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 2022
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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Registrars
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen, West Midlands
B62 8HD
United Kingdom
Accountants
Mourant GS Accounting Services 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 Companies Secretaries Limited
6th Floor,
Birmingham
BA 6AA
United Kingdom
Nominated Adviser and Joint Broker
SP Angel Corporate Finance LLP
35-39 Maddox Street
London
W1S 2PP
United Kingdom
Joint Broker
Turner Pope Investments Limited
8 Frederick’s Place
London
EC2R 8AB
United Kingdom
Auditor
Saffery Champness LLP
Westpoint
Peterborough Business Park
Lynch Wood
Peterborough
PE2 6FZ
United Kingdom
Company’s website www.n4pharma.com
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N4 Pharma plc
Chairman’s Report
N4 Pharma Plc (the “Company”), is the holding company and Parent Company for N4 Pharma UK
Limited (“N4 UK”), and together form the Group (the “Group”).
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 2022
During the year to 31 December 2022 no revenue was generated by the Group (31 December 2021:
£nil).
The operating loss for the year was reduced to £1,029,261 (31 December 2021: £1,843,290 loss).
Expenditure was broadly in line with budget and decreased as less work was undertaken on in vivo
vaccine and oncology studies in 2022 compared to 2021.
Cash at the year-end stood at £1,919,529 (31 December 2021: £1,784,024) having raised £1,054,000
towards the end of 2022. Our cash position remains good and leaves us well positioned to complete
our current work streams for 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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◼
◼
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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.
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N4 Pharma plc
Chairman’s Report (Continued)
Key Operational Events and Opportunities
2022 saw further significant changes in the field of vaccine and oncology product. The success of
the mRNA lipid nanoparticle covid vaccines from Pfizer and Moderna firmly established RNA products
in this field however their success also led others such as Astra Zeneca to reassess their approach in
this area. Having launched covid vaccines the key players in this area turned their attention to
launching new vaccines addressing other illnesses such as influenza using their existing lipid delivery
systems, meaning opportunities for novel delivery systems other than lipid nanoparticles in the
vaccine space would be in less demand. However there remains significant opportunities for novel
delivery system in earlier stage development using RNA in oncology, especially siRNA products of
which there are over 200 in clinical development and delivery is often cited as a major issue in
product development in this field.
The Company therefore undertook a strategic review of all the findings from the Nuvec® proof of
concept in-vivo and in-vitro work including its vaccine work, the successful intravenous tumour
reduction study and a series of in-vitro experiments looking at the ability to bind Nuvec® with
multiple siRNA compounds for gene silencing to determine the most appropriate commercial area
where it is most likely to be able to secure a commercial licensing deal.
Strategic review of Nuvec® as a delivery system
Nuvec® has consistently been shown to deliver DNA and RNA payloads into the cell where the
compound is able to escape the endosome and be released into the cell. Its unique structure allows
strong binding and protection of RNA/DNA leading to good stability for the formulated product. It is
also able to be formulated into a monodisperse formulation making it suitable for intravenous
injection as well as sub-cutaneous or intra muscular injection. It is also much cheaper to make and
formulate than lipid nanoparticles.
The field of vaccine development is complex and delivery of RNA into the cell is just the first step
on the medical pathway of a successful product. Once inside the cell, for a successful vaccine
sufficient RNA needs to produce the right amount of protein which in turn needs to attract the right
amount and type of antibodies to teach the body to ultimately fight an invading virus. The review
clearly highlighted that as well as being able to deliver RNA/DNA into a cell Nuvec® would require
optimisation with a partner's payload in order to achieve these downstream effects and the studies
to do this are extremely expensive.
The review highlighted that Nuvec® was best suited to applications where intra cellular delivery by
itself was a key element of product development. The tumour suppression work also showed that
monodisperse Nuvec® could be delivered intravenously and be safe and effective. The Company
therefore decided to focus its internal development work on loading and delivering siRNA intra
cellularly for applications in the field of oncology treatments and gene therapy since once inside
the cell, the payload needs to silence a gene inside the cell and a successful product is not
dependent on multiple downstream pathways.
