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Registered No. 08840579
4D pharma plc (formerly Schosween 18 Limited)
Annual Report and Financial Statements
Period 10 January 2014 to 31 December 2014
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4D pharma plc
CONTENTS
Company Information 3
Chairman’s and Chief Executive Officer’s Joint Review 4
The Board 6
Strategic Report 7
Directors’ Report 9
Corporate Governance Statement 13
Report of the Remuneration Committee 16
Independent Auditor’s Report 18
Group Statement of Comprehensive Income 20
Group Statement of Changes in Equity 21
Company Statement of Changes in Equity 22
Group Statement of Financial Position 23
Company Statement of Financial Position 24
Group Cash Flow Statement 25
Company Cash Flow Statement 26
Notes to the Financial Statements 27
Notice of Annual General Meeting 51
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COMPANY INFORMATION
Directors David Norwood (Non-executive Chairman)
Duncan Peyton (Chief Executive Officer)
Dr Alexander Stevenson (Chief Scientific Officer)
Thomas Engelen (Non-executive Director)
Secretary Laurence Dale
Nominated Advisor and Broker Zeus Capital Limited
82 King Street
Manchester M2 4WQ
and
23 Berkley Square
London W1 6HE
Auditor Baker Tilly UK Audit LLP
3 Hardman Street
Manchester M3 3HF
Registrar Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Registered Office 74 Gartside Street
Manchester M3 3EL
Website www.4dpharmaplc.com
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CHAIRMAN’S AND CHIEF EXECUTIVE OFFICER’S JOINT REVIEW
FOR THE PERIOD ENDED 31 DECEMBER 2014
4D pharma plc (“4D”, the “Company” and, together with its subsidiaries, the “Group”) is focussed on bringing to
market a new class of therapeutics known as live biotherapeutics. Rather than chemical entities or antibodies, 4D
uses carefully selected bacteria as the active ingredients in its products.
4D only uses bacteria that have a precise and evolved mechanism of action. As these bacteria are isolated from
healthy humans we believe these bacteria are safe and have no toxic effects.
This belief is also currently held by the regulatory bodies, with the U.S. Food and Drug Administration (FDA)
recognising live biotherapeutics as a new class of therapeutics. 4D is working together with the regulatory bodies
to understand and help determine the regulatory agenda.
At the Group’s inception it had two discovery projects; now after our first year 4D has products that we will take
into clinical trials in the next 12 months, and a methodology that has allowed us to identify other bacteria that target
asthma and rheumatoid arthritis.
Our first generation programmes address irritable bowel syndrome (IBS) and inflammatory bowel disease. Blautix,
a treatment for IBS, and Thetanix, a treatment for paediatric Crohn’s, will both enter first in man studies in 2015.
Rosburix, a treatment for paediatric ulcerative colitis, is currently undergoing development and is scheduled to enter
clinical trials in H2 2016.
With these, the Group’s first generation programmes, we have had to address several challenges associated with
taking a new class of therapeutics into the clinic. We are now capable of taking a pre-clinical programme through
development and ready for clinical trial within a 12 month period. This has been an exceptional period of learning
and something we can apply to our growing pipeline.
The biggest challenge we faced in 2014 was whether we could develop the capability to identify other bacteria that
were therapeutically relevant. We began this project in May 2014, and by September 2014, we had identified
several ‘hits’, i.e. bacteria we believed would be effective in certain autoimmune and inflammatory diseases.
By January 2015 we had the readouts from the Group’s pre-clinical work. This work used industry standard models
carried out by third party contract organisations who perform the same service for other biotechnology and
pharmaceutical companies.
At that time the work showed we had seen a statistically significant result for a number of our bacteria in severe
asthma, allergic asthma and rheumatoid arthritis.
The identification by our skilled research team, using our MicroRx methodology, of several candidate bacteria has
shown that we can rationally identify bacteria that affect therapeutic pathways. Our challenge in the next 12 months
is two-fold; firstly to take these candidates through development and our current programmes into the clinic and
secondly to identify other diseases that we can target. We will keep the Company’s shareholders updated as to our
progress.
Financial results and finance review
Loss for the period before tax:
Staff costs for the period:
Basic loss per share:
No dividend has been proposed
£2.38 million
£0.52 million
4.81 pence
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CHAIRMAN’S AND CHIEF EXECUTIVE OFFICER’S JOINT REVIEW continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
Cash flow and balance sheet
During the period cash, cash equivalents, deposits and short-term investments increased to £31.8 million.
During the period, after the initial share issue of 20,000,000 ordinary shares at 0.25 pence per share, the Company
raised £16.55 million on its admission to trading on AIM, which completed on 18 February 2014; and £21.5 million
in a placing that was completed on 14 July 2014. Post year end, a further £34.75 million was raised by the
Company in a placing that completed on 10 February 2015.
Treasury activities and policies
The Group manages its cash deposits prudently and invests its funds across a number of financial institutions which
have investment grade credit ratings. The deposits range from instant access to 12 month term deposits and are
regularly reviewed by the board. Cash forecasts are updated monthly to ensure that there is sufficient cash available
for the Group’s foreseeable requirements. More details on the Group’s treasury policies are provided in Note 22 to
the financial statements.
Credit risk
The Group only trades with recognised, creditworthy third parties. Receivable balances are monitored on an
on-going basis and any late payments are promptly investigated to ensure that the Group’s exposure to bad debts
is not significant.
Foreign exchange management
The Group does not take out forward contracts against uncertain or forecast expenditure, as the timings and extent
of future cashflow requirement denominated in foreign currencies are difficult to predict. There were no open
forward contracts as at 31 December 2014. Future currency needs are continually monitored and purchased when
the extent and timings are known.
David Norwood
Non-executive Chairman
Duncan Peyton
Chief Executive Officer
4 June 2015
4 June 2015
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THE BOARD
David Norwood – Non-executive Chairman
David has had a long career building a number of science, technology and investment companies. He is the founder
of IP Group plc, one of the UK’s leading technology commercialisation businesses and a shareholder in the
Company. Previously, he was Chief Executive of stockbroker Beeson Gregory (acquired by Evolution Group plc)
after it acquired IndexIT Partnership, a technology advisory boutique he had founded in 1999. He was a founding
shareholder of Evolution Group plc (recently acquired by Investec), and also co-founder of Ora Capital plc. He has
been a founder and director of many UK technology companies including Oxford Nanopore Technologies Ltd,
Proximagen Ltd, Synairgen plc, Ilika Technologies Ltd, Oxford Catalysts and Plectrum Petroleum (acquired by
Cairn Energy plc). He has also acted as seed investor and/or advisor to Wolfson Microelectronics Ltd, Nanoco
Technologies Ltd, Tissue Regenix Group plc and Arc International (now part of Synopsys). He is also Non-Executive
Chairman of Oxford Pharmascience Group plc.
Duncan Peyton – Chief Executive Officer
Duncan has a proven track record in identifying, investing and growing business within the pharmaceutical sector.
He was the founder of Aquarius Equity, a specialist investor in businesses within the life science sector, which
provided investors’ access to innovative, high growth potential companies that delivered significant capital growth.
Duncan started his career in a bio-science start-up business, which ultimately went on to list on the London Stock
Exchange, subsequently qualified as a corporate finance lawyer with Addleshaw Goddard, then Addleshaw Booth
& Co, and later joined 3i plc as an investment manager. Duncan founded Aquarius Equity in 2005, which made
founding investments into Nanoco Technologies Ltd, Auralis Limited (subsequently sold to ViroPharma) and Tissue
Regenix Group plc.
Dr Alexander Stevenson – Chief Scientific Officer
Alex began his career as a scientist, working in research and for a NYSE quoted drug development company,
before moving into early stage pharmaceutical and healthcare investments. He has fulfilled board level investment
and operational management roles. He was a director and shareholder in Aquarius Equity from 2008, where he was
responsible for identifying new investments and developing and implementing scientific strategies both pre and post
investment. Prior to joining Aquarius Equity, Alex worked for IP Group plc where he specialised in life science
investments, identifying, developing and advising a number of companies in its portfolio, some of which went on to
list on AIM. He joined IP Group following its acquisition of Techtran Group Ltd in 2005.
Thomas Engelen – Non Executive Director
Thomas is also non executive chairman at Akcros Holdings Ltd and Penlan Healthcare. Thomas has been a founder
and/or non-executive director of a number of UK Life Sciences companies including Colonis Pharma Ltd,
Warneford Partners Ltd and Martindale Pharma Ltd. Thomas has supported private equity and other investors in
over 50 potential deal transactions, on targets in Europe and the USA, from cash constrained / chapter 11 to cash-
rich with EV of up to $1B. Before this he worked in life sciences for over 20 years in senior executive roles. Starting
in 1987 at Akzo Nobel Pharma he worked with hospital products, diagnostics and medical equipment as General
Manager for Middle East & Africa. After this he led Rosemont Pharmaceuticals in Leeds in niche oral liquid
medicines, followed by being President of Organon in Brazil. He was promoted to VP The Americas, and lastly to
CMO at Organon, in charge of the global product portfolio, based in the USA. Returning to Europe he led Novartis
Consumer Health in the UK.
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STRATEGIC REPORT
FOR THE PERIOD ENDED 31 DECEMBER 2014
Principal activity
The principal activity of the Group during the period was the research and development of pharmaceutical products
in new live biotherapeutic areas.
Business model
A description of the Group’s activities and how it seeks to add value are included in the Chairman’s and Chief
Executive Officer’s (“CEO”) Joint Review on pages 4 and 5.
Review of the business and future developments
A review of the Group’s performance during the period and its future prospects are included in the Chairman’s and
CEO’s Joint Review on pages 4 and 5, which should be read in conjunction with this report.
Key performance indicators
The key indicators of performance for the business in its current stage of development are the completion of
technical milestones in relation to the development of targeted products and the research pipeline. In addition the
management and control of cash balances is a priority for the Group and these are budgeted and monitored closely
to ensure that it maintains adequate liquid resources to meet financial commitments as they arise.
At this stage in its development, quantitative key performance indicators are not an effective way of measuring the
Group’s performance. However, a qualitative summary of performance in the period is provided in the Chairman’s
and CEO’s Joint Review.
Principal risks and uncertainties
The principal risks to achieving full commercialisation and to becoming cash generative are outlined as follows:
Technology and development risk
There can be no guarantee that any of the products currently in development will be developed into commercially
viable products, meet regulatory requirements or be manufactured in commercial quantities at an acceptable cost
or marketed successfully and profitably. The Group employs experienced development personnel who have
experience of successfully bringing such products to the market.
Regulatory risk
Regulatory approval timelines can be affected by a number of factors such as trial recruitment rates, clinical results
and changes to regulatory requirements which are outside the control of the Group. However, all of the Group’s
products follow well established regulatory routes and the Group works with experienced regulatory personnel and
consultants to navigate the process.
Competition
Although the Directors believe that for certain of the Group’s products there is limited direct competition, there may
be products and competitors of which they are currently unaware, which could have a detrimental effect on the
Group’s trading performance in the future. The Group expects a balanced exposure to competition with some
offerings facing little competition, but others facing more.
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STRATEGIC REPORT continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
Attraction and retention of key employees
The Group depends on Directors and certain key employees spread across the various subsidiaries. The ability to
attract and retain key employees cannot be guaranteed. However, the Group endeavours to ensure succession
planning where possible and ensures that remuneration and incentive packages are in line with industry standards.
On behalf of the board
Duncan Peyton
Chief Executive Officer
4 June 2015
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DIRECTORS’ REPORT
FOR THE PERIOD ENDED 31 DECEMBER 2014
The directors present their report and the audited financial statements for the Group and the Company for
the period ended 31 December 2014. 4D pharma plc (formerly Schosween 18 Limited) was incorporated on
10 January 2014 and details of the various investments in subsidiaries are contained in Note 12 to the
financial statements.
