N4 Pharma Plc
Annual Report 2023

Plain-text annual report

Company Registration No. 01435584 (England and Wales) N4 Pharma Plc Annual Report and Consolidated Financial Statements Year Ended 31 December 2023 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 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 3 4 9 10 14 19 25 26 27 28 29 30 31 32 2 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 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) resigned on 1 August 2023 Dr Christopher Britten (Non-Executive Chairman) Registrars Neville Registrars Limited Neville House Steelpark Road Halesowen, West Midlands B62 8HD United Kingdom Accountants MourantGS Accounting Services Limited Fairbairn House Rohais St. Peter Port Guernsey GY1 1FE Registered Office of the Company 6th Floor 60 Gracechurch Street London EC3V 0HR United Kingdom Company Secretary SGH Company Secretaries Limited 6th Floor 60 Gracechurch Street London EC3V 0HR United Kingdom Nominated Adviser and Joint Broker SP Angel Corporate Finance LLP 35-39 Maddox Street London W1S 2PP United Kingdom Joint Broker Turner Pope Investments Limited 8 Frederick’s Place London EC2R 8AB United Kingdom Auditor Saffery LLP Westpoint Peterborough Business Park Lynch Wood Peterborough PE2 6FZ United Kingdom Company’s website www.n4pharma.com 3 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Chairman’s Report N4 Pharma Plc ("N4 Pharma" or the “Company”), is the Parent Company for N4 Pharma UK Limited (“N4 UK”) and Nanogenics Limited ("Nanogenics"), 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, gene therapy and vaccines. Nanogenics is a specialist pharmaceutical company engaged in the development of a Liptide@ platform to deliver a proprietary siRNA sequence to silence a fibrotic gene for the treatment of glaucoma. 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 2023 During the year to 31 December 2023 £1,953 of revenue was generated by the Group (31 December 2022: £nil). The operating loss for the year increased to £1,276,778 (31 December 2022: £1,029,261 loss). Expenditure was broadly in line with budget and increased compared to prior year as more work was undertaken on in vivo vaccine and oncology studies in 2023. Cash at the year-end was £1,027,112 (31 December 2022: £1,919,529) having raised £350,000 towards the end of 2023 primarily to fund the investment into Nanogenics. Our cash position remains sufficient to continue our current work streams albeit further funds may be required to expand our activities as set our further in the Directors’ Report. 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): ◼ ◼ ◼ ◼ ◼ ◼ 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 projects, Nuvec® and ECP105, the glaucoma product being developed by Nanogenics; the interests of the Group’s employees – save for the Directors, the Company has no other employees. The interests of the Directors are very much aligned with the success of the Group and Company; the need to foster the Group’s business relationships with suppliers, customers and others – the Group is reliant on third party providers such as clinical research organisations (“CROs”) to progress the business and maintains good work relationships with all its counterparties; the impact of the Group’s operations on the community and the environment – all CROs are required to adhere to strict ethical standards particularly in the use of animals in studies; the desirability of the Group maintaining a reputation for high standards of business conduct; and the need to act fairly between stakeholders of the Group. Where or to the extent that the purposes of the Group consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the Group for the benefit of its members were to achieve those purposes. The duty imposed by this section has effect subject to any enactment or rule of law requiring Directors, in certain circumstances, to consider or act in the interests of creditors of the Group. 4 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Chairman’s Report (Continued) Key Operational Events and Opportunities The Company has continued to add further pre-clinical proof of concept data to the significant data accumulated in the prior periods in respect of the potential for the use of Nuvec®. For 2023, the Company’s focus for Nuvec® was threefold: • • • to expand its knowledge around Nuvec® in oncology and gene therapy using siRNA to silence genes; to continue to investigate the oral delivery of Nuvec® to the intestine; and to further investigate the use of Nuvec® to improve the performance of viral vectors. In parallel to this ongoing work, we continued to explore potential collaborations to find appropriate partners with whom to develop Nuvec® in a way that could lead to it being marketed to pharma companies with commercialisation in mind. As stated previously, the Company has always been open to adding further, complimentary assets and this was achieved through investment resulting in a controlling stake in Nanogenics. siRNA The Company is focusing its research on the ability of Nuvec® nanoparticles to be loaded with, and deliver at the same time, two different siRNA known to inhibit relevant oncology targets. This is cutting edge research in the use of nanoparticles as delivery systems in oncology and consequently the Company is proceeding carefully to ensure that it gains the maximum understanding of the cellular processes involved. Through the use of multiple different siRNA constructs, the Company has demonstrated that two separate siRNA molecules can be loaded onto Nuvec® without changing the size or charge of Nuvec®, both parameters being essential for successful cellular uptake. The initial work on cell growth involved investigating the combination of inhibition of EGFR (epidermal growth factor receptor) and BCL-2: (B-cell lymphoma 2) using PC-9 cancer cells. Each siRNA when separately loaded onto Nuvec® achieved cell inhibition. The work identified that the expression level of BCL-2 in PC9 cells was low even though cellular inhibition was observed. The Company then began investigating alternative cellular pathways that may be inhibited using siRNA loaded alongside EGFR. The first was BRD4 (Bromodomain-containing-protein 4) a target for which inhibitors are currently being evaluated in clinical trials for the treatment of uveal melanoma, leukemia and carcinoma. The second target was PLK1 (Polo Like Kinase 1), inhibitors of which are in early clinical development for lymphoma and pancreatic cancer. As with the other siRNAs explored to date, Nuvec® can be loaded with the individual siRNA, as above, and cause knockdown of the respective targets and reduce cell viability in a dose-related manner. Having confirmed dual loading of Nuvec®, the Company subsequently tested the effect of both BRD4 combined with EGFR and PLK1 combined with EGFR on knockdown and cell viability. Although individually both siRNA had demonstrated the expected results of a dose-dependent inhibition of cell growth and target knockdown, critically when loaded together there was a synergistic effect which resulted in a reduction in knockdown of EGFR receptor but importantly the reduction on cell viability was retained. These findings give Nuvec® a unique position in using siRNA to treat oncology and other diseases as multiple siRNA molecules can be loaded onto Nuvec® and different cellular pathways inhibited at the same time, a hugely useful tool for combination therapy treatments. Oncology Strategy It is likely that the precise combinations of siRNA, both in terms of target and concentration of siRNA, will vary depending on which cell type they are tested in. Both these elements will be determined by the clinical outcome desired. Chemotherapy treatments for cancers are broad stroked and have very high toxicity which has led to the emergence of alternative immuno-oncology treatments. These have had remarkable success for some cancers but have proved ineffective in curbing the progression of numerous cancers. 