The Company’s work also highlighted that Nuvec® can load multiple siRNA onto each particle and
deliver each into the cell allowing a product to work intra cellularly on different pathways within
the same cell. This is a novel and highly differentiated aspect of Nuvec® as a delivery system.
siRNA programme
In September 2022, the Company announced a research programme looking to extend its work with
siRNA and load two clinically relevant siRNAs onto Nuvec® with the goal to test in vivo the ability
for tumour regression.
After several discussions with opinion leaders in oncology, lung cancer was identified as the most
appropriate target cancer type for this test. Most of these cancers are characterised by
overexpressing a receptor called the Epidermal growth factor receptor (EGFR), which prevents
apoptosis. Apoptosis is a type of cell death which the body uses to get rid of unneeded or abnormal
cells. The process of apoptosis may be blocked in cancer cells which are then prevented from
naturally dying and this can lead to uncontrolled growth. Silencing this mutated receptor
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N4 Pharma plc
Chairman’s Report (Continued)
siRNA programme (continued)
would lead to re-establishing apoptosis in the tumor cells and could potentially restore sensitivity
to other treatments.
This work has been researched extensively however often the body develops a resistance to such
single siRNA treatments. To strengthen the effect, the Company identified another target protein
BCL-2, which it would simultaneously load onto the same Nuvec® particle alongside EGFR to give a
second line of defence against the cancer cells growing.
The Company chose BCL-2 which belongs to the family of proteins that regulate apoptosis. This
mechanism is controlled by the ratio between the anti-apoptotic BCL-2 and the pro-apoptotic
protein BH3-only. When silencing BCL-2, BH3-only proteins will not be blocked and are therefore
more likely to induce apoptosis.
By targeting both EGFR and BCL-2 a double loaded Nuvec® can combat both the mechanism that
causes uncontrolled cell growth and the mechanism that prevents cell death which it believes will
give a greater chance to push the tumor cell into apoptosis and lead to tumour regression.
The Company has designed an experimental plan to develop, formulate and deliver a double loaded
Nuvec with siRNA against EGFR and BCL-2 and test this in a xenograft cancer model. This work will
provide relevant clinical proof of concept data which the Company believes will greatly showcase
Nuvec®’s potential in this space and lead to a better chance of establishing a commercial license
deal with one of the many companies operating in this space. The programme of work is as follows:
Step 1: Loading, characterisation and formulation of Nuvec with EGFR and BCL-2 siRNA.
Step 2: In vitro testing of delivery and ratios of the siRNAs
Step 3: Biodistribution and preliminary toxicology in both tumour and non-tumour models
Step 4: In vivo efficacy model of tumour regression
Globally, there is a shortage and delays in acquiring research grade materials and the Company
suffered delays towards the end of 2022 in getting the materials to start the work. These materials
have now arrived and the work is underway. Full results are expected by the end of Q2 2023.
Material Transfer Agreements ("MTAs")
MTAs are seen by the Company as a good means of establishing relationships with potential partners
but are totally dependent on the speed and ability of the partner to prioritise the research and
subject to strict confidentiality which means the Company is limited in any meaningful information
it can divulge. The Company still has one active MTA and the pursuit of MTAs remains a key strategy
as a means to see how Nuvec® may work with a potential partner's proprietary technology. However,
the field of siRNA gives the Company greater ability to undertake its own clinically relevant work to
establish how Nuvec® behaves in this space, hence its decision to operate both elements together
so it is not overly exposed to one particular MTA partner.
Intellectual Property
The Company has the exclusive worldwide rights for therapeutic uses in humans and animals for
technology developed by The University of Queensland (“UQ”). 2022 now sees this technology having
patents granted in Europe, Australia, Japan, China and the US.
The Company has also filed its own patent on using Nuvec® to enhance the performance of viral
vectors which is now entering the national phases of patent execution.
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N4 Pharma plc
Chairman’s Report (Continued)
Future Prospects
The Company is well funded to deliver its siRNA programme and will now start business development
outreach of its siRNA data working alongside a US company, Partner International, who have
extensive biotech business development experience.
