Company Registration No. 01435584 (England and Wales)
N4 Pharma Plc
(“N4 Pharma” or the “Company”)
Annual Report and Consolidated Financial Statements
Year Ended 31 December 2020
N4 Pharma Plc
Table of contents
Directors, Company Secretary and Advisors
Chairman’s Report
Board of Directors
Director’s Report
Corporate Governance Statement
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flow
Company Statement of Cash Flow
Notes to the Consolidated Financial Statements
3
4
8
9
13
16
21
22
23
24
25
26
27
28
2
N4 Pharma plc
Directors, Company Secretary and Advisors
Company Number 01435584 (England and Wales)
Directors:
Nigel Theobald (Chief Executive Officer)
Dr David Templeton (Executive Director)
Dr John Chiplin (Non-Executive Chairman)
Luke Cairns (Non-Executive Director. Appointed as Executive Director 15 July 2020)
Dr Christopher Britten (Non-Executive Director)
Registrars
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen, West Midlands
B62 8HD
Accountants
Offshore Accounting Limited
Fairbairn House,
Rohais
St. Peter Port
Guernsey
GY1 1FE
Registered Office of the Company
6th Floor
60 Gracechurch Street
London
EC3V 0HR
United Kingdom
Company Secretary
SGH Company Secretaries Limited
60 Gracechurch Street
London
EC3V 0HR
United Kingdom
Nominated Adviser and Joint Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
Joint Broker
Turner Pope Investments (TPI) Limited
8 Frederick’s Place
London
EC2R 8AB
Auditor
Saffery Champness LLP
Unex House
Bourges Boulevard
Peterborough
PE1 1NG
United Kingdom
Company’s website www.n4pharma.com
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N4 Pharma plc
Chairman’s Report
N4 Pharma Plc (the “Company”), is the holding company and Parent Company for N4 Pharma UK
Limited (“N4 UK”), and together form the Group (the “Group”).
In the comparative year results N4 Biotech also forms part of the Group. N4 Biotech was dissolved
on 14 January 2020.
N4 UK is a specialist pharmaceutical company engaged in the development of mesoparticulate silica
delivery systems to improve the cellular delivery and potency of vaccines.
The Board has not presented a Strategic Report for the year. All relevant information on the strategy
and performance of the Group is included in the Chairman’s report below and the Directors’ Report
on page 9.
Review of operations for the financial year ended 31 December 2020
During the year to 31 December 2020, as anticipated, no revenue was generated by the Group (31
December 2019: £nil).
The operating loss for the year was £1,564,421 (31 December 2019: £947,340 loss). Expenditure was
broadly in line with budget and increased in line with study results determining the next expenditure
requirements to progress work streams.
During the course of the year the Company raised in excess of £4.15m, through a placing of
50,731,250 new ordinary shares in May and a further 25,000,000 shares in December with the
remainder being through the exercise of warrants and options. In total the Company issued
79,617,812 new ordinary shares of 0.4p in 2020.
Cash at the year-end stood at £3,555,579 (31 December 2019: £965,752). Our cash position is the
strongest it has ever been and leaves us well positioned to complete our current work streams, plan
for follow on work and fund our costs in any initial collaboration work.
Key Operational Events and Opportunities
The first part of 2020 saw the Group focus on the optimisation of Nuvec® starting with the improved
manufacture and dispersion of the particle. In parallel, we entered into a research collaboration
agreement with Nanomerics Limited (“Nanomerics”) to focus on the stability of a number of
different formulations of Nuvec® using both a well characterised plasmid DNA and a novel small
interfering RNA (siRNA). Whilst these work streams remained ongoing, the advent of the Covid-19
pandemic presented significant local and global challenges but also created an opportunity as to
how Nuvec® may be applied as a potential delivery technology to any of the multiple Covid-19
vaccines recently approved and in development across the world.
Whilst we did not initially envisage a material disruption to our studies, the scale of lockdown
created minor but inevitable delays to our optimisation work. As working practices have evolved
against the backdrop of the pandemic, these work streams are now very much on track and continue
to expand our data set for Nuvec®. With such attention on Covid-19 and potential vaccines, we took
the decision to undertake a proof of concept study prior to a full in vivo study to assess the efficacy
of Nuvec® loaded with the Coronavirus plasmid DNA. This work was undertaken by an experienced
contract research organisation, Evotec, and concluded having demonstrated the successful in vitro
transfection of HEK cells resulting in the decision to move to a full in vivo study as set out further
below.
As announced previously our current strategy has been divided across three work streams:
1. Completion of the optimisation work including the establishment of optimal dispersion,
loading ratios and the tech transfer for consistent manufacture of naked nanosilica particles;
2. The scoping and implementation of our most comprehensive in vivo study to date; and
3. Feasibility studies on other applications for Nuvec® such as for oral vaccines and in oncology.
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N4 Pharma plc
Chairman’s Report (continued)
Updates on each stream are as follows:
Optimisation and tech transfer
Over the last 12 months, our program of optimisation work has been undertaken to further
characterise Nuvec® nanoparticulate silica with the objective of developing a colloidally stable
monodisperse formulation suitable for scaled manufacture. This work has been successful, and a
process has been developed which results in a monodisperse nanoparticulate formulation which can
be freeze dried and reconstituted without loss of colloidal stability. Importantly this formulation
also retains in vitro transfection activity when stored dry for up to 14 days at 0-4C and room
temperature, before reconstitution. Longer term stability assessment will be conducted in due
course.
Other studies have also been conducted to optimise the PEI content, determine need for
phosphonation and to assess the optimal pH and buffer capacity of the medium in which Nuvec® is
dissolved.
In September we appointed Ardena as our contract development and manufacturing organisation
(‘CDMO’) partner for the technology transfer and upscaling manufacturing of Nuvec®. Work has been
on schedule and Ardena is currently working on the process optimisation and scale-up resulting in
the manufacture and analysis of a non-GMP 50g batch of Nuvec® prior to moving towards the
manufacture, testing and product certification of Nuvec® for GMP status.
In Vivo study plans and implementation
The in vivo study to compare the reactions of the original Nuvec® loaded with the Coronavirus
plasmid and another generic plasmid in generating relevant antibodies, has recently commenced at
the University of Queensland. The commencement of this work is a little later than originally
envisaged, following delays in obtaining the relevant customs clearance to transport the Coronavirus
plasmid expressing the spike protein into Australia.
Having optimised Nuvec® as described above, we are now planning the commencement of further
in vivo studies to determine whether the improved properties noted in vitro can also be seen in
vivo. These studies will be undertaken by Evotec with study initiation expect by early March.
The optimised Nuvec® in vivo studies in mice are planned to assess the following points:
(1) to determine antibody production following dosing with optimised Nuvec®;
(2) To explore dose relationship to determine minimum and maximum plasmid dose required for
effect. This information may also provide information on dose-sparing i.e. reduced DNA use; and
(3) to confirm activity is retained after freeze drying and reconstitution at different intervals.
These studies will again involve the Coronavirus plasmid and another generic plasmid. Results from
both studies should be known during the first half of 2021.
Oral and oncology applications
In November we announced the launch of our Nuvec® oncology treatment programme with
Nanomerics Limited. The programme will explore the role of Nuvec® as a delivery system for DNA
and SiRNA in a proof of concept preclinical tumour model. The two-stage programme will focus
initially on the formulation of Nuvec® with a therapeutic DNA plasmid, whilst stage two will see the
candidate formulation evaluated in vivo in a subcutaneous tumour model to examine tumour
regression following multiple local or systemic injections.
5
N4 Pharma plc
Chairman’s Report (continued)
Our work to understand the viability of Nuvec® in oral delivery remains ongoing and is currently
focussed on extensive in vitro work. In particular we are assessing the ability to transfect epithelial
cells in the gut as well as the impact of mucus and other variables. Whilst the commercial potential
of successfully demonstrating Nuvec’s® efficacy in oral delivery would be huge we are still at the
early stages of establishing whether it is feasible. As this work continues in the background our
primary focus remains Nuvec’s® potential use to improve the cellular delivery and potency of
vaccines.
The strengthening of our balance sheet through the funds raised in May of this year, means that we
are well funded to complete all our currently planned work streams whilst the recent placing in
December means we can plan for more supplementary studies whilst being able to budget for the
next stage of work following the current in vivo studies and the oral and oncology work.
Intellectual Property
As announced on 11 February the University of Queensland (“UQ”) has been notified by the European
Patent Office (“EPO”) of its intention to grant a European Patent in relation to Nuvec® specifically
in respect of its composition, particulate materials and methods for making the particulate materials
(the “Patent”). N4 Pharma has the exclusive worldwide rights to Nuvec® for therapeutic uses in
humans and animals.
Having received the notification, the next steps prior to formal grant will require UQ to confirm the
particulars and translations with the EPO prior to publication of the grant after which the Patent
will be validated on a country by country basis throughout Europe as determined by UQ and the
Company. This process, resulting in the full grant of the Patent in each chosen territory, should take
six to eight months.
The Patent application process for other jurisdictions remains on course and the board is optimistic
that now the Patent has successfully been processed by the EPO other jurisdictions should follow
suit in due course. In line with this optimism I am delighted to announce that the Australian patent
office has also notified UQ of its intention to grant an Australian Patent.
Board Changes
On 15 July 2020 Luke Cairns, previously a Non-Executive Director, became an Executive Director,
overseeing the Group’s finance, corporate and investor relations activities allowing Nigel Theobald,
Chief Executive Officer, more time to focus on driving the Group’s development programmes and
potential commercial collaborations.
Future Prospects
What is increasingly clear with the ongoing Coronavirus pandemic is that even with the great success
of the recently approved vaccines, as the virus evolves, so will the vaccines and there will be
multiple iterations in the years to come. Cost effective storage, transportation and effective
delivery are areas where any improvements could have a material impact on the successful role out
of vaccines, particularly in emerging markets where wide scale accessibility to vaccines remains
challenging. It is our hope that as we look to conclude our most comprehensive Nuvec® studies to
date, we will be able to present Nuvec® as a viable delivery solution to vaccine developers.
