COMPANY NUMBER 03508592
TIZIANA LIFE SCIENCES PLC
ANNUAL REPORT & FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2019
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST DECEMBER 2019
CONTENTS
PAGE
STATUTORY AND OTHER INFORMATION
EXECUTIVE CHAIRMAN’S STATEMENT
STRATEGIC REPORT
DIRECTORS’ REPORT
DIRECTORS’ REMUNERATION REPORT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TIZIANA LIFE
SCIENCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASH FLOWS
COMPANY STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
COMPANY STATEMENT OF CHANGES IN EQUITY
NOTES TO THE CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS
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STATUTORY AND OTHER INFORMATION
Directors:
Secretary:
Registered Office:
Principal Bankers:
Auditors:
Nominated Advisors:
Nominated Brokers:
Solicitors:
Registrars:
Mr G. M. A. Cerrone
Dr K. Shailubhai
Mr W. Simon
Mr G. MacRae
Accomplish Secretaries Limited
3rd Floor, 11-12 St James’s Square, London, SW1Y 4LB
Allied Irish Bank, Ealing Cross, 85 Uxbridge Road, London,
W5 5TH
Mazars LLP, Tower Bridge House, St Katharine’s Way,
London, E1W 1DD
Cairn Financial Advisers LLP, 62-63 Cheapside, London,
EC2V 6AX
Optiva Securities Limited, 49 Berkeley Square, London,
W1J 5AZ
Orrick, Herrington & Sutcliffe (UK) LLP, 107 Cheapside,
London, EC2V 6DN
Link Asset Services, The Registry, 34 Beckenham Road,
Beckenham, BR3 4TU
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
EXECUTIVE CHAIRMAN’S STATEMENT
I am pleased to report on the Company (Tiziana Life Sciences PLC) and its subsidiaries, together the ‘Group’,
results for the year ended 31 December 2019.
Background
Tiziana Life Sciences plc is a publicly-listed (NASDAQ: TLSA; AIM:TILS) biotechnology company focused on the
discovery and clinical development of innovative therapeutics for cancers, autoimmune and inflammatory diseases.
The Group combines field-leading medical scientists, providing deep knowledge and novel insights into disease
mechanisms, together with a highly experienced clinical development team. Since its foundation in 2013, Tiziana
Life Sciences has expanded its pipeline of assets to include clinical stage development therapeutic candidates in
both oncology and immunology, as well as a pre-clinical drug discovery pipeline.
Clinical Programmes
The Group is focused on the discovery and development of novel molecules and related diagnostics to treat high
unmet medical needs in oncology and immunology.
Our lead product candidate in immunology are Foralumab (TZLS-401), which we believe is the only fully human
anti-CD3 monoclonal antibody, or mAb, in clinical development. MAbs represent a single pure antibody produced
by single clones and are an important class of human therapeutics for treating cancers and autoimmune diseases.
In addition, we are accelerating development of another fully human monoclonal antibody anti-IL6R (TZLS-501) to
treat acute inflammation resulting from infection with viral agents such as Coronaviruses. Antibodies produced in
animals for use in humans, lead to strong, immune responses limiting their effectiveness and potentially leading to
severe side effects. A process known as “humanization” removes most of the animal components of the antibody
thereby lowering the immune response from the human immune system. The entire omission of other animal
material, as in fully human antibodies, is the optimal goal to avoid incompatibility with the human immune system.
Our lead product candidate in oncology is Milciclib (TZLS-201), which is an orally bioavailable, small molecule broad
spectrum inhibitor of cyclin-dependent kinases, or CDKs, and Src family kinases. CDKs are a highly conserved
family of enzymes that phosphorylate a specific group of proteins that are involved in regulating the cell cycle. The
cell cycle is a series of events that takes place in cells leading to division and duplication of its DNA to produce two
daughter cells. Src family kinases are non-receptor tyrosine kinase proteins encoded by the Src gene also involved
in regulating cell growth and potential transformation of normal cells to cancer cells. We have a drug discovery
pipeline of small molecule new chemical entities, or NCEs, and biologics. We employ a lean and virtual research
and development, or R&D, model using highly experienced teams of experts for each business function to maximize
value accretion by focusing resources on the drug discovery and development processes. Our mission is to design
and deliver next generation therapeutics and diagnostics for oncology and immune diseases of high unmet medical
need by combining deep understanding of disease biology with clinical development expertise.
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
EXECUTIVE CHAIRMAN’S STATEMENT
DEVELOPMENT PIPELINE
Foralumab (TZLS-401 / NI-0401)
Foralumab is a fully human engineered anti-CD3 monoclonal antibody (mAB). It was in-licensed in December 2014
from Novimmune. In January 2016, Tiziana outlined its clinical development plan for Foralumab with initial plans to
evaluate the drug in two clinical indications: non-alcoholic steatohepatitis (NASH) and inflammatory bowel disease
(IBD).
As the only fully human engineered human anti-CD3 mAB in clinical development, Foralumab has significant
potential advantages such as a shorter treatment duration and reduced immunogenicity. With completion of the
intravenous dosing for our Phase 2a trial in Crohn’s Disease, Foralumab’s ability to modulate T-cell response
enables potential extension into a wide range of other autoimmune and inflammatory diseases, such as GvHD,
ulcerative colitis, multiple sclerosis, type-1 diabetes (T1D), inflammatory bowel disease (IBD), psoriasis and
rheumatoid arthritis.
Foralumab is being developed as both an immunosuppressive and immunomodulatory agent, with therapeutic
benefits of rendering T-cells unable to orchestrate an immune response and induction of immune tolerance via
maintenance of regulatory T-cells. There is further potential for Foralumab to be combined with the Company’s
TZLS-501, a fully human anti-IL-6R mAB in development to target autoimmune and inflammatory diseases.
In November 2016, Tiziana announced new data for oral efficacy in humanized mouse models with Foralumab, a
major milestone and a potential breakthrough for the treatment of NASH and autoimmune disease. This unique oral
technology stimulates the natural gut immune system and potentially provides a therapeutic effect in inflammatory
and autoimmune diseases with greatly reduced toxicity. Positive therapeutic effects with Foralumab were
consistently demonstrated in animal studies conducted by Prof. Kevan Herold (Yale University) and Prof. Howard
Weiner (Harvard University).
On 16 April, 2018, the Group entered into an exclusive license agreement with The Brigham and Women’s Hospital,
Inc. relating to a novel formulation of Foralumab dosed in a medical device for nasal administration. An
investigational new drug application (IND) for the first-in-human evaluation of the nasal administration of Foralumab
in healthy volunteers for progressive multiple sclerosis indication was filed in the second quarter of 2018.
Subsequent to IND approval, a single-site, double-blind, placebo-controlled, dose-ranging Phase 1 trial with nasally
administered Foralumab at 10, 50 and 250 µg per day, consecutively for 5 days to evaluate biomarkers of
immunomodulation of clinical responses was initiated in November 2018. The trial conducted at the Brigham and
Women's Hospital, Harvard Medical School, Boston, MA, in healthy volunteers. 18 subjects received Foralumab
treatment and 9 patients received placebo. All nasal doses were well tolerated. The study was completed in
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
EXECUTIVE CHAIRMAN’S STATEMENT
September 2019. Phase 1 clinical data demonstrated that nasally administered Foralumab, was well-tolerated and
no drug-related safety issues were reported at any of the doses. No drug-related changes were observed in vital
signs among subjects at pre-dose, during treatment and at discharge. The mean blood pressure (BP) during the 5
days of treatment were; Cohort A (10 µg/d):124/73, Cohort B (50 µg/d): 119/67 and Cohort C (250 µg/d):113/65
compared to placebo:118/67). Heart rates, respiratory rates and oral temperatures were unchanged among the 3
cohorts compared to the placebo. Nasally administered Foralumab at the 50 µg dose suppressed cytotoxic CD8+
as well as perforin secreting CD8+ cells, which have been implicated in neurodegeneration in multiple sclerosis
(MS). Treatment at 50 mg stimulated production of anti-inflammatory cytokine IL-10 and suppressed production of
pro-inflammatory cytokine IFN-γ. Taken together, the treatment showed significant positive effects on the
biomarkers for activation of mucosal immunity, which are capable of inducing site-targeted immunomodulation to
elicit anti-inflammatory effects.
An enteric-coated capsule formulation using a proprietary and novel technology has been developed for oral
administration of Foralumab. cGMP manufacturing of clinical trial materials for a Phase 1 study has been completed
and an IND has been submitted in March 2019.
On September 9, 2019, the FDA granted approval to initiate the Phase I clinical trials to evaluate the safety and
pharmacokinetics of oral Foralumab at 1.25, 2.5 and 5.0 mg/day as a single ascending dose study. The study was
completed in December 2019 at Brigham and Women’s Hospital (Boston, MA USA). Formulated Foralumab powder
encapsulated in enteric-coated capsule was well-tolerated at all doses tested and there were no drug-related safety
issues observed even at the highest dose of 5 mg in this trial. Based on successful Phase 1 data, we intend to
conduct a Phase 2 study using Crohn’s Disease patients starting in the second half of 2020.
Milciclib (TZLS-201)
Milciclib, Tiziana’s lead small molecule drug, was exclusively licenced in January 2015 from Nerviano Medical
Sciences. Milciclib is an orally bioavailable, broad spectrum inhibitor of Cyclin Dependent Kinases (CDKs): 1, 2, 4,
5 and 7 and Src family kinases. Cyclin dependent kinases are a family of highly conserved enzymes that are
involved in regulating the cell cycle. Src family kinases regulate cell growth and potential transformation of normal
cells to cancer cells. A unique feature of Milciclib is its ability to reduce microRNAs, miR- 221 and miR-222, which
silence gene expression. miR-221 and miR-222 promote the formation of blood vessels (angiogenesis) that are
important for the spread of cancer cells (metastasis). Levels of these microRNAs are consistently increased in
hepatocellular carcinoma (“HCC”) patients and may contribute towards resistance to treatment with Sorafenib. As
a result, the Group are investigating Milciclib both as a monotherapy and as a combination treatment with Sorafenib.
To date, Milciclib has been studied in a total of eight completed and ongoing Phase 1 and 2 clinical trials in 316
patients. In these trials, Milciclib was observed to be well-tolerated and showed initial signals of anti-tumour action.
Prior to in-licensing, Milciclib was granted orphan designation by the European Commission and by the U.S. Food
and Drug Administration (“FDA”) for the treatment of malignant thymoma and an aggressive form of thymic
carcinoma in patients previously treated with chemotherapy. In two Phase 2a trials, CDKO-125a-006 and
CDKO125a-007, Milciclib showed signs of slowing disease progression and acceptable safety.
The Group initiated a Phase 2a trial (CDKO-125a-010) of Milciclib safety and tolerability as a single therapy in
Sorafenib-resistant patients with HCC in the first half of 2017. Typically, this population of patients have an
advanced form of the disease with poor prognosis and an average overall survival expectancy of 3-5 months In
May 2018, the Independent Data Monitor committee (IDMC) completed an interim analysis of tolerability data from
the first eleven treated patients and recommended expansion of the initial cohort to an additional 20 patients to
complete the trial enrolment, which was completed in December 2018. .
In March 2019, the Independent Monitoring Committee, or IDMC, reviewed safety data from patients as of
February 26, 2019 and concluded that the administration of Milciclib to patients with advanced HCC was not
associated with unexpected signs or signals of toxicity. 28 out of 31 treated patients were evaluable, 14 completed
the 6-month duration study. The most frequent adverse events such as diarrhea, ascites, nausea, fatigue, asthenia,
fever, ataxia, headache, and rash were manageable. No drug-related deaths were recorded.
The clinical activity assessment in evaluable patients was based on the independent radiological review using the
modified Response Evaluation Criteria in Solid Tumors (mRECIST).
·14 out of 28 (50%) evaluable patients completed 6-month duration of the trial.
··Both median TTP and PFS were 5.9 months (95% Confidence Interval ("CI") 1.5-6.7 months) out of the 6-
months duration of the trial.
·16 of 28 (57.1%) evaluable patients showed 'Stable Disease'
·One patient (3.6%) showed unconfirmed 'Partial Response' (PR).
·17 of 28 (60.7%) evaluable patients showed 'Clinical Benefit Rate' defined as CBR=CR+PR+SD (with CR
representing Complete Remission).
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
EXECUTIVE CHAIRMAN’S STATEMENT
The Phase 2a trial was completed in June 2019 with clinical safety and efficacy result reported in July 2019.
Since overexpression of CDKs and dysregulation in pRB pathway (regulates transcription factors critical for cell
cycle progression) are prominently associated with tumor cell resistance to certain chemotherapeutic drugs,
inhibition of multiple CDKs is an appealing approach to improve clinical responses in cancer patient’s refractory to
existing treatment options. A Phase 1 dose-escalation study of Milciclib in combination with gemcitabine in patients
with refractory solid tumors exhibited clinical activity in patients including those refractory to gemcitabine. We plan
to explore a combination approach in patients with HCC.
Pre-Clinical Programmes
In pre-clinical development, the Group has two programmes:
Anti-IL6R (TZLS-501)
TZLS-501 is a fully human engineered mAb targeting the interleukin-6 receptor (IL-6R). Tiziana Life Sciences
licensed the intellectual property from Novimmune in January 2017. This fully human mAb has a unique mechanism
of action that binds to both the membrane-bound and soluble forms of the IL-6R resulting in lowering of circulating
levels of IL-6 in the blood. Excessive production of IL-6 is regarded as a key driver of chronic inflammation,
associated with autoimmune diseases such as multiple myeloma, oncology indications and rheumatoid arthritis,
and the Group believes that TZLS-501 may have potential therapeutic value for these indications.