Alongside the siRNA programme the Company, in conjunction with UQ, is continuing to research the
application of Nuvec® as an oral delivery system. Recent work has shown how Nuvec® can be loaded
with DNA and encapsulated by a pH-controlled polymer to deliver the DNA and transfect cells locally
in the intestine. The work will continue to test the ability to produce a localised intestinal effect
invivo which could have applications either in the vaccine field or more likely as a locally delivered
intestinal medicine.
The Company also announced in 2022 work to support its patent for viral vector improvements
whereby loading a lentivirus or adenovirus onto Nuvec® could reduce the amount of vector required
to deliver an enhance effect. Importantly, Adeno-Associated Virus (AAV) is seen as a key
improvement on other viral vectors and products have been developed to treat various conditions,
including hepatitis. However, due to the nature of the AAV, these products are very expensive and
can have toxicity issues. The Company intends to continue working in collaboration with Brunel
University to investigate improving Associated-Adeno Virus (AAV) as AAVs are at the forefront of
approved products in this area.
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
8 March 2023
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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 £1,029,261 during the year ended 31 December 2022
(2021: total comprehensive loss of £1,544,346).
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 nanoparticle silica
delivery systems to improve the cellular delivery and potency of cancer treatments and 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 2022 (2021: 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.
2022
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.
77,500
46,500
41,333
24,000
24,000
-
77,500
16,981,319
-
4,537
4,537
1,466
1,466
51,037
45,870
25,466
25,466
- 1,434,286
142,857 2,109,588
717,143
717,143
-
-
213,333
12,006
225,339
17,124,176 4,978,160
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N4 Pharma plc
Directors’ Report (Continued)
Directors’ remuneration and interests (Continued)
2021
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.
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
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
12,540,385
7.26%
5.36%
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 2022 of
£828,263 (2021: £1,772,232 outflow). At 31 December 2022, the Group had cash balances of
£1,919,529 (2021: £1,784,024) and a surplus in net working capital (current assets, including cash,
less current liabilities) of £2,088,158 (2021: £2,129,653).
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.
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.
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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
8 March 2023
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 2022, the Board met formally six 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 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 increase salaries for the executive directors broadly in
line with inflation.
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 7 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
13
N4 Pharma plc
Corporate Governance Statement (Continued)
Communication with shareholders and stakeholders (Continued
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.
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;
• Operational risk; and
• 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
nanoparticle silica delivery systems to improve the cellular delivery and potency of cancer
treatments and 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 , potential licensing partners 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 patents 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
8 March 2023
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
subsidiaries (the ‘group’) for the year ended 31 December 2022 which comprise Consolidated
Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the
Company Statement of Financial Position, the Consolidated Statement of Changes in Equity, the
Company Statement of Changes in Equity, the Consolidated Statement of Cash Flow, the Company
Statement of Cash Flow and notes to the financial statements, including significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable
law and 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 2022 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
accounting processes and controls and the industry in which the group and company operates.
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we looked at where the directors made
subjective judgements, for example in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain.
The risks of material misstatement that had the greatest effect on our audit, including the allocation
of our resources and effort, are discussed under “Key audit matters” within this report.
Our group audit scope included an audit of the group and parent company financial statements.
Based on our risk assessment, we determined that two components, N4 Pharma Plc and N4 Pharma
UK Limited, represented the principal business units within the group. A full scope audit was
undertaken on each component. The audit of both significant components was performed by the
same group audit team. The components within the scope of our audit work therefore covered 100%
of, group loss before tax and group net assets..
At group level we also tested the consolidation process to confirm our conclusion that there were
no significant risks of material misstatement in the consolidated financial information.
17
N4 Pharma plc
Independent auditor’s report to the members (Continued)
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.
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 & 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.
As such, significant audit time was devoted to
testing of the going concern assessment and
the going concern assumption is considered to
be a key audit matter.
