 2018
share £
0.045
Kunwar
Shailubhai
Leopoldo
Zambeletti
16,500,000
6 July 2018
0.045
3,500,000
6 July 2018
0.045
25 per cent. Will vest on
of
each
appointment.
anniversary
6 July 2025
25 per cent. Will vest on
of
each
appointment.
anniversary
6 July 2025
25 per cent. Will vest on
each
of
appointment.
anniversary
6 July 2025
Total Shareholder Return
The graph below shows the Company’s performance, measured by total shareholder return, of the Company
compared to the FTSE All share pharmaceuticals and Biotechnology index for the year ended March 31, 2020.
Total Shareholder Return
(Source: Investing.com)
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
Pharma & Biotech sector
OKYO TSR
Payments to past Directors (audited)
In the period there were no payments to past Directors.
Payments for loss of office (audited).
No payments were made to Directors for loss of office in the period.
17
OKYO Pharma Limited
Directors’ Remuneration report
Structure and role of Remuneration Committee
The Remuneration Committee of the Board comprises of Willy Simon and John Brancaccio. It is chaired by Willy
Simon, and is responsible for:
i.
ii.
iii.
The review of the performance of the executive Directors;
recommendations to the Board on matters relating to the remuneration and terms of service of the
executive Directors; and
recommendations to the Board on proposals for the granting of share options and other equity incentives
pursuant to any share option scheme or equity incentive scheme in operation from time to time.
In making their recommendations the Remuneration Committee will have due regard to the interests of the
Shareholders and the performance of the Company.
Directors' remuneration policy
The Company's policy is to maintain levels of remuneration sufficient to attract, motivate and retain senior
executives of the highest calibre who can deliver growth in shareholder value. Executive Directors’ remuneration
currently consists of basic salary and benefits. An annual bonus, and long-term incentives will be introduced in line
with the Company's expansion. The Company will seek to strike an appropriate balance between fixed and
performance-related reward so that the total remuneration package is structured to align a significant proportion to
the achievement of performance targets, reinforcing a clear link between pay and performance. The performance
targets for staff, senior executives and the Executive Directors will be aligned to the key drivers of the business
strategy, thereby creating a strong alignment of interest between staff, Executive Directors and shareholders.
The Remuneration Committee will continue to review the Company's remuneration policy and make amendments,
as and when necessary, to ensure it remains fit for purpose and continues to drive high levels of executive
performance and remains both affordable and competitive in the market.
The policy, as outlined below, is to obtain shareholder approval at the 2019 AGM. Upon approval, the company will
continue to put forward the remuneration policy to be approved every three years, however the company will update
it when necessary and will be sent for approval before the three-year approval.
Policy Table
Element of reward - Base Salary
Purpose and Link to
Strategy
To provide fixed remuneration to
■
■
help recruit and retain key individuals;
reflect the individual's experience, role and contribution within the Company.
Operation
The Remuneration Committee considers a number of factors when setting salaries,
including:
■
■
■
■
scope and complexity of the role
the skills and experience of the individual
salary levels for similar roles within the industry
pay elsewhere in the Company
Performance
conditions
Salaries are reviewed, but not necessarily increased, annually.
None.
Maximum opportunity Salary increases are normally made with reference to the average increase for the
wider Company. The Board retains discretion to make higher increases in certain
circumstances, for example, following an increase in the scope and/or responsibility
of the role or the development of the individual in the role or by benchmarking.
18
OKYO Pharma Limited
Directors’ Remuneration report
Element of reward- Other benefits
Purpose and Link to
Strategy
To provide a basic benefits package.
Operation
The Company provides Executive Directors with medical insurance for themselves and
their family.
Performance conditions None.
Maximum opportunity Maximum opportunity will be whatever it costs to provide the benefit.
Element of reward - Annual Bonus
Purpose and Link to
Strategy
To incentivise and reward the achievement of annual financial, operational and individual
objectives which are key to the delivery of the Company's short-term strategy.
Operation
Performance conditions
•
•
Executive Directors and staff are eligible to participate in a discretionary bonus
plan.
The Remuneration Committee will determine on an annual basis the level of
deferral, if any, of the bonus payment into Company shares.
• Maximum bonus levels and the proportion payable for on target performance are
considered in the light of market bonus levels for similar roles among the
industry sector.
•
•
•
•
•
•
Bonuses are not pensionable.
The Remuneration Committee sets targets which require appropriate levels of
performance, considering internal and external expectations of performance.
As soon as practicable after the year-end, the Remuneration Committee meets
to review performance against objectives and determines payout levels.
From 2019 in terms of bonus targets a balanced scorecard approach will be
operated which focuses on a mixture of strategic, operational, financial and
non-financial metrics.
At least 50% of the award will be assessed against Company metrics including
operational, financial and non-financial performance. The remainder of the award
will be based on performance against individual objectives.
A scale between 0% and 100% of the maximum award is paid dependent on the
level of performance.
Maximum opportunity The maximum potential bonus entitlement for Executive Directors under the plan will be
equal to 50% of the base salary.
19
OKYO Pharma Limited
Directors’ Remuneration report
Element of reward - Long Term Incentive Plan (LTIP)
Purpose and Link to
Strategy
•
•
To incentivise and reward the creation of long-term shareholder value.
To align the interests of the Executive Directors with those of shareholders.
Operation
•
Under the terms of the non-tax advantaged share option plan (the "Share Option Plan"),
the Remuneration Committee may issue options over shares up to 15% of the issued share
capital of the Company from time to time. Directors and employees are eligible for awards.
The exercise of options may be subject to the satisfaction of such performance
conditions, if any, as may be specified and subsequently varied and/or waived by the
Remuneration Committee.
The Remuneration Committee determines on an annual basis, and from time to time
as needed (i.e., new employee or promotion), the type of awards to be granted to
executives and other employees under the plan.
•
Performance conditions Vesting of the awards is dependent on financial, operational and/or share price measures,
as set by the Remuneration Committee, which are aligned with the long-term strategic
objectives of the Company. The relevant performance conditions will be set by the
Remuneration Committee on the award of each grant but will include a mixture of strategic,
operational, financial and non-financial metrics.
Notes on Table
The Remuneration Committee may make minor amendments to the Policy set out above for regulatory, exchange
control, tax or administrative purposes or to take account of a change in legislation without obtaining shareholder
approval for that amendment. Any major changes will be put to a shareholder vote at the next AGM or an EGM.
The Policy will be subject to a binding Shareholder vote at the 2019 AGM and, if approved, would be expected to
remain in force until the AGM in 2022 with no requirement to vote again on the Policy in the intervening years
provided that no changes are proposed.
Policy on payment for loss of office
In the event that the employment of an Executive Director is terminated, any compensation payable will be
determined in accordance with the terms of the service contract between the Company and the employee, as well
as the rules of any incentive plans. Notice periods are set at up to a maximum of twelve months by either party.
The Company considers a variety of factors when considering leaving arrangements for an Executive Director,
including individual and business performance, the obligation for the Director to mitigate loss (for example by gaining
new employment) and other relevant circumstances (e.g. ill health).
If the Executive Director's employment is terminated by the Company, the Executive Director may receive a time
pro-rated bonus to the period worked subject to performance in that period, subject to the Remuneration
Committee's discretion.
20
OKYO Pharma Limited
Directors’ Remuneration report
The treatment of outstanding share awards is governed by the relevant share plan rules. The following table
summarises the leaver provisions of share plans under which Executive Directors may currently hold awards.
Leaving Event
Time period
Conditions
Injury, disability, ill-health,
redundancy
Option may be exercised within
3 months of leaving.
Exercise and time vesting provisions per the
option certificate.
Death
Option may be exercised by
personal representatives within
12 months of death.
Board can waive if satisfied that such waiver
is not rewarding failure.
Exercise and time vesting provisions per the
option certificate.
