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 2021
N4 Pharma Plc
Table of contents
Directors, Company Secretary and Advisors
Chairman’s Report
Board of Directors
Directors’ 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 Flows
Company Statement of Cash Flows
Notes to the Consolidated Financial Statements
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4
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12
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23
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26
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28
29
30
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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
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)
Luke Cairns (Executive Director)
Dr John Chiplin (Non-Executive Chairman)
Dr Christopher Britten (Non-Executive Director)
Registered Office of the Company
6th Floor
60 Gracechurch Street
London
EC3V 0HR
United Kingdom
Company Secretary
SGH Company Secretaries Limited
6th Floor
60 Gracechurch Street
London
EC3V 0HR
United Kingdom
Nominated Adviser and Joint Broker
SP Angel Corporate Finance LLP
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
Westpoint
Peterborough Business Park
Lynch Wood
Peterborough
PE2 6FZ
Company’s website www.n4pharma.com
3
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”).
N4 UK is a specialist pharmaceutical company engaged in the development of silica nanoparticle
delivery systems to improve the cellular delivery of cancer treatments and 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 2021
During the year to 31 December 2021, as anticipated, no revenue was generated by the Group (31
December 2020: £nil).
The operating loss for the year was £1,843,290 (31 December 2020: £1,564,421 loss). Expenditure
was broadly in line with budget and increased in line with study results determining the next
expenditure requirements to progress work streams.
Cash at the year-end stood at £1,784,024 (31 December 2020: £3,555,579). Despite raising no further
funds in the period our cash position remains good and leaves us well positioned to complete our
current work streams and the year ahead.
Section 172 Disclosures
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):
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◼
◼
◼
◼
◼
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 Group’s
core project, 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 Group and Company;
the need to foster the Group’s business relationships with suppliers, customers and others –
the Group is reliant on third party providers such as clinical research organisations (“CROs”)
to progress the business and maintains good work relationships with all its counterparties;
the impact of the Group’s 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 Group.
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.
4
N4 Pharma plc
Chairman’s Report (Continued)
Key Operational Events and Opportunities
Following the optimisation of Nuvec® with the improved manufacture and dispersion of the particle
in 2020, 2021 focussed on in vivo studies with Nuvec® for both vaccines and in oncology as well as
the pursuit of material transfer agreements (‘MTAs’) with partners to begin exploring potential
collaborations.
In Vivo study results
The optimised Nuvec® in vivo studies in mice were 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 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 involved the Coronavirus plasmid and another generic plasmid. In vitro performance
with the optimised Nuvec® loaded with a new SARS-COV-2 plasmid demonstrated an improved
response in terms of transfection and SARS-COV-2 spike protein secretion in HEK 293 cells. In
addition this combination also showed a dose-related SARS-COV-2 spike protein production.
Whilst the in vitro results were very positive using the SARS-COV-2 plasmid the results from the
mouse in vivo immunogenicity studies carried out by Evotec did not show any meaningful
immunological response. In addition, the initial mRNA OVA in vivo immunogenicity study showed sub
optimal responses. These results again highlighted that a number of variables such as dose, route of
administration, timing of injection and formulation could require extensive optimisation for each
plasmid loaded onto Nuvec®. With the Company now getting traction with MTAs (as detailed further
below) the strategic decision was taken to concentrate ongoing vaccine work on specific products
linked to proprietary DNA or mRNA sequences under MTA.
Aside from the in vivo work, The Medicines Catapult has recently assessed, in vitro, Nuvec® loaded
with DNA that had been stored at room temperature for six months. Cell transfections was successful
demonstrating the stability of the Nuvec® loaded with DNA and the potential storage advantages of
Nuvec®. Thus, it has been shown that both mRNA and DNA loaded on Nuvec® are conferred a high
level of stability which may be an important feature in the MTA related studies.
Oncology programme
In December, the Company announced it had successfully completed an in vivo confirmatory
oncology study which reinforced the results from a pilot study earlier in the year. The initial pilot
study was designed to test the ability to use a monodispersed Nuvec® formulation in an intra venous
(“i.v”) route of administration using a DNA plasmid (pDNA) encoding TNF alpha to assess the
tolerance of different doses and to look at tumour regression.
The confirmatory study incorporated the following control and test groups: TNF alpha pDNA alone,
unloaded Nuvec®, Nuvec® loaded with 50ug of the TNF alpha pDNA and Nuvec® loaded with 20ug
of TNF alpha pDNA. The study was conducted in untreated tumour-bearing mouse models with dosing
for each cohort completed intravenously.
The results showed a clear inhibition of tumour progression for the groups where Nuvec® was loaded
with TNF alpha pDNA when compared to the other three groups. In addition, the use of Nuvec® was
shown to improve animal survival rates in the life of the study.
These excellent findings show that injection of a TNF alpha plasmid loaded onto Nuvec® into tumour
bearing mice successfully leads to the transfection and release of TNF alpha which results in the
suppression of tumour growth and increased survival rates.
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N4 Pharma plc
Chairman’s Report (Continued)
Oncology programme (continued)
The results from the successful oncology study open up the field of gene therapy and in vivo protein
production as a key opportunity for Nuvec®. This will become an important area of focus moving
forward as discussed further in Future Prospects below. This advancement is the result of the
ongoing optimisation work to produce a consistently monodispersed product, presenting potentially
huge market opportunities for Nuvec®.