It is important to stress that we see Nuvec® as a platform delivery technology and whilst it may suit
some plasmids better than others it is our intention that it be used across multiple vaccines and not
just those addressing Coronavirus. Through our oral studies we are also examining how Nuvec® could
simplify the way vaccines are administered. Whilst the majority of our data has been gathered using
plasmid DNA we are increasing our work with mRNA. Together with our oncology programme, 2021
could turn out to be a pivotal year for N4 Pharma, as our various applications for Nuvec® advance
to the point where we can engage further with potential collaborators and partners. In parallel we
are also exploring other assets that could be complimentary to Nuvec®.
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N4 Pharma plc
Chairman’s Report (continued)
On behalf of the Board, I would like to thank all of our shareholders for their continued patient
support and look forward to providing further updates on our progress.
By order of the Board
John Chiplin
Chairman
23 February 2021
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N4 Pharma plc
Board of Directors
Nigel Theobald (Chief Executive Officer)
Nigel has over 25 years’ experience in healthcare and in building businesses, strategy development
and its implementation and a strong network covering all aspects of pharmaceutical product
development and commercialisation. He was the head of healthcare brands at Boots Group Plc in
2002 before leaving to set up a series of successful businesses, including Oxford Pharmascience
Group Plc, which he grew over five years into an AIM quoted company with a market capitalisation
of £40 million upon departure. Nigel formed N4 Pharma UK Limited in 2014.
Dr David Templeton (Executive Director)
David is an experienced R&D manager who has worked in major pharmaceutical, biotech and in the
generic industry with specific expertise in early clinical development and translational biology,
toxicology and safety pharmacology, lead selection, candidate characterisation, PK/PD analysis and
bioanalysis. David has worked in various pharmacology and pre-clinical drug discovery roles for
Pfizer, Xenova, Smithkline Beecham and GSK and was the head of non-clinical development at
Celltech Limited from 2003 to 2004 before moving to Merck Generics UK as head of biometrics. He
was appointed as director of clinical pharmacology of Eisai Limited in 2007 until in 2010 setting up
his own consulting business offering discovery and early development advice to several
pharmaceutical companies.
Luke Cairns (Non-Executive Director to 14 July 2020, Executive Director from 15 July 2020)
Luke has spent over 20 years working in corporate finance and is a former head of corporate finance
and managing director at Northland Capital Partners, an FCA regulated stockbroking firm. Having
left Northland in 2014, Luke founded LSC Advisory Limited to provide advisory and consultancy
services to growth companies. He has worked with many growth companies across a number of
sectors and regions on a wide range of transactions, including IPOs, secondary fundraisings,
corporate restructurings and takeovers. He is an Associate of the Chartered Institute of Secretaries.
John Chiplin (Non-Executive Chairman)
Dr John Chiplin has significant operational, investment and transaction experience in the life science
and technology industries. Between 1995 and 2014, Dr Chiplin served as CEO of three leading publicly
listed software, biotechnology and cancer immunotherapy companies in the US. Based in London,
Dr Chiplin’s current board roles include Biotherapy Services, Regeneus and Scancell Holdings plc
(AIM: SCLP). He is also Managing Director of Newstar Ventures Ltd, an international private equity
firm focused on emerging companies.
Christopher Britten (Non-Executive Director)
Dr Christopher Britten is an experienced pharmaceutical executive and is currently Head of M&A at
Neuraxpharm, a privately-owned European CNS specialty pharmaceutical company. He has over 20
years’ experience in R&D, corporate development and investment banking. Previous roles include
Global Head of M&A at Sandoz (Munich), Managing Director at Torreya Partners (London), Head of
Business Development at Sanofi Pasteur MSD (Lyon) and Director, Life Sciences at Deloitte Corporate
Finance (London). Christopher also spent many years at GSK in both drug discovery and corporate
development.
8
N4 Pharma plc
Directors’ Report
The Directors present their report together with the Consolidated Financial Statements of the
Group.
N4 Pharma Plc (the “Company”), is the holding company and Parent Company for N4 Pharma UK
Limited (“N4 UK”), and together form the Group (the “Group”). In the comparative year results N4
Biotech also forms part of the Group. N4 Biotech was dissolved on 14 January 2020.
Performance review
The Group made a total comprehensive loss of £1,277,734 during the year ended 31 December 2020
(2019: total comprehensive loss of £876,373).
Background and principal activities
The Company is the holding company for N4 UK and provides funding for the Group to enable business
activity.
N4 UK is a specialist pharmaceutical company engaged in the development of mesoparticulate silica
delivery systems to improve the cellular delivery and potency of vaccines. The nature of the business
is not deemed to be impacted by seasonal fluctuations and as such performance is expected to be
consistent.
Further information on the research and development work and future developments is detailed in
the Chairman’s report on page 4.
The Company is domiciled in England and Wales and was incorporated and registered in England and
Wales on 6 July 1979 as a public limited company and its shares are admitted to trading on AIM (LSE:
N4P). The Company’s registered office is located at 6th Floor, 60 Gracechurch Street, London, EC3V
0HR.
Dividends
The Board has not declared a dividend for the year ended 31 December 2020 (2019: nil).
The Directors who held office during the year and up to the time of signing these Consolidated
Financial Statements are listed on page 3.
Directors’ remuneration and interests
The below remuneration relates to the Directors of the Group. There is no other Key Management
Personnel remuneration.
2020
Director
Nigel Theobald (Chief
Executive Officer)
David Templeton
Luke Cairns
Christopher Britten
John Chiplin
Cash-based
payments
Remuneration
Share-based
payments
Totals
Interests
Shares
Options
£
£
£
No.
No.
71,538
41,538
32,000
24,000
24,000
-
71,538
16,981,319
-
3,836
3,836
3,806
3,806
45,374
35,836
27,806
27,806
- 1,434,286
142,857 2,109,588
717,143
717,143
-
-
193,076
15,284
208,360
17,124,176 4,978,160
9
N4 Pharma plc
Directors’ Report (Continued)
Directors’ remuneration and interests (Continued)
2019
Director
Cash-based
payments
Remuneration
Share-based
payments
Totals
Interests
Shares
Options
£
£
£
No.
No.
Nigel Theobald (Chief
Executive Officer)
Paul Titley (resigned 20 May
2019)
David Templeton
Luke Cairns
Christopher Britten (appointed
20 May 2019)
John Chiplin (appointed 20 May
2019)
Section 172 Disclosures
70,000
15,282
38,310
24,000
14,923
-
70,000
16,981,319
-
1,330
15,282
142,857
717,143
1,330
1,330
2,329
38,310
24,000
14,923
-
717,143
142,857 1,392,445
717,143
-
14,667
2,329
14,667
-
717,143
177,182
8,648
177,182
17,267,033 4,261,017
In discharging their duties the Directors of the Group give due regard to their duties to promote
the success of the Group under Section 172(1) of the Companies Act 2006.
Given the size and nature of the Group all key decisions in the promotion of the success of the
Group are taken at board level with delegation to the Executive Directors for the execution of
such decisions.
All actions and decisions taken are in good faith with the long-term success of the Group in mind
and in doing so the Directors have considered (amongst other matters):
◼
◼
◼
◼
◼
◼
the likely consequences of any decision in the long term – all key decisions are taken at
board level and are focussed on what is required to achieve commerciality for the
Company’s core asset, Nuvec®;
the interests of the Group’s employees – save for the Directors, the Company has no other
full time employees. The interests of the Directors are very much aligned with the success
of the Company;
the need to foster the Groups business relationships with suppliers, customers and others –
the Company is reliant on third party providers such as CROs to progress the business and
maintains good work relationships with all its counterparties;
the impact of the Groups operations on the community and the environment – all CROs are
required to adhere to strict ethical standards particularly in the use of animals in studies;
the desirability of the Group maintaining a reputation for high standards of business
conduct; and
the need to act fairly between stakeholders of the Company.
Where or to the extent that the purposes of the Group consist of or include purposes other than the
benefit of its members, subsection (1) has effect as if the reference to promoting the success of the
Group for the benefit of its members were to achieve those purposes.
The duty imposed by this section has effect subject to any enactment or rule of law requiring
Directors, in certain circumstances, to consider or act in the interests of creditors of the Group.
10
N4 Pharma plc
Directors’ Report (Continued)
Going concern
These Consolidated Financial Statements have been prepared on the basis of accounting principles
applicable to a going concern. The Directors consider that the Group will have access to adequate
resources, as set out below, to meet the operational requirements for at least 12 months from the
date of approval of these Consolidated Financial Statements. For this reason, they continue to adopt
the going concern basis in preparing the Consolidated Financial Statements.
The Group currently has no source of operating cash inflows, other than interest and grant income,
and has incurred net operating cash outflows for the year ended 31 December 2020 of £1,354,967
(2019: £806,004 outflow). At 31 December 2020, the Group had cash balances of £3,555,579 (2019:
£965,752) and a surplus in net working capital (current assets, including cash, less current liabilities)
of £3,657,334 (2019: £987,338).
The Group prepares regular business forecasts and monitors its projected cash flows, which are
reviewed by the Board. Forecasts are adjusted for reasonable sensitivities that address the principal
risks and uncertainties to which the Group is exposed, thus creating a number of different scenarios
for the Board to challenge. In those cases, where scenarios deplete the Group’s cash resources too
rapidly, consideration is given to the potential actions available to management to mitigate the
impact of one or more of these sensitivities, in particular the discretionary nature of costs incurred
by the Group, in order to ensure the continued availability of funds.
As the Group did not have access to bank debt and future funding is reliant on issues of shares in
the Parent Company, the Board has derived a mitigation plan for the scenarios modelled as part of
the going concern review.
The Group has considered the current worldwide pandemic (“COVID-19”) and the impact it will have
on its operations. COVID-19 has not had any material negative impact on the operations of the
Group during the year and it is anticipated that the Group will remain a going concern despite the
unknown developments of COVID-19.
On the basis of this analysis, the Board has concluded that there is a reasonable expectation that
the Company will have adequate resources to continue in operational existence for the foreseeable
future being a period of at least twelve months from the Consolidated Statement of Financial
Position date.