In preclinical studies, TZLS-501 demonstrated the potential to overcome limitations of other IL-6 blocking pathway
drugs. Compared to Tocilizumab and Sarilumab, while binding to the membrane-bound IL-6R complex TZLS-501
has shown a higher affinity for the soluble IL-6 receptor as seen from the antibody binding studies conducted in cell
culture. TZLS-501 also demonstrated the potential to block or reduce IL-6 signaling in mouse models of
inflammation. The soluble form of IL-6 has been implicated to have a larger role in disease progression compared
to the membrane-bound form. (Kallen, K.J. (2002). “The role of trans signaling via the agonistic soluble IL-6 receptor
in human diseases”. Biochimica et Biophysica Acta. 1592 (3): 323–343.).
Recently, chronic inflammation is believed to be associated with severe lung damage observed with COVID-19
infections and acute respiratory illness. China’s National Health Commission has recommended the use of anti-IL6-
R mAbs for treatment of inflammation and elevated cytokine levels (“cytokine storm”) in COVID-19 patients.
StemPrintER
StemPrintER is a multi-gene signature assay intended for use in patients diagnosed with estrogen-receptor positive
ER+/HER2 negative breast cancers. The Group believes this in-vitro prognostic test will be used in conjunction with
clinical evaluation to identify those patients at increased risk for early and/or late metastasis. StemPrintER is
designed to help physicians distinguish ER+/HER2 negative patients:
■ with an elevated risk of early recurrence (<5 years) who could benefit from chemotherapy in addition
to hormonal therapy
■ with a high risk of late recurrence who could benefit from prolonged endocrine treatment up to 10
years
■ with a low risk of early recurrence who might be spared chemotherapy or be eligible for less
aggressive treatments
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
EXECUTIVE CHAIRMAN’S STATEMENT
The diagnostic has a unique biological basis, being based on the detection of cancer stem cell markers, uses a
reliable platform (qRT- PCR, FFPE), and has been evaluated in an initial retrospective validation study using a
consecutive cohort of approximately 2,400 patients with breast cancer. The development team is preparing for a
retrospective validation study using an independent cohort and has conducted a pre- submission meeting with the
FDA.
Financial summary
Consolidated Statement of Comprehensive Income
The Group has made a loss for the year of £7,178k (2018 restated: £6,063k). The loss is detailed in the consolidated
statement of comprehensive income on page 32.
Research and development costs were £2.9 million for the year ended December 31, 2019 as compared to £4.1
million for the year ended December 31, 2018, a decrease of £1.2 million. The decrease in cost is a result of the
completion of the Miciclib Phase 2a of clinical trials during the first half of 2019.
Consolidated Statement of Financial Position
At the end of the year the Group cash balance amounted to £153k (2018: £4,165k) and the total assets of the Group
amounted to £1,808k (2018: £5,436k). To bolster our cash reserves, the Group raised $10m via a public offering
of American Depositary Shares (“ADSs”) on the NASDAQ Global Market in March 2020
Fund raising
In the period, the Group successfully raised funds to further progress its on-going clinical trials and its pre-clinical
pipeline.
On 1 November 2019, the Company announced that it had raised £1,434,000 cash by issue of convertible
unsecured loan notes, with warrants attached. The Loan Notes are expected to be short term instruments and carry
a coupon of 16% per annum and are convertible (together with all accrued interest) into ordinary shares of nominal
value £0.03 each in the capital of the Company at a conversion price of 42p. The warrants issued in connection
with the Loan Notes entitle the holders to subscribe for one additional share per conversion share at the same price
of 42p. The warrants may be exercised for a period of up to 5 years from their issue.
Resignations
Non-Executive Directors
On 7 February 2019, the Group announced the resignation of Riccardo Dalla-Favera MD as a non-executive
director.
On 20 November 2019, the Group announced the resignation of Mr Leopoldo Zambeletti as a non-executive
director, noting the significant business interests of Mr Zambeletti in a wide range of life sciences companies.
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 Company's assets and the health and wellbeing of our employees. The
Company is well financed, resilient and well positioned to weather any financial downturn occurring as a result of
the outbreak. Indeed, the Company has raised additional funds through its ongoing "At the Market" or "ATM" Sales
Agreement with Think Equity (a division of Fordham Financial Management, Inc.) to raise up to US$20m from the
sale of ADSs.
We are also aware of the responsibility we have as a member of the global healthcare community we have
developed investigational new technology to treat COVID-19 infections.
Outlook and strategy
We have continued to progress our pipeline of drugs to treat rare cancers and autoimmune and inflammatory
diseases.
We have developed investigational new technology to treat COVID-19 infections, which consists of direct delivery
of anti-IL-6 receptor (anti-IL-6R) monoclonal antibodies (mAbs) into the lungs using a handheld inhaler or nebulizer.
Preclinical studies are ongoing and we hope to commence a trial investigating the direct delivery of an anti-IL-6
mAb to the lungs using a portable inhaler.
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
EXECUTIVE CHAIRMAN’S STATEMENT
We have outlined our clinical development plan for Foralumab and anticipate to commence Phase 2 trials for oral
administered Foralumab in Crohn’s disease patients and nasally administered Foralumab in multiple sclerosis
patients.
For Milciclib, we are planning to initiate a Phase 2b clinical trial in HCC patients with Milciclib in combination with a
Tyrosine kinase inhibitors such as Regorafenib or Sorafenib.
We are continuing development of StemPrint ER diagnostic tester. Recently, StemPrintER results were announced,
from a poster selected for discussion session at the American Society of Clinical Oncology (ASCO) Virtual
Conference, demonstrating the superiority of StemPrintER stem cell based genomic prognostic tool versus the
market leader, Oncotype DX, in predicting recurrence in ER+/HER2- postmenopausal breast cancer patients.
Looking ahead, Tiziana is confident that it is well positioned to advance these programs to their next respective
value inflection points.
We would like to thank the staff and Board members for all their contributions and shareholders for their continued
support during a successful year.
Gabriele Cerrone
Executive Chairman
June 17th, 2020
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
STRATEGIC REPORT
Business review
A review of the business, its results and strategic outlook is included in the Executive Chairman’s Statement on
page 2.
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 company concerned
with a number of pre-clinical and 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 2019 the main use of the Group’s funds was
completion of Phase II for Milciclib on single agent trials, involving recruitment of patients across different countries
(Italy, Greece and Israel) and completion of Phase I clinical trials with nasally and orally administered Foralumab in
healthy volunteers. Management monitors its cash consumption on a monthly basis and a cash projection is
presented at every quarterly 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 successfully raised additional cash during 2019 to fund research
and development, to meet the Group's ongoing liabilities in respect of licence agreements, and for general working
capital purposes. The Group maintains a virtual operating model resulting in low cash consumption for general and
administrative expenses during the period.
Share price
The Group monitors its share price to determine whether the market view of the Group’s position and prospects is
aligned with the view of management, and to consider the most appropriate time to raise further capital in the
interest of the Group and current shareholders. The Group raised funds via an initial public offering of American
Depository Shares on the Nasdaq Global market in November 2018 at a share price of $0.99 per share and ended
the financial period at $0.75 per share.
Non-financial KPIs
Successful Progress in clinical trials
Completion of the Phase 2a Milciclib clinical trial.
•
•
In March 2019, the Independent Monitoring Committee, or IDMC, reviewed safety data from patients as
of February 26, 2019 and concluded that the administration of Milciclib to patients with advanced HCC
was not associated with unexpected signs or signals of toxicity.
In June 2019, the Group completed the Phase 2a Milciclib clinical trial, with clinical safety and efficacy
result reported in July 2019.
Completion of Phase 1 Clinical Trials for Nasally and Orally Administered Foralumab.
•
27 healthy subjects were enrolled in and completed a Phase 1 clinical trial for progressive multiple
sclerosis indication for nasally administered Foralumab.
• An enteric-coated capsule formulation using a proprietary and novel technology has been developed for
oral administration of Foralumab.
cGMP manufacturing of clinical trial materials for a Phase 1 study has been completed and an IND has
been submitted in March 2019.
•
• On September 9, 2019, the FDA granted approval to initiate the Phase I clinical trials to evaluate the
safety and pharmacokinetics of oral Foralumab at 1.25, 2.5 and 5.0 mg/day as a single ascending dose
study. The study was completed in December 2019
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2018
STRATEGIC REPORT
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 2019.
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.
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 main risks have been identified as follows:
Risks Related to the Development of our Product Candidates
•
If we encounter substantial delays in clinical trials of our product candidates, we may be unable to obtain
required regulatory approvals, and therefore will be unable to commercialize our product candidates on a
timely basis or at all.
• We may fail to demonstrate the safety and therapeutic utility of our product candidates to the satisfaction
of applicable regulatory authorities, which would prevent or delay regulatory approval and
commercialization.
• We depend on enrolment of patients in our clinical trials for our product candidates and may find it difficult
to enrol patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of
our product candidates and could materially adversely affect our R&D efforts and business, financial
condition and results of operations.
• Our product candidates and the process for administering our product candidates may cause undesirable
side effects or have other properties that could delay or prevent their regulatory approval, limit their
commercial potential or result in significant negative consequences following any potential marketing
approval.
• Any contamination in our manufacturing process, shortages of raw materials or failure of any of our key
suppliers to deliver necessary components could result in delays in our clinical development or marketing
schedules.
Risks Related to Our Financial Position and Need for Capital
• We have incurred net losses in every year since our inception. We anticipate that we will continue to incur
losses for the foreseeable future and may never achieve or maintain profitability.
• We need substantial additional funding to complete the development of our product candidates, which may
not be available on acceptable terms, if at all. Failure to obtain this necessary capital when needed may
force us to delay, limit or terminate certain of our product development, research operations or future
commercialization efforts, if any.
• Our limited operating history and no history of commercializing pharmaceutical products may make it
difficult to evaluate the success of our business to date and to assess the prospects for our future viability.
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
STRATEGIC REPORT
Risks Related to Our Reliance on Third Parties
• We rely, and expect to continue to rely, on third parties to conduct our preclinical studies and clinical trials.
If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we
may not be able to obtain regulatory approval for or commercialize our product candidates.
• Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a
competitor will discover them or that our trade secrets will be misappropriated or disclosed.
• We utilize, and expect to continue to utilize, third parties to conduct our product manufacturing for the
•
foreseeable future, and these third parties may not perform satisfactorily.
To the extent we rely on a third-party manufacturing facility for commercial supply, that third party will be
subject to significant regulatory oversight with respect to manufacturing our product candidates.
Risks Related to Commercialization of Our Product Candidates
•
•
• We currently have no marketing and sales force. If we are unable to establish effective sales, marketing
and distribution capabilities or enter into agreements with third parties to market, sell and distribute our
product candidates that may be approved, we may not be successful in commercializing our product
candidates if and when approved, and we may be unable to generate any product revenue.
The market opportunities for our product candidates may be smaller than we anticipate.
The future commercial success of our product candidates will depend upon the degree of each product
candidates’ market acceptance by physicians, patients, third-party payors and others in the medical
community.
The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to
obtain or maintain adequate coverage and reimbursement for our product candidates, if approved, could
limit our ability to market those products.
•
Risks Related to Our Intellectual Property
• Our rights to develop and commercialize our product candidates are subject to the terms and conditions
of licenses granted to us by others. If we fail to comply with our obligations under our existing and any
future intellectual property licenses with third parties, we could lose license rights that are important to the
business.
If we are unable to obtain and maintain patent protection for our current product candidates, any future
product candidates we may develop and our technology, or if the scope of the patent protection obtained
is not sufficiently broad, our competitors could develop and commercialize products and technology similar
or identical to ours.
•
• Our intellectual property licenses with third parties may be subject to disagreements over contract
interpretation, which could narrow the scope of our rights to the relevant intellectual property or technology
or increase our financial or other obligations to our licensors.
If we fail to comply with our obligations in the agreements under which we license intellectual property
rights from third parties or otherwise experience disruptions to our business relationships with our
licensors, we could lose license rights that are important to our business.
•
• We may not be successful in obtaining or maintaining necessary rights to our product candidates through
acquisitions and in-licenses.
• Obtaining and maintaining our patent protection depends on compliance with various procedural,
document submission, fee payment and other requirements imposed by government patent agencies, and
our patent protection could be reduced or eliminated as a result of non-compliance with these
requirements.
• We may not be able to protect our intellectual property rights throughout the world.
• We may not be able to protect our trade secrets in court.
•
•
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel
from their normal responsibilities.
• We may be subject to claims asserting that our employees, consultants or advisors have wrongfully used
or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of
what we regard as our own intellectual property.
If our trademarks and trade names are not adequately protected, then we may not be able to build name
recognition in our markets of interest.
Intellectual property rights and regulatory exclusivity rights do not necessarily address all potential threats.
•
•
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
STRATEGIC REPORT
Risks Related to Government Regulation
• Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory
approval to commercialize our product candidates and the approval may be for a narrower indication than
we seek.
•
• Delays in obtaining regulatory approval of our manufacturing process and facility or disruptions in our
manufacturing process may delay or disrupt our product development and commercialization efforts.
If our competitors are able to obtain orphan drug exclusivity for products that constitute the same drug and
treat the same indications as our product candidates, we may not be able to have competing products
approved by applicable regulatory authorities for a significant period of time. In addition, even if we obtain
orphan drug exclusivity for any of our products, such exclusivity may not protect us from competition.
• Even if we obtain regulatory approval for a product candidate, our product candidates will remain subject
to regulatory oversight.
• Even if we obtain and maintain approval for our product candidates in a major pharmaceutical market such
as the United States, we may never obtain approval for our product candidates in other major markets.
• We may seek a conditional marketing authorization in Europe for some or all of our current product
candidates, but we may not be able to obtain or maintain such designation.
• Healthcare legislative reform measures may have a negative impact on our business and results of
operations.
• We are subject to governmental regulation and other legal obligations related to privacy, data protection
and data security. Our actual or perceived failure to comply with such obligations could harm our business.