Board can waive if satisfied that such waiver
is not rewarding failure.
Resignation or any other
not mentioned
reason
above.
Lapse of option unless
If allowed to exercise;
Board exercises discretion to
allow exercise of option in which
case within 3 months of
leaving/notice.
Exercise and time vesting provisions per the
option certificate.
Board can waive if satisfied that such waiver
is not rewarding failure.
21
OKYO Pharma Limited
Statement of Director’s responsibilities
The Directors are responsible for preparing the Annual Report and financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they
are required to prepare the financial statements in accordance with International Financial Reporting Standards
as adopted by the EU and applicable law.
Under company law, the Directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and the Company, and of its profit or loss for that
period. In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and estimates that are reasonable, relevant and reliable;
•
state whether applicable accounting standards have been followed, subject to any material departures;
disclosed and explained in the financial statements;
assess the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and
use the going concern basis of accounting unless they either intend to liquidate the Group or to cease
operations or have no realistic alternative but to do so.
•
•
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the
Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and
enable them to ensure that its financial statements comply with the Companies (Guernsey) Law, 2008. They are
responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Group’s website. Legislation in the Guernsey governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The Directors who hold office at the date of approval of this Directors’ Report confirm that so far as they are
aware, there is no relevant audit information of which the Group’s auditor is unaware, and that each Director has
taken all the steps he ought to have taken as a director to make himself aware of any relevant audit information
and to establish that the Company’s auditor is aware of that information.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
•
•
•
the financial statements, prepared in accordance with the relevant financial reporting framework, give a true
and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings
included in the consolidation taken as a whole;
the strategic report includes a fair review of the development and performance of the business and the
position of the Group and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
the annual report and financial statements, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Group's position and performance,
business model and strategy.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s position and performance, business model and
strategy.
Willy Simon
Chairman
14 August 2020
22
OKYO Pharma Limited
Auditors report
Independent Auditor's Report to the members of OKYO Pharma Limited
Opinion
We have audited the financial statements of OKYO Pharma Limited (the ‘Parent Company’) and its subsidiary (the
‘Group’) for the year ended 31 March 2020 which comprise the Consolidated Statement of Comprehensive Income; the
Consolidated and Company Statements Of Financial Position; the Consolidated and Company Statements Of Changes
In Equity; the Consolidated and Company Statements of Cash Flows, and notes to the financial statements, including a
summary of significant accounting policies. The financial reporting framework that has been applied in their preparation
is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s
affairs as at 31 March 2020 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance with the provisions of the Companies (Guernsey) Law
2008; and
the financial statements have been prepared in accordance with the requirements of the Companies
(Guernsey) Law 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard,
as applied to SME listed entities and public interest entities and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to Note 2 in the financial statements, which sets out the Directors’ view on the Group and Parent
Company’s requirement to secures sufficient investment to fund their pre-clinical activity. As stated in Note 2, these
events or conditions, along with the other matters as set forth in Note 2, indicate that a material uncertainty exists that
may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Explanation of material uncertainty
As detailed in Note 2 and the Strategic Report, the Group and Parent Company are in the early stages of development
and further funding will be required within the foreseeable future to continue their development programmes and
ongoing business operations. As the Directors have reasonable expectation that the Group and Parent Company will
raise the additional funding, they have prepared the financial statements on a going concern basis. However, until the
Group and Parent Company secures sufficient investment to fund their clinical trials and ongoing working capital
requirements, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on
the Group’s and Parent Company’s ability to continue as a going concern.
23
OKYO Pharma Limited
Auditors report
What audit procedures we performed
In forming our conclusion that there is a material uncertainty related to going concern, we evaluated the Directors’
going concern assessment as follows:
• We obtained and reviewed management’s forecasts (including a cash burn analysis) for a period no less than
18 months from the date of signing the financial statements. Accordingly, our analysis covered the period
August 2020 through January 2022;
• We discussed with management the basis for the forecasts and reviewed management’s assumptions used
within the cash burn analysis. We obtained further support for assumptions where deemed necessary;
• We performed a sensitivity analysis on management’s forecasts;
• We reviewed all post year-end Board Meeting minutes and Regulatory News Service (RNS) announcements
via the London Stock Exchange (LSE) website for the purposes of monitoring post year-end fundraising
activities, progress of clinical trials, and other noteworthy events and occurrences that could impact our going
concern conclusion;
• We have considered the post year-end fund raisings;
• We have discussed and challenged management on their assessment of the potential impact of COVID-19;
and
• We reviewed the disclosures with respect to going concern in the financial statements to ensure they are fair
and balanced.
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
In addition to the matter described in the “Material uncertainty related to going concern” section of our report, we
summarise below the Key Audit Matters we addressed in forming our audit opinion above, together with an overview of
the principal audit procedures performed to address each matter and, where relevant, key observations arising from
those procedures.
These matters, together with our findings, were communicated to those charged with governance through our Audit
Completion Report.
Key Audit Matter
How our audit responded to the Key Audit Matter
Valuation and accounting of options and warrants
(Parent Company)
Our response
The Group’s accounting policy in respect of options,
warrants and share-based payments are set out in
the accounting policy notes on page 39 and 40.
The Parent Company operates share-based
payments arrangements to remunerate directors and
employees in the form of share options. It also issues
options in lieu of fees to key suppliers and
collaborators. Additionally, warrants were granted in
July 2018 as a part of the acquisition of the Chemerin
project to the underlying scientific founders who will
continue to be involved with the project as
consideration. These options were treat as share-
based payments under IFRS 2. Subsequently,
additional warrants were granted as incentives
attached to the shares issued during the year ended
31 March 2020. These warrants are exercisable over
a five year period. The issue of these warrants were
treated as transactions between the Company and
some of its shareholders in their capacity as owners.
Our audit procedures over options and warrants
included but were not restricted to:
• We obtained management’s valuation of
options and warrants based on an
appropriate model and reviewed for
completeness and accuracy of information
used;
• We reviewed the options and warrants
calculations, and validated the inputs to the
model;
• We performed an assessment of the
reasonableness of the assumptions and
appropriateness of the model used;
• We obtained and reviewed the option and
warrant agreements for all current year
issuances and determined whether or not
they were to be accounted for under the
relevant accounting standards;
• We reviewed Regulatory News Service
(RNS) announcements per the London
24
OKYO Pharma Limited
Auditors report
Due to the complexity in the calculation and
judgement involved in underlying assumptions for the
valuation of share options and warrants, there is a
risk that these instruments are not accounted for
correctly.
Stock Exchange website for purposes of
concluding the completeness and accuracy
of current year equity instrument issuances
and/or other equity related transactions; and
• We reviewed the disclosure in the financial
statements to ensure disclosure is sufficient
and appropriate.
Our observations
Our audit identified errors in the accounting for
warrants and share options in the year ended 31
March 2020. Management concurred with our
findings and appropriate adjustments were made in
the financial statements.
Following the above adjustment, we are able to
conclude that warrants and share options were all
appropriately accounted for under the relevant
accounting standards.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in
evaluating the effect of misstatements, both individually and on the financial statements as a whole. Based on our
professional judgement, we determined materiality for the financial statements as a whole as follows:
Group and Parent Company materiality
Group - £63,095
Parent Company -
£63,095
How we determined materiality
In determining our materiality, we considered financial metrics which we believed to be relevant. We believe that
the benchmark of losses is most appropriate for both Group and Parent Company as the users of the accounts
were likely to be most concerned with expenditure on research and development and the consequential annual
and accumulated losses of the Group and Parent Company and the Group and Parent Company’s ability to
continue as a going concern.
Rationale for benchmark applied
Having considered factors such as the Group and Parent Company’s main market listing on the London Stock
Exchange, we determined materiality at 5.0% of Group and Parent Company’s losses for the year.