Directors’ confirmation
So far as the Directors are aware, there is no relevant audit information (as defined by Section 418
of the Companies Act 2006) of which the Group’s auditors are unaware, and each Director has taken
all the steps that he ought to have taken as a Director in order to make himself aware of any relevant
audit information and to establish that the Group's auditor is aware of that information.
Auditors
The auditors, Saffery Champness LLP indicated their willingness to continue in office.
11
N4 Pharma plc
Directors’ Report (Continued)
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Directors’ Report and the Consolidated Financial
Statements in accordance with applicable law and regulations.
Company law and AIM Rules require the directors to prepare Consolidated Financial Statements for
each financial year. Under that law, they have elected to prepare the Consolidated Financial
Statements in accordance with international accounting standards (IAS) in conformity with the
requirements of the Companies Act 2006. Under company law, the Directors must not approve the
Consolidated 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 results of the Group for that period.
In preparing these Consolidated Financial Statements, the directors are required to:
◼
select suitable accounting policies and then apply them consistently;
◼ make judgements and estimates that are reasonable and prudent;
◼
state whether applicable accounting standards have been followed, subject to any material
departures disclosed and explained in the Consolidated Financial Statements; and
◼ prepare the Consolidated Financial Statements on the going concern basis unless it is
inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping proper accounting records that are sufficient to show and
explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time
the financial position of the Group and Company and enable them to ensure that the Consolidated
Financial Statements comply with the Companies Act 2006 and the AIM Rules. They are also
responsible for safeguarding the assets of the Group and 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 Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of the Consolidated Financial Statements may differ from legislation
in other jurisdictions.
The Company is compliant with AIM Rule 26 regarding the Company’s website.
On behalf of the Board
_____________________________________
Nigel Theobald
Director
23 February 2021
12
N4 Pharma plc
Corporate Governance Statement
The Company’s ordinary shares are admitted to trading on AIM, a market operated by the London
Stock Exchange and the Company is subject to the continuing requirements of the AIM Rules. The
UK Corporate Governance Code sets out the principles of good practice in relation to corporate
governance which should be followed by companies with a full listing on the London Stock Exchange.
Although the Company is not required to comply with the UK Corporate Governance Code by virtue
of being an AIM-quoted company, during the period under review the Board sought to apply the QCA
Corporate Governance Code for Small and Mid-Size Quoted Companies (“QCA Guidelines”) to the
extent appropriate and practical for a company of its nature and size. With effect from September
2018, the Company adopted the Quoted Companies Alliance Corporate Governance Code 2018 (the
“QCA Code”). This section provides general information on the Group’s adoption of the QCA
Guidelines and the QCA Code. In addition, further detail about how the Company complies with the
ten principles of the QCA Code can be found on the Company’s website.
The Board
During the year Luke Cairns was appointed as an Executive Director (previously Non-Executive
Director).
The Board now consists of five Directors, two of whom are Non-Executive and are considered to be
independent in character and judgement, and there are no relationships or circumstances which
could materially affect or interfere with the exercise of their judgement save only in respect of
their holding of ordinary shares and options in the Company as set out on page 9. The ordinary shares
and options held by these directors are not thought to be material, and therefore are not considered
to affect the independence of the directors. The names of the Directors, together with their
biographical details, are set out on page 8.
The roles of Chairman and Chief Executive Officer are held by separate directors and there is clear
division of responsibilities between them. The Chairman is responsible for the leadership of the
board and is pivotal in fostering a culture that adopts good corporate governance. The Chairman
together with the rest of the board sets direction for the Company through a formal schedule of
matters reserved for its decision. The two executive directors have particular roles and areas of
responsibility and continually engage with the Company’s shareholders and stakeholders. The Board
has a schedule of matters reserved for its review and approval, such items include strategy, approval
of major capital expenditure projects, approval of the annual and interim results, annual budgets,
dividend policy and Board structure. It monitors the exposure to key business risks and reviews the
strategic direction of all trading subsidiaries, their annual budgets, their performance in relation to
those budgets and their capital expenditure. The Board delegates day-to-day responsibility for
managing the business to the Executive Directors and the senior management team.
In 2020, the Board met formally ten times and each Director attended each board meeting. In
addition, the Board has ad hoc meetings as required and regular management meetings. Each of the
Directors is subject to retirement by rotation and re-election in accordance with the articles of
association of the Company. Any Directors appointed by the Board are subject to election by
shareholders at the first Annual General Meeting (“AGM”) after their appointment.
Non-Executive directors are expected to devote such time as is necessary for the proper
performance of their duties. This includes attendance at Board meetings, the AGM, meetings with
the directors, meetings with shareholders, and committee meetings.
David Templeton and Luke Cairns are part time Executive Directors. Nigel Theobald is a full-time
Executive Director.
The Board composition is reviewed from time to time as appropriate. The Board considers that,
collectively the Directors have the necessary mix of experience, skills, personal qualities and
capabilities, with the appropriate balance of Executives and Non-Executives, to deliver the strategy
of the Company for the benefit of its Shareholders over the medium term. As work continues on
Nuvec® it is the Directors’ intention to broaden the Board’s skill set particularly in the areas of
oncology and virology delivery systems. The non-executive directors use the board meetings to
review and assess the performance of the executive Directors.
13
N4 Pharma plc
Corporate Governance Statement (continued)
Risk management and internal control
The Directors are aware of their responsibility for establishing and communicating a system to
manage risk and implement internal controls.
Operational risks are identified and assessed by management and any significant risks are reported
to the Board. Financial and commercial risks are reviewed by the Board on a regular basis.
The Company’s internal control systems are designed to provide the directors with reasonable
assurance that any problems are identified on a timely basis and dealt with appropriately. The Board
considers the internal controls to be effective, but no system of internal control can provide absolute
assurance against material misstatement or loss.
The key risks facing the Company together with any mitigation taken are considered further in note
2 and 12 of the financial statements.
Committees
The Audit Committee consists of Non-Executive Directors, John Chiplin and Christopher Britten, and
is chaired by Christopher Britten. The Audit Committee, inter alia, determines and examines
matters relating to the financial affairs of the Company including the terms of engagement of the
Company’s auditors and, in consultation with the auditors, the scope of the annual audit. It receives
and reviews reports from management and the Company’s auditors relating to the half yearly and
annual accounts and the accounting and internal control systems in use throughout the Group. It
also monitors and is responsible for ongoing compliance by the Company with the AIM Rules for
Companies. The audit committee met once during the year and had full attendance at this meeting.
The Remuneration Committee consists of non-executive Directors, John Chiplin and Christopher
Britten, and is chaired by Christopher Britten. The Remuneration Committee inter alia, reviews and
makes recommendations in respect of the Directors’ remuneration and benefits packages, including
share options and the terms of their appointment. The remuneration committee met once during
the year to review salaries and decided to leave them unaltered.
Given the Company’s current size, the Board has not considered it necessary to constitute a
nomination committee and the Board, as a whole, will consider the appointment of directors and
other senior employees of the Company as and when required.
In light of the size and stage of the Company the Board has reviewed and still considers it is not
appropriate to publish an audit committee or remuneration committee report in this annual report
and accounts but will again consider the matter annually as the Company grows.
Communication with shareholders and stakeholders
Details of the Company’s current strategy and business model can be found in pages 4 to 6 of this
document and is reflective of where the Company sits in the research and development cycle with
Nuvec®.
As an AIM company, the Company seeks to update investors on material matters through
announcements via RNS supplemented by presentations and the engagement of a PR firm. Historical
company documents can be found on the Company’s website.
In addition, all shareholders can 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 all price-sensitive information is made available to all shareholders at the
same time, in accordance with the AIM Rules, which, by definition, means the Board may not always
be able to answer questions as directly or immediately as shareholders may like.
14
N4 Pharma plc
Corporate Governance Statement (continued)
Principal risks and uncertainties
The Group is exposed to a variety of financial risks including market risk, liquidity risk, tax risk and
credit risk. These risks are discussed in detail in Note 2.
Financial instruments and associated risks:
The Board of Directors is committed to effective risk management and is responsible for ensuring
that the Group has an appropriate framework in place to identify and effectively manage business
risks and to monitor business performance and the Group’s financial position. The Board is also
responsible for overseeing compliance with regulatory, prudential, legal and ethical standards.
These risks are discussed in detail in Note 12.
By order of the Board
John Chiplin
Chairman
23 February 2021
15
N4 Pharma plc
Independent auditor’s report to the members
Opinion
We have audited the financial statements of N4 Pharma plc (the ‘Parent Company’) and its
subsidiaries (the ‘Group’) for the year ended 31 December 2020 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the
Company Statement of Financial Position, the Consolidated Statement of Changes in Equity, the
Company Statement of Changes in Equity, the Consolidated Statement of Cash Flow, the Company
Statement of Cash Flow and notes to the financial statements, including significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable
law and international accounting standards (IAS) in conformity with the requirements of the
Companies Act 2006.
In our opinion the financial statements:
•
•
•
give a true and fair view of the state of affairs of the Group and of the Parent Company as
at 31 December 2020 and of the Group’s loss for the period then ended;
have been properly prepared in accordance with IAS in conformity with the requirements
of the Companies Act 2006; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent
of the Group and the Parent Company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to SME listed entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of
the directors’ assessment of the Parent Company’s ability to continue to adopt the going concern
basis of accounting included
-
-
-
-
-
obtaining and critically appraising the Directors’ formal going concern assessment and
managements’ longer term strategic plans to develop and market a product which will
generate revenue and profitability;
reviewing projected cash flows and other available evidence to assess the ability of the
Group and the Company to continue in operation for the 12 months after the date of signing;
agreeing the receipts of the fund-raising in September 2020 and December 2020 to bank
statements;
performing a sensitivity analysis on the key assumptions underlying the Directors’ going
concern assessment including the level of development activity and the ability to reduce
the cost base if required to conserve cash; and
discussing post balance sheet events with the Directors to assess their impact on the going
concern assumption including reviewing the post year end cash balances compared to
forecast positions.
Based on the work we have performed, we have not identified any material uncertainties relating
to events or conditions that, individually or collectively, may cast significant doubt on the Parent
Company's ability to continue as a going concern for a period of at least twelve months from when
the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
16
N4 Pharma plc
Independent auditor’s report to the members (continued)
Our approach to the audit
We tailored the scope of our audit to ensure that we obtained sufficient evidence to support our
opinion on the financial statements as a whole, taking into account the structure of the Group and
the Company, the accounting processes and controls, and the industry in which they operate.
