REG - N4 Pharma PLC - Final Results
23/02/2022 07:00
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RNS Number : 4793C N4 Pharma PLC 23 February 2022
23 February 2022
N4 Pharma Plc
("N4 Pharma" or the "Company")
Final Results
N4 Pharma Plc (AIM: N4P), the specialist pharmaceutical company developing
Nuvec®, a novel delivery system for cancer treatments and vaccines, is
pleased to announce its audited results for the year ended 31 December 2021.
Highlights:
· Following extensive in vivo work and the commencement of Material
Transfer Agreements ("MTAs") in 2021 N4 Pharma has a clear focus in 2022 as to
where best to deploy resources in the short term
· Positive findings from the evaluation studies looking at the
potential of Nuvec® as a nano-carrier of a DNA plasmid expressing TNFalpha
· Commenced work with Medicines Discovery Catapult to extend the
observations to allow it to identify suitable loads to add to Nuvec® to take
to clinic
· In the process of identifying alternatives to TNF as
immunomodulators or gene therapy which may use Nuvec® as a delivery system
· Commenced working with MTA partners assessing how Nuvec® may
enhance their proprietary technologies
· Granting of (or notice of intention to grant) patents now in
Europe, Australia, Japan, China and in January of this year the critical
market of the US
· Operating loss for the period was £1,843,290 (2020: £1,564,421)
· Cash balance at period end of approximately £1.8m
Nigel Theobald, Chief Executive Officer of the Company, commented: "Following
our most extensive in vivo work to date and having worked with MTA partners in
2021 we have a clear focus in 2022 as to where best to deploy our R&D
resources in the short term. As a result of the positive findings from the
evaluation studies looking at the potential of Nuvec® as a nano-carrier of a
DNA plasmid expressing TNFalpha, which demonstrated a significant inhibition
of tumour growth derived from a human cell line, the Company has commenced
work with Medicines Discovery Catapult to extend the observations to allow us
to identify suitable loads to add to Nuvec® to take to clinic.
'We felt from the outset it could be a pivotal year for the Company and
believe it has proved to be so. On the back of increased data and results we
are now in a position to narrow our R&D focus onto the hugely exciting
oncology and gene therapy market. In parallel, we will continue to seek
further MTA partners to work with us and assess how Nuvec® may enhance their
proprietary technologies. Whilst we are not there yet and it will be results
driven, our path to the commercialisation of Nuvec® is clearer now than
perhaps at any time previously."
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 which has been incorporated into UK law by the European
Union (Withdrawal) Act 2018.
Enquiries:
N4 Pharma Plc Via IFC Advisory
Nigel Theobald, CEO
Luke Cairns, Executive Director
SP Angel Corporate Finance LLP Tel: +44 (0)20 3470 0470
Nominated Adviser and Joint Broker
Matthew Johnson/Caroline Rowe (Corporate Finance)
Vadim Alexandre/Rob Rees (Corporate Broking)
Turner Pope Investments (TPI) Limited Tel: +44 (0)20 3657 0050
Joint Broker
Andy Thacker
IFC Advisory Limited Tel: +44 (0)20 3934 6630
Financial PR
Graham Herring
Zach Cohen
About N4 Pharma
N4 Pharma is a specialist pharmaceutical company developing a novel delivery
system for cancer and vaccine treatments using its unique silica nanoparticle
delivery system called Nuvec®.
N4 Pharma's business model is to partner with companies developing novel
antigens for cancer and vaccine treatments to use Nuvec® as the delivery
vehicle to get their antigen into cells to express the protein needed for the
required immunity. As these products progress through pre clinical and
clinical programs, N4 Pharma will seek to receive up front payments, milestone
payments and ultimately royalty payments once products reach the market.
Chairman's Report
N4 Pharma Plc (the "Company"), is the holding company and Parent Company for
N4 Pharma UK Limited ("N4 UK"), and together form the Group (the "Group").
N4 UK is a specialist pharmaceutical company engaged in the development of
silica nanoparticle delivery systems to improve the cellular delivery of
cancer treatments and vaccines.
Key Operational Events and Opportunities
Following the optimisation of Nuvec® with the improved manufacture and
dispersion of the particle in 2020, 2021 focussed on in vivo studies with
Nuvec® for both vaccines and in oncology as well as the pursuit of MTAs with
partners to begin exploring potential collaborations.
In Vivo study results
The optimised Nuvec® in vivo studies in mice were planned to assess the
following points:
(1) to determine antibody production following dosing with optimised Nuvec®;
(2) To explore dose relationship to determine minimum and maximum plasmid dose
required for effect. This may also provide information on dose-sparing i.e.
reduced DNA use; and
(3) to confirm activity is retained after freeze drying and reconstitution at
different intervals.
These studies involved the Coronavirus plasmid and another generic plasmid. In
vitro performance with the optimised Nuvec® loaded with a new SARS-COV-2
plasmid demonstrated an improved response in terms of transfection and
SARS-COV-2 spike protein secretion in HEK 293 cells. In addition this
combination also showed a dose-related SARS-COV-2 spike protein production.
Whilst the in vitro results were very positive using the SARS-COV-2 plasmid
the results from the mouse in vivo immunogenicity studies carried out by
Evotec did not show any meaningful immunological response. In addition, the
initial mRNA OVA in vivo immunogenicity study showed sub optimal responses.
These results again highlighted that a number of variables such as dose, route
of administration, timing of injection and formulation could require extensive
optimisation for each plasmid loaded onto Nuvec®. With the Company now
getting traction with MTAs (as detailed further below) the strategic decision
was taken to concentrate ongoing vaccine work on specific products linked to
proprietary DNA or mRNA sequences under MTA.
Aside from the in vivo work, The Medicines Catapult has recently assessed, in
vitro, Nuvec® loaded with DNA that had been stored at room temperature for
six months. Cell transfections was successful demonstrating the stability of
the Nuvec® loaded with DNA and the potential storage advantages of Nuvec®.
Thus, it has been shown that both mRNA and DNA loaded on Nuvec® are conferred
a high level of stability which may be an important feature in the MTA related
studies.
Oncology programme
In December, the Company announced it had successfully completed an in vivo
confirmatory oncology study which reinforced the results from a pilot study
earlier in the year. The initial pilot study was designed to test the ability
to use a monodispersed Nuvec® formulation in an intra venous ("i.v") route of
administration using a DNA plasmid (pDNA) encoding TNF alpha to assess the
tolerance of different doses and to look at tumour regression.