Performance materiality – Group and Parent Company
We performed our audit procedures using a lower level of materiality – termed
‘performance materiality’ – which is set to reduce to an appropriate level the
probability that the aggregate of uncorrected and undetected misstatements in the
financial statements exceeds materiality for the financial statements as a whole.
Having considered factors such as the Group’s control environment, we set
performance materiality at 70% of overall materiality.
Reporting threshold – Group and Parent Company
We agreed with the Audit Committee that we would report to that committee all
identified corrected and uncorrected audit differences in excess of this level,
together with differences below that level that, in our view, warranted reporting on
qualitative grounds.
Component performance materiality
All components have been audited by the group engagement team. Materiality is
allocated to components based on size and risk. We performed our audit of the
only subsidiary of the Group (OKYO Pharma Inc.) based on the allocated
materiality which is below group performance materiality.
Group - £1,893
Parent Company £1,893
Group - £44,167
Parent Company - £44,167
£21,376
25
OKYO Pharma Limited
Auditors report
An overview of the scope of our audit, including extent to which the audit was considered capable of detecting
irregularities, including fraud
As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the financial
statements, whether due to fraud or error, and then designed and performed audit procedures responsive to those
risks. In particular, we looked at where the Directors made subjective judgements such as making assumptions on
significant accounting estimates.
We gained an understanding of the legal and regulatory framework applicable to the Group and Parent Company, the
structure of the Group and the Parent Company and the industry in which it operates. We considered the risk of acts by
the Group and Parent Company which were contrary to the applicable laws and regulations including fraud. We
designed our audit procedures to respond to those identified risks, including non-compliance with laws and regulations
(irregularities) that are material to the financial statements.
We focused on laws and regulations that could give rise to a material misstatement in the financial statements, including,
but not limited to, the Companies (Guernsey) Law 2008. We tailored the scope of our group audit to ensure that we
performed sufficient work to be able to give an opinion on the financial statements as a whole. We used the outputs of a
risk assessment, our understanding of the Parent Company and group’s accounting processes and controls and its
environment and considered qualitative factors in order to ensure that we obtained sufficient coverage across all financial
statement line items.
In identifying and assessing risks of material misstatement in respect to irregularities including non-compliance with laws
and regulations, our procedures included but were not limited to:
•
•
•
at planning stage, we gained an understanding of the legal and regulatory framework applicable to the Group
and Parent Company, the structure of the group, the industry in which it operates and considered the risk of
acts by the Group and Parent Company which were contrary to the applicable laws and regulations;
we discussed with the directors the policies and procedures in place regarding compliance with laws and
regulations; we discussed amongst the engagement team the identified laws and regulations, and remained
alert to any indications of non-compliance; and
during the audit, we focused on areas of laws and regulations that could reasonably be expected to have a
material effect on the financial statements from our general commercial and sector experience and through
discussions with the directors (as required by auditing standards), from inspection of the Parent Company’s
and Group’s regulatory and legal correspondence and review of minutes of directors’ meetings in the year.
Our procedures in relation to fraud included but were not limited to:
•
•
•
•
inquiries of management whether they have knowledge of any actual, suspected or alleged fraud;
gaining an understanding of the internal controls established to mitigate risk related to fraud;
discussion amongst the engagement team regarding risk of fraud such as opportunities for fraudulent
manipulation of financial statements, and determined that the principal risks were related to posting manual
journal entries to manipulate financial performance, management bias through judgements and assumptions
in significant accounting estimates, and significant one-off or unusual transactions; and
addressing the risk of fraud through management override of controls by performing journal entry testing.
The primary responsibility for the prevention and detection of irregularities including fraud rests with both those charged
with governance and management. As with any audit, there remained a risk of non-detection of irregularities, as these
may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.
Our tests included, but were not limited to, obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free from material misstatement,
whether caused by irregularities including fraud or error, review of minutes of directors’ meetings in the year and enquiries
of management. As a result of our procedures, we did not identify any Key Audit Matters relating to irregularities, including
fraud.
As a result of our procedures, we did not identify any “Key Audit Matters” relating to irregularities. The risks of material
misstatement that had the greatest effect on our audit, including fraud, are discussed under “Key Audit Matters” within
this report.
Our Group audit scope included an audit of the Group and Parent Company financial statements of Okyo Pharma Limited.
Based on our risk assessment, all entities within the group were subject to full scope audit and was performed by the
group audit team.
At the Parent Company level we also tested the consolidation process and carried out analytical procedures to confirm
our conclusion that there were no significant risks of material misstatement of the aggregated financial information.
26
OKYO Pharma Limited
Auditors report
Other information
The directors are responsible for the other information. The other information comprises the information included in the
Annual Report other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies (Guernsey) Law 2008
requires us to report to you if, in our opinion:
the Parent Company has not kept proper accounting records; or
the financial statements are not in agreement with the accounting records; or
•
•
• we have not received all the information and explanations, which to the best of our knowledge and belief are
necessary for the purpose of our audit.
Responsibilities of Directors
As explained more fully in the Directors' Responsibilities Statement set out on page 22, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
27
OKYO Pharma Limited
Auditors report
Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed by the Board of Directors with effect from 1
April 2018 to audit the financial statements for the year ended 31 March 2019 and subsequent financial periods. The
period of total uninterrupted engagement is two years, covering the years ended 31 March 2019 to 2020.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent
Company and we remain independent of the Group and the Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Use of the audit report
This report is made solely to the Company’s members, as a body, in accordance with Section 262 of the Companies
(Guernsey) Law 2008. Our audit work has been undertaken so that we might state to the Parent Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent
Company’s members as a body for our audit work, for this report, or for the opinions we have formed.
Robert Neate
for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditors
Tower Bridge House
St Katharine’s Way
London
E1W 1DD
14 August 2020
28
OKYO Pharma Limited
Consolidated statement of comprehensive income
for the year ended 31 March 2020
Continuing operations
Income
Operating expenses
Research
Operating expenses
Total operating loss
Finance expense
Finance income
Impairment
Loss before income tax
Taxation
Loss for the year
Notes
5
10
10
19
9
Other comprehensive income/(loss) - foreign
currency translation
Total comprehensive loss for the period
Basic and diluted loss per share
20
The notes on pages 36 to 55 form an integral part of these financial statements.
The Directors consider that all results derive from continuing activities.