• We are subject to the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act and other anti-corruption
laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and
other laws governing our operations.
• Our relationships with customers, physicians and third-party payors will be subject, directly or indirectly, to
federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and
security laws and other healthcare laws and regulations. If we are found in violation of these laws and
regulations, we may be required to pay a penalty or be suspended from participation in federal or state
healthcare programs, which may adversely affect our business, financial condition and results of
operations.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject
to fines or penalties or incur substantial costs.
•
Risks Related to our Business Operations
• We may not be successful in our efforts to identify or discover additional product candidates and may fail
to capitalize on programs or product candidates that may be a greater commercial opportunity or for which
there is a greater likelihood of success.
• Our future success depends on our ability to retain key employees, consultants and advisors and to recruit,
•
retain and motivate qualified personnel.
If we are unable to manage expected growth in the scale and complexity of our operations, our
performance may suffer.
• Our employees, principal investigators, consultants and commercial partners may engage in misconduct
or other improper activities, including non-compliance with regulatory standards and requirements and
insider trading, which could have a material adverse impact on our business.
• Product liability lawsuits against us could cause us to incur substantial liabilities and could limit
•
commercialization of any product candidate that we may develop.
Legal, political and economic uncertainty surrounding the planned exit of the United Kingdom or the U.K.,
from the European Union, or EU, may be a source of instability in international markets, create significant
currency fluctuations, adversely affect our operations in the U.K. and pose additional risks to our business,
revenue, financial condition, and results of operations.
• Exchange rate fluctuations may materially affect our results of operations and financial condition.
• Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail
or suffer security breaches, which could result in a material disruption of our product development
programs.
Gender of Directors and employees
We recruit individuals who have the skills, experience and integrity needed to perform the roles to make Tiziana
Life Sciences PLC 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 and directors at December 31, 2019, was as follows:
11
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
STRATEGIC REPORT
December 31, 2019
Male
Female
Total
Number or persons who were Directors or
officers of the Company
Number of persons who were other employees
of the Company
Total employees at December 31,2019
4
2
6
-
4
4
4
6
10
Directors duties in relation to s172 Companies Act 2006
The directors consider, that they have acted in the way they believe, in good faith, to promote the success of the
Company for the benefit of its members as a whole and, in doing so, have regard (amongst other matters) to:
• the likely consequences of any decisions in the long-term,
• the interests of the Company’s employees,
• the need to foster the Company’s business relationships with suppliers, customers and others,
• the impact of the Company’s operations on the community and environment,
• the desirability of the Company maintaining a reputation for high standards of business conduct, and
• the need to act fairly between the shareholders of the Company.
Long term value
The aim of all business resources allocation is to create a long-term value, being a development and
commercialisation of novel drugs.
Our people
Being a small group with only on average 8 employees (including Executive Directors), there is a high level of
visibility between Board and employees.
Business relationships
The Board is aware of the importance of maintaining good relationship with its key suppliers whilst safeguarding its
resources.
For further details, please see page 15 for stakeholder engagement.
Community and environment
The Board seeks to support as many interactions with research and development community as possible through
regular meetings and continuous collaborations. For further details, please see page 16 for stakeholder
engagement.
Shareholders
Shareholder communications are conducted via press releases or annual and interim reports on timely manner. For
further details, please see page 15 for stakeholder engagement.
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.
12
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
STRATEGIC REPORT
Greenhouse Gas Emissions
We are a company 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.
Whilst we have few employees, we have activities in the US and Europe and we need to fly our employees,
directors and consultants to effectively manage our business and operations. We recognize that we do have
control over business travel and have therefore chosen to disclose our estimated related greenhouse gas
emissions.
By order of the Board
Mr Willy Simon
June 17th 2020
3rd Floor, 11-12 St James’s Square, London, SW1Y 4LB
13
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
STRATEGIC REPORT
The Directors present their report and the financial statements of the Group and its Company for the year ended
31st December 2019.
Results and dividend
The results of the Group for the year are set out on page 31. No dividends were declared or paid in the year (2018:
nil).
Directors
The directors of the Company who were in office during the year and to the date of these financial statements were:
Executive Chairman
Mr Gabriele Cerrone
Dr Kunwar Shailubhai Chief Executive Officer
Mr Willy Simon
Non-Executive Director,
Dr Riccardo Dalla Favera Non-Executive Director (resigned, 7th February 2019)
Mr Leopoldo Zambeletti
Mr Gregor MacRae
Non-Executive Director (resigned, 20th November 2019)
Non-Executive Director (appointed, 21st January 2020)
Significant shareholdings
The directors have been notified or are aware of the following interests in 3% or more of the ordinary share capital
of the company at 31st December 2019:
Ordinary shares
Number
Percentage
63,680,404 46.60%
Planwise Group Limited*
32,970.762 24.13%
The Bank of New York (Nominees)
Guaranty Nominees Limited 15,543,630 11.37%
Security Services Nominees 4,946,568 3.62%
4,233,616 3.10%
Nerviano Medical Sciences Srl
*Mr Gabriele Cerrone, a director, is the ultimate beneficial owner of the entire issued share capital of Planwise
Group Limited.
Pensions
The Group operates a defined contribution pension scheme open to all Executive Directors, Non-Executive
Directors and employees.
Political and charitable contributions
There were no political or charitable contributions made by the Company during the year ended December 31, 2019
(2018: £nil).
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 is firmly committed to business integrity, high ethical values, and professionalism in its activities and
operations. The Board is committed to maintaining the highest standards of corporate governance and is
accountable to the Company’s shareholders. 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.
14
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2018
DIRECTORS REPORT
As an AIM listed company, Tiziana Life Sciences plc is required to adopt a corporate governance code. The Board
of Directors of Tiziana Life Sciences plc has adopted the Quoted Companies Alliance Corporate Governance Code
which they believe is the code that is most suitable for the Company, its subsidiaries and subsidiary undertakings
having regard to its strategy, size, stage of development and resources. The Company’s corporate governance is
reviewed on a regular basis by the Directors of the company. Tiziana Life Sciences Plc operates within the life
science sector in an effective and efficient way, with integrity and due regard for the interests of shareholders and
applies principles of general governance applicable to the size and stage of development of the Group.
Board Structure
The Board is currently comprised of four directors, the Executive Chairman, one Executive director and two Non-
Executive Directors. The directors of the Company have all been selected for their extensive experience in their
specialised fields, making the Board well rounded and balanced. The composition of the Board is regularly reviewed
through the Nomination committee. The wide range of skills among the directors helps to further the business and
strategic development of the Company as well as address any anticipated issued in the foreseeable future. To
ensure the Company’s future growth, all directors are subject to re-election at least once every three years,
confirming the current directors all have the necessary experience and skills. The skills of each director complement
one another guaranteeing a well-functioning balanced board, led by the Executive Chairman. The Company
maintains its governance structure through the Nomination Committee, Audit, Risk and Disclosure Committee and
the Remuneration Committee. These Committees also support the Board in making the best decisions in the interest
of the Company, shareholders and employees. The Board follow a formal schedule of matters and meet quarterly
every year. All Directors are expected to provide a sufficient amount of time to the Company to fully exhibit and fulfil
their duties. Each Directors time spent is reviewed annually prior to recommending their re-election to the
shareholders.
The board is responsible to the shareholders and to ensure acceptable management to the group.
The roles of the directors differ between Executive and Non-Executive directors, while both have fiduciary duties
towards the group. The board is made up of Executive Chairman, Gabriele Cerrone, who has extensive experience
in the financing and restructuring of micro-cap biotechnology companies and has successfully taken several
companies to the NASDAQ and AIM markets, and Kunwar Shailubhai who has many years of scientific and
research development experience. The Executive directors are responsible for the operation and business
development of the company. The Non-Executive officers, Willy Simon and Greg MacRae, have many years of
experience in the finance industry, who act as independent directors providing objective judgment and
constructively challenge the management to ensure all strategies are completely considered.
For the Board to carry out their duties in their entirety, they have full and timely access to all the relevant information
they need. Directors, if necessary, are also permitted to take independent professional advice to further their roles
at the expense of the Group. All Board members have access to the advice of the Company Secretary.
15
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS 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
Shareholders
Our Shareholders have been highly
supportive. We are actively encouraging
retention of their
investment whilst
trying to secure new Shareholders and
funding
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.
The Board is in regular communication
with its Shareholders via press releases,
Annual and Interim Report.
Staff turnover has been very low.
All our employees participate in share
based incentives.
The Company meets periodically with
its Shareholders. Summary of these
events are below:
• AGM, 31 May 2019
• Investor conferences, San
Francisco USA, January 2019
• Interviews: both audio and TV with
Proactive Investor, [Directors Talk,
Vox Markets and Investor meet
Company].
New supplier agreements with material
threshold need to be approved by two
directors.
budgets,
the
With
the
supported
development community
these objectives.
research
the
Board
and
to meet
During the year, employees reduced
their travel wherever reasonably
practical, phone - conferencing instead
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.
The Board seeks
to support as many
interactions with research and development
regular
community as possible
meetings and continuous collaborations.
through
Tiziana’s operations are relatively low in
their impact on the environment.
Business Partners
We have worked closely with our
suppliers to set up new commercial
and development agreements
Research and Development
Community
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
Internal Control and Risk Management
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.
Tiziana continuously monitors and
assesses all regulatory developments
to ensure that any issues are being
addressed in decision making.
The Directors are responsible for the Company’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.
16
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS REPORT
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 perform.
• A comprehensive forecasting process is completed four times a year, 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.
•
Whistleblowing
The company 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 Company’s Compliance Officer, so that appropriate action can be
taken.
Employment
The company 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 company'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 Company is fully committed to the elimination of unlawful and unfair discrimination and values the
differences that a diverse workforce brings to the organisation. The Company 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
Company 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.
The full QCA Compliance Statement can be found on the Company’s, Tiziana Life Sciences Plc, website.
Audit Committee
The Audit Committee of the Board comprises of Greg MacRae and Willy Simon. It is chaired by Greg MacRae, and
is responsible for:
i.
ii.
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;
17
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS REPORT
iii.
iv.
v.
Receipt and review of reports from the Company'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 Company’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 Company's
auditors.
Nomination Committee
The Nomination Committee of the Board comprises of Gabriele Cerrone and Willy Simon. It is chaired by Gabriele
Cerrone, and is responsible for:
i.
ii.
iii.
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
iv.
developing corporate governance guidelines.
Remuneration Committee
The Remuneration Committee of the Board comprises of Willy Simon and Greg MacRae. 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.
Statement of directors’ responsibilities
The Directors are responsible for preparing the Directors’ Report and the financial statements in accordance with
applicable law and regulations.
Company Law requires the directors to prepare group and company financial statements for each financial year.
The directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements
in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”)
and have elected to prepare the Company financial statements in accordance with IFRS as adopted by the EU.
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 Company and of the Group and the financial performance and
cash flows of the Group for that year. In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and accounting estimates that are reasonable and prudent;
•
state whether in preparation of the Group and Company financial statements the Group and Company has
complied with IFRS as adopted by the European Union, subject to any material departures disclosed and
explained in the Group financial statements;
prepare the accounts on the going concern basis unless it is inappropriate to presume that the company
will continue in business.
•
The Directors are responsible for keeping adequate 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
18
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS REPORT
enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible
for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of the
financial statements may differ from legislation in other jurisdictions.
Directors indemnity
The Company’s Articles of Association provide, subject to the provisions of UK legislation, an indemnity for directors
and officers of the Company 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
Company.
Appropriate directors and officer’s liability insurance cover is in place in respect of all Company directors.
Assessment of likely impact of the UK’s proposed withdrawal from the European Union (‘Brexit’)
The Directors have assessed the impact of Brexit on the Group. The Group’s key personnel are located outside of
the European Union so Brexit will not have a material impact on its personnel or its ability to recruit appropriately
qualified staff.
The Italian Medicines Agency (AIFA) have advised all sponsors of clinical trials who have engaged with UK
companies that they will be obliged to appoint a legal representative who is established in an EU member state.
Whilst the Group is impacted by this, it has accommodated this request via the appointment of Longevia Genomics
SRL as the legal representative of the Group in this regard and will use this approach for any similar future
requirements.
Assessment of the impact of COVID-19
The recent outbreak of COVID-19 originated in Wuhan, China, in December 2019 and has since spread to multiple
countries, including the United States and several European countries. On March 11, 2020, the World Health
Organization declared the outbreak a pandemic.
The Company does not believe that the recent outbreak of COVID-19 pandemic will have an adverse effect on the
Company’ operations. Indeed, the Company has raised substantial funds during the pandemic to enable it to
expedite development of TZLS-501 as well as other initiatives within its project pipeline.
Disclosure of information to auditor
So far as the Directors are aware, there is no relevant audit information of which the Company’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 Company’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 489 of the Companies Act 2006, a resolution proposing that Mazars LLP be reappointed as auditors of the
Company will be put to the Annual General Meeting.
Future developments
The Executive Chairman’s Statement on pages 2 to 6 provides a summary of future developments of the Group.
Research and development activities
The research and development activities of the Group are described in the Executive Chairman’s Statement on
page 2 to 6.
19
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS REPORT
Relations with shareholders
The Board values good relations with the Company’s shareholders and understands the importance of effectively
communicating the Company’s operational and financial performance as well as its future strategy. The Company’s
website provides financial information as well as historical news releases and matters relating to corporate
governance.
The Chairman of the Board and the CEO maintain ongoing dialogue with shareholders and communicate their
views to the Board. The Board recognizes it is accountable to shareholders and ensures that their views are taken
into account in agreeing the Company’s strategy and other operational matters. The Board also recognizes the
importance of treating all shareholders equally.
Annual and interim results are communicated by regulatory news services as are ad hoc operational and regulatory
releases. Shareholders may also attend the Annual General Meeting where they can discuss matters with the
board.