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we looked at where the Directors made
subjective judgements, for example in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain.
The Group consists of the Parent Company and one subsidiary, both of which are based in the UK.
Full scope audit procedures were performed for these entities. No work was undertaken by
component auditors.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters were addressed in the context of
our audit of the financial statement as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter
How our scope addressed this matter
Going concern
The financial statements have been prepared
on the going concern basis. The Group is loss
making and is currently in the development
phase and yet to generate revenue, other than
research and development (R&D) tax credits.
The availability of finance will affect the
continued development of the Nuvec® delivery
system. Further, the longer-term prospects of
the business will depend upon the success of the
Nuvec® delivery system which is currently the
only product under development. Due to the
significance of the going concern assumption
this has been identified as a key audit matter.
Capitalisation of research and development
expenditure
The Group is incurring significant expenditure
in respect of research and development. When
is a
certain conditions are met
requirement for development costs to be
capitalised in accordance with IAS. There is a
risk that the accounting treatment adopted
could be incorrect based upon the phase of the
project. Due to the significance of the
development expenditure to the financial
statements this has been determined to be a
key audit matter.
there
Our audit procedures are set out in the
‘Conclusions relating to going concern’ above.
We have further discussed the progress of the
development of the Nuvec® delivery system
with management including outcomes of pre-
clinical studies and reviewed board minutes
and publicly available information regarding its
development. We concluded that the project
remains viable at the balance sheet date and
supports the use of the going concern basis of
preparation.
Based on our procedures we agree with the
Director’s use of the going concern basis of
accounting and consider that the disclosures
relating to going concern have been made
appropriately.
Our audit procedures included the following:
•
•
•
the
treatment of
We discussed
development
research
and
expenditure and
future probable
income streams with the Directors and
compared this against the criteria for
capitalisation under IAS 38;
We substantively tested a sample of
research and development expenses
and corroborated
the accounting
treatment; and
We reviewed the claim for research
and development tax credits.
Based on our procedures performed we
consider that the expenditure on research and
development has been appropriately treated.
17
N4 Pharma plc
Independent auditor’s report to the members (continued)
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in evaluating the effect
of any identified misstatements and in forming our opinion. Our overall objective as auditor is to
obtain reasonable assurance that the financial statements as a whole are free from material
misstatement, whether due to fraud or error. We consider a misstatement to be material where it
could reasonably be expected to influence the economic decisions of the users of the financial
statements.
We determined an overall Group materiality of £60,000 (2019: £50,000) which has also been applied
to the Parent Company. This is based on 3% of gross assets for the year ended 31 December 2020.
This is an important measure of performance for the Group and consistent with current expectations
of the users of the financial statements.
Performance materiality was set at £48,000 (2019: £40,000) for both Group and Parent Company,
representing 80% of overall materiality. We agreed with the audit committee to report all individual
audit differences in excess of £3,000 (2019: £2,500), being 5% of Group materiality as well as any
other identified misstatements that warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report, other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in
the course of the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements themselves. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information we
are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial
year for which the financial statements are prepared is consistent with the financial
statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with
applicable legal requirements.
18
N4 Pharma plc
Independent auditor’s report to the members (continued)
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and their
environment obtained in the course of the audit, we have not identified material misstatements in
the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies
Act 2006 requires us to report to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records
and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 12, the directors
are responsible for the preparation of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in
respect of irregularities, including fraud. The specific procedures for this engagement and the
extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the Group and Parent Company’s financial statements to material
misstatement and how fraud might occur, including through discussions with the directors,
discussions within our audit team planning meeting, updating our record of internal controls and
ensuring these controls operated as intended. We evaluated possible incentives and opportunities
for fraudulent manipulation of the financial statements. We identified laws and regulations that
are of significance in the context of the Group and Parent Company by discussions with directors
and updating our understanding of the sector in which the Group and Parent Company operate.
Laws and regulations of direct significance in the context of the Group and Parent Company include
The Companies Act 2006, the AIM Rules for Companies and UK Tax legislation including as it relates
to research and development.
19
N4 Pharma plc
Independent auditor’s report to the members (continued)
In addition, the Group and the Parent Company are subject to other laws and regulations that do
not have a direct effect on the financial statements but compliance with which may be fundamental
to their ability to operate or to avoid a material penalty. These include anti-bribery legislation,
employment law and intellectual property rights.
Audit response to risks identified:
We considered the extent of compliance with these laws and regulations as part of our audit
procedures on the related financial statement items including a review of Group and Parent
Company financial statement disclosures. We reviewed the Parent Company’s records of breaches
of laws and regulations, minutes of meetings and correspondence with relevant authorities to
identify potential material misstatements arising. We discussed the Parent Company’s policies and
procedures for compliance with laws and regulations with members of management responsible for
compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the
key areas which might involve non-compliance with laws and regulations or fraud. We enquired of
management whether they were aware of any instances of non-compliance with laws and regulations
or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through
management override of controls by testing the appropriateness of journal entries and identifying
any significant transactions that were unusual or outside the normal course of business. We assessed
whether judgements made in making accounting estimates gave rise to a possible indication of
management bias. At the completion stage of the audit, the engagement partner’s review included
ensuring that the team had approached their work with appropriate professional scepticism and thus
the capacity to identify non-compliance with laws and regulations and fraud.
There are inherent limitations in the audit procedures described above and the further removed
non-compliance with laws and regulations is from the events and transactions reflected in the
financial statements, the less likely we would become aware of it. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may
intentional
misrepresentations, or through collusion.
involve deliberate concealment by, for example, forgery or
A further description of our responsibilities is available on the Financial Reporting Council’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent 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 Parent Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
…………………………………..
Alistair Hunt (Senior Statutory Auditor)
for and on behalf of Saffery Champness LLP
Chartered Accountants
Statutory Auditors
Unex House
Bourges Boulevard
Peterborough
PE1 1NG
23 February 2021
20
Consolidated Statement of Comprehensive Income for the year ended 31 December 2020
N4 Pharma Plc
Research and development costs
General and administration costs
Notes
2020
£
(900,410)
(664,011)
2019
£
(216,948)
(730,392)
Operating loss for the year
(1,564,421)
(947,340)
Finance expenditure
(1,963)
(1,385)
Loss for the year before tax
Taxation
4
5
(1,566,384)
(948,725)
261,541
72,352
Loss for the year after tax
(1,304,843)
(876,373)
Other comprehensive income net of
tax
Total comprehensive loss for the
year attributable to equity owners
of N4 Pharma Plc
Loss per share attributable to
owners of the parent
Weighted average number of shares:
Basic
Diluted
Basic loss per share
Diluted loss per share
-
-
(1,304,843)
(876,373)
136,303,141
139,432,226
(0.96)
(0.94)
100,168,016
100,168,016
(0.87p)
(0.87p)
All activities derive from continuing operations.
The notes on pages 28 to 46 are an integral part of the Consolidated Financial Statements
21
N4 Pharma Plc
Consolidated Statement of Financial Position as at 31 December 2020
Notes
7
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Accruals and deferred income
8
Total assets less current
liabilities
Net assets
Equity
2020
£
270,837
3,555,579
3,826,416
3,826,416
(142,484)
(26,598)
(169,082)
3,657,334
2019
£
99,269
965,752
1,065,021
1,065,021
(51,547)
(26,136)
(77,683)
987,338
3,657,334
987,338
Share capital
Share premium
Share option reserve
Reverse acquisition reserve
Merger reserve
Retained earnings
10
10
10
8,995,146
13,945,602
63,290
(14,138,244)
279,347
(5,487,807)
8,676,675
10,327,258
25,266
(14,138,244)
279,347
(4,182,964)
Total equity
3,657,334
987,338
The notes on pages 28 to 46 are an integral part of the Consolidated Financial Statements.
The Consolidated Financial Statements were approved by the board of Directors on 23 February 2021
and signed on its behalf:
Nigel Theobald
22
Company Statement of Financial Position as at 31 December 2020
N4 Pharma Plc
Assets
Non-current assets
Investments
Intercompany loan receivable
Current assets
Trade and other receivables
Cash and cash equivalents
Notes
6
13
7
Total assets
Liabilities
Current liabilities
Trade and other payables
Accruals and deferred income
8
2020
£
1,094,747
3,659,000
4,753,747
417,313
3,411,817
3,829,130
8,582,877
(23,348)
(19,790)
(43,138)
2019
£
1,094,847
2,659,000
3,753,847
247,045
760,085
1,007,130
4,760,977
(8,742)
(23,196)
(31,938)
Total assets less current
liabilities
8,539,739
4,729,039
Net assets
Equity
Share capital
Share premium
Share option reserve
Merger reserve
Retained earnings
Total equity
8,539,739
4,729,039
10
10
10
8,995,146
13,945,602
63,290
279,347
(14,743,646)
8,676,675
10,327,258
25,266
279,347
(14,579,507)
8,539,739
4,729,039
The Company recorded a loss of £164,139 for the year (31 December 2019: £103,718 loss).
The notes on pages 28 to 46 are an integral part of the Consolidated Financial Statements.
The Consolidated Financial Statements were approved by the board of directors on 23 January 2021
and signed on its behalf:
Nigel Theobald
23
N4 Pharma Plc
Consolidated Statement of Changes in Equity for the year ended 31 December 2020
(i) Year ended 31 December 2020
Share
capital
Share
premium
£
£
Share
option
reserve
£
Reverse
acquisition
reserve
£
Merger
reserve
Retained
earnings
Total equity
£
£
£
Balance at 1 January 2020
8,676,675
10,327,258
25,266
(14,138,244)
279,347
(4,182,964)
987,338
Total comprehensive loss for the year
Share issue
Share option reserve
-
318,471
-
-
3,618,344
-
-
-
38,024
-
-
-
-
-
-
(1,304,843)
-
-
(1,304,843)
3,936,815
38,024
At 31 December 2020
8,995,146 13,945,602
63,290
(14,138,244)
279,347
(5,487,807)
3,657,334
(ii) Year ended 31 December 2019
Share
capital
Share
premium
£
£
Share
option
reserve
£
Reverse
acquisition
reserve
Merger
reserve
Retained
earnings
Total equity
£
£
£
£
Balance at 1 January 2019
8,634,675
9,328,848
81,909
(14,138,244)
279,347
(3,306,591)
879,944
Total comprehensive loss for the year
Share issue
Share option reserve
-
42,000
-
-
998,410
-
-
-
-
(876,373)
(876,373)
-
(56,643)
-
-
-
-
-
-
1,040,410
(56,643)
At 31 December 2019
8,676,675
10,327,258
25,266
(14,138,244)
279,347
(4,182,964)
987,338
The notes on pages 28 to 46 are an integral part of the Consolidated Financial Statements.