MTAs
During 2020 the Company entered into three MTAs covering vaccine delivery and gene therapy. The
MTAs are subject to strict confidentiality which means the Company is limited in any meaningful
information it can divulge. Since the year end, work on one of these MTAs has recently ceased as
the partner has decided to stop investigating alternative delivery systems to the one it is already
using in respect of the delivery of its proprietary Covid pDNA plasmid. In addition, the Company has
been informed by the Gene Therapy MTA partner that, following the departure of the individuals
engaged on working on the MTA, they do not intend to undertake any further work under the MTA.
Work on the third MTA continues.
The MTAs have shown us that the level of engagement is entirely dependent on the personnel and
resource deployed by partners which, sometimes in very large organisations, can vary greatly and
sees the Company at the mercy of the partner as to timings and advancement of such studies.
However, the pursuit of MTAs remains a key strategy as a means to see how Nuvec® may work with
proprietary technologies.
As soon as the Company is in a position to publicly disclose material progression or otherwise in
respect of MTAs it will do so. In the meantime, it will only announce further MTAs when able to
without restrictions of confidentiality or in respect of a defined commercial agreement.
Intellectual Property
2021 was a very productive year in the advancement of the protection of our intellectual property.
The University of Queensland (“UQ”) has seen the granting of (or notice of intention to grant)
patents now in Europe, Australia, Japan, China and in January of this year the critical market of the
US. N4 Pharma has the exclusive worldwide rights to Nuvec® for therapeutic uses in humans and
animals.
Future Prospects
Following our most extensive in vivo work to date and the commencement of MTAs in 2021 we have
a clear focus in 2022 as to where best to deploy our resources in the short term. As a result of the
very positive findings from the evaluation studies looking at the potential of Nuvec® as a nano-
carrier of a DNA plasmid expressing TNFalpha, which demonstrated a significant inhibition of tumour
growth derived from a human cell line, the Company has commenced work with Medicines Discovery
Catapult to extend the observations to allow us to identify suitable loads to add to Nuvec® to take
to clinic.
To date, the Company has established that Nuvec® can deliver an appropriate biological load and
this new study will help determine the mechanism of action that produced the tumour suppression.
Amongst other things, it will seek to identify whether the Nuvec® loaded with TNF alpha was directly
taken up by the tumour cells to produce the active TNF within the tumour or whether other organs
such as the liver took up the Nuvec® and produced the TNF and released it systemically to suppress
the tumour. If it can be demonstrated that Nuvec® can selectively deliver the plasmid to the tumour
this may indicate the potential use of Nuvec® to deliver to tumours with a reduced systemic effect
and inform the scope of any clinical studies or collaboration discussions. In addition, studies will use
labelled Nuvec® particles to allow the organ and tissue distribution of Nuvec® to be followed.
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N4 Pharma plc
Chairman’s Report (Continued)
Future Prospects (Continued)
The Company is also in the process of identifying alternatives to TNF as immunomodulators or gene
therapy which may use Nuvec® as a delivery system. The selection process is expected to conclude
shortly and the Company intends to conduct a study programme similar to the work being undertaken
using TNF.
The oncology, gene therapy and protein replacement markets are huge and we believe will provide
us with the quickest route for Nuvec® to move into clinical trials with a product and far quicker
than with vaccines. That said, the potential for Nuvec’s® use in the delivery of vaccines remains
but we feel any advance in this area will be best done via MTAs. In addition, through our grant with
UQ, we continue our longer term proof of concept work in respect of oral applications for Nuvec®.
2021 has been a mixed year for the Company. We felt from the outset it could be a pivotal year for
the Company and believe it has proved to be so. On the back of increased data and results we are
now in a position to narrow our focus onto the hugely exciting oncology and gene therapy market.
In parallel, we are working with a number of MTA partners assessing how Nuvec® may enhance their
proprietary technologies. Whilst we are not there yet and it will be results driven, our path to the
commercialisation of Nuvec® is clearer now than perhaps at any time previously.
The opportunity for Nuvec® as a delivery system for immune-oncology is substantial. Market Watch
2022* highlights that the global Immuno-oncology therapy market size is expected to grow from $US
1.23 billion in 2020 to $US 1.65 billion by 2027; an expected CAGR of 4.5% during 2022-2027.
* Immuno-oncology Therapy Market 2022 Research Report Analysis by Competition, Countries Data,
Sales, Revenue, Industry Size, Share and Forecasted 2027
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
22nd February 2022
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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 (Executive Director)
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 Senior Vice
President of M&A at Advanz Pharma, a private equity-backed specialty pharmaceutical company.
He has over 25 years’ experience in R&D, corporate development and investment banking. Previous
roles include Global Head of M&A at both Neuraxpharm and Sandoz, Managing Director at Torreya
Partners, Head of Business Development at Sanofi Pasteur MSD and Director, Life Sciences at Deloitte
Corporate Finance. 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”).
Performance review
The Group made a total comprehensive loss of £1,544,346 during the year ended 31 December 2021
(2020: total comprehensive loss of £1,304,843).
Background and principal activities
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 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.
Detail of the Group’s exposure to risk management and control is detailed in the Corporate
Governance statement on page 12.