How our scope addressed this matter
Our audit procedures included the following:
• obtaining and critically appraising the
Directors’ formal going concern assessment
for arithmetical accuracy;
•
identifying the funding requirements for
managements’ longer term strategic plans
to develop and market a product which will
profitability,
generate
the Nuvec
including development of
delivery
of
system
commercialising the product;
revenue
goal
and
and
the
•
reviewing board minutes and publicly
available
the
information
development of the Nuvec product;
regarding
• 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;
•
reviewing projected cash flows, post year
end cash balances compared to the
projections 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;
• discussing post balance sheet events with
the Directors to assess their impact on the
going concern assumption and formal
assessment;
•
•
considering how the impact of the current
economic climate has been factored into
the forecasts; and
reviewing the disclosures in the annual
report, specifically in note [X], to assess
that these disclosures are appropriate.
Based on our procedures, we concluded that
there is not a 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.
18
N4 Pharma plc
Independent auditor’s report to the members (Continued)
Key audit matters (Continued)
Capitalisation of development expenditure
Our audit procedures included the following:
The Group is incurring material expenditure in
respect of research and development.
statement. There
During the year, £577,525 was expensed to the
significant
income
judgement as to whether any of these costs
meet the recognition criteria of development
assets under IAS 38, specifically establishing
the technical and commercial feasibility of the
Nuvec project.
is
Due to the significance of the development
expenditure to the financial statements and
the judgements
involved, this has been
identified as a key audit matter.
Our application of materiality
•
•
Reviewing the Directors’ assessment of
compatibility with the criteria for
capitalisation set out
IAS 38,
agreeing that the requirements to
recognise a development asset had not
been met; and
in
Substantively testing a sample of
research and development expenses to
underlying records.
Based on our procedures we have not identified
any material misstatement arising from the
capitalisation of development costs.
We apply the concept of materiality in planning and performing our audit, in evaluating the effect
of misstatements and in forming our opinion. Our overall objective as auditor is to obtain reasonable
assurance that the financial statements as a whole are free from material misstatement, whether
due to fraud or error. We consider 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
circumstances of their occurrence, when evaluating their effect on the financial statements as a
whole.
Based on our professional judgement and taking into account the possible metrics used by investors
and other readers of the accounts, we have determined an overall group materiality of £50,000
(2021: £68,000). This was determined with reference to a benchmark of 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 600 component materiality cannot exceed the
materiality of the group and as such the materiality threshold for both the parent and the subsidiary
have been capped at 90% of the group materiality (£45,000). With regard to subsidiary materiality,
the cap was not applied as calculated materiality was £40,000 (2021: £61,000).
Performance materiality was set at 75% of the above materiality level, being £37,500 for the group
(2021: £54,000), £33,750 for the parent (2021: £49,000) and £30,000 for the subsidiary company
(£49,000). We agreed with the Audit Committee that we would report to the Committee all
individual audit differences in excess of £2,500 (2021: £3,000), being 5% of group materiality. We
also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
19
N4 Pharma plc
Independent auditor’s report to the members (Continued)
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 is set out in the ‘Key audit matters’ section above.
Based on the work we have performed, we have not identified any material uncertainties relating
to events or conditions that, individually or collectively, may cast significant doubt on the group or
the parent company's ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
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.
In addition, the group is subject to other laws and regulations that do not have a direct effect on
the financial statements but compliance with which may be fundamental to its ability to operate or
to avoid a material penalty. These include anti-bribery legislation and employment law.
Audit response to risks identified:
We considered the extent of compliance with these laws and regulations as part of our audit
procedures on the related financial statement items including a review of group and parent company
financial statement disclosures. We reviewed the parent company’s records of breaches of laws and
regulations, minutes of meetings and correspondence with relevant authorities to identify potential
material misstatements arising. We discussed the parent company’s policies and procedures for
compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the
key areas which might involve non-compliance with laws and regulations or fraud. We enquired of
management whether they were aware of any instances of non-compliance with laws and regulations
or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud
21
N4 Pharma plc
Independent auditor’s report to the members (Continued)
Auditor’s responsibilities for the audit of the financial statements (Continued)
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
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.