Directors
The directors who held office during the period and as at the date of signing the financial statements were as
follows:
David Norwood appointed 5 February 2014
Duncan Peyton appointed 18 January 2014
Dr Alexander Stevenson appointed 18 January 2014
Thomas Engelen appointed 5 February 2014
Laurence Dale appointed 10 January 2014 – resigned 18 January 2014
Details of the directors’ remuneration are shown in the Report of the Remuneration Committee on pages 16 and
17. Details of the directors’ interests in the share capital of the Company are set out below.
No director had an interest in any contract that was significant in relation to the Company’s business at any time
during the period.
Financial instruments
Details of the Group’s financial risk management objectives and policies are disclosed in Note 22 to the
financial statements.
Research and development
The principal activity of the Group is research and development, a review of which is included in the Chairman’s and
CEO’s Joint Review on pages 4 and 5.
Total research and development spend was £1.823 million. No development expenditure was capitalised in the
period.
Dividends
The directors do not recommend payment of a dividend.
Share capital and funding
As at 31 December 2014 share capital comprised 52,092,119 ordinary shares of 0.25 pence each. There is only
one class of share and all shares are fully paid. Full details of the Group’s and Company’s share capital movements
during the period are given in Note 19 to the financial statements.
As at 31 December 2014 there were no shares under option.
Directors’ indemnity insurance
The Group has maintained insurance throughout the period for its directors and officers against the consequences
of actions brought against them in relation to their duties for the Group. Such provision remains in force as at the
date of approval of the Directors’ Report.
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DIRECTORS’ REPORT continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
Directors’ interests
The interests in the shares of the Company of those directors serving at 31 December 2014, and as at the date of
signing of these financial statements, all of which are beneficial, in the share capital of the Company were as follows:
Number Number
of 0.25p of 0.25p
ordinary ordinary
shares % of issued shares % of issued
at 31 Dec share at 4 June share
2014 capital 2015 capital
David Robert Norwood 7,000,000 13.4% 7,000,000 11.6%
Duncan Joseph Peyton 6,250,286 12.0% 6,250,286 10.3%
Alexander James Stevenson 6,250,286 12.0% 6,250,286 10.3%
Thomas Engelen 500,000 1.0% 500,000 0.8%
Substantial shareholders
The Company is aware that the following had an interest in 3% or more of the issued ordinary share capital of the
Company at 31 December 2014 (ordinary shares in issue – 52,092,119):
Number
of 0.25p
ordinary
shares % of issued
at 31 Dec share
2014 capital
David Robert Norwood 7,000,000 13.4%
Invesco Asset Management Limited 6,905,667 13.3%
Woodford Investment Management LLP 6,857,113 13.2%
Duncan Joseph Peyton 6,250,286 12.0%
Alexander James Stevenson 6,250,286 12.0%
Lansdowne Partners 3,800,000 7.3%
Aviva Investors Global Services Limited 1,998,399 3.8%
UBS Global Asset Management 1,664,446 3.2%
The following parties’ shareholdings had changed since 31 December 2014 (based on ordinary shares in issue of
60,569,729 as at the date of signing of these financial statements):
● Woodford Investment Management LLP – increase to 11,567,684 shares (19.1%)
● Invesco Asset Management Limited – increase to 8,612,984 shares (14.2%)
● Lansdowne Partners – increase to 4,513,707 shares (7.5%)
● Aviva Investors Global Services Limited – increase to 2,852,176 shares (4.7%)
● UBS Global Asset Management – increase to 1,898,592 shares (3.1%)
Apart from the above, there were no other notified significant changes in the holdings between the 31 December
2014 and the date of signing of these financial statements.
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DIRECTORS’ REPORT continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
Donations
No charitable or political donations were made in the period.
Policy on payment of suppliers
It is the policy and normal practice of the Group to make payments due to suppliers, in accordance with agreed
terms and conditions, with payments being made generally in the month following receipt of invoice.
Employment policies
The Group is committed to ensuring the health and safety of its employees in the workplace. This includes the
provision of regular medical checks.
The Group supports the employment of disabled people where possible through recruitment, by retention of those
who become disabled and generally through training, career development and promotion.
The Group is committed to keeping employees as fully informed as possible with regard to the Group’s performance
and prospects and seeks their views, wherever possible, on matters which affect them as employees.
Corporate Governance Statement
The Group’s statement on corporate governance can be found in the Corporate Governance Statement on
pages 13 to 15.
Going concern
The Chairman’s and CEO’s Joint Review on pages 4 and 5 outlines the business activities of the Group along with
the factors which may affect its future development and performance, and discusses the Group’s financial position,
along with details of its cash flow and liquidity. Note 22 to the financial statements sets out the Group’s financial
risks and the management of those risks.
Having prepared management forecasts and made appropriate enquiries, the directors are satisfied that the Group
has adequate resources for the foreseeable future, as the Group is at the start up stage of its business life cycle.
Accordingly they have continued to adopt the going concern basis in preparing the Group and Company financial
statements.
Disclosure of information to the auditor
The directors who held office at the date of approval of this Directors’ Report confirm that:
● so far as they are each aware there is no relevant audit information of which the Group’s auditor is
unaware; and
● that each director has taken all the steps that he ought to have taken as a director to make himself aware of
any relevant audit information and to establish that the Group’s auditor is aware of that information.
Auditor
KPMG LLP resigned as auditor on 12 March 2015 and Baker Tilly UK Audit LLP was appointed. Baker Tilly UK
Audit LLP has indicated its willingness to continue in office. Ordinary resolutions to re-appoint Baker Tilly UK Audit
LLP as auditor and to authorise the directors to agree their audit fee, will be proposed at the forthcoming annual
general meeting.
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DIRECTORS’ REPORT continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
Subsequent events
On 10 February 2015 4D pharma plc raised a further £34.225 million (net of expenses) via the placing of 8,475,610
new ordinary shares at 410 pence per share.
On 30 March 2015, 4D pharma plc acquired a further 16.5% of the ordinary share capital of 4D Pharma Research
Limited for a cost of £230,000 taking their holding to 100%.
Annual General Meeting
The annual general meeting of the Company will be held on 29 June 2015 at 10.00. a.m., at the offices of Schofield
Sweeney LLP, Springfield House, 76 Wellington Street, Leeds LS1 2AY. The notice convening the annual general
meeting, together with an explanation of the resolutions to be proposed at the meeting, is contained in the notice
of meeting on pages 51 to 58.
Recommendation
The board considers that the resolutions to be proposed at the annual general meeting are in the best interests of
the Company and it is unanimously recommended that shareholders support these proposals as the board intends
to do in respect of their own holdings.
The Directors’ Report was approved by the board on 4 June 2015 and signed on its behalf by.
Duncan Peyton
Chief Executive Officer
4 June 2015
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CORPORATE GOVERNANCE STATEMENT
FOR THE PERIOD ENDED 31 DECEMBER 2014
Compliance
As a company whose shares are admitted to trading on the London Stock Exchange AIM Market, the Company is
not required to comply with the UK Corporate Governance Code. However, the directors recognise the importance
of sound corporate governance, while also taking into account the size and nature of the Group, and, as a matter
of best practice, adopt many of the Code’s recommendations.
Board composition and responsibility
The board consists of four directors, two of whom are non-executive. The names of the directors together with their
biographical details are set out on page 6.
The board has determined that Thomas Engelen is independent in character and judgement and that there are no
relationships or circumstances which could materially affect or interfere with the exercise of his independent
judgement. The board is satisfied with the balance between executive and non-executive directors which allows it
to exercise objectivity in decision making and proper control of the Group’s business. The board considers its
composition is appropriate in view of the size and requirements of the Group’s business and the need to maintain
a practical balance between executives and non-executives. Due to the structure of the Company it is considered
that it is not appropriate to change the successful board composition at present.
All directors appointed by the board are subject to election by shareholders at the first annual general meeting after
their appointment. Directors are also subject to retirement by rotation and re-election in accordance with the articles
of association of the Company.
The non-executive directors constructively challenge and help develop proposals on strategy and bring strong,
independent judgement, knowledge and experience to the board’s deliberations. The directors are given access to
independent professional advice at the Group’s expense, when the directors deem it is necessary in order for them
to carry out their responsibilities.
The board’s primary objective is to focus on adding value to the assets of the Group by identifying and assessing
business opportunities and ensuring that potential risks are identified, monitored and controlled. Matters reserved
for board decisions include strategy, budget, performance, approval of major capital expenditure and the framework
of internal controls. The implementation of board decisions and day to day operations of the Group are delegated
to executive directors.
The board receives appropriate and timely information prior to each meeting, with a formal agenda and board and
committee papers being distributed several days before meetings take place. Any director may challenge Group
proposals, and decisions are taken democratically after discussion. Any director who feels that any concern
remains unresolved after discussion may ask for that concern to be noted in the minutes of the meeting. Any
specific actions arising from such meetings are agreed by the board and then followed up by management.
The Group maintains, for its directors and officers, liability insurance for any claims against them in that capacity.
The Group has effective procedures in place to deal with conflicts of interest. The board is aware of other
commitments of its directors and changes to these commitments are reported to the board.
The board has established an Audit and Risk Committee and a Remuneration Committee, with formally delegated
duties and responsibilities. The directors do not consider that, given the size of the board, it is appropriate at this
stage to have a nomination committee. However, this will be kept under regular review by the board.
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CORPORATE GOVERNANCE STATEMENT continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
Audit and Risk Committee
The Audit and Risk Committee comprises Thomas Engelen as Chairman and David Norwood as the other member
of the committee. Thomas Engelen is an independent director and has recent and relevant finance experience. The
Committee has primary responsibility for monitoring the quality of internal controls, ensuring that the financial
performance of the Company is properly measured and reported on, and reviewing reports from the Company’s
auditors relating to the Company’s accounting and internal controls, in all cases having due regard to the interests
of shareholders. The Audit and Risk Committee will meet at least twice a year.
Remuneration Committee
The Company has established a formal and transparent procedure for developing policy on executive remuneration
and for fixing the remuneration packages of individual directors. This committee comprises Thomas Engelen as
Chairman and David Norwood as the other member of the committee. The committee reviews the performance of
the executive directors and determines their terms and conditions of service, including their remuneration and the
grant of options, having due regard to the interests of shareholders. The Remuneration Committee will meet at least
once a year.
The number of Board and committee meetings attended by each of the directors during the period are shown
below.
Audit Remuneration
Full Board Committee Committee
Number of meetings in period 21 1 1
Attendance:
Executive directors
Duncan Peyton 18 – –
Dr Alexander Stevenson 18 – –
Non-executive directors:
David Norwood 13 1 1
Thomas Engelen 13 1 1
Laurence Dale resigned 18 January 2014 3 – –
Approach to Risk and Internal Control
The board is responsible for establishing and maintaining the Group’s system of internal controls. Internal control
systems are designed to meet the particular needs of the Group, and to address the risks to which it is exposed.
By their nature, internal control systems are designed to manage rather than eliminate risk, and can provide only
reasonable and not absolute assurance against material misstatement or loss. As stated, primary responsibility for
monitoring the quality of internal controls has been delegated to the Audit and Risk Committee.
Communicating Vision and Strategy
The directors seek to visit institutional shareholders at least twice a year. In addition, all shareholders are welcome
to attend the Company’s annual general meeting, where there is an opportunity to question the directors as part of
the agenda, or more informally after the meeting. Communication with shareholders is seen as an important part
of the board’s responsibilities, and care is taken to ensure that all price sensitive information is made available to all
shareholders at the same time.
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CORPORATE GOVERNANCE STATEMENT continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
Share Dealing
The directors understand the importance of complying with the AIM Rules for Companies relating to directors’
dealings and has established a share dealing code which is appropriate for an AIM quoted company.
Annual General Meeting
At the annual general meeting, separate resolutions will be proposed for each substantially different issue. The
outcome of the voting on resolutions is disclosed by means of an announcement on AIM.