The confirmatory study incorporated the following control and test groups: TNF
alpha pDNA alone, unloaded Nuvec®, Nuvec® loaded with 50ug of the TNF alpha
pDNA and Nuvec® loaded with 20ug of TNF alpha pDNA. The study was conducted
in untreated tumour-bearing mouse models with dosing for each cohort completed
intravenously.
The results showed a clear inhibition of tumour progression for the groups
where Nuvec® was loaded with TNF alpha pDNA when compared to the other three
groups. In addition, the use of Nuvec® was shown to improve animal survival
rates in the life of the study.
These excellent findings show that injection of a TNF alpha plasmid loaded
onto Nuvec® into tumour bearing mice successfully leads to the transfection
and release of TNF alpha which results in the suppression of tumour growth and
increased survival rates.
The results from the successful oncology study open up the field of gene
therapy and in vivo protein production as a key opportunity for Nuvec®. This
will become an important area of focus moving forward as discussed further in
Future Prospects below. This advancement is the result of the ongoing
optimisation work to produce a consistently monodispersed product, presenting
potentially huge market opportunities for Nuvec®.
MTAs
During 2020 the Company entered into three MTAs covering vaccine delivery and
gene therapy. The MTAs are subject to strict confidentiality which means the
Company is limited in any meaningful information it can divulge. Since the
year end, work on one of these MTAs has recently ceased as the partner has
decided to stop investigating alternative delivery systems to the one it is
already using in respect of the delivery of its proprietary Covid pDNA
plasmid. In addition, the Company has been informed by the Gene Therapy MTA
partner that, following the departure of the individuals engaged on working on
the MTA, they do not intend to undertake any further work under the MTA. Work
on the third MTA continues.
The MTAs have shown us that the level of engagement is entirely dependent on
the personnel and resource deployed by partners which, sometimes in very large
organisations, can vary greatly and sees the Company at the mercy of the
partner as to timings and advancement of such studies. However, the pursuit of
MTAs remains a key strategy as a means to see how Nuvec® may work with
proprietary technologies.
As soon as the Company is in a position to publicly disclose material
progression or otherwise in respect of MTAs it will do so. In the meantime, it
will only announce further MTAs when able to without restrictions of
confidentiality or in respect of a defined commercial agreement.
Intellectual Property
2021 was a very productive year in the advancement of the protection of our
intellectual property. The University of Queensland ("UQ") has seen the
granting of (or notice of intention to grant) patents now in Europe,
Australia, Japan, China and in January of this year the critical market of the
US. N4 Pharma has the exclusive worldwide rights to Nuvec® for therapeutic
uses in humans and animals.
Future Prospects
Following our most extensive in vivo work to date and the commencement of MTAs
in 2021 we have a clear focus in 2022 as to where best to deploy our resources
in the short term. As a result of the very positive findings from the
evaluation studies looking at the potential of Nuvec® as a nano-carrier of a
DNA plasmid expressing TNFalpha, which demonstrated a significant inhibition
of tumour growth derived from a human cell line, the Company has commenced
work with Medicines Discovery Catapult to extend the observations to allow us
to identify suitable loads to add to Nuvec® to take to clinic.
To date, the Company has established that Nuvec® can deliver an appropriate
biological load and this new study will help determine the mechanism of action
that produced the tumour suppression. Amongst other things, it will seek to
identify whether the Nuvec® loaded with TNF alpha was directly taken up by
the tumour cells to produce the active TNF within the tumour or whether other
organs such as the liver took up the Nuvec® and produced the TNF and released
it systemically to suppress the tumour. If it can be demonstrated that Nuvec®
can selectively deliver the plasmid to the tumour this may indicate the
potential use of Nuvec® to deliver to tumours with a reduced systemic effect
and inform the scope of any clinical studies or collaboration discussions. In
addition, studies will use labelled Nuvec® particles to allow the organ and
tissue distribution of Nuvec® to be followed.
The Company is also in the process of identifying alternatives to TNF as
immunomodulators or gene therapy which may use Nuvec® as a delivery system.
The selection process is expected to conclude shortly and the Company intends
to conduct a study programme similar to the work being undertaken using TNF.
The oncology, gene therapy and protein replacement markets are huge and we
believe will provide us with the quickest route for Nuvec® to move into
clinical trials with a product and far quicker than with vaccines. That said,
the potential for Nuvec's® use in the delivery of vaccines remains but we
feel any advance in this area will be best done via MTAs. In addition, through
our grant with UQ, we continue our longer term proof of concept work in
respect of oral applications for Nuvec®.
2021 has been a mixed year for the Company. We felt from the outset it could
be a pivotal year for the Company and believe it has proved to be so. On the
back of increased data and results we are now in a position to narrow our
focus onto the hugely exciting oncology and gene therapy market. In parallel,
we are working with a number of MTA partners assessing how Nuvec® may enhance
their proprietary technologies. Whilst we are not there yet and it will be
results driven, our path to the commercialisation of Nuvec® is clearer now
than perhaps at any time previously.
The opportunity for Nuvec® as a delivery system for immune-oncology is
substantial. Market Watch 2022* highlights that the global Immuno-oncology
therapy market size is expected to grow from $US 1.23 billion in 2020 to $US
1.65 billion by 2027; an expected CAGR of 4.5% during 2022-2027.
* Immuno-oncology Therapy Market 2022 Research Report Analysis by Competition,
Countries Data, Sales, Revenue, Industry Size, Share and Forecasted 2027
On behalf of the Board, I would like to thank all of our shareholders for
their continued patient support and look forward to providing further updates
on our progress.
By order of the Board
John Chiplin
Chairman
N4 Pharma Plc
Consolidated Statement of Comprehensive Income for the year ended 31 December
2021
Notes 2021 2020
£ £
(1,179,425) (900,410)
Research and development costs
(663,865) (664,011)
General and administration costs
(1,843,290) (1,564,421)
Operating loss for the year
677 (1,963)
Net finance income/(expenditure) 4
(1,842,613) (1,566,384)
Loss for the year before tax 5
298,267 261,541
Taxation 6
(1,544,346) (1,304,843)
Loss for the year after tax
Other comprehensive income net of tax - -
Total comprehensive loss for the year attributable to equity owners of N4 (1,544,346) (1,304,843)
Pharma Plc
Loss per share attributable to owners of the parent 12
Weighted average number of shares:
Basic 181,080,349 136,303,141
Diluted (restated, see note 12) 181,080,349 136,303,141
Basic loss per share (0.85) (0.96)
Diluted loss per share (restated, see note 12) (0.85) (0.96)
All results were derived from continuing operations.