Dividends
The Board has not declared a dividend for the year ended 31 December 2021 (2020: nil).
Directors
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.
2021
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.
75,000
45,000
40,000
24,000
24,000
-
75,000
16,981,319
-
4,538
4,537
3,795
3,795
49,538
44,537
27,795
27,795
- 1,434,286
142,857 2,109,588
717,143
717,143
-
-
208,000
16,665
224,665
17,124,176 4,978,160
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N4 Pharma plc
Directors’ Report (Continued)
Directors’ remuneration and interests (Continued)
2020
Director
Nigel Theobald (Chief
Executive Officer)
David Templeton
Luke Cairns
Christopher Britten
John Chiplin
Significant shareholders
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
The below details the significant shareholders of the Company.
Shareholder
Number of shares held
Percentage of issued share capital
Nigel Theobald
David Farrier
Going concern
16,981,319
12,175,510
9.38%
6.72%
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, 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 before tax for the year ended 31 December 2021 of
£1,772,232 (2020: £1,503,595 outflow). At 31 December 2021, the Group had cash balances of
£1,784,024 (2020: £3,555,579) and a surplus in net working capital (current assets, including cash,
less current liabilities) of £2,129,654 (2020: £3,657,334).
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 the issue 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 continues to consider the current worldwide pandemic (“COVID-19”) and the impact it
may have on its operations. COVID-19 continued to not have 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 12 months from the Consolidated Statement of Financial Position
date.
10
N4 Pharma plc
Directors’ Report (Continued)
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.
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 UK adopted 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
22nd February 2022
11
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
The Board 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 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 2021, 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.
12
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 the
Principal risks and uncertainties section of this statement and note 2 and 13 of the consolidated
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 8 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.
13
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.
Overview
The Group has exposure to the following risks:
Liquidity risk;
• Credit risk;
•
• Tax risk;
• Market risk; and
• Operational risk
• Regulatory and legislative risk
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 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 13 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 to the Company, but not to the Group.
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.
14
N4 Pharma plc
Corporate Governance Statement (Continued)
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.
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.
15
N4 Pharma plc
Corporate Governance Statement (Continued)
Capital management (Continued)
The capital structure of the Group consists of cash and cash equivalents and equity comprising,
capital, reserves and accumulated losses.
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 13.
By order of the Board
John Chiplin
Chairman
22 February 2022
16
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 subsidiary
(the ‘group’) for the year ended 31 December 2021 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 Flows, the Company Statement of Cash Flows
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 UK-adopted
international accounting standards.
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 2021 and of the group’s loss for the year then ended;
have been properly prepared in accordance with UK-adopted international accounting
standards; 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 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.
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, the
group’s accounting processes and controls and the industry in which the group and parent company
operate.
As part of planning 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 amounts that involve making
assumptions and when 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. A
full scope audit was undertaken on each entity with no work undertaken by component auditors.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance
in our audit of the financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
17
N4 Pharma plc
Independent auditor’s report to the members (Continued)
Key Audit Matter
Going concern
The going concern assumption is a fundamental
and pervasive principle in the preparation of
financial statements. The group is loss making and
is currently in the research and development
phase of developing the Nuvec delivery system,
and is therefore yet to generate income other than
research and development (R&D) tax credits. The
long-term performance of the business will
depend on the viability 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
certain conditions are met there is a requirement
for development costs to be capitalised in
accordance with IAS. There is a risk that an
incorrect assessment of the phase of the project
would in turn, lead to the adoption of an incorrect
accounting treatment Due to the significance of
the development expenditure to the financial
statements, this has been determined as a key
audit matter.
Risk of impairment of intercompany investments
and loan balances
In the books of N4 Pharma plc, the investment in
and intercompany balance debtor due from N4
Pharma UK Limited are both highly material
balances.
N4 Pharma UK Limited has net liabilities. The
recoverable amount of the investment and debtor
recorded in the books of N4 Pharma plc is
dependent upon estimates and judgements as to
the expected financial performance of N4 Pharma
UK Limited in the future.
How our scope addressed this matter
Our audit procedures are set out in the ‘Conclusions
relating to going concern’ below.
We have further discussed the progress of the
development of the Nuvec delivery system with
management, including future plans with the goal of
commercialising their product. We have also
reviewed board minutes and publicly available
information regarding the development of the
product. We concluded that the project remains
viable and supports the going concern assumption.
Based on our procedures, we concluded that there is
no material uncertainty in relation to going concern
and that the continued adoption of the going concern
basis of accounting in these financial statements
remains appropriate.
Our audit procedures included the following:
•
the expenditure meets
We reviewed the directors’ assessment of
whether
the
conditions for capitalisation set out in IAS
38, challenging the assumptions within this
assessment; and
•
When substantively testing a sample of
research and development expenses to
underlying records, we corroborated the
accounting treatment given; and
Based on our procedures performed, we consider
that the expenditure on research and development
has been appropriately accounted for.
Our audit procedures included the following:
•
•
•
there were
We obtained the directors assessment of
whether
of
impairment relating to these balances and
compared this to the requirements of IFRS
9.
indicators
We scrutinised, sensitised and challenged
the assumptions under IFRS 9 and compared
to our own expectations.