Statement of directors’ responsibilities in relation to the Annual Report and financial
statements
The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements
in accordance with applicable law and regulations.
Company law requires the directors to prepare group and company financial statements for each financial year. The
directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in
accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and
have elected under company law to prepare the company financial statements in accordance with IFRS as adopted
by the EU.
The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of
the Group and the Company and the financial performance of the Group and the Company. The Companies Act
2006 provides in relation to such financial statements that references in the relevant part of that Act to financial
statements giving a true and fair view are references to their achieving a fair presentation.
Under company law the directors must not approve the financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and
the Company for that period.
In preparing the Group and Company financial statements, the directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with IFRSs adopted by the EU;
d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group and the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position
of the Group and the Company and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included
on the 4D pharma plc website (www.4dpharmaplc.com). Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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REPORT OF THE REMUNERATION COMMITTEE
FOR THE PERIOD ENDED 31 DECEMBER 2014
Statement of compliance
This report does not constitute a directors remuneration report in accordance with the Companies Act 2006. As a
company whose shares are admitted to trading on AIM, the Company is not required by the Companies Act 2006
to prepare such a report. This report sets out the Group policy on directors’ remuneration, including emoluments,
benefits and other share-based awards made to each director.
Policy on executive directors’ and senior management’s remuneration
The overall policy of the board is to ensure that executive management are provided with appropriate incentives to
encourage enhanced performance and are, in a fair and responsible manner, rewarded for their contribution to the
success of the Group.
The main elements to the remuneration packages for executive directors and senior management are as follows:
Basic annual salary
The base salary is reviewed annually at the beginning of each year. The review process is undertaken by the
Remuneration Committee and takes into account several factors, including the current position and development
of the Group, individual contributions and market salaries for comparable organisations.
The Company does not provide an occupational pension scheme for executive directors, nor does it make
contributions into the private pension schemes of executives.
Discretionary annual bonus
All executive directors and senior managers are eligible for a discretionary annual bonus. This takes into account
individual contribution, business performance and technical and commercial progress, along with financial results.
Discretionary share incentives
As at 31 December 2014 no share incentives had been granted to executive directors or senior managers. It is the
board’s intention to consider possible such incentive structures in due course; having regard to the need to motivate
and retain key individuals, along with similar performance criteria to the discretionary bonus scheme.
Benefit in kind
The Company does not provide any taxable benefits for executives.
Policy on non-executive directors’ remuneration
Non-executive directors receive a fixed fee and do not receive any pension payments or other benefits, nor do they
participate in bonus or share schemes.
Service contract
Each of Duncan Peyton and Dr Alexander Stevenson have service agreements with an indefinite term providing for
a maximum of twelve months’ notice by either party.
Non-executive directors are employed on letters of appointment which may be terminated on not less than three
months’ notice.
16
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4D pharma plc
REPORT OF THE REMUNERATION COMMITTEE continue
FOR THE PERIOD ENDED 31 DECEMBER 2014
Directors’ remuneration
The remuneration of the directors, who served on the Company’s board during the period to 31 December 2014,
is as follows:
Base salary & Total
fees 2014
£000 £000
Executive directors:
Duncan Peyton 97 97
Dr Alexander Stevenson 97 97
Non-executive directors:
David Norwood 23 23
Thomas Engelen 47 47
Laurence Dale – –
–––––––––––– ––––––––––––
264 264
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
17
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4D pharma plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 4D PHARMA PLC
FOR THE PERIOD ENDED 31 DECEMBER 2014
We have audited the group and parent company financial statements (“the financial statements”) on pages 20 to
50. The financial reporting framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company
financial statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As more fully explained in the Directors’ Responsibilities Statement set out on page 15, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s
website at http://www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion
● the financial statements give a true and fair view of the state of the group’s and the parent’s affairs as at
31 December 2014 and of the group’s loss for the period then ended;
● the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union
● the parent financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the Companies Act 2006; and
● the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial period for
which the financial statements are prepared is consistent with the financial statements.
18
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4D pharma plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 4D PHARMA PLC continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report
to you if, in our opinion:
● adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
● the parent company financial statements are not in agreement with the accounting records and returns; or
● certain disclosures of directors’ remuneration specified by law are not made; or
● we have not received all the information and explanations we require for our audit.
Graham Bond FCA (Senior Statutory Auditor)
For and on behalf of BAKER TILLY UK AUDIT LLP, Statutory Auditor
Chartered Accountants
3 Hardman Street
Manchester
M3 3HF
4 June 2015
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4D pharma plc
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD 10 JANUARY 2014 TO 31 DECEMBER 2014
2014
Notes £000
Administrative expenses 4 (3,476)
––––––––––––
Operating loss 4 (3,476)
––––––––––––
Finance income 6 92
Finance expense 6 (5)
Share of losses in associated undertaking 7 (379)
Gain on remeasurement of equity interest to fair value on acquisition of a subsidiary 7 1,388
––––––––––––
Loss before taxation (2,380)
Taxation 8 —
––––––––––––
Loss for the period and total comprehensive income for the period (2,380)
––––––––––––
––––––––––––
Loss for the period and total comprehensive
income for the period attributable to:
Owners of the parent undertaking (2,021)
Non-controlling interests (359)
––––––––––––
Loss for the period and total comprehensive income for the period (2,380)
––––––––––––
––––––––––––
Loss per share
Basic and diluted loss for the period 9 (4.81)p
––––––––––––
––––––––––––
The loss for the period arises from the Group’s continuing operations and is attributable to the equity holders of
the parent.
There were no other items of comprehensive income for the period and therefore the loss for the period is also the
total comprehensive loss for the period.
The basic and diluted loss per share are the same as there are no shares in the Company under option.
The notes on pages 27 to 50 form an integral part of these financial statements.
20
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4D pharma plc
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD 10 JANUARY 2014 TO 31 DECEMBER 2014
Attributable to owners of parent Non
Share Share Merger Retained controlling Total
capital premium reserve earnings Total interest Equity
£000 £’000 £000 £000 £000 £000 £000
Issue of share capital
(net of expenses) 130 38,259 958 — 39,347 — 39,347
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Total transactions
with owners recognised
in equity 130 38,259 958 — 39,347 — 39,347
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Loss and total
comprehensive
income for the period — — — (2,021) (2,021) (359) (2,380)
Non-controlling interest
share of net assets of the
Group on acquisition – – – – – 81 81
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
At 31 December 2014 130 38,259 958 (2,021) 37,326 (278) 37,048
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
–––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
21
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4D pharma plc
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD 10 JANUARY 2014 TO 31 DECEMBER 2014
Share Share Merger Retained
capital Premium Reserve earnings Total
£000 £000 £000 £000 £000
Issue of share capital (net of expenses) 130 38,259 958 — 39,347
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Total transactions with owners
recognised in equity 130 38,259 958 — 39,347
Loss for the period and total comprehensive
income for the period — — — (1,165) (1,165)
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
At 31 December 2014 130 38,259 958 (1,165) 38,182
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
–––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
22
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4D pharma plc
GROUP STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2014
Registered No. 08840579
As at
31 December
2014
Notes £000
Assets
Non-current assets
Property, plant and equipment 10 417
Intangible assets 11 6,266
––––––––––––
6,683
––––––––––––
Current assets
Inventories 14 115
Trade and other receivables 15 590
Short-term investments and cash on deposit 16 3,007
Cash and cash equivalents 16 28,823
––––––––––––
32,535
––––––––––––
Total assets 39,218
––––––––––––
Liabilities
Current liabilities
Trade and other payables 17 1,785
––––––––––––
1,785
––––––––––––
Non-current liabilities
Deferred tax 18 385
––––––––––––
385
––––––––––––
Total liabilities 2,170
––––––––––––
Net assets 37,048
––––––––––––
––––––––––––
Capital and reserves
Share capital 19 130
Share premium account 20 38,259
Merger reserve 20 958
Retained earnings 20 (2,380)
––––––––––––
36,967
Non-controlling interest 81
––––––––––––
Total equity 37,048
––––––––––––
––––––––––––
Approved by the board and authorised for issue on 4 June 2015
The notes on pages 27 to 50 form an integral part of these financial statements.
Duncan Peyton
Director
4 June 2015
23
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4D pharma plc
COMPANY STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2014
Registered No. 08840579
As at
31 December
2014
Notes £000
Assets
Non-current assets
Property, plant and equipment 10 4
Investment in subsidiaries 12 2,716
Loans to subsidiaries 12 3,803
––––––––––––
6,523
––––––––––––
Current assets
Trade and other receivables 15 285
Short-term investments and cash on deposit 16 3,007
Cash and cash equivalents 16 28,784
––––––––––––
32,076
––––––––––––
Total assets 38,599
––––––––––––
Liabilities
Current liabilities
Trade and other payables 17 417
––––––––––––
Total liabilities 417
––––––––––––
Net assets 38,182
––––––––––––
––––––––––––
Capital and reserves
Share capital 19 130
Share premium account 20 38,259
Merger reserve 20 958
Retained earnings 20 (1,165)
––––––––––––
Total equity 38,182
––––––––––––
––––––––––––
Approved by the board and authorised for issue on 4 June 2015
The notes on pages 27 to 50 form an integral part of these financial statements.
Duncan Peyton
Director
4 June 2015
24
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4D pharma plc
GROUP CASH FLOW STATEMENT
FOR THE PERIOD 10 JANUARY 2014 TO 31 DECEMBER 2014
31 Dec 2014
Group
Notes £000
Loss before taxation (2,380)
Adjustments for:
Depreciation of property, plant and equipment 10 65
Amortisation of intangible assets 11 49
Finance income (92)
Finance expense 5
Gain on remeasurement of existing interest on
acquisition of subsidiary to fair value 7 (1,388)
Share of losses in associated undertaking 379
––––––––––––
Cash flows from operations before movements in working capital (3,362)
Changes in working capital:
Increase in inventories (115)
Increase in trade and other receivables (474)
Increase in trade and other payables 133
––––––––––––
Cash outflow from operating activities (3,818)
––––––––––––
Cash flows from investing activities
Purchases of property, plant and equipment 10 (264)
Loan advanced 11 (1,076)
Acquisition of subsidiaries net of cash acquired 238
Interest received 92
Monies placed on deposit (3,007)
––––––––––––
Net cash outflow from investing activities (4,017)
––––––––––––
Cash flows from financing activities
Proceeds from issues of ordinary share capital 38,100
Expenses on issue of shares 19 (937)
Repayment of loan 12 (500)
Interest paid 6 (5)
––––––––––––
Net cash inflow from financing activities 36,658
––––––––––––
Increase in cash and cash equivalents 28,823
Cash and cash equivalents at the start of the period —
––––––––––––
Cash and cash equivalents at the end of the period 28,823
––––––––––––
––––––––––––
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4D pharma plc
COMPANY CASH FLOW STATEMENT
FOR THE PERIOD 10 JANUARY 2014 TO 31 DECEMBER 2014
31 Dec 2014
Company
Notes £000
Loss before taxation (1,165)
Adjustments for:
Finance income (92)
Finance expense 5
––––––––––––
Cash flows from operations before movements in working capital (1,252)
Changes in working capital:
Increase in trade and other receivables (285)
Increase in trade and other payables 417
––––––––––––
Cash outflow from operating activities (1,120)
––––––––––––
Cash flows from investing activities
Purchases of property, plant and equipment 10 (4)
Acquisition of subsidiary undertakings 12 (32)
Loans to subsidiary undertakings (3,803)
Interest received 92
Monies placed on deposit (3,007)
––––––––––––
Net cash outflow from investing activities (6,754)
––––––––––––
Cash flows from financing activities
Proceeds from issues of ordinary share capital 38,100
Expenses on issue of shares 19 (937)
Repayment of loan 12 (500)
Interest paid 6 (5)
––––––––––––
Net cash inflow from financing activities 36,658
––––––––––––
Increase in cash and cash equivalents 28,784
Cash and cash equivalents at the start of the period —
––––––––––––
Cash and cash equivalents at the end of the period 16 28,784
––––––––––––
––––––––––––
26
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2014
1. GENERAL INFORMATION
4D pharma plc (“the Company”) is an AIM listed company incorporated and domiciled in the UK. The locations and
principal activities of the subsidiaries are set out in Note 12. 4D pharma plc is a Company incorporated in England
and Wales. The registered office is 74 Gartside Street, Manchester, M3 3EL. These Group financial statements
consolidate those of the Company and its subsidiaries (together referred to as the ‘Group’ and individually as
‘Group entities’) for the period ended 31 December 2014.