N4 Pharma Plc
Consolidated Statement of Financial Position as at 31 December 2021
Notes 2021 2020
£ £
Current assets
Trade and other receivables 8 558,359 270,837
Cash and cash equivalents 1,784,024 3,555,579
2,342,383 3,826,416
Total assets 2,342,383 3,826,416
Liabilities
Current liabilities
Trade and other payables 9 (184,820) (142,484)
Accruals and deferred income (27,910) (26,598)
Total liabilities (212,730) (169,082)
Total assets less current liabilities 2,129,653 3,657,334
Net assets 2,129,653 3,657,334
Equity
Share capital 11 8,995,146 8,995,146
Share premium 11 13,945,602 13,945,602
Share option reserve 11 79,955 63,290
Reverse acquisition reserve 11 (14,138,244) (14,138,244)
Merger reserve 11 279,347 279,347
Retained earnings 11 (7,032,153) (5,487,807)
Total equity 2,129,653 3,657,334
The Consolidated Financial Statements were approved by the Board of Directors
on 22 February 2022 and signed on its behalf:
Nigel Theobald
N4 Pharma Plc
Company Statement of Financial Position as at 31 December 2021
Notes 2021 2020
£ £
Assets
Non-current assets
Investments 7 1,094,747 1,094,747
Intercompany loan receivable 14 5,259,000 3,659,000
6,353,747 4,753,747
Current assets
Trade and other receivables 8 629,113 417,313
Cash and cash equivalents 1,538,615 3,411,817
2,167,728 3,829,130
Total assets 8,521,475 8,582,877
Liabilities
Current liabilities
Trade and other payables 9 (8,966) (23,348)
Accruals and deferred income (19,493) (19,790)
Total liabilities (28,459) (43,138)
Total assets less current liabilities 8,493,016 8,539,739
Net assets 8,493,016 8,539,739
Equity
Share capital 11 8,995,146 8,995,146
Share premium 11 13,945,602 13,945,602
Share option reserve 11 79,955 63,290
Merger reserve 11 279,347 279,347
Retained earnings 11 (14,807,034) (14,743,646)
Total equity 8,493,016 8,539,739
The Company recorded a loss of £63,388 for the year (31 December 2020:
£164,139 loss).
The Company Financial Statements were approved by the Board of Directors on
22nd February 2022 and signed on its behalf:
Nigel Theobald
N4 Pharma Plc
Consolidated Statement of Changes in Equity for the year ended 31 December
2021
(i) Year ended 31 December 2021 Share capital Share premium Share option reserve Reverse acquisition reserve Merger reserve Retained earnings Total equity
£ £ £ £ £ £ £
Balance at 1 January 2021 8,995,146 13,945,602 63,290 (14,138,244) 279,347 (5,487,807) 3,657,334
Total comprehensive loss for the year - - - - - (1,544,346) (1,544,346)
Share issue - - - - - - -
Share based payment charge - - 16,665 - - - 16,665
8,995,146 13,945,602 79,955 (14,138,244) 279,347 (7,032,153) 2,129,653
At 31 December 2021
(ii) Year ended 31 December 2020 Share capital Share premium Share option reserve Reverse acquisition reserve Merger reserve Retained earnings Total equity
£ £ £ £ £ £ £
Balance at 1 January 2020 8,676,675 25,266 (14,138,244) (4,182,964)
10,327,258 279,347 987,338
Total comprehensive loss for the year - - - - - (1,304,843) (1,304,843)
Share issue 318,471 3,618,344 - - - - 3,936,815
Share based payment charge - - 38,024 - - - 38,024
At 31 December 2020 8,995,146 13,945,602 63,290 (14,138,244) 279,347 (5,487,807) 3,657,334
N4 Pharma Plc
Company Statement of Changes in Equity for the year ended 31 December 2021
(i) Year ended 31 December 2021 Share capital Share Share option reserve Merger reserve Retained earnings Total equity
premium
£ £ £ £ £ £
Balance at 1 January 2021 8,995,146 13,945,602 63,290 279,347 (14,743,646) 8,539,739
Total comprehensive loss for the year - - - - (63,388) (63,388)
Share issue - - - - - -
Share based payment charge - - 16,665 - - 16,665
8,995,146 13,945,602 79,955 279,347 (14,807,034) 8,493,016
At 31 December 2021
(ii) Year ended 31 December 2020 Share capital Share premium Share option reserve Merger reserve Retained earnings Total equity
£ £ £ £ £ £
Balance at 1 January 2020 8,676,675 10,327,258 25,266 279,347 (14,579,507) 4,729,039
Total comprehensive loss for the year - - - - (164,139) (164,139)
Share issue 318,471 3,618,344 - - - 3,936,815
Share based payment charge - - 38,024 - - 38,024
8,995,146 13,945,602 63,290 279,347 (14,743,646) 8,539,739
At 31 December 2020
N4 Pharma Plc
Consolidated Statement of Cash Flows for the year ended 31 December 2021
2021 2020
Notes £ £
Operating activities
(1,544,346) (1,304,843)
Loss after tax
Finance expenditure and other income (677) (1,963)
Share based payment charge 16,665 3,977
Taxation credit (298,267) (261,541)
Operating loss before changes in working capital (1,826,625)
(1,564,370)
Movements in working capital:
Decrease /(Increase) in trade and other receivables 10,745 (30,534)
Increase in trade, other payables and accruals 43,648 91,399
Cash used in operations (1,772,232) (1,503,595)
Taxation paid - 120,507
Net cash flows used in operating activities (1,772,232) (1,382,998)
Financing activities
Finance expenditure and other income 677 1,963
Net proceeds of ordinary share issue - 3,970,862
Net cash flows from financing activities 677 3,972,825
Net (decrease) /increase in cash and cash equivalents (1,771,555) 2,589,827
Cash and cash equivalents at beginning of the year 3,555,579 965,752
Cash and cash equivalents at 31 December 1,784,024 3,555,579
N4 Pharma Plc
Company Statement of Cash Flows for the year ended 31 December 2021
2021 2020
£ £
Operating activities
(63,388) (164,139)
Loss before tax
Interest (228,588) (153,045)
Share based payment charge 16,665 3,977
Impairment of investment - 100
Operating loss before changes in working capital (275,311) (313,107)
Movements in working capital:
Increase in trade and other receivables (211,801) (170,268)
(Decrease) /Increase in trade and other payables (14,678) 11,200
Cash used in operations (501,790) (472,175)
Net cash flows used in operating activities (501,790) (472,175)
Investing activities
Loan receivable advancements (1,600,000) (1,000,000)
(1,600,000) (1,000,000)
Net cash flows used in investing activities
Financing activities
Interest received 228,588 153,045
Net proceeds of ordinary share issue - 3,970,862
228,588 4,123,907
Net cash flows from financing activities
Net (decrease) /increase in cash and cash equivalents (1,873,202) 2,651,732
3,411,817 760,085
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at 31 December 1,538,615 3,411,817
N4 Pharma Plc
Notes to the Consolidated Financial Statements for the year ended 31 December
2021
1. Accounting policies
1.1 Reporting entity
N4 Pharma Plc (the "Company"), is the holding Company for N4 Pharma UK Limited
("N4 UK"), and together form the Group (the "Group"). N4 Pharma UK Limited is
a specialist pharmaceutical company engaged in the development of
mesoparticulate silica delivery systems to improve the cellular delivery and
potency of vaccines. The nature of the business is not deemed to be impacted
by seasonal fluctuations and as such performance is expected to be consistent.