5 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Chairman’s Report (Continued) Oncology Strategy (Continued) Single pathway treatments can have an initial effect but many see the post treatment emergence of cancer cells that have developed “immune escape” pathways leaving retreatment as futile. Novel approaches to the treatment of cancer that do not rely on the immune response, nor incur the general toxicity induced by chemotherapy or radiotherapy, but rather rely on targeting the well- known growth factor pathways spurring tumour growth are key to addressing the shortfalls of immunotherapeutic and chemotherapeutic approaches. Although some monoclonal antibody treatments (mAbs) do target tumour growth dependent pathways, they have highly significant off- target effects, must be dosed repeatedly, can be immunogenic, and target only one pathway at a time, allowing for emergence of tumour populations that proliferate by other growth pathways. None have been curative. The work the Company is doing shows that Nuvec® can bind not only single, but multiple siRNAs aimed at simultaneously targeting identified pathways responsible for cancer progression after initial treatments. Knocking down both (or more) pathways will give a greater chance that tumours will not develop resistance, escape and again proliferate by the emergence of a significant alternative growth pathway, which is common in treatments blocking just one growth factor pathway. Oral Studies at the University of Queensland (“UQ”) During the period UQ has, utilising the grant funding obtained by N4 Pharma and the Australian Research Council, made considerable progress in the longer-term study on oral applications for Nuvec®. We have demonstrated via in vivo pre-clinical studies that an enterically-coated capsule containing Nuvec® loaded with DNA encoding ovalbumin is able to pass through the lining of the stomach to successfully transfect the upper intestine. Using a single dose, ovalbumin expression was observed after 3 days. In a second study a second capsule was administered on day 3 and a much higher sustained level of expression was observed on days 4-7. This work clearly shows that Nuvec® can be successfully used as an oral delivery system with many potential applications such as a vaccine, a product for gastrointestinal disorders (e.g. Inflammatory Bowel Disease, Ulcerative Colitis etc) or to treat colon cancer among many possible examples. As recently announced further studies at UQ show that administering capsules on subsequent days can maintain the protein expression for even longer and produce antibodies. The Company is in active discussions with UQ as to the appropriate next steps and likely costings to maximise this opportunity. Viral vectors Viral vectors remain the go to delivery vehicle for use in gene therapy but they remain fraught with problems, most notably they are expensive to make and cause side effects due to their inflammatory nature. The Company has taken a novel approach to how Nuvec® might initially be used in this area. The Company has shown that Nuvec® can be combined with the viral vector to significantly improve its efficiency. This could mean products formulated with viral vectors could achieve their same efficacy but from a reduced amount thereby significantly reducing the cost of manufacture and potentially reducing the unwanted side effects from the viral vector. Post the year end, The Company announced that it had also shown through its research programme with the University of Brunel, that Nuvec® can deliver increased transduction efficacy, when complexed with Adeno-Associated virus 8 (“AAV8”). AAV8 was chosen for investigation as this virus is currently being used for products already in clinical development. 6 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Chairman’s Report (Continued) Viral vectors (Continued) The number of approvals of new gene therapies and the need for appropriate delivery systems have reached unprecedented highs and demand is growing exponentially. For in vivo gene therapy, the Adenovirus (AV) and Adeno-Associated virus (AAV) are acknowledged as the most used delivery vehicles. However relatively high amounts of AV and AAV are needed to be clinically efficient and this appears directly correlated with adverse events in patients such as unwanted immunogenicity and potential safety implications. The incorporation of Nuvec® into the treatment protocol has the potential to both increase efficacy and reduce side effects. These three work streams are the focus of the Company in demonstrating both the viability and the flexibility of Nuvec® as a unique delivery system in this space. It remains a key priority for the Company to present this data to third parties developing novel products in this space with a view to licensing Nuvec® to use as part of their developments. Collaborations The Company is at advanced stages of finalising a collaboration with an independent global leader in R&D based in the US which, on the back of successful initial studies utilising our combined technologies, would lead to a co-marketing agreement to allow both parties to promote the resultant combined technology. We anticipate being able to make a further announcement on this in the coming weeks. Additional Assets We have been investigating potential assets to add to the Company for some time and after seeing a number of opportunities, we were delighted to take a controlling stake in Nanogenics in September 2023. The RNA sector is an exciting one with a lot of investor and commercial interest. The addition of the Liptide® delivery system and siRNA sequence adds significant potential value to our business. As well as glaucoma, the MRTF-B gene is also responsible for fibrosis of the liver and lung, two large areas into which Nanogenics could develop its portfolio. Non-viral, non-lipid delivery systems are high in demand in the gene therapy space and we now have two such delivery systems and expect considerable technical synergies in developing programmes using both Nuvec® and Liptide®. Since the investment Nanogenics has been working with the University of Strathclyde on the formulation to take into in vivo studies with Kings College London. These studies are expected to commence in May 2024. In parallel we have been looking into the preparatory work required to undertake safety and toxicology testing and move into clinical trials, achieving pre-IND approval from the FDA and what is required to obtain orphan designation for the product which, if achieved, would potentially give 7 years exclusivity to market our product upon FDA approval which, in itself, would be hugely value enhancing. 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”). 2023 now sees this technology having patents granted in Europe, Australia, Japan, China and the US and post year end the patent was also granted in India. 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. 7 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Chairman’s Report (Continued) Future Prospects As the Company looks forward, we are consolidating our efforts on Nuvec® and actively seeking commercial solutions for the product. Future development of the product as a drug delivery vehicle requires significant capital so we are seeking a suitable partner to work with us to deliver Nuvec@’s potential. Through the investment in Nanogenics, the Company has an additional exciting development candidate and we will be looking to progress this opportunity towards clinical trials as quickly as possible. 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 Chris Britten Chairman 22 April 2024 8 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 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. Christopher Britten (Non-Executive Chairman) Dr Christopher Britten is an experienced pharmaceutical executive and is currently Senior Vice President and Head of Global Business Development at Grunenthal GmbH a mid-sized 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. 