The financial statements of 4D pharma plc and its subsidiaries (the “Group”) for the period ended 31 December
2014 were authorised for issue by the Board of Directors on 4 June 2015 and the Statements of Financial Position
was signed on the Board’s behalf by Duncan Peyton.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the
parent company’s Statement of Comprehensive Income.
The significant accounting policies adopted by the Group are set out in Note 3.
2. BASIS OF PREPARATION
(a) Statement of compliance
The Group’s financial statements have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (“IFRS”) and IFRS Interpretations Committee (“IFRSIC”)
interpretations as they apply to the financial statements of the Group for the period ended 31 December 2014 and
the requirements of the Companies Act 2006 applicable to companies reporting under IFRS.
(b) Basis of measurement
The parent company and Group financial statements have been prepared on the historical cost basis.
The methods used to measure fair values of assets and liabilities are discussed in the respective notes in Note 3.
(c) Going concern
The Chairman’s and Chief Executive Officer’s Review on pages 4 and 5 outlines the business activities of the Group
along with the factors which may affect its future development and performance. The Group’s financial position is
discussed in the Financial Review on pages 4 and 5 along with details of its cash flow and liquidity. Note 22 to the
financial statements sets out the Group’s financial risks and the management of those risks.
Having prepared management forecasts and made appropriate enquiries, the Directors are satisfied that the
Group has adequate resources for the foreseeable future as the Group is at the start up stage of its business life
cycle. Accordingly they have continued to adopt the going concern basis in preparing the Group and Company
financial statements.
(d) Functional and presentational currency
These financial statements are presented in pounds sterling, which is the Group’s functional currency. All financial
information presented has been rounded to the nearest thousand.
(e) Use of estimates and judgements
The preparation of financial statements requires management to make estimates and judgements that affect the
amounts reported for assets and liabilities as at the reporting date and the amounts reported for revenues and
expenses during the period. The nature of estimation means that actual amounts could differ from those estimates.
Estimates and judgements used in the preparation of the financial statements are continually reviewed and revised
as necessary. While every effort is made to ensure that such estimates and judgements are reasonable, by their
nature they are uncertain and, as such, changes in estimates and judgements may have a material impact on the
financial statements.
27
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
2. BASIS OF PREPARATION continued
The key sources of estimation uncertainty and critical accounting policies that have a significant risk of causing
material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed
below.
● Taxation
Management judgement is required to determine the amount of tax assets that can be recognised, based
upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax
planning strategies. The carrying value of the unrecognised tax losses at 31 December 2014 was
£4.319 million. The value of the additional deferred tax asset not recognised at the period-end is £846,000.
Further information is included in Note 8.
● Research and development
Careful judgement by the directors is applied when deciding whether the recognition requirements for
development costs have been met. This is necessary as the economic success of any product development
is uncertain until such time as technical viability has been proven and commercial supply agreements are likely
to be achieved. Judgements are based on the information available at each reporting date which includes the
progress with testing and certification and progress on, for example, establishment of commercial
arrangements with third parties. In addition, all internal activities related to research and development of new
products are continuously monitored by the directors. Further information is included in Note 3.
● Intangible fixed assets and goodwill
Estimated impairment of intangible fixed assets and goodwill
The Group test annually whether intangible fixed assets and goodwill has suffered any impairment, in
accordance with the accounting policy stated in Note 3. The potential recoverable amounts of intangible fixed
assets and goodwill have been determined based on value in use calculations. These calculations require the
use of estimates both in arriving at the expected future cash flows and the application of a suitable discount
rate in order to calculate the present value of these flows. There is a degree of judgement involved in making
assessments of attributable values on acquisition and making impairment assessments. More detail is given in
Notes 3(i) and 3(j).
Valuation of intangibles on acquisition
Valuation of an early stage drug discovery pharmaceutical company is a notoriously difficult task. Analysis of
financial history gives little indication of future performance. Despite this, for products currently in development
sales potentials can be estimated and management have used their own experience as well as consulting with
external experts to establish best estimates of sales pricing and revenue forecasting and these can provide the
starting point for valuing these products and ensuring that their value has not been impaired. In addition, clinical
development risks, measured as product attrition failure rates incurred as drugs progress through the clinic are
reasonably well documented and can be applied as meaningful risk-adjusters to account for the chance of
development failure.
● Assessment of control for consolidation purposes
Subsidiaries
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies so
as to obtain economic benefits from their activities. Subsidiaries are consolidated from the date on which
control is transferred to the Group up until the date that control ceases.
28
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below are applied consistently by Group entities.
The Group financial statements are presented in sterling and all values are rounded to the nearest thousand pounds
except where otherwise indicated.
(a) Basis of consolidation
(i) Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control
is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that
are currently exercisable.
The Group measures goodwill at the acquisition date as:
● the fair value of the consideration transferred; plus
● the recognised amount of any non-controlling interests in the acquiree; plus
● if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the
acquiree; less
● the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in
connection with a business combination are expensed as incurred.
(ii) Non-controlling interests
For each business combination, the Group elects to measure any non-controlling interests in the acquire either:
● at fair value; or
● at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as
transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a
proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss
is recognised in profit or loss.
(iii) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases.
(iv) Investments in associates
Associates are those entities in which the Group has significant influence, but not control or joint control, over the
financial and operating policies. Significant influence is presumed to exist when the Group holds between
20 percent and 50 percent of the voting power of another entity.
Investments in associates are accounted for under the equity method and are recognised initially at cost. The cost
of the investment includes transaction costs.
The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive
income of equity-accounted investees, after adjustments to align the accounting policies with those of the Group,
from the date that significant influence or joint control commences until the date that significant influence or joint
control ceases.
29
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES continued
(a) Basis of consolidation (continued)
When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the
investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of
further losses is discontinued except to the extent that the Group has an obligation or has made payments on
behalf of the investee.
(v) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from
transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s
interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent
that there is no evidence of impairment.
(b) Foreign currency transactions
Transactions in foreign currencies are initially recorded in the functional currency by applying the spot rate ruling at
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the
functional currency rate of exchange ruling at the reporting date. All differences are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value was determined.
(c) Segmental reporting
An operating segment is a component of an entity that engages in business activities from which it may earn
revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating
decision maker, being the chief executive officer, to make decisions about resources to be allocated to the segment
and assess its performance, and for which discrete financial information is available. As at the reporting date the
Group operated as a single segment.
(d) Lease payments
Rentals payable under operating leases, which are leases where the lessor retains a significant proportion of the
risks and rewards of the underlying asset, are charged in profit or loss on a straight-line basis over the expected
lease term.
Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
(e) Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue
can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable for the
sale of goods or services, excluding discounts, rebates, VAT and other sales taxes or duties
Revenue from the sale of products is recognised at the point of transfer of risks and rewards of ownership which
is generally on shipment of product.
30
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES continued
(f) Finance income and finance expense
Finance income comprises interest income on funds invested and changes in the fair value of financial assets at fair
value through profit or loss. Interest income is recognised as interest accrues using the effective interest rate
method.
Finance expense comprises interest expense on borrowings, changes in the fair value of financial assets at fair value
through the Group Statement of Comprehensive Income, impairment losses recognised on financial assets and
losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised using the
effective interest method.
(g) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Income
Statement except to the extent that it relates to items recognised directly in equity or in other comprehensive
income.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to
be recovered from or paid to, the tax authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the reporting date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements with the following exceptions:
● where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination, that at the time of the transaction affects neither accounting
nor taxable profit nor loss; and
● in respect of taxable temporary differences associated with investments in subsidiaries where the timing of
the reversal of the temporary differences can be controlled and it is probable that the temporary differences
will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws
that have been enacted or substantially enacted by the date and which are expected to apply when the related
deferred tax asset is realised or the deferred tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available
against which differences can be utilised. An asset is not recognised to the extent that the transfer or economic
benefits in the future is uncertain.
(h) Property, plant and equipment
Property, plant and equipment are recognised initially at cost. After initial recognition, these assets are carried at
cost less any accumulated depreciation and any accumulated impairment losses. Cost comprises the aggregate
amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly
attributable to making the asset capable of operating as intended.
Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life
and is applied separately to each identifiable component.
31
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES continued
(h) Property, plant and equipment (continued)
The following bases and rates are used to depreciate classes of assets:
Office equipment, fixtures and fittings
Plant and machinery
–
–
straight line over five years
straight line over five years
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in
circumstances indicate that the carrying value may not be recoverable, and are written down immediately to their
recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required
these are made prospectively.
A property, plant and equipment item is de-recognised on disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the de-recognition of the asset
is included in the Income Statement in the period of de-recognition.
(i) Intangible assets
Intellectual property and patents
The carrying value of intangible fixed assets (with the exception of goodwill) is reviewed annually for impairment
whenever events or changes in circumstances indicate the carrying value may not be recoverable.
At each reporting date the Group reviews the carrying value of its intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss.
Where the asset does not generate cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash generating unit to which the asset belongs. A cash generating unit is the smallest
identifiable group of assets that generates cash inflows from other assets or group assets.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset, for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the
asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the assets is increased to the revised
climate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal
of an impairment loss is recognised in profit or loss immediately.
Amortisation is provided on the fair value of the asset and is calculated on a straight line basis over its useful life.
Amortisation is recognised within the statement of comprehensive income. Intellectual property and patents
acquired as part of a business combination are only amortised once technical viability has been proven and
commercial agreements are likely to be achieved.
Patents includes the costs associated with acquiring and registering patents in respect of intellectual property
rights. Patents are amortised, on a straight-line basis over their useful lives (ten years).
32
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES continued
(i) Intangible assets (continued)
Goodwill
Goodwill on acquisitions, being the excess of the fair value of the cost of acquisition over the Group’s interest in the
fair value of the identifiable assets and liabilities acquired, is capitalised and tested for impairment on an annual basis.
Any impairment is recognised immediately in profit or loss and is not subsequently reversed. For the purpose of
impairment testing goodwill is allocated to cash generating units of 4D pharma plc, which represent the smallest
identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other
assets or groups of assets.
Internally generated intangible assets
Expenditure on research activities is recognised in the statement of comprehensive income as incurred.
Expenditure arising from the Group’s development is recognised only if all of the following conditions are met:
● an asset is created that can be identified;
● it is probable that the asset created will generate future economic benefits;
● the development cost of the asset can be measured reliably;
● the Group has the intention to complete the asset and the ability and intention to use or sell it;
● the product or process is technically and commercially feasible; and
● sufficient resources are available to complete the development and to either sell or use the asset.
Where these criteria have not been achieved, development expenditure is recognised in profit or loss in the period
in which it is incurred.
(j) Impairment of assets
At each reporting date the Group reviews the carrying value of its plant, equipment and intangible assets to
determine whether there is an indication that these assets have suffered an impairment loss. If any such indication
exists, or when annual impairment testing for an asset is required, the Group makes an assessment of the asset’s
recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and
its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets. Where the carrying value of an asset exceeds
its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
In determining fair value less costs of disposal, an appropriate valuation model is used, these calculations
corroborated by valuation multiples, or other available fair value indicators. Impairment losses on continuing
operations are recognised in the Income Statement in those expense categories consistent with the function of the
impaired asset.