The Company is domiciled in England and Wales and was incorporated and
registered in England and Wales on 6 July 1979 as a public limited company and
its shares are admitted to trading on AIM (LSE: N4P). The Company's registered
office is located at 6th Floor, 60 Gracechurch Street, London, EC3V 0HR.
The Consolidated Financial Statements have been prepared in accordance with
UK-adopted international accounting standards and applied to the Parent
Company Accounts in accordance with the provisions of the Companies Act 2006.
The Consolidated Financial Statements are presented in Great British Pounds
("GBP" or "£"), rounded to the nearest £.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these Consolidated Financial
Statements.
The Company has taken advantage of the exemption granted by Section 408 of the
Companies Act 2006 from presenting its own Income Statement. The loss
generated by the Company is disclosed under the Company Statement of Financial
Position.
1.2 Measurement convention
The Consolidated Financial Statements are prepared on the historical cost
basis, except for the following items:
· Share-based payments related to investment acquisition are
measured at fair value shown in the Merger Reserve.
· Share-based payments related to employee costs are measured at
fair value shown in the Statement of Comprehensive Income.
· The associated Share Options are measured at fair value using the
Black Scholes model (see note 9).
1.3 Going concern
These Consolidated Financial Statements have been prepared on the basis of
accounting principles applicable to a going concern. The Directors consider
that the Group will have access to adequate resources, to meet the operational
requirements for at least 12 months from the date of approval of these
Consolidated Financial Statements. For this reason, they continue to adopt the
going concern basis in preparing the Consolidated Financial Statements.
The Group currently has no source of operating cash inflows, other than
interest and grant income, and has incurred net operating cash outflows before
tax for the year ended 31 December 2021 of £1,772,232 (2020: £1,503,595
outflow). At 31 December 2021, the Group had cash balances of £1,784,024
(2020: £3,555,579) and a surplus in net working capital (current assets,
including cash, less current liabilities) of £2,129,653 (2020: £3,657,334).
The Group prepares regular business forecasts and monitors its projected cash
flows, which are reviewed by the Board. Forecasts are adjusted for reasonable
sensitivities that address the principal risks and uncertainties to which the
Group is exposed, thus creating a number of different scenarios for the Board
to challenge. In those cases, where scenarios deplete the Group's cash
resources too rapidly, consideration is given to the potential actions
available to management to mitigate the impact of one or more of these
sensitivities, in particular the discretionary nature of costs incurred by the
Group, in order to ensure the continued availability of funds.
As the Group did not have access to bank debt and future funding is reliant on
issues of shares in the Parent Company, the Board has derived a mitigation
plan for the scenarios modelled as part of the going concern review.
The Group continues to consider the current worldwide pandemic ("COVID-19")
and the impact it may have on its operations. COVID-19 continued to not have
any material negative impact on the operations of the Group during the year
and it is anticipated that the Group will remain a going concern despite the
unknown developments of COVID-19.
On the basis of this analysis, the Board has concluded that there is a
reasonable expectation that the Company will have adequate resources to
continue in operational existence for the foreseeable future being a period of
at least 12 months from the Consolidated Statement of Financial Position date.
1.4 Basis of consolidation
The consolidated Group financial statements consist of the financial
statements of Company together with the only entity controlled by the parent
company (its subsidiary), N4 UK.
All financial statements are made up to 31 December 2021. Where necessary,
adjustments are made to the financial statements of N4 UK to bring the
accounting policies used into line with those used by the Group.
All intra-group transactions, balances and unrealised gains on transactions
between Group companies are eliminated on consolidation. Unrealised losses are
also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
Subsidiaries are consolidated in the Group's financial statements from the
date that control commences until the date that control ceases.
1.5 Revenue
The Group has not recognised any revenue to date.
1.6 Government grant income
Government grants are recognised only when there is reasonable assurance that
the Group will comply with the conditions attaching to them and that the
grants will be received.
Government grants are recognised in the Consolidated Statement of
Comprehensive Income on a systematic basis over the periods in which the Group
recognises and expenses the related costs for which the grants are intended to
compensate.
Government grants that are receivable as compensation for expenses or losses
already incurred or for the purpose of giving immediate financial support to
the Group with no future related costs are recognised in Consolidated
Statement of Comprehensive Income in the period in which they become
receivable, and against the associated cost.
1.7 Expenses
Financing income and expenses
Financing expenses comprise interest expense and finance charges. Financing
income comprises interest receivable on funds invested.
Financing income and expenses are recognised in the Consolidated Statement of
Comprehensive Income as it accrues, using the effective interest method.
Research and development
Research costs are charged against the Consolidated Statement of Comprehensive
Income as they are incurred. Certain development costs will be capitalised as
intangible assets when it is probable that the future economic benefits will
flow to the Group. Such intangible assets will be amortised on a straight-line
basis from the point at which the assets are ready for use, over the period of
the expected benefit, and are reviewed for impairment at each year end date.