involve deliberate concealment by, for example, forgery or
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
Date:
22
Consolidated Statement of Comprehensive Income for the year ended 31 December 2022
N4 Pharma Plc
Research and development costs
General and administration costs
Notes
2022
£
(577,525)
(615,735)
2021
£
(1,179,425)
(663,865)
Operating loss for the year
(1,193,260)
(1,843,290)
Net finance income
Loss for the year before tax
Taxation
4
5
6
1
677
(1,193,259)
(1,842,613)
163,998
298,267
Loss for the year after tax
(1,029,261)
(1,544,346)
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
(1,029,261)
(1,544,346)
Basic
Diluted
Basic loss per share
Diluted loss per share
186,422,541
186,422,541
(0.55)
(0.55)
181,080,349
181,080,349
(0.85)
(0.85)
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 2022
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
2022
£
246,518
1,919,529
2,166,047
2,166,047
(40,722)
(37,167)
(77,889)
2021
£
558,359
1,784,024
2,342,383
2,342,383
(184,820)
(27,910)
(212,730)
2,088,158
2,129,653
2,088,158
2,129,653
Share capital
Share premium
Share option reserve
Reverse acquisition reserve
Merger reserve
Retained earnings
11
11
11
11
11
11
9,205,946
14,698,569
103,954
(14,138,244)
279,347
(8,061,414)
8,995,146
13,945,602
79,955
(14,138,244)
279,347
(7,032,153)
Total equity
2,088,158
2,129,653
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 8 March 2023 and
signed on its behalf:
Nigel Theobald
24
Company Statement of Financial Position as at 31 December 2022
N4 Pharma Plc
2022
£
1,094,747
5,659,000
6,753,747
992,325
1,761,330
2,753,655
9,507,402
(13,381)
(20,465)
(33,846)
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)
9,473,556
8,493,016
9,473,556
8,493,016
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
9,205,946
14,698,569
103,954
279,347
(14,814,260)
8,995,146
13,945,602
79,955
279,347
(14,807,034)
9,473,556
8,493,016
The Company recorded a loss of £7,226 for the year (31 December 2021: £63,388 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 8 March 2023 and signed
on its behalf:
Nigel Theobald
25
N4 Pharma Plc
Consolidated Statement of Changes in Equity for the year ended 31 December 2022
(i) Year ended 31 December 2022
Balance at 1 January 2022
Total comprehensive loss for the year
Share issue
Share issue costs
Share based payment charge
At 31 December 2022
(ii) Year ended 31 December 2021
Share
capital
Share
premium
£
£
8,995,146 13,945,602
Share
option
reserve
£
79,955
Reverse
acquisition
reserve
£
(14,138,244)
Merger
reserve
Retained
earnings
Total equity
£
279,347
£
(7,032,153)
£
2,129,653
-
210,800
-
-
-
843,200
(90,233)
-
9,205,946 14,698,569
-
-
-
23,999
103,954
-
-
-
-
(14,138,244)
-
-
-
-
279,347
(1,029,261)
-
-
-
(8,061,414)
(1,029,261)
1,054,000
(90,233)
23,999
2,088,158
Share
capital
Share
premium
£
£
Share
option
reserve
£
Reverse
acquisition
reserve
Merger
reserve
Retained
earnings
Total equity
£
£
£
£
Balance at 1 January 2021
8,995,146 13,945,602
63,290
(14,138,244)
279,347
(5,487,807)
3,657,334
Total comprehensive loss for the year
-
-
-
-
-
(1,544,346)
(1,544,346)
Share based payment charge
At 31 December 2021
-
8,995,146 13,945,602
-
16,665
79,955
-
(14,138,244)
-
279,347
-
(7,032,153)
16,665
2,129,653
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 2022
N4 Pharma Plc
(i) Year ended 31 December 2022
Share capital
Share
premium
Share option
reserve
Merger
reserve
Retained
earnings
Total equity
£
£
£
£
£
£
Balance at 1 January 2022
8,995,146 13,945,602
79,955
279,347
(14,807,034)
8,493,016
Total comprehensive loss for the year
Share issue
Share issue costs
Share based payment charge
-
210,800
-
-
-
843,200
(90,233)
-
-
-
-
23,999
-
-
-
-
(7,226)
-
-
-
(7,226)
843,200
(90,233)
23,999
At 31 December 2022
9,205,946 14,698,569
103,954
279,347
(14,814,260)
9,473,556
(ii) 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 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
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 2022
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:
(Increase)/decrease in trade and other
receivables
(Decrease)/increase in trade, other payables
and accruals
Cash used in operations
Taxation credit received
Notes
2022
£
2021
£
(1,029,261)
(1)
23,999
(163,998)
(1,544,346)
(677)
16,665
(298,267)
(1,169,261)
(1,826,625)
(37,312)