Year ended
31 March 2020
£
Year ended
31 March 2019
(restated)
£
-
-
(407,478)
(799,503)
───────
(1,206,981)
(911)
37,850
(104,342)
───────
(1,274,384)
60,000
───────
(1,214,384)
3,639
───────
(1,210,745)
═══════
(0. 00)
═══════
(2,333,765)
(1,146,612)
───────
(3,480,377)
-
-
(278,347)
───────
(3,758,724)
-
───────
(3,758,724)
(895)
───────
(3,759,619)
═══════
(0. 01)
═══════
29
OKYO Pharma Limited
Consolidated statement of financial position
As at 31 March 2020
Notes
12
21
13
19
9
11
16
16
21
14
19
21
Property, plant, and equipment
Right of use asset
Total non-current assets
Cash and cash equivalents
Trade and other receivables
Related party receivable
Taxation receivable
Total current assets
Total assets
Equity
Share premium
Share options reserve
Warrants reserve
Foreign currency translation reserve
Retained deficit
Shareholders’ equity
Lease liability non-current
Total non-current liabilities
Trade and other payables
Related party payable
Lease Liability current
Total current liabilities
Total current and non-current liabilities
Total equity and liabilities
At
31 March 2020
£
At
31 March 2019
£
(Restated)
512
24,278
───────
24,790
───────
189,941
191,120
17,092
60,000
───────
458,153
───────
482,943
═══════
847
-
───────
847
───────
481,153
100,581
-
-
───────
581,734
───────
582,581
═══════
67,518,700
68,233
1,721,625
2,744
(69,424,317)
───────
(113,015)
───────
68,403,220
38,744
24,281
(895)
(68,209,933)
───────
255,417
───────
21,454
───────
21,454
535,000
35,398
4,106
───────
574,504
───────
595,958
───────
482,943
═══════
-
───────
-
321,691
5,473
-
───────
327,164
───────
327,164
───────
582,581
═══════
The notes on pages 36 to 55 form an integral part of these financial statements
These financial statements were approved by the board of Directors on 14 August 2020 and were signed on their behalf by:
Willy Simon
Director
30
OKYO Pharma Limited
Company statement of financial position
for the year ended 31 March 2020
Notes
At
31 March 2020
£
At
31 March 2019
£
Property, plant and equipment
Investment in subsidiary
Total non-current assets
Cash and cash equivalents
Trade and other receivables
Related party receivable
Taxation receivable
Total current assets
Total assets
Equity
Share premium
Share options reserves
Warrants reserve
Retained deficit
Shareholders’ equity
Current Liabilities
Trade and other payables
Related party payable
Total liabilities
Total equity and liabilities
12
15
13
19
9
11
16
16
14
19
512
-
───────
512
───────
162,277
190,784
17,092
60,000
───────
430,153
───────
430,665
═══════
67,518,700
68,233
1,721,625
(69,430,027)
───────
(121,469)
───────
516,736
35,398
───────
552,134
───────
430,665
═══════
847
139,649
───────
140,496
───────
479,118
100,262
-
-
───────
579,380
───────
719,876
═══════
68,403,220
38,744
24,281
(68,058,104)
───────
408,141
───────
306,262
5,473
───────
311,735
───────
719,876
═══════
The Company reported a loss for the financial year ended 31 March 2020 of £1,371,923 (2019: £3,606,895).
These financial statements were approved by the board of Directors on 14 August 2020 and were signed on their behalf by:
Willy Simon
Director
31
OKYO Pharma Limited
Consolidated statement of changes in equity
for the year ended 31 March 2020
Notes
Share
premium
£
Share options
reserve
£
Warrants
reserve
£
Translation
reserve
£
Restated
Retained
deficit
£
Restated
Total
shareholders’
equity
£
Balance at 1 April 2019
68,403,220
38,744
24,281
(895)
(68,209,933)
255,417
Total comprehensive loss for the period
Loss for the period
Exchange differences on translating foreign operations
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Shares issued
Options charge
Warrants charge
Balance at 31 March 2020
Balance at 1 April 2018
Total comprehensive loss for the period
Loss for the period
Exchange differences on translating foreign operations
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Shares issued
Options charge
Warrants charge
Balance at 31 March 2019
-
-
-
-
-
-
-
3,639
(1,214,384)
-
(1,214,384)
3,639
11
16
16
779,126
-
(1,663,646)
───────
67,518,700
═══════
66,368,028
-
-
-
29,489
-
───────
68,233
═══════
-
-
1,697,344
───────
1,721,625
═══════
-
-
-
───────
2,744
═══════
-
-
-
────────
(69,424,317)
════════
779,126
29,489
33,698
───────
(113,015)
═══════
-
-
-
-
-
-
-
(64,451,209)
1,916,819
-
(895)
(3,758,724)
-
(3,758,724)
(895)
11
16
16
2,035,192
-
-
───────
68,403,220
═══════
-
38,744
-
───────
38,744
═══════
-
-
24,281
───────
24,281
═══════
-
-
-
───────
(895)
═══════
-
-
-
────────
(68,209,933)
════════
2,035,192
38,744
24,281
───────
255,417
═══════
32
OKYO Pharma Limited
Company statement of changes in equity
for the year ended 31 March 2020
Balance at 1 April 2019
68,403,220
38,744
24,281
(68,058,104)
408,141
Notes
Share
premium
£
Share
options
reserve
£
Share
warrants
reserve
£
Retained
deficit
£
Total
shareholders’
equity
£
Total comprehensive loss for the period
Loss for the period
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Shares issued
Options charge
Warrants charge
Balance at 31 March 2020
Balance at 1 April 2018
Total comprehensive loss for the period
Loss for the period
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Shares issued
Options charge
Warrants charge
Balance at 31 March 2019
-
-
-
(1,371,923)
(1,371,923)
-
-
1,697,344
-
-
-
─────── ────────
(69,430,027)
═══════ ════════
1,721,625
779,126
29,489
33,698
───────
(121,469)
═══════
-
(64,451,209)
1,916,819
-
(3,606,895)
(3,606,895)
-
-
24,281
-
-
-
─────── ────────
(68,058,104)
═══════ ════════
24,281
2,035,192
38,744
24,281
───────
408,141
═══════
11
16
16
779,126
-
(1,663,646)
───────
67,518,700
═══════
66,368,028
-
-
29,489
-
───────
68,233
═══════
-
-
11
16
16
2,035,192
-
-
───────
68,403,220
═══════
-
38,744
-
───────
38,744
═══════
33
OKYO Pharma Limited
Consolidated statement of cash flows
for the year ended 31 March 2020
Cash flows from operating activities
Loss for the year before taxation
Adjusted for non-cash and non-operating items:
Shares issued in lieu of fees
Share options charge
Warrants charge
Depreciation of property, plant, and equipment
Depreciation of right-of-use asset
Loss on foreign exchange
Net (increase) in related party receivables
Net increase in related party payables
Net (increase) in other receivables
Net increase in trade and other payables
Cash used in operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Repayment of leasing liabilities
Cash generated from financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Notes
Year ended 31
March 2020
£
Year ended 31
March 2019
£
16
16
12
21
(1,274,384)
(3,758,724)
-
29,489
33,698
335
4,367
10,944
(17,093)
29,925
(96,101)
213,310
───────
(1,065,510)
2,035,192
38,744
24,281
167
-
(895)
-
-
(100,547)
236,105
───────
(1,525,677)
-
───────
-
(1,014)
───────
(1,014)
779,126
(4,828)
───────
774,298
-
-
───────
-
(291,212)
(1,526,691)
481,153
───────
189,941
═══════
2,007,844
───────
481,153
═══════
34
OKYO Pharma Limited
Company statement of cash flows
for the year ended 31 March 2020
Cash flows from operating activities
Loss for the year before taxation
Adjusted for non-cash and non-operating items:
Shares issued in lieu of fees
Share options charge
Warrants charge
Depreciation
Loss on foreign exchange
Impairment of investment in subsidiaries
Net (increase) in related party receivables
Net increase in related party payables
Net (increase) in other receivables
Net increase in trade and other payables
Cash used in operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Capital contribution to subsidiary
Cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Cash generated from financing activities
Notes
Year ended 31
March 2020
£
Year ended 31
March 2019
£
(1,431,923)
(3,606,895)
16
16
12
-
29,489
33,698
335
17,387
128,102
(17,092)
29,925
(96,363)
210,475
───────
(1,095,967)
-
-
───────
-
2,035,192
38,744
24,281
167
-
-
-
-
(100,228)
220,676
───────
(1,388,063)
(1,014)
(139,649)
───────
(140,663)
779,126
───────
779,126
-
───────
-
Decrease in cash and cash equivalents
(316,841)
(1,528,726)
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
479,118
───────
162,277
═══════
2,007,844
───────
479,118
═══════
35
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
1. Reporting Entity
OKYO Pharma Limited (the “Company” or “OKYO”) is a company domiciled in Guernsey and listed on the standard
market of the London Stock Exchange (LON:OKYO).
The Company is developing next-generation therapeutics to improve the lives of patients with inflammatory eye diseases
and chronic pain. Our goal is to develop first in class drug candidates that prevent the disease instead of controlling it,
and we achieve this through our collaboration with pioneer scientists in the field.
The ultimate parent of the group is Planwise Group Limited, incorporated in the British Virgin Islands.
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 and Company have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and the Companies
(Guernsey) Law 2008 as applicable to companies reporting under IFRS. These accounts have been prepared under the
historical cost convention.