24
Company Statement of Changes in Equity for the year ended 31 December 2020
N4 Pharma Plc
(i) Year ended 31 December 2020
Share capital
Share
premium
Share option
reserve
Merger
reserve
Retained
earnings
Total equity
£
£
£
£
£
£
Balance at 1 January 2020
8,676,675 10,327,258
25,266
279,347
(14,579,507)
4,729,039
Total comprehensive loss for the year
Share issue
Share option reserve
-
318,471
-
-
3,618,344
-
-
-
38,024
-
-
-
(164,139)
-
-
(164,139)
3,936,815
38,024
At 31 December 2020
8,995,146 13,945,602
63,290
279,347
(14,716,537)
8,539,739
(ii) Year ended 31 December 2019
Share capital
Share
premium
Share option
reserve
Merger
reserve
Retained
earnings
Total equity
£
£
£
£
£
£
Balance at 1 January 2019
8,634,675
9,328,848
81,909
279,347
(14,475,789)
3,848,990
Total comprehensive loss for the year
Share issue
Share option reserve
-
42,000
-
-
998,410
-
-
-
(56,643)
-
-
-
(103,718)
-
-
(103,718)
1,040,410
(56,643)
At 31 December 2019
8,676,675
10,327,258
25,266
279,347
(14,579,507)
4,729,039
The notes on pages 28 to 46 are an integral part of the Consolidated Financial Statements.
25
N4 Pharma Plc
Consolidated Statement of Cash Flow for the year ended 31 December 2020
Operating activities
Loss before tax
Finance expenditure
Share based payments to employees
Operating loss before changes in working
capital
Movements in working capital:
(Increase)/Decrease in trade and other
receivables
Decrease in trade, other payables and
accruals
Taxation
Cash used in operations
2020
£
(1,566,384)
1,963
3,977
2019
£
(948,725)
1,385
5,713
(1,560,444)
(941,627)
(30,534)
91,399
120,507
(1,379,072)
29,441
(112,440)
220,568
(804,058)
Net cash flows used in operating activities
(1,379,072)
(804,058)
Financing activities
Finance expenditure
Net proceeds of ordinary share issue
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of
the year
(1,963)
3,970,862
3,968,899
2,589,827
965,752
(1,385)
978,054
976,669
172,611
793,141
Cash and cash equivalents at 31 December
3,555,579
965,752
The notes on pages 28 to 46 are an integral part of the Consolidated Financial Statements
26
N4 Pharma Plc
Company Statement of Cash Flow for the year ended 31 December 2020
Operating activities
Loss before tax
Interest
Share based payments to employees
Impairment of investment
2020
£
2019
£
(164,139)
(153,045)
3,977
100
(103,718)
(124,103)
5,713
-
Operating loss before changes in working capital
(313,107)
(222,108)
Movements in working capital:
Increase in trade and other receivables
Increase in trade and other payables
Cash used in operations
(170,268)
11,200
(472,175)
(124,149)
7,787
(338,470)
Net cash flows used in operating activities
(472,175)
(338,470)
Investing activities
Loan receivable advancements
(1,000,000)
(650,000)
Net cash flows used investing activities
(1,000,000)
(650,000)
Financing activities
Interest received
Net proceeds of ordinary share issue
153,045
3,970,862
124,103
978,054
Net cash flows from financing activities
4,123,907
1,102,157
Net increase in cash and cash equivalents
2,651,732
113,687
Cash and cash equivalents at beginning of the year
760,085
646,398
Cash and cash equivalents at 31 December
3,411,817
760,085
The notes on pages 28 to 46 are an integral part of the Consolidated Financial Statements
27
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
1.
Accounting policies
1.1
Reporting entity
N4 Pharma Plc (the “Company”), is the holding Company for N4 Pharma UK Limited (“N4 UK”), and
together form the Group (the “Group”). N4 Pharma UK Limited is a specialist pharmaceutical company
engaged in the development of mesoparticulate silica delivery systems to improve the cellular delivery
and potency of vaccines. The nature of the business is not deemed to be impacted by seasonal
fluctuations and as such performance is expected to be consistent.
The Company is domiciled in England and Wales and was incorporated and registered in England and
Wales on 6 July 1979 as a public limited company and its shares are admitted to trading on AIM (LSE:
N4P). The Company’s registered office is located at 6th Floor, 60 Gracechurch Street, London, EC3V 0HR.
The Accounts have been prepared in accordance with International accounting standards in conformity
with the requirements of the Companies Act 2006 and applied to the Parent Company Accounts in
accordance with the provisions of the Companies Act 2006.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all
periods presented in these Consolidated Financial Statements.
The Company has taken advantage of the exemption granted by Section 408 of the Companies Act 2006
from presenting its own Income Statement. The loss generated by the Company is disclosed under the
Company Statement of Financial Position.
1.2
Measurement convention
The Consolidated Financial Statements are prepared on the historical cost basis, except for the following
items:
•
•
•
Share-based payments related to investment acquisition are measured at fair value shown in the
Merger Reserve.
Share-based payments related to employee costs are measured at fair value shown in the
Statement of Comprehensive Income.
Share Warrants and Options are measured at fair value using the Black Scholes model (see note
9).
The Consolidated Financial Statements are presented in Great British Pounds (“GBP” or “£”).
1.3
Going concern
These Consolidated Financial Statements have been prepared on the basis of accounting principles
applicable to a going concern. The Directors consider that the Group will have access to adequate
resources, as set out below, to meet the operational requirements for at least 12 months from the date
of approval of these Consolidated Financial Statements. For this reason, they continue to adopt the going
concern basis in preparing the Consolidated Financial Statements.
The Group currently has no source of operating cash inflows, other than interest and grant income, and
has incurred net operating cash outflows for the year ended 31 December 2020 of £1,379,072 (2019:
£804,058 outflow). At 31 December 2020, the Group had cash balances of £3,555,579 (2019: £965,752)
and a surplus in net working capital (current assets, including cash, less current liabilities) of £3,657,334
(2019: £987,338).
The Group prepares regular business forecasts and monitors its projected cash flows, which are reviewed
by the Board. Forecasts are adjusted for reasonable sensitivities that address the principal risks and
uncertainties to which the Group is exposed, thus creating a number of different scenarios for the Board
to challenge. In those cases, where scenarios deplete the Group’s cash resources too rapidly,
consideration is given to the potential actions available to management to mitigate the impact of one or
more of these sensitivities, in particular the discretionary nature of costs incurred by the Group, in order
to ensure the continued availability of funds.
28
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
1.
Accounting policies (Continued)
1.3
Going concern (Continued)
As the Group did not have access to bank debt and future funding is reliant on issues of shares in the
Parent Company, the Board has derived a mitigation plan for the scenarios modelled as part of the going
concern review.
The Group has considered COVID-19 and the impact it will have on its operations. COVID-19 has not had
any material negative impact on the operations of the Group during the year and it is anticipated that
the Group will remain a going concern despite the unknown developments of COVID-19.
On the basis of this analysis, the Board has concluded that there is a reasonable expectation that the
Company will have adequate resources to continue in operational existence for the foreseeable future
being a period of at least twelve months from the Consolidated Statement of Financial Position date.
1.4
Basis of 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.
1.5
Revenue
Revenue is recognised to the extent this it is probable that economic benefit will flow to the Group and
the revenue can be reliably measured. Revenue is measured at the lower of value of the consideration
received or receivable for the sale of goods or services, excluding discounts, rebates, VAT and other
sales taxes and duties.
The Group has not recognised any revenue to date.
1.6
Government grant income
Government grants are recognised only when there is reasonable assurance that the Group will comply
with the conditions attaching to them and that the grants will be received.
Government grants are recognised in the Consolidated Statement of Comprehensive Income on a
systematic basis over the periods in which the Group recognises and expenses the related costs for which
the grants are intended to compensate.
Government grants that are receivable as compensation for expenses or losses already incurred or for
the purpose of giving immediate financial support to the Group with no future related costs are
recognised in Consolidated Statement of Comprehensive Income in the period in which they become
receivable.
1.7
Expenses
Financing income and expenses
Financing expenses comprise interest expense and finance charges. Financing income comprises interest
receivable on funds invested.
Interest income and interest payable is recognised in the Consolidated Statement of Comprehensive
Income as it accrues, using the effective interest method.
29
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
1.
Accounting policies (Continued)
1.7
Expenses (Continued)
Research and development
Research costs are charged against the Consolidated Statement of Comprehensive Income as they are
incurred. Certain development costs will be capitalised as intangible assets when it is probable that the
future economic benefits will flow to the Group. Such intangible assets will be amortised on a straight-
line basis from the point at which the assets are ready for use, over the period of the expected benefit,
and are reviewed for impairment at each year end date. Other development costs are charged against
income as incurred since the criteria for their recognition as an asset is not met.
The criteria for recognising expenditure as an asset are:
It is technically feasible to complete the product;
▪
▪ Management intends to complete the product and use or sell it;
▪ There is an ability to use or sell the product;
▪
It can be demonstrated how the product will generate probable future economic benefits;
▪ Adequate technical, financial and other resources are available to complete the development,
use and sale of the product; and
▪ Expenditure attributable to the product can be reliably measured.