(134,841)
10,745
43,648
(1,341,414)
(1,772,232)
513,151
-
Net cash flows used in operating activities
(828,263)
(1,772,232)
Financing activities
Finance expenditure and other income
Proceeds of ordinary share issue
Costs of share issue
Net cash flows from financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of the
year
1
1,054,000
(90,233)
963,768
677
-
-
677
135,505
(1,771,555)
1,784,024
3,555,579
Cash and cash equivalents at 31 December
1,919,529
1,784,024
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 2022
Operating activities
Loss before tax
Interest
Share based payment charge
2022
£
2021
£
(7,226)
(271,772)
23,999
(63,388)
(228,588)
16,665
Operating loss before changes in working capital
(254,999)
(275,311)
Movements in working capital:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
(91,440)
5,387
16,787
(14,678)
Cash used in operations
(341,052)
(273,202)
Net cash flows used in operating activities
(341,052)
(273,202)
Investing activities
Loan receivable advancements
(400,000)
(1,600,000)
Net cash flows used in investing activities
(400,000)
(1,600,000)
Financing activities
Net proceeds of ordinary share issue
Costs of share issue
Net cash flows from financing activities
Net increase/(decrease) in cash and cash
equivalents
1,054,000
(90,233)
963,767
-
-
-
222,715
(1,873,202)
Cash and cash equivalents at beginning of the year
1,538,615
3,411,817
Cash and cash equivalents at 31 December
1,761,330
1,538,615
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 2022
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.
Share-based payments related to share issue costs are measured at fair value shown in Share
Premium.
• The associated Share Options and Warrants are measured at fair value using the Black Scholes
model (see note 10).
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 2022 of £828,263
(2021: £1,772,232 outflow). At 31 December 2022, the Group had cash balances of £1,919,529 (2021:
£1,784,024) and a surplus in net working capital (current assets, including cash, less current liabilities)
of £2,088,158 (2021: £2,129,653).
30
Notes to the Consolidated Financial Statements for the year ended 31 December 2022
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.
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 the Company together
with the only entity controlled by the parent company (its subsidiary), N4 UK.
All financial statements are made up to 31 December 2022. 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 2022
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 2022
N4 Pharma Plc
1.
Accounting policies (Continued)
1.8
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 2022
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 2022
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 2022 but have not had a material effect on this Consolidated Financial Information:
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
Effective date
1 January 2022
1 January 2022
1 January 2022
1 January 2022
35
Notes to the Consolidated Financial Statements for the year ended 31 December 2022
N4 Pharma Plc
1.
Accounting policies (Continued)
1.16 Adoption of new and revised International Financial Reporting Standards (Continued)
All new standards and amendments to standards and interpretations effective for annual periods
beginning on or after 1 January 2022 that are applicable to the Group have been applied in preparing
these Consolidated Financial Statements.
The standards and interpretations that are issued and relevant to the Group, 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 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 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 2022
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 2022
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 2022
N4 Pharma Plc
3.
Employees and directors
The average monthly number of employees during the year was 5 (2021: 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.
2022
£
2021
£
213,333
208,000
17,562
16,518
230,895
224,518
2022
£
1
1
2022
£
2021
£
677
677
2021
£
28,640
24,675
2022
£
2021
£
(163,998)
(298,267)
-
-
(163,998)
(298,267)
-
-
(163,998)
(298,267)
Wages and Salaries
Social security costs
4.
Net finance income and (expenditure)
Interest received on financial assets measured at
amortised cost
5.