Post balance sheet events
Subsequent to the year end the Group announced that it had appointed advisers in relation to an intended
redomicile of the Company to Bermuda, as a consequence of the redomicile the Company will not be seeking to
re-admit its ordinary shares on AIM and will therefore seek shareholder consent for its shares to be cancelled from
AIM when the redomicile occurs. The timing of this exercise has been delayed due to COVID-19.
The Group also appointed Gregor MacRae as a non-executive director in January 2020.
The Group also announced that it had appointed advisers in relation to an intended redomicile of the Company to
Bermuda, as a consequence of the redomicile the Company will not be seeking to re-admit its ordinary shares on
AIM and will therefore seek shareholder consent for its shares to be cancelled from AIM when the redomicile occurs.
The timing of this exercise has been delayed due to COVID-19.
The Group also raised $10m in a public offering of American Depositary Shares (“ADSs”) on the NASDAQ Global
Market, that closed in March 2020.
The Group expedited the development of TZLS-501, (anti-IL6R) monoclonal antibody (mAb) for treatment of
patients infected with coronavirus COVID-19 (SARS-CoV-2). Tiziana plans to administer TZLS-501 using a
proprietary formulation technology.
The Group acquired all of the intellectual property relating to a nanoparticle-based formulation of Actinomycin D
(Act D; a.k.a. Dactinomycin), from Rasna Therapeutics, Inc, a related party, to expand its pipeline for a
consideration of an initial $120,000 upfront payment and milestone payments of up to an additional aggregate
$630,000. The Group has also filed a provisional patent application on the combination of nanoparticle-Actinomycin
D (NP-ACT D) with anti-interleukin-6 receptor monoclonal antibody (anti-IL-6R) as a potential therapy for
management of COVID-19 disease.
The Group entered into an "At the Market" or "ATM" Sales Agreement with Think Equity (a division of Fordham
Financial Management, Inc.) to raise up to US$20m from the sale of ADSs (each representing 5 new ordinary
shares). During the month of May 2020, the Group raised $1,985,004 under this agreement.
In addition, the Group has raised an additional £710,843 from the conversion of warrants during the months of May
and June 2020.
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 8 to 11, and at note 2 to the financial statements.
By order of the Board
Mr Willy Simon
June 17th 2020
20
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS REPORT
3rd Floor, 11-12 St James’s Square, London, SW1Y 4LB
21
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
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 December 31, 2019 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 2018 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 December 31, 2019
Since January 1, 2019, the Committee has undertaken the following key decisions and activities.
•
The Chairman drew the attention to the Company's financial position and its financing plans and noted
that certain executive officers had accepted temporary salary reductions.
• Resolved that in light of the Company’s financial situation, decisions regarding compensation and share
options should be deferred until the Company's financing strategy had been implemented.
The Company has made significant progress during 2019 in the clinical development on Foralumab, with the
completion of Phase I clinical trials for the first in-human evaluation of the nasal and oral administration of Foralumab
and the completion of Phase 2a trials in Milciclib, along with the strengthening of the financial position of the
Company through fundraising.
I hope that you remain supportive of our remuneration approach and will vote in favour of the Directors'
Remuneration Report.
Yours faithfully,
Willy Simon
Chair of the Remuneration Committee
June 17th, 2020
22
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2018
DIRECTORS REMUNERATION REPORT
Annual report on Remuneration
The information in this part of the Directors Remuneration Report (“DRR”) is subject to audit.
Single total figure of remuneration of each Director
The Directors received the following remuneration for the years ended December 31, 2019 and December 31, 2018:
Year Ended
December 31, 2019
£’000
Executive
Gabriele Cerrone
Kunwar Shailubhai
Non - Executive
Willy Simon
Leopoldo Zambeletti
(1)
Riccardo Dalla Favera
(2)
Base
Salary
Bonus
80
470
38
-
2
143(5)
159
-
-
-
Share-based
payment (3)
Other (4)
2019 Total
296
695
-
-
-
-
32
-
-
-
32
519
1,356
38
-
2
1,915
Total
590
302
991
Year Ended
December 31, 2018
£’000
Executive
Gabriele Cerrone
Kunwar Shailubhai
Non - Executive
Willy Simon
Riccardo Dalla Favera
(2)
Leopoldo Zambeletti
Base
Salary
Bonus
93
225
38
20
-
-
79
-
-
-
Total
376
79
Share-based
payment (3)
Other (4)
2018 Total
272
618
-
1
46
937
-
15
-
-
-
15
365
937
38
21
46
1,407
(1) Resigned 20th November 2020
(2) Resigned 7th February 2019
(3) Shares based payments represent the fair value of options that vested during the years ended December
31, 2019 and December 31, 2018.
(4) Other benefits represent healthcare benefits
(5) Bonus covers the period June 9, 2016 to December 31, 2019
No payments were made towards a pension plan for our executive directors.
A share price appreciation of 50% would have no impact on performance related pay.
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 December 31, 2019:
Year Ended December
31, 2019
Executive
Gabriele Cerrone
Kunwar Shailubhai
Non - Executive
Willy Simon
Shares
Options – not yet
vested
Options – vested
not yet exercised
Total (Shares and
options)
64,225,925
5,000
3,809,403
5,700,000
3,200,000
1,500,000
71,235,328
7,205,000
-
-
-
Total
64,230,925
9,509,403
4,700,000
78,440,328
23
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
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
Gabriele
Cerrone
1,200,000
25 April 2014
share £
0.15
25 per cent. Will vest on
each
24/04/2015,
24/04/2016, 24/04/2017,
24/04/2018
of
10 years from date
of vesting
2,000,000
26
2016
January
0.35
Immediate
3,259,403
9 June 2016
1.50
weighted average of an
ordinary share must be
greater than £3 for 120
consecutive dealing days
550,000
1 May 2018
0.8175
Kunwar
Shailubhai
300,000
25 April 2014
0.15
price
share
reaching
£1.635 on a volume
weighted average for 5
trading days
25 per cent. Will vest on
each
24/04/2015,
24/04/2016, 24/04/2017,
24/04/2018
of
10 years from date
of vesting
9 June 2026
1 May 2028
10 years from date
of vesting
400,000
August
1.595
30
2017
25 per cent. will vest on
each of 30 August 2018,
2019, 2020 and 2021
30 August 2027
2,500,000
1 May 2018
0,8175
Vesting only on change of
control
1 May 2028
4,000,000
1 May 2018
0,8175
25 per cent. will vest on
each of 30 April 2019,
2020, 2021 and 2022
10 years from date
of vesting
Total Shareholder Return
The graph below shows the Company’s performance, measured by total shareholder return, for UK ordinary
shares listed on AIM against the AIM All Share Index (AIM: TILS). The AIM All Share Index has been selected for
this comparison because Tiziana Life Sciences PLC has been trading on this exchange for five years and is
considered to be the most suitable comparator index.
Total Shareholder Return
(Source: Investing.com)
24
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS REMUNERATION REPORT
300%
250%
200%
150%
100%
50%
0%
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
AIM All Share TSR
TILS TSR
Chief Executive Officer Total Remuneration History
2018 was the first year that Tiziana Life Sciences PLC prepared a Directors' Remuneration Report and took the
exemption not to disclose 5 years of history of remuneration. The Company has chosen to disclose remuneration
history from 2018 onwards.
Total CEO Renumeration (£000)
2019
938
2018
858
Percentage change of Chief Executive Officer Total Remuneration
Base Salary
Short term incentives
Taxable Benefits (1)
Percentage increase for the year ended December 31,
2019 compared to the year ended December 31, 2018
CEO
0%
0%
0%
Average Employee
0%
0%
n/a
(1) All average employees did not receive taxable benefits so a comparison is not possible.
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.
25
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS REMUNERATION REPORT
Relative Importance of spend on pay
The Committee considers the company’s research and development expenditure relative to salary expenditure for
all employees, to be the most appropriate metric for assessing overall spend on pay due to the nature and stage of
the company’s business. Dividend distribution and share buy-back comparators have not been included as the
company has no history of such transactions. The graph below illustrates the gross pay to all employees per year
as compared to research and development expenditure and illustrates the year-on-year change.
£000
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Research and Development
Labour costs
2019
2018
Structure and role of Remuneration Committee
The Remuneration Committee of the Board comprises of Willy Simon and Greg MacRae. 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.
The information in this part of the Directors’ Remuneration Report (‘DRR’) is not subject to audit.
Directors' remuneration policy
The Policy was approved by the Company’s shareholders at the 2019 AGM and will remain in force for three years
from that date (until the AGM in 2022), or until a revised Remuneration Policy is approved by shareholders.
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 Director's 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.
26
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS REMUNERATION REPORT
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.
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.
27
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS REMUNERATION REPORT
Operation
• 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.
Performance conditions
• 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.
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 and Non- 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 was approved by a Shareholder vote at the 2019 AGM and, i remains 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
28
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
DIRECTORS REMUNERATION REPORT
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.
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
reason
not mentioned
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.
Annual report on Remuneration
In determining remuneration for new appointments to the Board, the Board will consider all relevant factors
including, but not limited to, the calibre of the individual and their existing package, the external market and the
existing arrangements for the Company's current Executive Directors, with a view that any arrangements offered
are in the best interests of the Company and shareholders and without paying any more than is necessary.
Where the new appointment is replacing a previous Executive Director, salaries and total remuneration opportunity
may be higher or lower than the previous incumbent. If the appointee is expected to develop into the role, the Board
may decide to appoint the new Executive Director to the Board at a lower than typical salary. Larger increases
(above those of the wider company) may be awarded over time to move closer to the market level as their
experience develops.
Benefits and other elements of remuneration will normally be limited to those outlined in the remuneration policy
table above. However, additional benefits may be provided by the Company where the Board considers it
reasonable and necessary to do so.
It is expected that the structure and various pay elements would reflect those set out in the policy table above.
However, the Board recognises that, as an independent life sciences company, it is competing with global firms for
its talent. As a result, the Board considers it important that the recruitment policy has sufficient flexibility in order to
attract the calibre of individual that the Company requires to grow a successful business. The Company recognises
that in many cases, an external appointee may forfeit significant cash bonuses and/or share awards from a prior
employer. The Board believes that it needs the ability to compensate new hires for bonuses and/ or incentive awards
lost on joining the Company. The Board will use its discretion in settling any such compensation, which will be
decided on a case-by-case basis, provided that in no event shall such compensation exceed the value of
compensation forfeited by the external appointee, as confirmed by the appointee in a written agreement with the
Company.
29
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TIZIANA LIFE SCIENCES PLC
Opinion
We have audited the financial statements of Tiziana Life Sciences Plc (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 31 December 2019 which comprise the Consolidated Statement of Comprehensive Income; the
Consolidated and Company Statements of Financial Position; the Consolidated and Company Statements of Cash Flows; the
Consolidated and Company Statements of Changes In Equity 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 and, as regards the Parent
Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
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 December 2019 and of the Group’s loss for the year then ended;
the Group’s 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 Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
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 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 concerning the applicability of the going concern basis of preparation.
As detailed in the financial statements and the Strategic Report, the Group and Parent Company are pre revenue and its business
model requires significant ongoing expenditure on research and development. In the period to 31 December 2019 the Group
incurred losses after taxation of £7,306,000. At 31 December 2019, the Group and the Company had net liabilities of
£4,180,000 and £1,705,000, and cash and cash equivalents of £153,000 and £116,000 respectively. In Note 2, the directors
explain that to date they have successfully raised funds to finance clinical trials. Since the year end the Group has raised
approximately $12m in new equity. However, further significant funding will be required to continue their development
programmes and to meet liabilities as they fall due. As the directors are confident that the Group will raise the additional
funding they have prepared the accounts on the going concern basis. The Group needs to secure sufficient investment to fund
their clinical trials in full and ongoing working capital requirements. These 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.
Our opinion is not modified in respect of this matter.
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.
In addition to the matter described in the “Material uncertainty related to going concern” section, we have determined the
matter described below to be the key audit matter to be communicated in our report. This matter was 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 this matter.
30
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2018
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TIZIANA LIFE SCIENCES PLC
Key Audit Matter 1 - Valuation and accounting of options, warrants, and convertible loan notes (Parent Company)
The Group’s accounting policy in respect of “share based payments and convertible loan notes” are set out in the accounting policy
notes on pages 45 and 46.
The Parent Company operates share-based payments arrangements to remunerate directors and employees in the form of share
options. Additionally, warrants were granted in lieu of fundraising fees in 2015 which are exercisable over a four year period.
Subsequently, additional warrants were granted as part of incentive attached to the convertible loans notes issued in 2019. These
warrants are exercisable over a five year period.
With regards to the convertible loan notes, IAS 32 requires liability and equity components to be presented separately on the
Statement of Financial Position. As a result, particular attention is required when reviewing the contractual obligations of the notes
in order to conclude as to their accounting as debt or equity classified.
Due to the complexity in 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.
Our response:
Our audit procedures over options, warrants, and convertible loan notes 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 mechanics of the options and warrants calculations, and validated the inputs to the model;
• 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 IFRS 2 Share-Base Payments;
• We examined the contractual obligations of the convertible loan note to ensure that management’s accounting for the
aforementioned notes under IAS 32 Financial Instruments as debt classified was appropriate;
• We reviewed the calculation for convertible debt instrument and ensured the principal of loan note and accrued interest are
recorded appropriately on the financial statements;
• We reviewed Regulatory News Service (RNS) announcements per the London Stock Exchange website for purposes of
concluding the completeness and accuracy of current year equity instrument issuances and/or other equity related
transactions and conversion of convertible loan notes; and
• We reviewed the disclosure in the financial statements to ensure disclosure is sufficient and appropriate.
Our findings:
Our audit identified material errors in the accounting for warrants and share options in the year ended 31 December 2019.
Management concurred with our findings and appropriate adjustments were made to the financial statements.
