Consolidated Statement of Cash Flows

for the year ended 31 December 2022

 

		2022		2021
	Notes	£		£
Operating activities
Loss after tax		(1,029,261)		(1,544,346)
Finance expenditure and other income		(1)		(677)
Share based payment charge		23,999		16,665
Taxation credit		(163,998)		(298,267)
Operating loss before changes in working capital		(1,169,261)		(1,826,625)
Movements in working capital:
(Increase)/decrease in trade and other receivables		(37,312)		10,745
(Decrease)/increase in trade, other payables and accruals		(134,841)		43,648
Cash used in operations		(1,341,414)		(1,772,232)
Taxation credit received		513,151		-
Net cash flows used in operating activities		(828,263)		(1,772,232)
Financing activities
Finance expenditure and other income		1		677
Proceeds of ordinary share issue		1,054,000		-
Costs of share issue		(90,233)		-
Net cash flows from financing activities		963,768		677
Net increase/(decrease) in cash and cash equivalents		135,505		(1,771,555)
Cash and cash equivalents at beginning of the year		1,784,024		3,555,579
Cash and cash equivalents at 31 December		1,919,529		1,784,024

 

 

 

Company Statement of Cash Flows

for the year ended 31 December 2022

 

		2022		2021
		£		£
Operating activities
Loss before tax		(7,226)		(63,388)
Interest		(271,772)		(228,588)
Share based payment charge		23,999		16,665
Operating loss before changes in working capital		(254,999)		(275,311)
Movements in working capital:
(Increase)/decrease in trade and other receivables		(91,440)		16,787
Increase/(decrease) in trade and other payables		5,387		(14,678)
Cash used in operations		(341,052)		(273,202)
Net cash flows used in operating activities		(341,052)		(273,202)
Investing activities
Loan receivable advancements		(400,000)		(1,600,000)
Net cash flows used in investing activities		(400,000)		(1,600,000)
Financing activities
Net proceeds of ordinary share issue		1,054,000		-
Costs of share issue		(90,233)		-
Net cash flows from financing activities		963,767		-
Net increase/(decrease) in cash and cash equivalents		222,715		(1,873,202)
Cash and cash equivalents at beginning of the year		1,538,615		3,411,817
Cash and cash equivalents at 31 December		1,761,330		1,538,615

 

 

 

Notes to the Consolidated Financial Statements

for the year ended 31 December 2022

 

1. Accounting policies

 

1.1 Reporting entity

 

N4 Pharma Plc (the "Company"), is the holding Company for N4 Pharma UK Limited ("N4 UK"), and together form the Group (the "Group"). N4 Pharma UK Limited is a specialist pharmaceutical company engaged in the development of mesoparticulate silica delivery systems to improve the cellular delivery and potency of vaccines. The nature of the business is not deemed to be impacted by seasonal fluctuations and as such performance is expected to be consistent.

 

The Company is domiciled in England and Wales and was incorporated and registered in England and Wales on 6 July 1979 as a public limited company and its shares are admitted to trading on AIM (LSE: N4P). The Company's registered office is located at 6th Floor, 60 Gracechurch Street, London, EC3V 0HR.

 

The Consolidated Financial Statements have been prepared in accordance with UK-adopted international accounting standards and applied to the Parent Company Accounts in accordance with the provisions of the Companies Act 2006.

 

The Consolidated Financial Statements are presented in Great British Pounds ("GBP" or "£"), rounded to the nearest £.

 

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Consolidated Financial Statements.

 

The Company has taken advantage of the exemption granted by Section 408 of the Companies Act 2006 from presenting its own Income Statement. The loss generated by the Company is disclosed under the Company Statement of Financial Position.

 

1.2 Measurement convention

 

The Consolidated Financial Statements are prepared on the historical cost basis, except for the following items:

 

•	Share-based payments related to investment acquisition are measured at fair value shown in the Merger Reserve.
•	Share-based payments related to employee costs are measured at fair value shown in the Statement of Comprehensive Income.
•	Share-based payments related to share issue costs are measured at fair value shown in Share Premium.
•	The associated Share Options and Warrants are measured at fair value using the Black Scholes model (see note 10).