Basis of measurement
Functional and Presentation Currency
The financial statements of the Group and Company are presented in Pound Sterling (£) which is the Parent Company’s
functional currency. All financial information presented in Pound Sterling has been rounded to the nearest pound.
In preparing these financial statements, the significant judgements made by management in applying the Group and
Company’s accounting policies and the key accounting estimates are accruals and the non-recognition of a deferred tax
asset. The deferred tax asset has not been recognised as the Directors do not expect profits to be made for the
foreseeable future.
Going Concern
The Group and Company incurred losses during the year and has net liabilities at the year end.
As discussed in the Strategic Report, the Group and Company is in the early stages of developing its business focusing
on drug candidates for the treatment of dry-eye, uveitis, ocular and chronic pain. The Directors expect the Group and
Company to incur further losses and to require significant capital expenditure in continuing towards the clinical stage for
these candidates. The Group and Company has successfully secured additional investment funds to date.
The Directors have prepared cash flow projections that include the costs associated with the pre-clinical operations and
the additional investment to fund those operations. These projections identify that the Directors need to raise further
funds beyond March 2020 in order to fund pre-clinical activities and ongoing business operations. Based on the recent
fund-raising and progress made on animal studies for our novel technology, the Directors are confident that sufficient
funds will be forthcoming and accordingly they have prepared these financial statements on a going concern basis.
However, until and unless the Group and Company secures sufficient investment to fund their pre-clinical activity, there
is a material uncertainty about the Group and Company’s ability to continue as a going concern, and therefore about the
applicability of the going concern basis of preparation. The financial statements do not include the adjustments that
would be required if the going concern basis of preparation was considered inappropriate.
The Directors do not believe that COVID-19 and Brexit will have an impact on the Group and Company’s ability to raise
funds.
36
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
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.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated
upon consolidation. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Board. The Board
allocates resources to and assess the performance of the segments. The Board considers there to be only one operating
segment being the research and development of biotechnological and pharmaceutical products.
Taxation
The tax credit for the year represents the total of current taxation and deferred taxation. The credit in respect of current
taxation is based on the estimated taxable loss for the year. Taxable profit or loss for the year is based on the profit or
loss as shown in the statement of comprehensive income, as adjusted for items of income or expenditure which are not
deductible or chargeable for tax purposes. The current tax asset for the year is calculated using tax rates which have
either been enacted or substantively enacted at 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 realised, or the deferred liability is settled. Deferred tax assets are recognised to
the extent that it is probable that the future taxable profit will be available against which the temporary differences can
be utilised.
Foreign currency translation
Foreign currency transactions are translated using the rate of exchange applicable at the date of the transaction. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the re-translation at the year end
of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
On consolidation, the assets and liabilities of foreign subsidiaries are translated into Pound Sterling at the rate of
exchange prevailing at the reporting date and their statements of comprehensive income are translated at exchange
rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are
recognised in other comprehensive income. On disposal of a foreign subsidiary, the component of other comprehensive
income relating to that particular foreign subsidiary is recognised in profit or loss.
License fees
Payments related to the acquisition of rights to a product or technology are capitalised as intangible assets if it is probable
that future economic benefits from the asset will flow to the entity and the cost of the asset can be reliably measured.
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. Licence fees expenses are recognised 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
recognised 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.
37
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
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
The measurement of financial assets depends on their classification. Financial assets such as receivables and
deposits are subsequently measured at amortised cost using the effective interest method, less loss allowance.
The Group does not hold any 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
All financial liabilities are subsequently measured at amortised cost using the effective interest method.
Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.
The Group’s financial liabilities include trade and other payables.
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, restricted cash 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.
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
i) Non-financial assets are tested for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
ii) Non-financial assets are impaired when its carrying amount exceed its recoverable amount. 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.
38
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
Investments
Investments are held as non-current assets and comprise investments in subsidiary undertakings and are stated at cost
less provision for any impairment.
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, less its residual value.
Depreciation is recognised in profit or 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 and Company will obtain ownership by the end of the lease term.
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
Depreciation methods, useful lives and residual values are reviewed at each reporting date. Depreciation is allocated to
the operating expenses line of the statement of comprehensive income.
Leases
IFRS 16 Leases was issued in January 2016 and was implemented by the Group from 1 April 2019. The Standard
replaces IAS 17 and requires lease liabilities and ‘right of use’ assets to be recognised on the balance sheet for almost
all leases. The adoption methodology of IFRS 16 is the cumulative catch-up method, and the impact of adoption was to
recognise a right of use asset of £28,645 and a lease liability of £28,645 on 1 April 2019. Please see Note 4 for further
detail.
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.
Share based payments
The calculation of the fair value of equity-settled share based awards and the resulting charge to the statement of
comprehensive income 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.
39
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
Where employees, Directors or advisers are rewarded using share based payments, the fair value of the employees',
Directors' 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). Warrants issued in association with the issue of Convertible Loan Notes or private
placements are also considered as share based payments and a share based payment charge is calculated for these
too.
In accordance with IFRS 2, a charge is made to the statement of comprehensive income for all share-based payments
including share options based upon the fair value of the instrument used. A corresponding credit is made to a share
based payment reserve - options, 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.
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 Statement of comprehensive income.
All goods and services received in exchange for the grant of any share based payment are measured at their fair value.
Warrants
Warrants issued by the Group to investors as part of a share subscription are compound financial instruments
where the warrant meets the definition of a financial liability.
The financial liability component is initially measured at fair value in the Consolidated Statement of Financial
Position. Equity is measured at the residual between the subscription price for the entire instrument and the
liability component. The financial liability component is remeasured depending on its classification. Equity is not
remeasured.
New and Revised Standards
Standards in effect in 2019
IFRS 16 ‘Leases’ has come into effect from 1 January 2019 and has been adopted by the Group. The impact of the
adoption of the leasing standard is disclosed in Note 4 below.
IFRS in issue but not applied in the current financial statements
The Directors do not expect that the adoption of new IFRS Standards, Interpretations and Amendments that have been
issued but are not yet effective will have a material impact on the financial statements of the Group in the future.
In addition, IFRS 2 Share-based Payment: classification and measurement of share-based payment transactions is an
additional standard that will impact the Group, management are still in the process of assessing its impact, if any.
Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until
a detailed review has been completed.
A number of IFRS and IFRIC interpretations are also currently in issue which are not relevant for the Group’s activities
and which have not therefore been adopted in preparing these financial statements.
40
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial information in accordance with generally accepted accounting practice, in the case of the
Group being International Financial Reporting Standards as adopted by the European Union, 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 financial statements. Such estimates and judgements must be continually evaluated based on
historical experience and other factors, including expectations of future events.
When entering into agreements with third parties which provide the rights to conduct research into specific biological
processes the Group accounts for these agreements as an expense if the agreements are 'milestone' in nature and relate
to the Group's own research and development costs. Such agreements involve periodic payments and are evaluated as
representing payments made to fund research.
The other critical accounting estimates and judgements made in the preparation of the financial statements were fair
value estimates used in the calculation of share based payments and warrants which have been detailed above in note
2, accounting policies, and note 16, share based payments, to the accounts. A critical accounting estimate and judgement
has been made in the impairment of the loan to West African Mineral Ltd (WAML), see note 19.
The Group has also made a judgement regarding going concern on the impact of COVID-19 and Brexit during the
preparation of the financial statements and considered it to not be significant.
4. CHANGES IN ACCOUTING POLICIES AND PRIOR YEAR ADJUSTMENTS
IFRS 16 Leases
The group has adopted IFRS 16 retrospectively from 1 April 2019 but has not restated comparatives for the 2019 reporting
period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments
arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 April 2019.
On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had previously been classified
as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the
remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 April 2019. The weighted
average lessee’s incremental borrowing rate applied to the lease liabilities on 1 April 2019 was 3.34%.
