RNS Number : 1156C
4d Pharma PLC
18 February 2022
 

4D pharma to Restate Unaudited Interim Financial Statements for the Six-Month Period Ended June 30, 2021 to Correct Accounting for Warrants

Non-cash adjustment with no effect on cash position or operating results of 4D Pharma's business

Audited financial statements for Fiscal Year 2020 are not affected

 

Leeds, UK, February 18, 2022 - 4D pharma plc (AIM: DDDD, NASDAQ: LBPS), a pharmaceutical Company leading the development of Live Biotherapeutic products (LBPs), a novel class of drug derived from the microbiome, today announced that the Company has determined that the warrants and units assumed by the Company in connection with its March 2021 merger with Longevity Acquisition Corporation should not be recorded as equity instruments, and in accordance with IFRS and US GAAP, should be recorded as derivative liabilities. While the issues identified are non-cash, and do not impact the cash and cash equivalents, the Company has restated the unaudited interim consolidated financial statements for the six months period ending June 30, 2021.

The issues disclosed in this release are an accounting technicality and were identified by the Company during the ongoing preparation of its audited financial statements for the year ended December 31, 2021. The restatements do not impact the Company's cash and cash equivalents, revenues, operating expenses, operating loss, assets, or liquidity for the affected period.

This restatement will apply to the Company's International Financial Reporting Standards "IFRS" and US Generally Accepted Accounting Principles "GAAP" financial statements for the six months period ending June 30, 2021.The Company's audited financial statements for the year ended December 31, 2020 are not affected.

IFRS Statements

As previously reported under IFRS, the Company had concluded that the warrants and units were determined to be equity instruments and accounted for under IFRS 2. During the re-assessment and in line with the IFRIC discussion paper dated February 1, 2022 ('Special purpose acquisition companies (SPAC); accounting for warrants at acquisition'), the Company has reviewed its warrant accounting policies and determined that the rules outlined in IAS 32 may provide a more appropriate treatment than that of IFRS 2. IAS 32 states that equity linked financial instruments must meet a "fixed for fixed" criteria to be accounted for as equity based. As a result of the variation in the strike price currency (USD$) and the Company's functional currency (GBP£) together with the cashless exercise features, the warrants and units are to be determined as liabilities. Therefore, the Company has decided to reassess its accounting policy, changing the reporting of the warrants and units to liabilities in its restated financials. The restated IFRS financial statements are set out below. The effect on IFRS reporting are as follows:

·    Income Statement: Restated comprehensive loss of (£49.2) million compared to (£56.1) million as previously reported. This is a reduction in comprehensive loss of £6.9 million due to the change in fair value of the warrants as of June 30, 2021

·    Balance Sheet: Reduction in equity and net assets of £11.5 million, offset by an increase in liabilities of £11.5 million

 

GAAP Statements

As previously reported under GAAP, the Company had concluded that the warrants and units were indexed to its own stock and were equity based. According to Accounting Standards Codification "ASC" 815-40-15-71, equity linked financial instruments issued with a strike price denominated in a currency (USD$) different than the Company's functional currency (GBP£) incurs an exposure to changes in currency exchange rates and thus cannot be indexed to the Company's stock. Therefore, the Company has corrected this issue and will report the warrants and units as derivative liabilities in the Form 6-K to be furnished with the US Securities and Exchange Commission. The effect on GAAP reporting are as follows:

·    Income Statement: Restated comprehensive loss of ($24.2) million compared to ($18.5) million as previously reported. This is an increase in comprehensive loss of $5.8 million, due to $11.0 million loss on issuance of securities, partially offset by $5.2 million in the change in fair value of the warrants as of June 30, 2021

·    Balance Sheet: Reduction of $5.8 million in stockholder's equity, offset by an increase in liabilities of $5.8 million

 

About 4D pharma

4D pharma is a world leader in the development of Live Biotherapeutics, a novel and emerging class of drugs, defined by the FDA as biological products that contain a live organism, such as a bacterium, that is applicable to the prevention, treatment or cure of a disease.  4D pharma has developed a proprietary platform, MicroRx®, that rationally identifies Live Biotherapeutics based on a deep understanding of function and mechanism.

