4basebio PLC Annual Report 2019

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FY2019 Annual Report · 4basebio PLC

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Annual Report 2019

4basebio | Annual Report 2019

Content

Foreword by the Management Board 4

The 4basebio share 6

Report of the Supervisory Board 10

Combined Management Report 16

Consolidated Financial Statements 54

Independent Auditor’s Report 122

Corporate Governance Report 128

4basebio | Annual Report 2019Foreword by the Management Board

Dear Shareholders,

We present our Annual Report for 2019 recognising that much
has changed since our previous report. The Company, now
moving in to 2020, is also significantly changed from the po-
sition at 31 December 2019.

These changes were brought about primarily following the
transaction approved by shareholders at the Extraordinary
General Meeting on 19 December 2019. This provided for the
sale of the Group’s immunology and proteomics businesses to
Abcam PLC, a transaction which completed on 1 January 2020.

Over the past three years, the Company has transformed from
a research-oriented entity to a dynamic organisation offering
a wide range of products and services for biomarker research,
drug discovery and clinical diagnosis. These have been devel-
oped, manufactured and marketed by our company formerly
operating under the name of Expedeon to enable scientists
worldwide to push the boundaries of research and product
development.

The proteomics and immunology products and services which
were sold to Abcam most notably included Lightning-Link®,
a patented technology allowing single step, fast and accurate
antibody conjugation to a range of reporter molecules, whilst
overcoming the many constraints associated with traditional
antibody labelling methods as well as CaptSure™ a next-gen-
eration cross-platform immunoassay technology enabling fast
and reliable capture of biomarker targets through creation of a
universal capture surface. CaptSure™ has also been successfully
embedded in a high throughput drug discovery tool (SureFire®)
and had also been deployed in ELISA assay formats.

With the sale to Abcam PLC of those businesses for €120m,
in the process realising a threefold return on its investment in
those businesses, the Company is refocussing on its assets
and intellectual property in the field of genomics.

Along with the approval of the transaction, shareholders also
approved a change in name to 4basebio AG, reflecting the
change in strategic direction; and also gave consent to a share
buy back programme which was completed successfully in
February 2020, with the company repurchasing 9.99% of its
then issued share capital. The share capital of the Company
will be reduced by way of redemption of these acquired shares.

As a result of the changes brought about by the Abcam trans-
action, the Company has now disposed of its principal revenue
and profit generating assets and is likely to record losses in
the near term, before it expects to return to profit through
exploitation of its genomics assets.

With this context, the Management Board is very pleased to
present the results for 2019 and position of the Company as
at 31 December 2019.

Financials

As explained in the Management Report, the Company applies
an adjusted measure of EBITDA to evaluate its financial per-
formance which excludes non-cash items and adjustments to
purchase price consideration post transaction, which under
IFRS are included in the income statement.

The Company continued to demonstrate strong improvement
in adjusted EBITDA during 2019, rising from EUR 1 million in 2018
to EUR 2.9 million in 2019. Included within the EBITDA result
for 2019 are transaction costs of 360 thousand EUR relating
to the Abcam transaction.

Revenues for the year grew to EUR 15.7 million from EUR 13.1
million in 2018, representing an increase of 19%. This came
from a combination of acquisitive and organic growth.

The balance sheet at 31 December 2019 continued to present
a high equity to total assets ratio of 77% and the Group ended
the year with a cash balance in excess of EUR 3.7 million.

For the full year, both revenue and net loss per share improved
significantly versus 2018.

Capital Increase

The Company issued an additional 898,462 shares by way
of contribution in kind for shares in Innova Biosciences and
as part of an earn out agreement following the acquisition
on 16 June 2017. These shares were issued in three stages:
148,458 shares in April; 747,484 shares in October and 2,520
shares in December. The earn out for Innova Biosciences is
now complete.

Outlook

As noted, following the Abcam transaction 4basebio AG has
refocussed its strategy on the exploitation of its genomics
intellectual property and assets. While in the short term, the
Company expects to report losses, the Management Board is
very positive about the medium-term growth and profitability
prospects for the Group and the opportunity to significantly
enhance shareholder value.

4basebio | Annual Report 2019During 2020, 4basebio will report a significant accounting profit
due to the disposal of its proteomics and immunology assets
to Abcam which completed on 1 January 2020 with proceeds
of EUR 120 million. In the near term however, it is expected that
the group will report operational losses and cash outflows as
the Group re-invests to scale and expand its activities. The
operational cash burn for 2020, excluding expenses relating
to the Abcam transaction, from the remaining business is
expected to between EUR 2.5 million to EUR 3.5 million with
revenues between EUR 0.5 million and EUR 1.0 million.

Our mission is to use the sales proceeds to once again become
a pioneer and innovator in the rapidly growing market for phar-
maceutical DNA and to work as a strategic partner with global
developers of gene therapies and DNA vaccines in the future.
The proven “Grow, Buy, Build” strategy, which has delivered
significant value creation continues to form the basis for our
renewed dynamic growth objectives.

We would like to thank our shareholders for their ongoing sup-
port and their confidence in our development. We would like
to extend our appreciation to all departing Expedeon and TGR
employees and remaining 4basebio employees for their efforts
and the dedication over this exciting period. Success in 2019
and in the future is due to the attitude, commitment and the
performance of the entire team. We would like to thank all of
you for your trust in our Company and our team.

Heikki Lanckriet David Roth
CEO

CFO

April 28, 2020

4basebio | Annual Report 2019

The 4basebio share

2019 was a very satisfactory year for
stock markets and particularly for long-term
oriented investors.

4basebio | Annual Report 2019

The 4basebio share

Back on track

2019 was a very satisfactory year for stock markets and par-
ticularly for long-term oriented investors. The German stock
index DAX, for example, grew more than a quarter, although
various uncertainties were always present, such as the ongo-
ing trade conflict between the USA and China, various fears
of recession, the Brexit process and the growing populism
in Europe.

However, a longer-term view beyond 2019 shows that in many
cases the good development only made up for the price losses
in the previous year. The Expedeon share also suffered and
came under severe pressure in the second half of 2018, when
concerns about the economy and the trade dispute between
the United States and China shook the stock markets and
caused stock prices to slide in general.

2019 trading of the Expedeon share closed at €1.70 compared
with €0.89 at the close of 2018, representing a gain of 81 cents
or just over 90% in value.

The product innovations announced during the year and the
increasing sales figures contributed to a slow, but continuous
positive share price development so that from the middle of
the year the share price increased for more than 20%.

But the major part of the price gain was due to the of the sale
of the immunology and proteomics businesses of Expedeon to
Abcam for EUR 120 million, announced on November 11, 2019.

Capital increases

As part of the acquisition of Innova Biosciences, which was
completed in 2017, 148,458 subscription shares were issued
on 29 April 2019, 747,484 subscription shares were issued on
31 October 2019 and 2,520 subscription shares were issued
on 31 December 2019. As a result, all the remaining shares of
the 1.5 million shares included in the purchase price for Innova
Biosciences Limited were issued and registered under the
terms of the convertible bond instrument.

As part of the complete acquisition of TGR BioSciences
Pty Limited (hereinafter also referred to as TGR) on May 14,
2018, 1,612,642 shares from conditional capital were also
issued through mandatory convertible bonds to partially
finance the acquisition. After Expedeon completed the sale
of the Company’s proteomics and immunology business to
Abcam plc, Cambridge, United Kingdom, on January 2, 2020,
the issuance of subscription shares for the acquisition of
TGR was to be accelerated and completed in 2020. To this
end, 723,392 shares were issued in February 2020 and the
remaining 889,250 shares for the acquisition of TGR will be
issued in the coming months.

Price development of the Expedeon share in 2019

1,8

1,6

1,4

1,2

0,8

1,6

4basebio | Annual Report 2019Conversion to registered shares

On October 4, 2019 Expedeon AG converted its bearer
shares into registered shares. The registered shares of Ex-
pedeon AG have been traded since then under the new ISIN
DE000A2YN801 (formerly: DE000A1RFM03) or WKN A2YN80
(formerly: A1RFM0). The stock symbol changed to EXNN
(formerly: EXN).

The conversion from bearer shares to registered shares was
approved at the Annual General Meeting on 9 July 2019. Reg-
istered shares require the maintenance of a share register in
which the shareholders of Expedeon AG are entered, stating
their name, date of birth and address as well as the number of
shares they hold. The legal status of the shareholders entered
on the share register will not be affected by the conversion to
registered shares. Their shareholding in the company remains
unchanged. Furthermore, the right of shareholders to sell their
shares or to purchase shares is not restricted or impeded.

Shareholder structure (%) per 31 December 2019

Shareholders in %

Deutsche Balaton

Fernandez Trust

Heikki Lanckriet

Streubesitz

11,9

5,1

3,2

79,8

4basebio | Annual Report 2019Report of the
Supervisory Board

The Supervisory Board reports below
on the performance of its duties during
the fiscal year 2019.

4basebio | Annual Report 2019

Report of the Supervisory Board

The Supervisory Board reports below on the performance of
its duties during the fiscal year 2019. The business focus during
the year is on the development and marketing of innovative
reagents and services for life sciences and diagnostics.

In the reporting year, the Supervisory Board performed the
tasks required by law and the memorandum and articles of
association with diligence. It examined the Company’s situ-
ation and future at various meetings (plenary sessions and
committees) as well as advised the Management Board on
the management of the Company, ensuring that it performed
properly and in accordance with the law at all times.

The Supervisory Board held 3 physical meetings and one
telephone conference in the fiscal year 2019. Each member
of the Supervisory Board attended at least half of the Super-
visory Board meetings in the reporting period. Prior to each
Supervisory Board meeting, the Management Board sent
detailed reports and comprehensive draft resolutions to the
members of the Supervisory Board. Referring to the reports
received from the Management Board, the Supervisory Board
discussed in detail at each meeting the development of
business and any decisions of significance to the Company
taken in the committees and plenary sessions.

Cooperation between The Management Board and
Supervisory Board

The Management Board provided the Supervisory Board with
regular, timely and comprehensive written or oral reports
on key aspects and events, particularly those relating to the
economic and financial situation and their impact on the
Company and its employees, as well as fundamental issues
concerning corporate planning and strategy, the risk situation
as well as compliance. The Management Board presented,
justified and discussed with the Supervisory Board all rel-
evant issues, including also any deviation from approved
plans. Furthermore, the Management Board ensured that the
Supervisory Board was fully involved at an early stage in all
decisions of material strategic and operational significance
to the Company. It consulted with the Supervisory Board
in advance to determine the course of action to be taken.
Matters requiring the approval of the Supervisory Board were
presented to the Supervisory Board for resolution in good time.
Following thorough examination and detailed consultation
with the Management Board, the Supervisory Board voted
on the Management Board’s draft resolutions and reports. In
urgent cases, resolutions were passed outside of scheduled
meetings by written procedure or by telephone.

The Supervisory Board was also informed between meetings
of important business transactions by means of written
reports and, whenever it was deemed necessary, a reso-
lution was drawn up in writing in close coordination with
the Chairwoman/Chairman of the Supervisory Board. The
Chairwoman/Chairman of the Supervisory Board and the
Chairman of the Audit Committee were also kept up to date
by the Management Board on all relevant key developments
and decisions taken in the Company. Where necessary, the
Chairwoman/the Chairman of the Supervisory Board arranged
for important matters to be dealt with in plenary sessions or
by the appropriate Supervisory Board committee. As a result,
the Supervisory Board was informed of current developments
and upcoming decisions at all times.

Focus of Supervisory Board Activities

From an early stage, the Supervisory Board was closely in-
volved in all decisions of significance for the Company. Deci-
sions were based on the Company’s agreed business strategy.
The discussions held and decisions taken by the Supervisory
Board were based on comprehensive documentation pro-
vided by the Management Board in advance of each meeting.

The Management Board’s reports during the past fiscal year
2019 focused on providing detailed updates on the financial
status of the Company, the business strategy, and the sale of
the immunology and proteomics businesses to Abcam PLC,
which completed on 1 January 2020. The information provided
by the Management Board was substantiated occasionally
by oral reports from the Chairman of the Audit Committee.

The Management Board reported in the plenary session on
a regular basis on the financial position and planning of the
Group.

The discussions of the Supervisory Board focused on the
financial situation of the Company and any deviations to the
business plan, the launch of new products, the integration
plans for the newly acquired companies and the Abcam
transaction. The Supervisory Board also discussed the agenda
items for the Annual General Meeting in July 2019 and the Ex-
traordinary General Meeting in December 2019. Via the Audit
Committee and at plenary sessions, the Supervisory Board
was also updated regularly on the Group’s risk situation and
risk management as well as compliance.

Following the ordinary meetings, the Supervisory Board re-
viewed the efficiency of its control and advisory activities,
including cooperation with the Management Board. The
results were used to further optimise the activities of the
Supervisory Board.

Already on 12 June 2017, the Capital Increase Committee
approved of the resolution of the Management Board to

4basebio | Annual Report 2019issue up to a further 1,500,000 shares against contribution
in kind by the shareholders of Innova under exclusion of the
subscription rights of the existing shareholders as part of
an earn out arrangement in relation to Innova Biosciences.
On 30 April 2019, 148,458 of those shares were registered in
relation to this transaction. On 31 October 2019, 747,484 of
those shares were registered in relation to this transaction.
On 31 December 2019, 2,520 of those shares were registered
in relation to this transaction.

Already on 30 April 2018, the Supervisory Board approved
of the resolution of the Management Board to issue up to a
further 1,612,638 shares against contribution in kind by the
shareholders of TGR under exclusion of the subscription rights
of the existing shareholders as part of an earn out arrangement
in relation to TGR BioSciences PTY Ltd..

In February 2020, the shares due under the first year TGR
earn out, totalling 723,392 were registered.

The composition of the committees of the Supervisory Board
were as follows:

(a) Mr Peter Llewellyn-Davies continued to act as chair of

the Audit Committee consisting of:

• Peter Llewellyn-Davies (Chairman)
• Pilar de la Huerta
• Tim McCarthy

(b) Mr. Joseph M. Fernandez was chair of the Nomination
and Remuneration Committee until 12 April 2019; at
which time, Mrs. Pilar de la Huerta became chair and
replaced Mr. Joseph M. Fernandez in the Committee,
which consisted of:

• Mrs. Pilar de la Huerta (Chairwoman), from 12 April 2019
• Peter Llewellyn-Davies
• Trevor Jarman

Management Board Matters

Activities of the OF THE Committees

Mr. Heikki Lanckriet acted as sole CEO as well as CSO of the
Management Board throughout the year. Mr. David Roth, CFO,
was a member of the Management Board throughout the year.

Composition of the Supervisory Board and the
Committees

On 4 April 2019, Dr Cristina Garmendia Mendizabal resigned
from her position on the Supervisory Board. Joseph Fernandez
was appointed as Chairman on 12 April 2019. On 9 July 2019,
the appointment of Hansjörg Plaggemars to the Supervisory
Board was approved by the shareholders at the Annual General
Meeting. Other members of the Supervisory Board continued
to be Mr. Peter-Llewellyn-Davies, Mr. Tim McCarthy, Dr. Trevor
Jarman and Mrs. Pilar de la Huerta.

The existing Committees and sub-committees support the
work carried out in the plenary sessions of the Supervisory
Board. The committees prepare the resolutions and the topics
to be discussed by the full Supervisory Board. The chairman
of each committee subsequently reported to the Supervisory
Board at the next plenary session on the details and results
of the work performed at the committee meetings.

The Audit Committee held four ordinary meetings in the
reporting period. Its activities mainly focused on monitoring
the accounting process, the audit of the separate and con-
solidated financial statements and management reports
for the fiscal year 2019, discussing the audit reports and
defining the areas of audit focus with the external auditors.
The Audit Committee discussed the quarterly reports with
the Management Board prior to publication. The committee
also dealt with the examination and review of financial plan-
ning, the risk management system and the effectiveness of
the internal control system. The committee prepared the
Supervisory Board’s proposal to the annual general meeting
for the election of external auditors, awarded this engagement
for the annual and consolidated financial statements and
monitored the independence of the external auditors as well
as any non-audit services they had provided.

The Nomination and Remuneration Committee had two
meetings during 2019.

4basebio | Annual Report 2019Report of the Supervisory Board

Corporate Governance

The Supervisory Board, as in the past, regularly dealt with
the continuing development of corporate governance and
its implementation at 4basebio. The corporate governance
report, which is part of this annual report, contains further
details of corporate governance at 4basebio. In March 2020,
the Supervisory Board and the Management Board of 4basebio
AG issued the declaration of compliance with the German
Corporate Governance Code in accordance with Sec. 161
AktG [“Aktiengesetz”: German Stock Corporation Act] and
made it permanently available on the Company’s website. It
is a component of the corporate governance report included
in this annual report.

The Management Board and Supervisory Board of 4basebio
AG are committed to the interests of the Company. In per-
forming their duties, they pursue neither personal interests
nor do they grant other persons unjustified advantages.
Secondary activities are to be disclosed to the Supervisory
Board and require the Supervisory Board’s approval. The
members of the Management Board and of the Supervisory
Board inform about any conflict of interests without delay.
There were no conflicts of interests regarding members of
the Management Board and Supervisory Board in the fiscal
year 2019. Significant transactions between the Company
and the members of the Supervisory Board or parties related
to members of the Supervisory Board require Supervisory
Board approval. This also applies in the case of consultancy
or other service agreements between a Supervisory Board
member and the Company.

Since 25 February 2015 Science & Innovation Link Office,
S.L. (SILO), Madrid, Spain, provided consulting services for
project support to Expedeon, S.L.U., Madrid, Spain. The mem-
ber of the Supervisory Board of Expedeon, Mrs. Dr. Cristina
Garmendia and the former member Mr. Pedro Agustín del
Castillo are principal shareholders of Science & Innovation
Link Office, S.L. (SILO), Madrid, Spain. For these consulting
services, Expedeon, S.L.U., Madrid, Spain, paid in 2019 the
amount of €12,165 to Science & Innovation Link Office, S.L.
(SILO), Madrid, Spain.

Due to a public soft loan 4basebio S.L.U. receives from Spanish
institutions for its R&D activities in Spain, Dr. Heikki Lanckriet
pledged 400,000 shares of his interest in 4basebio AG to
secure this loan. According to the agreement on the pay-
ment of a share pledge fee between 4basebio and Dr Heikki
Lanckriet, it was agreed that 4basebio has to compensate
Dr Heikki Lanckriet, for creating this pledge as a security for
4basebio’s fulfilment of its obligation arising from the pubic
loan received from the Spanish institution by paying a so called
share pledge fee. This fee is €10,000 annually. The pledged

shares shall be released from the pledge once a corporate
transaction takes place (e.g. share or asset deal of 4basebio
AG to a third party) or if 4basebio assumes the liability.

Annual and Consolidated Financial Statements

Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Mann-
heim, rendered an unqualified audit opinion on the annual
financial statements for the period from 1 January 2019 to 31
December 2019, which were prepared by the Management
Board in accordance with the provisions of the HGB [“Han-
delsgesetzbuch”: German Commercial Code], and the man-
agement report of 4basebio AG, as well as the consolidated
financial statements ending 31 December 2019 prepared
in accordance with IFRSs and Sec. 315a HGB and the group
management report of the 4basebio Group (4basebio AG
and its subsidiaries).

The external auditors are of the opinion that the consolidated
financial statements and the separate financial statements,
prepared in accordance with the applicable financial reporting
standards, give a true and fair view of the net assets, financial
position, results of operations and cash flows of the Group.
The Supervisory Board’s Audit Committee awarded the audit
engagement in accordance with the resolution taken by the
annual general meeting of EXPEDEON AG on 9 July 2019.

This year’s audit focused on the valuation / presentation of
discontinued operations in accordance with IFRS 5, the ac-
counting for deferred tax assets and liabilities, the underlying
documentation of the valuation assumptions and the infor-
mation on the consolidated financial reports as part of the
reporting. Other examination topics included accounting for
revenues in accordance with IFRS 15, accounting for leases in
accordance with 16, accounting for bonds in accordance with
IFRS 9, goodwill and the group management report (including
the report on opportunities and risks).

The annual financial statements, the consolidated financial
statements, the management reports and the audit reports
of the external auditors were presented to the members of
the Supervisory Board in good time. Following detailed initial
discussion at the meeting of the Audit Committee held on
20 April 2020 a resolution was passed on the same day rec-
ommending them for approval to the Supervisory Board. The
Chairman of the Audit Committee presented a detailed report
in the plenary session on 20 April 2020 of the Supervisory
Board on the Audit Committee’s examination of the annual
financial statements, the consolidated financial statements
and the management reports. The auditor attended the Audit
Committee and Supervisory Board meetings to report on
the key scope and findings of the audit and was available to

4basebio | Annual Report 2019answer the Supervisory Board’s follow-up queries and sup-
ply supplementary information. Following its own in-depth
examination and discussion, the Supervisory Board raised
no objections to the financial statements or the audit by
the external auditors. The Supervisory Board accepted the
findings of the audit and, in accordance with the recommen-
dation of the Audit Committee, approved the annual financial
statements of 4basebio AG and the consolidated financial
statements for the fiscal year 2019 on 28 April 2020. The
financial statements are therefore adopted.

The Supervisory Board would like to thank the Management
Board and all of the Company’s employees for their personal
commitment and excellent performance in the past fiscal year.

Cambridge, United Kingdom, April 28, 2020

Joseph Fernandez
Chairman of the Supervisory Board

4basebio | Annual Report 2019

4basebio | Annual Report 2019Combined Management
Report

4basebio AG, Heidelberg (formerly: Expedeon AG,
Heidelberg) Financial year from 1 January to
31 December 2019

4basebio | Annual Report 2019Combined Management Report

1. General Information

Reporting entity

4basebio AG, Heidelberg (formerly Expedeon AG, Heidelberg; previously Sygnis AG, Heidelberg) is an
incorporated company under German law (hereinafter “4basebio AG”). 4basebio AG and the subsidiaries
controlled by it (hereinafter “4basebio Group” or “Group” or “Group of Companies”) operate in the life
sciences sector and are mainly active in the fields of immunology, proteomics and genomics as well as
related services and the sale of instruments and reagents. 4basebio AG is registered in the Commercial
Register at the Mannheim Local Court under the number HRB 335706 and has its registered office at
Waldhofer Strasse 102, 69123 Heidelberg. On 6 August 2018 the change of name of Sygnis AG to Expe-
deon AG was entered in the commercial register. The Extraordinary General Meeting on 19 December
2019 approved the renaming of the company to 4basebio AG. The shares of 4basebio AG are listed
on the Prime Standard on the Frankfurt Stock Exchange under the German securities identification
number (WKN) A2YN80. In the course of the conversion from ordinary to registered shares approved
by the Annual General Meeting on 9 July 2019, the international securities number (ISIN) has changed
(DE000A2YN801).

Accounting and auditing

4basebio AG prepares its consolidated financial statements and interim reports in accordance with
the applicable regulations of the International Financial Reporting Standards (IFRS), as they are ap-
plied in the EU. The annual financial statements are prepared in accordance with the provisions of the
German Commercial Code (HGB). Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Mannheim,
was appointed as auditor for the annual and consolidated financial statements for the 2019 financial
year at the Annual General Meeting on 9 July 2019. There are no business, personal, financial or other
relationships between the auditing company, its executive bodies and audit managers on the one hand
and the 4basebio Group on the other that could give rise to doubts about the independence of the
auditors. Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft did not participate in the bookkeeping
or the preparation of the annual or consolidated financial statements of 4basebio AG.

For the 2019 financial year, use was made of the option of a combined management report (hereinaf-
ter also referred to as “management report”). The presented management report thus combines the
management report of 4basebio AG and the group management report of the 4basebio Group and
was prepared in accordance with §§ 289, 289a, 289f, 315, 315a and 315d HGB and in accordance with
German Accounting Standards (GAS) No. 17 and 20.

Distinction between parent company and group

In order to clarify which information relates to the parent company and which to the group of compa-
nies, “4basebio AG” is always used for the parent company. “4basebio Group” or “Group” or “Group of
Companies” is used for disclosures relating to the Group. Where the above distinctions are not applied
and no other separate notes are made, the information relates equally to the group of companies and
the parent company.

4basebio | Annual Report 2019Financial year

The 2019 financial year of 4basebio AG began on 1 January 2019 and ended on 31 December 2019. The
corresponding period of the previous year (hereinafter also referred to as “prior year”) therefore covers
the period from 1 January 2018 to 31 December 2018.

Rounding differences

Unless otherwise indicated, all amounts are stated in thousands of euros (€’000). For technical rea-
sons, rounding differences of +/- one unit (€’000, %, etc.) may occur in the information presented in
these financial statements.

Forward-looking statements

This management report contains forward-looking statements. These statements reflect our own
estimates and assumptions - including those of third parties (such as statistical data relating to the
industry and global economic developments) - at the time they were made or on the date of this report.
Forward-looking statements are always subject to uncertainties. If the estimates and assumptions
prove to be incorrect or only partially correct, the actual results may differ - even significantly - from
the expectations.

2. Basic principles of the Group

2.1. Group structure and organisation

Legal structure of the Group

4basebio AG acts as the management and functional holding company of the 4basebio Group and is
responsible for the control and management of the corporate group. It also organises the technology
and the associated intellectual property of the 4basebio Group. Furthermore, 4basebio AG is also
responsible for the tasks of strategic significance, for example the expansion of the product portfolio,
acquisitions and financial issues for the entire group. The holding company is also responsible for cor-
porate identity, investor relations and marketing. In addition, 4basebio AG assumes, where necessary,
the financing of strategically important development projects of the operating subsidiaries.

4basebio AG emerged from Lion Bioscience AG, Heidelberg, founded in 1997, which marketed software
and IT applications for biotechnology companies and whose shares were listed on the German Stock
Exchange in Frankfurt in 2000. With the reorientation in 2006, the Company’s activities were concen-
trated on the development of biopharmaceuticals under the new company name “Sygnis Pharma AG”.
After the merger with the Spanish company X-Pol Biotech at the end of 2012, the business activities
under the new company name Sygnis AG focused on molecular biological products for genomics and
proteomics applications. In July 2018 Sygnis AG changed its company name to Expedeon AG and in
January 2020 to 4basebio AG.

4basebio AG is the sole shareholder in the companies included in the consolidated financial statements.
As of 31 December 2019, 4basebio AG directly (or indirectly) controls two domestic (prior year: two)
and eight foreign (prior year: seven) subsidiaries (Australia, Singapore, Spain, UK and USA). Loans from
the holding company were only granted to subsidiaries and their subsidiaries. The most important
locations of the 4basebio Group with regard to the financial year 2019 were Cambridge/UK, San Diego/

4basebio | Annual Report 2019
Combined Management Report

USA, Adelaide/Australia and Madrid/Spain. The 4basebio Group has rented premises in technology and
business parks at most locations and owns real estate in Cambridge. As of 31 December 2019, 4base-
bio AG directly held 100% of the shares in 4basebio Bioscience GmbH & Co. KG (formerly: Expedeon
Bioscience GmbH & Co. KG), Heidelberg/Germany; 4basebio Verwaltungs GmbH (formerly: Expedeon
Verwaltungs GmbH), Heidelberg/Germany; 4basebio S.L.U. (formerly: Expedeon S.L.U.), Madrid/Spain;
4basebio Inc. (formerly: Expedeon Inc.), San Diego/USA; 4basebio Ltd, Cambridge/UK; and Expedeon
Holdings Ltd, Cambridge/UK. As of 31 December 2019, the latter subsidiary again held 100% of the
shares in TGR BioSciences Pty. Ltd, Adelaide/Australia, Innova Biosciences Ltd, Cambridge/UK and
Expedeon Ltd, Cambridge/UK, which in turn held 100% of the shares in Expedeon Asia Pte. Ltd, Singa-
pore. 4basebio Ltd, Cambridge/UK - a direct subsidiary of 4basebio AG - was founded in anticipation
of the Abcam transaction during the 2019 financial year. The four employment contracts of the four
employees remaining after the Abcam transaction and the assets remaining after this transaction were
transferred to this company. The research and development activities of the 4basebio Group in the
2019 financial year were carried out by 4basebio S.L.U., Madrid/Spain; Expedeon Ltd, Cambridge/UK; and
TGR BioSciences Pty Ltd, Adelaide/Australia. Expedeon Ltd, Cambridge/UK; 4basebio Inc., San Diego/
USA; 4basebio S.L.U., Madrid/Spain; and TGR BioSciences Pty. Ltd, Adelaide/Australia manufactured and
sold products in the 2019 financial year. Expedeon Asia Pte. Ltd, Singapore, acted as a sales company
in the 2019 financial year. The group structure as at 31 December 2019 before the Abcam transaction
is shown below (100% subsidiaries in each case):

4basebio AG

4basebio
Verwaltungs GmbH

4basebio S.L.U.

Expedeon Holdings
Ltd

4basbio Inc.

4basebio Ltd

4basebio Bioscience
GmbH & Co. KG

Expedeon Ltd

Innova Bosciences
Ltd

TGR Biosciences
Pty. Ltd

Expedeon Asia
Pte. Ltd

Sale of the proteomics and immunology businesses (“Abcam transaction”)

On 2 January 2020, 4basebio AG, formerly known as Expedeon AG, concluded the transaction with Ab-
cam PLC, Cambridge/UK (London Stock Exchange: ABC; ISIN: GB00B6774699; AIM MTF) - hereinafter
referred to as “Abcam” - on the sale of its proteomics and immunology businesses for €120 million in
cash with effect from 1 January 2020. The Annual General Meeting convened on 19 December 2019
gave its approval to this transaction and the change of name to 4basebio AG. The change of name
from Expedeon AG to 4basebio AG, which was resolved at the extraordinary general meeting on 19
December 2019, was entered in the commercial register on 13 January 2020. With the change of name
to 4basebio AG, the company’s shares are listed and traded under the new stock exchange code 4BSB.
The company’s shares will continue to be traded on the German Stock Exchange in Frankfurt under
the unchanged WKN (A2YN80).

The agreement includes the sale and transfer of all shares in Expedeon Holdings Ltd, Cambridge/UK, a
subsidiary of 4basebio AG, formerly known as Expedeon AG. Expedeon Holdings Ltd, Cambridge/UK, is
divided as a holding company into the following two divisions: its subsidiary Expedeon Ltd, Cambridge/
UK focuses on its proteomics business and the immunology business previously undertaken by Innova
Biosciences Ltd (now dormant), Cambridge/UK; its subsidiary TGR BioSciences Pty. Ltd, Adelaide, Aus-
tralia, is active in immunology. A further subsidiary of Expedeon Holding Ltd, Cambridge/UK, 4basebio

4basebio | Annual Report 2019Inc., San Diego/USA, was transferred to 4basebio AG, formerly known as Expedeon AG, with effect from
30 December 2019. With effect from 1 January 2020, the assets of the non-electrophoresis instruments
business were transferred from 4basebio Inc., San Diego/USA to Abcam. In future the activities in the
genomics business area will continue under the new company name “4basebio”, based on the expertise
and intellectual property of the Spanish subsidiary 4basebio S.L.U., Madrid/Spain (formerly: Expedeon
Biotech S.L.U., Madrid/Spain). The group will focus on the manufacture of DNA for therapies and other
applications requiring large amounts of highly purified DNA (e.g. the fast growing markets for novel gene
therapies and gene vaccines). The sale of certain assets of the subsidiary 4basebio Inc., San Diego/USA
as well as the sale of the investment in Expedeon Holdings Ltd, Cambridge/UK by 4basebio AG is referred
as the “Abcam transaction”. Not part of the Abcam transaction were 4basebio Bioscience GmbH & Co
KG, Heidelberg/Germany; 4basebio Verwaltungs GmbH, Heidelberg/Germany; 4basebio S.L.U., Madrid/
Spain; and 4basebio Inc., San Diego/USA, although the latter company sold certain inventories, customer
contracts and fixed assets to Abcam.

The group structure of the 4basebio Group as of 1 January 2020 is shown below, taking into account
the Abcam transaction (100% subsidiaries in each case):

4basebio AG

4basebio S.L.U.

4basebio Inc.

4basebio Ltd

4basebio
Verwaltungs GmbH

4basebio Bioscience
GmbH & Co. KG

Business activities and operating segments

The 4basebio Group is a life sciences company that develops proprietary technologies that are used to
create innovative products and services with high added value for biomarker research, drug discovery and
clinical diagnostics. The Company’s core technologies are in the fields of immunology, proteomics and
genomics and thus cover the large areas of the market for molecular biology. The core business model
of the 4basebio Group is the research, development and marketing of innovative kits that are used in
research. The group of companies is positioning itself to achieve further added value from the application
of its technology in clinical diagnostics. The product portfolio of the 4basebio Group continued to expand
in 2019, both organically and through acquisitions, and at the end of the 2019 financial year consisted of a
broad range of novel tools and technologies for molecular biology. The group of companies was particularly
influenced by the recent acquisitions of Innova Biosciences Ltd, Cambridge/UK (acquisition date 16 June
2017) and TGR BioSciences Pty Ltd, Adelaide/Australia (acquisition date 2 May 2018), whose focus is on
the field of immunology, especially antibody conjugates and immunoassays.

The 4basebio Group sells its products to a large number of customers from the academic and industrial
sectors. Most of the products sold by the Group are used by customers for research purposes, although
more and more products are supplied in connection with diagnostic products. This enables rapid market
penetration due to the absence of regulatory hurdles (to which the industrial customers of the 4basebio
Group, who develop products for diagnosis or clinical use, are subject). The products are used worldwide,
with the Group selling its range through its own sales and marketing infrastructure and a global sales
network to enable rapid market penetration. In addition, the Group also manufactures OEM products for
key business partners.

Management, planning and control of the 4basebio Group are carried out at the level of the entire group
of companies. Consequently, the 4basebio Group consists of only one business segment.

4basebio | Annual Report 2019

Combined Management Report

Employees

The sustainable economic success of the 4basebio Group can only be achieved with a team of highly
qualified and motivated employees. Consistent and forward-looking personnel development therefore
forms a supporting pillar of the corporate strategy. The nature of the 4basebio Group’s business activities
in an innovative sector places high demands on the personnel in all areas of the group. The number of
employees (full-time equivalent) remained largely constant in the 2019 financial year and averaged 101
(2018: 113) over the year. As a result of the Abcam transaction, the number of employees was reduced to
29 as of 1 January 2020.

Durchschnittliche Personalkapazitäten nach Funktionsbereichen

Operation and production

Sales and marketing

General finance and administration

research and development

Number of employees (annual average)

2019

101

2018

113

As of 31 December 2019, 4basebio AG had one employee (31.12.2018: one employee).

Diversity in the company

The diversity of the people who work for the 4basebio Group form the basis for the performance
and success of the company. By promoting diversity in the 4basebio Group, the right people can be
brought together and a working culture can be created that promotes the performance, motivation
and satisfaction of all staff. The 4basebio Group promotes the equal participation of women and men
in management positions within the framework of the “Diversity Concept”. In the 2019 financial year,
women accounted for 44% of the 4basebio Group’s total workforce. Due to the law on the promotion
of women in management positions, 4basebio AG must set concrete targets for the two management
levels. Below the Management Board, the second management level consists of managers who report
directly to the Management Board. While no women were employed at the Executive Board level in
the 2019 financial year, the proportion at the second management level was 57%. The proportion of
women on the Supervisory Board in the 2019 financial year was 33% until 4 April 2019, 20% until 9 July
2019 and 17% thereafter.

2.2. Strategy

Future Group strategy

Following the sale of the proteomics and immunology business units as part of the Abcam transaction,
the genomics business unit will in future be the focus of the 4basebio Group’s business strategy. The
expertise in this area is located in the Spanish subsidiary 4basebio S.L.U., Madrid/Spain. In future, the
group will concentrate on the commercial applications of this proprietary technology, although the
Management Board expects operating losses in the next two financial years (see section “5. Guidance
report”). In addition to developing DNA production capability, the Group will continue its “buy and build”
strategy, focusing on assets along the workflows in the areas of gene therapy and gene vaccines that
complement the core DNA business.

4basebio | Annual Report 2019The strategy of the 4basebio Group will in future concentrate on the following three areas of application
in the business field of genomics.

• The Group will continue to produce and sell genomics kits for the research market. However, this

field of application offers the lowest expected earnings for the Group in the future. For example,
revenues generated from the sale of genomics kits in 2019 accounted for less than 2% of the Group’s
total revenues.