Other development costs are charged against income as incurred since the
criteria for their recognition as an asset is not met.
The criteria for recognising expenditure as an asset are:
§ It is technically feasible to complete the product;
§ Management intends to complete the product and use or sell it;
§ There is an ability to use or sell the product;
§ It can be demonstrated how the product will generate probable future
economic benefits;
§ Adequate technical, financial and other resources are available to complete
the development, use and sale of the product; and
§ Expenditure attributable to the product can be reliably measured.
The costs of an internally generated intangible asset comprise all directly
attributable costs necessary to create, produce and prepare the asset to be
capable of operating in the manner intended by management. Directly
attributable costs include employee costs incurred on technical development,
testing and certification, materials consumed and any relevant third-party
cost. The costs of internally generated developments are recognised as
intangible assets and are subsequently measured in the same way as externally
acquired intangible assets. However, until completion of the development
project, the assets are subject to impairment testing only.
To date, the criteria for recognition of an internally generated intangible
asset have not been met as explained in note 1.17.
1.8 Taxation
Taxation
Taxation for the year comprises current and deferred tax. Tax is recognised in
the Consolidated Statement of Comprehensive Income, except to the extent that
it relates to items recognised directly in equity.
Current or deferred taxation assets and liabilities are not discounted.
Current tax
Current tax is recognised at the amount of tax payable using the tax rates and
laws that have been enacted or substantively enacted by the Consolidated
Statement of Financial Position date.
Deferred tax
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the Consolidated Statement of Financial
Position date.
Timing differences arise from the inclusion of income and expenses in tax
assessments in periods different from those in which they are recognised in
the Consolidated Financial Statements. Deferred tax is measured using tax
rates and laws that have been enacted or substantively enacted by the year end
and that are expected to apply to the reversal of the timing difference.
Unrelieved tax losses and other deferred tax assets are recognised only to the
extent that it is probable that they will be recovered against the reversal of
deferred tax liabilities or other future taxable profits.
1.9 Foreign Currencies
Monetary assets and liabilities denominated in foreign currencies are
translated into Sterling at the rate of exchange ruling at the Consolidated
Statement of Financial Position date. Transactions in foreign currencies are
translated at the rate of exchange ruling at the date of the transaction.
Foreign exchange gains and losses are included in the Consolidated Statement
of Comprehensive
Income.
1.10 Earnings per share
The Group presents basic and diluted earnings or loss per share data for its
ordinary shares. Basic earnings/loss per share is calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the period,
adjusted for own shares held. Diluted earnings/loss per share is determined
by adjusting the profit or loss attributable to ordinary shareholders and the
weighted average number of ordinary shares outstanding, adjusted for own
shares held, for the effects of all dilutive potential ordinary shares, which
comprise of share options granted.
1.11 Operating segments
The Group operated in one business segment, that of the development and
commercialisation of medicines via its delivery system called Nuvec®. No
revenue has yet been generated by any of the work undertaken by the Group.
The Directors consider that there are no identifiable business segments that
are subject to risks and returns different to the core business. The
information reported to the Directors, for the purposes of resource allocation
and assessment of performance, is based wholly on the overall activities of
the Group.
1.12 Presentation and classification of financial instruments issued
by the Group
In accordance with IAS 32, financial instruments issued by the Group are
treated as equity only to the extent that they meet the following two
conditions:
(a) 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
(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. 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.
1.16 Adoption of new and revised International Financial Reporting
Standards
The following IFRS standards, amendments or interpretations became effective
during the year ended 31 December 2021 but have not had a material effect on
this Consolidated Financial Information:
Standard
Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS
7, IFRS 4 and IFRS 16) (effective periods beginning on or after 1
January 2021)
Covid 19-Related Rent Concessions Beyond 30 June 2021 (Amendment to IFRS 16
Leases) (effective periods beginning on or after 1 April 2021)
All new standards and amendments to standards and interpretations effective
for annual periods beginning on or after 1 January 2021 that are applicable to
the Group have been applied in preparing these Consolidated Financial
Statements.
The standards and interpretations that are issued, but not yet effective, up
to the date of issuance of the Consolidated Financial Statements are disclosed
below. The Group intends to adopt these standards, if applicable, when they
become effective.
Standard Effective date
Amendments to IFRS 3 Reference to the Conceptual Framework 1 January 2022
Amendments to IAS 16 Property Plant and Equipment (Proceeds before 1 January 2022
intended use)
Amendments to IAS 37 Onerous Contracts (Cost of fulfilling a contract) 1 January 2022
Amendments to IFRS 1, Annual Improvements to IFRS Standards 2018-2020 1 January 2022
IFRS 9, IFRS 16 and
IAS 41
Amendments to IAS 1 Disclosure of accounting policies 1 January 2023
Amendments to IAS 8 Definition of accounting estimates 1 January 2023
Amendments to IAS 12 Deferred tax related to assets and liabilities arising 1 January 2023
from
a
single transaction
The Directors are continuing to assess the potential impact that the adoption
of the standards listed above will have on the Consolidated Financial
Statements for the year ended 31 December 2022.
1.17 Use of estimates and judgements
The preparation of Consolidated Financial Statements in conformity with IFRSs
requires management to make certain judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses during the period. Actual results
may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
In the process of applying the Group's accounting policies, the Directors have
decided the following estimates and assumptions are material to the carrying
amounts of assets and liabilities recognised in the Consolidated Financial
Statements.
Critical judgements
Research and development expenditure
The key judgements surrounding the Research & Development expenditure is
whether the expenditure meets the criteria for capitalisation. Expenditure
will only be capitalised when the recognition criteria is met and is otherwise
written off to the Consolidated Statement of Comprehensive Income. The
recognition criteria include the identification of a clearly defined project
with separately identifiable expenditure where the outcome of the project, in
terms of its technical feasibility and commercial viability, can be measured
or assessed with reasonable certainty and that sufficient resources exist to
complete a profitable project. In the event that these criteria are met, and
it is probable that future economic benefit attributable to the product will
flow to the Group, then the expenditure will be capitalised.
Impairment of investments and intercompany debtors
N4 UK has sustained losses and the Statement of Financial position is in
deficit. The recoverability of the intercompany debtor and the cost of
investment is dependent on the future profitability and success of the entity,
which is in a research phase and has not therefore generated any revenue to
date. Having considered research progress during the year and future prospects
of N4 UK, the Directors do not consider that there are indicators of
impairment in respect of these balances. This is a significant judgement.