9 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Directors’ Report The Directors present their report together with the Consolidated Financial Statements of the Group. N4 Pharma Plc (the "N4 Pharma" or “Company”), is the Parent Company for N4 Pharma UK Limited (“N4 UK”), and Nanogenics Limited ("Nanogenics"), together form the group (the “Group”). Performance review The Group made a total comprehensive loss of £1,276,778 during the year ended 31 December 2023 (2022: total comprehensive loss of £1,029,261). General and admin costs were up for the period largely impacted by the costs associated with the investment in Nanogenics. It is expected the Company will continue to be loss making in 2024. Background and principal activities The Company 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 Nanogenics 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. Nanogenics is a specialist pharmaceutical company engaged in the development of a Liptide@ platform to deliver a proprietary siRNA sequence to silence a fibrotic gene. 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 13. Dividends The Board has not declared a dividend for the year ended 31 December 2023 (2022: nil). Directors The Directors who held office during the year are listed on page 3. 10 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Directors’ Report (Continued) Directors’ remuneration and interests The below remuneration relates to the Directors of the Group. There is no other Key Management Personnel. 2023 Director Nigel Theobald (Chief Executive Officer) David Templeton Luke Cairns Christopher Britten John Chiplin (resigned on 1 August 2023) Cash-based payments Remuneration Share-based payments £ £ Totals £ Interests Shares Options No. No. 82,500 49,500 44,000 24,000 14,000 - 82,500 16,981,319 - 1,715 1,716 - - 51,215 45,716 24,000 14,000 - 142,857 - - 1,434,286 2,109,588 717,143 717,143 214,000 3,431 217,431 17,124,176 4,978,160 2022 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. 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 The below details the significant shareholders of the Company. Shareholder Number of shares held Percentage of issued share capital Marc Mathenz Nigel Theobald David Farrier Going concern 24,600,000 16,981,319 12,540,385 9.00% 7.26% 5.36% These Consolidated Financial Statements have been prepared on the basis of accounting principles applicable to a going concern. The Group currently has no significant 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 2023 of £1,209,098 (2022: £828,263 outflow). At 31 December 2023, the Group had cash balances of £1,027,112 (2022: £1,919,529) and a surplus in net working capital (current assets, including cash, less current liabilities) of £1,132,431 (2022: £2,088,158). 11 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Directors’ Report (Continued) 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. Notwithstanding such different scenarios and mitigation options available to the Board it is highly probable that, in the absence of a commercial deal bringing in immediate revenue, further funding will need to be raised from third parties prior to the year-end in order for the Company to meaningfully fund operations and continue as a going concern. At this point in time the Board plans to raise funds against delivery of further milestones and to fund specific, value enhancing studies ideally in collaboration with partners with the ability to then commercialise the outcomes of such studies. Any fundraising will be done on the advice of its professional advisers and in such a way as to minimise dilution taking into account the prevailing market conditions and the share price at the time. Any such fundraising would also rely on shareholders authorising the Board to issue such shares as it deemed appropriate in order to raise sufficient funds for the Group. Whilst the Board remains confident that necessary funds will be available as and when required, as at the date of this report the future funding requirements are not secured and, accordingly, there is material uncertainty that casts doubt over the Group’s ability to continue as a going concern. Whilst the financial statements have been prepared on a going concern basis they do not include the adjustments that would result if the Group was unable to continue as a going concern. 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 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 International Financial Reporting Standards (IFRS) 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 12 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Directors’ Report (Continued) Statement of Directors’ responsibilities (Continued) ◼ 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 22 April 2024 13 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 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 four Directors, one of whom is Non-Executive and is 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 2023, the Board met formally seven 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® and ECP105, it is the Directors’ intention to broaden the Board’s skill set particularly in the areas of oncology delivery systems. The non-executive director uses the board meetings to review and assess the performance of the executive Directors. The Directors acknowledge that succession planning is also a vital task for boards, and the management of succession planning will represent on ongoing key responsibility of the Board. 14 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 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 notes 2 and 13 of the consolidated financial statements. Committees The Audit Committee 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 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 didn't meet during the year. 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 the Consolidated Financial Statements and is reflective of where the Company sits in the research and development cycle with Nuvec® and the newly acquired Nanogenics IP. As an AIM company, the Company seeks to update investors on material matters through announcements via RNS supplemented by presentations and the engagement of a PR firm. Historical company documents can be found on the Company’s website. In addition, all shareholders can attend the Company’s Annual General Meeting, where there is an opportunity to question the Directors as part of the agenda, or more informally after the meeting. Communication with shareholders is seen as an important part of the Board’s responsibilities, and care is taken to ensure all price-sensitive information is made available to all shareholders at the same time, in accordance with the AIM Rules, which, by definition, means the Board may not always be able to answer questions as directly or immediately as shareholders may like. 15 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Corporate Governance Statement (Continued) Principal risks and uncertainties The Group is exposed to a variety of financial risks including market risk, liquidity risk, tax risk and credit risk. Overview The Group has exposure to the following risks: Liquidity risk; • Credit risk; • • Tax risk; • Market risk; • 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. As a result of this credit risk the Directors have considered that this loan should be impaired to £nil. 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. 16 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 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 for its current work streams albeit further funds may be required to expand its work streams. 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. 