• In future the Group will increase its efforts to acquire major orders for the sale of enzymes used by

customers for inclusion in their products for diagnostic use. Estimating the amount of revenue ex-
pected from these contracts and the timing of this revenue (which tends to be volatile) is subject to
a high degree of uncertainty. The 4basebio Group expects an annual sales potential of €1 million or
more from these customer contracts over time.

• The Group will primarily focus on the application of its technology in the commercial production of

synthetic DNA for gene therapy and the application of gene vaccines. Following the completion of
the Abcam transaction, this activity will in future represent the main focus of the 4basebio Group’s
activities. The Management Board expects the successful implementation of the project in the next
two to three years, from the feasibility study and standardisation to the development of a manufac-
turing plant. The group expects that readiness for production will require accreditation according
to the “Good Manufacturing Principles” (GMP) and that it will be possible to start producing DNA for
sale to the pharmaceutical industry and biotechnology for gene therapy and vaccine applications
within the aforementioned period.

The business model of the 4basebio Group will develop over the next three years, whereby the Group
wishes to position itself ultimately as a contract manufacturer (“CMO”) whose added value consists
primarily in the creation of its own (legally protected) intellectual property. The earnings and earnings
measures of this strategy could exceed the volume of Group revenues and adjusted EBITDA of the 2019
financial year within the next five years.

Financial strategy

In recent financial years, the 4basebio Group has concentrated primarily on the implementation of
its “buy and build” strategy. The consistent pursuit of this strategy has had a fundamentally positive
impact on the financial situation of the Group. This growth strategy was mainly responsible for more
than doubling the adjusted EBITDA in the financial year 2019 compared with the prior year.

Even after the sale of the proteomics and immunology business units to Abcam, the 4basebio Group
will continue to pursue an acquisition strategy where opportunities arise in the future. By acquiring
complementary or additive technologies, products or content, the growth of the 4basebio Group should
thus be further enhanced and its profitability further increased.

In recent financial years, the 4basebio Group has financed its operational trading and acquisition
strategy through equity and debt financing. With the sale of the proteomics and immunology business
units to Abcam, the Group has sufficient liquid funds to undertake its intended commercial strategy.

In the coming financial years, the 4basebio Group aims to improve both its EBITDA margins and sales
revenues. The financial strategy is aimed at increasing the enterprise value of the 4basebio Group with
regards to all stakeholders and to grow profitably.

4basebio | Annual Report 2019Combined Management Report

Customer profile

Due to the recent acquisitions of Innova Biosciences Ltd, Cambridge/UK in the 2017 financial year and
TGR BioSciences Pty. Ltd, Adelaide/Australia in the 2018 financial year, the Group’s customer profile
has shifted. While historically more than 70% of the customer base had been academic customers,
there was a significant increase in industrial customers in the 2018 and 2019 financial years. Although
academic customers were still in the majority compared to industrial customers at the end of the 2019
fiscal year, industrial customers already accounted for more than 80% of revenue.

The geographica distribution of the consolidated sales revenues has meanwhile shifted towards Europe
and America, which, with a view to the 2019 financial year, account for 39% and 54% of the consolidated
sales revenues of the 4basebio Group respectively (2018: 48% and 47%).

With the advance into the field of DNA manufacturing for gene therapies and DNA-based vaccines,
4basebio Group will continue to offer its services worldwide after the Abcam transaction. Europe and
the USA are likely to be the future main sales markets with regards to this new field of activity for the
Group, although it is difficult to forecast the future sales markets from today’s position.

2.3. Management system – financial targets

The 4basebio Group is managed by the Management Board of 4basebio AG, which is responsible for
managing the Group, setting goals and strategic direction, and controlling the implementation of the
growth strategy (“buy and build”).

The broader management team meets regularly to discuss emerging risks and operational issues in
the Group and to discuss the review of key financial indicators. As part of this regular review process,
deviations from expected performance are identified, their potential impact on liquidity and profitability
is assessed and appropriate action is taken.

The primary objective of the Group’s corporate development is to increase the value of the Company
with regards to all stakeholders and to grow profitably. The financial management of 4basebio AG and
the 4basebio Group is based on regular reports that present deviations from the budget using perfor-
mance indicators. The following three financial performance indicators are considered to be the most
important control parameters for the economic goals of the group:

• Revenue (IFRS);
• (unaffected by taxes and interest) adjusted operating profit before depreciation and amortisation
• Cash

(adjusted EBITDA); and

In light of the Abcam transaction and the liquid funds secured as a result, cash will become less import-
ant as a control parameter for the Group in the future. However, for 4basebio AG cash held remains the
only financial performance indicator.

In the 2019 financial year adjusted EBITDA was defined as earnings before interest, taxes, depreciation
and amortisation (EBITDA) unaffected by taxes and interest, plus the expenses listed below:

• Entries (mainly non-cash) for earn-out obligations;
• Expenses for employee stock option plans; and
• (One-time) consultancy fees in connection with the sale of the proteomics and immunology busi-

nesses to Abcam with effect from 1 January 2020.

4basebio | Annual Report 2019In particular in connection with the accounting for business combinations, International Financial
Reporting Standards impose a number of burdens on earnings for which there is no impact on cash
and cash equivalents (e.g. with regard to earn-out obligations or employee stock option plans). These
items are therefore added back when calculating adjusted EBITDA in order to improve the forecasting
of earnings. Thus, EBITDA includes in particular the earnings effects from the revaluation of the earn-
out obligations of the two acquisitions TGR BioSciences Pty Ltd, Adelaide/Australia (acquisition date 2
May 2018) and Innova Biosciences Ltd, Cambridge/UK (acquisition date 16 June 2017), which are linked
to the share value of the 4basebio share and which must be carried out at the end of the respective
financial year. Due to share price fluctuations between the acquisition date and the balance sheet
date, these adjustment entries, which are expensed (but not initially cash-effective), are adjusted in
the calculation of adjusted EBITDA.

Furthermore, with regard to the Abcam transaction, international accounting standards required certain
expenses to be included in the profit and loss account for the financial year 2019, although the actual
sale (and subsequently the total proceeds from the sale) will be recorded in the financial year 2020.
The expenses to be recognised in the 2019 financial year include, among other things, the costs of the
extraordinary general meeting necessary to approve the transaction as well as the valuation and legal
costs directly related to the transaction. Adjusted EBITDA in the financial year 2020 will be adjusted
accordingly for the net proceeds from the sale to Abcam. In the opinion of the Management Board,
Adjusted EBITDA will allow better forecasting of the Group’s performance and profitability.

2.4. Research & Development (R&D)

In future, research and development activities will be concentrated exclusively in 4basebio S.L.U., Madrid/
Spain, which specialises in the research and development of genomics. Prior to the Abcam transaction,
both Expedeon Ltd, Cambridge/UK and TGR BioSciences Pty Ltd, Adelaide/Australia, also conducted
research and development activities in the fields of proteomics and immunology. Since the research and
development activities in the fields of proteomics and immunology were part of the Abcam transaction,
these two companies (Expedeon Ltd, Cambridge/UK and TGR BioSciences Pty Ltd, Adelaide/Australia)
were removed from the scope of consolidation of the 4basebio Group with effect from 1 January 2020.

The proteomics and immunology products and services sold to Abcam include Lightning-Link®, a
patented technology that enables rapid and accurate one-step conjugation of antibodies to a range of
reporter molecules while overcoming the many limitations associated with traditional antibody labelling
methods, and CaptSure™, a next-generation cross-platform immunoassay technology that enables
rapid and reliable capture of biomarker targets by creating a universal capture surface. CaptSure™ has
also been successfully embedded in a high-throughput drug discovery tool (SureFire®) and has also
been used in ELISA assay formats.

In the past financial years, the 4basebio Group has focused on DNA amplification technologies to pro-
mote research in oncology and to enable early diagnosis and monitoring of cancer progress using an
NGS-based liquid biopsy approach. TruePrime™ is the brand name of a series of technologies dedicated
to the amplification of different DNA or RNA species for a variety of applications, including those with
small amounts of available DNA.

The 4basebio Group has continued to invest in the technology of TruePrime™, where great potential
is seen for new products and manufacturing services based on this proprietary platform technology.
4basebio S.L.U., Madrid/Spain, is distinguished above all by its know-how and IP in the field of polymerase
enzymology.

4basebio | Annual Report 2019Combined Management Report

R&D expenses in the 2019 financial year amounted to €1.4 million (prior year: €1.0 million). This increase is
due to increased R&D activity in Expedeon Ltd, Cambridge/UK and the R&D activities of TGR BioSciences
Pty Ltd, Adelaide/Australia, where R&D expenses for the latter were not included in the consolidated
income statement of the Group for the 2018 financial year until the acquisition of this company with
effect from 1 May 2018 (and therefore only on a pro rata basis).

3. Economic Report

3.1. Business overview

General economic and industry-related conditions

The macroeconomic and industry-specific framework conditions primarily relate to the subsidiaries
of 4basebio AG. Since the success of 4basebio AG is, however, largely determined by its subsidiaries,
these framework conditions are not only important for the 4basebio Group as a whole, but also for the
holding company.

Macroeconomic Development

The global economic outlook is unstable and GDP growth in 2019 has been accordingly weak. A slowdown
was observed in almost all economies and world trade stagnated. The United Nations reported global
economic growth of 2.3% for 2019, the lowest level since the global financial crisis of 2008/2009 (source:
UN, World Economic Situation and Outlook, 2019). According to its economic forecast published at
the beginning of March, the Organisation for Economic Co-operation and Development (OECD) sees
the spread of the coronavirus as the greatest threat to the global economy since the global financial
crisis of 2008/2009 (OECD, Interim Economic Assessment, 2 March 2020). The spread of COVID-19,
which was classified as a pandemic by the World Health Organization (WHO) on 11 March 2020, could
have a significant negative impact on global growth in 2020, especially in view of the current significant
restrictions on the movement of people, goods and services. In the case of the now global spread
of COVID-19, the OECD has recently had to revise its forecasts downwards and now expects global
economic growth of 1.5%in 2020, only half as strong as in its forecast of last November (OECD, Interim
Economic Assessment, 2 March 2020). According to the OECD, the measures to contain the virus and
the loss of confidence could have such an impact on production and consumption that some econo-
mies - including the eurozone - could slip into recession.

In view of these current developments, the 4basebio Group is concerned about the wellbeing of its
employees and customers. Despite the unfavourable global economic situation, the Group considers
itself to be relatively well positioned to meet the current economic challenges, in view of the liquid funds
held following the Abcam transaction.

Capital Markets

The stock market proved to be satisfactory in 2019, especially for long-term investors. For example,
the German share index DAX rose by more than a quarter, although various uncertainties remained,
such as the ongoing trade conflict between the USA and China, fears of recession, the Brexit process
and growing populism in Europe.

The positive development of the capital markets in 2019 has in many cases been able to compensate
for the price losses of the previous year. This was also the case with the 4basebio share, which came
under heavy pressure in the second half of 2018 as concerns about the economy and the trade dispute
between the USA and China shook the stock markets and prices generally slumped. The share price of

4basebio | Annual Report 20194basebio shares was €1.70 at the end of 2019 compared with €0.89 at the end of 2018, which corre-
sponds to an increase in value of €0.81 (absolute) or around 90% (percentage).

The product innovations announced in the course of the 2019 financial year and rising sales figures
contributed to a slow but continuous positive share price development, so that the share price rose by
more than 20% from mid-2019. Most of the share price gain was generated following the announcement
of the sale of the proteomics and immunology businesses (“Abcam transaction”).

In view of COVID-19 and the incipient corona pandemic, far-reaching effects on the global stock markets
can already be observed at present, with higher market volatility than during the global financial crisis
of 2008/2009. As a result of these price volatilities, the price of the 4basebio share is very volatile, as
is the case with most listed small-cap companies.

Development of the Life Sciences Industry

Despite the current economic challenges, the outlook for the life sciences industry remains positive,
mainly with regard to new technologies that could change the healthcare market in the long term.
According to Deloitte (source: Deloitte, Global Outlook on Life Sciences, 2019), life science spending
is expected to grow at an annual rate of 6.5% between 2018 and 2022. This will be driven by new ther-
apies that address unmet needs and the increasingly important role of personalised medicine, as well
as greater global access to medicines. 4basebio technologies and products are flowing into research
and have the potential to be used in the fields of gene therapy and personalised medicine, with these
areas showing above-average growth compared to the market average.

Key developments in the 2019 financial year

In January 2019 the 4basebio Group concluded a supply and licence agreement with Cell Guidance
Systems, a developer of therapeutic products for use in medicine and life science research. The subject
of the agreement is the use of the Company’s proprietary Lightning-Link® rapid biotinylation technology
for the production of TRIFic™ immunoassays (Time Resolved Immunofluorescence Exosome Detection
Assay). Cell Guidance Systems had previously benefited from the application of 4basebio Group’s
Lightning-Link® technology for more than two years. According to this supply and licence agreement,
the 4basebio Group became the preferred immunoreagent supplier for Cell Guidance Systems.

In May 2019, the 4basebio Group expanded its product range with CaptSure™ DIY ELISA, an assay
technology for the analysis of cellular signalling pathways. The technology was developed by TGR Bio-
Sciences Pty Ltd, Adelaide/Australia, which was acquired by 4basebio AG in May 2018. CaptSure™ DIY
ELISA is designed to significantly reduce the time required for the development of ELISA tests and to
improve flexibility and sensitivity. This product enables the 4basebio Group to address new markets
during a decisive growth and development phase of the group.

In June 2019, the 4basebio Group presented for the first time Lightning-Link® metal labelling kits for
use in several immunoassay-based applications to support single cell analysis. The kits enable users to
significantly improve the phenotypic analysis of heterogeneous cell populations by offering increased
multiplexing capability compared to fluorophore labelling, thereby improving sample throughput and
research performance.

In August 2019 the 4basebio Group signed a commercial agreement with Sona Nanotech Inc. (CSE:
SONA.). The aim is to overcome the limitations in the development of complex multiplex point-of-care
(POC) Lateral Flow Assay (LFA) diagnostic tests. Under the agreement, the 4basebio Group will provide
gold nanoparticles, bioconjugation technologies and expertise. In return, Sona will contribute its Lateral
Flow Assay development services.

4basebio | Annual Report 2019Combined Management Report

4basebio AG, formerly known as Expedeon AG, signed an agreement with Abcam PLC, Cambridge/UK
(“Abcam”; London Stock Exchange: ABC; ISIN: GB00B6774699; AIM MTF) on 11 November 2019 for the
sale of its proteomics and immunology businesses for €120 million in cash with effect from 1 January
2020 (subject to approval by the shareholders of 4basebio AG). The extraordinary general meeting
convened on 19 December 2019 gave its approval to this transaction and subsequently the change of
name to 4basebio AG. These business areas account for the majority of the balances reported in the
consolidated balance sheet, consolidated income statement and consolidated cash flow statement.
The financial figures attributable to the proteomics and immunology business units are therefore of
minor importance for the purpose of assessing the future net assets, financial position and results of
operations. For further explanations, please refer to section “2.1 Group Structure and Organization”
(“Sale of the Proteomics and Immunology Business Units”).

The 4basebio Group applied “IFRS 16 Leases” for the first time in the 2019 financial year. The effects on
the asset, financial and earnings position of the consolidated financial statements of 4basebio AG are
attributable to lessee accounting and here in particular to those leases that were previously classified
as operating leases within the meaning of IAS 17 and which are to be recognised (for the first time) in
the balance sheet in the 2019 financial year. This is due to the fact that IFRS 16 introduces a uniform
accounting model according to which lessees must capitalise a right of use for all leases and recognise
a corresponding lease liability for all outstanding lease payments (so-called right of use model). As a
result, lessees need no longer classify leases as operating or finance leases. Overall, the first-time ap-
plication led to only minor effects on the asset, financial and earnings position of the 4basebio Group.
IFRS 16 was implemented by the 4basebio Group as of 1 January 2019 using the modified retrospective
method. In accordance with the transitional provisions the comparative information was not adjusted.
Nevertheless, the comparability with the previous year’s figures is only slightly affected.

General statement on the course of business and the economic situation of the Group

The 4basebio Group can once again look back on a successful financial year 2019, as both sales and
adjusted EBITDA increased.

In the 2019 financial year, the Group’s sales revenues of €15.7 million were up 19% on the previous year
(2018: €13.1 million). This increase in revenue is primarily due to the first-time full-year consolidation of
the subsidiary TGR BioSciences Pty Ltd, Adelaide/Australia, in the 2019 financial year, as the revenue
of this subsidiary in the 2018 financial year was only included from the acquisition date of 2 May 2018
(and therefore only pro rata temporis for eight months).

[in €‘000]

Operating result

Depreciation on property, plant and equipment

Amortization of intangible assets

EBITDA

Revaluation of earn-out obligations

Expenses for stock options (non-cash)

Expenses Abcam transaction (1 January 2020)

Adjusted EBITDA

2019

-1,780

613

2,282

1,115

1,372

360

2,916

2018

-585

311

2,034

1,761

-1,042

265

984

In addition to sales revenues, adjusted EBITDA also qualifies in the 4basebio Group as an important con-
trol parameter for the economic goals of the 4basebio Group. In the opinion of the Management Board,
the adjusted EBITDA enables better forecasting of the performance and earning power of the group. For

4basebio | Annual Report 2019an explanation of the calculation basis, please refer to section “2.3. control system - financial targets”.
EBITDA, using a conventional definition, is approximately 2.5 times lower than adjusted EBITDA in the
2019 financial year. Compared with the previous year, EBITDA in the 2019 financial year is around 1.5
times lower, while adjusted EBITDA is almost three times higher. For the purpose of calculating adjusted
EBITDA, in the 2018 financial year the income from the revaluation of the relevant earn-out obligations in
the amount of €1.0 million and in the 2019 financial year corresponding expenses from the revaluation
of these obligations in the amount of €1.4 million were adjusted. The stock option expenses to be ad-
justed for the purpose of calculating adjusted EBITDA amounted to €69 thousand in the 2019 financial
year (2018: €265 thousand). In addition, the expenses incurred in the 2019 financial year in connection
with the “Abcam transaction” carried out in the 2020 financial year amounting to €360 thousand were
adjusted in the adjusted EBITDA figure.

The cash flow from operating activities improved significantly compared to the previous year. At €1.1
million, the operating cash inflow for the 2019 financial year was positive and significantly above the
level of the previous year (2018: cash outflow of €0.2 million). The positive development of the “cash
flow from operating activities” is primarily the result of strong sales growth and consistent cost man-
agement. Cash and cash equivalents declined from €6.2 million at the end of the 2018 financial year
to €3.7 million at the end of the 2019 financial year, primarily due to the payments in connection with
the repayment of financial liabilities in the 2019 financial year of €2.8 million. With the sale of the pro-
teomics and immunology business units to Abcam effective 1 January 2020, the Group has sufficient
liquid funds to react quickly and flexibly to the needs of its customers in the future. As a result, cash
holdings will become less important as a management parameter for the 4basebio Group in the future.
In addition to growth through established products, the Group continued to focus on internal innova-
tions. Although new products were launched during 2019, these products did not make a significant
contribution to the Group’s key financial performance indicators in the 2019 financial year.

On 2 January 2020, 4basebio AG, formerly known as Expedeon AG, concluded the transaction with
Abcam on the sale of its proteomics and immunology business units for €120 million in cash with effect
from 1 January 2020 (see section 2.1. “Group structure and organisation” - “Sale of the proteomics and
immunology business units”). Expedeon Holdings Ltd was classified as a disposal group held for sale
and as a discontinued operation in accordance with IFRS 5 as of 31 December 2019. In accordance with
the requirements of IFRS 5, no assets held for sale were reported as such in the consolidated balance
sheet as of 31 December 2018, while in the consolidated income statement the prior year figures were
adjusted. The proteomics and immunology business units account for the majority of the balances pre-
viously reported in the consolidated balance sheet, consolidated income statement and consolidated
cash flow statement. The financial figures attributable to these business units are of minor importance
for the purpose of assessing the future net assets, financial position and results of operations.

The Management Board of 4basebio AG expects that both the high level of economic uncertainty and
the incipient corona pandemic could have a considerable negative impact on global growth in the 2020
financial year. Particularly in view of the already comprehensively introduced stabilising measures to
mitigate the negative financial effects, the Management Board currently does not consider the eco-
nomic situation of the 4basebio Group to be at risk beyond the end of the 2019 financial year. With
the conclusion of the Abcam transaction, the 4basebio Group has sufficient liquid funds to cope with
these current challenges.

4basebio | Annual Report 2019Combined Management Report

3.2. Comparison of the actual development with the business performance

forecast in the Forecast Report 2018

Based on the original forecast made in April 2019 and the revised forecast in October 2019, the 4basebio
Group had forecast a double-digit percentage increase in consolidated sales revenues for the 2019
financial year through a combination of organic and acquisition-driven growth. As a result of this revenue
growth, the forecast made in April with a view to the 2019 financial year was to achieve an improved
adjusted EBITDA of €2.0 million or more. This forecast was adjusted to €2.5 - €3.5 million in October
2019. Furthermore, the Management Board forecast a positive cash flow from operating activities for
the 2019 financial year, which should contribute to a stable cash development of the Group.

The sales of the 4basebio Group in 2019 of €15.7 million increased compared to the previous year
(2018: €13.1 million) in the double-digit percentage range (19%). The original adjusted EBITDA target
set for the 2019 financial year was exceeded with an actual adjusted EBITDA of €2.9 million within the
reforecast range set in October 2019. The cash flow target set was also achieved in the 2019 financial
year. In contrast to the previous year, cash flow from operating activities was clearly positive in the 2019
financial year at €1.1 million (2018: cash outflow of €0.2 million).

3.3. Earnings situation of the Group

Discontinued operations: Proteomics and Immunology Business Units

The proteomics and immunology businesses sold to Abcam with effect from 1 January 2020 have been
classified as a disposal group held for sale and as discontinued operations as of 31 December 2019 in
accordance with the requirements of IFRS 5. In the consolidated income statement, the income and
expenses attributable to the discontinued operations had to be summarized in one item and the pri-
or-year figures adjusted accordingly. In the following table, the earnings situation of the 4basebio Group
is presented both with regard to the discontinued business areas and with regard to the continued op-
erations of the 4basebio Group. The two business areas proteomics and immunology account for the
majority of the items previously reported in the consolidated income statement. The income statement
items attributable to these business units are of minor importance for the purpose of assessing the
future net assets, financial position and results of operations.

Sales revenues [in €‘000]

Divisions 2019

Divisions 2018

Continuing Discontinued

Total

Continuing Discontinued

Total

Nature of goods and services

Sales of products

Licenses and royalties

Total

1,022

1,052

12,436

13,458

2,169

2,199

14,605

15,657

1,025

149

1,174

11,552

402

11,954

12,577

551

13,128

The sales of the 4basebio Group in the 2019 financial year increased by 19% to €15.7 million compared
to the previous year (2018: €13.1 million). The sales growth resulted from a combination of organic and
acquisition-related growth. The increase in revenues is primarily due to the first-time full-year consol-
idation of the subsidiary TGR BioSciences Pty Ltd, Adelaide/Australia in the 2019 financial year, as the
revenues of this subsidiary in the 2018 financial year were only included from the acquisition date of 2
May 2018 (and therefore only pro rata for eight months).

The vast majority of revenues in fiscal year 2019 were generated from the sale of products, in partic-
ular kits, with around 80% (2018: 70%) of revenues generated with industrial customers and around

4basebio | Annual Report 2019
20% (2018: 30%) with academic customers. The Company’s revenues in the 2019 financial year were
geographically allocated as follows: 54% to customers located in the United States (2018: 47%), 39% to
European customers (2018: 48%) and 7% to customers located in other regions (2018: 5%). Revenue
from customers that individually account for more than 10% of Group revenue amounted to €5.5 million
in the 2019 financial year 2019 (2018: €3.6 million).

Other operating income
[in €‘000]

Divisions 2019

Divisions 2018

Total

1,145

215

221

1,010

Continuing Discontinued

Total

Continuing Discontinued

Total

1,231

At €215 thousand, other operating income for the financial year is significantly below the previous
year’s level (2018: €1.2 million). This decrease is largely due to income from the revaluation of earn-out
obligations from acquisitions amounting to €1.0 million, which is included in other operating income in
the 2018 financial year and relates to the two acquisitions TGR BioSciences Pty Ltd, Adelaide/Australia
(acquisition date 2 May 2018) and Innova Biosciences Ltd, Cambridge/UK (acquisition date 16 June
2017). In addition, other operating income mainly includes income from exchange rate differences.

Operating expenses
[in €‘000]

Cost of sales

Distribution costs

General and administrative expenses

Research and non-capitalised
develop-ment costs

Divisions 2019

Divisions 2018

Continuing Discontinued

Total

Continuing Discontinued

Total

-686

-134

-3,954

-220

-2,803

-3,489

-2,245

-5,077

-1,163

-2,379

-9,031

-1,383

-663

-227

-3,378

-206

-2,928

-2,582

-4,104

-837

-3,591

-2,809

-7,482

-1,043

Other operating expenses

-1,370

-19

Total

-4,994

-12,658

-17,652

-4,473

-10,470

-14,943

Operating expenses include the cost of goods sold, personnel expenses related to sales and market-
ing, finance and administration, and research and development. Operating expenses rose from €14.9
million to €17.7 million (+ 18%) in the 2019 financial year compared to the previous year. €1.0 m of
this increase is attributable to the subsidiary TGR BioSciences Pty Ltd, Adelaide/Australia, which was
consolidated for the first time in financial year 2019 for the full year, as the operating expenses of this
subsidiary were only included in financial year 2018 from the acquisition date of 2 May 2018 (and thus
only pro rata temporis for eight months). Another reason for the increase in operating expenses in the
2019 financial year is the expenses of €1.4 million from the revaluation of earn-out obligations from
the two acquisitions TGR BioSciences Pty. Ltd, Adelaide/Australia (acquisition date 2 May 2018) and
Innova Biosciences Ltd, Cambridge/UK (acquisition date 16 June 2017), which are reported under other
operating expenses. With regard to research and non-capitalized development costs, please refer to
section “2.4. research & development (R&D)”.

Depreciation, amortisation and impairment losses included in operating expenses amounted to €2.9
million in the 2019 financial year 2019 (2018: €2.3 million).

4basebio | Annual Report 2019Combined Management Report

Result summary
[in €‘000]

Divisions 2019

Divisions 2018

Continuing Discontinued

Total

Continuing Discontinued

Total

Sales revenues

Other operating income

1,052

145

14,605

15,657

215

Operating expenses

-4,994

-12,658

-17,652

Result from operating activities (EBIT)

-3,797

Financial result

Income taxes

Total

-308

317

-3,787

2,017

-460

-422

1,134

-1,780

-768

-105

1,174

221

-4,473

-3,078

229

11,954

1,010

13,128

1,231

-10,470

-14,943

2,495

-585

-147

182

202

-301

-2,653

-2,829

2,528

The period loss of the 4basebio Group in the financial year 2019 was €2.7 million (2018: loss of €0.3
million). The €2.4 million greater net loss for the period compared to the previous year is mainly due
to the recognition of earn-out obligations for the two acquisitions TGR BioSciences Pty Ltd, Adelaide/
Australia (acquisition date 2 May 2018) and Innova Biosciences Ltd, Cambridge/UK (acquisition date
16 June 2017). While income of €1.0 million from the revaluation of these earn-out obligations had
to be recognised in the income statement in fiscal year 2018, expenses of €1.4 million were incurred
in fiscal year 2019. The balance of interest income and interest expense for fiscal year 2019 totalled
-€0.8 million (2018: €0.1 million), including €0.5 million (2018: €0.2 million) for interest payments in
connection with long-term and short-term credit financing. Despite the €2.5 million increase in sales
revenues, earnings before interest and taxes (EBIT) in the 2019 financial year were -€1.8 million, €1.2
million lower than in the previous year (2018: -€0.6 million), which is largely due to the non-cash char-
ges from the revaluation of earn-out obligations.

3.4. Net assets and financial position of the Group

Principles and objectives of financial management of the 4basebio Group

For the 4basebio Group, financial management means above all liquidity and capital structure manage-
ment as well as the management of interest and currencies. The financial management of the 4basebio
Group basically pursues the goal of maintaining the financial independence of the company by ensuring
sufficient liquidity. In this way, the financial strength of the group should be maintained at a high level
at all times. Risks should be avoided as far as possible or effectively hedged. The financing and liquidity
risks are presented in section “4. opportunities and risk report”. The 4basebio Group does not engage
in speculative forward transactions and only uses derivative financial instruments when necessary.

The focus of the financial management of the 4basebio Group in the past financial years was primarily on
ensuring sufficient liquidity. In order to anticipate future liquidity requirements, twelve-month liquidity
plans were used. In view of the cash income from the Abcam transaction, the group of companies cur-
rently has not inconsiderable cash resources. The main focus in the future will therefore be on investing
these cash funds. The capital is to be protected as far as possible from loss of value and the costs of
holding deposits with banks minimised (e.g. in the event of negative interest rates).

Furthermore, the objectives of the financial management of the 4basebio Group focus on improving
the profitability of the group measured by the adjusted EBITDA results. In recent financial years, this
has been achieved through a combination of earnings growth and effective cost management. With

4basebio | Annual Report 2019the Abcam transaction, 4basebio Group will achieve a significant capital gain in the first quarter of 2020
but the focus of financial management remains on minimizing the adjusted EBITDA losses in the near
future and returning to positive adjusted EBITDA within the next two to three years. This is expected to
be the case as soon as the 4basebio Group has developed the DNA production readiness and is able
to generate revenues and profits.

Discontinued operations: Proteomics and Immunology Business Units

The proteomics and immunology businesses sold to Abcam with effect from 1 January 2020 have been
classified as a disposal group held for sale and as discontinued operations as of 31 December 2019 in
accordance with the requirements of IFRS 5. In the consolidated balance sheet, the assets and liabilities
attributable to the discontinued operations had to be summarized in separate items on the assets
and liabilities side of the balance sheet, whereby the prior year figures did not have to be adjusted. In
the following table, the assets and financial situation of the 4basebio Group is presented both with re-
gard to the discontinued business areas and with regard to the continued operations of the 4basebio
Group. The two business areas proteomics and immunology account for the majority of the balances
previously reported in the consolidated balance sheet. The balance sheet items attributable to these
business units are of minor importance for the purpose of assessing the future net assets, financial
position and results of operations.

Financial position [in €‘000]

31.12.2019

31.12.2018

84%

51,808

81%

in %

+0,8

Non-current assets

thereof: continuing operations

thereof: discontinued operations

Current assets

thereof: continuing operations

thereof: discontinued operations

Total assets

Equity

Non-current liabilities

thereof: continuing operations

thereof: discontinued operations

Current liabilities

thereof: continuing operations

thereof: discontinued operations

52,214

3,646

48,568

10,037

2,501

7,536

62,251

48,096

6,093

1,532

4,562

8,061

2,535

5,527

16%

12,369

19%

-18,9

100%

64,177

100%

77%

10%

46,502

9,916

73%

15%

-3,0

+3,4

-38,5

13%

7,759

12%

+3,9

Total equity and liabilities

62,251

100%

64,177

100%

-3,0

The balance sheet total of 4basebio Group decreased by 3% to €62.3 million as of 31 December 2019
(31 December 2018: €64.2 million).

Non-current assets as of 31 December 2019, were up slightly on the prior-year level at €52.2 million (31
December 2018: €51.8 million). Intangible assets in the amount of €49.0 million (31 December 2018:
€49.5 million) include goodwill in the amount of €35.0 million (31 December 2018: €33.9 million) and
other intangible assets capitalized as part of company acquisitions in the amount of €14.0 million (31
December 2018: €15.6 million). With the sale of its proteomics and immunology businesses to Abcam
with effect from 1 January 2020, all goodwill of the 4basebio Group will be removed from the consolidated
balance sheet. The goodwill is subject to an impairment test at least once a year. In the 2019 financial

4basebio | Annual Report 2019Combined Management Report

year, in accordance with IFRS 16, rights of use from rental and leasing relationships were capitalised for
the first time in the amount of €0.6 million and are included in property, plant and equipment. None-
theless, property, plant and equipment as of 31 December 2019, at €2.1 million, remained roughly at
the previous year’s level (31 December 2018: €2.0 million) due to offsetting depreciation and disposals.
At €10.0 million, current assets as of 31 December 2019 were €2.3 million down on the prior-year figure
(31 December 2018: €12.4 million). The reduction is mainly due to the not insignificant decrease in cash
and cash equivalents by €2.5 million to €3.7 million as of 31 December 2019 (31 December 2018: €6.2
million). In contrast, trade receivables (€2.6 million), inventories (€2.4 million) and other current assets
(€0.8 million) were roughly at the prior year’s level as of 31 December 2019.

Non-current liabilities amounted to €6.1 million as of 31 December 2019, down €3.8 million on the
prior year figure (31 December 2018: €9.9 million). This decline is largely due to non-current financial
liabilities, which amounted to €3.9 million as of 31 December 2019, down €3.6 million on the prior year
(31 December 2018: €7.5 million). The decline in non-current financial liabilities is mainly due to the
reclassification of non-current liabilities to current. As of 31 December 2019, non-current liabilities also
include €2.1 million in deferred tax liabilities (31 December 2018: €2.4 million).

At €8.1 million, current liabilities as of 31 December 2019 were up €0.3 million on the prior year figure
(31 December 2018: €7.8 million). The loan bond to former TGR shareholders reported under current
financial liabilities in the previous year, which was due in May 2019, was repaid on schedule in the current
financial year. As a result of the reclassification of non-current financial liabilities as current, current
financial liabilities of €4.0 million as of 31 December 2019 increased by €0.8 million against prior year’s
level (31 December 2018: €3.2 million). Trade accounts payable (€1.1 million), current provisions (€1.9
million) and other current liabilities (€1.1 million) were also subject to only minor fluctuations compared
to the prior year.

Equity increased by €1.6 million to €48.1 million as of 31 December 2019 (31 December 2018: €46.5
million). The equity ratio rose to 77% at the end of fiscal year 2019 (31 December 2018: 73%).

Following the Abcam transaction effective 1 January 2020, certain debts of the Group to Boost & Co. and
Santander were settled in 2020 from the proceeds of the sale of Abcam. As a result, debt was reduced
by €4.7 million at the beginning of 2020. On the other hand, cash and cash equivalents increased by
€122 million at that date. These liquid funds include restricted cash in the amount of €14.4 million, as
this amount from the transaction proceeds is to be held for two years in an escrow account managed
by JP Morgan on a fiduciary basis.

Financial position

The proteomics and immunology businesses sold to Abcam with effect from 1 January 2020 have been
classified as a disposal group held for sale and as discontinued operations as of 31 December 2019 in
accordance with the requirements of IFRS 5. However, the consolidated cash flow statement includes
cash inflows and outflows attributable to both discontinued operations and continuing operations. In
the following, the financial situation of the 4basebio Group is presented both with regard to the discon-
tinued operations and with regard to the continuing operations of the 4basebio Group. The two business
areas proteomics and immunology account for the majority of the cash flows previously reported in the
consolidated cash flow statement. The items attributable to these business units are of minor impor-
tance for the purpose of assessing the future net assets, financial position and results of operations.

4basebio | Annual Report 2019[in €‘000]

Cash flow from operating activities

thereof: continuing operations

thereof: discontinued operations

Cash flow from investing activities

thereof: continuing operations

thereof: discontinued operations

Cash flow from financing activities

thereof: continuing operations

thereof: discontinued operations

in %

+ >100

+ 86,1

- >100

2019

1,098

-2,694

3,792

-925

-421

-504

-2,875

-902

-1,973

2018

-158

-3,129

2,971

-6,707

-441

-6,266

11,187

7,224

3,963

Cash and cash equivalents decreased from €6.2 million at the end of the 2018 financial year to €3.7
million at the end of the 2019 financial year. This is primarily due to cash flows in connection with the
repayment of financial liabilities in the 2019 financial year to the amount of €2.8 million. With the sale
of the proteomics and immunology business units to Abcam effective 1 January 2020, the Group has
sufficient liquid funds to react quickly and flexibly to the needs of its customers in the future.