As a consequence of our 2019 findings, together with management, we reviewed the accounting for warrants and share options in
prior periods and concluded that prior period adjustments were needed to reclassify entries between certain reserves. The overall
impact on net assets was not significant. The reclassifications made are detailed in note 4.
Following the above adjustments we are able to conclude that warrants, share options and convertible loan notes were all
appropriately accounted for under 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
How we determined materiality
Group - £452,000
Parent Company - £276,000
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 & Parent Company as the users of the accounts were likely to be most
concerned with the annual and accumulated losses of the Group and Parent Company and the Group and Parent Company’s
ability to continue as a going concern.
31
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TIZIANA LIFE SCIENCES PLC
Rationale for benchmark applied
Having considered factors such as the Group and Parent Company’s AIM and (NASDAQ) listing, we determined materiality
at 6.0% 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 65% of overall materiality.
Group - £317,000
Parent Company - £194,000
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.
Group - £13,000
Parent Company £8,000
The range of financial statement materiality across components, audited to the lower of local statutory audit materiality and
materiality capped for group audit purposes, was between £173,000 and £276,000, being all below group financial statement
materiality.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the financial
statements. 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 that could be
considered to be contrary to 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 Act 2006. 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.
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, 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.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort,
are discussed under “Key audit matters” within this report.
Our Group audit scope included an audit of the Group and Parent Company financial statements. Based on our risk assessment,
each of the Group’s key subsidiaries (Tiziana Life Sciences Plc & Tiziana Pharma Limited) considered to be a significant
component of the Group were subject to a full scope audit by the Group engagement team and other Group entities not
considered to be significant components (Tiziana Therapeutics Inc & Longevia Srl), were subject to analytical review and
limited audit procedures.
At the Parent Company level we also tested the consolidation process and carried out overall analytical procedures to confirm
our conclusion that there were no material misstatements in the aggregated financial information.
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
32
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TIZIANA LIFE SCIENCES PLC
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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
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 Act 2006 requires us to report
to you if, in our opinion:
•
•
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
the Parent Company financial statements and the parts of the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on pages 17 and 18, 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.
33
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TIZIANA LIFE SCIENCES PLC
Use of the audit report
This report is made solely to the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the 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 Company and the Company’s members as a body for our audit work, for this report, or
for the opinions we have formed.
Robert Neate (Senior Statutory Auditor)
for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
Tower Bridge House
St Katharine’s Way
London
E1W 1DD
17th June 2020
34
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
Continuing Operations
Note
Research and development costs
Operating expenses
Operating loss
Finance costs
Loss before taxation
Taxation
5
10
11
2019
£’000
(2,910)
(4,864)
(7,774)
(72)
(7,846)
540
2018
£’000
(Restated)
(4,132)
(3,268)
(7,400)
(9)
(7,409)
1,459
Loss for the year attributable to equity owners
(7,306)
(5,950)
Other comprehensive income that may be classified to
profit and loss in subsequent periods
Exchange differences on translation of foreign operations
129
(113)
Total comprehensive loss for the year attributable to
equity owners
(7,177)
(6,063)
Loss per share
Basic and diluted (loss) per share on continuing operations
12
(5.4p)
(4.7p)
35
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
Note
13
15
27
16
15
26
14
11
18
22
21
19,22
19,22
22
22
27
25
27
26
ASSETS
Non-Current assets
Property, plant and equipment
Finance lease receivable
Right of use asset
Other non-current assets
Total non-current assets
Current assets
Finance lease receivable
Related party receivable
Other receivables
Taxation receivable
Cash and cash equivalents
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Capital and reserves attributable to equity holders
of the company
Called up share capital
Share premium
Capital reduction reserve
Shares to be issued reserve (convertible notes)
Share based payment reserve (options)
Share based payment reserve (warrants)
Other reserve
Translation reserve
Retained earnings
Total equity
Liabilities
Non-Current liabilities
Lease Liability
Current liabilities
Trade and other payables
Lease liability
Related party payable
Other liabilities
Total current and non-current liabilities
TOTAL EQUITY AND LIABILITIES
2019
£’000
5
113
329
217
664
109
245
124
513
153
1,144
1,808
4,099
25,194
31,183
1,099
3,850
1,812
(28,286)
15
(43,146)
(4,180)
2018
£’000
(Restated)
1 January
2018
£’000
(Restated)
6
-
-
217
223
-
20
228
800
4,165
5,213
5,436
18
-
-
217
235
-
20
94
1,434
48
1,596
1,831
4,094
25,117
31,183
-
2,857
1,399
(28,286)
(113)
(35,840)
3,752
18,113
31,183
-
2,354
1,075
(28,286)
-
(29,874)
411
(1,683)
411
-
-
4,851
212
451
63
5,988
1,808
4,673
-
352
-
5,025
5,436
3,270
-
244
-
3,514
1,831
The financial statements were approved by the Board of directors and authorised for issue on 17th June 2020.
Mr W Simon
Director
Company Number: 03508592 (England and Wales)
36
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
2019
2018
Notes
£’000
ASSETS
Non-current assets
Investment in subsidiaries
Other non- current assets
Property, plant and equipment
Current assets
Other receivables
Related party receivable
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity Capital and reserves attributable
to equity holders of the company
Called up share capital
Share premium
Shares to be issued reserve (convertible
notes)
Share based payment reserve (options)
Share based payment reserve (warrants)
Capital reduction reserve
Retained earnings
Total equity
Liabilities
Current liabilities
Trade and other payables
Related party payable
TOTAL EQUITY AND LIABILITIES
17
16
14
26
18
21
19,22
19,22
22
22
25
26
1
January
2018
£’000
Restated
16,005
217
6
1,055
-
22
£’000
Restated
20,305
217
-
343
44
3,593
24,502
17,305
-
217
-
62
243
116
638
4,099
25,194
1,099
3,915
1,875
31,183
(69,070)
4,094
25,117
-
2,922
1,462
31,183
(42,387)
3,752
18,113
-
2,419
1,138
31,183
(40,522)
(1,705)
22,391
16,083
2,091
252
2,343
638
1,869
242
2,111
988
234
1,222
24,502
17,305
The Company reported a loss for the financial year ended 31 December 2019 of £26,683k (2018: £1,849k, restated).
The financial statements were approved by the Board of directors and authorised for issue on 17th June 2020.
Mr W Simon
Director
Company Number: 03508592 (England and Wales)
37
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
Cash flows from operating activities
Loss for the year before taxation
Adjustments for:
Convertible loan interest accrued
Loan interest paid as equity
Shares issued in lieu of fees
Share based payment – options
Share based payment – warrants
Net (increase) in related party receivables
Net increase in related party payables
Net decrease/(increase) in other receivables
Net (decrease)/increase in trade and other payables
Depreciation of property, plant and equipment
Depreciation of right-of-use asset
(Gain)/Loss on foreign exchange
Lease adjustment
Loss on disposal of right of use asset
CASH USED IN OPERATING ACTIVITIES
Increase in taxation receivable
NET CASH USED IN OPERATING ACTIVITIES
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Proceeds from issuance of warrants
Repayment of leasing liabilities
Fundraising costs
NET CASH GENERATED FROM FINANCING ACTIVITIES
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of other investments
NET CASH GENERATED FROM INVESTING ACTIVITIES
NET (DECREASE)/ INCREASE IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
2019
£’000
2018
£’000
(7,846)
(7,409)
39
-
82
992
-
(225)
342
125
(17)
4
194
129
-
56
(6,125)
800
(5,325)
-
1,473
(157)
-
1,316
(3)
-
(3)
9
16
41
504
45
-
108
(135)
1,483
12
-
(222)
3
-
(5,544)
2,093
(3,451)
7,437
1,132
(1,001)
7,568
-
-
-
(4,012)
4,117
4,165
153
48
4,165
38
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
Cash flows from operating activities
Loss for the year before taxation
Adjustments for:
Convertible loan interest accrued
Loan interest paid as equity
Shares issued in lieu of fees
Share based payment - options
Share based payment - warrants
Depreciation
Net (increase) in related party receivables
Net increase in related party payables
Net decrease/(increase) in operating assets/other receivables
Net increase in trade and other payables
(Gain) on foreign exchange
Impairment of investment
CASH USED IN OPERATING ACTIVITIES
Increase in taxation receivable
NET CASH GENERATED (USED IN)/ GENERATED FROM
OPERATING ACTIVITIES
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Proceeds from issuance of warrants
Proceeds from issuance of warrants
Fundraising costs
NET CASH GENERATED FROM FINANCING ACTIVITIES
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of other investments
Capital contribution to subsidiaries
NET CASH USED IN INVESTING ACTIVITIES
2019
£’000
2018
£’000
(26,683)
(2,427)
39
-
82
992
-
-
(243)
-
24
234
-
21,966
(3,589)
300
(3,289)
-
-
1,473
-
1,473
-
-
(1,661)
(1,661)
9
16
41
503
45
6
(44)
8
(35)
971
(116)
-
(1,023)
1,326
303
7,437
1,132
-
(1,001)
7,568
-
-
(4,300)
(4,300)
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
(3,477)
3,571
3,593
116
22
3,593
39
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Balance at 1 January 2018
Prior period adjustment
Balance at 1 January 2018 (restated)
Transactions with owners
Issue of share capital (private placement
and IPO)
Issue of share capital (warrants)
Issue of share capital (loan conversion)
Share based payment (options)
Issue of share capital in lieu of fees
Convertible loan note interest
Share based payment (warrants)
Total transactions with owners
Comprehensive income
Exchange differences on translating foreign
operations
Comprehensive loss for the year
Total comprehensive income
Balance as at 31 December 2018
(Restated)
Transactions with owners
Issue of share capital (in lieu of fees)
Convertible loan notes issued
Convertible loan note interest
Share based payment (options)
Issuance of warrants
Total transactions with owners
Comprehensive income
Exchange differences on translating foreign
operations
Comprehensive loss for the year
Total comprehensive income
Balance as at 31 December 2019
Share
Capital
Share
Premium
Capital
Reduction
Reserve
£’000
£’000
£’000
Share
Based
Payment
Reserve
(options)
£’000
Share
Based
Payment
Reserve
(warrants)
£’000
3,752
-
3,752
232
44
64
-
1
1
-
342
-
-
-
18,650
(537)
18,113
4,864
1,085
1,240
-
40
15
(240)
7,004
-
-
-
31,183
-
31,183
2,354
-
2,354
419
656
1,075
-
-
-
-
-
-
-
-
-
-
-
-
-
-
503
-
-
-
503
-
-
-
-
-
-
-
-
-
324
324
-
-
-
4,094
25,117
31,183
2,857
1,399
Convertible
Loan Note
Reserve
Other
Reserve
Translation
Reserve
Retained
Earnings
Total
Equity
£’000
£’000
(28,286)
-
(28,286)
-
-
---
£’000
-
-
-
-
-
-
-
-
-
-
-
(113)
-
(113)
£’000
(29,755)
(119)
(29,874)
£’000
(1,683)
-
(1,683)
-
-
-
-
-
(16)
-
(16)
-
(5,950)
(5,950)
5,096
1,129
1,304
503
41
-
84
8,158
(113)
(5,950)
(6,063)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(28,286)
(113)
(35,840)
411
5
-
-
-
-
5
-
77
-
-
-
-
77
-
-
-
-
-
-
-
-
-
-
-
993
-
993
-
-
-
-
413
413
-
1,473
39
-
(413)
1,099
-
-
-
-
-
-
-
-
-
-
-
-
4,099
-
-
25,194
-
-
31,183
-
-
3,850
-
-
1,812
-
-
1,099
-
-
(28,286)
-
-
-
-
-
-
128
-
128
15
-
-
-
-
-
-
-
(7,306)
(7,306)
(43,146)
82
1,473
39
993
-
2,587
128
(7,306)
(7,178)
(4,180)
40
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share
Capital
Share
Premium
Capital
Reduction
Reserve
£’000
£’000
£’000
Share
Based
Payment
Reserve
(options)
£’000
Share Based
Payment
Reserve
(warrants)
Convertible
Loan Note
Reserve
Retained
Earnings
Total
Equity
£’000
£’000
£’000
£’000
Balance at 1 January 2018
Prior period adjustment
Balance at 1 January 2018 (restated)
Transactions with owners
Issue of share capital
Issue of share capital (warrants)
Issue of share capital (loan conversion)
Share based payment (options)
Issue of share capital in lieu of fees
Convertible loan note interest
Share based payment (warrants)
Total transactions with owners
Comprehensive income
Comprehensive loss for the year
Total comprehensive income
3,752
-
3,752
232
44
64
-
1
1
-
342
-
-
18,650
(537)
18,113
4,864
1,085
1,240
-
40
15
(240)
7,004
-
-
31,183
-
31,183
2,419
-
2,419
-
-
-
-
-
-
-
-
-
-
-
-
-
503
-
-
-
503
-
-
482
656
1,138
-
-
-
-
-
-
324
324
-
-
Balance as at 31 December 2018
4,094
25,117
31,183
2,922
1,462
Transactions with owners
Issue of share capital
Convertible loan notes issued
Convertible loan note interest
Share based payment (options)
Issuance of warrants
Total transactions with owners
Comprehensive income
Comprehensive loss for the year
Total comprehensive income
5
-
-
-
-
5
-
-
77
-
-
-
-
77
-
-
-
-
-
-
-
-
-
-
-
-
-
993
-
993
-
-
-
-
-
-
413
413
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,473
39
-
(413)
1,099
(40,403)
(119)
(40,522)
-
-
-
-
-
(16)
-
(16)
(1,849)
(1,849)
(42,387)
-
-
-
-
-
16,083
-
16,083
5,096
1,129
1,304
503
41
-
84
8,157
(1,849
(1,849)
22,391
82
1,473
39
993
-
2,587
-
-
(26,683)
(26,683)
(26,683)
(26,683)
Balance as at 31 December 2019
4,099
25,194
31,183
3,915
1,875
1,099
(69,070)
(1,705)
41
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. GENERAL INFORMATION
Tiziana Life Sciences PLC is a public limited company incorporated in the United Kingdom under the Companies
Act and quoted on the AIM market of the London Stock Exchange (AIM: TILS) and on the NASDAQ Capital Market
(NDAQ: TLSA). The address of its registered office is given on page 1. The principal activities of the Company and
its subsidiaries (the Group) are that of a clinical stage biotechnology company focussed on targeted drugs to treat
diseases in oncology and immunology.