33
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES continued
(k) Investments in subsidiaries
Investments in and loans to subsidiaries are stated in the Company’s Statement of Financial Position at cost less
provision for any impairment.
(l) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost based on latest contractual prices includes
all costs incurred in bringing each product to its present location and condition. Net realisable value is based on
estimated selling price less any further costs expected to be incurred to disposal. Provision is made for slow-moving
or obsolete items.
(m) Cash, cash equivalents and short-term investments
Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less. Short-term
investments comprise deposits with maturities of more than three months, but no greater than twelve months.
(n) Trade and other payables
Trade and other payables are non-interest bearing and are initially recognised at fair value. They are subsequently
measured at amortised cost using the effective interest rate method.
(o) Borrowings
Borrowings are recognised when the Group becomes party to related contracts and are measured initially at fair
value, net of directly attributable transaction costs incurred. After initial recognition, borrowings are stated at
amortised cost.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least twelve months after the reporting date.
Costs of borrowing funds are expensed in the period in which they occur.
(p) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event
and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
The expense relating to any provision is presented in the Income Statement, net of any expected reimbursement,
but only where recoverability of such reimbursement is virtually certain.
Provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risk specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
There were no provisions at 31 December 2014.
(q) Financial assets and liabilities
Financial assets and liabilities are recognised when the Group becomes party to the contracts that give rise to
them and are classified as financial assets and liabilities at fair value through the Group Statement of
Comprehensive Income. The Group determines the classification of its financial assets and liabilities at initial
recognition and re–evaluates this designation at each financial year end.
A financial asset or liability is generally de-recognised when the contract that gives rise to it is settled, sold, cancelled
or expires.
At the period end, the Group had no financial assets or liabilities designated at fair value through the Group
Statement of Comprehensive Income.
34
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES continued
(r) Share capital
Proceeds on issue of shares are included in shareholders’ equity, net of transaction costs. The carrying amount is
not re-measured in subsequent years.
(s) New accounting standards and interpretations
Adoption of IFRS
The Group and Company financial statements have been prepared in accordance with IFRS, IAS and IFRS
Interpretations Committee (“IFRSIC”) effective as at 31 December 2014. The Group and Company have not chosen
to adopt any amendments or revised standards early.
IFRSs Issued but not yet Effective
The following IFRS, IAS and IFRICs have been issued, are not yet effective, and have not been adopted by the
Group or the Company in these financial statements. The directors do not believe the adoption will have a material
impact on the business.
IAS 19 Employee Benefits – defined benefit plans (Amended)
IFRS 2 Share Based Payments (Amended)
IFRS 3 Business Combinations (Amended)
IFRS 8 Operating Segments (Amended)
IAS 16 Property Plant and Intangibles (Annual Improvements 2012)
IAS 24 Related Party Disclosure (Annual Improvements 2012)
IAS 38 Intangible Assets (Annual Improvements 2012)
IFRS 13 Fair Value Measurement (Annual Improvements 2013)
IAS 1 Presentation of Financial Statements
IAS 28 Investments in Associates
IFRS 10 Consolidated Financial Statements
IFRS 12 Disclosure of Interest in Other Entities
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue From Contracts with Customers
IFRS 9 Financial Instruments
Effective date
1 July 2014
1 July 2014
1 July 2014
1 July 2014
1 July 2014
1 July 2014
1 July 2014
1 July 2014
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2018
1 January 2018
35
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NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
4. OPERATING LOSS
By nature:
Operating loss is stated after charging :
Depreciation on property, plant, and equipment
Amortisation of intangible assets
Staff costs (see Note 5)
Foreign exchange losses
Research and development expense
Operating lease rentals
Land and buildings
Auditor’s remuneration
Legal and professional
Consultancy
Other costs
Auditor’s remuneration:
Audit services:
– Fees payable to Company auditor for the audit of the parent and the consolidated accounts
– Auditing the financial statements of subsidiaries pursuant to legislation
Total auditor’s remuneration
5.
STAFF COSTS
Wages and salaries
Social security costs
Pension contributions
Directors’ remuneration (including benefits-in-kind) included in
the aggregate remuneration above comprised:
Emoluments for qualifying services
4D pharma plc
31 Dec
2014
£000
65
49
520
3
1,823
148
20
357
202
289
––––––––––––––
3,476
––––––––––––––
––––––––––––––
14
6
––––––––––––––
20
––––––––––––––
––––––––––––––
31 Dec
2014
£000
470
50
–
––––––––––––––
520
––––––––––––––
––––––––––––––
264
––––––––––––––
––––––––––––––
Directors’ emoluments (excluding social security costs, but including benefits in kind) disclosed above include
£97,000 paid to the highest paid director.
An analysis of the highest paid director’s remuneration is included in the Report of the Remuneration Committee.
The average number of employees during the period (including directors), was as follows:
The Group
Directors
Laboratory and administrative staff
36
31 Dec
2014
Number
4
9
––––––––––––––
13
––––––––––––––
––––––––––––––
236661 4D pp027 - pp038 05/06/2015 00:37 Page 37
4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
6. FINANCE INCOME AND FINANCE EXPENSE
The Group
Finance income:
Bank interest receivable
Finance expense:
Loan interest payable
31 Dec
2014
£000
92
(5)
––––––––––––––
87
––––––––––––––
––––––––––––––
Bank interest receivable includes £12,000 which is receivable after the period end.
7. INTEREST IN ASSOCIATE
In January 2014 the Group acquired a non-controlling interest in 4D Pharma Research Limited (formerly GT
Biologics Limited) when it purchased 46% of the ordinary share capital.
The Group
Cash consideration of acquisition
Share of losses in the associated undertaking
Fair value of identifiable net assets on date associate became a
subsidiary per Note 13 including goodwill
Gain on measurement of existing interest to fair value on acquisition of a subsidiary
8. TAXATION
The tax charge is made up as follows:
The Group
Current income tax:
Total current income tax
Current deferred tax:
Current year charge
Total deferred tax
Total income tax expenses recognised in the period
31 Dec
2014
£000
(500)
379
––––––––––––––
(121)
1,509
––––––––––––––
1,388
––––––––––––––
––––––––––––––
31 Dec
2014
£000
––––––––––––––
–
––––––––––––––
–
––––––––––––––
–
––––––––––––––
–
––––––––––––––
––––––––––––––
37
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NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
8. TAXATION continued
The income tax expenses can be reconciled to the accounting loss as follows:
The Group
Loss before taxation
Tax at standard rate of 20%
Effects of:
Expenses not deductible for tax purposes
Enhanced research and development expenditure
Gains not chargeable to tax
Bank interest
Property, plant and equipment timing differences
Tax losses carried forward to future years
Tax income tax expense recognised in the period
4D pharma plc
31 Dec
2014
£000
(2,380)
––––––––––––––
(476)
100
(18)
(277)
(55)
(206)
932
––––––––––––––
–
––––––––––––––
––––––––––––––
At 31 December, the Group had tax losses available for carry forward of approximately £4,662 million. The Group
has not recognised deferred tax assets relating to such earned forward losses of approximately £932,000.
Group’s management considers that there is insufficient evidence of future taxable income, taxable temporary
differences and feasible tax-planning strategies to utilise all or the cumulative losses and therefore it is not
considered certain that the deferred tax assets will be realised in full. If future income differs from current projections,
this could significantly impact the tax charge or benefit in future periods.
9. LOSS PER SHARE
31 Dec
2014
Group £000
Loss for the period attributable to equity holders of the parent (2,021)
––––––––––––
Weighted average number of shares:
Ordinary shares in issue 42,001,850
––––––––––––
Basic loss per share (pence) (4.81)
––––––––––––
––––––––––––
The loss for the period and the weighted average number of ordinary shares for calculating the diluted loss per
share for the period ended 31 December 2014 are identical to those for the basic loss per share. This is because
there are no outstanding share options that would have the effect of reducing the loss per ordinary share and would
therefore not be dilutive under the terms of International Accounting Standard (IAS) No 33 Earnings per Share.
38
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
10. PROPERTY, PLANT AND EQUIPMENT
Office
equipment,
fixtures Plant and
and fittings machinery Total
The Group £000 £000 £000
Cost:
At 10 January 2014 — — —
Additions 4 260 264
Additions arising from acquisitions in the period 2 216 218
–––––––––––– –––––––––––– ––––––––––––
At 31 December 2014 6 476 482
–––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– ––––––––––––
Depreciation:
At 10 January 2014 — — —
Provided during the period — 65 65
–––––––––––– –––––––––––– ––––––––––––
At 31 December 2014 — 65 65
–––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– ––––––––––––
Net book value:
At 31 December 2014 6 411 417
–––––––––––– –––––––––––– ––––––––––––
At 10 January 2014 — — —
–––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– ––––––––––––
Office
equipment,
fixtures
and fittings Total
The Company £000 £000
Cost:
At 10 January 2014 — —
Additions 4 4
–––––––––––– ––––––––––––
At 31 December 2014 4 4
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
Depreciation:
At 10 January 2014 — —
Provided during the period — —
–––––––––––– ––––––––––––
At 31 December 2014 — —
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
Net book value:
At 31 December 2014 4 4
–––––––––––– ––––––––––––
At 10 January 2014 — —
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
39
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
11. INTANGIBLE ASSETS
Intellectual
Goodwill Property Patents Total
Group £000 £000 £000 £000
Cost:
At 10 January 2014 — — — —
Arising on acquisition of subsidiary undertakings 3,316 1,923 1,076 6,315
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
At 31 December 2014 3,316 1,923 1,076 6,315
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
Amortisation:
At 10 January 2014 — — — —
Provided during the period — — 49 49
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
At 31 December 2014 — — 49 49
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
Net book value:
At 31 December 2014 3,316 1,923 1,027 6,266
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
At 10 January 2014 — — — —
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– –––––––––––– ––––––––––––
Goodwill amounting to £3.316 million relates to a cash generating unit (CGU), being 4D Pharma Research Limited
(formerly GT Biologics Limited) acquired on 10 June 2014 when the Group acquired 37.5% of the share capital for
a total consideration of £1,730,255 and The Microbiota Company Limited acquired on 17 July 2014 when the
Group acquired 100% of the share capital. Analysis of these acquisitions is detailed in Note 13.
This goodwill, which has arisen on the business combinations detailed in Note 13, represents staff and accumulated
know how after a fair value has been attributed to all other assets and liabilities acquired.
During the period, goodwill was tested for impairment in accordance with IAS 36 Impairment of Assets. The
recoverable amount of the CGU exceeds the carrying amount of goodwill. The recoverable amount of each CGU
has been measured using a value in use calculation and as such no impairment was deemed necessary. The key
assumptions used (which are based on management’s past experience) for the value in use calculations are those
relating to the number of potential new targets for future products that can be identified in each year, and the length
of time that this rate can be maintained. The recoverable amount of goodwill exceeds the carrying amount by
171%. The directors consider the number of targets to be identified, and the number of years that they believe they
will be able to successfully identify new product targets, to be the most sensitive assumptions used in the
impairment reviews. A reduction in excess of 38% in the number of targets per annum identified, or a reduction in
excess of 33% in the number of years during which these are identified, would result in the recoverable amount of
the 4D Pharma Research Limited CGU being equal to its carrying amount.
Intellectual property amounting to £1.923 million relates to a CGU being 4D Pharma Research Limited, acquired as
per above. This represents bacteria identified by the Group’s know how and processes and at different stages of
research and development, from early identification to patented strains of bacteria.