The cash outflow from investing activities amounted to €1.0 million, compared with € 6.7 million in the
previous year. If the cash outflow from investing activities is adjusted for the payments made in the 2018
financial year for the acquisition of TGR BioSciences Pty Ltd, Adelaide/Australia, in the amount of €5.7
million, the cash flow from investing activities is almost identical to that of the previous year. The cash
outflow from financing activities amounted to €2.9 million in the 2019 financial year, compared with a
cash inflow of €11.2 million in the previous 2018 financial year, mainly due to payments in connection
with the repayment of financial liabilities in the 2019 financial year in the amount of €2.8 million.

4basebio | Annual Report 2019Combined Management Report

3.5. Assets, financial and earnings position of 4basebio AG

The annual financial statements of 4basebio AG are - in contrast to the consolidated financial state-
ments, which are based on the IFRS of the IASB, as applicable in the EU - prepared in accordance with
the principles of proper accounting in compliance with the provisions of §§ 242 to 256a and §§ 264
to 288 HGB and the special provisions of the German Stock Corporation Act (AktG). Since 4basebio
AG generates its main income from management recharges from its subsidiaries, the annual financial
statements of 4basebio AG show a very similar course of business to the consolidated financial state-
ments of the 4basebio Group.

Earnings position [in €‘000]

Sales revenues

Other operating income

Personnel expenses

Depreciation

Other operating expenses

Financial result

Depreciation of financial assets

Other taxes

Net loss for the year

2019

201

-5

-9

2018

158

1,483

-5

-2

-2,070

-2,836

644

811

in %

+27,2

-99,4

–

> 100,0

-27,0

-20,6

-31,601

-6,968

> 100,0

-1

–

-32,832

-7,359

> 100,0

Revenue for fiscal year 2019 amounts to €0.2 million (2018: €0.2 million) and relates to revenue generated
within the Group (ongoing charges for management services provided by 4basebio AG to the subsidiar-
ies). The other operating income accrued in the 2019 financial year relates exclusively to income from
the release of provisions (€9 thousand). The other operating income of the previous year amounting
to €1.5 million is very much influenced by the income from the sale of Innova Biosciences Ltd, Cam-
bridge/UK to another subsidiary of 4basebio AG, Expedeon Holdings Ltd, Cambridge/UK (€1.3 million).

Other operating expenses amounted to €2.1 million in the 2019 financial year and fell not insignificantly
compared with the previous year (€2.8 million). The largest single items under other operating expenses
in the 2019 financial year are non-refundable value-added tax of €0.2 million (2018: €0.5 million), legal
and consulting fees in connection with company acquisitions of €0.4 million (2018: €0.0 million) and
other operating expenses of €0.1 million (2018: €0.1 million). €0.4 million (2018: €0.0 million), other legal
consulting fees of €0.1 million (2018: €0.2 million), investor relations expenses of €0.3 million (2018:
€0.2 million), management and supervisory board compensation of €0.4 million (2018: €0.4 million)
and audit fees of €0.4 million (2018: €0.4 million).

The financial result of €0.6 million (2018: €0.8 million) mainly includes interest income from inter-
est-bearing loans granted within the Group and interest expenses from the use of prepaid expenses
on the bond with warrants attached.

The write-downs on financial assets in the 2019 financial year relate to the write-down of the investment
in 4basebio S.L.U., Madrid/Spain, in the amount of €31.6 million (and write-downs in the 2018 financial
year for 4basebio Biosciences GmbH & Co. KG, Heidelberg in the amount of €7.0 million). 4basebio AG
has sold its proteomics and immunology businesses to Abcam PLC, Cambridge/UK with effect from
2 January 2020 (“Abcam transaction”). Against this background, the Company has fully written off its
investment in 4basebio S.L.U., Madrid/Spain as of 31 December 2019 due to an expected permanent
impairment. While 4basebio S.L.U., Madrid/Spain conducted research and development activities in the
fields of proteomics and immunology prior to the Abcam transaction, the research and development

4basebio | Annual Report 2019activities in the future will focus exclusively on genomics research and development. The reduction in
the carrying amount of the investment in 4basebio S.L.U. reflects the uncertainty associated with long-
term valuation models for accounting purposes regarding the ultimate value of the Spanish intellectual
property that the Group is currently commercializing. The Management Board continues to see significant
shareholder value in the commercial exploitation of the Spanish intellectual property by 4basebio AG.

The net loss for the financial year 2019 was €32.8 million compared to €7.4 million in the previous year.
The net loss for the year is largely due to the impairment of the investment in 4basebio S.L.U., Madrid/
Spain, in the 2019 financial year. .

Assets and financial position

In 4basebio AG, the same principles for financial management apply as they do for the group of com-
panies (see section “3.4. Assets and financial position of the group”).

[in €‘000]

Intangible assets

Property, plant and equipment

Financial assets

Receivables and other assets

liquid assets

Accruals and deferred income

Total assets

Equity

Contributions made (resolved capital increase)

Provisions

Liabilities

Total liabilities and shareholders‘ equity

31.12.2019

31.12.2018

in %

25,818

26,696

662

53,279

45,591

806

1,129

5,753

53,279

49%

50%

100%

86%

10%

100%

55,326

26,458

205

1,125

83,144

75,851

213

2,250

4,830

67%

32%

100%

91%

83,144

100%

-30,8

-50,0

-53,3

+0,9

-59,5

-41,2

-35,9

-39,9

+ >100

-49,8

+19,1

-35,9

Intangible assets and property, plant and equipment decreased due to scheduled depreciation.

Financial assets decreased by €29.5 million to €25.8 million in the financial year 2019 due to the write-
down of the investment in 4basebio S.L.U., Madrid/Spain (€31.6 million), partly offset by a revaluation of
the earn-out obligation from the acquisition of TGR BioSciences Pty Ltd, Adelaide/Australia with effect
from 2 May 2018 (€2.1 million).

Receivables include long-term loans to companies in the Group amounting to €26.7 million (31 De-
cember 2018: €26.5 million), the largest single item being receivables from Expedeon Holdings Ltd,
Cambridge/UK in the amount of €18.3 million (31 December 2018: €16.8 million) and from Expedeon
Ltd, Cambridge/UK in the amount of €5.1 million (31 December 2018: €5.1 million). The receivables from
affiliated companies result from loans granted and other services provided by 4basebio AG and have
a remaining term of up to one year.

The prepaid expenses include the deferred expenses from the warrant bonds shown under other
liabilities, which were issued at a nominal value below the interest rate. The accruals and deferrals are
distributed as expenses over the term of the options of 3 years.

4basebio | Annual Report 2019Combined Management Report

Cash and cash equivalents amounted to €0.1 million as of 31 December 2019, compared to €0.5 million
at the prior year’s reporting date.

Equity decreased by €30.3 million to €46.8 million, mainly due to the write-down of the investment in
4basebio S.L.U., Madrid/Spain.

Other provisions decreased by €1.2 million to €1.1 million (31 December 2018: €2.3 million). This change
is mainly due to the fact that the earn-out payments of €1.1 million accrued in the 2018 financial year
were booked to equity in the 2019 financial year. Liabilities increased by €1.0 million to €5.8 million (31
December 2018: €4.8 million) and include liabilities from warrant bonds in the amount of €3.1 million
(31 December 2018: €2.8 million), trade payables of €0.1 million (31 December 2018: €0.2 million) and
liabilities to affiliated companies in the amount of €2.5 million (31 December 2018: €1.7 million).

Overall assessment of the net assets, financial position and results of operations

4. Report on opportunities and risks

The statements presented in the following opportunities and risk report apply equally to the group
(4basebio Group) and the parent company (4basebio AG).

4.1. Opportunity and risk management system

The 4basebio Group operates in a dynamic market environment and is therefore exposed to various
risks that are inseparably linked to entrepreneurial activity. In order to identify and analyse risks at an
early stage and to take effective countermeasures, the Executive Board, in its overall responsibility for
the 4basebio Group, has set up a system for risk management and internal controls. The main objective
of risk management is to identify and monitor strategic, market-related, financial and business-specific
opportunities and risks at an early stage in order to take the necessary, appropriate and appropriate
measures after careful examination.

For this purpose, the Management Board has appointed a risk manager within the organisational structure.
The most important mechanisms for risk identification are regular meetings of the upper management
level at which newly emerging risks are identified and classified and the monitoring of business devel-
opment against budget. This is supported by a regular exchange between the Management Board and
the Supervisory Board, in which important issues are addressed and discussed. The risk situation of the
4basebio Group is also discussed with the audit committee in the context of the audit of the quarterly
reports and the annual report.

The 4basebio Group continuously monitors all applicable environmental, health and safety, operational
and other applicable legal or industrial guidelines and has implemented functions to effectively fulfil

4basebio | Annual Report 2019these guidelines at each of its business locations. In order to reduce the potential impact of numerous
tax, business, labour, competition, IP and other legal frameworks, the Group bases its decisions and
designs its policies and processes on advice from internal experts in each of these areas and, if neces-
sary, on advice from external consultants. The 4basebio Group creates provisions to cover potential
risks wherever this is reasonable and appropriate.

Accounting related internal control and risk management system

4basebio AG is obliged pursuant to § 289 Para. 4 and § 315 Para. 4 HGB to describe the main features
of its accounting-related internal control and risk management system in the management report. The
aim of the internal control and risk management system in relation to the group accounting process is
to identify and assess risks that could conflict with the aim of ensuring that the consolidated financial
statements comply with the regulations. This is intended to ensure sufficient certainty that the financial
reporting, both with regard to the consolidated financial statements of the 4basebio Group and with
regard to the individual financial statements of all subsidiaries to be included, is prepared in accordance
with the law and in compliance with the generally recognised accounting principles.

The internal control and risk management system for financial reporting comprises principles, proce-
dures and measures to ensure the effectiveness, efficiency and propriety of financial reporting and
to ensure compliance with the relevant laws and standards. Key elements are clearly defined control
mechanisms (in the form of system-related and manual coordination processes), the separation of
functions (“dual control principle”) and the existence of or compliance with guidelines and work instruc-
tions. In principle, any internal control system (“ICS”) must take into account the fact that, regardless
of its design, it cannot provide absolute certainty that material misstatements in accounting will be
avoided or uncovered. The reasons for this could be, for example, incorrect discretionary decisions,
inadequate controls or criminal acts. The Management Board bears overall responsibility for the internal
control and risk management system for financial reporting.

Specific accounting-related risks may arise, for example, from the conclusion of unusual or complex
transactions. Furthermore, business transactions that are not routinely processed are subject to latent
risk. A limited group of persons necessarily has discretionary powers in the recognition and measurement
of assets and liabilities, which may result in further accounting-related risks.

Significant changes in accounting processes due to new legislation, changes in legislation or changes
in internal processes are analysed in Group Accounting for their effects in a timely manner. Special
accounting and financial reporting issues or complex matters that either involve special risks or require
special expertise are monitored and processed centrally. Fundamental issues arising in the course
of preparing the annual or consolidated financial statements and financial matters arising during the
year (e.g. accounting and tax issues) are discussed promptly with the Audit Committee. If necessary,
additional external consultants are consulted on various topics (e.g. valuation of issued stock options
in accordance with IFRS, tax loss carry forwards and deferred taxes).

The monthly, quarterly and annual financial information is analysed for plan/actual variances and ac-
counting inconsistencies and inconsistencies. Prior to publication, the quarterly, annual and consolidated
financial statements are discussed with the Audit Committee, which also carries out its own review.

The ICS is continuously reviewed for the effectiveness of the controls and adjusted as necessary. The
accounting-related internal control system and the early warning system pursuant to Section 91 (2) of
the German Stock Corporation Act (AktG) are reviewed as part of the audit of the financial statements.
The auditor is obligated to inform the Supervisory Board of any accounting-related risks or control
weaknesses as well as other material weaknesses of the accounting-related internal control system
and the early warning system pursuant to Section 91 (2) AktG identified during the audit.

4basebio | Annual Report 2019Combined Management Report

4.2. Opportunities and risks of future business development

The following is a list of the opportunities and risks that have been identified and are being pursued in
the 4basebio Group as part of its risk management system. There is no offsetting of opportunities and
risks. For the purposes of internal management, the individual risks presented in condensed form are
not quantified using a consistent methodology throughout the group. The 4basebio Group distinguishes
between “environment and business risks”, “financial risks”, “other risks” and “business opportunities“.

Environmental and business risks

Among the “environment and business risks”, the 4basebio Group monitors in particular risks that arise
from macroeconomic, political, social and regulatory developments. In addition, the specific operating
risks inherent in the 4basebio Group’s business model are monitored.

General industry risks

The 4basebio Group is exposed to the risks typical of the industry for companies in the life sciences
sector. This naturally gives the group of companies a high risk profile, which can have a direct impact
on the asset, financial and earnings position of the group and thus also directly influence the valuation
of the company.

The biotech and pharmaceutical environment is extremely dynamic. Both the market environment
and the competitive situation can change very quickly. Following the Abcam transaction and the as-
sociated operational realignment of the 4basebio Group, the number and identity of competitors has
changed. Some of the competitors are significantly larger and financially more well placed than the
4basebio Group. There is also a risk that economically more important competitors could in future
enter the market segment on which 4basebio Group has meanwhile focused after the conclusion of
the Abcam transaction..

Risks from selling products

In the past financial years, the 4basebio Group has concentrated on the sale of its own products, where
the market success of these sales activities was of great importance with regard to the overall financial
performance of the group. Accordingly, there were risks above all from insufficient market demand,
declining customer needs or delays due to postponements in the market launch of further new and
innovative products. As a result of its operational realignment, the Group will focus from 2020 onwards
on the development of a DNA production capability, and product sales will no longer have a significant
impact on the Group’s overall financial performance (at least in the near future).

Risks from product development

The 4basebio Group develops new products and technologies in the field of molecular biology. Before
new projects are launched, each project is intensively reviewed by the research management of the
group of companies in regular meetings. These reviews cover both technical aspects and a careful
analysis of the market potential.

Risks from business combinations

Acquisitions of companies and product lines represent an important strategic instrument for the 4base-
bio Group to expand the service portfolio more quickly and to align it specifically with customer needs.
Through the acquisition of companies or individual assets, the 4basebio Group can be exposed to risks
associated with the integration of new technologies, business units, company locations and employees.

4basebio | Annual Report 2019In addition, in this context, risks may subsequently arise from the issue of equity instruments that could
dilute the value of the shares held by the shareholders. Negative consequences on the enterprise value
of 4basebio can arise in particular if an acquisition does not achieve the expected results.

Ip risks

Patents are an important factor for life sciences companies in the marketing of products. The moni-
toring and protection of patents is therefore a very high priority for the 4basebio Group. Patent rights
can be contested at any time and the granting of a new patent can involve a long and arduous process
that offers no guarantee of a successful outcome. Patent disputes can entail considerable additional
internal and external expenditure and, in extreme cases, can lead to the termination of a project.

Personnel risks

In order to ensure the best possible corporate success, it is also extremely important for the 4basebio
Group to hire a sufficient number of highly qualified employees and to commit them to the group. The
group is in competition with other companies in terms of personnel resources. In this context, there is
both the fundamental risk of turnover and the risk that the 4basebio Group is not in a position to hire
new employees with the necessary qualifications. In addition, the unforeseen loss of key employees
and the associated loss of relevant know-how can have an adverse effect on the 4basebio Group, for
example, particularly in a growth and expansion phase.

Financing risks

The implementation of a targeted growth strategy based on a “buy-and-build” concept requires ad-
ditional liquid funds. In recent financial years, the 4basebio Group has examined various options for
securing this capital requirement. Following the completion of the Abcam transaction and in view of the
liquid funds generated by it, the Management Board of the 4basebio Group assumes that the Group is
in a position to finance acquisitions from its own funds.

Going concern

The going concern assumption was an important management focus in the past fiscal years. For this
purpose, the business planning process was of central importance in the 4basebio Group, which ulti-
mately ensured sufficient liquidity. With the cash income from the Abcam transaction, the priority of the
going concern assumption for the group of companies has in the meantime been significantly reduced..

Risks in connection with the recognition of tax losses carried forward

In addition to the previous regulations on loss deduction in accordance with Section 8 (4) KStG, the
German legislator introduced more stringent legislation in Section 8c KStG, which came into force as
part of the corporate tax reform on 1 January 2008, according to which the addition of new business
assets is no longer an object and a transfer of more than 25% of the share capital before 1 January 2016
would result in at least part of the loss carry forwards no longer being deductible. A transfer of more
than 50% of the share capital in accordance with the provisions of section 8c KStG would result in the
entire loss carry forward no longer being deductible. The provisions of section 8d KStG apply to such
transfers of shareholdings in the share capital that take place after 31 December 2015 - provided that
the relevant conditions are met - so that in the event of a harmful acquisition of shareholdings pursuant
to section 8c KStG, a so-called continuation-bound loss carry forward is granted upon application if
the same business operations are continued and the other conditions are met.

4basebio | Annual Report 2019Combined Management Report

Risks in connection with the refund of input tax amounts

With regard to 4basebio AG’s entitlement to deduct input tax, an ongoing appeal process is underway with
the tax authorities. In this process, there are different opinions between 4basebio AG and the relevant
tax authorities. The risks are fully taken into account in the provisions and relate to the reimbursement
of input tax amounts for periods prior to 31 December 2019..

Financial risks

Various financial risks in connection with financial assets and financial liabilities can have an adverse
effect on the asset, financial and earnings situation of the 4basebio Group. These are mainly interest
rate risks, credit or default risks, liquidity risks and exchange rate risks. Supplementary explanations
of the financial risks relating to the use of financial instruments can also be found in the notes to the
consolidated financial statements in Note “22. Additional disclosures on financial instruments”.

Interest rate risks

The 4basebio Group does not currently hold any significant financial liabilities with variable interest
rates in its balance sheet. However, after the Abcam transaction, the group currently has not inconsid-
erable cash holdings the interest rate on which is primarily dependent on the base interest rate of the
European Central Bank. In the event of a reduction in the base rate, interest costs may arise for holding
these bank deposits (e.g. in the event of negative interest rates).

Credit or default risks

In past financial years, credit or default risks existed in connection with the direct sale of the Compa-
ny’s own products regarding the timely collection or default of trade receivables from customers. Until
the Abcam transaction, however, the actual bad debt losses were minimal. As the Group will focus on
the development of DNA production readiness from fiscal year 2020 onwards due to the operational
realignment, both the credit acceptance processes implemented to date and the credit control pro-
cesses (e.g. the continuous monitoring of outstanding invoices) will no longer have a significant impact
on the Group’s risk position (at least in the near future).

Following the Abcam transaction, however, the group of companies currently has not inconsiderable
cash holdings at banks. Against this background, the 4basebio Group is exposed to potential failures
of the banking system and a resulting loss of capital. The financial stability of the banks used by the
group is constantly monitored and the amount of deposits at the individual banks is regularly reviewed..

Liquidity risks

The liquidity risk describes the risk that the 4basebio Group is not in a position to settle its liabilities
on maturity. The Group monitors its cash holdings closely to ensure that it has adequate liquidity at all
times. With the cash income from the Abcam transaction, the liquidity risk of the 4basebio Group has
in the meantime been reduced not insignificantly.

Exchange rate risks

The majority of the activities of the 4basebio Group during 2019 are carried out in currencies other than
the euro. Consequently, strong fluctuations in the exchange rate of the euro, especially against the US
dollar or the British pound, can have a negative impact on the overall financial performance. From the
financial year 2020, this risk has been significantly reduced as a result of the Abcam transaction with
the sale of most British assets, all Australian assets and some US assets. With regard to 4basebio Inc.,

4basebio | Annual Report 2019San Diego/USA, the transactions of the 4basebio Group will continue to be concluded in US dollars and
certain employee-related costs will continue to be paid in British pounds. With a view to the closure of
4basebio Inc. San Diego/USA, which was decided in March 2020, the currency risk will be further reduced
in fiscal year 2020. On the other hand, an exchange rate risk could exist in the future with regard to the
cash investments of the liquid funds received as part of the Abcam transaction. This is only the case,
however, if the funds received in euros are invested in currencies other than the euro.

Other risks

Brexit

The outcome of the Brexit process is currently still uncertain. Since the Abcam transaction, the Group has
employed four people in the UK in administrative and management functions. There are no production,
research and development or sales activities in the UK. Consequently, the significance of “Brexit” for
the Group will be considered low in the future. Nevertheless, the 4basebio Group continues to monitor
and consider the potential impact on the group itself and on its business partners.

Corona /Ccovid-19

The effects of the Coronavirus pandemic, which is ongoing at the time of the preparation of the man-
agement report, on the European and global economy in general and the 4basebio Group in particular
cannot be estimated at the present time due to the current dynamics and the unforeseeable duration.
Particularly in view of the already comprehensively initiated stabilising measures to mitigate the negative
financial effects, the Management Board does not consider the economic situation of the 4basebio
Group to be at risk beyond the end of the 2020 financial year at the time of preparation of the manage-
ment report. With the conclusion of the Abcam transaction, the 4basebio Group has sufficient liquid
funds to cope with the negative consequences of this pandemic.

Business Opportunities

Following the Abcam transaction, the main focus of the 4basebio Group over the next two years will be
on the development of production facilities for the commercial production of synthetic DNA for use
in gene therapy and gene vaccine applications. In due course (but not before the financial year 2022),
cash income and profits from the sale of these development services should thus be generated. How-
ever, no significant income is expected before the financial year 2022. The Management Board is of
the opinion that the concentration on the development of synthetic DNA production will contribute
to increasing the value of the company.

In addition, the Group expects that in the future it will only rarely sell large quantities of enzymes that
third parties intend to include in their diagnostics products. Both the timing and the amount of these
product sales are difficult to predict, as they depend on a number of factors that are beyond the control
of the 4basebio Group, in particular the progress made by potential customers in the development and
marketing of diagnostic products.

Acquisitions will continue to offer the 4basebio Group the opportunity to complement the core com-
petence of developing its production readiness for synthetic DNA along the genomic workflow. Against
this background, the group will continue to pursue its “buy and build” strategy in the future.

4basebio | Annual Report 2019Combined Management Report

General statement of the board

In its function as the body responsible for risk management, the Management Board of 4basebio AG
reviews the risk and opportunity situation of the group of companies. The fundamental risk profile has
changed considerably with the conclusion of the Abcam transaction. Following the Abcam transaction,
the main focus of the 4basebio Group in the next two years will be on the development of its production
readiness for synthetic DNA. The aim is to drive forward the commercial production of synthetic DNA
in gene therapy and for gene vaccine applications. Despite the risks described above, in the opinion of
the Management Board of 4basebio AG, an overall assessment shows that the future business oppor-
tunities outweigh the risks. The Management Board considers the risks to be appropriate overall and
trusts in the effectiveness of the risk management system with regard to changes in the environment
and the requirements of the ongoing operating business. Particularly after the conclusion of the Ab-
cam transaction, the 4basebio Group has sufficient cash at its disposal to successfully meet the new
challenges of the current overall risk profile..

5. Guidance report

The following section may contain forward-looking statements based on the estimates and expecta-
tions of the Management Board regarding future developments, including financial forecasts and the
future business situation of the company. These expectations are subject to the risks and uncertainties
described in section “4. opportunities and risks report”. Actual results may differ materially from the
estimates due to a variety of factors beyond the control of the Management Board.

The total financial performance in financial year 2020 will depend on the progress made in the devel-
opment of DNA production facilities, the related cost structure and the Group’s ongoing research and
development activities. In view of the closure of 4basebio Inc., San Diego/USA, the Management Board
expects operating losses of this subsidiary until its final closure in the course of the 2020 financial year.
In addition, additional costs for the closure of operations are expected.

During 2020, 4basebio will report a significant accounting profit due to the disposal of its proteomics
and immunology assets to Abcam which completed on 1 January 2020 with proceeds of €120 million.
In the near term however, it is expected that the Group will report operating losses and cash outflows as
the Group re-invests to scale and expand our activities. The operational cash burn, excluding expenses
relating to the Abcam transaction, from the remaining business for 2020 is expected to between €2.5
million to €3.5 million with revenues between €0.5 million and €1.0 million

4basebio is now primarily focussed on the development of commercial quantities of synthetic DNA for
use in gene therapy and gene vaccine markets, two rapidly emerging and fast-growing market segments.
Current DNA supply for these markets is met by biofermentation production processes over which
synthetic DNA, a new technology, has very clear performance, safety and cost benefits.

Over the next two years 4basebio expects to invest up to €15.0 million in the ongoing development of
its proprietary technology for DNA manufacture, the subsequent scaling of its business and the devel-
opment of a DNA manufacturing facility to produce commercial quantities of synthetic, clinical grade
DNA. Alongside this we will continue our buy and build strategy with the aim of acquiring assets and
technologies in gene therapy and vaccine workflows which are complementary to the core synthetic
DNA production technology.

Management believes the pursuit of this strategy offers a value creation opportunity that can in due course
significantly exceed the €120 million received from the sale of the immunology and proteomics assets..

4basebio | Annual Report 20196. Compensation Report

The remuneration report is part of the combined management report and contains both the basic
principles of the remuneration systems for the Management Board and Supervisory Board as well as a
disclosure of the amount and structure of the remuneration. The compensation report is based on the
recommendations of the German Corporate Governance Code (DCGK) and meets the requirements
of the applicable provisions of Sections 289a (2), 314 (1) No. 6a and b, 315a (2) of the German Com-
mercial Code (HGB). In this remuneration report, 4basebio AG discloses both the remuneration of the
Management Board and the remuneration of the Supervisory Board on an individual basis

6.1. Management Board

Management Board members

• Dr. Heikki Lanckriet (CEO and CSO), member of the Executive Board since 2016,
• David Roth (CFO), member of the Management Board since 2017, appointed until 31.12.2023.

appointed until 31.12.2023.

Main features of the remuneration system for the Management Board

The overall structure of the remuneration system for the Management Board is discussed and regularly
reviewed by the plenary session of the Supervisory Board, which is responsible for determining the ap-
propriate remuneration of the individual Management Board members. In view of the importance of the
composition of the Management Board and the associated remuneration of the individual members,
the Supervisory Board has formed its own Nomination and Remuneration Committee. The non-per-
formance-related components and the basic structures of the performance-related components are
part of the employment contracts concluded with the individual Management Board members.

The aim and purpose of the remuneration system for the members of the Management Board of
4basebio AG is to enable the members of the Management Board to participate in the development
of the company’s business in accordance with their individual tasks and performance for the group of
companies and their success in managing the economic and financial situation of the company, taking
into account the competitive environment. The total remuneration of the Management Board is per-
formance-related and consisted of various components in the 2019 financial year:

• a non-performance-related remuneration (fixed remuneration); and
• a performance-related remuneration (variable remuneration).

At the Annual General Meeting on 7 July 2017, the Company received shareholder approval to allocate
up to 2 million shares to the Management Board as part of an employee stock option plan. 1.75 million
shares were allocated in the 2018 financial year.

The non-performance-related components consist of a fixed amount.

Since 1 August 2016, Dr Heikki Lanckriet has had an employment contract with 4basebio AG and an
employment contract with Expedeon Ltd, Cambridge/UK. Since 1 March 2017, David Roth has had an
employment contract with 4basebio AG and an employment contract with Expedeon Ltd, Cambridge/
UK. From 1 January 2020 the employment contracts moved from Expedeon Ltd to 4basebio Ltd,
Cambridge/UK.

4basebio | Annual Report 2019
Combined Management Report

With a view to the 2019 financial year, the performance-related remuneration consisted of a variable
bonus. The amount of the respective bonus depends exclusively on the achievement of certain target
parameters based on the Group’s performance. The amount of the variable bonus is based on an an-
nual assessment of the Company’s performance, which is based on the achievement of strategic and
operational goals such as the completion of the financing process, increasing the Company’s visibility
on the capital market and other corporate goals. During and after the end of the financial year, the
Supervisory Board assessed the progress made in achieving the targets and determined the bonus
taking all relevant factors into account.

The total remuneration of the members of the Management Board in the 2019 financial year amounted
to €640 thousand (2018: €561 thousand).

Remuneration of the Management
Board [in €‘000]

Performance-unre-
lated compensation

Performance-based
compensation

Other benefits

Total cash
compensation

Dr. Heikki Lanckriet

thereof from 4basebio AG

thereof from Expedeon Ltd

David Roth

thereof from 4basebio AG

thereof from Expedeon Ltd

296

178

119

213

171

–

372

223

149

268

214

For the prior financial year 2018, the remuneration of the members of the Management Board is made
up as follows:

Remuneration of the Management
Board [in €‘000]

Performance-unre-
lated compensation

Performance-based
compensation

Other benefits

Total cash
compensation

Dr. Heikki Lanckriet

thereof from 4basebio AG

thereof from Expedeon Ltd

David Roth

thereof from 4basebio AG

thereof from Expedeon Ltd

251

151

100

181

145

–

326

196

130

235

188

Shares and subscription rights of
members of the Management Board

Dr. Heikki Lanckriet

David Roth

01.01.2019

Additions

Disposals

31.12.2019

1,629,019

125,500

1,754,519

57,500

32,000

89,500

–

1,686,519

157,500

1,844,019

In addition, as of 31 December 2019, Max Lanckriet, Nell Lanckriet and Finn Lanckriet, all persons affil-
iated with Dr Heikki Lanckriet, each hold 2,500 shares in 4basebio AG. Sarah Roth, a related person of
David Roth, holds 89,000 shares in 4basebio AG as of 31 December 2019.

As of 31 December 2019, Dr Heikki Lanckriet holds 1,000,000 stock options in 4basebio AG and David
Roth holds 750,000 stock options in 4basebio AG in 4basebio AG.

4basebio | Annual Report 2019
6.2. Supervisory Board

Supervisory Board members

Chairman of the Supervisory Board

Independent entrepreneur, Cambridge, UK

• Dr. Cristina Garmendia Mendizábal (Chairwoman of the Supervisory Board until 4 April 2019)
• Self-employed entrepreneur, Madrid, Spain
• Joseph M. Fernández
• Chairman of the Board of Active Motif Inc., Carlsbad, California, USA
• Dr. Trevor Jarman
• Tim McCarthy
• Peter Llewellyn-Davies
• Pilar de la Huerta
• Hansjörg Plaggemars (member of the Supervisory Board since 9 July 2019)

Chief Executive Officer and Chief Financial Officer of APEIRON Biologics AG, Vienna, Austria

Chairman of the Executive Board of Unnamed Ltd, Cambridge, UK

Chief Executive Officer of ADL BioPharma, Madrid, Spain

Management Consultant, Stuttgart, Germany

Supervisory Board members’ other memberships in statutory supervisory boards and comparable
domestic and foreign supervisory bodies (section 125 (1) sentence 5 AktG)

• Joseph M. Fernández

Chairman of the Management Board of Active Motif Chromeon GmbH, Tegernheim, Germany
Member of the Board of Directors of Hiram College, Hiram, Ohio, USA
Member of the Board of Directors of Protein Fluidics, Santa Clara, San Francisco, CA, USA
Member of the Board of Directors of Delegate Advisors, San Francisco, CA, USA

• Dr. Trevor Jarman

Chairman of the Board of Directors of Persavita Ltd, Cambridge, UK, terminated during 2019
Chairman of the Board of Natures Remedies Ltd, Cambridge, UK, terminated during 2019
Member of the Board of Directors of Cambridge Cell Networks Ltd, Cambridge, UK
Member of the Board of Directors of Swangap Flat Management Ltd, Cambridge, UK
Member of the Board of Directors of Protus Ltd, Cambridge, UK
Designated Partner of CB4Living LLP, Cambridge, UK

• Tim McCarthy

Chairman of the Board of Directors of ImmuPharma PLC, London, UK
Chairman of the Board of Directors of Dropped Ltd, Cambridge, UK
Chairman of the Board of Directors of Incanthera Ltd, Manchester, UK
Member of the Board of Directors of Incanthera Therapeutics Ltd, Manchester, UK
Member of the Board of Directors of Incanthera R&D Ltd, Manchester, UK
Member of the Board of Directors of Frangipani Dreams Ltd, Cambridge, UK

• Peter Llewellyn-Davies

Chief Executive Officer and Chief Financial Officer of APEIRON Biologics AG, Vienna, Austria
Member of the Supervisory Board and Chairman of the Audit Committee of Shield Therapeutics
PLC, London, UK

• Pilar de la Huerta

Member of the Board of Directors of Epidesease SL, Madrid, Spain

4basebio | Annual Report 2019Combined Management Report

• Hansjörg Plaggemars (since 9 July 2019)

Non-Executive Director of KIN Mining NL, Perth, Australia
Non-Executive Director of Azure Minerals Limited, Perth, Australia
Non-Executive Director of Davenport Resources Limited, Perth, Australia
Supervisory Board Chairman of Nordic SSW 1000 Verwaltungs AG, Heidelberg, Germany
Supervisory Board Member of Carus AG, Heidelberg, Germany
Supervisory Board Member of Deutsche Balaton Immobilien I AG, Heidelberg, Germany

Main features of the remuneration system for the Supervisory Board

The remuneration of the members of the Supervisory Board is determined by the Annual General
Meeting and is set out in § 10 of the articles of association of 4basebio AG. In accordance with the
German Corporate Governance Code, the individual members of the Supervisory Board of 4basebio
AG receive both fixed remuneration that is not performance-related and variable remuneration that
is performance-related.

The non-performance-related remuneration that each member receives amounts to €20,000. The
Chairman receives twice and the Deputy Chairman 1.5 times the remuneration of a Supervisory Board
member. In addition to this remuneration, each chairman of a Supervisory Board committee receives
€10,000 in remuneration, provided that the committee meets at least twice during the fiscal year. In
addition, the members of the Supervisory Board receive variable remuneration amounting to 10% of
their fixed salary for the first fiscal year in which a positive return on equity is achieved. In subsequent
years, the variable remuneration (performance-related remuneration) is measured as a percentage
of the return on equity (percentage) of the consolidated financial statements. Supervisory Board
members who are only active for part of the fiscal year receive an appropriate proportionate (reduced)
remuneration. All members of the Supervisory Board are reimbursed for expenses incurred in the
performance of their duties.

2019

2018

Fix

Variable

Total

162

–

Fix

–

Variable

Total

–

160

162

160

Remuneration of the Supervisory Board
[in €‘000]

Dr. Cristina Garmendia Mendizábal

Joseph M. Fernandez

Dr. Trevor Jarman

Tim McCarthy

Peter Llewellyn-Davies

Pilar de la Huerta

Hansjörg Plaggemars

Total

4basebio | Annual Report 2019Shares and subscription rights of
members of the Supervisory Board

01.01.2019

Additions

Disposals

31.12.2019

Joseph M. Fernández

Dr. Trevor Jarman

Tim McCarthy

Peter Llewellyn-Davies

Pilar de la Huerta

Hansjörg Plaggemars

2,649,921

608,288

154,817

–

39,548

–

10,000

–

3,413,026

49,548

–

2,689,469

608,288

154,817

10,000

–

3,462,574

In addition, Kathrin Plaggemars, a person closely associated with Hansjörg Plaggemars, holds 40,000
shares in 4basebio AG as of 31 December 2019.

6.3. Professional liability insurance (D&O insurance)

4basebio AG has taken out liability insurance (D&O insurance) with a deductible for members of the
Supervisory Board, for members of the Management Board and for executive employees of affiliated
companies in Germany and abroad. The deductible is based on the legal requirements and the rec-
ommendations of the German Corporate Governance Code. The insurance covers the costs of legal
defence in the event of damage and any compensation payments to be made, which are covered by
the insurance policy. The sum insured is deliberately kept low in order to ensure that the premium
remains appropriate to the Company’s financial situation. In the event of liability exceeding the sum
insured, each individual member of the Management Board or Supervisory Board is held personally
liable to the full extent.

Information relevant to takeovers

Disclosures pursuant to Sections 289a (1), 315a (1) HGB

Composition of the subscribed capital (no. 1)

The share capital of 4basebio AG in the amount of €52,309,785 as of 31 December 2019, consists
of 52,309,785 no-par value bearer shares with a notional interest in the share capital of €1 per share.
Without exception, all ordinary shares carry voting rights. There are no holders of shares with special
rights or other restrictions on voting rights.

Restrictions affecting voting rights or the transfer of shares (no. 2)

The Management Board is not aware of any restrictions affecting voting rights or the transfer of shares,
in particular restrictions that may result from agreements between shareholders.