Loss before tax
Loss before taxation is arrived after charging:
Fees payable to the Group’s auditors for the audit
of the Group’s financial statements
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
Notes to the Consolidated Financial Statements for the year ended 31 December 2022
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
2022
£
2021
£
(1,029,261)
(1,842,613)
Tax at the UK corporation tax rate of 19% (2021: 19%)
(195,560)
(350,096)
Net Research and development tax credits
Changes in unrecognised deferred tax
Adjustments in respect of prior periods
Tax charge for the year
(163,998)
195,560
-
(298,267)
350,096
-
(163,998)
(298,267)
At the year end the Group had trading losses carried forward of £9,969,504 (2021: £9,011,815) 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
Balance at 31 December
2022
£
2021
£
1,094,747
1,094,747
1,094,747
1,094,747
Details of the Company’s subsidiary at 31 December 2022 are as follows:
Registered Office
Principal activity
N4 Pharma UK Limited
The Mills, Canal
Street, Derby, DE1
2RJ
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.
40
Notes to the Consolidated Financial Statements for the year ended 31 December 2022
N4 Pharma Plc
8.
Trade and other receivables
Prepayments
VAT due
Group
2022
£
36,888
18,632
Group
2021
£
7,013
23,553
R&D tax credits receivable
163,998
513,151
Interest receivable
Other debtors
-
27,000
246,518
677
13,965
558,359
Loan interest receivable relates to the intra-group loan disclosed in Note 14.
9.
Trade and other payables
Company
2022
£
36,029
13,352
-
883,610
59,334
992,325
Group
2022
£
35,756
4,966
40,722
Group
2021
£
180,346
4,474
184,820
Company
2022
£
12,196
1,185
13,381
Trade payables
Other payables
10. Share-based payments
Options
Company
2021
£
6,514
6,361
-
611,838
4,400
629,113
Company
2021
£
7,848
1,118
8,966
The Company has the ability to issue options to Directors to compensate them for services rendered and
recognised 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 2022, there were 7,046,513 (2021: 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 2022
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
2022 was 4.93 years (2021: 5.93 years).
Each option entitles the holder to subscribe for one ordinary share in the Company. Options do not confer
any voting rights on the holder.
An amount of £12,006 has been recognised in the Consolidated Statement of Comprehensive Income and
in the Share Option Reserve in relation to the share options (2021: £16,665).
The aggregate fair value of the share options in issue was £91,961 (2021 £79,955), with amounts recorded
at each reporting date being as follows:
2015 Options
2017 Options
2019 Options
2020 Options
2022
£
18,492
26,884
22,793
23,792
91,961
2021
£
18,492
26,884
19,861
14,718
79,955
42
Notes to the Consolidated Financial Statements for the year ended 31 December 2022
N4 Pharma Plc
10. Share-based payments (Continued)
Warrants
As part of the placing in November 2022 which raised £1,054,000 before fees and expenses, the Company
issued 3,162,000 warrants at an exercise price of 2p per warrant to the Company’s brokers on the
transaction as part of their fees.
The warrants entitle holders to subscribe for new ordinary shares at any time in the period of three years
following the grant of the warrants. The expiry date for the warrants is 23 November 2025.
Fair value is measured using a Black Scholes pricing model.
An amount of £11,993 has been recognised in the Share Premium and in the Share Option Reserve in
relation to the warrants (2021: £nil).
Date of
Grant
Ordinary shares
under option
Expiry
Date
Exercise
Price £
Fair value at 31 December
2022
£
25.11.22
3,162,000
24.11.25
0.02
11,993
11.
Capital and reserves
Issued, allotted and fully paid
233,780,349 Ordinary Shares of 0.4p each (2021:
181,080,349)
137,674,431 Deferred Shares of 4p each (2021:
137,674,431)
279,176,540 Deferred Shares of 0.99p each (2021:
279,176,540)
2022
£
935,121
2021
£
724,321
5,506,977
5,506,977
2,763,848
2,763,848
9,205,946
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 2022 totalled 334,682,497 (2021:334,682,497).
During the year 52,700,000 new ordinary shares of 0.4p each were issued through two placings in
November 2022 at a share price of 2p per share.
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.