2. Risk management
Overview
The Group has exposure to the following risks:
· Credit risk;
· Liquidity risk;
· Tax risk;
· Market risk; and
· Operational risk
· Regulatory and legislative risk
This note presents information about the Group's exposure to each of the above
risks, its objectives, policies and processes for measuring and managing risk,
and its management of capital. Further quantitative disclosures are included
throughout these Consolidated Financial Statements.
Risk management framework
The Board has overall responsibility for the establishment and oversight of
the risk management framework and developing and monitoring the Group's risk
management policies. Key risk areas have been identified and the Group's risk
management policies and systems will be reviewed regularly to reflect changes
in market conditions and the Group's activities.
The Audit Committee oversees how management monitors compliance with the
Group's risk management policies and procedures and reviews the adequacy of
the risk management framework in relation to the risks faced by the Group.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group's bank deposits and
receivables. See Note 13 for further detail. The risk of non-collection is
considered to be low. This risk is deemed low at present due to the Group not
yet trading and generating revenue but is a consideration for future risks.
There is an intercompany debtor balance between the Company and N4 UK. The
recoverability of this debtor is dependent on the future profitability of the
entity. As N4 UK has sustained losses and the Statement of Financial
position is in deficit it is currently not in a position to repay this amount
and this therefore poses a credit risk to the Company, but not to the Group.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset. The Group's approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the Group's reputation. The Group monitors cash flow on a monthly basis
through forecasting to help mitigate this risk.
Tax risk
Any change in the Group's tax status or in taxation legislation or its
interpretations could affect the value of the investments held by the Group or
the Group's ability to provide returns to shareholders or alter post-tax
returns to shareholders.
Market risk and competition
The Group operates as a specialist pharmaceutical Company engaged in the
development of mesoparticulate silica delivery systems to improve the cellular
delivery and potency of vaccines. The Group is entering into a market with
existing competitors and the prospect of new entrants entering the current
market. There is no guarantee that current competitors or new entrants to the
market will not appeal to a wider portion of the Group's target market or
command broader band awareness.
In addition, the Group's future potential revenues from product sales will be
affected by changes in the market price of pharmaceutical drugs and could also
be subject to regulatory controls or similar restrictions.
Market risk is monitored continuously by the Group and the Board reacts to any
changes in market conditions as and when they arise.
Operational risk
The Group is at an early stage of development and is subject to several
operational risks. The commencement of the Group's material revenues is
difficult to predict and there is no guarantee the Group will generate
material revenues in the future. The Group has a limited operational history
upon which its performance and prospects can be evaluated and faces the risks
frequently encountered by developing companies. The risks include the
uncertainty as to which areas of pharmaceuticals to target for growth.
Operational risk is managed by adapting the future plans of the Group based on
results and feedback from employees, suppliers and contractors.
Regulatory and legislative risk
The operations of the Group are such that it is exposed to the risk of
litigation from its suppliers, employees and regulatory authorities. Exposure
to litigation or fines imposed by regulatory authorities may affect the
Group's reputation even though monetary consequences may not be significant.
Any changes to regulations or legislation are reviewed by the Board on a
regular basis and the Group applies any that are relevant accordingly.
Changes to legislation, regulations, rules and practices may change and is
often the case in the pharmaceutical industry which is highly regulated and
susceptible to regular change. Any changes may have an adverse effect on the
Group's operations.
Regulatory and legislative risk will become more significant once the current
research generates revenue.
Protection of intellectual property
The Group's ability to compete significantly relies upon the successful
protection of its intellectual property, in particular its licenced and owned
patent applications for Nuvec®. The Group seeks to protect its intellectual
property through the filing of worldwide patent applications, as well as
robust confidentiality obligations on its employees. However, this does not
provide assurance that a third party will not infringe on the Group's
intellectual property, release confidential information about the intellectual
property or claim technology which is registered to the Group.
Capital management
The Group has no loans or borrowings and has sufficient resources, in the view
of the Directors, to meet its working capital requirements for the next 12
months.
The Group manages its capital through the preparation of detailed forecasts,
and tracks actual receipts and outlays against the forecasts on a regular
basis, to ensure that the Group will be able to continue as a going concern
while maximising the return to shareholders.
The capital structure of the Group consists of cash and cash equivalents and
equity comprising, capital, reserves and accumulated losses.
3. Employees and directors
The average monthly number of employees during the year was 5 (2020: 5). The
Directors of the Group are employed by both the Company and N4 UK and as such
are included in the employee figure. Total Directors remuneration is detailed
in Note 14 of these Consolidated Financial Statements.
2021 2020
£ £
Wages and Salaries 208,000 204,768
Social security costs 16,518 20,370
Pension costs - 219
224,518 225,357
4. Net finance income and (expenditure)
2021 2020
£ £
Exchange rate losses - (813)
Bank charges - (1,150)
Interest received on financial assets measured at amortised cost 677 -
677 (1,963)
5. Loss before tax
2021 2020
£ £
Loss before taxation is arrived after charging:
Fees payable to the Group's auditors for the audit 24,675 21,600
of the Group's financial statements
Other fees payable to auditors:
- Other assurance services - 4,500
6. Taxation
2021 2020
£ £
Current tax
Research and development tax credit receivable for the current period (298,267) (214,884)
Adjustments in respect of prior periods - (46,657)
(298,267) (261,541)
Deferred tax
Origination and reversal of temporary differences - -
Tax in income statement (298,267) (261,541)
The tax charge for the year can be reconciled to the loss in the Consolidated
Statement of Comprehensive Income as follows:
2021 2020
£ £
Loss before taxation (1,842,613) (1,566,384)
Tax at the UK corporation tax rate of 19% (2020: 19%) (350,096) (297,613)
Net Research and development tax credits (298,267) (214,884)
Changes in unrecognised deferred tax 350,096 297,613
Adjustments in respect of prior periods - (46,657)
Tax charge for the year (298,267) (261,541)
At the year end the Group had trading losses carried forward of £9,011,815
(2020: £8,084,975) for use against future profits. There are no other
factors which may impact future tax charges. A deferred tax asset has not
been recognised on unrelieved trading losses as the timing, extent and
availability of future profits is not yet certain
7. Investments
Investment in subsidiary
Company
2021 2020
Cost £ £
Balance at 1 January 1,094,747 1,094,847
Impairment on dissolution - (100)
Balance at 31 December 1,094,747 1,094,747
Details of the Company's subsidiary at 31 December 2021 are as follows:
Place of incorporation and operation Principal activity Proportion of ownership and voting rights held
N4 Pharma UK Limited England and Wales Delivery of vaccines and therapeutics 100%
The accounting reference date of the subsidiary are co-terminous with that of
the Company. The registered office address and principal place of business of
N4 Pharma UK Limited is The Mills, Canal Street, Derby, DE1 2RJ.