40
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
11. INTANGIBLE ASSETS continued
The key assumptions used, which are based on management’s past experience, for the value in use calculations
are those relating to discount rates, growth rates and direct costs during the period. The value in use calculations
are based on the future cash flows from approved risk based net present value forecasts that have been
extrapolated to cover a period of 25 years, and to apply prudence no terminal value is added. Valuation of an early
stage drug discovery pharmaceutical company is a notoriously difficult task. Analysis of financial history gives little
indication of future performance. Despite this, for products currently in development sales potentials can be
estimated and management have used their own experience as well as consulting with external experts to establish
best estimates of sales pricing and revenue forecasting and these can provide the starting point for valuing these
products and ensuring that their value has not been impaired. In addition, clinical development risks, measured as
product attrition failure rates incurred as drugs progress through the clinic are reasonably well documented and can
be applied as meaningful risk-adjusters to account for the chance of development failure. We have therefore
adopted a risk-adjusted net present value of future cash flows method for this analysis for each CGU.
At 31 December 2014 a pre-tax discount rate of 13% was applied and was used in the value calculation.
The recoverable amount of the 4D Pharma Research Limited CGU exceeds the carrying amount of this CGU by
953%. The directors consider the discount rate and revenues to be the most sensitive assumptions used in the
impairment reviews. An increase in the discount rate of 31% or a reduction in certain revenues of in excess of 30%
would result in the recoverable amount of the 4D Pharma Research Limited CGU being equal to its carrying
amount.
Intangible assets, other than goodwill and intangible assets purchased as part of the acquisition of a subsidiary, are
amortised on a straight line basis over ten years. Amortisation provided during the period is recognised in
administrative expenses. The Group does not believe that any of its patents in isolation is material to the business.
Patents amounting to £1.076 million were purchased by The Microbiota Company Limited immediately prior to its
acquisition by the Group on 17 July 2014 via a loan advanced by 4D pharma plc.
12. INVESTMENT IN SUBSIDIARIES
Loans to
subsidiary
Shares undertakings Total
£000 £000 £000
Company
Additions in the period 2,716 3,803 6,519
–––––––––––– –––––––––––– ––––––––––––
At 31 December 2014 2,716 3,803 6,519
–––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– ––––––––––––
By subsidiary
4D Pharma Research Limited* 1,730 2,727 4,457
The Microbiota Company Limited 986 1,076 2,062
Schosween 18 Limited — — —
–––––––––––– –––––––––––– ––––––––––––
At 31 December 2014 2,716 3,803 6,519
–––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– ––––––––––––
*Formerly GT Biologics Limited
Additions were made as follows:
41
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
12. INVESTMENT IN SUBSIDIARIES continued
4D Pharma Research Limited
Date % Cost (£’000) Consideration
5 February 2014 46.0 500 Cash
4 June 2014 37.5 1,230 699,500 ordinary shares in 4D pharma plc
(issue price of £1.75 per share; £6,130
–––––––––––– –––––––––––– stamp duty)
83.5 1,730
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
Prior to 4 June 2014 the acquisition was accounted for as an associate under IAS28.
The Microbiota Company Limited
Date % Cost (£’000) Consideration
17 July 2014 100.00 986 509,285 ordinary shares in 4D pharma plc
(issue price of £1.885 per share; stamp
–––––––––––– –––––––––––– duty and costs £26,000)
100.00 986
–––––––––––– ––––––––––––
–––––––––––– ––––––––––––
31 Dec
Subsidiary undertakings Country of incorporation Principal activity 2014
4D Pharma Research Limited (formerly
GT Biologics Limited Scotland Research and development 83.5%*
The Microbiota Company Limited England and Wales Research and development 100%
Schosween 18 Limited England and Wales Dormant 100%
GT Prohealth Limited Scotland Dormant 83.5%**
GT Therapeutics Limited Scotland Dormant 83.5%***
With the exception of the companies noted below all other shareholdings are owned by 4D pharma plc.
* The remaining 16.5% ordinary share capital of 4D Pharma Research Limited was acquired on the 30 March 2015 taking the
holding to 100%.
** GT Prohealth Limited is a 100% subsidiary of 4D Pharma Research Limited.
*** GT Therapeutics Limited is a 100% subsidiary of 4D Pharma Research Limited.
13. BUSINESS COMBINATIONS
Subsidiary acquired:
2014
Principal
activity
Proportion of voting Consideration
Date of equity interests transferred
acquisition acquired £000
4D Pharma Research
Limited (formerly GT
Biologics Limited)
Research and
development
4 June 2014 83.5% 1,730
––––––––––––
––––––––––––
––––––––––––
––––––––––––
42
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
13. BUSINESS COMBINATIONS continued
4D Pharma Research
Fair value Limited (formally GT
Assets acquired and liabilities Book value adjustments Biologics Limited)
recognised at the date of acquisition £000 £000 £000
Non-current assets:
Intellectual property — 1,923 1,923
Property, plant and equipment 218 — 218
Current assets:
Trade and other receivables 115 — 115
Cash and cash equivalents 270 — 270
Current liabilities:
Trade and other payables (1,651) — (1,651)
Non-current liabilities
Deferred tax – (385) (385)
–––––––––––– –––––––––––– ––––––––––––
Fair value of identifiable net
liabilities acquired (1,048) 1,538 490
–––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– ––––––––––––
Consideration transferred:
Satisfied in shares 1,230
Non-controlling interest share of the
fair values of net assets acquired 81
Fair value of previous held interest
classified as an associate 1,509
Fair value of identifiable net liabilities acquired (490)
––––––––––––
Goodwill arising on acquisition 2,330
––––––––––––
––––––––––––
Goodwill relates to the accumulated knowledge and know how inherent within 4D Pharma Research Limited.
Net cash outflow on acquisition £000
Consideration paid in cash —
Cash and cash equivalent balances acquired 270
––––––––––––
Net cash inflow 270
––––––––––––
––––––––––––
Impact of acquisition on the results of the Group
Included in the loss for the period is £2.175 million attributable to the additional business generated by 4D Pharma
Research Limited (formally GT Biologics Limited).
Had this business combination been effected at 10 January 2014, 4D Pharma Research Limited (formally GT
Biologics Limited) would have added £3.122 million to the loss from continuing operations.
43
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
13. BUSINESS COMBINATIONS continued
Subsidiary acquired:
2014
Principal
activity
Proportion of voting Consideration
Date of equity interests transferred
acquisition acquired £000
The Microbiota
Company Limited
Research and
development
17 July 2014 100% 986
––––––––––––
––––––––––––
––––––––––––
––––––––––––
The Microbiota
Book Fair value Company
Assets acquired and liabilities value adjustments Limited
recognised at the date of acquisition £000 £000 £000
Non-current assets:
Patents 1,076 — 1,076
Current liabilities:
Loan (1,076) — (1,076)
–––––––––––– –––––––––––– ––––––––––––
Fair value of identifiable
net liabilities acquired — — —
–––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– ––––––––––––
Consideration transferred:
Satisfied in shares 986
Fair value of identifiable net assets acquired —
––––––––––––
Goodwill arising on acquisition 986
––––––––––––
––––––––––––
Goodwill relates to the accumulated knowledge and know how inherent within The Microbiota Company Limited.
Impact of acquisition on the results of the Group
Included in the loss for the period is £49,000 attributable to the additional business generated by
The Microbiota Company.
Had this business combination been effected at 10 January 2014, The Microbiota Company Limited would have
added £49,000 to the loss from continuing operations.
14. INVENTORIES
Consumables
44
31 Dec 2014
Group
£000
115
––––––––––––––
115
––––––––––––––
––––––––––––––
31 Dec 2014
Company
£000
–
––––––––––––––
–
––––––––––––––
––––––––––––––
236661 4D pp039 -end 05/06/2015 00:38 Page 45
4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
15. TRADE AND OTHER RECEIVABLES
Prepayments
Other receivables
31 Dec 2014
Group
£000
356
234
––––––––––––––
590
––––––––––––––
––––––––––––––
31 Dec 2014
Company
£000
194
91
––––––––––––––
285
––––––––––––––
––––––––––––––
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.
16. CASH, CASH EQUIVALENTS AND DEPOSITS
Short-term investments and cash on deposit
Cash and cash equivalents
31 Dec 2014
Group
£000
3,007
28,823
––––––––––––––
31,830
––––––––––––––
––––––––––––––
31 Dec 2014
Company
£000
3,007
28,784
––––––––––––––
31,791
––––––––––––––
––––––––––––––
Under IAS 7 Statement of Cashflows, cash held on long-term deposits (being deposits with maturity of greater than
three months and no more than twelve months) that cannot readily be converted into cash has been classified as
a short-term investment. The maturity on this investment was less than twelve months at the reporting date.
Cash and cash equivalents at 31 December 2014 include deposits with original maturity of three months or less of
£28,823,000 (Group) and £28,784,000 (Company).
The Directors consider that the carrying value of cash and cash equivalents approximates their fair value. For details
on the Group’s credit risk management refer to Note 22.
17. TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables
Accruals
31 Dec 2014
Group
£000
31 Dec 2014
Company
£000
1,375
32
378
––––––––––––––
1,785
––––––––––––––
––––––––––––––
302
29
86
––––––––––––––
417
––––––––––––––
––––––––––––––
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. Trade
payables are non-interest bearing and are typically settled on 30 to 45 day terms.
The Director’s consider that the carrying value of trade payables, other payables and accruals approximates to their
fair value.
45
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
17. TRADE AND OTHER PAYABLES continued
All trade and other payables are denominated in Sterling.
The Group has financial risk management policies in place to ensure that any trade payables are settled within the
credit time frame; and no interest has been charged by any suppliers as a result of late payment of invoices during
the reporting period presented herein.
18. DEFERRED TAX
The Group
At 10 January 2014
Arising on the fair value acquisition of intellectual property on the
acquisition of subsidiaries per Note 13
As at 31 December 2014
19. SHARE CAPITAL
The Group and the Company
Allotted, called up and fully paid ordinary shares of 0.25p:
Shares issued
Shares issued on investment in subsidiary
Shares issued in placing
As at 31 December 2014
31 Dec
2014
£000
–
385
––––––––––––––
385
––––––––––––––
––––––––––––––
Number
Share capital
£000
20,000,000
1,208,785
30,883,334
––––––––––––––
52,092,119
––––––––––––––
––––––––––––––
50
3
77
––––––––––––––
130
––––––––––––––
––––––––––––––
The balances classified as share capital and share premium include the total net proceeds (nominal value and share
premium respectively) on issue of the Company’s equity share capital, comprising 0.25 pence ordinary shares.
The Company issued in aggregate 20,000,000 ordinary shares of 0.25p at par value between 10 January 2014 and
18 January 2014.
The Company raised gross proceeds of £16,550,000 from a placing on 18 February 2014 through the issue of
16,550,000 new ordinary shares at an issue price of 100 pence per share. Issue costs associated with the placing
totalled £504,212.
The Company raised gross proceeds of £21,500,000 from a placing on 14 July 2014 through the issue of
14,333,334 new ordinary shares at an issue price of 150 pence per share. Issue costs associated with the placing
totalled £433,000.
20. CAPITAL AND RESERVES
The components of equity are as follows:
Called up share capital
The share capital account includes the par value for all shares issued and outstanding.
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
20. CAPITAL AND RESERVES continued
Share premium account
The share premium account is used to record amounts received in excess of the nominal value of shares on issue
of new shares less the costs of new share issues.
Merger reserve
The merger reserve comprises the premium arising on share issued as consideration for the acquisition of
subsidiary undertakings where merger relief under section 612 of the Companies Act 2006 applies.
Retained earings
Retained earnings includes the accumulated profits and losses arising from the Group Statement of Comprehensive
Income and certain items from Other Comprehensive Income attributable to equity shareholders net of distributions
to shareholders.
Non-controlling interest
This reserve includes the accumulated profits and losses arising from the Group Statement of Comprehensive
Income and certain items from Other Comprehensive Income attributable to the minority equity shareholders of
subsidiary undertakings not wholly owned by the Group.
21. COMMITMENTS
Operating lease commitments
The Group leases premises under non-cancellable operating lease agreements. The future aggregate minimum
lease and service charge payments under non-cancellable operating leases are as follows:
31 Dec
2014
Group
£000
210
402
––––––––––––––
612
––––––––––––––
––––––––––––––
Land and buildings:
Not later than one year
After one year but not more than five years
The Company has no lease commitments.