4D pharma's Live Biotherapeutic products (LBPs) are orally delivered single strains of bacteria that are naturally found in the healthy human gut. The Company has five clinical programs, namely a Phase I/II study of MRx0518 in combination with KEYTRUDA® (pembrolizumab) in solid tumors, a Phase I study of MRx0518 in a neoadjuvant setting for patients with solid tumors, a Phase I study of MRx0518 in patients with pancreatic cancer, a Phase I/II study of MRx-4DP0004 in asthma, and Blautix® in irritable bowel syndrome (IBS) which has completed a successful Phase II trial. Preclinical-stage programs include candidates for CNS disease such as Parkinson's disease and other neurodegenerative conditions. The Company has a research collaboration with MSD, a tradename of Merck & Co., Inc., Kenilworth, NJ, USA, to discover and develop Live Biotherapeutics for vaccines.

For more information, refer to https://www.4dpharmaplc.com.

 

Contact Information:

4D

Duncan Peyton, Chief Executive Officer +44 (0)113 895 0130

Investor Relations ir@4dpharmaplc.com

 

Singer Capital Markets - Nominated Adviser and Joint Broker +44 (0)20 7496 3000

Philip Davies / James Fischer (Corporate Finance)

Tom Salvesen (Corporate Broking)

 

Bryan Garnier & Co. Limited - Joint Broker +44 (0)20 7332 2500

Dominic Wilson

 

Stern Investor Relations

Julie Seidel +1-212-362-1200

Julie.seidel@sternir.com

 

 

IFRS Group Statement of Total Comprehensive Income

For the six months to 30 June 2021 (restated)

 

 

 

Unaudited

six months

ended

30 June

2021

Unaudited

six months

ended

30 June

2021

Unaudited

six months

ended

30 June

2021

Unaudited

six months

ended

30 June

2020

Audited

Year to

31 December

2020

 

 

Reported

Adjustment

Restated

Reported

Reported

 

 

£000

£000

£000

£000

£000

Revenue

 

231

-

231

275

534

Research and development costs

 

(9,873)

-

(9,873)

(12,418)

(22,041)

Administrative expenses

 

(3,346)

-

(3,346)

(3,839)

(5,969)

Foreign currency gains

 

229

-

(229)

920

363

Other operating income

 

18

-

(18)

21

45

Operating loss before non-recurring costs

 

(12,741)

-

(12,741)

(15,041)

(27,068)

Non-recurring costs

 

(44,160)

-

(44,160)

(565)

(3,110)

Operating loss after non-recuring costs

 

(56,901)

-

(56,901)

(15,606)

(30,178)

Finance income

 

 

 

 

 

 

- Fair value adjustment of warrants

    and Options

 

-

6,927

6,927

-

-

- Other

 

2

-

2

5

5

Finance expense

 

(83)

-

(83)

(88)

(173)

Loss before taxation

 

(56,982)

6,927

(50,055)

(15,689)

(30,346)

Taxation

 

1,532

-

1,532

1,963

4,383

Loss for the period

 

(55,450)

6,927

(48,523)

(13,726)

(25,963)

Other comprehensive income:

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

(665)

-

(665)

165

110

Loss and total comprehensive income for the period

 

(56,115)

6,927

(49,188)

(13,561)

(25,853)

Loss per share

 

 

 

 

 

 

Basic and diluted for the period

 

(34.97)p

4.37p

(30.60)p

(14.06)p

(22.80)p

 

 

 

 

 

 

 

 

 

 

IFRS Group Statement of Financial Position

At 30 June 2021 (restated)

 

 

At

30 June

2021

At

30 June

2021

At

30 June

2021

At

30 June

2020

At

31 December

2020

 

 

Reported

Adjustment

Restated

Reported

Reported

 

 

£000

£000

£000

£000

£000

Assets

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

 

 

 

 

 

- Owned assets

 

3,229

-

3,229

4,150

3,659

- Right-of-use assets

 

752

-

752

911

835

Intangible assets

 

13,780

-

13,780

14,181

14,025

Taxation receivables

 

180

-

180

191

177

 

 

17,941

-

17,941

19,433

18,696

Current assets

 

 

 

 

 

 

Inventories

 

305

-

305

212

291

Trade and other receivables

 