17 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Corporate Governance Statement (Continued) Capital management (Continued) 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 _________ Chairman 22 April 2024 18 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 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 2023 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 Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards. In our opinion the financial statements: • • • give a true and fair view of the state of affairs of the group and of the parent company as at 31 December 2023 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 98.6% of, group loss before tax and group net assets. Nanogenics was not considered a material component and exemption from audit was taken via parental guarantee. 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. 19 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 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. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key Audit Matter How our scope addressed this matter Capitalisation of development expenditure The Group is incurring material expenditure in respect of research and development. statement. There During the year, £618,542 was expensed to the income significant 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 audit procedures included the following: • Reviewing the Directors’ assessment of compatibility with the criteria for capitalisation set out in IAS 38, agreeing that the requirements to recognise a development asset had not been met; and • 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. Impairment of intercompany investments and loan balances The parent company has an investment in and intercompany balance debtor due from its subsidiary, N4 Pharma UK Limited. Our audit procedures included the following: • We reviewed the directors’ assessment of whether there were indicators of impairment relating to these balances and compared this to the requirements of IFRS 9 and IAS 36; the During the year, investment and impaired by intercompany balance were £866,004 and £7,696,833 respectively. N4 Pharma UK Limited has net liabilities and there is significant estimation uncertainty over the the expected subsidiary in the future. financial performance of Due to the significance of the impairments to the financial statements and the estimation uncertainty involved, this has been identified as a key audit matter. • • We discussed the directors’ future plans for the business and viability of the product under development upon which the recoverability of these balances depends; We critically appraised the directors’ assessment of the recoverable amount of the intercompany loan by checking the mathematical accuracy of the expected credit losses model, agreeing key inputs such as probability of default and exposure at the reporting date to supporting documentation; 20 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Independent auditor’s report to the members (Continued) Key audit matters (Continued) Key Audit Matter How our scope addressed this matter • • We critically appraised the directors’ assessment of the recoverable amount of the investment in the subsidiary by agreeing the the calculation; and inputs into reviewed the disclosures made We regarding and impairments compared them to the underlying models. Based on our procedures we have not identified any material misstatement arising from the impairment of intercompany investments and loan balances. Our application of materiality We apply the concept of materiality in planning and performing our audit, in evaluating the effect of misstatements and in forming our opinion. 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 £57,000 (2022: £50,000). 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 (UK) 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 (£51,000). Performance materiality was set at 75% of the above materiality level, being £43,000 for the group (2022: £37,500), £38,500 for the parent (2022: £33,750) and £38,500 for the subsidiary company (2022: £30,000). We agreed with the Audit Committee that we would report to the Committee all individual audit differences in excess of £3,000 (2022: £2,500), being 5% of group materiality. We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. Material uncertainty relating to going concern We draw attention to note 1.3 in the financial statements, which indicates that while the directors believe the Group has sufficient funds to complete its existing work programmes, its ability to continue its research and commission new work streams is dependent on the raising of further capital. At the reporting date, the specifics of the fundraise have not been proposed and there is uncertainty over the timing and amount that will be obtained. As such, this condition indicates that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. 21 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Independent auditor’s report to the members (Continued) Material uncertainty relating to going concern (Continued) Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting included: • obtaining and critically appraising the Directors’ formal going concern assessment for arithmetical accuracy; • • • • • reviewing board minutes and publicly available information regarding the development of the Nuvec product; 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; identifying key assumptions within the forecast, primarily the ability of the group to reduce or delay expenditure and challenging the Directors’ rationale behind the appropriateness of these; assessing the plausibility of the Directors’ plans to raise additional funding; discussing post balance sheet events with the Directors to assess their impact on the going concern assumption and formal assessment; and reviewing the disclosures in the annual report, specifically in note 1.16, to ensure that they are consistent with the requirements of UK-adopted international accounting standards and that they present a true and fair view to readers of the financial statements. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information. 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. 22 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Independent auditor’s report to the members (Continued) We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the Directors’ Responsibilities Statement set out on page 12, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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. 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. 23 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma plc Independent auditor’s report to the members (Continued) Auditor’s responsibilities for the audit of the financial statements (Continued) During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud. As group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud differed at group and component level according to their particular circumstances. Our communications included a request to identify instances of non-compliance with laws and regulations and fraud that could give rise to a material misstatement of the group financial statements in addition to our risk assessment. There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may intentional misrepresentations, or through collusion. involve deliberate concealment by, for example, forgery or A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed. ………………………………….. Gareth Norris FCA (Senior Statutory Auditor) for and on behalf of Saffery LLP Chartered Accountants Statutory Auditors Westpoint Peterborough Business Park Lynch Wood Peterborough PE2 6FZ Date: 24 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE622-Apr-2024 Consolidated Statement of Comprehensive Income for the year ended 31 December 2023 N4 Pharma Plc Revenue Gross Profit Research and development costs General