The costs of an internally generated intangible asset comprise all directly attributable costs necessary
to create, produce and prepare the asset to be capable of operating in the manner intended by
management. Directly attributable costs include employee costs incurred on technical development,
testing and certification, materials consumed and any relevant third-party cost. The costs of internally
generated developments are recognised as intangible assets and are subsequently measured in the same
way as externally acquired intangible assets. However, until completion of the development project, the
assets are subject to impairment testing only.
1.8
Taxation
Taxation
Taxation for the year comprises current and deferred tax. Tax is recognised in the Consolidated
Statement of Comprehensive Income, except to the extent that it relates to items recognised directly in
equity.
Current or deferred taxation assets and liabilities are not discounted.
Current tax
Current tax is recognised at the amount of tax payable using the tax rates and laws that have been
enacted or substantively enacted by the Consolidated Statement of Financial Position date.
Deferred tax
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the
Consolidated Statement of Financial Position date.
Timing differences arise from the inclusion of income and expenses in tax assessments in periods different
from those in which they are recognised in Consolidated Financial Statements. Deferred tax is measured
using tax rates and laws that have been enacted or substantively enacted by the year end and that are
expected to apply to the reversal of the timing difference.
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable
that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
30
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
1.
Accounting policies (Continued)
1.9
Earnings per share
The Group presents basic and diluted earnings or loss per share data for its ordinary shares. Basic
earnings/loss per share is calculated by dividing the profit or loss attributable to ordinary shareholders
of the Company by the weighted average number of ordinary shares outstanding during the period,
adjusted for own shares held. Diluted earnings/loss per share is determined by adjusting the profit or
loss attributable to ordinary shareholders and the weighted average number of ordinary shares
outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which
comprise share options granted.
1.10 Operating segments
Segment results that are reported to the Chief Executive Officer include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly
corporate assets, head office expenses, and income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire plant and equipment,
and intangible assets other than goodwill.
The Group operated in one business segment, that of the development and commercialisation of
medicines via its delivery system called Nuvec®. No revenue has yet been generated by any of the work
undertaken by the Group.
The Directors consider that there are no identifiable business segments that are subject to risks and
returns different to the core business. The information reported to the Directors, for the purposes of
resource allocation and assessment of performance, is based wholly on the overall activities of the Group.
1.11
Presentation and classification of financial instruments issued by the Group
In accordance with IAS 32, financial instruments issued by the Group are treated as equity only to the
extent that they meet the following two conditions:
(a)
(b)
they include no contractual obligations upon the Group to deliver cash or other financial assets
or to exchange financial assets or financial liabilities with another party under conditions that
are potentially unfavourable to the Group; and
where the instrument will or may be settled in the Company’s own equity instruments, it is either
a non-derivative that includes no obligation to deliver a variable number of the Company’s own
equity instruments or is a derivative that will be settled by the Company exchanging a fixed
amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability.
Where the instrument so classified takes the legal form of the Company’s own shares, the amounts
presented in these Consolidated Financial Statements for called up share capital and share premium
account exclude amounts in relation to those shares.
Where a financial instrument that contains both equity and financial liability components exists these
components are separated and accounted for individually under the above policy.
1.12 Non-derivative financial instruments
Non-derivative financial instruments comprise investments, trade and other receivables, cash and cash
equivalents and trade and other payables.
Investments
Investments are investments held in subsidiaries accounted for at cost under IAS 27.
31
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
1.
Accounting policies (Continued)
1.12 Non-derivative financial instruments (Continued)
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they
are measured at amortised cost less impairment.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are
measured at amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and comprise cash in hand, deposits held at call with
banks, other short-term liquid investments with original maturities of three months or less, and bank
overdrafts. Any overdrafts are shown within borrowings in current liabilities.
1.13
Impairment
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to
determine whether there is objective evidence that it is impaired. A financial asset is impaired if
objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and
that the loss event had a negative effect on the estimated future cash flows of that asset that can be
estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash flows
discounted at the asset’s original effective interest rate. Interest on the impaired asset continues to be
recognised through the unwinding of the discount. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through the Statement of
Comprehensive Income.
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell.
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 the purpose of impairment testing, assets that cannot be tested individually
are grouped together into the smallest Group of assets that generates cash inflows from continuing use
that are largely independent of the cash inflows of other assets or Groups of assets (the “cash-generating
unit”).
An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds
its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses
recognised in respect of cash generated units are allocated first to reduce the carrying amount of any
goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit
(Group of units) on a pro rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that
the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
32
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
1.
Accounting policies (Continued)
1.14
Share based payment arrangements
Share-based payment arrangements in which the Group receives goods or services as consideration for
its own equity instruments are accounted for as equity-settled share-based payment transactions,
regardless of how the equity instruments are obtained by the Group.
Share-based transactions, other than those with employees, are measured at the value of goods or
services received where this can be reliably measured. Where the services received are not identifiable,
their fair value is determined by reference to the grant date fair value of the equity instruments
provided. Should it not be possible to measure reliably the fair value of identifiable goods and services
received, their fair value shall be determined by reference to the fair value of the equity instruments
provided measured over the period of time that the goods and services are received.
The expense is recognised in the Consolidated Statement of Comprehensive Income or capitalised as part
of an asset when the goods are received or as services are provided, with a corresponding increase in
equity.
The grant date fair value of share-based payment awards granted to employees is recognised as an
employee expense, with a corresponding increase in equity, over the period that the employees become
unconditionally entitled to the awards. The fair value of the options granted is measured using an option
valuation model, taking into account the terms and conditions upon which the options were granted. The
amount recognised as an expense is adjusted to reflect the actual number of awards for which the related
service and non-market vesting conditions are expected to be met, such that the amount ultimately
recognised as an expense is based on the number of awards that do meet the related service and non-
market performance conditions at the vesting date. For share-based payment awards with non-vesting
conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and
there is no “true-up” for differences between expected and actual outcomes.
Share-based payment transactions in which the Group receives goods or services by incurring a liability
to transfer cash or other assets that is based on the price of the Group’s equity instruments are accounted
for as cash-settled share-based payments. The fair value of the amount payable to recipients is
recognised as an expense, with a corresponding increase in liabilities, over the period in which the
recipients become unconditionally entitled to payment. The liability is re-measured at each Consolidated
Statement of Financial Position date and at settlement date. Any changes in the fair value of the liability
are recognised in the Consolidated Statement of Comprehensive Income.
1.15 Adoption of new and revised International Financial Reporting Standards
The following IFRS standards, amendments or interpretations became effective during the year ended
31 December 2020 but have not had a material effect on this Consolidated Financial Information:
Standard
Amendments to References to the Conceptual Framework in IFRS Standards
Amendments to IFRS 3 Business Combinations (Definition of a Business)
Amendments to IAS 1 and IAS 8: Definition of Material
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform
Amendments to IFRS 16: Leases (Covid-19-Related Rent Concessions)
All new standards and amendments to standards and interpretations effective for annual periods
beginning on or after 1 January 2020 that are applicable to the Group have been applied in preparing
these Consolidated Financial Statements.
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of
the Consolidated Financial Statements are disclosed below. The Group intends to adopt these standards,
if applicable, when they become effective.
33
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
1.
Accounting policies (Continued)
1.15 Adoption of new and revised International Financial Reporting Standards (Continued)
Standard
Amendments to IAS 1 Classification of Liabilities as Current or Non-Current
Amendments to IFRS 3 Reference to the Conceptual Framework
Amendments to IAS 16 Property Plant and Equipment (Proceeds before intended
use)
Amendments to IAS 37 Onerous Contracts (Cost of fulfilling a contract)
Annual Improvements to IFRS Standards 2018-2020
IFRS 17 – Insurance Contracts
Effective date
1 January 2023
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2023
The Directors are continuing to assess the potential impact that the adoption of the standards listed
above will have on the Consolidated Financial Statements for the year ended 31 December 2021.
1.16 Use of estimates and judgements
The preparation of Consolidated Financial Statements in conformity with IFRSs requires management to
make certain judgements, estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses during the period. Actual results
may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised and in any future periods
affected.
In the process of applying the Group’s accounting policies, management has decided the following
estimates and assumptions are material to the carrying amounts of assets and liabilities recognised in
the Consolidated Financial Statements.
Critical judgements
Research and development expenditure
The key estimates and judgements surrounding the capitalisation of Research & Development
expenditure is whether the expenditure meets the criteria for capitalisation. Expenditure will only be
capitalised when the recognition criteria is met and is otherwise written off to the Consolidated
Statement of Comprehensive Income. The recognition criteria include the identification of a clearly
defined project with separately identifiable expenditure where the outcome of the project, in terms of
its technical feasibility and commercial viability, can be measured or assessed with reasonable certainty
and that sufficient resources exist to complete a profitable project. In the event that these criteria are
met, and it is probable that future economic benefit attributable to the product will flow to the Group,
then the expenditure will be capitalised.
Impairment of investments and intercompany debtors
N4 UK has sustained losses and the Statement of Financial position is in deficit. This is a potential
indicator of impairment. The recoverability of intercompany debtor and the cost of investment is
dependent on the future profitability of the entity. No provision for impairment has been made in these
accounts and this is a significant judgement.
2.
Risk management
Overview
The Group has exposure to the following risks:
Liquidity risk;
• Credit risk;
•
• Tax risk;
• Market risk; and
• Operational risk
• Regulatory and legislative risk
34
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
2.
Risk management (Continued)
This note presents information about the Group’s exposure to each of the above risks, its objectives,
policies and processes for measuring and managing risk, and its management of capital. Further
quantitative disclosures are included throughout these Consolidated Financial Statements.
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the risk
management framework and developing and monitoring the Group’s risk management policies. Key risk
areas have been identified and the Group’s risk management policies and systems will be reviewed
regularly to reflect changes in market conditions and the Group’s activities.
The Audit Committee oversees how management monitors compliance with the Group’s risk management
policies and procedures and reviews the adequacy of the risk management framework in relation to the
risks faced by the Group.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations and arises principally from the Group’s bank deposits and
receivables. See note 12 for further detail. The risk of non-collection is considered to be low. This risk
is deemed low at present due to the Group not yet trading and generating revenue but is a consideration
for future risks.