We critically assessed the director’s future
plans for the business and viability of the
product under development upon which the
recoverability of these balances depends.
Based on the procedures performed, we concluded
that there is no impairment with regard to the
investment and intercompany balance. We recognise
that there is uncertainty over the timing of future
income, however we understand from the progress
made in the current year that there is currently no
indication that the research will not generate a
viable product, and on this basis the investment
carrying amount should not be impaired.
18
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 misstatements and in forming our opinion. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic decisions of reasonable users that
are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed
materiality, we use a lower materiality level, performance materiality, to determine the extent of
testing needed. Importantly, misstatements below this level will not necessarily be evaluated as
immaterial as we also take account of the qualitative nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.
The materiality for the group financial statements as a whole was set at £68,000 (2020: £60,000).
This was determined by reference to reported loss before tax, which we consider to be the principal
consideration in assessing the financial performance of the group. Materiality cannot be based on
revenue or assets because the group is not yet generating revenue or capitalising development costs.
In line with ISA (UK) 600 component materiality must be less than the materiality of the group and
as such, the materiality threshold for both the parent company and the subsidiary have been capped
at 90% of the group materiality (£61,000).
Performance materiality was set at 80 percent of the above materiality level, being £54,000 for the
group (2020: £48,000) and £49,000 for the parent and subsidiary companies. We agreed with the
Audit Committee that we would report to the Committee all individual audit differences in excess
of £3,000 (2020: £3,000), being 5% of parent materiality. We also agreed to report differences below
this threshold that, in our view, warranted reporting on qualitative grounds.
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 group and 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 in
particular:
-
assessing their longer term strategic plans to develop and market a product which will
generate revenue and profitability;
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 reviewing projected cash flows,
post year end cash balances compared to the projections and other available evidence
to assess further the ability of the group and the parent company to continue in
operation for at least 12 months after the date of approval of the financial statements;
and
•
discussing post balance sheet events with the directors to assess their potential impact on
the going concern assumption
19
N4 Pharma plc
Independent auditor’s report to the members (Continued)
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report, other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
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.
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.
20
N4 Pharma plc
Independent auditor’s report to the members (Continued)
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 11, the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and the
parent company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the group or the parent company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the group and parent company
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 by 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 as it relates
to research and development.
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.
21
N4 Pharma plc
Independent auditor’s report to the members (Continued)
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.
As group auditors, our assessment of matters relating to non-compliance with laws or regulations
and fraud differed at group and component level according to their particular circumstances. Our
communications included a request to identify instances of non-compliance with laws and
regulations and fraud that could give rise to a material misstatement of the group financial
statements in addition to our risk assessment.
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 involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
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.
…………………………………..
Simon Hall (Senior Statutory Auditor)
for and on behalf of Saffery Champness LLP
Chartered Accountants
Statutory Auditors
Westpoint
Peterborough Business Park
Lynch Wood
Peterborough
PE2 6FZ
22 February 2022
22
Consolidated Statement of Comprehensive Income for the year ended 31 December 2021
N4 Pharma Plc
Research and development costs
General and administration costs
Notes
2021
£
(1,179,425)
(663,865)
2020
£
(900,410)
(664,011)
Operating loss for the year
(1,843,290)
(1,564,421)
Net finance income/(expenditure)
Loss for the year before tax
Taxation
4
5
6
677
(1,963)
(1,842,613)
(1,566,384)
298,267
261,541
Loss for the year after tax
(1,544,346)
(1,304,843)
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:
12
Basic
Diluted (restated, see note 12)
Basic loss per share
Diluted loss per share (restated, see note
12)
(1,544,346)
(1,304,843)
181,080,349
181,080,349
136,303,141
136,303,141
(0.85)
(0.85)
(0.96)
(0.96)
All results were derived from continuing operations.
The notes on pages 30 to 48 are an integral part of the Consolidated Financial Statements
23
N4 Pharma Plc
Consolidated Statement of Financial Position as at 31 December 2021
Notes
8
9
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Accruals and deferred income
Total liabilities
Total assets less current
liabilities
Net assets
Equity
2021
£
558,359
1,784,024
2,342,383
2,342,383
(184,820)
(27,910)
(212,730)
2020
£
270,837
3,555,579
3,826,416
3,826,416
(142,484)
(26,598)
(169,082)
2,129,653
3,657,334
2,129,653
3,657,334
Share capital
Share premium
Share option reserve
Reverse acquisition reserve
Merger reserve
Retained earnings
11
11
11
11
11
11
8,995,146
13,945,602
79,955
(14,138,244)
279,347
(7,032,153)
8,995,146
13,945,602
63,290
(14,138,244)
279,347
(5,487,807)
Total equity
2,129,653
3,657,334
The notes on pages 30 to 48 are an integral part of the Consolidated Financial Statements.