2,980

-

2,980

2,046

3,223

Taxation receivables

 

5,675

-

5,675

8,228

4,436

Cash and cash equivalents

 

20,746

-

20,746

20,746

8,775

 

 

29,706

-

29,706

20,513

16,725

Total assets

 

47,647

-

47,647

39,946

35,421

Liabilities

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 

6,962

-

6,962

6,423

6,379

Lease liabilities

 

74

-

74

73

73

 

 

7,036

-

7,036

6,496

6,452

Non-current liabilities

 

 

 

 

 

 

Lease liabilities

 

936

-

936

1,027

986

Liabilities on warrants and options

 

-

11,503

11,503

-

-

Deferred tax

 

12

-

12

966

13

 

 

948

11,503

12,451

1,993

999

Total liabilities

 

7,984

11,503

19,487

8,489

7,451

Net assets

 

39,663

(11,503)

28,160

31,457

27,970

Capital and reserves

 

 

 

 

 

 

Share capital

 

451

-

451

274

329

Share premium

 

159,937

25,734

185,671

130,186

136,278

Merger reserve

 

958

-

958

958

958

Translation reserve

 

(110)

-

(110)

611

555

Other reserve

 

(864)

-

(864)

(864)

(864)

Share-based payment reserve

 

47,488

(44,164)

3,324

1,010

3,497

Retained earnings

 

(168,197)

6,927

(161,270)

(100,718)

(112,783)

Total equity

 

39,663

(11,503)

28,160

31,457

27,970

 

 

 

IFRS Group Cash Flow Statement

For the six months to 30 June 2021 (restated)

 

 

Unaudited

six months

ended

30 June

2021

Unaudited

six months

ended

30 June

2021

Unaudited

six months

ended

30 June

2021

Unaudited

six months

ended

30 June

2020

Audited

Year to

31 December

2020

 

 

Reported

Adjustment

Restated

Reported

Reported

 

 

£000

£000

£000

£000

£000

Loss after taxation

 

(55,450)

6,927

(48,523)

(13,726)

(25,963)

Adjustments for:

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

446

-

446

508

1,003

Amortization of intangible assets

 

74

-

74

110

203

Loss on disposal of property, plant and equipment

 

40

-

40

-

-

Lease liabilities included in the Income Statement

 

-

-

-

68

135

Finance income

 

 

 

 

 

 

- Other

 

(2)

-

(2)

(5)

(5)

- Fair value adjustment of warrants and options

 

-

(6,927)

(6,927)

-

-

Finance expense

 

83

-

83

88

173

Expense on issue of shares

 

-

-

-

1,498

-

Share based compensation

 

44,121

-

44,121

675

3,334

Cash flows from operations before movements in working capital

 

(10,688)

-

(10,688)

(10,784)

(21,120)

Changes in working capital:

 

 

 

 

 

 

Increase in inventories

 

(14)

-

(14)

(14)

(93)

Decrease/(increase) in trade and other receivables

 

243

-

243

(1,037)

(2,106)

(Increase)/decrease in taxation receivables

 

(1,238)

-

(1,238)

(2,111)

1,697

Increase/(decrease) in trade and other payables

 

216

-

216

19

(1,052)

Cash outflow from operating activities

 

(11,481)

-

(11,481)

(13,927)

(22,674)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(117)

-

(117)

(160)

(163)

Purchase of software and other intangibles

 

-

-

-

(15)

(15)

Net cash outflow from investing activities

 

(117)

-

(117)

(175)

(178)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issues of ordinary share capital

 

27,904

-

27,904

22,000

29,741

Expenses on issue of shares

 

(4,217)

-

(4,217)

(1,498)

(1,594)

Lease liability payments

 

(37)

-

(37)

(126)

(188)

Interest received

 

2

-

2

5

5

Interest paid

 

(83)

-

(83)

(88)

(173)

Net cash inflow from financing activities

 

23,569

-

23,569

20,293

27,791

Increase in cash and cash equivalents

 

11,971

-

11,971

6,191

4,939

Cash and cash equivalents at the start of the year

 

8,775

-

8,775

3,836

3,836

Cash and cash equivalents at the end of the period

 

20,746

-

20,746

10,027

8,775

 

 

 

 

 

 

 

 

 

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