43
Notes to the Consolidated Financial Statements for the year ended 31 December 2022
N4 Pharma Plc
11.
Capital and reserves (Continued)
The 279,176,540 deferred shares of 0.99p shall be entitled to receive a special dividend, which is payable
upon the repayment to the Company of any amount owed under certain loan agreements, after which
the Company shall, in priority to any distribution to any other class of share, pay to the holders of the
Special Deferred Shares an aggregate amount equal to the amount repaid pro rata according to the
number of such shares paid up as to their nominal value held by each shareholder. They shall be entitled
to no other distribution save for a special dividend and shall not be entitled to receive notice of or attend
or vote at a general meeting of the Company. On a return of capital on a winding up of the Company,
they shall only be entitled to receive the amount paid up on such shares up to a maximum of 0.9 pence
per share after the holders of the Ordinary Shares and the Deferred Shares have received their return on
capital.
Reserves
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 options granted, less the fair value of lapsed and
expired 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 2022 was based on the loss of £1,029,261 (2021:
£1,544,346), and a weighted average number of ordinary shares outstanding of 186,422,541
(2021:181,080,349), calculated as follows:
2022
£
2021
£
Losses attributable to ordinary shareholders
(1,029,261)
(1,544,346)
Weighted average number of ordinary shares
Issued ordinary shares at 1 January
Effect of shares issued during the year
181,080,349
5,342,192
181,080,349
-
Weighted average number of shares at 31 December
186,422,541
181,080,349
Basic loss per share
2022 pence
per share
2021 pence
per share
(0.55)
(0.85)
44
Notes to the Consolidated Financial Statements for the year ended 31 December 2022
N4 Pharma Plc
12.
Earnings per share (Continued)
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 and warrants. The calculation
of diluted loss per share at 31 December 2022 was based on the loss of £1,029,261 (31 December 2021:
£1,544,346), and a weighted average number of ordinary shares outstanding of 186,422,541 (2021:
181,080,349).
Diluted loss per share
13.
Risk management and analysis
(a) Credit risk
2022 pence
per share
2021 pence
per share
(0.55)
(0.85)
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 £2,002,049 (2021: £2,342,383),
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 2022
Trade and other payables
31 December 2021
Trade and other payables
Company:
Financial liabilities
31 December 2022
Trade and other payables
31 December 2021
Trade and other payables
Carrying
amount
£
Contractual
cash flows
£
6 months or
less
£
6-12
months
£
1 -2 years
£
40,722
40,722
40,722
184,820
184,820
184,820
-
-
-
-
Carrying
amount
£
Contractual
cash flows
£
6 months or
less
£
6-12
months
£
1 -2 years
£
13,381
13,381
13,381
8,966
8,966
8,966
-
-
-
-
45
Notes to the Consolidated Financial Statements for the year ended 31 December 2022
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
2022
£
2021
£
1,919,529
1,784,024
Carrying amount
2022
£
2021
£
1,761,330
1,538,615
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 2021.
Group:
Variable rate instruments
Company:
Variable rate instruments
2022
Profit or loss
2021
Profit or loss
100 bp
increase
19,195
100 bp
decrease
(19,195)
100 bp
increase
17,840
100 bp
decrease
(17,840)
2022
Profit or loss
2021
Profit or loss
100 bp
increase
17,613
100 bp
decrease
(17,613)
100 bp
increase
15,386
100 bp
decrease
(15,386)
46
Notes to the Consolidated Financial Statements for the year ended 31 December 2022
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.
2022
£
230,895
12,006
242,901
2021
£
224,518
16,665
241,183
2022
Director
Nigel Theobald (Chief
Executive Officer)
David Templeton
Luke Cairns
Christopher Britten
John Chiplin
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.
77,500
46,500
41,333
24,000
24,000
-
77,500
16,981,319
-
4,537
4,537
1,466
1,466
51,037
45,870
25,466
25,466
- 1,434,286
142,857 2,109,588
717,143
717,143
-
-
213,333
12,006
225,339
17,124,176 4,978,160
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
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 (2021: 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 2022 of £5,659,000
(2021: £5,259,000). 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 2022
N4 Pharma Plc
15.
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