and administration costs Costs of purchase of investments Operating loss for the year Net finance income Loss for the year before tax Taxation Notes 15 4 5 6 2023 £ 1,953 1,953 (619,392) (717,980) (89,175) 2022 £ - - (577,525) (615,735) - (1,424,594) (1,193,260) - 1 (1,424,594) (1,193,259) 147,816 163,998 Loss for the year after tax (1,276,778) (1,029,261) Other comprehensive income net of tax - - Total comprehensive loss for the year (1,276,778) (1,029,261) Total comprehensive loss for the year is attributable to: Equity owners of N4 Pharma Plc NCI Loss per share attributable to owners of the parent 12 Weighted average number of shares: Basic Diluted Basic loss per share (1,269,331) (7,447) (1,276,778) (1,029,261) - (1,029,261) 242,889,938 242,889,938 (0.52) 186,422,541 186,422,541 (0.55) Diluted loss per share (0.52) (0.55) All results were derived from continuing operations. The notes on pages 32 to 51 are an integral part of the Consolidated Financial Statements 25 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Consolidated Statement of Financial Position as at 31 December 2023 N4 Pharma Plc Notes 15 8 Assets Non-current assets Goodwill 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 9 2023 £ 61,210 61,210 187,045 1,027,112 1,214,157 1,275,367 (26,224) (55,502) (81,726) 2022 £ - - 246,518 1,919,529 2,166,047 2,166,047 (40,722) (37,167) (77,889) Net current assets 1,132,431 2,088,158 Total assets less current liabilities 1,203,080 2,088,158 Net assets Equity 1,193,641 2,088,158 Share capital Share premium Share option reserve Reverse acquisition reserve Merger reserve Retained earnings Non Controlling interest 11 11 11 11 11 11 16 9,345,946 14,874,469 107,385 (14,138,244) 279,347 (9,341,267) 66,005 9,205,946 14,698,569 103,954 (14,138,244) 279,347 (8,061,414) - Total equity 1,193,641 2,088,158 The notes on pages 32 to 51 are an integral part of the Consolidated Financial Statements. The Consolidated Financial Statements were approved by the Board of Directors on 22 April 2024 and signed on its behalf: Nigel Theobald 26 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Company Statement of Financial Position as at 31 December 2023 N4 Pharma Plc 2023 £ 478,843 - 478,843 20,625 697,850 718,475 1,197,318 (2,146) (38,835) (40,981) 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) 1,156,337 9,473,556 1,156,337 9,473,556 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 9,345,946 14,874,469 107,385 279,347 (23,450,810) 9,205,946 14,698,569 103,954 279,347 (14,814,260) 1,156,337 9,473,556 The Company recorded a loss of £8,636,650 for the year (31 December 2022: £7,226 loss) primarily attributable to impairment of the intra company loan and investment as set out in the Company Statement of Cash Flows for the year ended 31 December 2023. The policy on impairment is dealt with in 1.14 of the Accounting Policies. The notes on pages 32 to 51 are an integral part of the Consolidated Financial Statements. The Company Financial Statements were approved by the Board of Directors on 22 April 2024 and signed on its behalf: Nigel Theobald 27 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma Plc Consolidated Statement of Changes in Equity for the year ended 31 December 2023 (i) Year ended 31 December 2023 Share capital Share premium £ £ Share option reserve £ Balance at 1 January 2023 9,205,946 14,698,569 103,954 Reverse acquisition reserve £ (14,138,244) Merger reserve Retained earnings Non- controlling Interest Total equity £ 279,347 £ (8,061,414) £ £ - 2,088,158 Non-controlling interest on acquisition of subsidiary Shares in subsidiary issued to NCI Total comprehensive loss for the year Share issue Share issue costs Share based payment charge At 31 December 2023 (ii) Year ended 31 December 2022 - - - - - - - - - - (10,522) - 62,930 62,930 - 140,000 - - - 210,000 (34,100) - 9,345,946 14,874,469 - - - 3,431 107,385 - - - - (14,138,244) - - - - 279,347 (1,269,331) - - - (9,341,267) 10,522 (7,447) - - - 66,005 - (1,276,778) 350,000 (34,100) 3,431 1,193,641 Share capital Share premium £ £ Share option reserve £ Reverse acquisition reserve Merger reserve Retained earnings £ £ £ Non- controlling Interest £ Balance at 1 January 2022 8,995,146 13,945,602 79,955 (14,138,244) 279,347 (7,032,153) Total comprehensive loss for the year - - Share issue Share issue costs Share based payment charge At 31 December 2022 210,800 843,200 - (90,233) - - - - - - - - - (1,029,261) - - - 9,205,946 - 14,698,569 23,999 103,954 - (14,138,244) - 279,347 - (8,061,414) The notes on pages 32 to 51 are an integral part of the Consolidated Financial Statements. 28 Total equity £ 2,129,653 (1,029,261) 1,054,000 (90,233) 23,999 2,088,158 - - - - - - DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Company Statement of Changes in Equity for the year ended 31 December 2023 N4 Pharma Plc (i) Year ended 31 December 2023 Share capital Share premium Share option reserve Merger reserve Retained earnings Total equity £ £ £ £ £ £ Balance at 1 January 2023 9,205,946 14,698,569 103,954 279,347 (14,814,260) 9,473,556 Total comprehensive loss for the year Share issue Share issue costs Share based payment charge - 140,000 - - - 210,000 (34,100) - - - - 3,431 - - - - (8,636,550) - - - (8,636,550) 350,000 (34,100) 3,431 At 31 December 2023 9,345,946 14,874,469 107,385 279,347 (23,450,810) 1,156,337 (ii) 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) 1,054,000 (90,233) 23,999 At 31 December 2022 9,205,946 14,698,569 103,954 279,347 (14,814,260) 9,473,556 The notes on pages 32 to 51 are an integral part of the Consolidated Financial Statements. 29 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma Plc Consolidated Statement of Cash Flows for the year ended 31 December 2023 Operating activities Loss after tax Finance expenditure and other income Share based payment charge Taxation credit Operating loss before changes in working capital Movements in working capital: Decrease/(increase) in trade and other receivables Increase/decrease in trade, other payables and accruals Cash used in operations Taxation credit received Notes 2023 £ 2022 £ (1,276,778) - 3,431 (147,816) (1,029,261) (1) 23,999 (163,998) (1,421,163) (1,169,261) 44,230 3,838 (37,312) (134,841) (1,373,095) (1,341,414) 163,997 513,151 Net cash flows used in operating activities (1,209,098) (828,263) Investing activities Net cash on acquisition of Subsidiary Net cash flows from investing activities Financing activities Finance expenditure and other income Proceeds of ordinary share issue Costs of share issue Net cash flows from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year 781 781 - 350,000 (34,100) 315,900 (892,417) 1,919,529 - - 1 1,054,000 (90,233) 963,768 135,505 1,784,024 Cash and cash equivalents at year end 1,027,112 1,919,529 The notes on pages 32 to 51 are an integral part of the Consolidated Financial Statements 30 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma Plc Company Statement of Cash Flows for the year ended 31 December 2023 Operating activities Loss before tax Interest Share based payment charge Impairment of investment Impairment of Loan 2023 £ 2022 £ (8,636,650) (305,416) 3,431 866,004 6,459,000 (7,226) (271,772) 23,999 - - Operating loss before changes in working capital (1,613,631) (254,999) Movements in working capital: Decrease/(increase) in trade and other receivables Increase in trade and other payables 1,277,116 7,135 (91,440) 5,387 Cash used in operations (329,380) (341,052) Net cash flows used in operating activities (329,380) (341,052) Investing activities Acquisition of investment Loan receivable advancements (250,000) (800,000) - (400,000) Net cash flows used in investing activities (1,050,000) (400,000) Financing activities Net proceeds of ordinary share issue Costs of share issue 350,000 (34,100) 1,054,000 (90,233) Net cash flows from financing activities 315,900 963,767 Net (decrease)/increase in cash and cash equivalents (1,063,480) 222,715 Cash and cash equivalents at beginning of the year 1,761,330 1,538,615 Cash and cash equivalents at year end 697,850 1,761,330 The notes on pages 32 to 51 are an integral part of the Consolidated Financial Statements 31 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 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 Nanogenics Limited ("Nanogenics"), 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. Nanogenics is a specialist pharmaceutical company engaged in the development of a Liptide platform to deliver a proprietary siRNA sequence to silence a fibrotic gene. 