4basebio | Annual Report 2019Combined Management Report

Direct or indirect shareholdings in capital exceeding 10% of the voting rights (no. 3)

On 6 April 2020, a regulatory notification was made by Mr W. Zours confirming a total position in the
shares of 4basebio AG of 21.01%.

Holders of shares with special rights (no. 4)

There were and are no shares in 4basebio AG with special rights that confer controlling powers.

Nature of control of voting rights in the case of employee participation (no. 5)

There are no employees with an interest in the share capital of 4basebio AG who cannot directly ex-
ercise their control rights.

Legal provisions and provisions of the articles of association concerning the appointment and
dismissal of members of the management board and amendments to the articles of associa-
tion (no 6)

Appointment of Management Board members

In accordance with § 6 of the articles of association of 4basebio AG, the Management Board consists
of one or more members, while the actual number of additional Management Board members is de-
termined by the Supervisory Board. The Supervisory Board can appoint a Chairman and one or more
Deputy Chairmen of the Management Board..

b) Dismissal of members of the Management Board

The appointment and dismissal of members of the Management Board is governed by sections 84 et
seq. AktG and the supplementary provisions of the Supervisory Board Articles of Association.

Amendment of the Articles of Association of the Company

The amendment of the company’s articles of association is regulated in §§ 133 and 179 AktG in conjunction
with § 9 para. 7 of the articles of association of 4basebio AG. According to the articles of association of
4basebio AG, a resolution of the Annual General Meeting that approves an amendment to the articles
of association requires a simple majority of the share capital represented at the time of the resolution,
unless mandatory statutory provisions require otherwise.

Powers of the management board to issue or buy back shares (no. 7)

The Management Board was authorised by the Annual General Meeting to issue the following new shares
or conversion or option rights

Pursuant to § 4 para. 4 of the articles of association of 4basebio AG, the Management Board is autho-
rised, with the approval of the Supervisory Board, to increase the share capital of the company by a total
of EUR 25,561,278 by issuing new no-par value ordinary registered shares from the Authorised Capital
2018 against cash and/or non-cash contributions on one or more occasions up to and including 4 July
2023. The Management Board may, with the consent of the Supervisory Board, exclude the statutory
subscription right of shareholders

4basebio | Annual Report 2019• insofar as this is necessary to avoid fractional amounts;
• to grant shares against contributions in kind;
• insofar as it is necessary to protect against dilution, to grant the holders of convertible and/or war-

rant bonds, convertible bonds or warrants a subscription right to new shares to the extent to which
the holders would be entitled after exercising their conversion or option rights or after fulfilling a
conversion obligation; or

• in the case of a capital increase against cash contributions, if the proportion of the share capital of

the new shares for which subscription rights are excluded does not exceed 10% of the share capital
registered at the time the authorization* becomes effective and at the time the authorization is
exercised, and the issue price of the new shares is not significantly lower than the market price of
existing listed shares of the same class.

(*) The authorisation for Authorised Capital 2018 became effective on 24 October 2018 upon entry in
the commercial register. The share capital amounted to €51,411,323 at that date.

As of 31 December 2019, the Executive Board had not yet exercised this authorization. Thus, authorised
capital totalling €25,561,278 was available.

Pursuant to § 4 para. 5 of the articles of association of 4basebio AG, the Management Board is autho-
rised, with the approval of the Supervisory Board, to increase the share capital of the company by a
total of €1,000,000 by issuing up to 1,000,000 new registered ordinary shares with no par value from
the Authorised Capital 2019. The conditional capital increase from the Conditional Capital 2019 will
only be implemented to the extent that the holders of stock options issued by the Company up to and
including 6 July 2024 on the basis of the authorisation resolved by the General Meeting of 7 July 2017
(Stock Option Plan 2019) in the version of the General Meeting of 9 July 2019, exercise their subscription
rights and the Company does not grant treasury shares, shares from existing or newly created autho-
rised capital and does not opt for cash settlement. The new ordinary registered shares resulting from
the exercise of these subscription rights are entitled to dividends from the beginning of the financial
year for which, on the day of the issue of the shares, no resolution of the Annual General Meeting on the
appropriation of the balance sheet profit has yet been adopted.

According to § 4 para. 6 of the articles of association of 4basebio AG, the share capital is condition-
ally increased by up to €4,000,000 through the issue of up to 4,000,000 ordinary registered shares
(conditional capital 2018/I).

The conditional capital increase from Conditional Capital 2018/I will only be implemented to the extent
that the holders of stock options issued by the Company up to and including 6 July 2022 on the basis
of the authorization resolved by the Annual General Meeting on 7 July 2017 (Stock Option Plan 2017)
with the amendments in accordance with the resolution of the Annual General Meeting on 5 July 2018,
exercise their subscription rights and the Company does not grant treasury shares or shares from
existing or newly created authorized capital and does not decide to pay a cash settlement. The new
shares carry dividend rights from the beginning of the financial year for which, at the time of the issue
of the shares, no resolution of the Annual General Meeting on the appropriation of the balance sheet
profit has yet been passed.

4basebio | Annual Report 2019Combined Management Report

they are obliged to convert convertible bonds, fulfil their obligation to convert their convertible bonds,
and the company does not grant treasury shares or shares from existing or newly created authorized
capital and does not opt for a cash settlement. The new shares carry dividend rights from the beginning
of the fiscal year for which, at the time the shares are issued, no resolution of the Annual General Meeting
on the appropriation of the balance sheet profit has yet been passed.

According to § 4 para. 9 of the articles of association of 4basebio AG, the share capital is conditionally
increased by up to €1,650,000 through the issue of up to 1,650,000 ordinary registered shares (Con-
ditional Capital V). The conditional capital increase will only be implemented to the extent that the
holders of option or convertible bonds issued on the basis of the authorization resolved by the Annual
General Meeting on 20 June 2016 exercise their option or conversion rights or, to the extent that they
are obliged to convert convertible bonds, fulfil their obligation to convert their convertible bonds and
the company does not grant treasury shares or shares from existing or newly created authorized capital
and does not opt for a cash settlement. The new shares carry dividend rights from the beginning of the
fiscal year for which, at the time the shares are issued, no resolution of the Annual General Meeting on
the appropriation of the balance sheet profit has yet been passed.

Material agreements subject to the condition of a change of control following a takeover bid
(no. 8)

As of the reporting date, there were no material agreements in which the company was involved that
would take effect in the event of a change of control following a takeover bid.

Compensation agreements in the event of a takeover bid (no. 9)

There are no agreements with members of the Management Board or with the staff regarding compen-
sation payments in the event of a takeover bid.

8. Declaration on corporate governance

The 4basebio Group is committed to the recognised standards of good and responsible corporate
management and aligns management and control in accordance with the requirements of the German
Corporate Governance Code (DCGK). The standards applied are set out in the declaration on corporate
governance pursuant to § 289f in conjunction with § 289f of the German Corporate Governance Code.
§ Section 315d HGB. 4basebio AG publishes the Corporate Governance Declaration (§ 289f HGB) and
the Group Corporate Governance Declaration (§ 315d HGB) on its homepage at https://investors-
4basebio.com/corporate-governance. This declaration includes the declaration of compliance with
the German Corporate Governance Code pursuant to § 161 AktG, which can be accessed at https://
investors4basebio.com/corporate-governance.

4basebio | Annual Report 20199. Responsibility statement by the legal representatives

“To the best of our knowledge, and in accordance with the applicable reporting principles, the consoli-
dated financial statements and the separate financial statements give a true and fair view of the assets,
liabilities, financial position and profit or loss of the group and the parent company, and the group man-
agement report and management report provides a fair review of the development and performance of
the business and the position of the group and the company, together with a description of the principal
opportunities and risks associated with the expected development of the group and the company.

Heidelberg, April 28, 2020

Dr. Heikki Lanckriet
CEO

David Roth
CFO

4basebio | Annual Report 2019

5454

4basebio | Annual Report 2019

4basebio | Annual Report 2019Consolidated Financial
Statements

4basebio AG, Heidelberg (formerly
Expedeon AG, Heidelberg)
Financial year 1 January – 31 December 2019

4basebio | Annual Report 2019

55
55

4basebio | Annual Report 2019Consolidated Financial Statements

Consolidated statement of comprehensive income

[in €‘000]

Continuing operations

Revenues

Cost of goods sold

Gross profit

Sales and distribution costs

Administration expenses

Research and non-capitalised development costs

Other operating expenses

Other operating income

Operating result

Finance income

Finance costs

Financial result

Earnings before taxes from continuing operations

Income tax

Result from continuing operations

Discontinued operations

Earnings before taxes from discontinued opeartions

Income tax

Earnings after taxes from discontinued opeartions

Result for the period

Earnings per share

- Undiluted (in EUR/share)

- Diluted (in EUR/share)

Earnings per share from continuing operations

- Undiluted (in EUR/share)

- Diluted (in EUR/share)

Items that may be reclassified to the income statement in subsequent periods

Exchange rate adjustments

Other comprehensive income (after taxes)

Total comprehensive income

01.01. – 31.12.

Note

2019

2018 *)

(1)

(2)

(3)

(4)

(5)

(6)

1,052

(686)

365

1,174

(663)

511

(227)

(3,954)

(3,377)

(220)

(206)

145

221

(3,797)

(3,078)

122

(430)

(308)

498

(269)

229

(4,104)

(2,849)

(7)

317

(3,787)

(2,829)

(21)

(8)

1,556

(421)

1,133

(2,653)

(0,05)

(0,04)

(0,08)

(0,07)

1,152

(1,501)

2,346

182

2,528

(301)

(0,01)

(26)

(327)

*) Comparability of prior year figures limited (for further explanation see section B in the notes to the consolidated financial statements)

4basebio | Annual Report 2019Consolidated statement of financial position

[in €‘000]

Assets

Goodwill

Other intangible assets

Property, plant and equipment

Deferred tax assets

Non-current assets

Inventory

Trade receivables

Other current assets

Cash and cash equivalents

Assets held for sale

Current assets

Total assets

Equity and liabilities

Issued capital

Capital reserves

Accumulated loss

Other reserves

Equity

Financial liabilities

Deferred tax liabilities

Non-current liabilities

Financial liabilities

Trade payables

Other current liabilities

Liabilities associated with assets held for sale

Current liabilities

Total equity and liabilities

Note

31.12.2019

31.12.2018 *)

(10)

(11)

(12)

(13)

(14), (22)

(15)

(16)

(21)

(17)

(18)

(12)

(18)

(19)

(21)

33,906

1,845

1,547

254

15,584

1,999

319

3,646

51,808

442

581

488

990

56,104

58,605

62,251

52,310

21,947

1,966

2,627

1,538

6,238

12,369

64,177

51,411

19,753

(26,324)

(23,603)

163

(1,059)

48,096

46,502

1,532

1,264

336

934

10,088

12,623

62,251

7,476

2,440

9,916

3,171

1,498

3,090

7,759

64,177

*) Comparability of prior year figures limited (for further information see section B in the notes to the consolidated financial statements)

4basebio | Annual Report 2019Consolidated Financial Statements

Consolidated statement of changes in equity 2019

[in €‘000]

31 December 2018 (as reported)

First time application of IFRS 16

1 January 2019 (adjusted)

Net loss for the period

Result recorded directly in equity representing exchange rate adjustments

Overall result

Reclassification of capital increases against contribution in kind

Capital increase in respect of SEDA facility

Capital increase for Innova earn-out not yet registered

Capital increase for TGR earn-out not yet registered

Interest on mandatory convertible bond charged to income

Share option expense charged to income

31 December 2019

Issued capital

Capital reserves

Accumulated loss

Accumulated exchange

Total other comprehensive

Total equity

Other comprehensive income

difference

Exchange effect on

long term assets

51,411

898

52,309

19,753

(898)

(33)

757

2,092

206

21,946

(23,603)

(2,653)

(68)

(2,721)

(26,325)

163

(1,121)

1,213

income

(1,057)

1,220

46,501

(2,653)

1,152

(1,501)

(33)

757

2,092

206

48,096

For further information on the composition of equity see note 17 in the notes to the consolidated financial statements.

4basebio | Annual Report 2019Consolidated statement of changes in equity 2019

[in €‘000]

31 December 2018 (as reported)

First time application of IFRS 16

1 January 2019 (adjusted)

Net loss for the period

Result recorded directly in equity representing exchange rate adjustments

Overall result

Reclassification of capital increases against contribution in kind

Capital increase in respect of SEDA facility

Capital increase for Innova earn-out not yet registered

Capital increase for TGR earn-out not yet registered

Interest on mandatory convertible bond charged to income

Share option expense charged to income

31 December 2019

Issued capital

Capital reserves

Accumulated loss

Accumulated exchange
difference

Exchange effect on
long term assets

Total other comprehensive
income

Total equity

Other comprehensive income

51,411

898

52,309

19,753

(898)

(33)

757

2,092

206

21,946

(23,603)

(2,653)

(68)

(2,721)

(26,325)

(1,121)

1,213

(1,057)

1,220

163

46,501

(2,653)

1,152

(1,501)

(33)

757

2,092

206

48,096

For further information on the composition of equity see note 17 in the notes to the consolidated financial statements.

4basebio | Annual Report 2019Consolidated Financial Statements

Consolidated statement of changes in equity 2018

[in €‘000]

31 December 2017 (as reported)

First time application of IFRS 15

1 January 2018 (adjusted)

Net loss for the period

Result recorded directly in equity representing exchange rate adjustments

Overall result

Reclassification of capital increases against cash

Capital increase for cash

Other capital increase costs

Capital increase in respect of SEDA registered

Capital increase for Innova earn-out not yet registered

Capital increase for Innova earn-out registered

Conversion of bond to mandatory convertible

Equity component of bond with option

Share option expense charged to income

31 December 2018

Issued capital

Capital reserves

Accumulated loss

Accumulated exchange

Total other comprehensive

Total equity

Other comprehensive income

difference

Exchange effect on

long term assets

46,934

443

2,995

437

602

51,411

16,644

(443)

1,198

(480)

163

259

213

1,576

358

265

19,753

(23,460)

178

(23,282)

(301)

(20)

(321)

(29)

(1,144)

income

(1,051)

(6)

39,066

178

39,243

(301)

(26)

(327)

4,193

(480)

600

861

213

1,576

358

265

(23,603)

(1,121)

(1,057)

46,502

For further information on the composition of equity see note 17 in the notes to the consolidated financial statements.

4basebio | Annual Report 2019Consolidated statement of changes in equity 2018

Result recorded directly in equity representing exchange rate adjustments

[in €‘000]

31 December 2017 (as reported)

First time application of IFRS 15

1 January 2018 (adjusted)

Net loss for the period

Overall result

Reclassification of capital increases against cash

Capital increase for cash

Other capital increase costs

Capital increase in respect of SEDA registered

Capital increase for Innova earn-out not yet registered

Capital increase for Innova earn-out registered

Conversion of bond to mandatory convertible

Equity component of bond with option

Share option expense charged to income

31 December 2018

46,934

443

2,995

437

602

51,411

16,644

(443)

1,198

(480)

163

259

213

1,576

358

265

19,753

Issued capital

Capital reserves

Accumulated loss

Accumulated exchange
difference

Exchange effect on
long term assets

Total other comprehensive
income

Other comprehensive income

(23,460)

178

(23,282)

(301)

(20)

(321)

(29)

(1,144)

(1,051)

(6)

Total equity

39,066

178

39,243

(301)

(26)

(327)

4,193

(480)

600

861

213

1,576

358

265

For further information on the composition of equity see note 17 in the notes to the consolidated financial statements.

(23,603)

(1,121)

(1,057)

46,502

4basebio | Annual Report 2019Consolidated Financial Statements

Consolidated statement of cash flows

[in €‘000]

Net loss for the period

Income taxes

Financial result

Depreciation of property, plant and equipment

Amortisation and impairment of intangible assets

Movement in deferred tax

01.01. – 31.12.

2019

2018 *)

436

613

2,282

(301)

(202)

(501)

311

2,034

(230)

Gain (-) / loss (+) on non-cash revaluation of earn-outs

1,372

(1,042)

Share option charges

Gain on derivative

Other non-cash items

Change in operating assets and liabilities:

Trade receivables and other current assets

Trade payables

Other current liabilities

Inventories

Cash flows from operating activities (before interest and tax)

Interest paid

Tax paid

Cash flows from operating activities

Business acquisitions, net of cash acquired

Investments in property, plant and equipment and intangible assets

Investments in capitalised development

Cash flows from investing activities

Cash in(out)flow due to changes in current financial liabilities

Capital increase by way of cash contribution (less costs of issuing equity)

Payments for the redemption portion of leasing liabilities

Cash flows from financing activities

Net change in cash and cash equivalents

Exchange differences

Cash and cash equivalents at the beginning of the period

Cash and cash equivalents at the end of the period **)

265

424

(47)

(1,170)

697

(185)

(249)

(158)

107

(429)

163

(268)

2,031

(514)

(419)

1,098

(5,662)

(480)

(446)

(613)

(432)

(925)

(6,707)

(2,458)

(33)

(384)

(2,875)

(2,702)

161

6,238

3,697

6,465

4,722

–

11,187

4,323

(39)

1,954

6,238

*) Comparability of prior year figures is limited (for further information see section B in the notes to the consolidated financial

statements)

**) As of 31 December 2019, cash and cash equivalents amounting to €2,707 thousand are reported under the balance sheet item

“Assets held for sale”

For further information see section H and note 21 in the notes to the consolidated financial statements

4basebio | Annual Report 2019

A. Basis of preparation

Place and legal form of the entity

Business activities and operating segments

The 4basebio Group is a life sciences tools and reagents company that develops technologies protected
by intellectual property rights that are used to create innovative products and services with high added
value for biomarker research, drug discovery and clinical diagnostics. The company’s core technologies
are in the fields of immunology, proteomics and genomics, thus covering the large areas of the market
for molecular biology. The core business model of the 4basebio Group is the research, development
and marketing of innovative kits which are used in research. Management, planning and control of the
4basebio Group are carried out at the level of the entire group. Consequently, the 4basebio Group
consists of only one business segment.

Accounting standards and general principles of presentation

The consolidated financial statements of 4basebio AG for the 2019 financial year ending on 31 December
2019 have been prepared in accordance with the International Financial Reporting Standards (IFRS)
formulated by the International Accounting Standards Board (IASB), as applicable in the European
Union (EU), applying § 315e HGB. All International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS) and interpretations of the IFRS Interpretations Committee (IFRS IC) for
which application is mandatory for the 2019 financial year have been taken into account. In addition,
all statutory disclosure and explanation requirements of the German Commercial Code (HGB) that go
beyond the regulations of the IASB were met.

The financial year of the 4basebio Group corresponds to the calendar year. The consolidated financial
statements of 4basebio AG were prepared in principle using the acquisition cost principle. This does
not apply to derivative financial instruments, financial assets in the form of debt and equity instruments
and contingent consideration measured at fair value.

The consolidated income statement is prepared using the cost of sales method and expenses are broken
down accordingly by functional operating areas. Where items in the consolidated statement of financial
position and/or the consolidated income statement (or consolidated statement of comprehensive
income) have been combined to improve the clarity of presentation or for reasons of materiality, they
are disclosed separately in the notes to the consolidated financial statements. An explanation of the
accounting policies applied in respect of individual items of the consolidated statement of financial

4basebio | Annual Report 2019Consolidated Financial Statements

position and consolidated income statement (or consolidated statement of comprehensive income)
is provided in section 0.

The reporting currency and functional currency of the consolidated financial statements of 4basebio AG
is the euro (EUR, €). Unless otherwise indicated, all amounts are stated in thousands of euros (€’000).
For calculation-related reasons, rounding differences of +/- one unit (€’000, % etc.) may occur in the
information presented in these financial statements.

The consolidated financial statements of 4basebio AG for the financial year from 1 January to 31 Decem-
ber 2019 were released by the Management Board on 28 April 2020 and forwarded to the Supervisory
Board for approval.

B. Changes in accounting and valuation methods

Erstmals im Geschäftsjahr 2019 angewandte neue und geänderte Standards und
Interpretationen

Die im Konzernabschluss der 4basebio AG für das Geschäftsjahr 2019 angewandten Rechnungsle-
gungsmethoden entsprechen grundsätzlich denen des Vorjahrs (Geschäftsjahr 2018). Davon abwe-
ichend hat die 4basebio Group bei der Aufstellung des Konzernabschlusses zum 31. Dezember 2019
die folgenden, von der Europäischen Union (EU) in europäisches Recht übernommenen, neuen bzw.
geänderten Standards und Interpretationen erstmals angewendet:

IFRS 16

Changes to IFRS 9

Changes to IAS 19

Changes to IAS 28

Annual improvements

IFRIC 23

Title

Leases

Prepayment regulations with
negative compensation

Plan amendment, reduction
or settlement

Long-term investments in
associated companies and joint
ventures

Annual improvements to the IFRS
cycle 2015-2017: amendments to
IFRS 3, IFRS 11, IAS 12 and IAS 23

Uncertainty regarding the
income tax treatment

First application
4basebio Group

Adoption by EU

Effects on the
4basebio Group

1 January 2019

31 October 2017

Description
according to tabular
overview

1 January 2019

22 March 2018

No impact

1 January 2019

13 March 2019

No impact

1 January 2019

8 February 2019

No impact

1 January 2019

14 March 2019

No impact

1 January 2019

23 October 2018

No material impact

The first-time application of “IFRS 16 Leases” in the 2019 financial year resulted overall in only minor
effects on the asset, financial and earnings situation of the 4basebio Group. IFRS 16 was implemented
by the 4basebio Group on 1 January 2019 using the modified retrospective method. The comparative
information has not been restated in accordance with the transitional provisions. Nevertheless, com-
parability with the previous year’s figures is only slightly affected by this.

The 4basebio Group only acts as lessee within the framework of leasing agreements. IFRS 16 replaces
the existing guidance on leases, including ‘IAS 17 Leases’, ‘IFRIC 4 Determining whether an Arrangement
contains a Lease’, ‘SIC-15 Operating Leases - Incentives’ and ‘SIC-27 Assessing the Substance of Trans-
actions in the Legal Form of Leases’. IFRS 16 abolishes the previous classification of leases as operating

4basebio | Annual Report 2019and finance leases for lessees. Instead, IFRS 16 introduces a uniform accounting model according to
which lessees must capitalise a right of use for all leases and recognise a corresponding lease liability
for all outstanding lease payments. The effects on the asset, financial and earnings situation of the
consolidated financial statements of the 4basebio Group are attributable in particular to those leases
that previously had to be classified as operating leases within the meaning of IAS 17 and which are to be
recognised in statement of financial position for the first time from the 2019 financial year.

The acquisition cost of a right of use asset is calculated as the present value of all future lease payments
adjusted for any lease payments made at or before the inception of the lease plus the initial direct
costs of fulfilling the contract and the estimated costs of dismantling or restoring the leased asset.
When measuring acquisition costs the 4basebio Group makes use of the option to regard payments
for non-leasing components as leasing payments. Subsequent measurement of rights of use report-
ed under property, plant and equipment is at cost less accumulated depreciation and accumulated
impairment ¬losses. Amortisation and impairment losses on right of use assets are reported under
functional costs. As a rule, the rights of use are amortised on a scheduled basis over the term of the
lease. Exceptionally, rights of use are amortised over the useful life of the underlying leased asset in
those specific circumstances in which the lease payments to be taken into account also include the
transfer of ownership of the underlying asset at the end of the lease term or the exercise of a purchase
option is highly probable.

The lease liabilities reported under financial liabilities are initially recognised at the present value of the
outstanding lease payments. In subsequent measurement the carrying amount of the lease liability
is increased by the annual interest expense and reduced by the lease payments made. The resulting
interest expenses are reported within the financial result (“financial expenses”). In contrast, under the
old legal situation under IAS 17, lease expenses from operating leases were recognised in full under
functional costs.

As part of the transition to IFRS 16, assets from the capitalisation of rights of use and liabilities from the
recognition of lease liabilities were recognised as of 1 January 2019 in the amount of EUR 648 thousand
respectively. There were no finance leases in accordance with IAS 17 at the transition date. The transition
effects resulting from the first-time application of IFRS 16 are therefore not material with regard to the
asset, financial and earnings situation of the 4basebio Group.

The 4basebio Group has made use of the following practical simplifications for the first-time adoption
of IFRS 16:

• For leases previously classified as operating leases in accordance with IAS 17, the lease liability was

measured at the present value of the lease payments outstanding, discounted at the marginal interest
rate as of 1 January 2019. The weighted average marginal interest rate was 8.1%. The corresponding
right of use was recognised in the amount of the lease liability for reasons of simplification.

• Leases that end by 31 December 2019 are treated as short-term leases, irrespective of the original

term of the lease, i.e. no rights of use were recognised but instead the agreed lease instalments were
recognised directly in expenses (taking into account accruals and deferrals where applicable).

• No rights of use or lease liabilities for leases relating to leased assets of minor value were recognised

in the balance sheet, but the agreed lease instalments (taking into account accruals and deferrals
where applicable) were recognised directly in expenses.

• The initial direct costs were not taken into account when measuring the rights of use at the time of

first-time adoption of IFRS 16.

4basebio | Annual Report 2019Consolidated Financial Statements

• In determining the term of contracts with extension or termination options, the current state of

knowledge at the time of conversion was taken into account.

Based on the lease obligations as of 31 December 2018, the following reconciliation to the opening
balance sheet value of the lease obligations as of 1 January 2019 resulted:

Reconciliation of leasing liabilities [in €’000]

Future minimum lease payments from operating leases in accordance with IAS 17 as of 31 December 2018

Practical relief for short-term leases and leases of low-value assets

Additional leasing obligations as of 1 January 2019 (gross amount without discounting)

Discounting

Additional lease obligations at 1 January 2019 (discounted net amount)

Lease liabilities from finance leases as of 31 December 2018

Leasing liabilities in accordance with IFRS 16 as of 1 January 2019

733

(32)

701

(53)

648

Effects of the first-time adoption of IFRS 16 on the
consolidated statement of financial position as of
1 January 2019 [in €’000]

31.12.2018
(as previously
reported)

Adjustment effects
(IFRS 16)

01.01.2019
(adjusted)

Non-current assets

Property, plant and equipment

Deferred tax assets

Non-current liabilities

Financial liabilities

Deferred tax liabilities

Current liabilities

Financial liabilities

1,999

7,476

3,171

648

153

428

153

220

2,647

153

7,904

153

3,391

Effects of the first-time adoption of IFRS 16 on the
consolidated statement of financial position as of
31 December 2019 [in €’000]

31.12.2019
(IFRS 16)

31.12.2019
(IAS 17)

Adjustment effects
(IFRS 16)

Non-current assets

Property, plant and equipment

Deferred tax assets

Current assets

Assets held for sale

Non-current liabilities

Deferred tax liabilities

Current liabilities

Financial liabilities

Liabilities associated with assets held for sale

1,547

1,289

56,104

56,016

(1,264)

(10,088)

153

(1,025)

(9,999)

258

153

(239)

(89)

4basebio | Annual Report 2019

Effects of the first-time application of IFRS 16 on the
consolidated income statement for the financial year 2019
[in €’000]

General and administrative expenses

Financial expenses

Result for the period

2019
(IFRS 16)

(3,954)

(430)

(7)

2019
(IAS 17)

Adjustment effects
(IFRS 16)

(3,974)

(403)

(27)

Apart from this there were no significant changes for the 4basebio Group in the 2019 financial year from
standards or interpretations to be applied for the first time..

New and amended standards and interpretations applied for the first time in the 2018
financial year

The two standards “IFRS 9 Financial instruments” and “IFRS 15 Revenue from customer contracts” were
applied for the first time in the 2018 financial year. The first-time application of IFRS 9 had no significant
impact on the asset, financial and earnings position of the 4basebio Group. IFRS 15 replaces “IAS 11
Construction Contracts”, “IAS 18 Revenue” and the related interpretations and applies to all revenue
from contracts with customers, with a few exceptions. The standard introduces a five-level model for
accounting for revenue from contracts with customers. Revenue is recognised in the amount of the
consideration that an entity expects to receive in exchange for the transfer of committed goods or
services to a customer. IFRS 15 requires entities to make judgements and consider all relevant facts and
circumstances when applying each level of the model to contracts with their customers. The standard
also regulates the accounting for additional costs of initiating a contract and costs directly related to
the performance of a contract. Finally, the standard contains extensive disclosure requirements. The
4basebio Group has chosen the modified retrospective approach for the first-time application of
IFRS 15 as of 1 January 2018 (date of first-time application). Thereafter, the standard may be applied
either to all contracts existing at the date of initial application or only to contracts that have not yet
been completed at that date. The 4basebio Group has decided to apply the standard to all contracts
as of 1 January 2018. The cumulative effect of the first-time adoption of IFRS 15 was recognised as an
adjustment to the opening balance sheet value of retained earnings at the time of first-time adoption.

Effects of the first-time adoption of IFRS 15 on the consolidated statement of financial position
as of 1 January 2018 [in €‘000]

Current assets

Contract assets (reported under the balance sheet item "Other assets")

Current liabilities

Contract liabilities (reported under the balance sheet item "Other liabilities")

Equity adjustment

Retained earnings

409

(231)

178

The main reason for the change is the treatment of licence revenues in accordance with IFRS 15. The
4basebio Group classified various licence agreements as “right-to-use” agreements, so that in these
cases the revenues in accordance with IFRS 15 must be recognised upon conclusion of the agreement
and therefore earlier than previously in accordance with IAS 18.

4basebio | Annual Report 2019
Consolidated Financial Statements

Effects of the first-time adoption of IFRS 15 on the conso-
lidated balance sheet as of 31 December 2018 [in €‘000]

31.12.2018
(IFRS 15)

31.12.2018
(IAS 18)

Adjustment effects
(IFRS 15)

Assets

Non-current assets

Trade accounts receivable and other receivables

Contract assets

Other current assets

Total assets

Equity and liabilities

Equity

Contract liabilities

Other current and non-current liabilities

Total equity and liabilities

51,808

2,627

579

9,163

64,177

46,502

17,626

64,177

51,808

2,676

9,163

63,647

46,021

17,626

63,647

(49)

579

530

481

530

Effects of the first-time application of IFRS 15 on the
consolidated income statement for the financial year 2018
(without consideration of discontinued operations)
[in €‘000]

2018 (IFRS 15)

2018 (IAS 18)

Adjustment effects
(IFRS 15)

Sales revenues

Cost of sales

Total operating expenses

operating result

Financial expenses

Profit before tax

Income taxes

Result for the period

13,128

(3,591)

(13,713)

(585)

(82)

(503)

202

(301)

13,055

(3,495)

(13,617)

(562)

(82)

(480)

202

(278)

(96)

(23)

The application of IFRS 15 had no significant impact on the cash flows from operating activities, investing
activities and financing activities of the 4basebio Group.

New and amended standards and interpretations to be applied in future

The IASB and IFRS IC have issued the following announcements, the application of which was not
yet mandatory in the 2019 financial year. The 4basebio Group does not intend to apply these new or
amended standards and interpretations prematurely.

4basebio | Annual Report 2019Title

First application
4basebio Group

Adoption by EU

Effects on the 4basebio
Group

IFRS 17

Insurance contracts

1 January 2021

Pending

Not applicable

Changes to IFRS 9, IAS 39 and
IFRS 7

Interest Rate Benchmark
Reform

Changes to IFRS 3

Definition of a business
operation

1 January 2020

15 January 2020

No material impact

1 January 2020

21 April 2020

No material impact

Changes to IAS 1 and IAS 8

Definition of materiality

1 January 2020

29 November 2019

No impact

Changes to IAS 1

Framework for financial
reporting

Classification of liabilities as
current or non-current

Amendments to the references
to the Framework concept in
IFRS standards

1 January 2022

Pending

Analysis pending

1 January 2020

29 November 2019

No impact

C. Basis of consolidation

Consolidated companies

The present consolidated financial statements include 4basebio AG, formerly known as Expedeon
AG, and its domestic and foreign subsidiaries over which 4basebio AG can exercise control (“4basebio
Group” or “Group”). Control exists if 4basebio AG has a risk burden from or is entitled to fluctuating
returns from its involvement in an associated company and it can also use its power of disposal over
the associated company to influence these returns. In general, ownership of a majority of voting rights
(direct or indirect) is presumed to result in control. The financial statements of subsidiaries to be in-
cluded in the consolidated financial statements are included in the consolidated financial statements
from the date on which the possibility of exercising control begins until the date on which the possibility
of exercising control ends.

In addition to 4basebio AG, two domestic (prior year: two) and eight foreign (prior year: seven) subsid-
iaries were included in the consolidated financial statements as of 31 December 2019 on the basis of
full consolidation..

Company name

Principal activities

Place of incorporation

Equity held (in %)

31.12.2019

31.12.2018

4basebio Bioscience GmbH & Co. KG

Applications/Reagents

Heidelberg, Germany

4basebio Verwaltungs GmbH

General Partner Company

Heidelberg, Germany

4basebio S.L.U.

4basebio Inc.

4basebio Ltd

Applications/Reagents

Madrid, Spain

Applications/Reagents

San Diego, USA

Dormant

Cambridge, UK

Expedeon Holdings Ltd

Holding company

Cambridge, UK

Expedeon Ltd (*)

Applications/Reagents

Cambridge, UK

Expedeon Asia Pte. Ltd (*)

Applications/Reagents

Singapore, Singapore

Innova Biosciences Ltd (*)

Applications/Reagents

Cambridge, UK

TGR BioSciences Pty Ltd (*)

Applications/Reagents

Adelaide, Australia

(*) indirect shareholding (shareholding held by direct subsidiary Expedeon Holdings Ltd, Cambridge/UK)

100

4basebio | Annual Report 2019

Consolidated Financial Statements

Changes in the scope of consolidation

Domestic

Abroad

Total

Number of companies as of 1 January 2018

Additions through acquisition

Additions due to formation/ spin-off

Disposals through sale

Disposals through merger

Number of companies as of 31 December 2018

Number of companies as of 1 January 2019

Additions through acquisition

Additions due to formation/ spin-off

Disposals through sale

Disposals through merger

Number of companies as of 31 December 2019

Acquisitions in the 2019 financial year

There were no company acquisitions in the 2019 financial year.

Acquisitions in the 2018 financial year

Acquisition of TGR BioSciences Pty Ltd (“TGR BioSciences”)

On 2 May 2018, 77% of the shares in TGR BioSciences Pty Ltd, an unlisted company based in Adelaide,
Australia, were acquired. The remaining 23% were acquired on 14 May 2018. The company acquisition
was completed by Expedeon Holdings Ltd, Cambridge/UK. TGR BioSciences has been fully consolidated
since 1 May 2018.

TGR BioSciences, like the 4basebio Group, is a life sciences business and is active in the field of immu-
nology. The acquisition of TGR BioSciences by the 4basebio Group was driven by the technologies and
products used in TGR BioSciences, which are complementary to the products previously available and
marketed in the 4basebio Group. TGR BioSciences also has a strong customer base.

The fair value of the identifiable assets and liabilities of TGR BioSciences at the acquisition¬date are
as follows:

4basebio | Annual Report 2019
Fair value at date of acquisition [in €‘000]

Patents, licences and other intangibles

Customer lists

Plant, equipment and leasehold improvements

Inventories

Trade receivables

Other assets

Cash and cash equivalents

Deferred tax assets

Total assets

Trade payables

Other liabilities

Deferred tax liabilities

Total liabilities

Net assets

Goodwill (see Note 10)

Consideration transferred

3,032

2,497

109

549

1,122

442

8,322

294

1,385

1,742

6,580

3,309

9,889

The fair value of trade receivables (€549 thousand) differs only slightly from the relevant gross amount.
Deferred tax liabilities mainly comprise the effects of higher tax depreciation of tangible and intangible
assets. The goodwill of €3,309 thousand comprises the value of expected synergies from the compa-
ny acquisition and growth potential from complementary products and customer bases. This is also
expected to result in growth potential for the existing products. The goodwill was allocated in full to the
4basebio Group as the only cash-generating unit.