 

1.3 Going concern

 

These Consolidated Financial Statements have been prepared on the basis of accounting principles applicable to a going concern.  The Directors consider that the Group will have access to adequate resources, to meet the operational requirements for at least 12 months from the date of approval of these Consolidated Financial Statements. For this reason, they continue to adopt the going concern basis in preparing the Consolidated Financial Statements.

 

The Group currently has no source of operating cash inflows, other than interest and grant income, and has incurred net operating cash outflows before tax for the year ended 31 December 2022 of £828,263 (2021: £1,772,232 outflow). At 31 December 2022, the Group had cash balances of £1,919,529 (2021: £1,784,024) and a surplus in net working capital (current assets, including cash, less current liabilities) of £2,088,158 (2021: £2,129,653).

 

The Group prepares regular business forecasts and monitors its projected cash flows, which are reviewed by the Board. Forecasts are adjusted for reasonable sensitivities that address the principal risks and uncertainties to which the Group is exposed, thus creating a number of different scenarios for the Board to challenge. In those cases, where scenarios deplete the Group's cash resources too rapidly, consideration is given to the potential actions available to management to mitigate the impact of one or more of these sensitivities, in particular the discretionary nature of costs incurred by the Group, in order to ensure the continued availability of funds.

 

As the Group did not have access to bank debt and future funding is reliant on issues of shares in the Parent Company, the Board has derived a mitigation plan for the scenarios modelled as part of the going concern review.

 

On the basis of this analysis, the Board has concluded that there is a reasonable expectation that the Company will have adequate resources to continue in operational existence for the foreseeable future being a period of at least 12 months from the Consolidated Statement of Financial Position date.

 

1.4 Basis of consolidation

 

The consolidated Group financial statements consist of the financial statements of the Company together with the only entity controlled by the parent company (its subsidiary), N4 UK.

 

All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial statements of N4 UK to bring the accounting policies used into line with those used by the Group.

 

All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

 

Subsidiaries are consolidated in the Group's financial statements from the date that control commences until the date that control ceases.

 

1.5 Revenue

 

The Group has not recognised any revenue to date.

 

1.6 Government grant income

 

Government grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

 

Government grants are recognised in the Consolidated Statement of Comprehensive Income on a systematic basis over the periods in which the Group recognises and expenses the related costs for which the grants are intended to compensate.

 

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in Consolidated Statement of Comprehensive Income in the period in which they become receivable, and against the associated cost.

 

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 2022 but have not had a material effect on this Consolidated Financial Information:

 

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 intended use)	1 January 2022
Amendments to IAS 37	Onerous Contracts (Cost of fulfilling a contract)	1 January 2022
Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41	Annual Improvements to IFRS Standards 2018-2020	1 January 2022

 

All new standards and amendments to standards and interpretations effective for annual periods beginning on or after 1 January 2022 that are applicable to the Group have been applied in preparing these Consolidated Financial Statements.

 

The standards and interpretations that are issued and relevant to the Group, but not yet effective, up to the date of issuance of the Consolidated Financial Statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.

 

Standard		Effective date
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 from a single transaction	1 January 2023

 

The Directors are continuing to assess the potential impact that the adoption of the standards listed above will have on the Consolidated Financial Statements for the year ended 31 December 2022.

 

1.17 Use of estimates and judgements

 

The preparation of Consolidated Financial Statements in conformity with IFRSs requires management to make certain judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses during the period.  Actual results may differ from these estimates. 

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

 

In the process of applying the Group's accounting policies, the Directors have decided the following estimates and assumptions are material to the carrying amounts of assets and liabilities recognised in the Consolidated Financial Statements.

 

Critical judgements

 

Research and development expenditure

The key judgements surrounding the Research & Development expenditure is whether the expenditure meets the criteria for capitalisation. Expenditure will only be capitalised when the recognition criteria is met and is otherwise written off to the Consolidated Statement of Comprehensive Income. The recognition criteria include the identification of a clearly defined project with separately identifiable expenditure where the outcome of the project, in terms of its technical feasibility and commercial viability, can be measured or assessed with reasonable certainty and that sufficient resources exist to complete a profitable project. In the event that these criteria are met, and it is probable that future economic benefit attributable to the product will flow to the Group, then the expenditure will be capitalised.