These financial statements are presented in thousands of pounds sterling (£’000) which is the functional currency
of the primary economic environment in which the Company operates.
The ultimate parent of the group is Planwise Group Limited, incorporated in the British Virgin Islands. Gabriele
Cerrone is the ultimate beneficial owner of the entire issued share capital of Planwise Group Limited.
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 Act 2006 as applicable to companies reporting under IFRS. These accounts have been prepared
under the historical cost convention.
As permitted by section 408 of the Companies Act 2006, a separate profit and loss account for the Company has
not been presented in these financial statements.
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 the discovery and development of novel molecules that treat human disease in oncology and
immunology. The Directors expect the Group and Company to incur further losses and to require significant capital
expenditure in continuing to develop clinical stage development therapeutic candidates in both oncology and
immunology. The Group and Company has successfully funded clinical trials to date and is in the process of
securing additional investment for purposes of continuing to fund their clinical trials moving forward.
The Directors have prepared cash flow projections that include the costs associated with the continued clinical trials
and additional investment to fund that operation. On the basis of those projections, the directors conclude that the
company will be able to meet its liabilities as they fall due for the next 12 months from the date when these financial
statements are issued.
Until and unless the Group and Company secures sufficient investment to fund their clinical pipeline, there is a
material uncertainty about the Group and Company’s ability to continue as a going concern after the next 12 months,
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 Brexit will have an impact on the Group and Company’s ability to raise funds as it
has access to the US market due to its listing on the Nasdaq.
New and Revised Standards
Standards in effect in 2019
IFRS 16 ‘Leases’ has come into effect from January 1, 2019 and has been adopted by the Group. The
impact of the adoption of the leasing standard is disclosed in Note 4 below.
42
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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 future
periods.
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 their 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.
Several 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.
Basis of consolidation
Subsidiary undertakings are all entities over which the Group has the power to govern the financial and operating
policies of the subsidiary and therefore exercises control. The existence and effect of both current voting rights and
potential voting rights that are currently exercisable or convertible are considered when assessing whether control
of an entity is exercised. Subsidiaries are consolidated from the date at which the Group obtains control and are
de-consolidated from the date at which control ceases.
Business combination
The consolidated position of the Group is as a result of the reverse acquisition of Alexander David Investments plc
by Tiziana Pharma Ltd and the subsequent listing of the Company as Tiziana Life Sciences Plc on 24 April 2014.
Tiziana Pharma Limited was incorporated on 4 November 2013 and prepared its first set of financial statements to
31 December 2014. Therefore, the parent and subsidiary had the same reporting date but Tiziana Pharma Limited
had a long period of account. No adjustment was made in the consolidated financial statements for the difference
in length of reporting period because the only transaction in Tiziana Pharma Limited at 31 December 2013 was the
issue of ordinary share capital of £1.
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 expense for the year represents the total of current taxation and deferred taxation. The charge in respect
of current taxation is based on the estimated taxable profit for the year. Taxable profit for the year is based on the
profit as shown in the income statement, as adjusted for items of income or expenditure which are not deductible
or chargeable for tax purposes. The current tax liability 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 realized, or the deferred liability is settled. Deferred tax
assets are recognized to the extent that it is probable that the future taxable profit will be available against which
the temporary differences can be utilized.
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.
43
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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.
Financial instruments
The Group classifies a financial instrument, or its component parts, as a financial liability, a financial asset or an
equity instrument in accordance with the substance of the contractual arrangement and the definitions of a
financial liability, a financial asset and an equity instrument.
The Group evaluates the terms of the financial instrument to determine whether it contains an asset, a liability or
an equity component. Such components shall be classified separately as financial assets, financial liabilities or
equity instruments.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
(a) Financial assets, initial recognition and measurement and subsequent measurement
All financial assets not recorded at fair value through profit or loss, such as receivables and deposits, are
recognized initially at fair value plus transaction costs. Financial assets carried at fair value through profit or loss
are initially recognized at fair value, and transaction costs are expensed in the income statement.
The measurement of financial assets depends on their classification. Financial assets such as receivables and
deposits are subsequently measured at amortized cost using the effective interest method, less loss allowance.
The Group 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
Financial liabilities are classified as measured at amortized cost or FVTPL.
A financial liability is classified as at FVTPL if it is a derivative. Financial liabilities at FVTPL are measured at fair
value and net gains and losses, including any interest expense, are recognized in profit or loss.
Other financial liabilities are subsequently measured at amortized cost using the effective interest method.
Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on
derecognition is also recognized in profit or loss.
The Group's financial liabilities include trade and other payables.
Warrants
Warrants 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.
44
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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, or other amount substituted for
cost, 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 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
IT and equipment
5 years
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 income statement.
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.
Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
45
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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.
Leases
IFRS 16 Leases was issued in January 2016 and was implemented by the Group from 1 January 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 £833k and a lease liability of £833k on 1 January,
2019.
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.
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 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.
Other non-current assets
Other non- current assets are currently measured at cost less accumulated impairment. The asset is not yet being
amortised since it is not yet in the condition necessary for it to be capable of operating in the manner intended by
management.
46
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
Convertible loan notes
Where there is no option to repay in cash or the Company has the choice of settlement, and the interest rate is fixed
The Group considers these to be convertible equity instruments and records the principal of the loan note as an
equity in a Convertible loan note reserve. The accrued interest on the principal amount, for which there is no
obligation to settle in cash, is also recorded in the Convertible loan note reserve. Upon redemption of the instrument
and the issue of share capital, the amount is reclassified from the convertible loan note reserve to share capital and
share premium.
Where the above conditions are not met
The Group considers these to be convertible debt instruments and records the principal of the loan note as a debt
liability in the liabilities section of the statement of financial position. The accrued interest on the principal amount
is recorded in the income statement and as an increase in the debt liability. Upon redemption of the instrument and
the issue of share capital, the amount is reclassified from the debt liability to share capital and share premium.
Under IAS 32 the liability and equity components of convertible loan notes must be presented separately on the
statement of financial position. The Group has examined the terms of each issue of convertible loan notes and
determined their accounting treatment accordingly. Convertible loan notes are treated differently depending upon
a number of factors.
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 only 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 17, share based payments, to the accounts.
The Group has also made a judgement on the impact of 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 January 2019 but has not restated comparatives for the
2018 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
January 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 January
2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019
was 3.35%.
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
47
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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 December 2018
Remaining lease commitments discounted using the Group’s incremental borrowing
rate as at the date of initial application
Lease Liability recognised as at 1 January 2019
Of which:
Current lease liabilities
Non-current lease liabilities
2019
£000
897
833
833
197
636
The associated right-of-use assets for all leases were measured at the amount equal to the lease liability.
The recognised right-of-use assets relate to the following types of assets:
Properties
31 December 2019
£000
329
1 January 2019
£000
833
Total right-of-use assets
329
833
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 3.35% 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.
Accounting for Warrants – Prior period adjustment
During the year, the Group reviewed its accounting treatment for warrants. The Group has warrants that had been
issued in lieu of fees and warrants that had been issued as an additional incentive for investors to enter into a
Convertible Loan Note agreement.
Warrants issued in lieu of fees
In prior years the fair value at date of grant had been expensed to the Statement of Income based on the vesting
period of the warrant. The Group recognises that the fair value at the date of grant should be recognised over the
life of the service for which the warrant was provided.
Warrants issued as incentive
In prior years the fair value at date of grant had been expensed to the Statement of Income based on the vesting
period of the warrant. The Group recognises that the fair value of the warrants should be recognised as a cost of
fundraising and fully recognised at the date of issuance of the Convertible Loan Note.
The adjustments have impacted the prior period and earlier periods and the impact on the financial statements is
as follows:
48
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
Consolidated Balance Sheet (Extract)
£’000
£’000
£’000 (Restated)
1 January 2018
Adjustment
1 January 2018
Share Premium
Share based payment reserve (warrants)
Retained Earnings
18,650
419
(29,755)
(537)
656
(119)
18,113
1,075
(29,874)
Total Equity
(1,683)
-
(1,683)
Consolidated Balance Sheet (Extract)
Share Premium
Share based payment reserve (warrants)
Retained Earnings
share
Total Equity
31 December
2018
£’000
25,894
548
(35,766)
Adjustment
£’000
(777)
851
(30)
31 December
2018
£’000 (Restated)
25,117
1,399
(35,796)
411
44
411
31 December
2018
£’000
Adjustment
£’000
31 December
2018
£’000 (Restated)
(3,313)
(7,454)
44
44
(3,269)
(7,409)
Consolidated
Comprehensive Income (Extract)
Statement
of
Operating Expenses
Loss before taxation
5. OPERATING LOSS
The Group and Company’s operating loss for the year is stated after charging the following:
License fees
Depreciation of Property, Plant and Equipment
Depreciation (Right-of-use asset)
Foreign exchange (gains)/losses
2019
£’000
433
4
192
129
758
2018
£’000
781
12
-
(222)
571
6. SEGMENTAL REPORTING
During the year under review management identified the Group’s only operating segment as the research and
development of biotechnological and pharmaceutical products. This one segment is monitored and strategic
decisions are made based upon it and other non-financial data collated from industry intelligence. The form of
financial reporting reported to the Board is consistent with those presented in the annual financial statements.
49
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
7. AUDITOR’S REMUNERATION
Remuneration receivable by the Company’s auditor for the audit of the
consolidated and Company financial statements, including £16k (2017:£8k) for
the audit of Company subsidiaries.
Remuneration receivable by the Company’s auditor for other assurance
services
8. EMPLOYEES
Group
Staff costs comprised:
Directors’ salaries including bonus
Employees, wages, salaries and bonus
Social security costs
Share based payment charge
The average monthly number of employees, including directors, employed by
the Group during the year was:
Research and Development
Corporate and administration
A charge for share based payments totalling £586k (2018: £503k) was made in the year.
Company
Staff costs comprised:
Directors’ salaries
Recharge of US Salaries (including social security costs)
Share based payment charge
9. REMUNERATION OF KEY MANAGEMENT PERSONNEL
2019
£’000
2018
£’000
56
82
34
56
2019
£’000
892
554
477
992
2018
£’000
455
948
447
503
2,912
2,353
6
5
11
2018
£’000
151
-
503
654
5
4
9
2019
£’000
892
745
992
2,629
2018
2019
Bonus
£’000
Salary
£’000
Director
W Simon
G. Cerrone (1)
R. Dalla-Favera
K. Shailubhai (2)
Directors'
fee
£’000
38
80
2
-
-
143
-
159
120
302
Directors' fee
£’000
Bonus
£’000
Salary
38
93
20
-
151
-
-
79
79
-
-
-
225
225
-
-
-
470
470
(1) Gabriele Cerrone’s bonus covers the period June 9, 2016 to December 31, 2019
(2) Kunwar Shailubhai became an employee of the Company on 24th May 2017, at which point he ceased
to be a non-executive director.
50
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
The following share options were granted to directors in the year:
Director
R. Dalla-Favera
W. Simon
G. Cerrone
L Zambeletti
K Shailubhai
2019
Number of
options
-
-
-
-
-
-
2018
Number of
options
-
-
550,000
550,000
6,500,000
7,600,000
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.
No director exercised share options in the year.
The Company made £12k (2018: £13k) of payments to a defined contribution pension schemes on behalf of
directors or employees.
10. FINANCE INCOME AND COSTS
Group
Finance Income
Finance income received on net investment in lease
Total finance income
Finance Expenses
Finance charge accrued on convertible loan notes
Interest expense on lease liabilities
Total finance expenses
Net finance expense recognised in Statement of Comprehensive Income
2019
£’000
2018
£’000
1
1
49
24
73
72
-
-
9
-
9
9
51
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
11. 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:
2019
£’000
2018
£’000
(518)
(22)
(800)
(659)
Nil
Nil
(540)
(1,459)
Loss before taxation
(7,846)
(7,454)
Loss charged at standard rate of corporation tax 19%
(1,491)
(1,416)
Tax losses arising in the year not recognised
Movement in unrecognised deferred tax
Expenses not deductible for taxation
Adjustments due to prior periods
Research and development claim
Consolidation adjustment in relation to foreign exchange
movements
-
(189)
1,353
(22)
(223)
32
828
-
132
(659)
(344)
-
(540)
(1,459)
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 amount of tax losses for which no deferred tax assets has been recognised is £2,756k (2018: 2,946k).
12. LOSS PER SHARE
Basic loss per share is calculated by dividing the loss attributable to equity holders of the company by the weighted
average number of ordinary shares in issue during the year.
(Loss) attributable to equity holders of the Company (£)
(7,306,423)
(5,950,061)
Weighted average number of ordinary shares in issue
136,482,627
127,553,866
Basic loss per share (pence per share)
(5.4)
(4.7)
2019
2018
(restated)
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 Income Statement are therefore identical. All
earnings per share figures presented above arise from continuing and total operations and therefore no earnings
per share for discontinued operations are presented.