8. Trade and other receivables
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
Prepayments 7,013 16,009 6,514 15,320
VAT due 23,553 39,944 6,361 14,677
R&D tax credits receivable 513,151 214,884 - -
Interest receivable 677 - 611,838 382,916
Other debtors 13,965 - 4,400 4,400
558,359 270,837 629,113 417,313
Loan interest receivable relates to the intra-group loan disclosed in Note 14.
9. Trade and other payables
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
Trade payables 180,346 116,871 7,848 -
Other payables 4,474 25,613 1,118 23,348
184,820 142,484 8,966 23,348
10. Share-based payments
Options
The Company has the ability to issue options to Directors to compensate them
for services rendered and incentivise them to add value to the Group's
longer-term share value. Equity settled share-based payments are measured at
fair value at the date of grant. The fair value determined is charged to the
Consolidated Statement of Comprehensive Income on a straight-line basis over
the vesting period based on the Group's estimate of the number of shares that
will vest.
The vesting period is defined as the period in which the options are unable to
be exercised. The period commences on the date the options are issued. For
the options to vest, the holder must remain an employee of the group
throughout the vesting period. Once the vesting period is complete the options
may be exercised on any date up to the lapse date.
Cancellations of equity instruments are treated as an acceleration of the
vesting period and any outstanding charge is recognised in full immediately.
Fair value is measured using a Black Scholes pricing model. The key
assumptions used in the model at the grant date were adjusted based on
management's best estimate for the effects of non-transferability, exercise
restrictions and behavioral considerations.
As at 31 December 2021, there were 7,046,513 (2020: 7,046,513) options in
existence over ordinary shares of the Company. Options in existence during
the current and/or previous financial year are as follows:
Name Date of Grant Ordinary shares under option Vesting Date Expiry Date Exercise Price £
2015 Options
Gavin Burnell 14.10.15 1,351,210 14.10.15 14.10.25 0.0280
Luke Cairns 14.10.15 675,302 14.10.15 14.10.25 0.0280
2017 Options
Luke Cairns 03.05.17 717,143 03.05.20 03.05.27 0.0700
David Templeton 03.05.17 717,143 03.05.20 03.05.27 0.0700
Paul Titley 03.05.17 717,143 03.05.20 03.05.27 0.0700
2019 Options
John Chiplin 21.05.19 717,143 21.05.22 21.05.29 0.0355
Christopher Britten 21.05.19 717,143 21.05.22 21.05.29 0.0355
2020 Options
David Templeton 18.05.20 717,143 18.05.23 18.05.30 0.0480
Luke Cairns 18.05.20 717,143 18.05.23 18.05.30 0.0480
Total options 7,046,513
The weighted average remaining contractual life of the share options
outstanding as at 31 December 2021 was 5.93 years.
Share options outstanding:
Number of shares
At 1 January 2020 7,679,370
Exercise of options (1,350,000)
Lapse of options (717,143)
Options granted 1,434,286
At 31 December 2020 7,046,513
Exercise of options -
Lapse of options -
Options granted -
At 31 December 2021 7,046,513
Each option entitles the holder to subscribe for one ordinary share in the
Company. Options do not confer any voting rights on the holder.
An amount of £16,665 has been recognised in the Consolidated Statement of
Comprehensive Income in relation to the share options (2020: £3,977).
The aggregate fair value of the share options in issue was £79,955 (2020
£63,290), with amounts recorded at each balance sheet date being as follows:
2021 2020
£ £
2015 Options 18,492 18,493
2017 Options 26,884 26,884
2019 Options 19,861 12,270
2020 Options 14,718 5,643
79,955 63,290
11. Capital and reserves
Issued, allotted and fully paid 2021 2020
£ £
181,080,349 Ordinary Shares of 0.4p each (2020: 181,080,349) 724,321 724,321
137,674,431 Deferred Shares of 4p each (2020: 137,674,431) 5,506,977 5,506,977
279,176,540 Deferred Shares of 0.99p each (2020: 279,176,540) 2,763,848 2,763,848
8,995,146 8,995,146
All ordinary shares rank equally in all respects, including for dividends,
shareholder attendance and voting rights at meetings, on a return of capital
and in a winding-up.
Authorised ordinary shares at 31 December 2021 totalled 334,682,497
(2020:262,250,357).
The 137,674,431 deferred shares of 4p, have no right to dividends nor do the
holders thereof have the right to receive notice of or to attend or vote at
any general meeting of the Company. On a return of capital or on a winding up
of the Company, the holders of the deferred shares shall only be entitled to
receive the amount paid up on such shares after the holders of the ordinary
shares have received their return on capital.
The 279,176,540 deferred shares of 0.99p shall be entitled to receive a
special dividend, which is payable upon the repayment to the Company of any
amount owed under certain loan agreements, after which the Company shall, in
priority to any distribution to any other class of share, pay to the holders
of the Special Deferred Shares an aggregate amount equal to the amount repaid
pro rata according to the number of such shares paid up as to their nominal
value held by each shareholder. They shall be entitled to no other
distribution save for a special dividend and shall not be entitled to receive
notice of or attend or vote at a general meeting of the Company. On a return
of capital on a winding up of the Company, they shall only be entitled to
receive the amount paid up on such shares up to a maximum of 0.9 pence per
share after the holders of the Ordinary Shares and the Deferred Shares have
received their return on capital.
Reserves
The equity structure presented in the Consolidated Financial Statements
reflects the equity structure of the Group, including the equity instruments
issued as part of the Reverse Takeover transaction which occurred in 2017 and
followed accounting treatment in accordance with IFRS 2.
The reverse acquisition reserve and the merger reserve are derived as part of
the Reverse Takeover transaction and the balances within these reserves have
had no movement since the point of the Reverse takeover in 2017.
Share premium reserve
The share premium reserve comprises the excess of consideration received over
the par value of the shares issued, plus the nominal value of share capital at
the date of redesignation at no par value.