 

Impairment of investments and intercompany debtors

N4 UK has sustained losses and the Statement of Financial position is in deficit. The recoverability of the intercompany debtor and the cost of investment is dependent on the future profitability and success of the entity, which is in a research phase and has not therefore generated any revenue to date. Having considered research progress during the year and future prospects of N4 UK, the Directors do not consider that there are indicators of impairment in respect of these balances. This is a significant judgement.

 

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 (2021: 5). The Directors of the Group are employed by both the Company and N4 UK and as such are included in the employee figure. Total Directors remuneration is detailed in Note 14 of these Consolidated Financial Statements.

 

			2022	2021
			£	£
	Wages and Salaries		213,333	208,000
	Social security costs		17,562	16,518
			230,895	224,518

 

4. Net finance income and (expenditure)

			2022	2021
			£	£
	Interest received on financial assets measured at amortised cost		1	677
			1	677

 

5. Loss before tax

			2022	2021
			£	£
	Loss before taxation is arrived after charging:
	Fees payable to the Group's auditors for the audit of the Group's financial statements		28,640	24,675

 

 

6. Taxation

 

			2022	2021
			£	£
	Current tax
	Research and development tax credit receivable for the current period		(163,998)	(298,267)
	Adjustments in respect of prior periods		-	-
			(163,998)	(298,267)
	Deferred tax
	Origination and reversal of temporary differences		-	-
	Tax in income statement		(163,998)	(298,267)

 

The tax charge for the year can be reconciled to the loss in the Consolidated Statement of Comprehensive Income as follows:

			2022	2021
			£	£
	Loss before taxation		(1,029,261)	(1,842,613)
	Tax at the UK corporation tax rate of 19% (2021: 19%)		(195,560)	(350,096)
	Net Research and development tax credits		(163,998)	(298,267)
	Changes in unrecognised deferred tax		195,560	350,096
	Adjustments in respect of prior periods		-	-
	Tax charge for the year		(163,998)	(298,267)

 

At the year end the Group had trading losses carried forward of £9,969,504 (2021: £9,011,815) for use against future profits.  There are no other factors which may impact future tax charges.  A deferred tax asset has not been recognised on unrelieved trading losses as the timing, extent and availability of future profits is not yet certain.

 

7. Investments

 

Investment in subsidiary

 

Company

			2022	2021
	Cost		£	£
	Balance at 1 January		1,094,747	1,094,747
	Balance at 31 December		1,094,747	1,094,747

 

Details of the Company's subsidiary at 31 December 2022 are as follows:

 

		Registered Office	Principal activity	Proportion of ownership and voting rights held
	N4 Pharma UK Limited	The Mills, Canal Street, Derby, DE1 2RJ	Delivery of vaccines and therapeutics	100%

 

The accounting reference date of the subsidiary are co-terminous with that of the Company.

 

8. Trade and other receivables

 

		Group 2022	Group 2021	Company 2022	Company 2021
		£	£	£	£
	Prepayments	36,888	7,013	36,029	6,514
	VAT due	18,632	23,553	13,352	6,361
	R&D tax credits receivable	163,998	513,151	-	-
	Interest receivable	-	677	883,610	611,838
	Other debtors	27,000	13,965	59,334	4,400
		246,518	558,359	992,325	629,113

 

Loan interest receivable relates to the intra-group loan disclosed in Note 14.

 

9. Trade and other payables

 

		Group 2022	Group 2021	Company 2022	Company 2021
		£	£	£	£
	Trade payables	35,756	180,346	12,196	7,848
	Other payables	4,966	4,474	1,185	1,118
		40,722	184,820	13,381	8,966

 

 

10. Share-based payments

 

Options

 

The Company has the ability to issue options to Directors to compensate them for services rendered and recognised them to add value to the Group's longer-term share value. Equity settled share-based payments are measured at fair value at the date of grant. The fair value determined is charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the vesting period based on the Group's estimate of the number of shares that will vest.