Capital expenditure
The Group has no committed capital expenditure at 31 December 2014.
The Company has no committed capital expenditure at 31 December 2014.
22. FINANCIAL RISK MANAGEMENT
Overview
This Note presents information about the Group’s exposure to various kinds of financial risks, the Group’s
objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework. The executive directors report regularly to the Board on Group risk management.
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
22. FINANCIAL RISK MANAGEMENT continued
Capital risk management
The Company reviews its forecast capital requirements on a half-yearly basis to ensure that entities in the Group
will be able to continue as a going concern while maximising the return to stakeholders.
The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued
share capital, reserves and retained earnings as disclosed in Notes 19 and 20 and in the Group Statement of
Changes in Equity. Total equity was £37.048 million at 31 December 2014.
The Company is not subject to externally imposed capital requirements.
Liquidity risk
The Group’s approach to managing liquidity is to ensure that, as far as possible, it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses
or risking damage to the Group’s reputation.
The Group manages all of its external bank relationships centrally in accordance with defined treasury policies. The
policies include the minimum acceptable credit rating of relationship banks and financial transaction authority limits.
Any material change to the Group’s principal banking facility requires Board approval. The Group seeks to mitigate
the risk of bank failure by ensuring that it maintains relationships with a number of investment grade banks.
At the reporting date the Group was cash positive with no outstanding borrowings.
Categorisation of financial instruments
Fixed Floating Non-interest
rate rate bearing Total
Group £000 £000 £000 £000
Trade and other receivables – – 234 234
Cash and cash equivalents 4,009 27,821 – 31,830
Trade and other payables – – (1,785) (1,785)
–––––––––––
4,009 27,821 (1,551) 30,279
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
Fixed Floating Non-interest
rate rate bearing Total
Company £000 £000 £000 £000
Trade and other receivables – – 91 91
Cash and cash equivalents 4,009 27,782 – 31,791
Trade and other payables – – (417) (417)
–––––––––––
4,009 27,782 (326) 31,465
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
The values disclosed in the above table are carrying values. The Board considers that the carrying amount of
financial assets and liabilities approximates to their fair value.
Interest rate risk
As the Group has no significant borrowings the risk is limited to the reduction of interest received on cash surpluses
held at bank which receive a floating rate of interest. The exposure to interest rate movements is immaterial.
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
22. FINANCIAL RISK MANAGEMENT continued
Maturity profile
The Directors consider that the carrying amount of the financial liabilities approximates to their fair value.
As all financial assets are expected to mature within the next twelve months an aged analysis of financial assets has
not been presented.
As all financial liabilities are expected to mature within the next twelve months an aged analysis of financial assets
has not been presented.
23. RELATED PARTY TRANSACTIONS
Key management compensation
Fees for services provided as non-executive directors:
Salaries and short term benefits
Post employment retirement benefits
Employers’ national insurance & social security costs
Share-based payment charge
Executive directors:
Salaries and short term benefits
Post employment retirement benefits
Employers’ national insurance & social security costs
Share-based payment charge
Other key management:
Salaries and short term benefits
Post employment retirement benefits
Employers’ national insurance & social security costs
Share-based payment charge
31 Dec 2014
£000
70
–
6
–
––––––––––––––
76
––––––––––––––
––––––––––––––
192
–
22
–
––––––––––––––
214
––––––––––––––
––––––––––––––
24
–
2
–
––––––––––––––
26
––––––––––––––
––––––––––––––
Group:
During the period Aquarius Equity Partners Limited, an entity controlled by Duncan Peyton and Alexander
Stevenson, charged the Group £155,549 for consultancy and other office expenses and were owed £26,735 at
31 December 2014.
During the period Thomas Engelen charged the Group £15,015 for consultancy services and was owed £nil at
31 December 2014.
During the period Fommir Limited, an entity controlled by Douglas Thomson, charged the Group £73,092 for
consultancy services and was owed £12,123 at 31 December 2014.
On 10 January 2014 a loan of £500,000 carrying an interest rate of 4% above Bank of England base rate was novated
by agreement between David Norwood and Schosween 17 Limited (Company Registered Number 8795203) to
4D pharma plc. This loan was repaid on 18 February 2014 by 4D pharma plc and £5,178 interest was charged.
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4D pharma plc
NOTES TO THE FINANCIAL STATEMENTS continued
FOR THE PERIOD ENDED 31 DECEMBER 2014
23. RELATED PARTY TRANSACTIONS continued
Company:
Transactions between 100% owned Group companies have not been disclosed as these have all been eliminated
in the preparation of the Group financial statements.
During the period the Company recharged 4D Pharma Research Limited, a 83.5% owned subsidiary £86,000 for
various expenses incurred on behalf of the subsidiary. The net inter-company balance due to the Company at
31 December 2014 totalled £2.727 million.
24. SUBSEQUENT EVENTS
On 10 February 2015 4D pharma plc raised a further £34.225 million (net of expenses) via the placing of 8,475,610
new ordinary shares at 410 pence per share.
On 30 March 2015, 4D pharma plc acquired a further 16.5% of the ordinary share capital of 4D Pharma Research
Limited for a cost of £230,000 taking their holding to 100%.
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4D pharma plc
NOTICE OF ANNUAL GENERAL MEETING
4D pharma plc
(Incorporated and registered in England and Wales with registered number 08840579)
Notice is hereby given that the annual general meeting of 4D pharma plc will be held at the offices of Schofield
Sweeney LLP, Springfield House, 76 Wellington Street, Leeds LS1 2AY on 29 June 2015 at 10.00. a.m. for the
purpose of considering and, if thought fit, passing the following resolutions, of which resolutions 1 to 5 will be
proposed as ordinary resolutions and resolutions 6 and 7 will be proposed as special resolutions.
Ordinary resolutions
1 That the Company’s annual report and audited financial statements, and the reports of the directors and
auditors, for the period ended 31 December 2014, now laid before this meeting, be and are hereby approved.
2 That Dr Alexander Stevenson, who retires by rotation, be and is hereby re-elected as a director of the
Company.
3 That Baker Tilly UK Audit LLP be and are hereby reappointed as auditors of the Company, to hold office until
the conclusion of the next general meeting at which accounts are laid before the Company.
4 That the directors be and they are hereby authorised to agree the remuneration of the auditors.
5 That in accordance with section 551 of the Companies Act 2006:
5.1 the directors be and they are hereby generally and unconditionally authorised to exercise all the powers
of the Company to allot equity securities (as defined in section 560 of the Companies Act 2006) up to
an aggregate nominal value of £50,473 (approximately one third of the Company’s issued share capital
at the date of this notice); and
5.2 in addition to the authority granted pursuant to sub-paragraph 5.1, the directors be and they are hereby
generally and unconditionally authorised to exercise all the powers of the Company to allot equity
securities up to an aggregate nominal value of £50,473 (approximately one third of the Company’s
issued share capital at the date of this notice) in connection with a rights issue offered to holders of
equity securities and other persons who are entitled to participate, in proportion (as nearly as may be)
to their then holdings of equity securities (or, as appropriate, the numbers of such securities which such
other persons are for those purposes deemed to hold), subject only to such exclusions or other
arrangements as the directors may feel necessary or expedient to deal with treasury shares, fractional
entitlements or legal or practical problems under the laws of, or the requirements of any recognised
regulatory body of, or any stock exchange in, any territory,
provided that both such authorities shall (unless previously revoked, varied or renewed) expire on the earlier of
the date of the next annual general meeting of the Company and 29 September 2016, save that, in respect of
either authority, the Company may before such expiry make an offer or agreement which would or might require
equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of such
an offer or agreement as if the authority conferred hereby had not expired.
These authorities are in substitution for any and all authorities previously conferred upon the directors for the
purposes of section 551 of the Companies Act 2006, without prejudice to any allotments made pursuant to
the terms of such authorities.
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NOTICE OF ANNUAL GENERAL MEETING continued
Special resolutions
6 That, conditionally upon the passing of resolution 5 above, in accordance with sections 570 and 573 of the
Companies Act 2006, the directors be and they are hereby given power to allot equity securities (as defined
in section 560 of the Companies Act 2006) pursuant to the authority conferred by resolution 5 above, and to
sell treasury shares, as if section 561 of the Companies Act 2006 did not apply to such allotment or sale,
provided that this power shall be limited to:
6.1 the allotment or sale of equity securities for cash in connection with or pursuant to an offer to the holders
of equity securities and other persons entitled to participate, in proportion (as nearly as may be) to their
then holdings of equity securities (or, as appropriate, the numbers of such securities which such other
persons are for those purposes deemed to hold), subject only to such exclusions or other arrangements
as the directors may feel necessary or expedient to deal with treasury shares, fractional entitlements or
legal or practical problems under the laws of, or the requirements of any recognised regulatory body of,
or any stock exchange in, any territory; and
6.2 the allotment or sale of equity securities (otherwise than pursuant to sub-paragraph 6.1) for cash up to
a maximum nominal value of £15,142 (approximately 10% of the Company’s issued share capital at the
date of this notice),
and shall (unless previously revoked, varied or renewed) expire on the earlier of the date of the next annual
general meeting and 29 September 2016, save that the Company may before such expiry make an offer or
agreement which would or might require equity securities to be allotted or sold after such expiry and the
directors may allot or sell equity securities in pursuance of such an offer or agreement as if the power
conferred hereby had not expired.
7 That the Company be and is hereby generally authorised pursuant to section 701 of the Companies Act 2006
to make market purchases (as defined in section 693(4) of the Companies Act 2006) of its ordinary shares of
0.25 pence provided that:
7.1 the Company does not purchase more than 9,079,103 ordinary shares of 0.25 pence (approximately
14.99% of the Company’s issued share capital at the date of this notice);
7.2 the Company does not pay for any such ordinary share less than its nominal value at the time of purchase;
and
7.3 the Company does not pay for any such ordinary share more than 5% above the average of the closing
mid-market price for ordinary shares of 0.25 pence for the five business days immediately preceding the
date on which the Company agrees to buy the shares concerned, based on the share prices published
in the Daily Official List of the London Stock Exchange or the AIM supplement thereto.
The authority conferred by this resolution shall (unless previously revoked, varied or renewed) expire on the
earlier of the date of the next annual general meeting of the Company and 29 September 2016, save that the
Company may before such expiry make a contract to purchase shares which will or may be executed wholly
or partly after the expiry of such authority, and may make a purchase of shares in pursuance of any such
contract, as if such authority had not expired.
By order of the board
Laurence Dale
Company Secretary
Registered Office
74 Gartside Street
Manchester
M3 3EL
4 June 2015
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4D pharma plc
NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING
1. A member entitled to attend and vote at the meeting is also entitled to appoint one or more proxies of their own
choice to exercise all or any of their rights to attend, speak and vote on their behalf at the meeting. A member
can only appoint a proxy using the procedures set out in these notes and the notes to the accompanying form
of proxy.
2. A member may appoint more than one proxy in relation to the meeting provided that each proxy is appointed
to exercise the rights attached to a different share or shares held by that member. A member may not appoint
more than one proxy to exercise rights attached to any one share. The proxy need not to be a member of the
Company, but must attend the meeting to represent the member. Please refer to the notes to the form of
proxy for further information on appointing a proxy, including how to appoint multiple proxies.
3. In the absence of instructions, the person appointed proxy may vote or abstain from voting as he/she thinks
fit on the specified resolutions and, unless otherwise instructed, may also vote or abstain from voting on any
other matter (including amendments to the resolutions) which may properly come before the meeting.
4. In the case of joint holders of a share the vote of the senior who tenders a vote, whether in person or by
proxy, shall be accepted to the exclusion of the votes of the other joint holders. For this purpose seniority
is determined by the order in which the names of the holders stand in the Company’s register of members
in respect of the joint holding.