The Consolidated Financial Statements were approved by the Board of Directors on 22 February 2022
and signed on its behalf:
Nigel Theobald
24
Company Statement of Financial Position as at 31 December 2021
N4 Pharma Plc
2021
£
1,094,747
5,259,000
6,353,747
629,113
1,538,615
2,167,728
8,521,475
(8,966)
(19,493)
(28,459)
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)
8,493,016
8,539,739
8,493,016
8,539,739
Assets
Non-current assets
Investments
Intercompany loan receivable
Current assets
Trade and other receivables
Cash and cash equivalents
Notes
7
14
8
Total assets
Liabilities
Current liabilities
Trade and other payables
Accruals and deferred income
Total liabilities
9
Total assets less current
liabilities
Net assets
Equity
Share capital
Share premium
Share option reserve
Merger reserve
Retained earnings
Total equity
11
11
11
11
11
8,995,146
13,945,602
79,955
279,347
(14,807,034)
8,995,146
13,945,602
63,290
279,347
(14,743,646)
8,493,016
8,539,739
The Company recorded a loss of £63,388 for the year (31 December 2020: £164,139 loss).
The notes on pages 30 to 48 are an integral part of the Consolidated Financial Statements.
The Company Financial Statements were approved by the Board of Directors on 22nd February 2022
and signed on its behalf:
Nigel Theobald
25
N4 Pharma Plc
Consolidated Statement of Changes in Equity for the year ended 31 December 2021
(i) Year ended 31 December 2021
Balance at 1 January 2021
Total comprehensive loss for the year
Share issue
Share based payment charge
At 31 December 2021
(ii) Year ended 31 December 2020
Share
capital
Share
premium
£
£
8,995,146 13,945,602
Share
option
reserve
£
63,290
Reverse
acquisition
reserve
£
(14,138,244)
Merger
reserve
Retained
earnings
Total equity
£
279,347
£
(5,487,807)
£
3,657,334
-
-
-
8,995,146 13,945,602
-
-
-
-
-
16,665
79,955
-
-
-
(14,138,244)
-
-
-
279,347
(1,544,346)
-
-
(7,032,153)
(1,544,346)
-
16,665
2,129,653
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
-
-
-
-
-
(1,304,843)
(1,304,843)
Share issue
Share based payment charge
At 31 December 2020
318,471
-
3,618,344
-
8,995,146 13,945,602
-
38,024
63,290
-
-
(14,138,244)
-
-
279,347
-
-
(5,487,807)
3,936,815
38,024
3,657,334
The notes on pages 30 to 48 are an integral part of the Consolidated Financial Statements.
26
Company Statement of Changes in Equity for the year ended 31 December 2021
N4 Pharma Plc
(i) Year ended 31 December 2021
Share capital
Share
premium
Share option
reserve
Merger
reserve
Retained
earnings
Total equity
£
£
£
£
£
£
Balance at 1 January 2021
8,995,146 13,945,602
63,290
279,347
(14,743,646)
8,539,739
Total comprehensive loss for the year
Share issue
Share based payment charge
-
-
-
-
-
-
-
-
16,665
-
-
-
(63,388)
-
-
(63,388)
-
16,665
At 31 December 2021
8,995,146 13,945,602
79,955
279,347
(14,807,034)
8,493,016
(ii) 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 based payment charge
-
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
(14,743,646)
8,539,739
The notes on pages 30 to 48 are an integral part of the Consolidated Financial Statements.
27
N4 Pharma Plc
Consolidated Statement of Cash Flows for the year ended 31 December 2021
Operating activities
Loss after tax
Finance expenditure and other income
Share based payment charge
Taxation credit
Operating loss before changes in working
capital
Movements in working capital:
Decrease /(Increase) in trade and other
receivables
Increase in trade, other payables and accruals
Notes
2021
£
2020
£
(1,544,346)
(677)
16,665
(298,267)
(1,826,625)
10,745
43,648
(1,304,843)
(1,963)
3,977
(261,541)
(1,564,370)
(30,534)
91,399
Cash used in operations
(1,772,232)
(1,503,595)
Taxation paid
-
120,507
Net cash flows used in operating activities
(1,772,232)
(1,382,998)
Financing activities
Finance expenditure and other income
Net proceeds of ordinary share issue
Net cash flows from financing activities
Net (decrease) /increase in cash and cash
equivalents
Cash and cash equivalents at beginning of the
year
677
-
677
1,963
3,970,862
3,972,825
(1,771,555)
2,589,827
3,555,579
965,752
Cash and cash equivalents at 31 December
1,784,024
3,555,579
The notes on pages 30 to 48 are an integral part of the Consolidated Financial Statements
28
N4 Pharma Plc
Company Statement of Cash Flows for the year ended 31 December 2021
Operating activities
Loss before tax
Interest
Share based payment charge
Impairment of investment
2021
£
2020
£
(63,388)
(228,588)
16,665
-
(164,139)
(153,045)
3,977
100
Operating loss before changes in working capital
(275,311)
(313,107)
Movements in working capital:
Increase in trade and other receivables
(Decrease) /Increase in trade and other payables
Cash used in operations
(211,801)
(14,678)
(501,790)
(170,268)
11,200
(472,175)
Net cash flows used in operating activities
(501,790)
(472,175)
Investing activities
Loan receivable advancements
(1,600,000)
(1,000,000)
Net cash flows used in investing activities
(1,600,000)
(1,000,000)
Financing activities
Interest received
Net proceeds of ordinary share issue
228,588
-
153,045
3,970,862
Net cash flows from financing activities
228,588
4,123,907
Net (decrease) /increase in cash and cash
equivalents
(1,873,202)
2,651,732
Cash and cash equivalents at beginning of the year
3,411,817
760,085
Cash and cash equivalents at 31 December
1,538,615
3,411,817
The notes on pages 30 to 48 are an integral part of the Consolidated Financial Statements
29
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
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 Consolidated Financial Statements have been prepared in accordance with UK-adopted international
accounting standards and applied to the Parent Company Accounts in accordance with the provisions of
the Companies Act 2006.