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognises a right-
of-use assets and corresponding lease liabilities at the lease commencement date, except for short term leases and
leases of low value. For these leases, the lease payments are recognised as an operating expense on a straight-line
basis over the term of term of the lease.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liabilities adjusted for
any lease payments made at or before the commencement date, plus any initial costs incurred. The right-of-use assets
are subsequently measured at cost less accumulated depreciation and impairment losses. The right-of-use assets are
from the commencement date depreciated over the shorter period of lease term and useful life of the underlying asset.
The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment.
In addition, the right-of-use assets are periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liabilities, e.g. revised discount rate, change in the lease term or change in future lease
payments resulting from a change in an index.
The lease liabilities are initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate determined by the Group’s borrowing rate.
Operating lease commitments disclosed under IAS17 as at 31 March 2019
Remaining lease commitments discounted using the Group’s incremental borrowing
rate as at the date of initial application
Lease Liability recognised as at 1 April 2019
Of which:
Current lease liabilities
Non-current lease liabilities
2019
£
31,988
28,645
28,645
3,806
24,839
The associated right-of-use assets for all leases were measured at the amount equal to the lease liability.
41
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
The recognised right-of-use assets relate to the following types of assets:
Properties
31 March 2020
£
24,278
Total right-of-use assets
24,278
1 April 2019
£
28,645
28,645
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
• the use of a single discount rate of 3.34% to a portfolio of leases with reasonably similar characteristics;
• the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
Impairment loss classification – Prior period adjustment
During the year, the Group reviewed its accounting classification for its expenses regarding West African Mineral Ltd
(WAML). See Note 19 for more information. These costs were determined to be an impairment loss and not a Research
and Development expense, so a reclassification was made of £278,347.
Translation reserve classification – Prior period adjustment
During the year, the Group reviewed its accounting classification for its prior period translation expenses and reclassified
£895 from operating expenses to a translation reserve.
5. OPERATING LOSS
Operating loss is stated after charging:
Group
Research and development costs
FX Gains and losses
Depreciation
6. SEGMENTAL REPORTING
31 March 2020
£
407,478
10,944
4,702
══════
31 March 2019
£
2,196,624
12,123
167
══════
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 financial statements.
7. EMPLOYEES
Group
Staff costs comprised:
Directors’ salaries
Wages and salaries
Social security costs
The average monthly number of employees, including Directors, employed
by the Group during the year was:
Research and development
Corporate and administration
Company
Staff costs comprised:
Directors’ salaries
Wages and salaries
Social security costs
42
2020
£
96,031
180,379
54,063
330,473
2019
£
99,034
186,329
37,864
323,227
1
3
4
2020
£
96,031
180,379
54,063
330,473
1
4
5
2019
£
81,707
88,934
18,539
189,180
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
The Group and Company made £2,182 (2019: £1,652) of payments to a defined contribution pension schemes on behalf
of Directors or employees.
8. REMUNERATION OF KEY MANAGEMENT PERSONNEL
Directors of the Group and Company received the following remuneration during the period:
Directors fees recognised
during the period
31 March
2020
£
32,000
30,685
27,500
31 March
2019
£
32,000
30,041
36,962
Share based payment
expenses recognised
during the period
31 March
2019
£
3,369
27,795
5,896
31 March
2020
£
2,921
24,097
5,112
Outstanding at the end of
the period
31 March
2020
£
-
-
20,000
31 March
2019
£
-
-
-
5,846
-
-
-
-
-
Willy Simon
Dr Kunwar Shailubhai
Leopoldo Zambeletti
(resigned December 18,
2019)
Gregor MacRae (appointed
December 18, 2019)
─────── ─────── ───────
32,130
═══════ ═══════ ═══════
99,003
96,031
─────── ─────── ───────
-
═══════ ════════ ════════
20,000
37,061
The following share options were granted to Directors in the year:
Director
W. Simon
L Zambeletti
K Shailubhai
2020
Number of
options
-
-
-
-
2019
Number of
options
2,000,000
3,500,000
16,500,000
22,000,000
The key management personnel of the Group are considered to be represented by the Directors and officers of the
Company.
No director has yet benefitted from any increase in the value of share capital since issuance of the options and no director
exercised share options in the year.
43
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
9. TAXATION
Group
Current year tax (credit)
Adjustments in respect of prior periods
Deferred tax
Origination and reversal of timing differences
Total tax (credit) for period
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:
2020
£
-
(60,000)
-
(60,000)
2019
£
-
-
-
-
Loss before taxation
(1,274,384)
(3,758,724)
Loss charged at standard rate of corporation tax 19%
(242,133)
(714,158)
Tax losses arising in the year not recognised
Expenses not deductible for taxation
Tax increase from effect of capital allowances and depreciation
Research and Development tax claim
Adjustments to tax charge in respect of previous periods
Consolidation adjustment
movements
Loans written off
relation
to
in
foreign exchange
267,519
114
64
-
(60,000)
(25,564)
-
(60,000)
652,163
36,270
(161)
-
-
52,886
-
No deferred tax asset has been recognised in respect of trading losses carried forward because of uncertainty as to
when these losses will be recoverable.
The Group has tax losses of £3,477,761 (2019: £3,091,598) to carry forward for use against future profits.
44
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
10. FINANCE INCOME AND COSTS
Group
Finance Income
Finance income interest received on loan
Total finance income
Finance Expenses
Interest expense on lease liabilities
Total finance expenses
2020
£
37,850
37,850
(911)
(911)
Net finance expense recognised in Statement of Comprehensive Income
36,939
2019
£
-
-
-
-
-
11. CAPITAL AND RESERVES
Capital Management
The Group manages its capital to maximise the return to the shareholders through the optimisation of equity. The capital
structure of the Group at 31 March 2020 consists of equity attributable to equity holders of the Company, comprising
issued capital, reserves and retained deficit as disclosed.
The Group manages its capital structure and makes adjustments to it, in light of economic conditions and the strategy
approved by shareholders. To maintain or adjust the capital structure, the Group may adjust the dividend payment to
shareholders, return capital to shareholders or issue new shares and release the Company’s share premium account.
No changes were made in the objectives, policies or processes during the year ended 31 March 2020 and 31 March
2019.
Share capital and premium
The Company is authorised to issue an unlimited number of nil par value shares of a single class. The Company may
issue fractional shares and a fractional share shall have the corresponding fractional rights, obligations and liabilities of
a whole share of the same class or series of shares. Shares may be issued in one or more series of shares as the
Directors may by resolution determine from time to time.
Each share in the Company confers upon the shareholder:
•
•
•
the right to one vote at a meeting of the shareholders or on any resolution of shareholders;
the right to an equal share in any dividend paid by the Company; and
the right to an equal share in the distribution of the surplus assets of the Company on its liquidation.
The Company may by resolution of the Directors redeem, purchase or otherwise acquire all or any of the shares in the
Company subject to regulations set out in the Company’s Articles of Incorporation.
Authorised
The Company is authorised to issue an unlimited number of nil par value shares of a single class.
Issued ordinary shares of US$0.00 each
At 31 March 2019 (audited)
Shares issued - private placement
Warrant charge for warrants issued in conjunction
with private placement
At 31 March 2020
Shares
Number
Share
capital
£
Share
premium
£
524,108,283
════════
-
═══════
68,403,220
════════
112,188,766
-
-
-
779,126
(1,663,646)
636,297,049
════════
-
═══════
67,518,700
════════
45
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
Issuance of ordinary shares
In May 2019, 36,363,636 ordinary shares were issued at an issue price of 1.1p per ordinary share by way of a placing of
ordinary shares to raise finance.
In March 2020, 75,825,130 ordinary shares were issued at an issue price of 1.1p per ordinary share by way of a further
placing of ordinary shares to raise finance.