52
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
13. PROPERTY, PLANT AND EQUIPMENT
Details of the Groups property, plant and equipment are as follows:
Group
Cost
At 1 January 2019
Additions
Disposals
At 31 December 2019
Depreciation
At 1 January 2019
Charge in year
At 31 December 2019
Net book value as at 31 December 2019
Net book value as at 31 December 2018
14. OTHER RECEIVABLES
Group
Other receivables
Taxation receivable
Related party receivable
Prepayments
Furniture
and fixtures
£’000
IT
equipment
£’000
Total
£’000
12
-
-
12
7
2
9
3
5
25
3
-
28
24
2
26
2
1
2019
£’000
103
513
246
21
883
37
3
-
40
31
4
35
5
6
2018
£’000
195
800
20
33
1,048
There are no differences between the carrying amount and fair value of any of the trade and other receivables
above.
Company
Taxation receivable
Related party receivable
Prepayments and accrued income
15. FINANCE LEASE RECEIVABLES
2019
£000
53
243
9
305
2018
£000
300
44
43
387
In November 2019, the Group subleased one of its leased office spaces. The sublease has been classified as a
finance lease receivable.
Finance lease receivable
Current
Non-current
31 Dec 2019
£000
109
113
1 Jan 2019
£000
-
-
222
-
The undiscounted lease payments to be received over the next 5 years are as follows:
53
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
Undiscounted lease payments receivable
113
1 Year
£000
£000
114
2 years
3 or more years
£000
-
-
113
114
The undiscounted lease payments do not include a discount factor charge of £5k.
During the year ending December 31, 2019, the Group received £27k of income from its subleasing activities.
Finance Lease Receivable
Finance Lease receivable as at 1 Nov 2018
Sublease income
31 December
2019
£000
249
(27)
222
16. OTHER NON-CURRENT ASSETS
In June 2016, the Board approved the purchase of the data repository of DNA samples from SharDNA (an Italian
entity in liquidation) for EUR 258k, approximately £217k.
Management recognizes that the transaction is not the purchase of a business but the purchase of key assets
owned by SharDNA. These assets are owned by Tiziana Life Sciences PLC.
The validity to the sale of the assets has been confirmed by the Italian judicial system. The Company is still unable
to utilise these assets until the resolution of the outstanding data protection legal action. For this reason, the
investment has been recognised as a non-current asset until such a time that the Company is able to use this asset.
The Company has not recognised a contingent liability in respect of the legal action as the outcome is uncertain
and cannot be considered as probable to occur.
17. INVESTMENTS IN SUBSIDIARIES
Company
Cost
At 1 January 2019
Additions
Disposals
Less provision
At 31 December 2019
Impairment
Charge in year
At 31 December 2019
Net book value as at 31 December 2019
Net book value as at 31 December 2018
Shares in group
undertakings
Capital
Contribution
£’000
£’000
Total
£’000
7,509
-
-
-
7,509
(7,509)
(7,509)
12,796
1,661
-
-
12,796
(12,796)
(12,796)
20,305
1,661
-
-
21,966
(21,966)
(21,966)
-
-
-
7,509
12,796
20,305
54
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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 Company’s interest in subsidiary undertakings is as follows:
Name
Principal activity Registered Address
Tiziana Pharma Limited
Tiziana Therapeutics Inc
Longevia Genomics SRL
Clinical stage
biotechnology
company
Clinical stage
biotechnology
company
Biotech
Discovery
Company
3rd Floor, 11-12 St
James’s Square,
London, SW1Y 4LB
420 Lexington Avenue
Suite 2525
New York, NY 10170
Via Constantinopoli 42
09100- Cagliari (CA)
Percentage
shareholding
100%
Country of
incorporation
England &
Wales
100%
USA
100%
Italy
Tiziana Therapeutics Inc was incorporated on 28 October 2015. This entity was set up to house the Company’s US
operations.
Longevia Genomics SRL was incorporated on 4 July 2016. This entity was established to enable the Company to
carry out R&D activities in Sardinia and acting as the European legal representative of the Group, as per EU
regulatory (AIFA) requirements.
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 recognized 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.
18. SHARE CAPITAL
Company and Group
2019
2018
Ordinary Shares
2019
£000
In issue at 1 January
136,463,818
125,054,805
4,094
Issued for cash
Issued in lieu of consultancy
fees
Conversion of warrants
Conversion of Loan
Commission and Interest
-
7,742,167
190,698
-
-
-
-
1,454,644
2,137,625
74,577
-
5
-
-
-
2018
£000
3,752
232
-
45
65
-
In issue at 31 December
136,654,516
136,463,818
4,099
4,094
Ordinary Shares
Ordinary shares have a par value of £0.03. Every holder of ordinary shares is entitled to one vote, to participate in
dividends, and to share in the proceeds of winding up the company in proportion to the number of and amounts
paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by
proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. The Company does not have a
limited amount of authorised capital.
Issuance of ordinary shares
In November 2019, 190,968 new ordinary shares were issued in lieu of a consultancy fee of £82,000.
55
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
19. SHARE BASED PAYMENTS
Group and Company
Options
The Company operates share-based payment arrangements to remunerate directors and key employees in the
form of a share option scheme. The exercise price of the option is normally equal to the market price of an ordinary
share in the Company at the date of grant.
Options (‘000)
2019
Weighted
Average
exercise price
(pence)
Options (‘000)
2018
Weighted
Average
exercise price
(pence)
Outstanding at 1 January
Granted
Forfeited
Cancelled
Outstanding at 31
December
Exercisable at 31
December
18,617
-
(2,238)
-
16,379
5,521
84
-
(115)
-
86
51
10,717
9,500
(1,600)
-
18,617
5,236
93
82
(172)
-
84
39
No options were exercised during the period ending 31 December 2019 and 31 December 2018.
The total outstanding fair value charge of the share option instruments is deemed to be approximately £3,800k
(2018: £5,175k).
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 common stock since its inception and does not anticipate paying
dividends on its common stock in the foreseeable future.
The Company has estimated a forfeiture rate of zero.
Grant date share price
Exercise share price
Vesting periods
Risk free rate
Expected volatility
Option life
10 March 2017
30 August 2017
30 April 2018
£1.725
£1.725
Yr1, Yr 2, Yr 3, Yr4
£1.595
£1.595
Yr 1, Yr 2, Yr 3,
Yr4
£0.8175
£0.8175
Yr 1, Yr 2, Yr 3, Yr4
0.38% to 1.09%
80% to 167%
10 years
0.69% to 1.09%
58% to 60%
10 years
0.69% to 1.03%
58% to 59.7%
10 years
Weighted average share price
Weighted average fair value per
share option
£1.725
£1.06
£1.595
£0.57
£0.8175
£0.38
56
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
For the options issued with a market condition attached, the Directors have used the Monte Carlo simulation to
estimate the fair value of these options. The Company uses the following methods to determine its underlying
assumptions:
•
•
•
expected volatilities are based on the historical volatilities of the market;
the expected term of the award is 15 years and is based on managements’ assessment of when the market
condition is likely to be achieved; and
a range of fair value’s per share were produced and management have determined the most appropriate
value based on their knowledge of the market and vesting conditions being fulfilled.
Warrants
On 2nd March 2015, warrants were granted over 600,000 shares at an exercise price of £0.50 per share in lieu of
the issue of options. The warrants are exercisable until 31 December 2021.
On 31st May 2015, warrants were granted over 292,500 shares at an exercise price of £0.66 per share in lieu of
fundraising fees. The warrants are exercisable until 31 May 2022.
On 11th November 2017, warrants were granted over 100,000 shares at an exercise price of £1.60 per share in
conjunction with a Convertible Loan Note. The warrants are exercisable until 20 November 2022.
On 11th December 2017, warrants were granted over 183,333 shares at an exercise price of £1.60 per share in
conjunction with a Convertible Loan Note. The warrants are exercisable until 11 December 2023.
On 15th December 2017, warrants were granted over 196,667 shares at an exercise price of £1.60 per share in
conjunction with a Convertible Loan Note. The warrants are exercisable until 15 December 2023.
On 16th January 2018, warrants were granted over 63,334 shares at an exercise price of £1.60 per share in lieu of
fundraising fees. The warrants are exercisable until 15 January 2024.
On 22nd January 2018, warrants were granted over 133,333 shares at an exercise price of £1.60 per share in
conjunction with a Convertible Loan Note. The warrants are exercisable until 22 January 2024.
On 5th March 2018, warrants were granted over 78,000 shares at an exercise price of £1.60 per share in lieu of
fundraising fees. The warrants are exercisable until 5 March 2024.
On 19th April 2018, warrants were granted over 51,563 shares at an exercise price of £0.8 per share in lieu of
fundraising fees. The warrants are exercisable until 19 April 2024.
On 28th November 2018, warrants were granted over 185,000 shares at an exercise price of £0.8 per share in lieu
connection with the issuance and conversion of a loan. The warrants are exercisable until 27 November 2023.
On 28th November 2018, warrants were granted over 150,000 shares at an exercise price of £0.8 per share in
connection with the issuance and conversion of a loan. The warrants are exercisable until 27 November 2023.
On 31st October 2019, warrants were granted over 185,950 shares at an exercise price of £0.42 per share in in lieu
of fundraising fees. The warrants are exercisable until 31 October 2024.
On 31st October 2019, warrants were granted over 1,289,372 shares at an exercise price of £0.42 per share in
connection with the issuance of a convertible loan note. The warrants are exercisable until 31 October 2024.
As disclosed in Note 3, the Group has made an adjustment to its accounting treatment of warrants this year.
The Directors have estimated the fair value of the warrants in services provided using the Black-Scholes valuation
model and assumptions above.
Weighted average share
price
2019
2018
2017
£0.42
£0.67
£1.60
2015
£0.55
57
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
For each set of warrants, the charge has been expensed over the service period. A share-based payment charge
for the year of £nil (year to December 2018, restated: £45k) has been expensed in the statement of comprehensive
income.
20. CONVERTIBLE DEBT INSTRUMENT
Group and Company
Planwise Convertible Loan Notes 2016
From the date of the reverse acquisition a convertible loan note of £200k was in existence as detailed in the
Admission Document dated 31 March 2014. Proceeds of the subscriptions for the notes are to be used exclusively
to finance the Company's on-going working capital requirements. The terms of the loan note are that the loan notes,
plus accrued interest at a rate of 4 per cent above Bank of England base rate per annum, will convert into ordinary
shares in the Company at a price of £0.10 per share at the election of Planwise any time after the second
anniversary of the readmission to AIM on 24 April 2014. The Company considers this to be a Convertible Debt
Instrument as detailed in the policy described at note 2 as a result of the fact that the Company is obligated to repay
the capital amount and the interest of the loan, and Planwise has the right to settle the obligation via a cash
settlement and is not limited to settling the obligation in shares in the Company.
Accounting for the convertible debt instrument
The net proceeds received from the issue of the Planwise Convertible Loan Note has been recorded as a debt
liability in the balance sheet and the accrued interest charged to the income statement. The liability for the
convertible debt instrument at 31 December 2019 is;
Convertible loan notes issued
Accrued interest
2019
£000
243
9
252
2018
£000
234
9
243
21. CONVERTIBLE INSTRUMENTS CLASSIFIED AS EQUITY
On 31st October 2019, the Company decided to raise convertible equity finance, with warrants attached, from
supportive existing shareholders. £1,473,000 was raised from the issuance of Convertible Loan Notes. The Loan
Notes are short term instruments and carry a coupon of 16% per annum and are convertible (together with all
accrued interest) into ordinary shares of nominal value £0.03 each in the capital of the Company at a conversion
price of 42p,they are not convertible into cash. The Loan Notes are convertible on the third anniversary of the date
of issue of the Notes, or at the election of the noteholder on completion of the next non-qualifying equity financing
or on the making of a takeover offer for the Company (as defined in the City Code on Takeovers and Mergers), and
such election may be made on an immediate basis or conditional on any such takeover offer being declared, or
becoming, unconditional.
The warrants issued in connection with the Loan Notes entitle the holders to subscribe for one additional share per
conversion share at the same price of 42p. The warrants may be exercised for a period of up to 5 years from their
date of issue.
The principal amount of the Convertible Equity Instrument that was recorded as in the convertible loan note reserve
prior to conversion is as follows:
58
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
Par value of Convertible loan notes issued
Less: Fair value of warrants issued to note holders
Accrued interest
22. RESERVES
£000
1,473
(413)
1,060
39
1,099
The share-based payment reserve for warrants represent the value of equity shares which could be issued in future
accounting periods if the warrants in issue are exercised.
The share-based payment reserve for options represents the value of equity shares which could be issued in future
accounting periods if the share-based payment options in issue are exercised.
The convertible loan note reserve represents the value of equity shares which could be issued in future accounting
periods if the convertible loan notes are converted into equity.
The other reserve was created as a result of the reverse acquisition of Alexander David Investments Plc, which is
described in note 2. The reserve is required due to the fact that the reverse acquisition accounting requires the legal
parent's equity structure to be shown.
Retained earnings represent the cumulative profits/(losses) of the entity which have not been distributed to
shareholders. This reserve has been credited as part of the capital reduction exercise described below.
On the 14 of September 2016 the High Court granted the Company permission to cancel its share premium account
and its capital redemption reserve. The order had previously been ratified at the AGM held on 30 June 2016. The
£31.1m of distributable reserves arising from this transaction were taken to the capital reduction reserve.
The Company also decided to cancel its merger relief reserve as part of the capital reduction exercise.
The translation reserve represents the unrealised gains or losses from the foreign currency translation of
Companies within the Group.
23. FINANCIAL INSTRUMENTS
The main risks arising from the Group’s financial instruments are liquidity risk, foreign currency risk and credit risk.
The directors regularly review and agree policies for managing each of these risks which are summarised below.
Market risk
Market risk encompasses three types of risk, being foreign currency exchange risk, price risk and fair value interest
rate risk. The Group policies for managing fair value interest rate risk are considered along with those for managing
cash flow interest rate risk and are set out in the subsection entitled ‘‘interest rate risk’’ below. The Directors do not
consider the Group’s exposure to price risk to be significant. The Group’s risk management is coordinated by the
Directors and focuses on actively securing the Group’s short to medium term cash flows by minimising the exposure
to financial markets. The Group does not engage in the trading of financial assets for speculative purposes.