Since the acquisition date TGR BioSciences has contributed €2,800,000 to the sales revenues of the
2018 financial year and €930,000 to the earnings before taxes of the 4basebio Group for the 2018 finan-
cial year (which is treated as revenue from discontinued operations). If the business combination had
taken place at the beginning of the 2018 fiscal year, the sales revenues from discontinued operations of
the 4basebio Group for that year would have been greater by € 1,060 thousand and the earnings before
taxes from discontinued operations would have been higher by €335 thousand.

The consideration transferred is composed as follows:

[in €‘000]

Consideration in cash and cash equivalents

Loan notes

Convertible bond and contingent cash consideration liability (earn-out liability)

Consideration transferred

6,784

1,222

1,882

9,889

4basebio | Annual Report 2019

Consolidated Financial Statements

The actual cash outflow due to the company acquisition is as follows:

[in €‘000]

Transaction costs of business acquisition (included in cash flows from operating activities)

Consideration in cash and cash equivalents

Cash acquired with the subsidiary (included in cash flows from investing activities)

Transaction costs attributable to the issue of shares (included in cash flows from financing activities)

Actual cash outflow due to the acquisition

(71)

(6,784)

1,122

(5,733)

In addition to cash consideration of €6,784 thousand for the business acquisition, a promissory note in
the amount of AU$2.0 million with 3.5% interest was issued, due on the first anniversary of the acquisi-
tion. The fair value at the acquisition date was determined to be €1,222 thousand. In addition, 1,612,642
restricted shares were issued¬ through mandatory convertible notes and a further cash payment of
up to AU$721,541, 50% of which is due on the first anniversary and 50% on the second anniversary of
the purchase, subject to certain sales targets being met. The fair value of the shares was calculated
by reference to the quoted share price on the day of acquisition, which was €1.43. The fair value of the
convertible bond represents its present value, applying a probability¬factor for the potential earn-out
consideration. The fair value of the consideration was therefore €1,883 thousand. AU$783,900 of the
cash consideration represented cash balances of TGR BioSciences at acquisition due to former share-
holders based on a working capital calculation. The transaction¬costs of €71 thousand were recognised
as expenses (“General and administrative expenses”).

At the time of the transaction, the fair value of the contingent consideration was estimated at €1,883
thousand. The underlying assumptions were updated on 31 December 2018 and 31 December 2019.
The fair value of this tranche was measured at a price of €0.895 per share on 31 December 2018 and
at a price of €1.705 per share on 31 December 2019. This results in a liability of €1,259 thousand as of
31 December 2018 and €2,545 thousand as of 31 December 2019.

The following table shows the development of the fair value of the earn-out liability:

[in €‘000]

2 May 2018

Reduction of the fair value of the earn-out liability

31 December 2018

Increase of the fair value of the earn-out liability

31 December 2019

1,883

(624)

1,259

1,286

2,545

Principles of consolidation and business combinations

The financial statements of 4basebio AG and its subsidiaries included in the consolidated financial
statements are prepared in accordance with uniformly applicable recognition and measurement princi-
ples as of the reporting date of the consolidated financial statements (31 December 2019). Recognition,
measurement, consolidation and classification principles were consistently applied by all companies
included in the consolidated financial statements. All intercompany assets, liabilities, income and ex-
penses as well as cash flows from business transactions between the companies included in the con-
solidated financial statements were eliminated in the course of consolidation. Income tax effects were
taken into account and deferred taxes were recognised for consolidation processes affecting income.

4basebio | Annual Report 2019Business combinations are accounted for using the acquisition method. Accordingly, the cost of the
investment is allocated to the identifiable assets acquired and the identifiable liabilities and contingent
liabilities assumed based on their fair values at the acquisition date. Costs incurred within the scope
of a company acquisition are recorded as expenses in the consolidated income statement (“general
administrative expenses”). Deferred taxes are recognised for hidden reserves and liabilities disclosed
in the course of initial consolidation, unless such disclosure is also recognised for tax purposes. Re-
vealed hidden reserves and liabilities are carried forward in subsequent periods in accordance with the
treatment of the corresponding assets and liabilities.

If the 4basebio Group acquires a company, the appropriate classification and designation of the acquired
financial assets and liabilities is assessed in accordance with the contractual conditions, economic
circumstances and conditions prevailing at the time of acquisition. This also includes a separation of
derivatives embedded in host contracts. An agreed contingent consideration is recognised at fair value
at the time of acquisition. Contingent consideration classified as equity is not remeasured and sub-
sequent settlement is recognised in equity. Contingent consideration classified as an asset or liability
in the form of a financial instrument falling within the scope of IFRS 9 is measured at fair value through
profit or loss in accordance with IFRS 9. All other contingent consideration that is not within the scope
of IFRS 9 is measured at fair value through profit or loss at each balance sheet date.

Any excess of the cost of acquisition of the investment over the proportional net fair value of the iden-
tifiable assets, liabilities and contingent liabilities is recognised as goodwill. After initial recognition,
goodwill is measured at cost less accumulated impairment losses. For the purpose of the impairment
test, goodwill acquired in the context of business combinations was allocated to the entire 4basebio
Group as a single cash-generating unit from the time of acquisition.

Currency translation

The items recorded in the financial statements of the individual subsidiaries of the 4basebio Group are
measured on the basis of the respective functional currency. The reporting currency of the consolidated
financial statements of the 4basebio Group is the euro (EUR, €).

Transactions in foreign currencies are translated into the respective functional currency at the cur-
rent exchange rate on the day of the transaction. Monetary assets and liabilities in foreign currencies
are translated at the exchange rate on the balance sheet date. Exchange differences arising from the
settlement or translation of monetary items are recognised in the consolidated income statement.
This does not apply to monetary items designated as part of a hedge of the Group’s net investment
in a foreign operation. These are recognised in other comprehensive income until the net investment
is sold and reported in equity under the item “Exchange rate differences on non-current assets”. The
cumulative amount is not reclassified to the income statement until disposal. Taxes resulting from
translation differences on these monetary items are also recognised in other comprehensive income.
Non-monetary assets and liabilities measured at historical cost in a foreign currency are translated at
the exchange rate on the date of the transaction.

The financial statements of the consolidated companies whose functional currency differs from the
presentation currency of the consolidated financial statements of 4basebio AG (EUR) are translated
as follows: assets and liabilities are translated at the exchange rate applicable on the balance sheet
date (middle rate); equity at historic rates; and expenses and income at the average exchange rate for
the year. Translation differences arising from exchange rate movements between financial years are
generally recognised directly in equity under the item “Currency translation reserve”. When a foreign
operation is disposed of, the currency translation differences accumulated in the currency translation
reserve in equity are reclassified to the consolidated income statement and recognised in profit or loss.

4basebio | Annual Report 2019Consolidated Financial Statements

The principal curerncy rates of the Group have developed as follows in relation to the equivalent of
one euro (EUR):

[in EUR]

US Dollar

GBP

Singapore Dollar

Australia Dollar

Closing exchange rate

Average exchange rate

31.12.2019

31.12.2018

1.1234

0.8508

1.5111

1.5995

1.1450

0.8945

1.5591

1.6220

2019

1.1193

0.8773

1.5272

1.6106

2018

1.1790

0.8846

1.5924

1.5833

D. Significant accounting and valuation methods applied

Current and non-current classifications

The presentation in the consolidated statement of financial position distinguishes between current and
non-current assets and liabilities. Assets and liabilities are classified as current if they are due within
one year or within a longer normal business cycle. Deferred tax assets and deferred tax liabilities are
reported as non-current items in the consolidated statement of financial position.

Assets held for sale and discontinued operations

Assets are classified as held for sale if their sale has been initiated or the sale is highly probable and
the asset or disposal group is available for immediate sale in its present condition. Non-current assets
held for sale are measured at the lower of carrying amount or fair value less costs to sell. These assets
are no longer depreciated or amortised from the date of classification as held for sale. The liabilities
associated with assets held for sale are also shown separately as a current item in the consolidated
statement of financial position.

Discontinued operations are significant parts of the 4basebio Group that can be clearly distinguished
from the rest of the Group, both operationally and for accounting purposes, and which have been sold
or classified as available for sale. In the consolidated income statement the results from discontinued
operations for the reporting year and the previous year are shown separately. Cash inflows and outflows
from discontinued operations are not shown separately in the consolidated cash flow statement, but
in the disclosures in the notes (see Note 21). The explanations in the notes to the individual items of the
consolidated statement of financial position and the consolidated income statement generally only
refer to the continuing operations of the 4basebio Group.

Revenue from contracts with customers

Revenue from contracts with customers, in particular revenue from the sale of gels and kits and other
goods, is recognised at the point that control of the goods or services is transferred to the customer.
This is generally the point of delivery for gels and kits and other goods. Recognition amount is the amount
of the consideration that the 4basebio Group will likely receive in exchange for these goods or services.
The usual payment period is 30 to 90 days from delivery. The 4basebio Group has concluded that it
acts as a principal in its sales transactions, as the 4basebio Group usually has control over the goods
or services before they are transferred to the customer.

4basebio | Annual Report 2019In addition to the sale of products, the 4basebio Group also provides services that are sold to customers
either individually or together with gels and kits and other goods. The services can be provided not only by
the 4basebio Group but also by other providers and do not lead to any significant adjustment or change
of the underlying goods. If the 4basebio Group fulfils its contractual obligations by transferring goods
or services to a customer before the customer pays the consideration or before the payment is due, a
contractual asset is capitalised for the conditional claim to consideration. In contrast, the receivables
reported as trade receivables are an unconditional claim of the 4basebio Group for consideration (i.e.
the due date occurs automatically through the passage of time). If, on the other hand, a customer pays
a consideration before the 4basebio Group transfers goods or services to him, a contractual liability is
carried as a liability when the payment is made or due (whichever occurs earlier). Contractual liabilities
are recognised as revenue as soon as the 4basebio Group fulfils its contractual obligations.

The 4basebio Group checks contracts with customers to see whether the contracts contain other
commitments which represent separate performance obligations to which a part of the transaction
price must be allocated (e.g. warranties). In determining the transaction price for the sale of gels and
kits and other goods, the 4basebio Group takes into account the effects of variable consideration, sig-
nificant financing components and non-cash consideration and, if applicable, consideration payable
to a customer.

If a contractual consideration contains a variable component, the 4basebio Group determines the
amount of the consideration that it is entitled to in exchange for the transfer of the goods to the cus-
tomer. This applies in particular to some contracts for the sale of proteomics, which grant the customer
a right of return or quantity discounts that result in a variable consideration. The variable consideration
is estimated at the inception of the contract and included in the transaction price only when it is highly
probable that the cumulative revenue recognised will not be significantly impaired once the uncertainty
surrounding the variable consideration no longer exists.

A very small number of contracts with customers grant them the right to return the products within
a set period of time. The 4basebio Group uses the expected value method to estimate the products
that are not returned, as this method allows the variable consideration to which the 4basebio Group is
entitled to be estimated most reliably. In addition, the provisions of IFRS 15 are applied with regard to
the limitation of the estimate of variable consideration in order to determine the amount of variable
consideration that may be included in the transaction price. The 4basebio Group does not record any
revenues for expected product returns, but instead recognises a refund liability. In addition, an asset
is recognised for the right to receive products back from a customer under rights of return (with a cor-
responding adjustment to cost of sales).

The 4basebio Group generally receives no and only in rare cases short-term advance payments from
customers. Applying the simplification provisions provided for in IFRS 15, the 4basebio Group waives
the right to adjust the amount of the promised consideration by the effects of a significant financing
component if, at the start of the contract, it is expected that the time span between the transfer of the
promised good or service to the customer and the payment of this good or service by the customer will
not exceed one year. Normally, the 4basebio Group grants the legally required warranties for the elimi-
nation of defects that already existed at the time of sale. These so-called “assurance-type warranties”
are recognised as provisions in accordance with IAS 37.

Government grants

Government grants are recognised when there is reasonable assurance that the grants will be received
and the Company will comply with the conditions attached to them. The 4basebio Group receives
state subsidies and grants from various public support programmes. Depending on the structure of
the respective subsidy programme, the 4basebio Group decides whether these grants and subsidies

4basebio | Annual Report 2019Consolidated Financial Statements

are reported as revenues or offset against the resulting costs. Government grants and subsidies for
research and development costs that can be directly allocated to a programme are offset against the
corresponding expenses.

Income taxes

Income taxes comprise both current taxes on income and earnings and deferred taxes.

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid
to the taxation authorities. The calculation of the amount is based on the tax rates and tax laws that
apply or will shortly apply on the reporting date in the countries in which the 4basebio Group operates
and generates taxable income. Actual taxes relating to items recognised directly in equity are not rec-
ognised in the consolidated income statement. Management regularly assesses individual tax matters
to determine whether there is room for interpretation in light of applicable tax regulations. Provisions
for taxes are set up in cases where it is probable that amounts recognised in the tax returns cannot
be realised (uncertain tax positions). The amount is determined by the best possible estimate of the
expected tax payment (expected value or most probable value of the tax uncertainty).

Deferred taxes are recognised using the liability method for existing temporary differences between
the carrying amount of an asset or liability in the consolidated statement of financial position and its
tax base at the balance sheet date. Deferred tax assets and liabilities are measured using the tax rates
expected to apply in the period in which an asset is realised or a liability settled. Changes in deferred tax
assets and deferred tax liabilities are generally reflected in deferred taxes in the consolidated income
statement. This does not apply to deferred taxes that relate to items recognised directly in equity and
are also recognised directly in equity (either in other comprehensive income or directly in equity) in line
with the underlying transaction. The carrying amount of deferred tax assets is reviewed at each balance
sheet ¬date and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available against which the deferred tax asset can be at least partially utilised. Unrecognised deferred
tax assets are reviewed on each balance sheet date and recognised to the extent that it has become
probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax liabil-
ities on taxable temporary differences from shares in subsidiaries are not recognised if the 4basebio
Group can determine the time of the reversal and it is probable that the temporary difference will not
be reversed in the foreseeable future. In accordance with IAS 12, deferred tax assets and deferred tax
liabilities are offset only if the conditions for offsetting are met.

Value added tax

Receivables and liabilities are recognised in the consolidated statement of financial position together
with the amount of value added tax included therein. Expenses and assets are recognised net of value
added tax. An exception to this rule is when the sales taxes incurred when purchasing assets or using
services cannot be reclaimed from the tax authorities. In this case, the sales taxes are exceptionally
recorded as part of the acquisition costs of the asset or as part of the expenses. The sales tax amounts
that are to be refunded by the tax authorities or transferred to them by the 4basebio Group are shown
in the consolidated statement of financial position under other current assets or other current liabilities.

Intangible assets

Intangible assets are generally recognised initially at ¬cost. The cost of intangible assets acquired in
business combinations is the fair value at the time of acquisition. With the exception of capitalised
development costs and internally generated patents, no internally generated intangible assets are

4basebio | Annual Report 2019recognised in the consolidated statement of financial position of the 4basebio Group. Instead, the
corresponding expenses are recognised as expenses in the consolidated income statement in the
period in which they were incurred. Development costs are only capitalised as intangible assets if the
4basebio Group can demonstrate that the specific recognition criteria according to IAS 38.57 are met.
Research and non-capitalisable development costs are recorded as expenses in the period in which
they are incurred and reported in a separate line in the consolidated income statement (“Research
and non-capitalised development costs”).

For the purposes of subsequent measurement of intangible assets, IFRSs distinguish between intangible
assets with finite and indefinite useful lives. With the exception of goodwill, the consolidated financial
statements of the 4basebio Group essentially only contain intangible assets with a definite useful life.
These are amortised over their useful economic life and tested for possible impairment if there are
indications that the intangible asset may be impaired. In the case of capitalised development costs,
amortisation begins upon completion of the development phase and from the point at which the asset
can be used. During the development phase, an annual impairment test is carried out. Amortisation
is recognised for capitalised development costs within cost of sales and for all other intangible assets
within the expense category that corresponds to the function of the intangible asset in the 4basebio
Group. Depreciation periods and methods are reviewed at least at the end of each reporting period. If
changes in the expected useful life or the expected pattern of consumption of future economic ben-
efits embodied in an intangible asset necessitate changes in the amortisation method or amortisation
period, these changes are treated as changes in accounting estimates and recognised prospectively
in profit or loss for the period.

An intangible asset is derecognised either upon disposal or when no further economic benefit is expected
from the continued use or sale of the recognised asset. Gains or losses arising from derecognition of
intangible assets are measured as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognised in profit or loss in the period in which the intangible asset is
derecognised.

The accounting and valuation methods applied to the intangible assets of the 4basebio Group are
summarised as follows:

Useful life

Amortisation method

Licences

Finite

Patents

Finite

Capitalised development costs

Finite

Amortised on a straight-line
basis over the term of the
licence

Amortised on a straight-line
basis over the term of the
patent

Amortised on a straight-line basis over
the period of expected future sales
from the related project

Type of access

Acquired

Acquired / Internally generated Internally generated

Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation and accumulated
impairment losses. Cost includes the cost of replacing part of an item of property, plant and equipment
and borrowing costs for long-term construction projects, provided the recognition criteria are met. If
significant parts of property, plant and equipment have to be replaced at regular intervals, the 4base-
bio Group depreciates them separately based on their respective useful lives. Scheduled straight-line
depreciation is based on the following useful lives of the assets:

• Buildings: 15 to 20 years
• Office furniture and equipment: 4 to 10 years
• Laboratory apparatus and equipment: 3 to 10 years

4basebio | Annual Report 2019Consolidated Financial Statements

Property, plant and equipment are derecognised either upon disposal or when no further economic
benefit is expected from the continued use or sale of the recognised asset. Gains or losses arising from
derecognition of the asset are measured as the difference between the net disposal proceeds and
the carrying amount of the asset and are recognised in the income statement in the period in which
the asset is derecognised. The residual values, useful economic lives and depreciation methods of
classes of property, plant and equipment are reviewed at the end of each financial year and adjusted
prospectively if needed.

Leases

According to IFRS 16 a lease is an agreement whereby the lessor transfers to the lessee the right to use
an asset for an agreed period of time in return for a payment or series of payments. The 4basebio Group
only acts as lessee within the framework of leasing agreements. For leasing relationships, the 4basebio
Group capitalises a right of use and recognises a corresponding lease -liability for all lease payments to
be made over the term of the contract. For leased assets of minor value and for short-term leases (less
than twelve months) payments are recognised as expenses in the consolidated income statement on
a straight-line basis.

The cost of the right of use is calculated as the present value of all future lease payments plus any lease
payments made at or before the inception of the lease plus the initial direct costs and the estimated
costs of dismantling or restoring the leased asset. When measuring the acquisition costs, the 4basebio
Group makes use of the option to regard payments for non-lease components as lease payments.
Subsequent measurement of right of use assets reported under property, plant and equipment is at
cost less accumulated amortisation and accumulated impairment losses. Amortisation of right of use
assets is reported by function. As a rule, right of use assets are amortised on a scheduled basis over
the term of the lease. Exceptionally, rights of use are amortised over the useful life of the underlying
leased asset in those specific circumstances in which the lease payments to be taken into account also
include the transfer of ownership of the underlying asset at the end of the lease term or the exercise of
a purchase option is highly probable.

The lease liabilities reported under financial liabilities are initially recognised at the present value of the
outstanding lease payments. In subsequent measurement, the carrying amount of the lease liability
is increased by the annual interest expense and reduced by the lease payments made. The resulting
interest expenses are reported within the financial result (“financial expenses”).

Impairment and reversal of impairment of non-current non-financial assets

The 4basebio Group determines on each reporting date whether there are any indications of impairment
or reversal of impairment of non-current non-financial assets. If such indications exist or if an annual
impairment test of an asset is required, the 4basebio Group makes an estimate of the recoverable
amount of the asset. The recoverable amount is determined for each individual asset, unless an asset
does not generate cash inflows that are largely independent of those from other assets or groups of
assets (cash-generating units). If the carrying amount of an asset or a cash-generating unit exceeds
the recoverable amount, an impairment loss is recognised for the difference. Impairment losses are
generally recognised in the income statement in the expense categories that correspond to the function
of the impaired asset in the 4basebio Group.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. To
determine the value in use, the expected future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market expectations regarding the interest effect and the
specific risks of the asset. Recent market transactions are taken into account in determining fair value

4basebio | Annual Report 2019less costs to sell. If no such transactions can be identified, an appropriate valuation model is applied.
This is based on valuation¬multiples, quoted market prices of exchange-traded shares in companies
or other available indicators of fair value.

The 4basebio Group bases its impairment assessments on detailed budget and forecast calculations
for its single cash-generating unit (“4basebio Group”). Such budget and forecast calculations usually
cover a detailed planning period of five years. From the sixth year onwards, a long-term growth rate is
determined and used to forecast future cash flows.

At each balance sheet date, an assessment is made as to whether an impairment loss recognised in
prior periods, other than in respect of goodwill, no longer exists or may have decreased. In these cases,
the 4basebio Group carries out a partial or complete write-up. The carrying amount is increased to the
recoverable amount. However, the increase in the carrying amount is limited to the carrying amount
that would have been determined (less depreciation) had no impairment loss been recognised in prior
years. Reversals of impairment losses are generally recognised in profit or loss.

The recoverability of the goodwill of the 4basebio Group is tested for impairment once a year (on 31
December). A review is also carried out if circumstances indicate that the value of goodwill may be im-
paired. Impairment is determined by calculating the recoverable amount of the cash-generating unit
(or group of cash-generating units) to which the goodwill was allocated. The impairment test for goodwill
was carried out at the level of the 4basebio Group as the only cash-generating unit. If the recoverable
amount of the cash-generating unit is less than the carrying amount of this unit, an impairment loss is
recognised in the income statement. An impairment loss recognised for goodwill may not be reversed
in subsequent reporting periods.

Financial instruments

A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability
or equity instrument of another entity. Financial instruments recognised as financial assets or financial
liabilities are generally reported separately. Financial instruments are recognised as soon as the 4base-
bio Group becomes a contracting party to the financial instrument. Financial instruments are initially
recognised at fair value. For subsequent measurement, the financial instruments are allocated to one of
the measurement categories listed in IFRS 9. Transaction costs directly attributable to the acquisition
or issue are taken into account in determining the carrying amount if the financial instruments are not
measured at fair value through profit or loss.

The financial assets held by the 4basebio Group are predominantly non-derivative financial assets with
contractual payments, which consist exclusively of interest and principal payments on the outstanding
nominal amount and which are held with the aim of collecting the contractually agreed cash flows (“Hold”
business model). Accordingly, these financial assets, which mainly comprise trade receivables and
cash and cash equivalents, are allocated to the measurement category “at amortised cost”. These are
measured at amortised cost using the effective interest method less accumulated impairment losses.
Gains and losses are recognised in the consolidated income statement when the financial assets are
impaired or derecognised. The interest effects from the application of the effective interest method
and effects from currency translation are also recognised in the consolidated income statement. The
item cash and cash equivalents in the consolidated balance sheet comprises cash on hand, bank
balances and short-term deposits with a maturity of less than three months that are subject to an
insignificant risk of fluctuations in value. For the purposes of the cash flow statement, cash and cash
equivalents comprise the cash and short-term deposits defined above and short-term deposits less
utilised overdraft facilities, as these are an integral part of the 4basebio Group’s cash management.

4basebio | Annual Report 2019Consolidated Financial Statements

Upon initial recognition, financial liabilities are classified either in the measurement category “at amor-
tised cost” or “at fair value through profit or loss” (FVTPL). A financial liability is classified as FVTPL if it
is held for trading, is a derivative or is designated as such upon initial recognition. In addition, liabilities
from contingent consideration (earn-out liabilities) recognised as liabilities in the context of business
combinations in accordance with IFRS 3 must be classified as FVTPL. Financial liabilities at FVTPL are
measured at fair value and net gains or losses, including interest expenses, are recognised in profit
or loss. Other financial liabilities are subsequently measured at amortised cost using the effective
interest method. These include in particular trade payables, which are generally non-interest-bearing
and due between 30 and 60 days. Interest expenses and foreign currency translation differences are
recognised in the consolidated income statement. Financial liabilities are derecognised when the ob-
ligation underlying a liability is discharged, cancelled or expires. Gains or losses from derecognition are
recognised in the result for the period.

The 4basebio Group only establishes derivative financial instruments to hedge interest or exchange
rate fluctuations in individual instances. Such derivatives are measured at fair value both on initial
recognition and in subsequent measurement. Any resulting changes are generally recognised in profit
or loss. The 4basebio Group does not make use of the option to designate a corresponding hedging
relationship (so-called “hedge accounting”).

Impairment and reversal of impairment of financial assets

In order to determine impairments for trade receivables, the 4basebio Group uses a simplified meth-
od for calculating expected credit losses based on calculated loss rates (the “expected credit loss
model”). Impairments are then determined using an impairment matrix based on past experience of
credit losses and adjusted for future factors specific to the borrower and the economic environment.
For trade receivables with impaired creditworthiness, a special review of default risks is carried out on
a case-by-case basis. Indicators of impaired creditworthiness of trade receivables include significant
financial difficulties of the debtor or likely insolvency. Impairment losses are recognised in the consol-
idated income statement using an allowance account. If it becomes apparent in subsequent periods
that the reasons for impairment no longer exist, the impairment loss is reversed through profit or loss
up to a maximum of the original cost of acquisition.

Inventories

Inventories are stated at the lower of historical cost or net realisable value. The net realisable value is the
estimated selling price less estimated costs of completion and estimated selling expenses. The cost
of inventories is generally determined using the individual allocation method and includes the cost of
acquisition and the costs incurred in bringing the inventories to their present location and condition. In
the case of raw materials and supplies, acquisition or production costs are allocated using the moving
average method. In the case of internally generated work in progress and finished goods, the cost of
production also includes directly attributable material and production costs as well as appropriate
portions of production overheads based on the normal capacity of the production facilities, excluding
borrowing costs.

Provisions

Provisions are recognised if the 4basebio Group has a current (legal or de facto) obligation as a result of
a past event, the outflow of resources with economic benefits to settle the obligation is probable, and
a reliable estimate of the amount of the obligation is possible. The amount recognised as a provision
represents the best possible estimate of the obligation as of the balance sheet date. If the interest ef-

4basebio | Annual Report 2019fect resulting from discounting is material, provisions are discounted at a pre-tax rate that reflects the
risks specific to the liability. Where discounting is used, the increase in provisions due to the passage
of time is recognised as a financial expense. If the recognition criteria for provisions are not met and
the possibility of an outflow of cash upon settlement is not unlikely, disclosure is made as a contingent
liability. Provisions and contingent liabilities are regularly reviewed and adjusted in the light of new
information or changed circumstances. Reimbursement claims (e.g. based on insurance contracts)
are only capitalised as a separate asset if the inflow of the reimbursement is virtually certain. In the
consolidated income statement, the expense resulting from the recognition of a provision as a liability
is shown net of reimbursements.

The 4basebio Group offers a small number of legally required warranties for the rectification of defects
that were already present at the time of sale. Warranty provisions for these so-called “assurance-type
warranties” are formed at the time of sale of the underlying products or provision of the services to
the customer. Initial recognition is based on past experience. The original estimate of costs related to
warranties is reviewed annually.

If there is an onerous contract in the 4basebio Group, the current contractual obligation is recognised
as a provision. An onerous contract is a contract in which the unavoidable costs (i.e. the costs that the
4basebio Group cannot avoid because it has entered into the contract) of fulfilling the contractual
obligations exceed the expected economic benefit. The unavoidable costs from a contract reflect the
minimum amount of net costs incurred when the contract is terminated. These represent the lower of
the cost of settlement and any compensation or penalties resulting from non-performance. However,
before a provision for an onerous contract is recognised in the consolidated statement of financial po-
sition, the 4basebio Group first recognises the impairment loss on assets associated with the contract.

Share-based payment

Employees (including senior executives) of the 4basebio Group receive remuneration in the form of
share-based payments, whereby the employees render services in return for settlement with equity
instruments (so-called “equity-settled share-based payment transactions”). Expenses from equity-set-
tled transactions are determined by the fair value at the grant date using a suitable valuation model
(see Note23). The expense is recognised in functional costs together with a corresponding increase
in equity (additional paid-in capital) over the period in which the service period and, if applicable, the
performance conditions are fulfilled (so-called “vesting period”). The cumulative expense recognised
for equity-settled transactions at each reporting date until the vesting date indicates the extent to
which the vesting period has expired and the best estimate of the number of equity instruments that
will ultimately vest. The expense or credit in the consolidated statement of comprehensive income
for a period represents the movement in cumulative expense at the beginning and end of that period.

In determining the fair value of the options granted, the probability that the conditions will be met is
considered a component of the best estimate of the number of equity instruments that will ultimately
vest. Non-market performance conditions are not taken into account. The market conditions are taken
into account within the fair value at the time of granting. All other conditions that are linked to an award
but are not linked to a performance obligation are considered non-vesting conditions. Non-vesting
conditions are reflected in the fair value of a grant and result in immediate recognition of the grant
unless service and/or performance conditions are also met.

No expense is recognised for compensation that does not ultimately vest because the non-market
and/or performance conditions are not met. If the awards contain a market or non-vesting condition,
the transactions are treated as vesting regardless of whether the market or non-vesting condition is
satisfied, provided that all other performance and/or service conditions are satisfied.

4basebio | Annual Report 2019Consolidated Financial Statements

If the terms of an equity-settled award are modified, the minimum expense recognised is the fair value
of the unmodified award if the original terms of the award are satisfied. An additional expense, measured
at the date of modification, is recognised for each modification that increases the total fair value of the
share-based payment transaction or is otherwise beneficial to the employee. If an award is cancelled
by the entity or the counterparty, any remaining part of the fair value of the award is recognised imme-
diately in profit or loss.

The dilutive effect of outstanding options is taken into account in the calculation of diluted earnings
per share (see Note 8).

Measurement of fair value

The 4basebio Group measures certain financial instruments at fair value on each reporting date. The
fair value is the price that would be received for the sale of an asset or paid for the transfer of a liability
in an orderly transaction between market participants on the measurement date. In measuring fair
value, the transaction involving the sale of the asset or transfer of the liability is assumed to take place
either on the the main market for the asset or the liability or, if there is no main market, on the most
advantageous market for the asset or the liability.

The fair value of an asset or liability is measured on the basis of the assumptions that market participants
would use to price the asset or liability. This is based on the assumption that market participants act
in their best economic interest.

The 4basebio Group uses valuation techniques that are appropriate in the respective circumstances
and for which sufficient data is available to measure the fair value. The use of relevant observable input
factors should be kept as high as possible and non-observable input factors as low as possible. All assets
and liabilities for which fair value is determined or reported in the consolidated financial statements
are classified into the measurement hierarchy described below, based on the lowest level input factor
that is significant to fair value measurement overall:

• Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities
• Level 2: Valuation techniques where the lowest level input that is significant to the fair value measure-

ment is observable, directly or indirectly, in the market

• Level 3: Valuation techniques where the lowest level input that is significant to the fair value measure-

ment is not observable in the market.

In the case of assets and liabilities that are recognised in the consolidated financial statements on a
recurring basis at fair value, the 4basebio Group determines whether reclassifications between levels of
the hierarchy have taken place by reviewing the classification (based on the input factor of the lowest
level that is material for the fair value measurement overall) at the end of each reporting period.

External valuers are consulted as needed for the valuation of significant assets and significant liabilities,
e.g. contingent consideration. The decision as to whether external valuers should be commissioned
is made annually by the Chief Financial Officer (CFO). Selection criteria include market knowledge,
reputation, independence and compliance with relevant standards.

On each balance sheet date Management analyses the development in value of assets and liabilities
that have to be revalued or reassessed in accordance with the accounting methods of the 4basebio
Group. This analysis checks the main input factors applied in the last evaluation by comparing the in-
formation in the evaluation calculations with contracts and other relevant documents. Together with

4basebio | Annual Report 2019the external valuers of the 4basebio Group, Management also compares the changes in the fair value
of each asset and each liability with corresponding external sources in order to assess whether the
respective changes are plausible.

In order to meet the disclosure requirements for the fair values, the 4basebio Group has defined class-
es of assets and liabilities based on their nature, characteristics and risks as well as the levels of the
measurement hierarchy explained above. Information on the fair value of financial instruments that are
measured at fair value or for which a fair value is reported is provided in Section E and Notes 18 and 22.

Earnings per share

The undiluted earnings per share are calculated by dividing the share of the period result attributable to
the holders of ordinary shares of 4basebio AG by the weighted average number of shares in circulation
during the year. The diluted earnings per share are calculated by dividing the share of the period result
attributable to the holders of ordinary shares of 4basebio AG by the weighted average number of shares
in circulation during the financial year plus the weighted average number of ordinary shares that would
result from the conversion of all potential ordinary shares with a dilution effect into ordinary shares.

E. Discretionary decisions by management and estimation uncertainties

In the consolidated financial statements of the 4basebio Group, discretionary assumptions and
estimates must be made to a limited extent, which have an impact on the recognition, amount and
disclosure of the assets and liabilities, income and expenses and contingent liabilities in the balance
sheet. In assessing these discretionary exercises and estimation uncertainties, management is guided
by past experience, estimates by experts (lawyers, rating agencies, associations, etc.) and the result
of careful consideration of various scenarios. Actual results and developments beyond the control of
management may differ materially from the developments and assumptions expressed. The 4base-
bio Group therefore continually reviews the estimates and assumptions made. Changes in estimates
are recognised in profit or loss at the time of better knowledge. Significant discretionary exercises by
management and estimation uncertainties relate in particular to:

• Revenues from contracts with customers (Note 1): Discretionary decisions in accounting for revenues

from contracts with customers arise in particular in connection with the accounting for license fees.
Licence agreements must be classified as “right to use” or “right to access” and also the expected
licence income must be estimated and appropriately allocated.

• Income taxes (Note 7 and Note 12): Deferred tax assets are recognised for unused tax losses to the

extent that it is probable that taxable income will be available against which the losses carried forward
can be utilised. Significant management judgement is required to determine the amount of deferred
tax assets that can be recognised, based upon the likely timing and level of future taxable income
and future tax planning strategies. As of 31 December 2019 the 4basebio Group has tax loss carry-
forwards amounting to €37.8 million (31 December 2018: €36.9 million). These exist in subsidiaries
with a history of losses. The tax loss carryforwards cannot be offset against taxable income of other
group companies. The subsidiaries only partially have taxable temporary differences or tax planning
options that could lead in some cases to the recognition of deferred tax assets.

• Development costs (Note 10): The 4basebio Group capitalises the costs of product development

projects if the recognition criteria according to IAS 38.57 are met. The capitalisation of development
costs is based on management’s assessment that the technical and economic feasibility has been
demonstrated. This is generally the case when a product development project has reached a certain

4basebio | Annual Report 2019
Consolidated Financial Statements

milestone in an existing project management model. For the purpose of determining the amounts to
be capitalised, management makes assumptions about the amount of expected future cash flows
from the project, the discount rates to be applied and the timing of inflow of the expected future
benefit. As of 31 December 2019 the carrying amount of capitalised development costs amounted
to €1,845 thousand (31 December 2018: €1,956 thousand).

• Impairment and reversal of impairment of non-current non-financial assets (Note 10 and Note 11):

The calculation of fair value less costs to sell is based on available data from binding sale transactions
between independent business partners for similar assets or observable market prices less directly
attributable costs to sell the asset. A discounted cash flow (DCF) method is used to calculate the
value in use. The cash flows are derived from the financial plan for the next five years, whereby neither
restructuring measures, to which the 4basebio Group has not yet committed itself, nor significant
future investments are included that will increase the earning power of the tested cash-generating
unit. The recoverable amount depends on the discount rate used in the DCF method as well as on
the expected future cash flows and the growth rate used for extrapolation purposes.

• Allowance for expected credit losses on trade receivables and contract assets (Notes 14 and 22):

The 4basebio Group uses an allowance matrix to calculate the expected credit losses on trade re-
ceivables and contract assets. The impairment rates are determined on the basis of the period of
overdue payments in days for different customer categories grouped together in groups with similar
default patterns. The value adjustment table is based on the historical default rates of the 4basebio
Group. This table adjusts historic credit defaults with future-oriented information. If, for example, it
is assumed that forecast economic conditions (e.g. gross domestic product) will deteriorate in the
course of the coming year, which could lead to an increase in credit defaults in the manufacturing
industry, the historical default rates are adjusted accordingly. At each balance sheet date, the historic
default rates are updated and changes in future-related estimates are analysed. The assessment of
the relationship between historic default rates, forecast economic conditions and expected credit
defaults represents a significant estimate. The amount of expected credit defaults depends on
changes in circumstances and the forecast economic conditions. The historic credit defaults of the
4basebio Group and the forecast economic framework conditions may not be representative of the
actual defaults of customers in the future.