Share options reserve
These reserves comprise the cumulative share-based payment charge on outstanding options in issue as at 31 March
2020.
Warrants reserve
These reserves comprise the cumulative share-based payment charge on outstanding warrants in issue as at 31 March
2020.
Dividends
The Directors paid no dividend during the year to 31 March 2020 and 31 March 2019.
12. PROPERTY, PLANT AND EQUIPMENT
Details of the Group and Company’s property, plant and equipment are as follows:
IT equipment
£
1,014
-
-
1,014
167
335
502
512
-
1,014
-
1,014
-
167
167
847
Total
£
1,014
-
-
1,014
167
335
502
512
-
1,014
-
1,014
-
167
167
847
Group and Company
Cost
At 1 April 2019
Additions
Disposals
At 31 March 2020
Depreciation
At 1 April 2019
Charge in year
At 31 March 2020
Net book value as at 31 March 2020
Cost
At 1 April 2018
Additions
Disposals
At 31 March 2019
Depreciation
At 1 April 2018
Charge in year
At 31 March 2019
Net book value as at 31 March 2019
All property, plant and equipment is located in the UK.
46
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
13. TRADE AND OTHER RECEIVABLES
Group
Other receivables
VAT receivable
Prepayments
31 March 2020
£
31 March 2019
£
179,461
6,536
5,123
4,223
81,241
15,117
191,120
100,581
There are no differences between the carrying amount and fair value of any of the trade and other receivables above.
Company
Other receivables
VAT receivable
Prepayments
31 March 2020
£
31 March 2019
£
179,125
6,536
5,123
3,904
81,241
15,117
190,784
100,262
Other receivables for the Group and Company includes £179,125 of placing proceeds that were received after 31
March 2020.
14. TRADE AND OTHER PAYABLES
Group
Trade payables
Accruals
Other creditors
Company
Trade payables
Accruals
Other creditors
31 March 2020
£
31 March 2019
£
479,970
32,474
22,556
292,694
14,280
14,717
535,000
321,691
31 March 2020
£
31 March 2019
£
462,600
32,474
21,662
293,067
-
13,195
516,736
306,262
47
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
15. INVESTMENT IN SUBSIDIARIES
Company
Capital
Contribution
Cost
At 1 April 2019
Additions
Transfer pricing recharge
At 31 March 2020
Impairment
Charge in year
At 31 March 2020
Net book value as at 31 March 2020
Cost
At 1 April 2018
Additions
Disposals
At 31 March 2019
Impairment
Charge in year
At 31 March 2019
Net book value as at 31 March 2019
£
139,629
246,352
(257,879)
128,102
(128,102)
(128,102)
-
-
139,629
-
139,629
-
-
139,629
The capital contribution represents the funding of operations of the subsidiaries by the parent, with the Company acting
as the Group’s holding company. The parent has 20 shares in the group’s undertakings.
During the year, the Company entered into a transfer pricing agreement with its subsidiary whereby all costs incurred by
the subsidiary were recharged back to the Company who paid a 10% mark up.
The Company’s interest in subsidiary undertakings is as follows:
Name
Principal activity Registered
OKYO Pharma US Inc
Clinical stage
biotechnology
company
Address
108 West 13th
Street,
Wilmington
Delaware
19801
Percentage
shareholding
100%
Country of
incorporation
USA
OKYO Pharma US Inc was incorporated on 2 July 2018. This entity was set up to house the Company’s US operations.
During the year, the Company undertook an impairment review of its investments in subsidiaries. The Company has
been funding its subsidiary operations from funds raised by the Company for the development of its project portfolio. The
subsidiary’s activities have all been to support the Company in achieving its goals for progression of the project portfolio.
The funding provided to the subsidiaries to date has been recognised in the Company as investment in its subsidiaries,
and the Company does not expect the amounts to be repaid. The IP relating to the project portfolio belongs to the
Company and hence any future benefits will also belong to the Company. It is highly unlikely that these benefits will be
distributed to the subsidiaries. The Company therefore determined that the investment should be impaired.
48
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
16. SHARE OPTIONS AND WARRANTS
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. It also issues options in lieu of fees to key suppliers and collaborators. 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.
2020
Options
Weighted
Average
exercise price
(pence)
2019
Options
Weighted
Average
exercise price
(pence)
Outstanding at 1 April
23,000,000
Granted
Forfeited
Cancelled
-
(3,500,000)
-
Outstanding at 31 March
19,500,000
Exercisable at 31 March
4,875,000
4.5
-
(4.5)
-
4.5
4.5
-
23,000,000
-
-
23,000,000
-
-
4.5
-
-
4.5
-
No options were exercised during the period ended 31 March 2020 and 31 March 2019.
The total outstanding fair value charge of the share option instruments is deemed to be approximately £24,299 (2019:
£62,250). A share based payment charge for the year of £29,489 (2019: £38,744) has been expensed in the statement
of comprehensive income.
The Directors have used the Black-Scholes option pricing model to estimate the fair value of most of the options applying
the assumptions below.
Historical volatility relies in part on the historical volatility of a group of peer companies that management believes is
generally comparable to the Company.
The Company has not paid any dividends on share capital since its inception and does not anticipate paying dividends
on its share capital in the foreseeable future.
The Company has estimated a forfeiture rate of zero.
6 July 2018
1.5p
4.5p
25% each year
0.71%
65.5%
5 years
Grant date share price
Exercise share price
Vesting periods
Risk free rate
Expected volatility
Option life
Warrants
As part of the acquisition of the Chemerin project, the underlying scientific founders of the Chemerin Project, who will
continue to be involved in the development of the Chemerin Project, received 35,000,000 warrants as consideration. The
warrants are exercisable at a price of 4.5 pence each and are split into four distinct tranches and each tranche becomes
exercisable upon satisfaction of a specific developmental milestone. The warrants are exercisable until 17 July 2023.
49
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
In May 2019, warrants were granted over 36,363,636 shares at an exercise price of 1.35p per share in connection with
a private placement. The warrants are exercisable until 19 May 2024.
In March 2020, warrants were granted over 40,000,000 shares at an exercise price of 0.55p per share in connection with
a private placement. The warrants are exercisable until 23 March 2025.
In March 2020, warrants were granted over 35,825,130 shares at an exercise price of 0.55p per share in connection with
a private placement. The warrants are exercisable until 28 May 2025.
2020
Warrants
Weighted
Average
exercise price
(pence)
2019
Warrants
Weighted
Average
exercise price
(pence)
Outstanding at 1 April
35,000,000
Granted
Forfeited
Cancelled
112,188,766
-
-
Outstanding at 31 March
147,188,766
Exercisable at 31 March
-
4.5
0.8
-
-
1.5
-
35,000,000
-
-
-
35,000,000
-
4.5
-
-
-
4.5
-
The Directors have estimated the fair value of the warrants in services provided using the Black-Scholes valuation model
based on the assumptions below.
Grant date share
price
Exercise share
price
Vesting periods
Risk free rate
Expected volatility
Option life
24 March 2020
20 May 2019
6 July 2018
1.8p
0.5p
2p
1.35p
1.5p
4.5p
25% each year
25% each year
25% each year
0.22%
82.4%
5 years
0.77%
71.6%
5 years
0.71%
65.5%
5 years
The remaining fair value of the warrant instruments is deemed to be approximately £95,709 (2019: £129,407). For the
consideration warrants, the charge has been expensed over the vesting period. For all other warrants, the charge has
been expensed over the service period. A share-based payment charge for the year of £33,698 (2019: £24,281) has
been expensed in the statement of comprehensive income.