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 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 International Financial Reporting 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 Statement of Comprehensive Income. 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 Group currently has no source of operating cash inflows, other than interest, grant income and license fees, and has incurred net operating cash outflows before tax for the year ended 31 December 2023 of £1,209,098 (2022: £828,263 outflow). At 31 December 2023, the Group had cash balances of £1,027,112 (2022: £1,919,529) and a surplus in net working capital (current assets, including cash, less current liabilities) of £1,132,430 (2022: £2,088,158). 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. 32 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 1. Accounting policies (Continued) 1.3 Going concern (Continued) 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. Notwithstanding such different scenarios and mitigation options available to the Board it is highly probable that, in the absence of a commercial deal bringing in immediate revenue, further funding will need to be raised from third parties prior to the year-end in order for the Company to meaningfully fund operations and continue as a going concern. At this point in time the Board plans to raise funds against delivery of further milestones and to fund specific, value enhancing studies ideally in collaboration with partners with the ability to then commercialise the outcomes of such studies. Any fundraising will be done on the advice of its professional advisers and in such a way as to minimise dilution taking into account the prevailing market conditions and the share price at the time. Any such fundraising would also rely on shareholders authorising the Board to issue such shares as it deemed appropriate in order to raise sufficient funds for the Group. Whilst the Board remains confident that necessary funds will be available as and when required, as at the date of this report the future funding requirements are not secured and, accordingly, there is material uncertainty that casts doubt over the Group’s ability to continue as a going concern. Whilst the financial statements have been prepared on a going concern basis they do not include the adjustments that would result if the Group was unable to continue as a going concern. 1.4 Basis of consolidation The consolidated Group financial statements consist of the financial statements of the Company together with the entities controlled by the parent company (its subsidiaries), N4 UK and Nanogenics. The financial statements for N4 UK are made up to 31 December 2023. Nanogenics prepares individual financial statements to 31 May 2023. These consolidated financial statements for N4 Pharma include the results of Nanogenics from the date of acquisition to 31 December 2023 based on interim management accounts. Where necessary, adjustments are made to the financial statements of N4 UK and Nanogenics 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. Nanogenics was acquired by the Company on 27 September 2023. 1.5 Revenue The Group recognises revenue based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group follows a 5 steps process in recognising revenue: Identifying the contract with a customer. Identifying the performance obligations. 1. 2. 3. Determining the transaction price. 4. Allocating the transaction price to the performance obligations. 5. Recognising revenue when/as performance obligation(s) are satisfied. Revenue is recognised over time, when (or as) the Group satisfies the performance obligations by transferring the promised services to its customers. 33 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 1. Accounting policies (Continued) 1.5. Revenue (Continued) If the Group satisfies a performance obligation before it received the consideration, the Group recognises either a contract asset or a receivable in its Consolidation Statement of Financial Position. The Group generates license fees for the licencing of its products. Fee income is recognised on the accruals basis. 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. 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. 34 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 1. Accounting policies (Continued) 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. 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® and its liptide platform called ECP105. 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) 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 35 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 1. Accounting policies (Continued) 1.12 Presentation and classification of financial instruments issued by the Group (Continued) (b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these Consolidated Financial Statements for called up share capital and share premium account exclude amounts in relation to those shares. Where a financial instrument that contains both equity and financial liability components exists these components are separated and accounted for individually under the above policy. 1.13 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. 36 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 1. Accounting policies (Continued) 1.14 Impairment (Continued) For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest Group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or Groups of assets (the “cash-generating unit”). An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash generated units are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (Group of units) on a pro rata basis. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 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. 37 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 1. Accounting policies 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 2023 but have not had a material effect on this Consolidated Financial Information: 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 All new standards and amendments to standards and interpretations effective for annual periods beginning on or after 1 January 2023 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 IFRS Amendments to IAS 1 Non-current liabilities with covenants Amendments to IAS 7 Supplier finance and IFRS 7 Leases on sale and leaseback Effective date 1 January 2024 1 January 2024 1 January 2024 At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group and which have not been applied in these financial statements, have not been endorsed for use in the UK and will not be adopted until such time as endorsement is confirmed. Standard Amendments to IAS 21 Lack of Exchangeability Effective date 1 January 2025 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 2023. 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. 38 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 1. Accounting policies (Continued) 1.17 Use of estimates and judgements (Continued) 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 consider that there are indicators of impairment in respect of these balances. This is a significant judgement. 2. Risk management Overview The Group has exposure to the following risks: Liquidity risk; • Credit risk; • • Tax risk; • Market risk; and • Operational risk • Regulatory and legislative risk 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. 