5. Any corporation which is a member can appoint one or more corporate representatives who may exercise on
its behalf all of its powers as a member; provided that each representative is appointed to exercise the rights
attached to a different share or shares held by the member.
6. Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), the Company
specifies that only those members registered on the Register of Members at 6.00 p.m. on 25 June 2015 (the
Specified Time) (or if the meeting is adjourned to a time more than 48 hours after the Specified Time, taking
no account of any part of a day that is not a working day, by 6.00 p.m. on the day which is two working days
prior to the time of the adjourned meeting) shall be entitled to attend and vote thereat in respect of the number
of shares registered in their name at that time. If the meeting is adjourned to a time not more than 48 hours
after the Specified Time (taking no account of any part of a day that is not a working day), that time will also
apply for the purposes of determining the entitlement of members to attend and vote (and for the purposes
of determining the number of votes they may cast) at the adjourned meeting. Changes to the Register after
the relevant deadline shall be disregarded in determining rights to attend and vote.
Appointment of proxy using hard copy proxy form
7. Members may appoint a proxy or proxies by completing and returning a form of proxy by post to the offices
of the Company’s registrars using the business reply address on the form, or in an envelope addressed to
Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU; or delivering a form of
proxy by hand to such address during normal business hours. In the case of a member which is a
corporation, the proxy form must be executed under its common seal or signed on its behalf by a duly
authorised officer or an attorney. Any power of attorney or any other authority under which the proxy form
is signed (or a duly certified copy of such power of authority) must be included with the proxy form. Any
such power of attorney or other authority cannot be submitted electronically.
8. To be effective, the appointment of a proxy, or the amendment to the instructions given for a previously
appointed proxy, must be received by the Company’s registrars by the method outlined in note 7 above no
later than 10.00 a.m. on 25 June 2015. If you submit more than one valid proxy appointment, the
appointment received last before the latest time for the receipt of proxies will take precedence.
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NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING continued
Appointment of proxy using CREST electronic proxy appointment service
9. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment
service may do so for the meeting and any adjournment(s) of it by using the procedures described in the
CREST Manual (available from https://www.euroclear.com/site/public/EUI). CREST Personal Members or
other CREST sponsored members, and those CREST members who have appointed a voting service
provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
10. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a
CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland
Limited’s (EUI) specifications and must contain the information required for such instructions, as described in
the CREST Manual. The message must be transmitted so as to be received by the issuer’s agent (ID: RA10)
by the latest time(s) for receipt of proxy appointments specified in this notice. For this purpose, the time of
receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST
Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST.
11. CREST members and, where applicable, their CREST sponsors or voting service providers should note that
EUI does not make available special procedures in CREST for any particular messages. Normal system
timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal
member or sponsored member or has appointed a voting service provider(s), to procure that his CREST
sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is
transmitted by means of the CREST system by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting service providers are referred, in particular, to those
sections of the CREST Manual concerning practical limitations of the CREST system and timings.
12. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities Regulations 2001.
Termination of proxy appointments
13. Completion and return of the form of proxy will not preclude a member from attending and voting in person
at the meeting.
14. In order to terminate the authority of a proxy, you will need to inform the Company by sending a signed hard
copy notice clearly stating your intention to revoke such appointment to the Company’s registrars. To be
effective, the notice of termination must be received by the Company’s registrars by the method outlined in
note 7 above no later than 10.00 a.m. on 26 June 2015.
Voting Rights
15. As at 4 June 2015, being the latest practicable date prior to the printing of this notice, the Company’s issued
capital consisted of 60,567,729 ordinary shares carrying one vote each. Therefore, the total voting rights in
the Company as at 4 June 2015 are 60,567,729.
Communications
16. This notice, together with information about the total numbers of shares in the Company in respect of which
members are entitled to exercise voting rights at the meeting as at 4 June 2015, being the latest practicable
date prior to the printing of this notice, will be available on the Company’s website www.4dpharmaplc.com.
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NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING continued
17. Except as provided above, members who have general queries about the annual general meeting should
contact Laurence Dale (0161 837 6200; 74 Gartside Street, Manchester, M3 3EL). No other methods of
communication will be accepted. Any electronic address provided either in this notice or in any related
documents (including the form of proxy) may not be used to communicate with the Company for any purposes
other than those expressly stated.
Documents available for inspection
18. There are available for inspection at the registered office of the Company during usual business hours on any
week day (Saturdays, Sundays and public holidays excepted), and there will be available for inspection at the
place of the meeting from at least fifteen minutes prior to and until the conclusion of the meeting:
● copies of the service contracts of executive directors of the Company; and
● copies of the letters of appointment of the non-executive directors of the Company.
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4D pharma plc
EXPLANATORY NOTES OF ANNUAL GENERAL MEETING
These explanatory notes give further information in relation to the resolutions listed in the enclosed notice of the
Company’s annual general meeting.
Resolution 1 – Receipt of accounts
The directors must lay the Company’s accounts, the directors’ report and the auditors’ report before the
shareholders at a general meeting. This is a legal requirement after the directors have approved the accounts and
the directors’ report, and the auditors have prepared their report.
Resolution 2 – Re-election of Dr Alexander Stevenson
In accordance with the Company’s articles of association, all directors of the Company who have been appointed
since the Company’s last annual general meeting, and all other directors on a regular basis as set out in the
Company’s articles of association, seek election (or re-election as the case may be) by the shareholders.
Dr Alexander Stevenson, retiring by rotation, offers himself for re-election, in accordance with the Company’s
articles of association. Details of his CV are on page 6 of the Company’s annual report.
Resolution 3 – Re-election of Baker Tilly UK Audit LLP as auditors
The board of directors, on the recommendation of its audit committee, recommends the re-election of Baker Tilly
UK Audit LLP as auditors, to hold office until the next general meeting at which accounts are laid.
Resolution 4 – Remuneration of the auditors
This resolution authorises the directors to agree the remuneration of the auditors.
Resolution 5 – Authority to allot shares
The purpose of resolution 5 is to renew the directors’ power to allot shares. Section 551 of the Companies Act
2006 provides that the directors may not allot new shares (other than for employee share schemes) without
shareholder authority.
Accordingly, resolution 5 will be proposed as an ordinary resolution to authorise the directors (pursuant to Section
551 of the Companies Act 2006):
(i) to allot ordinary shares of 0.25 pence each in the capital of the Company up to a maximum nominal
amount of £50,473, being approximately one third of the nominal value of the ordinary shares in issue on
4 June 2015; and
(ii) in addition to the authority described above, to allot ordinary shares of 0.25 pence each in the capital of the
Company up to a maximum nominal amount of £50,473 pursuant to a rights issue in respect of which all
shareholders are entitled to participate as nearly as possible in proportion to their holding of shares in the
Company at the time.
This authority (unless previously revoked, varied or renewed) will expire on the earlier of the date of the next annual
general meeting of the Company or 15 months after the date of the passing of the resolution. The directors will
exercise the authority to allot only when satisfied that it is in the interests of the Company to do so. The directors
have no present intention of allotting further shares.
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EXPLANATORY NOTES OF ANNUAL GENERAL MEETING continued
Were the Company to use the relevant authorities and:
● the number of shares in issue increased, in aggregate, by more than one-third; and
● (as regards the use as a part of a rights issue) the proceeds of the relevant rights issue exceeded one-third
(or the relevant specific proportion) of the pre-issue market capitalisation, then those members of the board
wishing to remain in office would stand for re-election at the next annual general meeting.
Resolution 6 – Disapplication of pre-emption rights
Section 561 of the Companies Act 2006 confers on shareholders rights of pre-emption in respect of the allotment
of “equity securities” which are, or are to be, paid up in cash, otherwise than by way of allotment to employees
under an employees’ share scheme. The provisions of section 561 apply to the ordinary shares of 0.25 pence each
of the Company, to the extent that they are not disapplied pursuant to section 570 of the Companies Act 2006.
This provision also covers the sale of treasury shares (should the Company elect to hold any) for cash.
It is proposed that the disapplication of these statutory pre-emption rights be approved, as a special resolution, to
give the directors power to allot shares without the application of these statutory pre-emption rights, first, in relation
to rights issues and, secondly, in relation to the issue of ordinary shares of 0.25 pence each in the capital of the
Company for cash up to a maximum aggregate nominal amount of £15,142 (representing approximately 10% of
the nominal value of the ordinary shares in issue on 4 June 2015).
This authority (unless previously revoked, varied or renewed) will expire on the earlier of the date of the next annual
general meeting of the Company or 15 months after the date of the passing of the resolution.
The directors have no present intention of exercising the authority; in accordance with the National Association of
Pension Funds’ Corporate Governance Policy and Voting Guidelines for Smaller Companies, they are seeking the
authority so as to be able to raise funds at short notice, where appropriate, from the issue of new share capital for
the purpose of taking advantage of investment opportunities that may arise.
Resolution 7 – Purchase by the Company of its own Shares
The purpose of resolution 7 is to obtain the authority for the Company to make market purchases of its ordinary
shares. Under the Companies Act 2006 such an authority must first be sanctioned by an ordinary resolution of the
Company in general meeting, but current institutional shareholder voting guidelines require that any such authority
should be sanctioned by special resolution.
Accordingly, resolution 7 will be proposed as a special resolution to authorise the Company to purchase a maximum
of 9,079,103 ordinary shares (equal to approximately 14.99% of the ordinary shares in issue on 4 June 2015) on
AIM at a price per share of not less than 0.25 pence, and not more than 5% above the average of the middle market
quotations for ordinary shares of the Company for the five business days immediately preceding the day of
purchase. In order to maximise the benefit to be derived by the Company, it would be the directors’ intention that
any purchases should be made at as low a price (within the limits specified in resolution 7) as they considered
reasonably obtainable.
This authority (unless previously revoked, varied or renewed) will expire on the earlier of the date of the next annual
general meeting of the Company or 15 months after the date of the passing of the resolution.
Pursuant to the Companies Act 2006, the Company can hold the shares which have been repurchased as treasury
shares and either resell them for cash, cancel them (either immediately or at a point in the future) or use them for
the purposes of its employee share schemes. The directors believe that it is desirable for the Company to have this
choice and therefore currently envisage holding any shares purchased under this authority as treasury shares.
Holding the repurchased shares as treasury shares will give the Company the ability to re-sell or transfer them in
the future, and so provide the Company with additional flexibility in the management of its capital base. No
dividends will be paid on, and no voting rights will be exercised in respect of, treasury shares.
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4D pharma plc
EXPLANATORY NOTES OF ANNUAL GENERAL MEETING continued
Shares will only be repurchased if the directors consider such purchases to be in the best interests of shareholders
generally and that they can be expected to result in an increase in earnings per share. The authority will only be
used after careful consideration, taking into account market conditions prevailing at the time, other investment
opportunities and the overall financial position of the Company. Shares held as treasury shares will not automatically
be cancelled and will not be taken into account in future calculations of earnings per share (unless they are
subsequently resold or transferred out of treasury).
If any shares repurchased by the Company are held in treasury and used for the purposes of its employee share
schemes, so long as required under institutional shareholder voting guidelines, the Company will count those shares
towards the limits on the number of new shares which may be issued under such schemes.
Purchases will not be made to the extent that they may affect the eligibility of the Company for continued admission
to AIM and it is not the directors’ current intention that the Company should stand in the market for any particular
period or until any specified number of shares has been acquired.
The purchase of shares by the Company pursuant to these proposals will be a market purchase and thus made
through AIM. This means that any shareholder selling shares, even if those shares are subsequently acquired by
the Company, will not be subject to different tax considerations from those normally applying to a sale of shares in
the market provided that the purchase by the Company is made exclusively through a market maker acting as
principal. In that event, for shareholders who held their shares as an investment, the sale proceeds will normally be
treated as capital and the normal capital gains tax rules will apply to those sale shares. There will normally be no
liability to tax on income unless the shareholder’s disposal is by way of trade.
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Perivan Financial Print 236661