Credit risk
Credit risk is managed on a Group basis. Credit risk arises principally from cash and cash equivalents and deposits
with banks and financial institutions as well as credit exposure to customers including committed transactions and
outstanding receivables. The Group reviews its banking arrangements carefully to minimise such risks and currently
has no customers and therefore this risk is viewed as minimal. Management monitor loans between members of
the Group as part of their internal reporting and assess outstanding receivables for ability to be repaid.
59
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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’s financial liabilities based on contractual
undiscounted payments:
Less than 3
months
439
200
641
2019
3 to 12
months
2,739
252
2,989
Total
3,178
452
3,630
£000
Trade and other payables
Related party payables
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 Pounds 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 Euro, US dollar, or Sterling against all other currencies at
31 December 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.
December 31, 2019
EUR (5% movement)
USD (5% movement)
Interest rate risk
Profit or loss and equity
Strengthening
Weakening
62
35
(68)
(39)
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 December
2019 or 31 December 2018.
24. CAPITAL RISK MANAGEMENT
For the purpose of the Group’s capital management, capital includes called up share capital, share premium, share
based payments for options, share based payments for warrants, convertible loan note reserve, capital reduction
60
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
reserve 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.
25. TRADE AND OTHER PAYABLES
Group
Trade payables
Accruals
Company
Trade payables
Accruals
2019
£000
3,178
1,673
2018
£000
2,860
1,813
4,851
4,673
2019
£000
970
1,121
2,091
2018
£000
569
1,299
1,868
26. RELATED PARTY TRANSACTIONS
Tiziana Pharma Limited is a wholly owned subsidiary of Tiziana Life Sciences plc. During the year, Tiziana Life
Sciences Plc transferred a cash amount of £1,841k (2018: £3,079k) in total to Tiziana Pharma Limited. Included
within Investment in subsidiaries of Tiziana Life Sciences Plc’s company financial statements at the balance sheet
date is £11,672k (2018: £9,831k) owed by Tiziana Pharma Limited.
Tiziana Therapeutics Inc. is a wholly owned subsidiary of Tiziana Life Sciences plc. During the year, Tiziana Life
Sciences Plc transferred a cash amount of £1,551k (2018: £1,204k) to Tiziana Therapeutics Inc. Included within
investment in subsidiaries of Tiziana Life Sciences plc’s company financial statements at the balance sheet date is
£4,498k (2018: £2,948k) owed Tiziana Therapeutics Inc.
Longevia Genomics SRL. is a wholly owned subsidiary of Tiziana Life Sciences plc. During the year, Tiziana Life
Sciences Plc transferred a cash amount of £5k (2018: £18k) to Longevia Genomics SRL. Included within investment
in subsidiaries of Tiziana Life Sciences plc’s company financial statements at the balance sheet date is £23k
(2018:£18k) owed by Longevia Genomics SRL.
Rasna Therapeutics Inc is a related party as Tiziano Lazzaretti, CFO of Tiziana, is also CFO of Rasna as
Kunwar Shailubhai, director of our Company, is also a director of Rasna. Rasna is also party to a Shared Services
agreement with Tiziana whereby the Company is charged for shared services such as the payroll and rent. As of
December 31, 2019, £4k (2018: £102k) was owed to Tiziana Life Sciences PLC.
OKYO Pharma Ltd is a related party as Kunwar Shailubhai, director of our Company, is also a director of OKYO.
In addition, Tiziano Lazzaretti, CFO of Tiziana, is also CFO of OKYO. OKYO is also party to a Shared Services
agreement with Tiziana whereby the Company is charged for shared services such as the payroll and rent. As of
December 31, 2019, £21k (2018: £102k) was owed to Tiziana Life Sciences PLC in respect of this agreement.
OKYO Pharma Ltd has also extended a short term loan facility of £400k to Tiziana with interest payable of 20%
per annum, as Tiziana failed to repay the amount owed by the repayment date. In respect of this loan, £200k was
due as of December 31, 2019.
61
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
Gensignia Lifesciences Inc is a related party as Kunwar Shailubhai, director of our Company, is also a director
of Gensignia. In addition, Tiziano Lazzaretti, CFO of Tiziana, is also CFO of Gensignia. As of December 31, 2019,
£241k (2018: £43k) was owed to Tiziana Life Sciences PLC.
Planwise Group Limited is a related party as Gabriele Cerrone, Executive Chairman, is considered to have a
beneficial interest in the shares and voting rights held Planwise Group Limited. As described in Note 20, the
Company has a Convertible Debt Instrument outstanding with Planwise and as of December 31, 2019, Tiziana
owed £252k (2018: £243k) with respect to this instrument.
27. 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.
IFRS16 was adopted 1 January 2019 without restatement of comparative figures. For an explanation of the
transitional requirements that were applied as at I January 2019, see Note 4. The following policies apply
subsequent to the date of initial application, 1 January 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 does not have any 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).
For leases over office buildings and factory premises the Group must keep those properties in a good state of
repair and return the properties in their original condition at the end of the lease.
During the course of 2019, the Group sublet one of its office spaces. This has been recognised as a writeback of
the associated right of use asset and the recognition of a finance lease receivable for the value of the sublease.
Right-of-use assets
At 1 January 2019
Additions
Depreciation
Finance lease receivable
Loss on disposal
Foreign exchange movements
Lease Liabilities
At 1 January 2019
Additions
Interest expense
Lease payments
31 Dec 2019
£000
833
-
(194)
(249)
(56)
(5)
329
31 Dec 2019
£000
833
-
24
(234)
623
Lease liabilities are presented in the statement of financial; position as follows:
31 Dec 2019
1 Jan 2019
62
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
Current
Non-current
£000
212
411
£000
197
636
623
833
The lease liabilities are secured by the related underlying assets. Future minimum lease payments as at 31
December 2019 were as follows:
Within 1 year
1-2 years
2-5 years
Over 5 years
Total
Minimum lease payment due
31 December 2019
Lease payments
Finance Charges
Net Present Values
230
(17)
213
208
(10)
198
224
(11)
213
-
-
662
(39)
623
The total net cash outflow for leases in the year to 31 December 2019 was £156,748.
28. POST BALANCE SHEET EVENTS
On 13 January 2020, the Company announced that its intention to redomicile the Company to Bermuda and its
proposed cancellation from AIM.
On 21 January 2020, the Company announced the appointment of Greg MacRae to the Board of Directors.
On 23 January 2020, the Company announced the filing of a Form F-3 with the Securities Exchange Commission
to enable the Company to potentially conduct a future fundraise in the US. A General meeting was subsequently
called to seek general authorities to issue shares which would be required in the event that the Company were to
utilise the shelf registration.
On 11 March 2020, the Company announced that it is expediting development of TZLS-501, a novel, fully human
anti-interleukin-6 receptor (anti-IL6R) monoclonal antibody (mAb) for treatment of patients infected with coronavirus
COVID-19 (SARS-CoV-2). Tiziana plans to administer TZLS-501 using a proprietary formulation technology. The
Company entered into a world-wide license for composition-of-matter of TZLS-501, a fully human mAb targeting IL-
6R, with Novimmune, SA, a Swiss biotechnology company in January 2017.
On 16 March 2020, the Company announced the closing of its underwritten follow-on public offering of American
Depositary Shares (“ADSs”) on the NASDAQ Global Market. The Company issued 3,333,333 ADSs (representing
16,666,665 new ordinary shares of nominal value £0.03 each in the capital of the Company) at a price to the public
of $3.00 per ADS raising gross proceeds of approximately $10 million (before deducting underwriting discount,
commissions and offering expenses). Each ADS offered represents five (5) Ordinary Shares (reduced from 10
ordinary shares in a stock split that took place in October 2019. In addition, the Company has granted the
underwriters a 45-day option to purchase up to an additional 499,999 ADSs on the same terms and conditions (the
“Option”). All ADSs sold in the Offering were offered by the Company. The number of Ordinary Shares represented
by ADSs comprised in the Offering (including by way of the exercise of the Option) were within existing shareholder
authorities.
On 9 April 2020, the Company announced that it had developed investigational new technology to treat COVID-19
infections, which consists of direct delivery of anti-IL-6 receptor (anti-IL-6R) monoclonal antibodies (mAbs) into the
lungs using a handheld inhaler or nebulizer. Development of this novel technology is a step forward toward
expediting development of TZLS-501, a fully-human anti-interleukin-6 receptor (anti-IL6R) monoclonal antibody
(mAb) for treatment of patients infected with COVID-19 (SARS-CoV-2) coronavirus. The Company believes the
technology could also be applicable for use with other FDA approved mAbs and drugs. The Company has submitted
a provisional patent application for the delivery technology. At this time, an estimate of the financial effect cannot
be determined.
On 15 April 2020 the Company entered into an "At the Market" or "ATM" Sales Agreement with Think Equity (a
division of Fordham Financial Management, Inc.) to raise up to US$20m from the sale of ADSs (each representing
5 new ordinary shares).
On 15 April 2020, the Company issued 420,000 new Ordinary Shares of 3 pence each in connection with the
exercise of options by a former director granted under the Company's 2014 share option scheme.
63
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
On 24 April 2020, the Company issued 6,118,797 new Ordinary Shares of 3 pence each in paid in respect of (i) the
conversion of £1,595,322 in face value of its outstanding convertible notes at a conversion price of 42 pence per
share (including accrued interest of 16 per cent.); and (ii) the exercise of 1,712,672 warrants at a price of 35 pence
per share, yielding £599,435.20 in cash proceeds for the Company and retiring £1,595,322 of indebtedness.
On 6 May, 2020, the Company held a General Meeting and announced that all resolutions had been passed. The
resolutions included the grant of options under the Company's long-term incentive plan or US sub-plan (as
appropriate) over 9,000,000 Shares to Dr Kunwar Shailubhai, the Company's Chief Executive Officer and Chief
Scientific Officer; (b) options over 400,000 Shares to Tiziano Lazzaretti, the Company's Chief Financial Officer; and
(c) options over a further 327,000 Shares to other staff members, all at an exercise price of 35p per share and all
conditional on the surrender of all existing share options held by those individuals. The resolutions also included
the grant by the Company of options over 3,809,403 Shares to Gabriele Cerrone, the Company's Executive
Chairman under the Company's long-term incentive plan at an exercise price of 35p per share and conditional on
the surrender of all existing share options held by Mr Cerrone.
On 18 May 2020, the Company issued 264,286 ordinary shares of 3 pence each in respect of the exercise of
264,286 warrants at a price of 50 pence per share, yielding £132,143 in cash proceeds for the Company.
On 2 June 2020, the Company issued 1,234,399 ordinary shares in respect of the exercise of 1,234,399 warrants
at a price of 39 pence and 50 pence per share, yielding £578,700 in cash proceeds for the Company. The Company
also announced that during the calendar month of May, the Company issued a total of 1,743,445 ordinary shares
under the Company’s ATM sales agreement announced on 15 April 2020 to meet sales of a total of 348,689 ADSs
under the ATM sales agreement, totalling gross proceeds of $1,985,004.
The Company does not believe that the recent outbreak of COVID-19 pandemic will have an adverse effect on the
Company’ operations. Indeed, the Company has raised substantial funds during the pandemic to enable it to
expedite development of TZLS-501 as well as other initiatives within its project pipeline.
29. FINANCIAL COMMITMENTS
The Group’s main financial commitments relate to the contractual payments in respect of its licensing agreements.
Due to the uncertain nature of scientific research and development and the length of time required to reach
commercialisation of the products of this research and development, pre-clinical, clinical and commercial milestone
obligations are not detailed until there is a reasonable certainty that the obligation will become payable. Contractual
commitments are detailed where amounts are known and certain.
• Milciclib project research future payments relate to the achievement of clinical milestones or the payment
of royalties.
•
Foralumab project – Future payments relate to the achievement of clinical milestones or the payment of
royalties. Diligence obligations are payable to BMS/Medarex should the project continue to
commercialisation.
The Group also has financial commitments with a realisation bonus due to its Executive Chairman. The Executive
Chairman is also eligible to receive two realisation bonuses as follows:
(a)
(b)
in the event that, either: (i) the Group raises, in one or a series of transactions, new equity capital in
excess of £20,000,000 (after expenses); or (ii) there is a sale, in one or a series of transactions, of all
or substantially all of the assets (calculated on the basis of book values) of the Group Companies (or
a licence of the same on an exclusive or non-exclusive basis), where the Enterprise Value equals or
exceeds £150,000,000; or (iii) there is a change of control where the Enterprise Value equals or
exceeds £150,000,000, in which case the Realisation Bonus will be the amount equal to the Enterprise
Value multiplied by two and a half (2.5) per cent;
In addition to the payment of the Realisation Bonus outlined above, in the event that, during this
Agreement, either: (i) there is a sale, in one or a series of transactions, of all or substantially all of
the assets ( calculated on the basis of book values) of the Group ( or a licence of the same on an
exclusive or non-exclusive basis ), where · the Enterprise Value equals or exceeds £300;000,000; or
(ii) there is either a change of control where the Enterprise Value equals or exceeds £300,000,000,
the Chairman will be entitled to receive an additional Realisation Bonus in the amount equal to the
Enterprise Value multiplied by three and a half (3.5) per cent.
64
TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
The Enterprise Value means: (i) in the case of a change of control resulting in consideration payable to the Group
(for example, on a sale of its assets or licensing transaction), the total cash and non-cash consideration received
by the Group; or (ii) in the case of a change of control resulting in consideration payable to the shareholders of the
ordinary shares in the issued share capital of the Group from time to time, the total cash and non-cash
consideration payable to the Shareholders.
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TIZIANA LIFE SCIENCES PLC FINANCIAL STATEMENTS 2019