39 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 2. Risk management (Continued) 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. 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. 40 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 2. Risk management (Continued) 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® and ECP105. The Group seeks to protect its intellectual property through the filing of worldwide patent applications, as well as robust confidentiality obligations on its employees. However, this does not provide assurance that a third party will not infringe on the Group’s intellectual property, release confidential information about the intellectual property or claim technology which is registered to the Group. Capital management The Group has no loans or borrowings and has sufficient resources, in the view of the Directors, to meet its working capital requirements for the next 12 months. The Group manages its capital through the preparation of detailed forecasts, and tracks actual receipts and outlays against the forecasts on a regular basis, to ensure that the Group will be able to continue as a going concern while maximising the return to shareholders. The capital structure of the Group consists of cash and cash equivalents and equity comprising, capital, reserves and accumulated losses. 3. Employees and directors The average monthly number of employees during the year was 5 (2022: 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. 2023 £ 2022 £ 214,000 213,333 17,778 17,562 231,778 230,895 2023 £ - 2023 £ 2022 £ 1 2022 £ 26,985 10,015 28,640 5,940 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 Consolidated Financial Statements Fee payable for audit of subsidiaries 41 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 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 2023 £ 2022 £ (147,816) (163,998) - - (147,816) (163,998) - - Tax in Statement of Comprehensive Income (147,816) (163,998) The tax charge for the year can be reconciled to the loss in the Consolidated Statement of Comprehensive Income as follows: Loss before taxation 2023 £ 2022 £ (1,276,778) (1,029,261) Tax at the UK corporation tax rate of 25% (2022: 19%) (319,195) (195,560) Net Research and development tax credits Changes in unrecognised deferred tax Adjustments in respect of prior periods Tax charge for the year (147,816) 319,195 - (163,998) 195,560 - (147,816) (163,998) At the year end the Group had trading losses carried forward of £11,357,986 (2022: £9,969,504) 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 subsidiaries Company Cost Balance at 1 January Impairment of investment in subsidiary Investment in Nanogenics Limited Balance at 31 December 2023 £ 2022 £ 1,094,747 1,094,747 (866,004) 250,000 - - 478,843 1,094,747 The Directors have considered the carrying amount for the investment in N4 UK and decided to impair this to £228,743 in accordance with the accounting policies. In 2023 the Company acquired 75% (subsequently diluted to 70.82% following the issuance of management shares) of the issued shares of Nanogenics Limited. The information related to this acquisition is stated in the note 15. 42 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 7. Investments (Continued) Details of the Company’s subsidiaries at 31 December 2023 are as follows: Registered Office Principal activity N4 Pharma UK Limited Nanogenics Limited The Mills, Canal Street, Derby, DE1 2RJ Delivery of vaccines and therapeutics 6th Floor 60 Gracechurch Street, London, United Kingdom, EC3V 0HR Research and experimental development on biotechnology Proportion of ownership and voting rights held 100% 70.82% 8. Trade and other receivables Prepayments VAT due Group 2023 £ 10,613 24,972 Group 2022 £ 36,888 18,632 R&D tax credits receivable 147,816 163,998 Interest receivable Other debtors - 3,644 187,045 - 27,000 246,518 Loan interest receivable relates to the intra-group loan disclosed in Note 14. 9. Trade and other payables Company 2023 £ 9,916 10,709 - - - 20,625 Group 2023 £ 20,202 6,022 26,224 Group 2022 £ 35,756 4,966 40,722 Company 2023 £ 961 1,185 2,146 Trade payables Other payables 10. Share-based payments Options Company 2022 £ 36,029 13,352 - 883,610 59,334 992,325 Company 2022 £ 12,196 1,185 13,381 The Company has the ability to issue options to Directors to compensate them for services rendered and incentivize 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. 43 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 10. Share-based payments (Continued) Options (Continued) 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 behavioural considerations. As at 31 December 2023, there were 7,046,513 (2022: 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: 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 2023 was 3.93 years (2022: 4.93 years). Weighted average exercise price of options outstanding as at 01 January 2023 and as at 31 December 2023 was £0.05 (as at 01 January 2022 and as at 31 December 2022: £0.05). 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 £3,431 has been recognised in the Consolidated Statement of Comprehensive Income and in the Share Option Reserve in relation to the share options (2022: £12,006). 44 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 10. Share-based payments (Continued) The aggregate fair value of the share options in issue was £95,391 (2022 £91,961), with amounts recorded at each reporting date being as follows: 2015 Options 2017 Options 2019 Options 2020 Options Warrants 2023 £ 18,492 26,884 22,793 27,222 95,391 2022 £ 18,492 26,884 22,793 23,792 91,961 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 was recognised in the year ended 31 December 2022 in the Share Premium and in the Share Option Reserve in relation to the warrants. There was no amount in the year ended 31 December 2023 in the Share Premium and in the Share Option Reserve in relation to the warrants. 11. Capital and reserves Issued, allotted and fully paid 268,780,349 Ordinary Shares of 0.4p each (2022: 233,780,349) 137,674,431 Deferred Shares of 4p each (2022: 137,674,431) 279,176,540 Deferred Shares of 0.99p each (2022: 279,176,540) 2023 £ 1,075,121 2022 £ 935,121 5,506,977 5,506,977 2,763,848 2,763,848 9,345,946 9,205,946 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 2023 totalled 334,682,497 (2022:334,682,497). During the year 35,000,000 new ordinary shares of 0.4p each were issued through a placing in September 2023 at a share price of 1p 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. 45 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) 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 to date. 12. Earnings per share The calculation of basic loss per share at 31 December 2023 was based on the loss of £1,269,331 (2022: £1,029,261), and a weighted average number of ordinary shares outstanding of 242,889,938 (2022: 186,422,541), calculated as follows: 2023 £ 2022 £ Losses attributable to ordinary shareholders (1,269,331) (1,029,261) Weighted average number of ordinary shares Issued ordinary shares at 1 January Effect of shares issued during the year 233,780,349 9,109,589 181,080,349 5,342,192 Weighted average number of shares at 31 December 242,889,938 186,422,541 Basic loss per share 2023 pence per share 2022 pence per share (0.52) (0.55) 46 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 N4 Pharma Plc Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) 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 which could be bought for less than a market price. The calculation of diluted loss per share at 31 December 2023 was based on the loss of £1,269,331 (31 December 2022: £1,029,261), and a weighted average number of ordinary shares outstanding of 242,889,938 (2022: 186,422,541). Diluted loss per share 13. Risk management and analysis (a) Credit risk 2023 pence per share 2022 pence per share (0.52) (0.55) 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 by S&P at least A-2. 