• Measurement of the fair value of financial instruments (Notes 18 and 22): If the fair value of recognised

financial instruments cannot be measured using quoted prices in active markets they are determined
using valuation techniques, including the discounted cash flow method. The input factors used in the
model are based as far as possible on observable market data. If this is not available, the determina-
tion of fair values is based to a large extent on management’s discretionary decisions. Discretionary
decisions relate to input factors such as liquidity risk, default risk and volatility. Changes in the as-
sumptions made for these factors can affect the fair values of the financial instruments. This applies
in particular to financial liabilities from contingent consideration (earn-out liabilities) recognised as
liabilities in the context of business combinations in accordance with IFRS 3, which are measured at
fair value on each balance sheet date. The determination of fair value is based on discounted cash
flows, whereby the basic assumptions take into account the probability of meeting each performance
target and the discount factor.

• Share-based payments (Note 23): For the purpose of determining the fair value of options granted,

the probability that the conditions will be met is considered a component of the best estimate of the
number of equity instruments that will ultimately vest. Non-market performance conditions are not
taken into account. Market performance conditions are considered within the fair value at the time
of granting. All other conditions that are linked to the grant but are not associated with a performance
obligation are considered non-vesting conditions. Non-vesting conditions are included in the fair
value of a grant and result in immediate recognition of the grant unless service and/or performance
conditions are also attached. No expense is recognised for awards that do not ultimately vest because

4basebio | Annual Report 2019the non-market service and/or performance conditions are not met. If the awards contain a market
or non-vesting condition, the transactions are treated as vesting regardless of whether the market
or non-vesting condition is satisfied, provided that all other performance and/or service conditions
are satisfied. If the terms of an equity-settled award are modified, the minimum expense recognised
is the fair value of the unmodified award if the original award conditions are satisfied. An additional
expense, measured at the date of modification, is recognised for any modification that increases the
total fair value of the share-based payment transaction or is otherwise beneficial to the employee. If
a grant is cancelled by the entity or the counterparty, any remaining part of the fair value of the grant
is recognised immediately in profit or loss.

F. Notes to the consolidated statement of profit and loss

The proteomics and immunology businesses sold to Abcam effective 1 January 2020 have been
classified as a disposal group held for sale and as discontinued operations as of 31 December 2019 in
accordance with the requirements of IFRS 5 (see Note 21). In the consolidated statement of profit and
loss the income and expenses attributable to the discontinued operations are summarised in one item
and the prior year figures are adjusted accordingly.

Revenues

Revenue by type [in €‘000]

Revenue from sales of kits and other products

Revenue from licences and royalties

Total revenue

2019

1,022

2018 *)

1,025

149

1,052

1,174

Geographic markets [in €‘000]

2019

2018 *)

Europe

USA

Rest of world

Total revenue

Timing of revenue recognition [in €’000]

At a point in time

Over a period of time

Total revenue

*) Prior year’s figures adjusted (for further information see Note 21)

147

905

1.052

2019

1,052

359

815

1.174

2018 *)

1,174

4basebio | Annual Report 2019
Consolidated Financial Statements

2. Cost of sales, selling and general administrative expenses

[in €‘000]

Cost of goods sold

Amortisation of capitalised development costs

Other

Cost of sales

[in €‘000]

Staff costs

Material costs

Other

Sales and distribution costs

[in €‘000]

Staff costs

Legal consulting costs

Investor relations and PR

Audit and tax costs

M&A costs

2020 transaction costs

Management board

Lease costs

Supervisory board

Depreciation of property, plant and equipment and amortisation of intangible assets

Other occupancy costs

Other

2019

(117)

(560)

(9)

2018 *)

(268)

(378)

(17)

(686)

(663)

2019

(114)

(8)

(11)

(134)

2019

(865)

(555)

(416)

(405)

(360)

(640)

(223)

(147)

(93)

(91)

(161)

2018 *)

(169)

(9)

(49)

(227)

2018 *)

(1,025)

(243)

(339)

(191)

(429)

(561)

(215)

(160)

(84)

(66)

(64)

General and administrative expenses

(3,954)

(3,377)

*) Prior year’s figures adjusted (for further information see Note 21)

3. Research and non-capitalised development costs

Research and non-capitalised development costs for the 2019 financial year amount to €556 thousand
(2018: €600 thousand). Amortisation of capitalised development costs amounting to €560 thousand
(2018: €378 thousand) is included in cost of sales (Note 0). Research and development costs consist of:

[in €‘000]

Research and non-capitalised development costs

Investments in capitalisable development costs

Research and development costs

*) Prior year’s figures adjusted (for further information see Note 21)

2019

2018 *)

(556)

336

(220)

(600)

394

(206)

4basebio | Annual Report 20194. Other operating expenses

[in €‘000]

Foreign exchange losses

Other

Other operating expenses

*) Prior year’s figures adjusted (for further information see Note 21)

5. Other operating income

[in €‘000]

Government grants

Income from reversal of provisions

Other

Other operating income

*) Prior year’s figures adjusted (for further information see Note 21)

6. Financial result

[in €‘000]

Interest and similar income

Finance income

Interest expense on loans

Interest on lease liabilities

Finance expenses

Financial result

*) Prior year’s figures adjusted (for further information see Note 21)

Income taxes

[in €‘000]

Current tax expense (-) or income (+)

Deferred tax expense (-) or income (+)

of which resulting from temporary differences

of which from loss carryforwards and tax credits

Total income tax

*) Prior year’s figures adjusted (for further information see Note 21)

2019

2018 *)

2019

2018 *)

116

145

124

221

2019

2018 *)

122

(403)

(26)

(430)

(308)

2019

(475)

371

108

263

(104)

498

(269)

229

2018 *)

203

(70)

273

203

4basebio | Annual Report 2019Consolidated Financial Statements

Thereof attributable to discontinued operations:

[in €‘000]

Current tax expense (-) or income (+)

Deferred tax expense (-) or income (+)

of which resulting from temporary differences

of which from loss carryforwards and tax credits

Total income tax

Tax reconciliation statement

2019

(594)

173

(421)

2018

182

(70)

252

182

The difference between the expected income tax expense and the income tax expense actually reported
is shown in the following reconciliation. To determine the expected tax expenses, the tax rate of 30%
(2018: 30%) applicable for the 2019 financial year was multiplied by the earnings before taxes. This tax
rate is a combined income tax rate comprising a uniform corporate income tax rate of 15% plus 5.5%
social security costs and an effective trade tax rate of approximately 14%.

[in €‘000]

Profit before tax

Expected tax expense (-) or income (+)

Adjustments:

Effects of different tax rates

Changes to tax rates

R&D tax credits

Disallowable expenses / tax-free earnings

Changes to deferred taxation

Loss carryforwards on which no deferred tax recognised

Usage of loss carryforwards

Other

Total adjustments

Income tax (actual tax expense)

*) Prior year’s figures adjusted (for further information see Note 21)

2019

2018 *)

(2,549)

765

(97)

(78)

121

(694)

481

(601)

(3)

(869)

(104)

(503)

151

(157)

132

280

205

(405)

(5)

202

4basebio | Annual Report 2019
8. Earnings per share

Numerator [in €‘000]

Result for the period

Denominator [number of share]

2019

2018 *)

(2,653)

(301)

Weighted average number of registered shares in circulation (2018: ordinary shares) for calculating
the undiluted earnings per share

52,027,793

50,059,845

Undiluted earnings per share

Numerator [in €‘000]

Result for the period

Denominator [number of share]

(0,05)

(0,01)

2019

2018 *)

(2,653)

(301)

Weighted average number of registered shares in circulation (2018: ordinary shares) for calculating
the undiluted earnings per share

52,027,793

50,059,845

Dilutive effect from:

options

mandatory convertible bonds

Weighted average number of registered shares (2018: ordinary shares) adjusted for the dilution
effect

Diluted earnings per share

*) Prior year’s figures adjusted (for further information see Note 21)

3,248,027

3,306,363

4,974,307

2,290,267

60,250,127

55,656,476

(0,04)

(0,01)

During the period between the balance sheet date and the approval for publication of the consolidated
financial statements, 723,392 shares (2018: 148,462 shares) were issued in connection with the earn-
out obligation for the acquisition of Innova Biosciences Ltd, Cambridge/UK, in the 2017 financial year.

The calculation of the diluted and undiluted earnings per share for continuing and discontinued op-
erations (see Note 21) was based on the weighted average number of shares as determined above.
The numerator is defined as earnings after tax from continuing operations and earnings after tax from
discontinued operations.

9. Additional information on expense categories

Cost of materials

The materials cost is the total value of inventories recognised as an expense in the reporting period,
totalling €8 thousand for the 2019 financial year (2018: €9 thousand).

4basebio | Annual Report 2019
Consolidated Financial Statements

Staff costs and headcount

[in €‘000]

Salaries

Social security

Share-based payment expense

Staff costs

*) Prior year’s figures adjusted (for further information see Note 21)

2019

(478)

(118)

(69)

(665)

2018 *)

(469)

(97)

(265)

(831)

Average FTE headcount by function (continuing operations)

2019

2018 *)

Operations

Sales and marketing

GF&A

R&D

Total

*) Prior year’s figures adjusted (for further information see Note 21)

11.3

1.0

11.7

6.8

30.8

19.3

1.0

10.4

6.0

36.7

The number of employees (full-time equivalents) decreased overall from an average of 36.7 employees
in fiscal year 2018 to 30.8 employees in fiscal year 2019. The average number of employees by function
relating to discontinued operations is presented in Note 21.

Depreciation, amortisation, and impairment

[in €‘000]

Amortisation

Impairment of intangible assets

of which impairment of goodwill

Depreciation

Impairment of tangible assets

2019

(574)

(80)

2018 *)

(392)

(31)

Total depreciation, amortisation, and impairment

(653)

(422)

*) Prior year’s figures adjusted (for further information see Note 21)

4basebio | Annual Report 2019
G. Notes to the consolidated statement of financial position

10.

Intangible assets

[in €‘000]

Cost or acquisition value

01.01.2018

Exchange differences

Acquisition of subsidiary

Additions

Disposals

31.12.2018

01.01.2019

Exchange differences

Acquisition of subsidiary

Additions

Disposals

Assets held for sale

31.12.2019

Cumulative amortisation and impairment

Goodwill

Licences and
patents

Development
costs

Other

Total

30,408

10,093

2,768

2,839

46,108

192

493

3,309

4,668

33,909

15,254

(33,909)

(15,254)

394

3,162

336

797

3,636

192

493

9,168

–

55,961

336

(3,636)

(52,799)

3,498

01.01.2018

Exchange differences

Amortisation

Impairment

Disposals

31.12.2018

01.01.2019

Exchange differences

Amortisation

Impairment

Disposals

Assets held for sale

31.12.2019

Net book value

31.12.2018

31.12.2019

1,040

1,025

2,065

(2,065)

935

271

1,206

447

2,459

738

3,197

(3,197)

1,653

33,909

13,189

1,956

1,845

439

4,434

2,034

6,468

447

(5,262)

1,653

49,493

1,845

4basebio | Annual Report 2019Consolidated Financial Statements

Goodwill

Goodwill results from the reverse acquisition of Expedeon AG by Expedeon Biotech S.L.U., Madrid/
Spain, in fiscal year 2012, the acquisition of the Expedeon Group in fiscal year 2016, the acquisition of
CBS Scientific and Innova Biosciences Ltd, Cambridge/UK in the financial year 2017 and the acquisition
of TGR BioSciences Pty Ltd, Adelaide/Australia in the financial year 2018. The total carrying amount of
goodwill as of 31 December 2019 in the amount of €nil (31 December 2018: €33.9 million) was allocated
to the 4basebio Group as the only cash-generating unit.

The impairment test for goodwill was carried out at the level of the 4basebio Group as the only cash-gen-
erating unit. Using the measurement hierarchy in accordance with IFRS 13, the 4basebio Group tested
the goodwill for impairment by comparing the carrying amount of the cash-generating unit with the fair
value less reasonable costs to sell, which was estimated at 5% of the fair value. The fair value was deter-
mined by reference to the market valuation of the company, which amounted to €89.2 million as of 31
December 2019 (31 December 2018: €46.4 million) and represents a fair value of level 1 in accordance
with the fair value hierarchy of IFRS 13. The estimated cost of disposal is €3 million (31 December 2018:
€2.3 million). This results in a fair value less costs to sell of €86.2 million (31 December 2018: €44.1
million). On this basis, management concludes that there was no impairment of goodwill in either fiscal
year 2019 or the previous year. Management believes that no reasonably possible change in any of the
key assumptions used to determine fair value less reasonable costs to sell would cause the carrying
amount of goodwill to exceed the fair value less reasonable costs to sell.

Licences and patents

Both licences and patents are intangible assets acquired through business combinations. Patents
have been granted by the relevant state institution for a minimum period of ten years (with an option
to extend). The 4basebio Group incurs no or only low costs for an extension.

Development costs

The development costs relate to development work undertaken in 4basebio, S.L.U. in relation to enzyme
formulation and application.

4basebio | Annual Report 201911.

Property, plant and equipment

[in €‘000]

Land and buildings Operating equipment

Usage rights from
leases

Total

Cost or acquisition value

01.01.2018

Exchange differences

Acquisition of subsidiary

Additions

Disposals

31.12.2018

01.01.2019

First time application of IFRS 16

Exchange differences

Acquisition of subsidiary

Additions

Disposals

Assets held for sale

31.12.2019

Cumulative amortisation and impairment

01.01.2018

Exchange differences

Depreciation

Impairment

Disposals

31.12.2018

01.01.2019

Exchange differences

Depreciation

Impairment

Disposals

Assets held for sale

31.12.2019

Net book value

31.12.2018

31.12.2019

1,270

(11)

1,338

(217)

1,175

(137)

1,253

1,175

1,139

(44)

146

147

(17)

1,371

249

(429)

(801)

390

286

311

625

302

(391)

(301)

235

746

155

648

(220)

428

344

(133)

211

217

2,409

(55)

146

226

(17)

2,709

648

303

(646)

(1,021)

1,993

359

311

710

698

(391)

(571)

446

1,999

1,547

4basebio | Annual Report 2019

Consolidated Financial Statements

Usage rights from leases

[in €‘000]

31.12.2019

Acquisition cost

of which additions (FY 2019)

Depreciation (FY 2019)

Net book value

Land and buildings Operating equipment

422

(207)

215

(4)

Total

428

(211)

217

12. Deferred tax assets and liabilities

[in €‘000]

Deferred tax assets

Deferred tax liabilities

Deferred tax expense (-) /
deferred tax income (+) *)

31.12.2019

31.12.2018

31.12.2019

31.12.2018

2019

2018 **)

Intangible assets

Property, plant and equipment

Inventories

Other assets

Provisions

Liabilities

Assets held for sale

Liabilities in connection with assets held for
sale

Tax losses carried forward

Tax losses carried forward from discontinued
operations

R&D tax credits from discontinued
operations

691

237

549

(18)

103

(2.768)

(2.755)

(42) ***)

(558)

381

133 ***)

182

168

(86)

(70)

178

Total (before netting)

1.595

635

(3.344)

(2.755)

Netting

Net amount

Split:

Continuing operations

Discontinued divisions

(1.183)

(635)

1.183

635

412

254

158

(2.161)

(2.120)

371

203

(2.120)

(2.161)

recorded in the consolidated profit and loss account

*)
**) prior year figures adjusted (for further information see Note 21)
***)

within assets held for sale, £153 thousand results fro the addition of deferred tax liabilities in connection with IFRS 16, while within
liabilities in connection with assets held for sale, £153 thousand results from the addition of deferred tax claims with no effect on
income

4basebio | Annual Report 2019The deferred tax liabilities as of 31 December 2019, in the amount of €3,344 thousand (31 December
2018: €2,755 thousand) primarily relate to the individually identifiable intangible assets that were
identified as part of the purchase price allocation in fiscal year 2012 (reverse acquisition) and as part
of the purchase price allocations in fiscal years 2016 to 2018. The deferred tax liabilities arising from
these purchase price allocations totalled €4,450 thousand, of which a total of €2,209 thousand had
been used by 31 December 2019 (31 December 2018: €2,038 thousand). The change in deferred tax
liabilities in the current financial year 2019 is attributable to the current amortisation of hidden reserves
in intangible assets and the revaluation of deferred tax liabilities attributable to British companies (2018:
acquisition of TGR BioSciences Pty Limited, Adelaide/Australia, and offsetting current amortisation of
the acquired hidden reserves).

No deferred tax liabilities were recognised for possible future tax payments on retained earnings of
subsidiaries in the amount of €2,335 thousand (31 December2018: €1,994 thousand), as these earn-
ings are required in the long term to finance the respective subsidiary and a distribution is not planned.

The 4basebio Group recognises deferred tax assets if it is probable that these tax benefits will be re-
alised in future years. Deferred tax assets are not recognised if it is not sufficiently probable that the
expected benefits from the deferred taxes will be realised. As of 31 December 2019, deferred tax assets
capitalised on loss carryforwards amounted to €787 thousand (31 December 2018: €437 thousand).
Of this amount, €568 thousand (31 December 2018: €437 thousand) was offset against deferred tax
liabilities. The change in the total amount of deferred taxes by a total of €371 thousand (2018: €744
thousand) consists exclusively of a change in deferred taxes of €371 thousand (2018: €203 thousand
through profit or loss and addition of deferred tax assets in equity of €438 thousand and deferred tax
liabilities in equity of -€1,385 thousand from the acquisition of TGR BioSciences Pty Limited), changes
in equity not affecting profit or loss are not to be taken into account in 2019. There was no change in
deferred taxes in other comprehensive income (OCI) either in the current financial year 2019 or in the
previous year.

As of 31 December 2019, a deferred tax asset of €219 thousand on loss carryforwards and a deferred
tax asset on temporary differences of €35 thousand were capitalised at the level of 4basebio AG. In the
following assessment period a deferred tax asset of €219 thousand was capitalised due to the agree-
ment with Abcam plc. Cambridge/UK (London Stock Exchange: ABC; ISIN: GB00B6774699; AIM MTF)
already concluded on 11 November 2019 for the sale of its immunology and proteomics business units
for €120 million in cash with effect from 1 January 2020. Sufficient taxable income will be available in
the following assessment period.

The tax loss carryforwards for which no deferred tax assets were recognised amounted to approximately
€34.8 million as of 31 December 2019 (31 December 2018: €31.0 million). Of the unrecognised tax loss
carryforwards, around €16.5 million (31 December 2018: €15.8 million) are attributable to Germany,
around €10.3 million (31 December 2018: €9.5 million) to the Spanish subsidiary and around €4.8 million
(31 December 2018: €4.9 million) to the US subsidiary. Further loss carryforwards for which no deferred
tax assets were recognised relate to British subsidiaries and the Singapore subsidiary. Furthermore, no
deferred tax assets were recognised at the level of the Spanish and Australian subsidiaries for existing
tax credits of around €1.4 million (31 December 2018: €1.0 million).

In Germany, loss carryforwards can be carried forward indefinitely. Loss carryforwards have been
subject to minimum taxation since 2004 in accordance with the tax regulations for corporate income
tax and trade tax. Accordingly, the loss deduction that can be offset per assessment period is limited
to €1 million plus 60% of the taxable income exceeding this base amount. Since 2015 the loss carryfor-
wards in Spain can be carried forward and used for an unlimited period of time, whereby the amount
of the annually usable loss carryforwards is subject to a minimum taxation comparable to the German
regulation. Accordingly, the loss deduction that can be credited per assessment period is limited to €1
million plus 70% (up to and including 2016 the percentage was 60%) of the taxable income exceeding
this basic amount.

4basebio | Annual Report 2019Consolidated Financial Statements

The remaining expiration periods of tax loss carryforwards and tax credits for which no deferred tax
assets were recognised can be summarised as follows:

[in €‘000]

Expiration within 1 to 5 years

Expiration within 6 to 10 years

Expiration within 11 to 15 years

Expiration within 16 to 20 years

Non-forfeitable

Total

*) adjusted

31.12.2019

31.12.2018 *)

1,641

3,469

474

269

526

3,725

1,433

352

30,350

26,006

36,203

32,042

In addition to the current tax losses for which no deferred tax assets were capitalised, the change in
the level of tax loss carryforwards compared with 31 December 2018 is also due to a change in German
jurisdiction and statutory regulations regarding the loss carryforwards due to qualified changes in share-
holders for the 2016 financial year. Accordingly, tax losses and loss carryforwards of €4.9 million would
not be affected by the loss. Furthermore, it is assumed that the loss carryforwards and tax credits arising
at the level of Expedeon Inc. in fiscal years prior to 2016 are not affected by a loss loss.

For the determination of the amount of the unused tax losses in Germany, it was taken into account
that under current tax law, due to the capital increases and the transfers of shares of 4basebio AG in
the 2012 financial year, the tax losses and loss carryforwards that arose before 4 December 2012 will
no longer be available. These tax losses carried forward are not included in the above table.

Furthermore, the tax loss carryforwards of the former US subsidiary Lion Bioscience, Inc. were not taken
into account in the above table due to the merger with Expedeon Inc. in 2017.

13.

Inventories

[in €‘000]

Raw materials

Finished goods

Inventories

31.12.2019

31.12.2018

140

302

442

849

1,117

1,966

In the 2019 financial year €117 thousand (2018: €286 thousand) of inventories cost at net realisable
value was recognised within cost of sales. No material adjustments to inventory value were made in the
2019 financial year nor during the prior year.

14. Trade receivables

Trade receivables do not bear interest and generally fall due within 30 to 90 days. An impairment on trade
receivables for expected credit losses of €31 thousand (2018: €71 thousand) was recognised in 2019.

4basebio | Annual Report 2019Expected credit loss provision [in €‘000]

Impairment as at 1 January

Movement in provision

Impairment as at 31 December

*) Prior year’s figures adjusted (for further information see Note 21)

15. Other current assets

[in €‘000]

Contract assets

Financial assets

Deposits

Other

Other current assets

16. Cash and cash equivalents

[in €‘000]

Bank balances and cash in hand

Cash and cash equivalents

2019

(40)

2018 *)

n.z.

31.12.2019

31.12.2018

271

217

488

579

897

1,538

31.12.2019

31.12.2018

990

6,238

Bank balances bear interest at variable rates for daily callable deposits.

17. Equity

The share capital of 4basebio AG as of 31 December 2019 amounts to a total of €52,309,785 (31 De-
cember 2018: €51,411,323), divided into 52,309,785 (31 December 2018: 51,411,323) no-par value bearer
shares. These are all registered ordinary shares without exception (31 December 2018: ordinary shares).
There are no shares with special rights or other restrictions on voting rights.

Authorised capital

Financial year 2019

In April 2019, 148,458 shares were issued under the terms of the Innova Biosciences Ltd, Cambridge/UK
earn-out, which stem from the acquisition in 2017. In October 2019, 747,484 shares were issued under the
terms of the Innova Biosciences Ltd, Cambridge/UK earn-out which stem from the acquisition in 2017.

4basebio | Annual Report 2019
Consolidated Financial Statements

2018 against cash and/or non-cash contributions on one or more occasions up to and including 4 July
2023. The Management Board may, with the consent of the Supervisory Board, exclude the statutory
subscription right of shareholders

• insofar as this is necessary to avoid fractional amounts;
• to grant shares against contributions in kind;
• insofar as it is necessary to protect against dilution, to grant the holders of convertible and/or war-

• in the case of a capital increase against cash contributions, if the proportion of the share capital of

the new shares for which subscription rights are excluded does not exceed 10% of the share capital
registered at the time the authorisation* becomes effective and at the time the authorisation is
exercised, and the issue price of the new shares is not significantly lower than the market price of
existing listed shares of the same class.

(*) The authorisation for Authorised Capital 2018 became effective on 24 October 2018 upon entry in
the commercial register. The share capital amounted to €51,411,323 at that date.

As of 31 December 2019, the Executive Board had not yet exercised this authorisation. Thus, authorised
capital totalling €25,561,278 was available.

Financial year 2018

On 5 September 2017 the Supervisory Board approved the Management Board’s resolution to issue
124,223 shares from authorised share capital under a SEDA arrangement with exclusion of the subscrip-
tion rights of existing shareholders. These shares were registered on 18 January 2018.

On 19 September 2017 the Supervisory Board approved the Management Board’s resolution to issue
123,456 shares from authorised share capital under a SEDA arrangement with exclusion of the subscrip-
tion rights of existing shareholders. These shares were registered on 19 January 2018.

On 11 November 2017 the Supervisory Board approved the Management Board’s resolution to issue
139,860 shares from authorised share capital under a SEDA arrangement with exclusion of the sub-
scription rights of existing shareholders. These shares were registered on 24 January 2018.

On 11 December 2017 the Supervisory Board approved the Management Board’s resolution to issue
55,632 shares from authorised share capital under a SEDA arrangement with exclusion of the subscrip-
tion rights of existing shareholders. These shares were registered on 25 January 2018.

On 19 March 2018 the Supervisory Board approved the Management Board’s resolution to issue up to
4,737,725 shares by way of a private placement in order to partly finance the acquisition of TGR BioSci-
ences Pty Ltd, Adelaide/Australia. On 20 March 2018 the Supervisory Board approved the resolution of
the Management Board to carry out the private placement by issuing a total of 2,995,298 shares. These
shares were registered on 23 March 2018.

By resolution of the Expedeon AG Annual General Meeting on July 5, 2018, the authorised capital
still existing at that time was cancelled and newly authorised capital in the amount of €25,561,278
(Authorised Capital 2018) was created. Accordingly, the Management Board is authorised until 4 July
2023 to increase the Company’s share capital, with the approval of the Supervisory Board, by a total of

4basebio | Annual Report 2019€25,561,278 by issuing new no-par value ordinary bearer shares from Authorised Capital 2018 on one
or more occasions against cash and/or non-cash contributions. The Management Board may, with the
approval of the Supervisory Board, exclude the statutory subscription right of shareholders;

• insofar as this is necessary to avoid fractional amounts in order to grant shares against contributions

in kind;

• insofar as it is necessary for protection against dilution, to grant the holders of convertible and/or

warrant bonds, convertible bonds or warrants a subscription right to new shares to the extent to
which the holders would be entitled after exercising their conversion or option rights or after fulfilling
a conversion obligation; or

• in the event of a capital increase against cash contributions, if the proportion of the share capital of

the new shares for which the subscription right is excluded does not exceed 10% of the share capital
registered at the time of the authorisation coming into effect and at the time of the authorisation
being exercised and the issue price of the new shares is not significantly lower than the stock exchange
price of the existing listed shares of the same class.

On 26 April 2018 the Supervisory Board approved the Management Board’s resolution to issue 142,857
shares from authorised share capital under a SEDA arrangement with exclusion of the subscription
rights of existing shareholders. These shares were registered on 12 July 2018.

On 21 May 2018, the Supervisory Board approved the Management Board’s resolution to issue 142,857
shares from authorised share capital under a SEDA arrangement with exclusion of the subscription
rights of existing shareholders. These shares were registered on 13 July 2018.

On 31 July 2018 the Supervisory Board approved the Management Board’s resolution to issue 151,515
shares from authorised share capital under a SEDA arrangement with exclusion of the subscription
rights of existing shareholder. These shares were registered on 15 October 2018.

On 31 August 2018 601,538 shares were registered under the terms of the convertible bond instrument
of Innova Biosciences Ltd, Cambridge/UK.

Conditional capital

Financial year 2019

4basebio | Annual Report 2019Consolidated Financial Statements

The conditional capital increase from Conditional Capital 2018/I will only be implemented to the extent
that the holders of stock options issued by the Company up to and including 6 July 2022 on the basis
of the authorisation resolved by the Annual General Meeting on 7 July 2017 (Stock Option Plan 2017)
with the amendments in accordance with the resolution of the Annual General Meeting on 5 July 2018,
exercise their subscription rights and the Company does not grant treasury shares or shares from
existing or newly created authorised capital and does not decide to pay a cash settlement. The new
shares carry dividend rights from the beginning of the financial year for which, at the time of the issue
of the shares, no resolution of the Annual General Meeting on the appropriation of the balance sheet
profit has yet been passed.

According to § 4 para. 7 of the articles of association of 4basebio AG, the share capital is conditionally
increased by up to €18,000,000 through the issue of up to 18,000,000 ordinary registered shares
(conditional capital 2018/II). The conditional capital increase will only be implemented to the extent
that the holders of option or convertible bonds issued on the basis of the authorisation resolved by the
Annual General Meeting on 5 July 2018 exercise their option or conversion rights or, to the extent that
they are obliged to convert convertible bonds, fulfil their obligation to convert their convertible bonds,
and the company does not grant treasury shares or shares from existing or newly created authorised
capital and does not opt for a cash settlement. The new shares carry dividend rights from the beginning
of the fiscal year for which, at the time the shares are issued, no resolution of the Annual General Meeting
on the appropriation of the balance sheet profit has yet been passed.

According to § 4 para. 9 of the articles of association of 4basebio AG, the share capital is conditionally
increased by up to €1,650,000 through the issue of up to 1,650,000 ordinary registered shares (Con-
ditional Capital V). The conditional capital increase will only be implemented to the extent that the
holders of option or convertible bonds issued on the basis of the authorisation resolved by the Annual
General Meeting on 20 June 2016 exercise their option or conversion rights or, to the extent that they
are obliged to convert convertible bonds, fulfil their obligation to convert their convertible bonds and
the company does not grant treasury shares or shares from existing or newly created authorised capital
and does not opt for a cash settlement. The new shares carry dividend rights from the beginning of the
fiscal year for which, at the time the shares are issued, no resolution of the Annual General Meeting on
the appropriation of the balance sheet profit has yet been passed.

Financial year 2018

The share capital of 4basebio AG, formerly trading under the name Expedeon AG, is conditionally
increased by up to €4 million through the issue of up to 4 million no-par value bearer shares by resolu-
tion of the Annual General Meeting on 5 July 2018 (Conditional Capital 2018/I). The Conditional Capital
2018/I serves to fulfil the stock options issued on the basis of the authorisation resolved by the Annual
General Meeting on 7 July 2017 (Stock Option Plan 2017). The Conditional Capital 2018/I took effect on
30 July 2018 upon entry in the commercial register and amounted to €4 million as at 31 December 2018.

The share capital of 4basebio AG, formerly trading under the name Expedeon AG, is conditionally
increased by up to €18 million through the issue of up to 18 million no-par value bearer shares by res-
olution of the Annual General Meeting on 5 July 2018 (Conditional Capital 2018/II). The Conditional
Capital 2018/II serves to grant shares to the holders of convertible bonds issued on the basis of the
authorisation resolved by the Annual General Meeting of Expedeon AG on 5 July 2018. The Conditional
Capital 2018/II took effect on 30 July 2018 upon entry in the commercial register and amounted to €18
million as at 31 December 2018.

On 31 August 2018 the authorisation was exercised and a convertible bond with a nominal value of
€2,000,000 and a term until 30 August 2021 was issued. The mandatory convertible bond as an equity
instrument is equipped with a conversion right, at the latest at maturity, into registered ordinary shares
of 4basebio AG in the amount of 1,428,571. The conversion right may also be exercised at any time

100

4basebio | Annual Report 2019prior to this date in the period from 30 September 2018 to 10 days before maturity (but not during the
non-exercise period pursuant to section 6.4 of the contractual provisions). The bond has a conversion
ratio of €1.40 per share (subject to an adjustment of the conversion ratio as a result of the contractual
provisions set out in section 6.2 or the antidilution provisions set out in section 11) and was allocated
to the capital reserve in the amount of €1,576,153 on 31 August 2018. The interest coupon is 6.3% p.a.
and is payable in the event of early conversion, but no later than at maturity. Holders of the convertible
bond therefore have the right or the obligation to convert the bond into 4basebio AG shares by 30
August 2021 at the latest.

In addition, the mandatory convertible bond also includes a short call position on own shares. Togeth-
er with the mandatory convertible bond, the short position on treasury shares constitutes an equity
instrument and is fulfilled by the registered ordinary shares of 4basebio AG. The holder of the option
has the right at any time from 31 August 2018 to 30 August 2021 to acquire shares in 4basebio AG to the
amount of 1,428,560 at €1.40 per share, at their own discretion. If the average share price is less than
€1.40 10 days before maturity, the option period is extended by a further three years.

Furthermore, equity includes the equity option of the warrant bond, which was transferred to the capital
reserve during 2018 at the amount of £312,031 (GBP). The option writer’s position on treasury shares is
fulfilled by registered ordinary shares of 4basebio AG. From 3 September 2018 until 1 August 2023 the
holder of the option has the right, at any time and at their discretion, to acquire shares in 4basebio AG
to the amount of 594,480 at €1.40 per share.

The remaining Conditional Capital IV was cancelled by resolution of the Expedeon AG Annual General
Meeting on 5 July 2018.

The share capital of 4basebio AG was conditionally increased by up to €6.5 million through the issue
of up to 6.5 million no-par value shares by resolution of the Annual General Meeting on 20 June 2016
(Conditional Capital V). The Conditional Capital V serves to grant shares to the holders of convertible
bonds that were issued on the basis of the authorisation resolved by the General Meeting of Expedeon
AG on 20 June 2016 in the period until the cancellation of this authorisation by resolution of the General
Meeting of Expedeon AG on 5 July 2018. By resolution of the Annual General Meeting of Expedeon AG
on 5 July 2018, Conditional Capital V was reduced to €3.15 million.

During the period 601,538 shares were issued from Conditional Capital V to holders of convertible¬
bonds, which were issued by the Management Board with the approval of the Supervisory Board to the
shareholders of Innova Biosciences Ltd against contribution in kind on the basis of the authorisation to
issue convertible bonds granted by resolution of the Expedeon AG Annual General Meeting on 20 June
2016. As of 31 December 2018 the remaining Conditional Capital V amounted to €2,548,462.

Additional paid-in capital

Financial year 2019

In addition, a capital reserve for shares to be issued in connection with earn-out obligations relating to
TGR BioSciences Pty Ltd, Adelaide/Australia (€2,092 thousand) and Innova Biosciences Ltd, Cambridge/
UK (€767 thousand) was recognised in the 2019 financial year. The capital reserve was also increased
in the 2019 financial year in view of the interest arising on the mandatory convertible bond (€206 thou-
sand) and in view of share-based payment allocatons (€69 thousand) (see Note 23).

101

4basebio | Annual Report 2019Consolidated Financial Statements

Financial year 2018

As part of the capital increase in March 2018, new shares with a nominal value of €2,995 thousand and
a purchase price of €4,193 thousand were issued. Share premium of €1,198 thousand was added to the
capital reserve. In addition, shares with a premium of €163 thousand were added to the capital reserve
under the SEDA agreement. At the same time, shares not yet registered as of 31 December 2017 were
reclassified to subscribed capital to the amount of €443 thousand.

The realisation of the first year earn-our on Innova, which was settled in shares, resulted in an increase in
additional paid-in capital of €472 thousand in the 2018 financial year, of which €259 thousand represents
the premium on shares already registered. The remaining €213 thousand is attributable to shares not
yet registered and therefore also includes the nominal value of the shares.

In addition, during the 2018 financial year there were postings to the capital reserve from a mandatory
convertible bond, which was classified as an equity instrument, to the amount of €1,576 thousand; and
from a bond with warrants, the equity component of which was determined at €358 thousand.

4basebio AG directly charged the capital reserve with the costs attributable to the capital increase to
the amount of €480 thousand (2017: €1,336 thousand).

The share-based payment resulted in allocations to the capital reserve of €265 thousand (see Note 23).