The Consolidated Financial Statements are presented in Great British Pounds (“GBP” or “£”), rounded to
the nearest £.
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.
• The associated Share Options are measured at fair value using the Black Scholes model (see note
9).
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, 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 before tax for the year ended 31 December 2021 of £1,772,232
(2020: £1,503,595 outflow). At 31 December 2021, the Group had cash balances of £1,784,024 (2020:
£3,555,579) and a surplus in net working capital (current assets, including cash, less current liabilities)
of £2,129,653 (2020: £3,657,334).
30
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
1.
Accounting policies (Continued)
1.3
Going concern (Continued)
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 continues to consider the current worldwide pandemic (“COVID-19”) and the impact it may
have on its operations. COVID-19 continued to not have 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 12 months from the Consolidated Statement of Financial Position date.
1.4
Basis of consolidation
The consolidated Group financial statements consist of the financial statements of Company together
with the only entity controlled by the parent company (its subsidiary), N4 UK.
All financial statements are made up to 31 December 2021. Where necessary, adjustments are made to
the financial statements of N4 UK to bring the accounting policies used into line with those used by the
Group.
All intra-group transactions, balances and unrealised gains on transactions between Group companies
are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the Group’s financial statements from the date that control
commences until the date that control ceases.
1.5
Revenue
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, and against the associated cost.
31
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
1.
Accounting policies (Continued)
1.7
Expenses
Financing income and expenses
Financing expenses comprise interest expense and finance charges. Financing income comprises interest
receivable on funds invested.
Financing income and expenses are recognised in the Consolidated Statement of Comprehensive Income
as it accrues, using the effective interest method.
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.
To date, the criteria for recognition of an internally generated intangible asset have not been met as
explained in note 1.17.
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 the 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.
32
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
1.
Accounting policies (Continued)
1.9
Taxation (Continued)
Deferred tax (Continued)
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.
1.9
Foreign Currencies
Monetary assets and liabilities denominated in foreign currencies are translated into Sterling at the rate of
exchange ruling at the Consolidated Statement of Financial Position date. Transactions in foreign currencies
are translated at the rate of exchange ruling at the date of the transaction. Foreign exchange gains and
losses are included in the Consolidated Statement of Comprehensive Income.
1.10
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 of share options granted.
1.11 Operating segments
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.
1.12
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.
33
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
1.
Accounting policies (Continued)
1.13 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 less provision for impairment
under IAS 27.
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 of cash at bank. Any overdrafts are
shown within borrowings in current liabilities.
1.14
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 Consolidated
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.
34
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
1.
Accounting policies (Continued)
1.14
Impairment (Continued)
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.
1.15
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 payment 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.
1.16 Adoption of new and revised International Financial Reporting Standards
The following IFRS standards, amendments or interpretations became effective during the year ended
31 December 2021 but have not had a material effect on this Consolidated Financial Information:
Standard
Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS
16) (effective periods beginning on or after 1 January 2021)
Covid 19-Related Rent Concessions Beyond 30 June 2021 (Amendment to IFRS 16 Leases) (effective
periods beginning on or after 1 April 2021)
All new standards and amendments to standards and interpretations effective for annual periods
beginning on or after 1 January 2021 that are applicable to the Group have been applied in preparing
these Consolidated Financial Statements.
35
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
1.
Accounting policies (Continued)
1.16 Adoption of new and revised International Financial Reporting Standards (Continued)
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.
Standard
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)
Amendments to IFRS 1, Annual Improvements to IFRS Standards 2018-2020
IFRS 9, IFRS 16 and
IAS 41
Amendments to IAS 1 Disclosure of accounting policies
Amendments to IAS 8 Definition of accounting estimates
Amendments to IAS 12 Deferred tax related to assets and liabilities arising from
a single transaction
Effective date
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
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 2022.
1.17 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, the Directors have 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 judgements surrounding the 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. The recoverability of
the intercompany debtor and the cost of investment is dependent on the future profitability and
success of the entity, which is in a research phase and has not therefore generated any revenue to
date. Having considered research progress during the year and future prospects of N4 UK, the Directors
do not consider that there are indicators of impairment in respect of these balances. This is a
significant judgement.
36
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
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
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 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 13 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 to the Company, but not to the Group.
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.
37
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
2.
Risk management (Continued)
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.
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.
Regulatory and legislative risk will become more significant once the current research generates revenue.
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.
38
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
3.
Employees and directors
The average monthly number of employees during the year was 5 (2020: 5). The Directors of the Group
are employed by both the Company and N4 UK and as such are included in the employee figure. Total
Directors remuneration is detailed in Note 14 of these Consolidated Financial Statements.
Wages and Salaries
Social security costs
Pension costs
4.
Net finance income and (expenditure)
Exchange rate losses
Bank charges
Interest received on financial assets measured at
amortised cost
5.