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 £1,214,157 (2022: £2,166,047), 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 2023 Trade and other payables 31 December 2022 Trade and other payables Company: Financial liabilities 31 December 2023 Trade and other payables 31 December 2022 Trade and other payables Carrying amount £ Contractual cash flows £ 6 months or less £ 6-12 months £ 1 -2 years £ 25,024 25,024 25,024 40,722 40,722 40,722 - - - - Carrying amount £ Contractual cash flows £ 6 months or less £ 6-12 months £ 1 -2 years £ 2,146 2,146 2,146 13,381 13,381 13,381 - - - - 47 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) 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 2023 £ 2022 £ 1,027,112 1,919,529 Carrying amount 2023 £ 2022 £ 697,850 1,761,330 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 A-2 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 2022. Group: Variable rate instruments Company: Variable rate instruments 2023 Profit or loss 2022 Profit or loss 100 bp increase 10,271 100 bp decrease (10,271) 100 bp increase 19,195 100 bp decrease (19,195) 2023 Profit or loss 2022 Profit or loss 100 bp increase 6,979 100 bp decrease (6,979) 100 bp increase 17,613 100 bp decrease (17,613) 48 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) 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 2023 £ 231,778 3,431 235,209 2022 £ 230,895 12,006 242,901 Directors’ remuneration and interests The below remuneration relates to the Directors of the Group. 2023 Director Nigel Theobald (Chief Executive Officer) David Templeton Luke Cairns Christopher Britten John Chiplin (resigned on 1 August 2023) Cash-based payments Remuneration Share-based payments £ £ Totals £ Interests Shares Options No. No. 82,500 49,500 44,000 24,000 14,000 - 82,500 16,981,319 - 1,715 1,716 - - 51,215 45,716 24,000 14,000 - 1,434,286 142,857 2,109,588 717,143 717,143 - - 214,000 3,431 217,431 17,124,176 4,978,160 2022 Director Nigel Theobald (Chief Executive Officer) David Templeton Luke Cairns Christopher Britten John Chiplin (resigned on 1 August 2023) 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 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 (2022: Nigel Theobald). His remuneration in each year is disclosed above. 49 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 14. Related parties (Continued) N4 Pharma Plc has a loan receivable from N4 Pharma UK Limited at 31 December 2023 of £6,459,000 (2022: £5,659,000). It is repayable in December 2025, accrues interest at a rate of 5% and is unsecured. The Directors have considered the carrying amount for the loan to subsidiary and decided to impair this loan together with the accrued interest balance to £nil in accordance with the accounting policies. There are no further related parties identified. There is no ultimate controlling party of the Company or Group. 15. Interests in other entities The Group’s principal subsidiaries at 31 December 2023 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business. Name of entity Place of business/country of incorporation Ownership interest held by the group Ownership interest held by non- controlling interests Principal activities Nanogenics Limited UK 2023 % 2022 % 70.82 - 2023 % 29.18 N4 Pharma UK Limited UK 100 100 - 2022 % - - Research and experimental development on biotechnology Delivery of vaccines and therapeutics On 27 September 2023 the Company acquired 75% of the issued shares of Nanogenics Limited. The fair value of assets and liabilities acquired were equal to the net book value therefore no fair value adjustments are required. In connection with the subsequent issue of shares the Company's ownership interest was reduced to 70.82%. Below is a financial information for Nanogenics and calculation of Non-controlling interest and Goodwill on acquisition date 27 September 2023. Current assets Current liabilities Net assets Consideration paid Non-Controlling Interest, 25% of Net assets Goodwill The Goodwill represents the knowledge of ECP105. 50 £ 252,470 (750) 251,720 (250,000) (62,930) 61,210 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 (Continued) N4 Pharma Plc 15. Interest in other entities (Continued) Below is the information about the costs incurred that related to the investment in Nanogenics. Broker commission Advisory fee Settlement fees Survey of designated patent rights Exclusivity payment Legal services £ 21,000 12,500 600 8,075 25,000 22,000 89,175 Nanogenics is exempt from audit under s479a of the companies act (parental guarantee). 16. Non-controlling interest Below is financial information for Nanogenics given that it has non-controlling interest that is material to the group. The amounts disclosed are before inter-company eliminations and relate to results after 27 September 2023. Statement of Financial Position Current Assets Current liabilities Current Net assets Accumulated NCI Statements of Comprehensive Income Revenue Expenses Loss for the period Loss allocated to NCI 17. Subsequent events 2023 £ 239,833 (13,633) 226,200 66,005 2023 £ 1,953 (27,475) (25,522) (7,447) 2022 £ - - - - 2022 £ - - - - 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. 51 DocuSign Envelope ID: 2BF22183-E762-4931-A091-C3956F8EBEE6 Certificate Of CompletionEnvelope Id: 2BF22183E7624931A091C3956F8EBEE6Status: CompletedSubject: Complete with DocuSign: N4P FS 2023 v9.pdfSource Envelope: Document Pages: 51Signatures: 6Envelope Originator: Certificate Pages: 5Initials: 0Gary ChickAutoNav: EnabledEnvelopeId Stamping: EnabledTime Zone: (UTC) Dublin, Edinburgh, Lisbon, London22 Grenville StreetSt Helier, Jersey JE4 8PXGary.Chick@mourant.comIP Address: 85.255.27.169 Record TrackingStatus: Original 4/22/2024 9:45:24 PMHolder: Gary Chick Gary.Chick@mourant.comLocation: DocuSignSigner EventsSignatureTimestampChris Brittenchris.britten@btinternet.comSecurity Level: Email, Account Authentication (None)Signature Adoption: Pre-selected StyleUsing IP Address: 212.117.76.114Signed using mobileSent: 4/22/2024 9:50:43 PMViewed: 4/22/2024 11:57:02 PM Signed: 4/22/2024 11:57:22 PMElectronic Record and Signature Disclosure: Accepted: 4/22/2024 11:57:02 PM ID: d8f54cdd-05e7-4d4d-9987-45755f9bd068Gareth Norrisgareth.norris@saffrey.comSecurity Level: Email, Account Authentication (None)Signature Adoption: Pre-selected StyleUsing IP Address: 31.94.64.100Signed using mobileSent: 4/22/2024 9:50:44 PMViewed: 4/22/2024 9:56:37 PM Signed: 4/22/2024 10:56:41 PMElectronic Record and Signature Disclosure: Accepted: 4/22/2024 9:56:37 PM ID: 26273d32-d3ee-4fad-9dc2-5c49a6824a00Nigel Theobaldnigel@n4pharma.co.ukSecurity Level: Email, Account Authentication (None)Signature Adoption: Pre-selected StyleUsing IP Address: 86.143.197.221Sent: 4/22/2024 9:50:44 PMViewed: 4/22/2024 9:51:27 PM Signed: 4/22/2024 9:52:06 PMElectronic Record and Signature Disclosure: Accepted: 4/22/2024 9:51:27 PM ID: befe19f5-5e0a-4aef-8232-54aeca33c0eeIn Person Signer EventsSignatureTimestampEditor Delivery EventsStatusTimestampAgent Delivery EventsStatusTimestampIntermediary Delivery EventsStatusTimestampCertified Delivery EventsStatusTimestampCarbon Copy EventsStatusTimestampWitness EventsSignatureTimestampNotary EventsSignatureTimestampEnvelope Summary EventsStatusTimestampsEnvelope SentHashed/Encrypted4/22/2024 9:50:44 PMCertified DeliveredSecurity Checked4/22/2024 9:51:27 PMSigning CompleteSecurity Checked4/22/2024 9:52:06 PMCompletedSecurity Checked4/22/2024 11:57:22 PMPayment EventsStatusTimestampsElectronic Record and Signature DisclosureELECTRONIC RECORD AND SIGNATURE DISCLOSURE From time to time, Mourant (we, us or Company) may be required by law to provide to you certain written notices or disclosures. 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