There is an intercompany debtor balance between the Company and N4 UK. The recoverability of this
debtor is dependent on the future profitability of the entity. As N4 UK has sustained losses and the
Statement of Financial position is in deficit it is currently not in a position to repay this amount and this
therefore poses a credit risk.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated
with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s
approach to managing liquidity is to ensure, as far as possible, that 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 monitors cash flow on a
monthly basis through forecasting to help mitigate this risk.
Tax risk
Any change in the Group’s tax status or in taxation legislation or its interpretations could affect the value
of the investments held by the Group or the Group’s ability to provide returns to shareholders or alter
post-tax returns to shareholders.
Market risk and competition
The Group operates as a specialist pharmaceutical Company engaged in the development of
mesoparticulate silica delivery systems to improve the cellular delivery and potency of vaccines. The
Group is entering into a market with existing competitors and the prospect of new entrants entering the
current market. There is no guarantee that current competitors or new entrants to the market will not
appeal to a wider portion of the Group’s target market or command broader band awareness.
In addition, the Group’s future potential revenues from product sales will be affected by changes in the
market price of pharmaceutical drugs and could also be subject to regulatory controls or similar
restrictions.
Market risk is monitored continuously by the Group and the Board reacts to any changes in market
conditions as and when they arise.
35
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
2.
Risk management (Continued)
Operational risk
The Group is at an early stage of development and is subject to several operational risks. The
commencement of the Group’s material revenues is difficult to predict and there is no guarantee the
Group will generate material revenues in the future. The Group has a limited operational history upon
which its performance and prospects can be evaluated and faces the risks frequently encountered by
developing companies. The risks include the uncertainty as to which areas of pharmaceuticals to target
for growth.
Operational risk is managed by adapting the future plans of the Group based on results and feedback
from employees, suppliers and contractors.
Regulatory and legislative risk
The operations of the Group are such that it is exposed to the risk of litigation from its suppliers,
employees and regulatory authorities. Exposure to litigation or fines imposed by regulatory authorities
may affect the Group’s reputation even though monetary consequences may not be significant.
Any changes to regulations or legislation are reviewed by the Board on a regular basis and the Group
applies any that are relevant accordingly.
Changes to legislation, regulations, rules and practices may change and is often the case in the
pharmaceutical industry which is highly regulated and susceptible to regular change. Any changes may
have an adverse effect on the Group’s operations.
Protection of intellectual property
The Group’s ability to compete significantly relies upon the successful protection of its intellectual
property, in particular its licenced and owned patent applications for Nuvec®. The Group seeks to protect
its intellectual property through the filing of worldwide patent applications, as well as robust
confidentiality obligations on its employees. However, this does not provide assurance that a third party
will not infringe on the Group’s intellectual property, release confidential information about the
intellectual property or claim technology which is registered to the Group.
Capital management
The Group has no loans or borrowings and has sufficient resources, in the view of the Directors, to meet
its working capital requirements for the next 12 months.
The Group manages its capital through the preparation of detailed forecasts, and tracks actual receipts
and outlays against the forecasts on a regular basis, to ensure that the Group will be able to continue
as a going concern while maximising the return to shareholders.
The capital structure of the Group consists of cash and cash equivalents and equity comprising, capital,
reserves and accumulated losses.
3.
Employees and directors
The average monthly number of employees during the year was 5 (2019: 5). The Directors of the Group
are employed by both the Company and N4 Pharma UK Limited UK and as such are included in the
employee figure. Total Directors remuneration is detailed in note 13 of these Consolidated Financial
Statements.
Wages and Salaries
Social security costs
Pension costs
Year to 31
December 2020
£
Year to 31
December 2019
£
204,768
20,370
219
225,357
276,752
34,956
1,209
312,917
36
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
4.
Loss before tax
Loss before taxation is arrived after charging:
Fees payable to the Group’s auditors for the audit
of the Group’s financial statements
Other fees payable to auditors:
- Other assurance services
5.
Taxation
Current tax
Research and development tax credit receivable for
the current period
Adjustments in respect of prior periods
Deferred tax
Origination and reversal of temporary differences
Tax in income statement
Year to 31
December 2020
Year to 31
December 2019
£
£
21,600
21,200
4,500
700
2020
£
2019
£
(214,884)
(72,352)
(46,657)
-
(261,541)
(72,352)
-
-
(261,541)
(72,352)
The tax charge for the year can be reconciled to the loss in the Consolidated Statement of Comprehensive
Income as follows:
Loss before taxation
2020
£
2019
£
(1,566,384)
(948,725)
Tax at the UK corporation tax rate of 19% (2019: 19%)
(297,613)
(180,258)
Expenses not deductible
Net Research and development tax credits
Changes in unrecognized deferred tax
Prior year adjustment
Tax charge for the year
-
(214,884)
297,613
(46,657)
-
(72,352)
180,258
-
(261,541)
(72,352)
At the year end the Group had trading losses carried forward of £8,084,975 (2019: £6,868,627) for use
against future profits.
37
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
6.
Investments
Investment in subsidiary
Company
Cost
Balance at 1 January
Impairment on dissolution
Balance at 31 December
2020
£
2019
£
1,094,847
1,094,847
(100)
-
1,094,747
1,094,847
Details of the Company’s subsidiaries at 31 December 2020 are as follows:
Place of
incorporation and
operation
Principal activity
N4 Pharma UK Limited
England and Wales
Delivery of
vaccines and
therapeutics
Proportion of
ownership and
voting rights held
100%
The Company’s subsidiary N4 biotech Limited which was 100% owned was dissolved on 14 January 2020.
The accounting reference date of the subsidiaries are co-terminus with that of the Company. The
registered office of N4 Pharma UK Limited is The Mills, Canal Street, Derby, DE1 2RJ.
7.
Trade and other receivables
Prepayments
VAT due
Corporation tax due
Loan interest receivable
Other debtors
8.
Trade and other payables
Trade creditors
Employee creditors
Loan due to directors
Other creditors
Group
2020
£
16,009
39,944
214,884
-
-
Group
2019
£
Company
2020
£
Company
2019
£
11,758
13,660
73,851
-
-
15,320
14,677
-
382,916
4,400
417,313
10,478
3,575
-
229,492
3,500
247,045
270,837
99,269
Group
2019
£
Company
2020
£
Company
2019
£
27,157
8,152
16,000
238
51,547
-
1,219
-
22,129
23,348
7,512
1,230
-
-
8,742
Group
2020
£
116,871
3,439
-
22,174
142,484
38
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
9. Share-based payments
a) Options
The Company has the ability to issue options to Directors to compensate them for services rendered and
incentivise them to add value to the Group’s longer-term share value. Equity settled share-based
payments are measured at fair value at the date of grant. The fair value determined is charged to the
Comprehensive Income Statement on a straight-line basis over the vesting period based on the Group’s
estimate of the number of shares that will vest.
Cancellations of equity instruments are treated as an acceleration of the vesting period and any
outstanding charge is recognised in full immediately.
Fair value is measured using a Black Scholes pricing model. The key assumptions used in the model have been
adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions
and behavioral considerations. The inputs into model for the current year were as follows:
Share price
Exercise price
Expected volatility
Expected option life
Risk free rate
2020 Options
4.800p
4.800p
29.9%
6.5 years
5.00%
As at 31 December 2020, there were 7,046,513 (2019: 7,679,370) options in existence over ordinary shares of
the Company allocated as follows:
Name
2015 Options
Gavin Burnell
Luke Cairns
2017 Options
Luke Cairns
David Templeton
Paul Titley
2019 Options
John Chiplin
Christopher Britten
2020 Options
David Templeton
Luke Cairns
Total options
Date of
Grant
14.10.15
14.10.15
03.05.17
03.05.17
03.05.17
21.05.19
21.05.19
18.05.20
18.05.20
Ordinary
shares under
option
Lapse
Date
Exercise
Price £
0.0280
0.0280
0.0700
0.0700
0.0700
0.0355
0.0355
0.0480
0.0480
1,351,210
675,302
14.10.25
14.10.25
717,143
717,143
717,143
03.05.20
03.05.20
03.05.20
717,143
717,143
21.05.29
21.05.29
717,143
717,143
18.05.30
18.05.30
7,046,513
39
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
9.
Share-based payments (Continued)
a) Options (Continued)
Share options outstanding:
At 1 January 2019
Lapse of options
Options granted
At 31 December 2019
Exercise of options
Lapse of options
Options granted
At 31 December 2020
Number of
shares
7,249,084
(1,004,000)
1,434,286
7,679,370
(1,350,000)
(717,143)
1,434,286
7,046,513
Each option entitles the holder to subscribe for one ordinary share in N4 Pharma Plc. Options do not
confer any voting rights on the holder.
An amount of £3,977 has been recognised in the Statement of Comprehensive Income in relation to the
share options (2019: £5,713).
On 18 May 2020 717,143 options over ordinary shares were granted to both David Templeton and Luke Cairns
under the Company’s share option scheme and are exercisable at a price of 4.8p per share.
On 8 September 2020 the Company received a notification to exercise 1,350,000 options from Gavin Burnell
a former director representing 1,350,000 ordinary shares of 0.4 pence each, for a total consideration of
£37,800. At the date of exercise, the options had a fair value of £12,319. The 1,350,000 ordinary shares
issued following the exercise of options were admitted to trading on AIM on 14 September 2020. Gavin Burnell
now has 1,351,210 options remaining in issue.
Options exercised in the year ended 31 December 2020 had a weighted average fair value per share of £0.0571
(2019: £0.0522).
The aggregate fair value of the share options issued is as follows:
2015 Options
2017 Options
2018 Options
2019 Options
2020 Options
b) Warrants
2020
£
18,493
26,884
-
12,270
5,643
63,290
2019
£
17,831
3,037
2,999
1,399
-
25,266
A total of 2,536,562 placing warrants were issued as part of the Placing on 20 May 2020 which raised
£2,029,250 before fees and expenses.
The warrants entitled holders to subscribe for new ordinary shares at any time in the period of two years
following the grant of the warrants. The expiry date of the placing warrants was 20 May 2022.
40
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
9.