Share option reserve
The share option reserve comprises the fair value of warrants and options
granted, less the fair value of lapsed and expired warrants and options.
Retained earnings
Retained earnings comprises of accumulated results of the Group to date.
12. Earnings per share
The calculation of basic loss per share at 31 December 2021 was based on the
loss of £1,544,346 (2020: £1,304,843), and a weighted average number of
ordinary shares outstanding of 181,080,349 (2020:136,303,141), calculated as
follows:
2021 2020
£ £
Losses attributable to ordinary shareholders (1,544,346) (1,304,843)
Weighted average number of ordinary shares
Issued ordinary shares at 1 January 181,080,349 100,168,016
Effect of shares issued during the year - 36,135,125
181,080,349 136,303,141
Weighted average number of shares at 31 December
2021 pence per share
2020 pence per share
Basic loss per share (0.85) (0.96)
Diluted loss per share
Diluted earnings per share is calculated by adjusting the weighted average
number of shares outstanding to assume conversion of all potential dilutive
shares, namely share options. The calculation of diluted loss per share at 31
December 2021 was based on the loss of £1,544,346 (31 December 2020:
£1,304,843), and a weighted average number of ordinary shares outstanding of
181,080,349 (2020: 136,303,141).
2021 pence per share 2020 pence per share
Diluted loss per share (0.85) (0.96)
Management have reconsidered the effect of antidilutive potential shares on
the weighted average number of shares used in the calculation of diluted EPS.
Management have therefore restated the prior year disclosure in respect of
diluted weighted average number of shares and diluted loss per share.
13. Risk management and analysis
(a) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group's receivables and cash and
cash equivalents. The carrying amount of cash, cash equivalents and term
deposits represents the maximum credit exposure on those assets. The cash
and cash equivalents are held with UK bank and financial institution
counterparties which are rated at least A.
There is an intercompany debtor balance between the Company and N4 UK. The
recoverability of this debtor is dependent on the future profitability of the
entity. As N4 UK has sustained losses and the Statement of Financial
position is in deficit it is currently not in a position to repay this amount
and this therefore poses a credit risk to the Company, but not to the Group.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit
exposure. Therefore, the maximum exposure to credit risk at the reporting date
of the Group was £2,342,383 (2020: £3,826,416), being the total of the
carrying amount of financial assets, shown in the Consolidated Statement of
Financial Position.
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
The following are the contractual maturities of financial liabilities,
including estimated interest payments and excluding the impact of netting
agreements.
Group:
Financial liabilities Carrying amount Contractual cash flows 6 months or less 6-12 months 1 -2 years
£ £ £ £ £
31 December 2021
Trade and other payables 184,820 184,820 184,820 - -
31 December 2020
Trade and other payables 142,484 142,484 142,484 - -
Company:
Financial liabilities Carrying amount Contractual cash flows 6 months or less 6-12 months 1 -2 years
£ £ £ £ £
31 December 2021
Trade and other payables 8,966 8,966 8,966 - -
31 December 2020
Trade and other payables 23,348 23,348 23,348 - -
(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:
Carrying amount
Group: 2021
£
2020
£
Variable rate instruments
Cash and cash equivalents 1,784,024 3,555,579
Carrying amount
Company: 2021
£
2020
£
Variable rate instruments
Cash and cash equivalents 1,538,615 3,411,817
Cash flow sensitivity analysis for variable rate instruments
The Group's interest-bearing assets at the reporting date were invested with
financial institutions in the United Kingdom with a S&P rating of A2 and
comprised solely of bank accounts.
A change in interest rates would have increased/(decreased) profit or loss by
the amounts shown below. This analysis assumes that all other variables remain
constant. This analysis is performed on the same basis for 2020.
Group: 2021 2020
Profit or loss Profit or loss
100 bp increase 100 bp decrease 100 bp increase 100 bp decrease
Variable rate instruments 17,840 (17,840) 35,555 (35,555)
Company: 2021 2020
Profit or loss Profit or loss
100 bp increase 100 bp decrease 100 bp increase 100 bp decrease
Variable rate instruments 15,386 (15,386) 34,118 (34,118)
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.
2021 2020
£ £
Short-term employee benefits 224,518 225,357
Share based payments 16,665 3,977
241,183 229,334
Directors' remuneration and interests
The below remuneration relates to the Directors of the Group.
2021 Remuneration Interests
Cash-based payments Share-based payments Shares Options
Director Totals
£ £ £ No. No.
Nigel Theobald (Chief Executive Officer) 75,000 - 75,000 16,981,319 -
David Templeton 45,000 4,538 49,538 - 1,434,286
Luke Cairns 40,000 4,537 44,537 142,857 2,109,588
Christopher Britten 24,000 3,795 27,795 - 717,143
John Chiplin 24,000 3,795 27,795 - 717,143
208,000 16,665 224,665 17,124,176 4,978,160
2020 Remuneration Interests
Cash-based payments Share-based payments Shares Options
Director Totals
£ £ £ No. No.
Nigel Theobald (Chief Executive Officer) 71,538 - 71,538 16,981,319 -
David Templeton 41,538 3,836 45,374 - 1,434,286
Luke Cairns 32,000 3,836 35,836 142,857 2,109,588
Christopher Britten 24,000 3,806 27,806 - 717,143
John Chiplin 24,000 3,806 27,806 - 717,143
193,076 15,284 208,360 17,124,176 4,978,160
No contributions are paid by the Group to a pension scheme on behalf of the
Directors.
Nigel Theobald is the Group's highest paid director (2020: Nigel Theobald).
His remuneration in each year is disclosed above.
N4 Pharma PLC has a loan receivable from N4 Pharma UK Limited at 31 December
2021 of £5,259,000 (2020: £3,659,000). It is repayable in December 2025,
accrues interest at a rate of 5% and is unsecured.
There are no further related parties identified. There is no ultimate controlling party of the Company or Group.
15. Retirement benefit schemes
The Group operates a defined contribution pension scheme for all qualifying
employees. The assets of the scheme are held separately from those of the
Group in an independently administered fund.
The charge to the profit and loss during the year in respect of this scheme
was £Nil (2020:£219). The liability at the year end amounted to £Nil
(2020:£Nil).
16. Subsequent events
There have been no material events subsequent to the Consolidated Statement of
Financial Position date that require adjustment or disclosure in these
Consolidated Financial Statements.
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