Loss before tax
2021
£
208,000
16,518
-
224,518
2021
£
-
-
677
677
2021
£
2020
£
204,768
20,370
219
225,357
2020
£
(813)
(1,150)
-
(1,963)
2020
£
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
24,675
21,600
-
4,500
6.
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
39
2021
£
2020
£
(298,267)
(214,884)
-
(46,657)
(298,267)
(261,541)
-
-
(298,267)
(261,541)
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
6.
Taxation (Continued)
The tax charge for the year can be reconciled to the loss in the Consolidated Statement of Comprehensive
Income as follows:
Loss before taxation
2021
£
2020
£
(1,842,613)
(1,566,384)
Tax at the UK corporation tax rate of 19% (2020: 19%)
(350,096)
(297,613)
Net Research and development tax credits
Changes in unrecognised deferred tax
Adjustments in respect of prior periods
Tax charge for the year
(298,267)
350,096
-
(214,884)
297,613
(46,657)
(298,267)
(261,541)
At the year end the Group had trading losses carried forward of £9,011,815 (2020: £8,084,975) for use
against future profits. There are no other factors which may impact future tax charges. A deferred tax
asset has not been recognised on unrelieved trading losses as the timing, extent and availability of future
profits is not yet certain
7.
Investments
Investment in subsidiary
Company
Cost
Balance at 1 January
Impairment on dissolution
Balance at 31 December
2021
£
2020
£
1,094,747
1,094,847
-
(100)
1,094,747
1,094,747
Details of the Company’s subsidiary at 31 December 2021 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 accounting reference date of the subsidiary are co-terminous with that of the Company. The
registered office address and principal place of business of N4 Pharma UK Limited is The Mills, Canal
Street, Derby, DE1 2RJ.
40
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
8.
Trade and other receivables
Prepayments
VAT due
R&D tax credits receivable
Interest receivable
Other debtors
Group
2021
£
7,013
23,553
513,151
677
13,965
558,359
Group
2020
£
16,009
39,944
214,884
-
-
270,837
Company
2021
£
Company
2020
£
6,514
6,361
-
611,838
4,400
629,113
15,320
14,677
-
382,916
4,400
417,313
Loan interest receivable relates to the intra-group loan disclosed in Note 14.
9.
Trade and other payables
Group
2021
£
180,346
4,474
184,820
Group
2020
£
116,871
25,613
142,484
Company
2021
£
Company
2020
£
7,848
1,118
8,966
-
23,348
23,348
Trade payables
Other payables
10. Share-based payments
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 Consolidated Statement of
Comprehensive Income on a straight-line basis over the vesting period based on the Group’s estimate of the number
of shares that will vest.
The vesting period is defined as the period in which the options are unable to be exercised. The period commences
on the date the options are issued. For the options to vest, the holder must remain an employee of the group
throughout the vesting period. Once the vesting period is complete the options may be exercised on any date up
to the lapse date.
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 at the grant
date were adjusted based on management’s best estimate for the effects of non-transferability, exercise
restrictions and behavioral considerations.
As at 31 December 2021, there were 7,046,513 (2020: 7,046,513) options in existence over ordinary shares of the
Company. Options in existence during the current and/or previous financial year are as follows:
41
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
10. Share-based payments (Continued)
Options (Continued)
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
Date of
Grant
Ordinary
shares
under
option
Vesting
Date
Expiry Date
Exercise
Price £
14.10.15
14.10.15
1,351,210
675,302
14.10.15
14.10.15
14.10.25
14.10.25
03.05.17
03.05.17
03.05.17
717,143
717,143
717,143
03.05.20
03.05.20
03.05.20
03.05.27
03.05.27
03.05.27
0.0280
0.0280
0.0700
0.0700
0.0700
21.05.19
717,143
21.05.22
21.05.29
0.0355
21.05.19
717,143
21.05.22
21.05.29
0.0355
18.05.20
18.05.20
717,143
717,143
18.05.23
18.05.23
18.05.30
18.05.30
0.0480
0.0480
Total options
7,046,513
The weighted average remaining contractual life of the share options outstanding as at 31 December
2021 was 5.93 years.
Share options outstanding:
At 1 January 2020
Exercise of options
Lapse of options
Options granted
At 31 December 2020
Exercise of options
Lapse of options
Options granted
At 31 December 2021
Number of
shares
7,679,370
(1,350,000)
(717,143)
1,434,286
7,046,513
-
-
-
7,046,513
Each option entitles the holder to subscribe for one ordinary share in the Company. Options do not confer
any voting rights on the holder.
42
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
10. Share-based payments (Continued)
Options (Continued)
An amount of £16,665 has been recognised in the Consolidated Statement of Comprehensive Income in
relation to the share options (2020: £3,977).
The aggregate fair value of the share options in issue was £79,955 (2020 £63,290), with amounts recorded
at each balance sheet date being as follows:
2015 Options
2017 Options
2019 Options
2020 Options
11.
Capital and reserves
Issued, allotted and fully paid
181,080,349 Ordinary Shares of 0.4p each
(2020: 181,080,349)
137,674,431 Deferred Shares of 4p each (2020:
137,674,431)
279,176,540 Deferred Shares of 0.99p each
(2020: 279,176,540)
2021
£
18,492
26,884
19,861
14,718
79,955
2020
£
18,493
26,884
12,270
5,643
63,290
2021
£
724,321
2020
£
724,321
5,506,977
5,506,977
2,763,848
2,763,848
8,995,146
8,995,146
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.