18. Financial liabilities

[in €‘000]

31.12.2019

31.12.2018

Current Non-current

Total

Current Non-current

Option bond

Soft loans

Shareholder loans

Earn-out liabilities

Obligations from contracts

Other loans

329

226

188

521

1,244

259

1,573

226

217

780

Financial liabilities

1,264

1,532

2,796

447

1,277

971

422

3,171

695

1,573

629

4,579

7,476

Total

749

2,020

1,277

1,600

5,001

10,647

Option bond

On 3 September 2018 4basebio AG issued a warrant bond with a denomination of 93,750 GBP (€105
thousand) and a total nominal volume of 750,000 GBP. The loan bears interest at 10% on the respective
nominal amount and matures on 1 August 2022. In addition to interest payments on the respective nom-
inal amount, the loan is to be repaid proportionately from the 13th month of the term until maturity. As
of September 3, 2018, the bond was carried at a carrying amount of 428,594 GBP; the difference to the
amount paid out results from transaction costs for the separate option (equity instrument). The warrant
bond is not collateralised.

The bond has a current value of nil as of 31 December 2019 (31 December 2018: 54,148 GBP / €57 thou-
sand) and a non-current portion of nil (31 December 2018: 695,852 GBP and €784 thousand). The option
bond is neither a compound financial instrument nor a bond with an embedded derivative. Instead, they

102

4basebio | Annual Report 2019
are two separate instruments. In accordance with IAS 32, the bond represents an independent debt
instrument. During the 2019 financial year, interest expense of 14 GBP or €16 thousand (2018: 26,740
GBP or €30 thousand) was incurred for the liability using the effective interest method. 4basebio AG is
entitled to repay the bond prematurely at the outstanding nominal amount plus, depending on the time,
a percentage of the interest accrued but not yet paid up to the date of repayment.

As a further instrument, the warrant bond contains a short call position on own shares. The option writer
position on own shares represents an equity derivative and is settled by registered ordinary shares of Ex-
pedeon AG. The holder of the option has the right to acquire 594,000 shares in 4basebio AG at any time
between 3 September 2018 and 1 August 2023, at his own discretion, at a price of €1.40. In accordance
with IAS 32, the equity option contained in the bond with warrants represents an equity instrument, which
was recorded in the capital reserves in the amount of GBP 312 thousand or EUR 351 thousand.

Shareholder loan

A shareholder loan was issued relation to the acquisition of TGR Biosciences in 2018. This was repaid in
full in 2019.

Earn-out liabilities (contingent consideration)

The obligations to pay purchase price components mainly comprise obligations from the acquisitions
of Innova Biosciences Ltd and TGR BioSciences Pty Ltd. As part of the purchase agreement with the for-
mer owners of Innova Biosciences Ltd and TGR BioSciences Pty Ltd they will receive additional shares in
4basebio AG if future sales targets of the companies are achieved. Compared to the previous financial
year 2018, earn-out liabilities decreased by €1,374 thousand in the financial year 2019. This reduction is
due to the Abcam transaction (see Note 21).

Credit facility

In the 2018 fiscal year, Expedeon AG took out a credit facility with the right to convert into a mandatory
convertible bond. Depending on the term, the bond carries a fixed interest rate of 5% p.a. until 30 July 2018,
10% p.a. until 30 July 2019 and 15% p.a. thereafter. Furthermore, the bond is equipped with a conversion
right into registered ordinary shares of Expedeon AG, whereby a mandatory conversion takes place at
maturity at the latest.

In accordance with IAS 32, the credit facility represents a debt component and was recognised at an
original value of €1,076.94 thousand after deduction of the issuing costs and embedded derivatives within
the non-current financial liabilities. The original difference to the nominal value of €2,000 thousand in the
amount of €923.06 thousand will be distributed as interest expense over the remaining term starting in
the 2018 financial year using the effective interest method. As of 31 December 2018, there was no longer
a financial liability due to the exercise of the conversion option.

In accordance with IFRS 9, the right of conversion securitised in the credit facility represents an em-
bedded derivative that must be separated, which was recognised initially as a derivative financial asset
in the amount of €730.8 thousand. In addition, the credit facility has an interest rate dependent on the
share price and a so-called “kicker” as a further derivative that must be separated. Both components
each represent embedded derivatives that must be separated and were initially recognised as derivative
financial liabilities in the amount of €1,465.6 thousand for the variable interest rate and €188.31 thousand
for the kicker. Expedeon AG exercised its right on 31 August 2018 and converted the credit facility into
a mandatory convertible bond. In total, financial income of nil (2018: €497.6 thousand) was recognised
from derivative financial instruments during the 2019 financial year.

103

4basebio | Annual Report 2019Consolidated Financial Statements

19. Other current liabilities

[in €‘000]

Sales taxes payable

Supervisory board remuneration

Audit costs

Contract liabilities

Provision for legal and consultancy costs

Provision for earn-out

Other

Other current liabilities

Provisions and accruals

31.12.2019

31.12.2018

149

160

150

360

116

934

598

173

150

1,072

1,048

3,090

As of 31 December 2019, the 4basebio Group has formed a provision for the repayment of input sales
tax received in the amount of €149 thousand (31 December 2018: €598 thousand), which results from
the two financial years 2017 and 2018. In addition, provisions for volume discounts and warranties in the
amount of €5 thousand (31 December 2018: €33 thousand) and a provision of nil (31 December 2018:
€5 thousand) for return rights granted to certain customers were recognised as of 31 December 2019.

H. Notes to the consolidated statement of cash flows

Reconciliation of cash and cash equivalents in the consolidated balance sheet to cash and cash equiv-
alents in the consolidated statement of cash flows

[in €‘000]

Bank balances and cash in hand

Cash and cash equivalents (consolidated balance sheet)

Cash and cash equivalents from operations held for sale

Overdrawn cash

31.12.2019

31.12.2018

990

2,707

6,238

Cash and cash equivalents (consolidated statement of cash flows)

3,697

6,238

104

4basebio | Annual Report 2019Changes in financial liabilities for which cash flows have been or will be presented in the cash flow
statement as cash flows from financing activities

Financial year 2019

Financial year 2018

short-term
interest-bearing
loans

non-current
interest-bearing
loans

short-term
interest-bearing
loans

non-current
interest-bearing
loans

3,171

(2,875)

(236)

(405)

7,476

(405)

3,954

(3,954)

375

167

648

1,766

(535)

630

1,222

4,038

3,932

3,171

3,947

6,377

(955)

629

(2,357)

(39)

(126)

7,476

[in €‘000]

1 January

Cash flows

Earn-out liability (Innova Biosciences Ltd)

Earn-out liability (TGR BioSciences Pty Ltd)

Shareholder loan (TGR BioSciences Pty Ltd)

Conversion into equity

Reclassificaiton

Exchange rate differences

Other non-cash changes

31 December

I. Other explanatory notes

20. Segment reporting

In accordance with IFRS 8, segment reporting follows the management approach. The allocation of re-
sources and the internal evaluation of the 4basebio Group’s performance by the management is based
on the internal organisational and management reporting system for the entire Group. Consequently,
the 4basebio Group consists of only one business segment for the purposes of segment reporting.

Information on products and services

Reference is made to the breakdown of revenues in Note 1.

Information by geographic region

[in €‘000]

Revenues *)

Europe

USA

Rest of world

Non-current assets (as at 31.12)

Europe

USA

Rest of world

*) Prior year’s figures adjusted (for further information see Note 21)

2019

1,052

147

905

3,646

3,577

2018

1,174

359

815

17,583

16,567

224

792

105

4basebio | Annual Report 2019
Consolidated Financial Statements

The allocation of sales revenues to geographical regions was based on the location of the customer’s
registered office. Non-current assets are allocated on the basis of the amounts reported in the indi-
vidual financial statements, while intangible assets identified in the course of purchase price allocation
were allocated to the respective acquired companies. Goodwill to the amount of nil (2018: € 33,906
thousand) was not allocated to a geographical region, as goodwill is allocated to the 4basebio Group
as the only cash-generating unit.

Information on significant customers

[in €‘000]

Revenues from significant customers (customers which represent at least 10% of Group revenue)

Other revenues

Total revenue

*) Prior year’s figures adjusted (for further information see Note 21)

2019

2018 *)

1,052

1,174

21. Discontinued operations

Expedeon AG signed an agreement with Abcam plc, Cambridge/UK (London Stock Exchange: ABC; ISIN:
GB00B6774699; AIM MTF) – “Abcam” – on 11 November 2019 to sell its immunology and proteomics
businesses for €120 million in cash with effect from 1 January 2020 (subject to approval by Expedeon
AG shareholders). The Extraordinary General Meeting convened on 19 December 2019 gave its approval
to this transaction (“Abcam transaction”) and subsequently the change of name to 4basebio AG. The
agreement includes the sale and transfer of all shares in Expedeon Holdings Ltd, Cambridge/UK (hereafter
“Expedeon Holdings Ltd”), a subsidiary of 4basebio AG, formerly known as Expedeon AG. As a holding
company, Expedeon Holdings Ltd is divided into the following three divisions: the subsidiary Expedeon
Ltd, Cambridge/UK which focuses on the proteomics business, while the other two subsidiaries Innova
Biosciences Ltd, Cambridge/UK and TGR BioSciences Pty Ltd, Thebarton/Australia are active in immu-
nology. Another subsidiary of Expedeon Holdings Ltd, 4basebio Inc., San Diego/USA, was transferred
to 4basebio AG, formerly known as Expedeon AG, with effect from 30 December 2019. The assets of
the non-electrophoresis instruments were transferred from Expedeon Inc. to the buyer with effect on
2 January 2020. Under the new company name 4basebio, the 4basebio Group will combine activities
in the field of genomics, based on the expertise of the Spanish business unit 4basebio S.L.U., Madrid/
Spain. The company will focus on the production of DNA products for therapies and other applications
requiring large amounts of highly pure DNA (e.g. the fast growing markets for novel gene therapies and
gene vaccines).

In accordance with the requirements of IFRS 5, Expedeon Holdings Ltd has been classified as a dis-
posal group held for sale and discontinued operation as of 31 December 2019. In accordance with the
requirements of IFRS 5, no assets held for sale were reported in the consolidated balance sheet as at
31 December 2018, while in the consolidated income statement the previous year’s figures have been
adjusted. The explanations in the notes to the individual items of the consolidated income statement
relate primarily only to the continuing operations of the 4basebio Group.

106

4basebio | Annual Report 2019Material items within discontinued operations in the consolidated statement of
comprehensive income

[in €‘000]

Revenues

Cost of sales

Gross profit

Sales costs

General and administrative expenses

Research and non-capitalised development costs

Other operating income (expenses)

Operating result

Finance income

Finance expense

Financial result

Profit before tax from discontinued operations

Income taxes

Profit after tax from discontinued operations

Incomes taxes (discontinued operations) [in €‘000]

Current tax expense (-) or income (+)

Deferred tax expense (-) or income (+)

of which resulting from temporary differences

of which from loss carryforwards and tax credits

Total income tax

01.01. – 31.12.

2019

14,605

2018

11,954

(2,803)

(2,928)

11,802

(2,242)

(5,074)

(1,163)

(1,307)

2,016

(525)

(460)

1,556

(423)

1,133

2019

(594)

173

(421)

9,026

(2,582)

(4,104)

(837)

991

2,493

(150)

(147)

2,346

182

2,528

2018

182

(70)

252

182

107

4basebio | Annual Report 2019
Consolidated Financial Statements

Main categories of assets and liabilities classified as held for sale in the consolidated
balance sheet as at 31.12.2019

Assets [in €‘000]

Goodwill

Other intangible assets

Property, plant and equipment

Inventories

Trade receivables

Other assets

Cash and cash equivalents

Deferred tax assets

Assets held for sale

Liabilities [in €‘000]

Financial liabilities

Trade payables

Other liabilities

Deferred tax liabilities

Liabilities associated with assets held for sale

Net cash flows from discontinued operations [in €‘000]

Cash flow from operating activities

Cash flow from investing activities

Cash flow from financing activities

Change in cash and cash equivalents due to exchange rates

Change in cash and cash equivalents

Earnings per share from discontinued operations [in EUR/Share]

Undiluted earnings from discontinued operations

Diluted earnings from discontinued operations

31.12.2019

34,955

12,207

805

1,752

1,977

1,543

2,707

158

56,104

31.12.2019

5,176

783

1,969

2,161

10,088

2019

3,792

(504)

2018

2,971

(6,266)

(1,973)

3,963

156

1,471

2019

0.02

(38)

630

2018

0.05

Immediately prior to classification as a discontinued operation, the recoverable amount on individual
items of property, plant and equipment was determined. No impairment requirement was determined.

Average FTE headcount by function (discontinued operations)

2019

2018

Operations

Sales and marketing

GF&A

R&D

Total

108

4basebio | Annual Report 2019
22. Additional information on financial instruments

Financial risks

In addition to derivative financial instruments, the financial liabilities of the 4basebio Group consist
primarily of loans and trade payables. The main purpose of these financial liabilities is to finance the
business activities of the 4basebio Group. The financial assets of the 4basebio Group essentially con-
sist of trade receivables, cash and cash equivalents, and short-term deposits that result directly from
its business activities.

The 4basebio Group is exposed to various financial risks in the course of its business activities. These
include default, liquidity and market risks. The management of these risks is the responsibility of the
management of the 4basebio Group. All derivative financial transactions entered into for risk man-
agement purposes are managed centrally by the finance department. In accordance with the Group’s
internal guidelines, trading in derivatives for speculative purposes is not conducted. The guidelines for
managing the risks described below are reviewed and approved by management.

Default risks

Default risk is the risk that a business partner fails to meet its obligations under a financial instrument
or customer contract and this leads to a financial loss. The 4basebio Group is exposed to default risks
in the course of its operating activities (in particular with regard to trade receivables) as well as risks in
the course of its financing activities, including those from deposits with banks and financial institutions,
foreign exchange transactions, and other financial instruments. On the basis of the positive experience
to date, the 4basebio Group estimates the probability of occurrence to be medium, but the financial
impact to be extremely low.

The default risk from receivables from customers is managed by the respective business units based
on the guidelines, procedures and controls of the 4basebio Group for default risk management for
customers. Outstanding receivables from customers and contract assets are monitored regularly.

The need for impairment is analysed at each balance sheet date using an impairment matrix to determine
the expected credit losses. The impairment rates are determined on the basis of the number of days
past due for various customer segments (grouped together according to criteria such as geographic
region, product type, customer type, and credit rating) with similar default patterns. The calculation
includes the probability-weighted result, taking into account the interest effect as well as appropriate
and reliable information on past events, current circumstances and expected future economic con-
ditions available at the balance sheet date. Trade receivables are generally impaired if they are more
than one year overdue and not subject to enforcement action.

The maximum default risk at the balance sheet date corresponds to the carrying amount of each class
of financial assets reported. The 4basebio Group holds no collateral.

The 4basebio Group assesses the risk concentration in trade receivables and contract assets as mod-
erate, as its customers are also moderately concentrated in the USA and Europe.

Information on the credit risk of trade receivables and contract assets of the 4basebio Group using an
impairment matrix is shown below:

109

4basebio | Annual Report 2019Consolidated Financial Statements

Impairment matrix (simplified approach) [in €‘000]

Trade receivables

31.12.2019

Contract assets

Not overdue

< 30 days
overdue

30 to 60 days
overdue

61 to 90 days
overdue

> 90 days
overdue

Expected credit loss rate

0.03%

2.00%

18.93%

Net book value

Expected credit loss

581

146

180

158

Impairment matrix (simplified approach) [in €‘000]

Trade receivables

31.12.2018

Contract assets

Not overdue

< 30 days
overdue

30 to 60 days
overdue

61 to 90 days
overdue

> 90 days
overdue

Expected credit loss rate

Net book value

Expected credit loss

3.206

2.11%

579

0.21%

1.967

0.03%

2.04%

35.26%

378

103

156

Liquidity risk

The 4basebio Group monitors the risk of a possible liquidity bottleneck using regular budget and planning
measures. The aim of the 4basebio Group is to ensure adequate liquidity in order to bridge short-term
liquidity bottlenecks.

The following table shows the financial liabilities by maturity class based on the remaining time to ma-
turity at the respective balance sheet date. A reconciliation of the amounts shown in the consolidated
balance sheet is not possible, as the table shows non-discounted cash flows.

[in €‘000]

31.12.2019

31.12.2018

Trade payables

Option bond

Soft loans

Shareholder loans

Earn-out liabilities

Obligations from contracts

Other loans

Total

Maturity
<1 year

Maturity
>1 < 5 years

Maturity
> 5 years

336

329

188

747

1,600

763

481

259

1,051

481

Total

336

1,573

217

1,006

3,132

Maturity
<1 year

Maturity
>1 < 5 years

Maturity
> 5 years

1,498

447

1,277

971

422

4,669

695

901

629

4,579

6,804

672

Total

1,498

749

2,020

1,277

1,600

5,001

12,145

110

4basebio | Annual Report 2019
Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due
to changes in market prices. Market risk includes currency and interest rate risks.

Currency risk is the risk that the fair value or future cash flows of a financial instrument are exposed
to fluctuations due to changes in exchange rates. Exchange rate fluctuations have an impact on the
presentation of assets and liabilities in the consolidated financial statements of 4basebio AG prepared
in euros, insofar as assets and liabilities are denominated in currencies other than euros. To control
currency risk the 4basebio Group tries to carry out foreign cash flows in and out as promotly as possible
and in a manner appropriate to that currency. Hedging transactions are not currently used. The assets
and liabilities of the 4basebio Group reported in foreign currency largely relate to assets and liabilities
denominated in US dollars and British pounds, which essentially result from the Group’s business ac-
tivities. The 4basebio Group reviews currency requirements in the course of the year in order to reduce
currency risk if needed. In addition, the 4basebio Group generally endeavours to minimise the volume
of assets held and liabilities entered into in foreign currencies.

The following table shows the effects on the result for the period before taxes and equity, which result
from a five percent positive or negative development of either the British pound or the US dollar against
the euro, the two most important currencies in which the 4basebio Group carries out transactions in
addition to the euro:

Sensitivity analysis [in €‘000]

USD development against EUR

GBP development against EUR

Exchange rate
movement

Impact on profit
before tax

Impact on equity
before tax

Impact on profit
before tax

Impact on equity
before tax

2019

2018

+5%

-5%

+5%

-5%

20)

152

(152)

(25)

(95)

(2)

(40)

(2)

(8)

111

4basebio | Annual Report 2019

Consolidated Financial Statements

Categories of financial instruments as at
31.12.2019 [in €‘000]

Carrying amount per valuation category (IFRS 9)

Financial assets

Financial liabilities

At fair value
through profit
or loss

At amortised
cost

At fair value
through profit
or loss

At amortised
cost

Uncategorised *)

Total

581

990

4,684

1,532

1,264

336

10,088

581

990

51,420

56,104

1,532

1,264

336

10,088

Current assets

Trade receivables

Other financial assets

Cash and cash equivalents

Assets held for sale

Non-current liabilities

Financial liabilities

Current liabilities

Financial liabilities

Trade payables

Liabilities relating to assets held for sale

*) no scope of IFRS 7

Categories of financial instruments as at
31.12.2018 [in €‘000]

Carrying amount per valuation category (IFRS 9)

Financial assets

Financial liabilities

At fair value
through profit
or loss

At amortised
cost

At fair value
through profit
or loss

At amortised
cost

Uncategorised *)

Total

2,627

298

6,238

1,930

7,476

1,241

1,498

1,240

2,627

1,538

6,238

7,476

3,171

1,498

Current assets

Trade receivables

Other financial assets

Cash and cash equivalents

Non-current liabilities

Financial liabilities

Current liabilities

Financial liabilities

Trade payables

*) no scope of IFRS 7

112

4basebio | Annual Report 2019
Measurement of fair value (fair value hierarchy)

The following table contains a breakdown of financial assets and liabilities measured at fair value accord-
ing to the measurement levels described in IFRS 13 (the so-called “fair value hierarchy”). The valuation
levels shown in the table are defined as follows:

• Level 1: Financial instruments traded on active markets, whose prices were used unchanged for

valuation purposes.

• Level 2: Valuation is based on valuation methods in which the input factors are derived directly or

indirectly from observable market data.

• Level 3: Valuation is based on valuation techniques in which the input factors are not exclusively

based on observed market data.

Fair value hierarchy as of 31.12.2019 [in €’000]

Level 1

Level 2

Level 3

Total

Debts

Financial liabilities measured at fair value through profit or loss

Soft loans

Financial liabilities for which a fair value is reported:

Fixed interest loans

Total

1,573

747

2,320

1,573

747

2,320

Fair value hierarchy as of 31.12.2018 [in €’000]

Level 1

Level 2

Level 3

Total

Debts

Financial liabilities measured at fair value through profit or loss

Earn-out liabilities

Financial liabilities for which a fair value is reported:

Fixed interest loans

Total

1,930

10,647

1,930

12,577

fair value of the respective financial instruments. The 4basebio Group has used the following methods
and assumptions to determine fair values:

• Long-term fixed and variable interest receivables/loans are evaluated by the 4basebio Group based

on parameters such as interest rates, country-specific risk factors, creditworthiness of individual
customers, and the risk characteristics of the financed project. Based on this valuation, allowances
are made to reflect the estimated default of these receivables.

• The fair values of the interest-bearing loans of the 4basebio Group are determined on the basis of the

discounted cash flow method. A discount rate is used which reflects the borrowing rate of the issuer
at the end of the reporting period. As of 31 December 2019, the Group’s own non-performance risk
was classified as low, as in the previous financial year 2018.

The balance sheet item “Financial liabilities” includes purchase price components from company ac-
quisitions that are measured at fair value through profit or loss. The fair value is calculated as the present
value of the expected discounted cash flows based on the planned further business development of the
companies concerned. The valuation parameters for determining fair value are based on unobservable
market data (Level 3).

113

4basebio | Annual Report 2019
Consolidated Financial Statements

Information on capital management

The objectives of capital management are to secure liquidity and thus to ensure the company’s ability to
continue as a going concern as well as a sustainable increase in the company’s value combined with an
adequate return on equity. The 4basebio Group manages the capital structure and makes adjustments
taking into account changes in the economic environment. The equity ratio of the 4basebio Group as of
31 December 2019 is 77.3% (31 December 2018: 72.5%). Lenders to the 4basebio Group are entitled to
increase the interest rate in the event of non-compliance with certain key financial ratios (“covenants”)
specified in the loan agreements and can, if necessary, terminate the loans and make them immediately
payable. All key financial figures were adhered to both in the 2019 financial year and in the previous year.
As of 31 December 2019 and 31 December 2018 respectively, no changes were made to the objectives,
guidelines and procedures for capital management.

Deposits

The default risk from credit balances with banks and financial institutions is managed in accordance with
Group guidelines. Investments with liquidity surpluses are only made with approved business partners
and within the credit limit allocated to the respective party.

Disproportionately high concentration of risk

Concentrations of risk arise when several counterparties engage in similar business activities or activities
in the same geographic region or have economic characteristics that cause them to be equally affected
in their ability to meet their contractual obligations in the event of changes in the economic or political
situation or other conditions. The 4basebio Group reacts sensitively to changes in the life science sector
and the associated changes in demand.

23. Share-based payments

General valuation policies

Equity settled share-based compensation for employees, or for other parties who render similar ser-
vices, is recognised at the fair value of the equity instruments at grant date.

The full amount of the fair value of the equity instruments, measured at the grant date, is recognised as
an expense with a corresponding increase to equity (reserve for compensation to employees settled
in equity instruments) on a straight-line basis over the vesting period and is based on the Company’s
expectation of the number of equity instruments that will vest. At the end of each reporting period the
Company will examine the number of equity instruments expected to vest. The presentation requires
that the total expense reflect any changes to the estimates and to results in a corresponding adjustment
to the reserve for compensation to employees settled in equity instruments.

As of the balance sheet date the Company has two issued option series, with two different “Performance“
agreements. These are weighted separately.

Employee share options programs of the Company

4basebio AG (formerly: Expedeon AG and Sygnis AG) has implemented a share option program “Ak-

114

4basebio | Annual Report 2019
tien-optionsprogramm 2017“ for eligible employees. The shareholders’ meeting on 7 July 2017 has
authorised the company to issue up to 4 million options until 6 July 2022 to its current and future
employees, members of the Executive Board and management organs as well as the employees of its
current and future affiliated companies.

In addition, the shareholders’ meeting on 9 July 2019 has authorised the company to issue up to 1
million options until 8 July 2023 to its current and future employees, members of the Executive Board
and management organs as well as the employees of its current and future affiliated companies. No
options have been awarded under the 9 July 2019 scheme.

Upon exercise the option will be exchanged for a new registered share of 4basebio AG. For exercise of
the option the employees should pay an individual settled “exercise price“. The underlying exercise
price for each share comprised in an option is measured as the higher amount of the following:

• the closing price of a share on the Xetra trading system (or a comparable successor system) on the

Frankfurt Stock Exchange on the trading day preceding the grant date, or;

• 95 % of the average closing price of a share in Xetra trading system (or a comparable successor

system) on the Frankfurt Stock Exchange during the 10 day period preceding the grant date, but;

• under no circumstances lower than 1.00 Euro.

The options entitle neither a dividend claim nor a voting right. The options can be exercised at any time
from the end of the holding period to its expiration date. The number of granted options is determined
by the share option plan 2017 approved by the shareholders’ meeting. In general, the share options
plan is subject to the vesting restrictions that the consolidated annual revenue of the 4basebio group
should exceed €20 million. Furthermore, quantitative objectives are outlined in the individual criteria:

• Membership of the company
• Development of the stock price

The following share-based compensation agreements have been settled in former reporting periods
under which options still remain:

Option

Series 1

Series 2

Series 3

Series 4

No.

Grant date

Expiration date

Exercise price

Grant date fair value

490,000

1,100,000

160,000

1,550,000

21.12.2017

20.12.2026

03.01.2018

02.01.2028

20.04.2018

19.04.2028

22.05.2018

21.05.2028

1.506

1.470

1.456

1.420

0.4309

0.4232

0.3658

0.3617

During the reporting period, certain employee options were cancelled so that at the end of the report-
ing period 2,040,000 share options remain (from Series 2: 570,000; Series 3: 100,000; and Series
4: 1,370,000). No share-based compensation agreements have been settled in the reporting period
where options are outstanding.

The options can be exercised upon a term of 4 years (holding time according to § 193 Abs. 2 Nr. 4 AktG)
and a consolidated annual revenue of €20 million (performance target by § 193 Abs. 2 Nr. 4 AktG) and
will be expired after 10 years.

115

4basebio | Annual Report 2019
Consolidated Financial Statements

Fair value of stock options granted

The employee stock options (calls) were valued using an option valuation model developed by John Hull
and Alan White. The expected volatility p.a. was derived from the historical volatility of the 4basebio AG
share. For this purpose, the standard deviation of the historical, daily changes in share price yields over
the past 4 years was calculated and the expected volatilities p.a. were derived from this. Furthermore,
it was assumed in the exercise behaviour that option holders will exercise their options prematurely
if the share price is 100% above the respective exercise price. The model was based on the following
assumptions and valuation parameters:

Employee Call Options; Series 2

Stock price Expedeon AG (Xetra Close)

Exercise price

Vesting periods in year

Expected volatility (in % p.a.)

Max. remaining term until valuation date (years)

Expiration date

Dividend yield (in % p.a.)

Risk-free interest rate (in %)

Employee Exit Rate pre-vesting (% p.a.)

Employee Exit Rate post-vesting (% p.a.)

Expected average term until exercise (years)

Fair Value in Euro

Employee Call Options; Series 3

Stock price Expedeon AG (Xetra Close)

Exercise price

Vesting periods in year

Expected volatility (in % p.a.)

Max. remaining term until valuation date (years)

Expiration date

Dividend yield (in % p.a.)

Risk-free interest rate (in %)

Employee Exit Rate pre-vesting (% p.a.)

Employee Exit Rate post-vesting (% p.a.)

Expected average term until exercise (years)

Fair Value in Euro

Employee Call Options; Series 4

Stock price Expedeon AG (Xetra Close)

Exercise price

Vesting periods in year

Expected volatility (in % p.a.)

116

Valuation date 03.01.2018

1.492

1.470

4.00000000

88.05

10.00000000

02.01.2028

0.05

6.90

0.4232

Valuation date 20.04.2018

1.444

1.456

4.00000000

74.51

10.00000000

19.04.2028

0.07

6.82

0.3658

Valuation date 22.05.2018

1.436

1.420

4.00000000

73.19

4basebio | Annual Report 2019
Max. remaining term until valuation date (years)

Expiration date

Dividend yield (in % p.a.)

Risk-free interest rate (in %)

Employee Exit Rate pre-vesting (% p.a.)

Employee Exit Rate post-vesting (% p.a.)

Expected average term until exercise (year)

Fair Value in Euro

10.00000000

21.05.2028

0.06

6.80

0.3617

Changes to the share options during the reporting period

None of the outstanding share options is exercisable at the reporting date 31 December 2019, as was
the case as the reporting date 31 December 2018.

24. Contingent liabilities and other financial obligations

The 4basebio Group is occasionally involved in legal disputes in the course of its business activities.
Management is not aware of any events that would have a material adverse effect on earnings, liquid-
ity, or financial position. Any risks from legal disputes are taken into account by setting up appropriate
provisions.

Expenses for off-balance sheet leases amounted to €30 thousand in the 2019 financial year, of which
€29 thousand is attributable to current leases and €1 thousand to leases for assets of minor value.

25. Related parties

Related parties as defined by IAS 24 are legal or natural persons that can exert influence on the 4base-
bio Group or are subject to control, joint management or significant influence by 4basebio AG. Related
parties are also members of management in key positions, their close family members and companies
that are controlled, jointly controlled or significantly influenced by this group of persons.

With regard to the 4basebio Group, transactions with related parties concern business transactions
with the companies included in the consolidated financial statements. All transactions are carried out
under normal market conditions and are completely eliminated in the preparation of the consolidated
financial statements. In this respect, there are no effects on the asset, financial or earnings situation
of the 4basebio Group.

Since 25 February 2015 the Science & Innovation Link Office, S.L. (SILO), Madrid/Spain, has been
providing project support consulting services to 4basebio, S.L.U. (formerly Expedeon, S.L.U.), Madrid/
Spain. The member of the Supervisory Board of 4basebio AG Dr Cristina Garmendia Mendizábal and
the former member Mr Pedro Agustín del Castillo are the main shareholders of Science & Innovation
Link Office, S.L. (SILO), Madrid, Spain. For these consulting services, 4basebio, S.L.U., Madrid/Spain, paid
an amount of €12,165 (2018: €27,510) to Science & Innovation Link Office, S.L. (SILO), Madrid/Spain in
the 2019 financial year..

Dr Heikki Lanckriet has pledged 400,000 of his shares in 4basebio AG for security on a public low-interest
loan that 4basebio S.L.U. receives from Spanish institutions for its research and development activities

117

4basebio | Annual Report 2019
Consolidated Financial Statements

in Spain. In accordance with the agreement between the 4basebio Group and Dr Heikki Lanckriet, it was
agreed that the 4basebio Group would make a compensation payment to Dr Heikki Lanckriet for the
4basebio Group to use this pledge as security for the fulfilment of its obligation from the public loan
received from the Spanish institution by paying a so-called share pledge fee. This fee amounts to €10
thousand per year. The pledged shares are released as soon as a company transaction (e.g. a share or
asset transaction of 4basebio AG to a third party) takes place or when the 4basebio Group takes over
the payments of Dr Heikki Lanckriet’s contractual conditions in a cash-effective manner.

Management Board members

• Dr. Heikki Lanckriet (CEO and CSO), member of the Management Board since 2016,
• David Roth (CFO), member of the Management Board since 2017, appointed until 31 December 2023.

appointed until 31 December 2023.

Total remuneration of the Management Board members[in €‘000]

Benefits due in the short term

Total

2019

640

2018

561

Detailed information on the remuneration system and the remuneration components of the mem-
bers of the Management Board are presented in the remuneration report within the 4basebio Group
management report.

Supervisory Board Members

• Dr. Cristina Garmendia Mendizábal (Chairwoman of the Supervisory Board until 4 April 2019)
• Joseph M. Fernández

Independent entrepreneur, Madrid, Spain

Chairman of the Supervisory Board
Chairman of the Board of Directors of Active Motif Inc, Carlsbad, California, USA

Independent entrepreneur, Cambridge, UK

Chairman of the Executive Board of Unnamed Ltd, Cambridge, UK

• Dr. Trevor Jarman
• Tim McCarthy
• Peter Llewellyn-Davies
• Pilar de la Huerta
• Hansjörg Plaggemars (Member of the Supervisory Board since 9 July 2019)

Chief Executive Officer of ADL BioPharma, Madrid, Spain

Management Consultant, Stuttgart, Germany

Chief Executive Officer and Chief Financial Officer of APEIRON Biologics AG, Vienna, Austria

Total remuneration of the Supervisory Board members [in €‘000]

Fixed remuneration

Total

2019

162

2018

160

118

4basebio | Annual Report 2019Detailed information on the remuneration system and the remuneration components of the mem-
bers of the Supervisory Board are presented in the remuneration report within the 4basebio Group
management report.

26. Auditor’s fees and services

At the Annual General Meeting on 9 July 2019, the shareholders of 4basebio AG appointed Ernst & Young
GmbH Wirtschaftsprüfungsgesellschaft (Ernst & Young GmbH), Mannheim, as the auditor and group
auditor of 4basebio AG for the 2019 financial year. Expenses amounting to €163 thousand (2018: €268
thousand) were recognised for services provided by Ernst & Young GmbH. Of the total amount, €129
thousand (2018: €183 thousand) relates to audit services and €34 thousand (2018: €85 thousand) to
tax advisory services.

27. Declaration of compliance with § 161 AktG

The Management Board and Supervisory Board of 4basebio AG have issued the declaration of compliance
with the recommendations of the German Corporate Governance Code (DCGC) in accordance with §
161 AktG and made it available to the shareholders. The complete declaration is permanently available
on the company’s homepage (www. investors.expedeon.com/en/corporate governance/declaration of
conformity). The declarations of compliance from previous financial years are also available.

28. Going concern assumption

The 4basebio Group has prepared the financial statements for the 2019 financial year on the basis of
the going concern assumption, also in view of the classification of significant business areas as dis-
continued operations (see Note 21). 4basebio AG retains approximately 38% of its operating assets at
the level of the individual financial statements and approximately 15% at the level of the consolidated
financial statements. These remaining parts of the company are shown as continuing operations in the
consolidated financial statements for 2019. The 4basebio Group intends to use part of the proceeds
from the sale to continue its growth, purchase and development strategy in the remaining genomics
business. 4basebio AG will continue this area with the remaining Spanish business unit 4basebio S.L.U.,
Madrid/Spain and on the basis of the company’s own TruePrime™ technology. Future activities will focus
on DNA production and on the construction of GMP-certified production facilities. The company will
supply DNA products for research and therapy as well as for other applications requiring large amounts
of highly purified DNA. 4basebio AG is thus targeting the rapidly growing market for novel gene therapies.
The 4basebio Group has drawn up a business plan for 2020, which foresees a positive result before
taxes, depreciation and PPA adjustments for 2020 and expects that its activities will be managed with
the resources available on 31 December 2019. On the basis of the business plan and the available
financial resources, the management assumes that the 4basebio Group has sufficient liquid funds to
maintain the current business operations.

119

4basebio | Annual Report 2019
Consolidated Financial Statements

29. Significant events after the balance sheet date

On 2 January 2020 4basebio AG, formerly known as Expedeon AG, concluded the transaction with
Abcam plc, Cambridge/UK (London Stock Exchange: ABC; ISIN: GB00B6774699; AIM MTF) for the sale
of its immunology and proteomics business for €120 million in cash with effect from 1 January 2020.
The Annual General Meeting convened for an extraordinary meeting on 19 December 2019 approved
this transaction. The agreement includes the sale and transfer of all shares in Expedeon Holdings Ltd,
Cambridge/UK, a subsidiary of 4basebio AG, formerly known as Expedeon AG. The completion of the
transaction triggers a payment of €120 million, of which €105.6 million is due immediately and €14.4
million is booked to an escrow account for two years in accordance with the contractual agreement. In
future, the activities in the field of genomics will be bundled under the new company name 4basebio,
based on the expertise of the Spanish business unit 4basebio S.L.U. in Madrid/Spain. The company will
focus on the manufacture of DNA products for therapies and other applications requiring large amounts
of highly purified DNA (e.g. the fast growing markets for advanced gene therapies and gene vaccines).