17. 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, interest risk and other price risk. The
Group policies for managing 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
50
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
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 summarises the maturity profile of the Group and Company’s financial liabilities based on contractual
undiscounted payments:
Group
£
Less than 3 months 3 to 12 months
Total
2020
Trade and other payables
Related party payables
114,257
4,670
118,927
388,249
30,728
418,977
502,506
35,398
537,904
Company
£
Trade and other payables
Related party payables
Less than 3 months 3 to 12 months
Total
2020
98,232
4,670
102,902
386,030
30,728
416,758
484,262
35,398
519,660
Due to the nature of the Group, it is difficult to forecast financial liabilities greater than 12 months out as said liabilities
are subject to change based upon a multitude of variables.
Foreign currency risks
The Group operates internationally although the majority of its operations are based in the United Kingdom and the
majority of assets and liabilities denominated in Pound Sterling. It therefore is exposed to foreign exchange risk arising
from exposure to various currencies primarily the Euro and US Dollar.
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 Pound Sterling against all other currencies at 31 March 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.
51
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
£
30 March 2020
Profit or loss and equity
Strengthening
Weakening
USD (5% movement)
3,091
(3,416)
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 Allied Irish Bank 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 at the year-end for either the year ended 31 March 2020 or
31 March 2019.
18. 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 and all other equity reserves attributable to the equity holders
of the parent as reflected in the 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 maximise shareholder value through the optimisation of the debt and equity balance.
The Group adjusts its capital structure in light of changes in economic conditions and expected business demands on
capital. In order to maintain or adjust its capital structure, the Group considers whether or not to pay dividends and adjusts
the amount of any dividend payments to shareholders. The Group may also return capital to shareholders or issue
additional shares.
19. RELATED PARTY TRANSACTIONS
All related party transactions occurred on an arm’s length basis and in the normal course of operations.
West African Minerals Limited (“WAML”)
WAML is a related party of the Company as it shares a common director, Willy Simon. In 2018, the Company disposed
of it Cameroon operations by way of an in specie distribution of all of its shares in Ferrum Resources Limited (renamed
West African Minerals Limited) to shareholders. As part of this transaction, the Group had agreed to a deed of release
with WAML whereby it agreed to write off $17,056,070 of loans in exchange for shares in WAML to be distributed as part
of the in-specie distribution. A remaining amount of $3,400,000 is still outstanding from WAML, however, after careful
consideration of the operations of WAML and its subsidiaries, the Company decided to impair this receivable down to
£nil in 2018 as it does not expect to recover any of this outstanding debt. In addition to the $3,400,000 outstanding was
a working capital loan advance of $600,000.
During the year ended March 31, 2020, the Group had funded £104,342 (2019: £278,347) towards this $600,000 loan
facility and as at the year-end approximately $10,000 was still payable under this facility. The amounts funded in the
year have been immediately written off as the Group has no reasonable expectation of recovering the contractual cash
flows of the loan in its entirety.
Tiziana Life Sciences PLC
Tiziana Life Sciences PLC is a related party as it shares common Directors and officers. The Company share premises
and other resources with Tiziana Life Sciences PLC and there is a shared services agreement in place between Company
and Tiziana Life Sciences PLC. As at 31st March 2020, the Company had incurred £92,622 (2019: £98,436) worth of
costs in relation to his agreement and at 31st March 2020, £35,398 (£2019: £5,473) was due to Tiziana Life Sciences
PLC.
The Company has also extended a short-term loan facility of £400k to Tiziana Life Sciences PLC with interest payable
of 20% per annum, as Tiziana Life Sciences PLC failed to repay the amount owed by the repayment date. In respect of
this loan, £17,092 was due as of March 31, 2020.
52
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
Panetta Partners Limited
Panetta Partners Limited is a related party as it is a shareholder of the Company and also a vendor. The Company has
entered into a Deed of Assignment with Panetta Partners whereby the Company has the licence and sub-licence of
certain research and development assets in relation to the Chemerin product, assigned to it.
20. BASIC AND DILUTED LOSS PER SHARE
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Group by the weighted average
number of ordinary shares in issue during the year.
2020
2019
(Loss) attributable to equity holders of the Group (£)
(1,214,384)
(3,758,724)
Weighted average number of ordinary shares in issue
595,474,039
513,900,867
Basic loss per share (pence per share)
(0.00)
(0.01)
As the Group is reporting a loss from continuing operations for the year then, in accordance with IAS 33, the share
options 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 Comprehensive statement of income 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.
21. 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.
IFRS 16 was adopted 1 April 2019 without restatement of comparative figures. For an explanation of the transitional
requirements that were applied as at 1 April 2019, see Note 4. The following policies apply subsequent to the date of
initial application, 1 April 2019.
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 has one short-term leases or 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 12). All the right-of-use assets are located in the USA.
Right-of-use assets
31 March 2020
At 1 April 2019
Additions
Depreciation
£
28,645
-
(4,367)
24,278
53
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
Lease Liabilities
At 1 April 2019
Additions
Interest expense
Lease payments
Foreign exchange movements
Lease liabilities are presented in the statement of financial position as follows:
Current
Non-current
31 March 2020
£
28,645
-
912
(4,827)
830
25,560
31 March
2020
£
4,106
21,454
1 April
2019
£
3,806
24,839
25,560
28,645
The lease liabilities are secured by the related underlying assets. Future minimum lease payments as at 31 March 2020
were as follows:
Within 1 year
1-2 years
2-5 years
Over 5 years
Total
Minimum lease payment due
31 March 2020
Lease payments
Finance charges
Net present values
4,885
(779)
4,106
9,770
(1,143)
8,627
13,434
(607)
12,827
-
-
-
28,089
(2,529)
25,560
The total net cash outflow for leases in the year to 31 March 2020 was £4,827.
22. COMMITMENTS AND CONTINGENCIES
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. Contractual commitments are
detailed where amounts are known and certain.
• BAM8 – The Group are committed to paying an annual license maintenance fee until the first commercial sale.
The annual license maintenance fee is $15,000 until May 2021, and $10,000 thereafter.
54
OKYO Pharma Limited
Notes to the consolidated financial statements
for the year ended 31 March 2020
23. POST BALANCE SHEET EVENTS
On 28 May 2020, the Company announced that further to the announcement made on 23 March 2020, the Company
had placed a further 36,269,253 new ordinary shares of no par value in the Company at the placing price of 0.5 pence
each to raise £181,346 (before expenses). The Placing Shares were issued with warrants attached on a one-for-one
basis, exercisable at a price of 0.55 pence for a period of five years, until 19 May 2024.
On 29 May 2020, the Company announced that it has raised £440,000 through the issue of convertible loan notes
("CLNs"), the proceeds of which will be used for working capital purposes. The CLNs carry an interest rate of 20%
compounding and have maximum term of 4 years. The CLNs convert into ordinary shares at a price of 0.4p per share
and, if converted, the shares will be issued with a warrant attached at an exercise price of 0.4p (with a maximum life of
5 years from the date of issue of the CLN, regardless of the conversion date). Conversion will be subject to shareholder
approval. The CLNs were placed privately with strategic investors.
On 10 June 2020, the Company announced that John Brancaccio had been appointed as a non-executive director of the
company with immediate effect. Gregor MacRae simultaneously stood down as a director of the Company with immediate
effect.
On 28 July 2020, the Company announced that it had raised £3.5m through the issuance of CLN’s. The CLNs carry an
interest rate of 2.15% compounding and have maximum term of 4 years. The CLNs convert into ordinary shares at a
price of 8.5p per share. Conversion will be subject to shareholder approval and no conversions may take place prior to
28 February 2021.
On 7 August 2020, the Group announced that it was establishing a Scientific Advisory Board to be led by Dr A. James
Khodabakhsh MD. His appointment was effective immediately, with the remit to bring together a small group of leaders-
in-the-field to review and inform the Company’s plans to progress its lead product candidate, Chemerin, to an IND in the
indication of dry-eye disease. Dr. James Khodabakhsh specializes in complex surgeries of the eye and is one of the most
sought-after surgeons in Los Angeles and is the Medical Director at the Beverly Hills Institute of Ophthalmology.
55