Authorised ordinary shares at 31 December 2021 totalled 334,682,497 (2020:262,250,357).
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.
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.
43
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
11.
Capital and reserves (Continued)
Reserves
The equity structure presented in the Consolidated Financial Statements reflects the equity structure of
the Group, including the equity instruments issued as part of the Reverse Takeover transaction which
occurred in 2017 and followed accounting treatment in accordance with IFRS 2.
The reverse acquisition reserve and the merger reserve are derived as part of the Reverse Takeover
transaction and the balances within these reserves have had no movement since the point of the
Reverse takeover in 2017.
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.
Retained earnings
Retained earnings comprises of accumulated results of the Group to date.
12.
Earnings per share
The calculation of basic loss per share at 31 December 2021 was based on the loss of £1,544,346 (2020:
£1,304,843), and a weighted average number of ordinary shares outstanding of 181,080,349
(2020:136,303,141), calculated as follows:
2021
£
2020
£
Losses attributable to ordinary shareholders
(1,544,346)
(1,304,843)
Weighted average number of ordinary shares
Issued ordinary shares at 1 January
Effect of shares issued during the year
181,080,349
-
100,168,016
36,135,125
Weighted average number of shares at 31 December
181,080,349
136,303,141
Basic loss per share
2021 pence
per share
2020 pence
per share
(0.85)
(0.96)
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. The calculation of diluted
loss per share at 31 December 2021 was based on the loss of £1,544,346 (31 December 2020: £1,304,843),
and a weighted average number of ordinary shares outstanding of 181,080,349 (2020: 136,303,141).
44
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
12.
Earnings per share (continued)
Diluted loss per share (continued)
Diluted loss per share
2021 pence
per share
2020 pence
per share
(0.85)
(0.96)
Management have reconsidered the effect of antidilutive potential shares on the weighted average
number of shares used in the calculation of diluted EPS. Management have therefore restated the prior
year disclosure in respect of diluted weighted average number of shares and diluted loss per share.
13.
Risk management and analysis
(a) 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.
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 to the Company, but not to the Group.
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 £2,342,383 (2020: £3,826,416),
being the total of the carrying amount of financial assets, shown in the Consolidated Statement of
Financial Position.
(b) 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 2021
Trade and other payables
31 December 2020
Trade and other payables
Company:
Financial liabilities
31 December 2021
Trade and other payables
31 December 2020
Trade and other payables
Carrying
amount
£
Contractual
cash flows
£
6 months or
less
£
6-12
months
£
1 -2 years
£
184,820
184,820
184,820
142,484
142,484
142,484
-
-
-
-
Carrying
amount
£
Contractual
cash flows
£
6 months or
less
£
6-12
months
£
1 -2 years
£
8,966
8,966
8,966
23,348
23,348
23,348
-
-
-
-
45
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
13.
Risk management and analysis (Continued)
(c) Currency risk
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.
(d) 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
2021
£
2020
£
1,784,024
3,555,579
Carrying amount
2021
£
2020
£
1,538,615
3,411,817
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 2020.
Group:
Variable rate instruments
Company:
Variable rate instruments
2021
Profit or loss
2020
Profit or loss
100 bp
increase
17,840
100 bp
decrease
(17,840)
100 bp
increase
35,555
100 bp
decrease
(35,555)
2021
Profit or loss
2020
Profit or loss
100 bp
increase
15,386
100 bp
decrease
(15,386)
100 bp
increase
34,118
100 bp
decrease
(34,118)
46
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
14.
Related parties
Key management personnel
The below remuneration relates to key management personnel, there are no key management personnel
employed by the Group in addition to the Directors.
Short-term employee benefits
Share based payments
Directors’ remuneration and interests
The below remuneration relates to the Directors of the Group.
2021
£
224,518
16,665
241,183
2020
£
225,357
3,977
229,334
2021
Director
Nigel Theobald (Chief
Executive Officer)
David Templeton
Luke Cairns
Christopher Britten
John Chiplin
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.
75,000
45,000
40,000
24,000
24,000
-
75,000
16,981,319
-
4,538
4,537
3,795
3,795
49,538
44,537
27,795
27,795
- 1,434,286
142,857 2,109,588
717,143
717,143
-
-
208,000
16,665
224,665
17,124,176 4,978,160
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
No contributions are paid by the Group to a pension scheme on behalf of the Directors.
Nigel Theobald is the Group’s highest paid director (2020: Nigel Theobald). His remuneration in each
year is disclosed above.
N4 Pharma PLC has a loan receivable from N4 Pharma UK Limited at 31 December 2021 of £5,259,000
(2020: £3,659,000). It is repayable in December 2025, accrues interest at a rate of 5% and is unsecured.
There are no further related parties identified. There is no ultimate controlling party of the Company or
Group.
47
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
N4 Pharma Plc
15.
Retirement benefit schemes
The Group operates a defined contribution pension scheme for all qualifying employees. The assets of
the scheme are held separately from those of the Group in an independently administered fund.
The charge to the profit and loss during the year in respect of this scheme was £Nil (2020:£219). The
liability at the year end amounted to £Nil (2020:£Nil).
16.
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.
48