The change of name of Expedeon AG to 4basebio AG, which was approved in the extraordinary general
meeting on 19 December 2019, was entered in the commercial register on 13 January 2020. With the
change of name to 4basebio AG, the company’s shares will be listed and traded under the new stock
exchange code 4BSB. The company’s shares will continue to be traded on the German Stock Exchange
in Frankfurt under the unchanged WKN (A2YN80).

On 21 January 2020, 4basebio AG decided on the basis of the authorisation of the extraordinary gen-
eral meeting of 19 December 2019 and with the approval of the Supervisory Board to acquire up to
2,056,452 own shares (approx. 4% of the Company’s share capital) as part of a share buyback offer.
On 10 February 2020, the offer was increased to acquire up to 5,230,726 own shares (approx. 10% of
the Company’s share capital) which were acquired on 21 February 2020. 4basebio AG is considering
holding the repurchased shares until further notice in order to use them later in accordance with the
authorisation of the Annual General Meeting of 19 December 2019 - for example as consideration for
the acquisition of companies or investments as part of the continued buy & build strategy. Shares not
required will be cancelled.

On 21 February 2020, the Company held 5,230,667 own shares in treasury following the completion of
a share buyback. On 20 April 2020, the management and supervisory boards of the company resolved
to redeem these shares, a process which is now underway.

Subsequent to year end, the closure of the 4basebio Inc. business unit was announced. The company
expects operating losses at this subsidiary until its final closure in the course of the 2020 financial year.
In addition, additional costs are expected for the closure of the operations.

120

4basebio | Annual Report 2019The effects of the Coronavirus pandemic, which is ongoing at the time of the preparation of the consoli-
dated financial statements, on the European and global economy in general and on the 4basebio Group
in particular cannot be estimated at the present time due to the current dynamics and the unforeseeable
duration. Particularly in view of the already comprehensively initiated stabilising measures to mitigate
the negative financial effects, the Management Board does not consider the economic situation of the
4basebio Group to be at risk beyond the end of the 2019 financial year at the time of preparation of the
consolidated financial statements. With the conclusion of the Abcam transaction, the 4basebio Group
has sufficient liquid funds to cope with the negative consequences of this pandemic

Heidelberg, April 28, 2020

Dr. Heikki Lanckriet
CEO

David Roth
CFO

121

4basebio | Annual Report 2019

Independent Auditor’s
Report

Note on the audit of the consolidated
financial statements and the Group
management report

122122 4basebio | Annual Report 2019

4basebio | Annual Report 20194basebio | Annual Report 2019

123123

4basebio | Annual Report 2019Independent Auditor’s Report

To 4basebio AG

Note on the audit of the consolidated financial statements
and the Group management report

Audit opinions

We have audited the consolidated financial statements of
4basebio AG, Heidelberg, and its subsidiaries (the Group),
comprising the consolidated statement of comprehensive
income for the financial year from 1 January to 31 December
2019, the consolidated balance sheet as at 31 December
2019, the consolidated statement of changes in equity and
the consolidated cash flow statement for the financial year
from 1 January to 31 December 2019 and the notes to the
consolidated financial statements, including a summary of
significant accounting policies. We have also audited the group
management report of 4basebio AG, which was combined
with the management report of the Company, for the financial
year from 1 January to 31 December 2019. In accordance with
German legal requirements, we have not audited the contents
of the Group management report in section 8.

In our opinion, based on the findings of our audit

• the accompanying consolidated financial statements com-

ply in all material respects with IFRSs as adopted by the EU
and the additional requirements of German law pursuant
to Section 315e (1) HGB and give a true and fair view of the
net assets and financial position of the Group as of 31 De-
cember 2019 and of its results of operations for the fiscal
year from 1 January to 31 December 2019 in accordance
with these requirements; and

• the attached Group management report provides a suit-

able understanding of the Group’s position. In all material
respects this combined management report is consistent
with the consolidated financial statements, complies with
German legal requirements and suitably presents the op-
portunities and risks of future development. Our audit
opinion on the Group management report does not extend
to the content of the above-mentioned Group declaration
on corporate governance..

In accordance with § 322 (3) sentence 1 HGB, we declare that
our audit has not led to any objections to the correctness
of the consolidated financial statements and the Group
management report.

Basis for the audit opinion

124

We conducted our audit of the consolidated financial state-
ments and the Group management report in accordance
with § 317 HGB and the EU Auditor Regulation (No. 537/2014;
hereinafter “EU-APrVO”) and in compliance with the gener-
ally accepted German auditing standards established by
the Institut der Wirtschaftsprüfer (IDW). Our responsibility
under these rules and principles is described in more detail
in the section “Auditor’s Responsibility for the Audit of the
Consolidated Financial Statements and the Group Man-
agement Report” in our audit opinion. We are independent
of the Group companies in accordance with European law
and German commercial and professional regulations and
have fulfilled our other German professional duties in ac-
cordance with these requirements. In addition, we declare
pursuant to Article 10 (2) (f ) EU-APrVO that we have not
performed any prohibited non-audit services pursuant to
Article 5 (1) EU-APrVO. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide
a basis for our audit opinion on the consolidated financial
statements and the Group management report.

Audit issues of particular importance in the audit of
the consolidated financial statements

Matters of particular importance are those matters which in
our opinion, based on our professional judgement, are most
relevant to our audit of the consolidated financial statements
for the financial year from 1 January to 31 December 2019.
These matters have been considered in the context of our
audit of the consolidated financial statements as a whole
and in forming our opinion thereon; we do not express a
separate opinion on these matters.

In the following, we describe the audit issues that we
consider to be particularly important:

1. Discontinued Immunology and Proteomics

Division

Reasons for designation as a particularly important
audit area
Die gesetzlichen Vertreter der 4basebio AG haben mit Vertrag
vom 11. November 2019, unter Vorbehalt der Zustimmung
der Anteilseigner, die Veräußerung des Immunologie- und
Proteomik-Geschäfts an die Abcam Plc., Cambridge/UK
vereinbart. Die Zustimmung der Anteilseigner erfolgte auf
der außerordentlichen Hauptversammlung am 19. Dezember
2019 in Heidelberg. Die Vermögenswerte und Schulden der
Immunologie- und Proteomik-Sparte wurden entsprechend
IFRS 5 als zur Veräußerung bestimmte Vermögenswerte
und Schulden und alle betreffenden Transaktionen in der

4basebio | Annual Report 2019Konzern- Gewinn- und Verlustrechnung und in der Kon-
zern-Kapitalflussrechnung für alle berichteten Zeiträume
(endgültige Veräußerung am 2. Januar 2020) als aufge-
gebener Geschäftsbereich nach IFRS 5 klassifiziert. Wir
haben diesen Sachverhalt als besonders wichtigen Prüfungs-
sachverhalt bestimmt, da das Immunologie- und Proteo-
mik-Geschäft einen signifikanten Anteil des Geschäfts der
Gruppe ausmacht und die Klassifizierung als aufgegebener
Geschäftsbereich Auswirkungen auf alle Bestandteile des
Konzernabschlusses hat.

Auditing procedure
The focus of our audit procedures was to separate the dis-
continued operations of the immunology and proteomics
division from continuing operations and to measure the
assets and liabilities of the discontinued operation. With
regard to the disclosure as discontinued operation, we have
assessed whether the requirements of IFRS 5 are met. For
the valuation, we dealt with the underlying business pro-
cesses and carried out individual case examinations. The
audit procedures included reconciling the gross sales price
with the sales contract and the net assets with the closing
balance sheet. In addition, we reviewed the assumptions
used to define and measure the assets and liabilities based
on the underlying contracts, compared them with the valu-
ations from previous periods and discussed them with the
legal representatives of the company. We also examined
the completeness and accuracy of the disclosures in the
notes relating to the discontinued operation in accordance
with IFRS 5.

Our audit did not give rise to any objections with regard to the
disclosure as discontinued operation and the measurement
of the assets and liabilities of the discontinued operation.

Reference to related information
The Company has made disclosures on the recognition
and measurement of the discontinued operation in the
notes to the consolidated financial statements in section
“D. Significant accounting policies applied” and in note “21.
Discontinued operations”.

2. Recognition and measurement of deferred taxes

Reasons for designation as a particularly important
audit subject
The recognition and measurement of deferred tax assets
and liabilities requires a complete determination of the
differences between the recognition and measurement
of assets and liabilities in accordance with the respective
local tax regulations and accounting under IFRS, as well as
a determination of tax loss carryforwards. Due to different,
usually complex local tax regulations, this requires extensive

calculations. Detailed knowledge of the applicable tax law
is required for this and for the measurement of deferred
tax assets and liabilities. In addition, the assessment of the
usability of deferred tax assets is based on the expectations
of the legal representatives regarding the economic devel-
opment of the company, which is influenced by the current
market environment and future market developments. It is
therefore subject to discretion. In view of the complexity of
the matter and the associated susceptibility to error and
the scope for discretion, the recognition and measurement
of deferred taxes was one of the most significant issues in
our audit.

Auditing procedure
We have dealt with the process set up by the legal repre-
sentatives for the complete recognition and measurement
of deferred taxes. With the involvement of tax experts with
knowledge of the respective local tax law, we have carried
out spot checks to identify and quantify differences between
the recognition and measurement of assets and liabilities in
accordance with tax regulations and IFRS accounting, and
the application of the appropriate tax rate in accordance with
the requirements of IAS 12. We have examined the calculation
of deferred taxes carried out by the legal representatives for
arithmetical correctness. With regard to the recoverability of
deferred tax assets from temporary differences and from
loss carryforwards, we examined the tax planning made by
the legal representatives to ensure that it was in line with
corporate planning. In addition, we examined the tax planning
to determine whether the Group-wide planning horizon was
used to determine the usability of tax loss carryforwards
and whether the respective country-specific tax regulations
were observed.

Our audit did not give rise to any objections regarding the
recognition and measurement of deferred taxes.

Reference to related information
The company has made disclosures on the recognition and
measurement of deferred taxes in the notes to the consolidat-
ed financial statements in section “D. Significant accounting
policies applied” and in note “12. Deferred tax assets and
liabilities”.

Other information

The legal representatives are responsible for other information.
Other information includes the above-mentioned corporate
governance statement.

Our audit opinion on the consolidated financial statements
and the Group management report does not extend to the

125

4basebio | Annual Report 2019Independent Auditor‘s Report

other information, and accordingly we do not express an audit
opinion or any other form of conclusion on these matters.

the Group management report.

In connection with our audit, we have a responsibility to
read the other information and assess whether the other
information

• contain material inconsistencies with the consolidated

financial statements, the Group management report or
our knowledge gained during the audit, or

• appear to be substantially misrepresented elsewhere.

Management’s Responsibility for the Consolidated Finan-
cial Statements and the Group Management Report
Management is responsible for the preparation and fair pre-
sentation of these consolidated financial statements in ac-
cordance with IFRSs as adopted by the EU, and the additional
requirements of German law pursuant to § 315e Abs. 1 HGB
and German commercial law, and for ensuring that the con-
solidated financial statements give a true and fair view of the
net assets, financial position and results of operations of the
Group in accordance with these requirements. Furthermore,
the legal representatives are responsible for the internal con-
trols that they have determined to be necessary to enable the
preparation of consolidated financial statements that are free
from material misstatements, whether due to fraud or error.

In preparing the consolidated financial statements, the legal
representatives are responsible for assessing the Group’s
ability to continue as a going concern. They are also respon-
sible for disclosing, where relevant, the matters relating to
the Group’s ability to continue as a going concern. They are
also responsible for disclosing, where relevant, the matters
relating to the Group’s ability to continue as a going concern.
Furthermore, they are responsible for accounting on a going
concern basis unless the Group is to be wound up or decom-
missioned or there is no realistic alternative to such.

In addition, the legal representatives are responsible for
the preparation of the Group management report, which
as a whole provides a suitable view of the Group’s position
and suitably presents the opportunities and risks of future
development. Furthermore, the legal representatives are
responsible for the precautions and measures (systems)
which they have deemed necessary to enable the preparation
of a Group management report in accordance with German
legal requirements and to provide sufficient suitable evidence
for the statements made in the Group management report.

The Supervisory Board is responsible for monitoring the
accounting and financial processes of the Group for the
preparation of the consolidated financial statements and

Auditor’s responsibility for the audit of the consolidated
financial statements and the Group management report
Our objective is to obtain reasonable assurance as to whether
the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error,
and whether the Group management report as a whole pro-
vides a suitable view of the Group’s position and suitably
presents the opportunities and risks of future development
in all material respects in accordance with the consolidated
financial statements and the findings of our audit, as well
as to issue an audit opinion which includes our conclusions
on the consolidated financial statements and the Group
management report.

Adequate assurance is a high degree of certainty, but does
not guarantee that an audit conducted in accordance with
§ 317 HGB and the EU-APrVO and in compliance with the
generally accepted German auditing standards established
by the Institut der Wirtschaftsprüfer (IDW) will always detect
a material misstatement. Misstatements can result from
violations or inaccuracies and are considered material if it
could reasonably be expected that they could individually or
collectively influence the economic decisions of addressees
made on the basis of these consolidated financial statements
and the Group management report.

During the audit we exercise due discretion and maintain a
critical attitude. Beyond that

• we identify and assess the risks of material misstatement

of the consolidated financial statements and the group
management report, whether due to fraud or error, plan
and perform the audit procedures to respond to these risks
and obtain audit evidence sufficient and appropriate to
provide a basis for our audit opinion. The risk that material
misstatements will not be detected is higher for violations
than for inaccuracies, as violations may involve fraudulent
collusion, falsification, intentional incompleteness, mis-
leading statements or the invalidation of internal controls;

• we obtain an understanding of the internal control system

relevant to the audit of the consolidated financial state-
ments and the procedures and measures relevant to the
audit of the group management report in order to plan audit
procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the
effectiveness of these systems;

• we evaluate the appropriateness of accounting policies

used and the reasonableness of accounting estimates and
related disclosures made by management;

126

4basebio | Annual Report 2019• we draw conclusions about the appropriateness of the

accounting policies used by the legal representatives of
the Group’s going concern basis and, based on the audit
evidence obtained, whether there is any material uncertainty
related to events or conditions that may cast significant
doubt upon the Group’s ability to continue as a going con-
cern. If we conclude that a material uncertainty exists, we are
obliged to draw attention in our audit opinion to the related
disclosures in the consolidated financial statements and
the group management report or, if these disclosures are
inappropriate, to modify our respective audit opinion. We
draw our conclusions on the basis of the audit evidence
obtained up to the date of our audit opinion. However,
future events or circumstances may result in the Group
being unable to continue its operations;

• we assess the overall presentation, structure and content

of the consolidated financial statements, including the
disclosures and whether the consolidated financial state-
ments present the underlying transactions and events in
such a way that the consolidated financial statements give
a true and fair view of the net assets , financial position and
results of operations of the Group in accordance with IFRS
as adopted by the EU and the additional requirements of
German law pursuant to Section 315e (1) HGB;

• we obtain sufficient and appropriate audit evidence for

the accounting information of the companies or business
activities within the group to enable us to express an opinion
on the consolidated financial statements and the group
management report. We are responsible for instructing,
monitoring and performing the audit of the consolidated
financial statements. We are solely responsible for our
audit opinions;

• we assess the consistency of the Group management

report with the consolidated financial statements, its legal
representatives and the picture of the Group’s situation
conveyed by it;

• we perform audit procedures on the future-oriented state-

ments made by the legal representatives in the group man-
agement report. On the basis of sufficient and appropri-
ate audit evidence, we verify in particular the significant
assumptions underlying the forward-looking statements
made by the legal representatives and assess whether the
forward-looking statements can be properly derived from
these assumptions. We do not express an independent
audit opinion on the forward-looking statements and the
underlying assumptions. There is a significant unavoidable
risk that future events could differ materially from the for-
ward-looking statements.

We discuss with those responsible for monitoring, among
other things, the planned scope and timing of the audit as
well as significant audit findings, including any deficiencies in
the internal control system that we discover during our audit.

We make a declaration to those responsible for monitor-
ing that we have complied with the relevant independence
requirements and discuss with them any relationships or
other matters that can reasonably be expected to affect our
independence and the safeguards put in place to protect it.

Of the matters that we have discussed with those responsible
for supervision, we have identified those matters that were
most significant in the audit of the consolidated financial
statements for the current reporting period and are therefore
the most significant audit matters. We describe these matters
in our audit opinion unless laws or regulations preclude public
disclosure of the matters.

Other legal and regulatory requirements

Other information required under Article 10 EU-APrVO

We were elected as auditors of the consolidated financial
statements by the Annual General Meeting on 9 July 2019.
We were commissioned by the Supervisory Board on 23
October 2019. We are auditors of the consolidated financial
statements of 4basebio AG without interruption since the
2002 financial year.

We declare that the audit opinions contained in this audit
report are consistent with the additional report to the Audit
Committee pursuant to Article 11 EU-APrVO (audit report)..

Responsible auditor

The auditor responsible for the audit is Uwe Kaschub.

Mannheim, April 28, 2020

Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft

Kaschub
Auditor

Reiter
Auditor

127

4basebio | Annual Report 2019

128

4basebio | Annual Report 2019Corporate Governance
Report

(with disclosures pursuant to Secs. 289f and
315d of the German Commercial Code)

129

4basebio | Annual Report 2019Corporate Governance Report

(with disclosures pursuant to Secs. 289f and 315d of the
German Commercial Code)

The Management Board and Supervisory Board of 4basebio
AG are committed to responsible corporate management and
control of the Company that is geared towards a sustained
increase in shareholder value. The key factors that will enable
us to achieve this goal are the long-term corporate strategy, a
sound financial policy, compliance with legal and ethical prin-
ciples as well as transparency in corporate communications.

Corporate Governance covers the entire system of manage-
ment and monitoring of a company, including its organisation,
its commercial principles and guidelines as well as the system
of internal and external control and supervisory mechanisms.
The German Corporate Governance Code (“Code” or “GCGC”)
was introduced to increase confidence in the corporate man-
agement of German listed companies. The aim of the Code
is to make the rules applying to corporate management and
governance in Germany more transparent for both national
and international investors.

Implementation of the recommendations of the ger-
man corporate governance code and declaration of
compliance

The sustained increase in shareholder value and the vast ma-
jority of the provisions, recommendations and suggestions for
responsible corporate governance included in the Code have
been an active element of our day-to-day business for years.

On 12 March 2020, the Management Board and Supervisory
Board of 4basebio AG issued the following declaration of
compliance with the German Corporate Governance Code
in accordance with Sec. 161 AktG [“Aktiengesetz”: German
Stock Corporation Act] which is also published on the Com-
pany’s website.

“The Executive Board and the Supervisory Board of 4base-
bio AG hereby declare that, 4basebio AG has complied and
continues to comply with the recommendations set forth
by the German Government Commission in the German
Corporate Governance Code (hereinafter also “GCGC”) in
the version of 7 February 2017 since the submittal of the last
declaration of compliance on 12 April 2019, in each case with
the exceptions set forth below.

• Item 5.4.1 (2) Sentence 1 GCGC: The Supervisory Board has

specified concrete objectives regarding its composition,
however, neither an age limit nor a regular limit of length

of membership. The Supervisory Board is convinced that
such limits are not adequate in times of prolonged working
lives and shortage of skilled and experienced candidates for
such positions and would thus unduly limit the selection of
eligible Supervisory Board members. The Supervisory Board
will discuss the introduction of an age limit and a regular
limit of length of membership in due course.

• Item 7.1.2 Sentence 3 GCGC: The Consolidated Financial

Statements for the fiscal year 2018 have been published on
30 April 2019. The Consolidated Financial Statements for
the fiscal year 2019 are planned to be published on 30 April
2020. Thus, for the fiscal year 2018, the Company has not
complied and will not comply for the fiscal year 2019 with
the recommendation of Item 7.1.2 Sentence 3 to publish
the Consolidated Financial Statements within 90 days of
the end of the financial year. In both cases, the exceeding
of the period is owed to challenges in ensuring timely year
end reporting and auditing in connection with the acqui-
sition and/or sale of subsidiary entities, respectively. The
Company aims to meet such deadline from 2021 onwards..

Heidelberg, 12 March 2020

For the Management Board
Dr. Heikki Lanckriet
CEO/CSO

For the Supervisory Board
Joseph M. Fernández
Chairman of the Supervisory Board

4basebio provides detailed information on Corporate Gover-
nance on the Company’s website at https://investors.4basebio.
com/ under Corporate Governance. This is also, where the
current declaration of compliance and earlier versions of
the declaration of compliance in accordance with Item 3.10
of the Code and the 4basebio Code of Ethics can be viewed
and are available for download.

Compliance

An integral element of the 4basebio corporate culture is its
adherence to national and international legal and ethical
principles in business transactions. These include principles
of professional conduct, honesty and integrity in its dealings
with our customers, suppliers, partners, competent author-
ities, employees, shareholders and the general public. With
the Code of Ethics, which was introduced throughout the
Company in 2003, we ensure that our employees are aware
of and observe the relevant national and international rules
of conduct within the Company and in their relationships

130

4basebio | Annual Report 2019with external partners and the general public. The Code of
Ethics implemented by the Management Board is also the
reason for having a group-wide reporting system in place
for the centralised collection of possible violations of the
provisions contained in the Code of Ethics. Each employee
is called upon to ensure, by observing the laws and also the
principles and rules of the Code of Ethics, that 4basebio is
perceived as a reliable partner of integrity. The Code of Ethics
is also published on the Company’s website under Corporate
Governance.

As a matter of principle, compliance at 4basebio is regarded
as the task of the management at all decision-making levels. In
addition to monitoring the observance of the applicable legal
regulations and requirements of the 4basebio compliance
rules, the Company’s Compliance Officer examines facts for
their ad-hoc relevance in order to ensure that any potential
inside information is handled in accordance with the law.
All relevant persons who are employed or engaged by the
Company and have authorised access to inside information
are also included in an insider register and informed of the
duties arising from the laws governing inside information. In
addition, the Company’s Compliance Officer supports the
development and implementation of procedures designed to
ensure that our ethical standards are met and any applicable
international and national legal regulations are observed..

General meeting

The shareholders exercise their rights in a General Meeting,
where they also exercise their voting rights. Each registered
non-par value share of 4basebio AG carries one vote.

Our Annual General Meeting was held on 9 July 2019, where
around 38.44 % of the Company’s voting share capital was
represented. The shareholders have approved all agenda
items proposed by the Management. All shareholders who
were unable to attend our Annual General Meeting had the
opportunity to download the presentation of the CEO and all
documents and information relating to the Annual General
Meeting from our then website at https://investors.expedeon.
com/ under Events/Annual General Meeting. 4basebio also
provided assistance to its shareholders in issuing powers
of representation and supported them, in accordance with
the recommendation in the German Corporate Governance
Code, in appointing a proxy to exercise their voting rights in
accordance with the shareholder’s instructions. This oppor-
tunity was also available during the Annual General Meeting
itself. It was possible to issue instructions to these proxies
on the exercise of voting rights before and during the Annual
General Meeting until the end of the voting.

An Extraordinary General Meeting was held on 19 December
2019, where around 44.05 % of the Company’s voting share
capital was represented. The shareholders have approved
all agenda items proposed by the Management. The Annual
General Meeting’s framework conditions for the shareholders
applied accordingly.

Workings of the management board and supervisory
board - dual management and control system

The strict segregation of the Company’s management and
control structure prescribed and defined by the AktG, the
Company’s memorandum and articles of association and its
rules of procedure is reflected in the clearly defined separation
of Management Board and Supervisory Board responsibilities.
The two boards work closely for the benefit of the Company;
their common aim is to secure long-term and sustainable
growth prospects for the shareholders. As well as coordinating
with each other to define the Company’s strategic alignment,
this also involves making joint decisions on material transac-
tions. In addition, there is the Annual General Meeting as the
decision-making body of the shareholders.

Management Board

From 1 January 2019 until 31 December 2019, the Management
Board consisted of two persons, Dr Heikki Lanckriet as CEO/
CSO and Mr David Roth as CFO. The Management Board is
responsible for managing the Company and conducting its
business. The Management Board develops the strategic
alignment, which it subsequently coordinates with the Su-
pervisory Board and ensures its implementation. Its actions
and decisions are taken in the Company’s best interests.

In addition to the applicable legal provisions, the Manage-
ment Board rules of procedure approved by the Company’s
Supervisory Board and the plan for the allocation of duties
(for the case that at least two members of the Management
Board exist) determine the areas of responsibility of the
Management Board members, the detailed work carried
out by the Management Board and matters reserved for
the Management Board as a whole. For important business
transactions, the memorandum and articles of association
and the Management Board bylaws assign rights of veto to
the Supervisory Board. The Management Board members
also act as managing directors for other group companies.
They are not engaged in activities for any other supervisory
boards or comparable control bodies of other companies..

131

4basebio | Annual Report 2019Corporate Governance Report

Supervisory Board

From 1 January 2019 until 31 December 2019, the Supervisory
Board of 4basebio AG consisted of six persons, except for the
period 4 April 2019 until 9 July 2019, following the resignation
of Dr. Cristina Garmendia and the subsequent appointment
of Mr Hansjörg Plaggemars by the Annual General Meeting
2019. The Supervisory Board appoints, monitors and advises
the Management Board on the management of the Company
and is immediately involved in any decisions of fundamental
significance for the Company. All members of the Supervi-
sory Board with the exception of Mr Hansjörg Plaggemars
were elected by the Annual General Meeting on 7 July 2017.
Mr Hansjörg Plaggemars was elected by the Annual General
Meeting on 9 July 2019 for the remaining term of office of Dr.
Christina Garmendia.

In the interest of the Company, proposals for the election of
Supervisory Board members are prepared with a focus on
the knowledge, abilities and technical experience required
to perform the duties. In addition, efforts are also made
to consider diversity in the composition of the Company’s
Supervisory Board.

The term of office of the members of the Supervisory Board
ends at the close of the Company’s Annual General Meeting
which resolves on the exoneration in respect of the fourth
financial year following the beginning of the term of office, not
counting the financial year in which the term of office begins.
The Supervisory Board believes that it has a sufficient number
of independent members. Details of the election, constitution
and term of office of the Supervisory Board, of its meetings
and resolutions, in addition to its rights and obligations are
laid down in the articles of association of 4basebio AG, which
are available for download on our website at https://inves-
tors.4basebio.com/ under Corporate Governance.

In accordance with Item 5.1.3. of the German Corporate Gov-
ernance Code, the Supervisory Board established separate
rules of procedure for itself and the Audit Committee. The
Chairman of the Supervisory Board is responsible for coor-
dinating its activities, convening and chairing its meetings,
and representing its interests externally. In the event of the
absence of the chairman, the duties will be exercised by the
deputy, and, in the absence of the deputy, by the oldest (by
age) member of the Supervisory Board elected by the Annual
General Meeting. The Supervisory Board is required to meet
once every calendar quarter and must hold two meetings every
calendar half-year. The Supervisory Board passes resolutions
with a majority of the votes cast, unless otherwise provided
for by the law or in the Company’s memorandum and articles
of association. In the event of a tied vote, each member of
the Supervisory Board has the right to demand that a fresh

132

vote be taken on the same matter. In the event of a tied vote
again, the chairperson has the casting vote.

Regular dialogue with the Management Board ensures that
the Supervisory Board is informed about the development of
business, financial situation, corporate planning and strategy
at all times. It also deals in particular with the annual financial
statements of the Company and the Group, taking into con-
sideration the reports of the external auditors. The report of
the Supervisory Board, which is included in this annual report,
provides information on the key activities of the Supervisory
Board and its committees in the financial year 2019.

Supervisory Board committees

Another integral part of the Supervisory Board’s activities
is the work performed in the committees, which are set up
in accordance with the provisions of the AktG, the recom-
mendations of the Code and the Company’s needs. The
Supervisory Board of 4basebio AG has set up two permanent
committees from among its members: The Audit Committee
and the Nomination and Remuneration Committee, each
composed of three members.

The members of the committees are elected with a majority
of the votes cast by the Supervisory Board members. The
committees hold meetings as required. The meetings are
convened by the relevant committee chair, who forwards the
minutes of the meetings to the members of the Supervisory
Board and reports on the work of the committee in the next
plenary meeting.

Composition of Supervisory Board committees:

Term of
office ends

Audit Com-
mittee

Nomination
and remune-
ration

Dr. Joseph M. Fernández,
Chairman

AGM 2022

Tim McCarthy,
Deputy Chairman

AGM 2022

Hansjörg Plaggemars

AGM 2022

Trevor Jarman

AGM 2022

Peter Llewellyn-Davies

AGM 2022

X (Chair)

Pilar de la Huerta

AGM 2022

X (Chair)

Dr. Cristina Garmendia,
Chairwoman (until
resignation)

4 April 20192)

The tasks of the Audit Committee include preparing decisions
to be taken by the Supervisory Board on the approval of
the annual financial statements and consolidated financial

1)1Hansjörg Plaggemars was elected to the Supervisory Board by the 2019

Annual General Meeting on July 9, 2019.

2) Dr. Cristina Garmendia resigned from the Supervisory Board

effective April 4, 2019.

4basebio | Annual Report 2019statements and the Supervisory Board’s proposal to the
Annual General Meeting for the election of the external audi-
tors. It is also required to discuss and examine the quarterly
and half-year reports with the Management Board prior to
their publication and to specify the individual areas of audit
focus with the external auditors after awarding the audit
engagement (including the fee agreement) and agreeing
on the auditors’ reporting duties to the Supervisory Board.
Furthermore, it deals in particular with the examination of the
risk management and control systems, compliance issues
and the required independence of the external auditor. The
Audit Committee’s Chairman Mr. Peter Llewellyn-Davies
possesses the qualifications required under the AktG and
complies with the provisions of Item 5.3.2 of the German
Corporate Governance Code.

During 2019 the Nomination and Remuneration Committee
had 2 meetings..

Avoidance of conflicts of interests

In accordance with Item 5.6 GCGC, the Supervisory Board of
4basebio AG regularly reviews the efficiency of its activities
in the form of an open discussion in the plenary sessions.
Individual aspects of these reviews include the sequence
and structure of the meetings and resolutions, the scope of
proposals and the supply of information by the Management
Board, in addition to the work performed by the committees
in preparation for any decisions to be taken by the Supervisory
Board. The reviews revealed that the Supervisory Board is
efficiently organised, including in its new composition, and
that cooperation between the Supervisory Board and the
Management Board is effective.

Avoidance of conflicts of interests

The Management Board and Supervisory Board of 4basebio AG
are committed to the interests of the Company. In performing
their duties, they pursue neither personal interests nor do
they grant other persons unjustified advantages. Secondary
activities or business relations of members of the two boards
with the Company are to be disclosed to the Supervisory Board
immediately and require the Supervisory Board’s approval.
The Supervisory Board reports to the Annual General Meeting
on any conflict of interests and how they have been treated.

No conflict of interests involving members of the Management
Board or the Supervisory Board arose in the reporting period
that required immediate disclosure to the Supervisory Board.
Possible conflicts of interests involving the Management
Board and Supervisory Board members were discussed in
depth by the Supervisory Board and appropriate action was

taken to prevent them from arising.

Since 25 February 2015 Science & Innovation Link Office,
S.L. (SILO), Madrid, Spain, provided consulting services for
project support to 4basebio S.L.U. (formerly EXPEDEON
Biotech S.L.U.), Madrid, Spain. The former chairwoman of the
Supervisory Board of 4basebio Mrs. Dr. Cristina Garmendia is
principal shareholder of Science & Innovation Link Office, S.L.
(SILO), Madrid, Spain. For these consulting services, 4basebio
S.L.U., Madrid, Spain, paid in 2019 the amount of €12,165 to
Science & Innovation Link Office, S.L. (SILO), Madrid, Spain.

Due to a public soft loans 4basebio S.L.U. receives from
Spanish institutions for its R&D activities in Spain, Dr. Heikki
Lanckriet pledged 400,000 shares of his interest in EXPDE-
PEON AG to secure this loan. According to the agreement
on the payment of a share pledge fee between 4basebio
and Dr Heikki Lanckriet, it was agreed that 4basebio has to
compensate Dr Heikki Lanckriet, for creating this pledge as a
security for 4basebio’s fulfilment of its obligation arising from
the pubic loan received from the Spanish institution by paying
a so called share pledge fee. This fee is €10,000 annually.

The mandates of the Supervisory Board members on su-
pervisory boards or comparable supervisory bodies of other
companies are indicated in the notes to the consolidated
financial statements included in this annual report.

Open and transparent corporate communication

4basebio meets all recommendations applicable to the
Company that are included in Item 6 of the German Corporate
Governance Code. In the interest of ensuring the greatest pos-
sible degree of transparency, our corporate communications
strategy is designed to keep the general public informed and
up to date on the Company’s activities and thus confirm and
strengthen confidence in us. The Company rigorously applies
the principle that no shareholder may receive privileged in-
formation. To ensure that all market participants are provided
with the same information at the same time, we make all press
releases, ad-hoc messages and key documents available on
our website https://investors.4basebio.com/ under News.

In addition, all shareholders and interested parties can sub-
scribe to our electronic mailing list to receive notification of
the Company’s press releases. In addition, when important
corporate news has been released, the Company’s investor
relations department is immediately available to provide
further information and answer any questions. Furthermore,
our financial calendar contains the publication dates of regu-
lar financial reports and the date of the next Annual General
Meeting.

133

4basebio | Annual Report 2019Corporate Governance Report

Risk management

Target for Supervisory Board

In 2015, the Supervisory Board of 4basebio AG further adopt-
ed the target of 33 % for the proportion of female members
of the Supervisory Board to be achieved by the end of 2017.
Until 4 April 2019, the proportion of female members of the
Supervisory Board was 33 %. From then until 9 July 2019, the
proportion was 20 % and thereafter 17 % Thus, the target has
not been met throughout the reporting period.

The Supervisory Board of 4basebio AG is working actively to
address this discrepancy.

Target for First and Second Management Level below
Management Board

In 2018, the Management Board of 4basebio AG adopted the
target of 40 % for the proportion of female executives on the
first management level below the Management Board and the
target of 40 % for the proportion of female executives on the
2nd level below the Management Board to be achieved by 1
January 2019. This target has been met.

Remuneration report

According to Item 4.2.5 of the German Corporate Gover-
nance Code, the remuneration report should be included
in the corporate governance report. A detailed presenta-
tion explanation of the compensation of the Management
Board (with distinctions between fixed and variable com-
pensation components as well as other benefits) and of the
compensation of the members of the Supervisory Board is
provided in a separate chapter “REMUNERATION REPORT” of
the management report, which is also part of this corporate
governance report.

Dealing with all risks responsibly and appropriately is a key ele-
ment of good corporate governance in our opinion. 4basebio
has a risk management system in place which is structured
to ensure periodic monitoring, enabling the Management
Board to identify and assess risks and the trends associated
with them at an early stage and to respond immediately to
relevant changes in the risk profile in an appropriate manner.
The Management Board keeps the Supervisory Board up to
date on existing risks and their development. The risk man-
agement system is developed on a rolling basis to reflect
changing circumstances and conditions and is discussed
by the Audit Committee in connection with the quarterly
reports and the audit of the annual financial statements.
The group management report contains further details in
the opportunities and risks report.

Accounting and auditing of the financial statements

The consolidated financial statements of the 4basebio Group
for the financial year 2019 were prepared in accordance with
the International Financial Reporting Standards (IFRSs),
applying Sec. 315a HGB. The annual financial statements of
4basebio AG were prepared in accordance with the provisions
of the HGB.

The Audit Committee awarded the audit engagement to Ernst
& Young GmbH Wirtschaftsprüfungsgesellschaft, Mannheim, in
accordance with the resolution of the Annual General Meeting
on 9 July 2019. The external auditors issued a declaration of
independence to the Audit Committee before the engage-
ment was awarded..

Determinations pursuant to secs. 76 and 111 aktg

Pursuant to Sec. 76 para. 4 and Sec. 111 para. 5 AktG, the
Supervisory Board and the Management Board of 4basebio
AG have passed resolutions stipulating the targets for the
proportion of females in management positions and the end
dates for the fulfilment of these targets.

Target for Management Board

In April 2019, the Supervisory Board of 4basebio AG adopted
a target of 30 % for the proportion of female members of
the Management Board to be achieved by 31 March 2024.
Throughout the financial year 2019 the proportion of female
members of the Management Board was 0 %..

134

4basebio | Annual Report 2019135

4basebio | Annual Report 2019www.4basebio.com