Share-based payments (Continued)
b) Warrants (continued)
2020
Date of Grant
20.05.2020
2019
Date of Grant
03.05.2017
Warrant
balance at
1 January
2020
-
Warrant
balance at
1 January
2019
11,054,071
Expiry
Date
Exercise
Price £
Exercised
Warrants
Number of
Shares issued
(1:1)
Remaining
Warrants at
31 December
2020
20.05.2022
0.04
2,536,562
2,536,562
-
Expiry
Date
Exercise
Price £
Exercised
Warrants
Number of
Shares issued
(1:1)
03.05.2019
0.085
-
-
Remaining
Warrants at
31 December
2019
-
During the year ended 31 December 2020 the full amount of the warrants issued on 20 May 2020 were
exercised on 14 August and 26 August respectively. The total consideration for the warrants was £101,462
and resulted in the issue of 2,536,562 ordinary shares. At the date of exercise, the warrants had a fair
value of £28,758.
The fair value of the warrants in issue and not yet exercised was determined using the Black Scholes
model. The fair value of the warrants at 31 December 2020 is £Nil (2019: £Nil).
10.
Capital and reserves
181,080,349 Ordinary Shares of 0.4p each (2019:
101,462,537 Ordinary Shares of 0.4p each)
137,674,431 Deferred Shares of 4p each (2019:
137,674,431 Deferred Shares of 4p each)
279,176,540 Deferred Shares of 0.99p each (2019:
279,176,540 Deferred Shares of 0.99p each)
2020
£
724,321
2019
£
405,850
5,506,977
5,506,977
2,763,848
2,763,848
8,995,146
8,676,675
All ordinary shares rank equally in all respects, including for dividends, shareholder attendance and
voting rights at meetings, on a return of capital and in a winding-up.
During the year 79,617,812 (2019:10,500,000) new ordinary shares of 0.4p each were issued through two
placings and the exercise of warrants and options.
The first placing for 50,731,250 ordinary shares on 21 May 2020 for a total consideration of £2,029,250
and the second placing for 25,000,000 ordinary shares on 9 December 2020 for a total consideration of
£2,000,000 had total placing costs of £221,755.
The 137,674,431 deferred shares of 4p, have no right to dividends nor do the holders thereof have the
right to receive notice of or to attend or vote at any general meeting of the Company. On a return of
capital or on a winding up of the Company, the holders of the deferred shares shall only be entitled to
receive the amount paid up on such shares after the holders of the ordinary shares have received their
return on capital.
41
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
10.
Capital and reserves (continued)
The 279,176,540 deferred shares of 0.99p shall be entitled to receive a special dividend, which is payable
upon the repayment to the Company of any amount owed under certain loan agreements, after which
the Company shall, in priority to any distribution to any other class of share, pay to the holders of the
Special Deferred Shares an aggregate amount equal to the amount repaid pro rata according to the
number of such shares paid up as to their nominal value held by each shareholder. They shall be entitled
to no other distribution save for a special dividend and shall not be entitled to receive notice of or attend
or vote at a general meeting of the Company. On a return of capital on a winding up of the Company,
they shall only be entitled to receive the amount paid up on such shares up to a maximum of 0.9 pence
per share after the holders of the Ordinary Shares and the Deferred Shares have received their return on
capital.
Reserves
Share premium reserve
The share premium reserve comprises the excess of consideration received over the par value of the
shares issued, plus the nominal value of share capital at the date of redesignation at no par value.
Share option reserve
The share option reserve comprises the fair value of warrants and options granted, less the fair value of
lapsed and expired warrants and options.
Reserves in the Consolidated Statement of Financial Position comprise the share option reserve, reverse
acquisition reserve and the merger reserve.
11.
Earnings per share
The calculation of basic loss per share at 31 December 2020 was based on the loss of £1,304,843 (2019:
£876,373), and a weighted average number of ordinary shares outstanding of 136,303,141 (2019:
100,168,016), calculated as follows:
2020
£
2019
£
Losses attributable to ordinary shareholders
1,304,843
876,373
Weighted average number of ordinary shares
Issued ordinary shares at 1 January
Effect of shares issued during the year
100,168,016
36,135,125
89,440,373
10,727,643
Weighted average number of shares at 31 December
136,303,141
100,168,016
Basic loss per share
2020 pence
per share
2019 pence
per share
(0.96)
(0.87)
Diluted loss per share
Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding
to assume conversion of all potential dilutive shares, namely share options. In 2019 options existing at
31 December 2019 had an exercise price greater than the market price of the shares and as a result were
excluded from the diluted loss per share calculation.The calculation of diluted loss per share at 31
December 2020 was based on the loss of £1,304,843 (31 December 2019: £876,373), and a weighted
average number of ordinary shares outstanding of 139,432,226 (2019: 100,168,016).
42
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
11.
Earnings per share (Continued)
Diluted loss per share (Continued)
Diluted loss per share
12.
Financial instruments
(a) Fair values of financial instruments
2020 pence
per share
2019 pence
per share
(0.94)
(0.87)
The fair values of all financial assets and financial liabilities are equal to their carrying amounts shown
in the Consolidated Statement of Financial Position.
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows,
discounted at the market rate of interest at the reporting date if the effect is material.
Trade and other payables
The fair value of trade and other payables is estimated as the present value of future cash flows,
discounted at the market rate of interest at the reporting date if the effect is material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is
repayable on demand. Where it is not repayable on demand then the fair value is estimated at the
present value of future cash flows, discounted at the market rate of interest at the reporting date.
(b) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations and arises principally from the Group’s receivables and cash and
cash equivalents. The carrying amount of cash, cash equivalents and term deposits represents the
maximum credit exposure on those assets. The cash and cash equivalents are held with UK bank and
financial institution counterparties which are rated at least A.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. Therefore, the
maximum exposure to credit risk at the reporting date of the Group was £3,810,407 (2019: £1,053,263),
being the total of the carrying amount of financial assets, shown in the Consolidated Statement of
Financial Position.
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The following are the contractual maturities of financial liabilities, including estimated interest
payments and excluding the impact of netting agreements.
Group:
Financial liabilities
31 December 2020
Trade and other
payables
31 December 2019
Trade and other
payables
Carrying
amount
£
Contractual
cash flows
£
6 months or
less
£
6-12
months
£
1 -2 years
£
142,484
142,484
142,484
51,547
51,547
51,547
43
-
-
-
-
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
12.
Financial instruments (Continued)
(c) Liquidity risk (Continued)
Company:
Financial liabilities
31 December 2020
Trade and other
payables
31 December 2019
Trade and other
payables
(d) Currency risk
Carrying
amount
£
Contractual
cash flows
£
6 months or
less
£
6-12
months
£
1 -2 years
£
23,348
23,348
23,348
8,742
8,742
8,742
-
-
-
-
The Group does not have significant exposure to foreign currency risk at present. The Group does not
have any monetary financial instruments which are held in a currency that differs from that entity’s
functional currency.
(e) Interest rate risk
Profile
At the reporting date the interest rate profile of interest-bearing financial instruments was:
Group:
Variable rate instruments
Cash and cash equivalents
Company:
Variable rate instruments
Cash and cash equivalents
Carrying amount
2020
£
2019
£
3,555,579
965,752
Carrying amount
2020
£
2019
£
3,411,817
760,085
Cash flow sensitivity analysis for variable rate instruments
The Group’s interest-bearing assets at the reporting date were invested with financial institutions in the
United Kingdom with a S&P rating of A2 and comprised solely of bank accounts.
A change in interest rates would have increased/(decreased) profit or loss by the amounts shown below.
This analysis assumes that all other variables remain constant. This analysis is performed on the same
basis for 2019.
Group:
Variable rate instruments
2020
Profit or loss
2019
Profit or loss
100 bp
increase
35,555
100 bp
decrease
(35,555)
100 bp
increase
9,658
100 bp
decrease
(9,658)
44
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
12.
Financial instruments (Continued)
(e) Interest rate risk (Continued)
Company:
Variable rate instruments
13.
Related parties
Key management personnel
2020
Profit or loss
2019
Profit or loss
100 bp
increase
34,118
100 bp
decrease
(34,118)
100 bp
increase
7,601
100 bp
decrease
(7,601)
As at the year end, there are no key management personnel employed by the Group in addition to the
Directors.
Directors’ remuneration and interests
The below remuneration relates to the Directors of the Group. There is no other Key Management
Personnel remuneration.
2020
Director
Nigel Theobald (Chief
Executive Officer)
David Templeton
Luke Cairns
Christopher Britten
John Chiplin
Cash-based
payments
Remuneration
Share-based
payments
Totals
Interests
Shares
Options
£
£
£
No.
No.
71,538
41,538
32,000
24,000
24,000
-
71,538
16,981,319
-
3,836
3,836
3,806
3,806
45,374
35,836
27,806
27,806
- 1,434,286
142,857 2,109,588
717,143
717,143
-
-
193,076
15,284
208,360
17,124,176 4,978,160
2019
Director
Cash-based
payments
Remuneration
Share-based
payments
£
£
Totals
£
Interests
Shares
Options
No.
No.
Nigel Theobald (Chief
Executive Officer)
Paul Titley (resigned 20 May
2019)
David Templeton
Luke Cairns
Christopher Britten (appointed
20 May 2019)
John Chiplin (appointed 20 May
2019)
70,000
15,282
38,310
24,000
14,923
-
70,000
16,981,319
-
1,330
16,612
142,857
717,143
1,330
1,330
2,329
39,640
25,330
17,252
-
717,143
142,857 1,392,445
717,143
-
14,667
2,329
16,996
-
717,143
177,182
8,648
185,830
17,267,033 4,261,017
No contributions are paid by the Group to a pension scheme on behalf of the Directors.
45
Notes to the Consolidated Financial Statements for the year ended 31 December 2020
N4 Pharma Plc
13.
Related parties (Continued)
N4 Pharma PLC has a loan receivable from N4 Pharma UK Limited at 31 December 2020 of £3,659,000
(2019: £2,659,000). It is repayable in December 2025 and interest is receivable at 5%.
Amounts owed to the Directors of the Group was nil at the year-end (2019: £16,000).
There are no further related parties identified.
14.
Subsequent events
There have been no material events subsequent to the Consolidated Statement of Financial Position date
that require adjustment or disclosure in these Consolidated Financial Statements.
46