 

The vesting period is defined as the period in which the options are unable to be exercised.  The period commences on the date the options are issued. For the options to vest, the holder must remain an employee of the group throughout the vesting period. Once the vesting period is complete the options may be exercised on any date up to the lapse date.

 

Cancellations of equity instruments are treated as an acceleration of the vesting period and any outstanding charge is recognised in full immediately.

 

Fair value is measured using a Black Scholes pricing model. The key assumptions used in the model at the grant date were adjusted based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioral considerations.

 

As at 31 December 2022, there were 7,046,513 (2021: 7,046,513) options in existence over ordinary shares of the Company.  Options in existence during the current and/or previous financial year are as follows:

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 2022 was 4.93 years (2021: 5.93 years).

 

Each option entitles the holder to subscribe for one ordinary share in the Company. Options do not confer any voting rights on the holder.

 

An amount of £12,006 has been recognised in the Consolidated Statement of Comprehensive Income and in the Share Option Reserve in relation to the share options (2021: £16,665).

 

The aggregate fair value of the share options in issue was £91,961 (2021 £79,955), with amounts recorded at each reporting date being as follows:

 

			2022	2021
			£	£
	2015 Options		18,492	18,492
	2017 Options		26,884	26,884
	2019 Options		22,793	19,861
	2020 Options		23,792	14,718
			91,961	79,955

 

Warrants

 

As part of the placing in November 2022 which raised £1,054,000 before fees and expenses, the Company issued 3,162,000 warrants at an exercise price of 2p per warrant to the Company's brokers on the transaction as part of their fees.

 

The warrants entitle holders to subscribe for new ordinary shares at any time in the period of three years following the grant of the warrants. The expiry date for the warrants is 23 November 2025.

 

Fair value is measured using a Black Scholes pricing model.

 

An amount of £11,993 has been recognised in the Share Premium and in the Share Option Reserve in relation to the warrants (2021: £nil).

 

Date of Grant		Ordinary shares under option		Expiry Date		Exercise Price £		Fair value at 31 December 2022
								£
25.11.22		3,162,000		24.11.25		0.02		11,993

 

 

 

11. Capital and reserves

 

	Issued, allotted and fully paid		2022	2021
			£	£
	233,780,349 Ordinary Shares of 0.4p each (2021: 181,080,349)		935,121	724,321
	137,674,431 Deferred Shares of 4p each (2021: 137,674,431)		5,506,977	5,506,977
	279,176,540 Deferred Shares of 0.99p each (2021: 279,176,540)		2,763,848	2,763,848
			9,205,946	8,995,146

 

All ordinary shares rank equally in all respects, including for dividends, shareholder attendance and voting rights at meetings, on a return of capital and in a winding-up.

 

Authorised ordinary shares at 31 December 2022 totalled 334,682,497 (2021:334,682,497).

 

During the year 52,700,000 new ordinary shares of 0.4p each were issued through two placings in November 2022 at a share price of 2p per share.

 

The 137,674,431 deferred shares of 4p, have no right to dividends nor do the holders thereof have the right to receive notice of or to attend or vote at any general meeting of the Company. On a return of capital or on a winding up of the Company, the holders of the deferred shares shall only be entitled to receive the amount paid up on such shares after the holders of the ordinary shares have received their return on capital.

 

The 279,176,540 deferred shares of 0.99p shall be entitled to receive a special dividend, which is payable upon the repayment to the Company of any amount owed under certain loan agreements, after which the Company shall, in priority to any distribution to any other class of share, pay to the holders of the Special Deferred Shares an aggregate amount equal to the amount repaid pro rata according to the number of such shares paid up as to their nominal value held by each shareholder. They shall be entitled to no other distribution save for a special dividend and shall not be entitled to receive notice of or attend or vote at a general meeting of the Company. On a return of capital on a winding up of the Company, they shall only be entitled to receive the amount paid up on such shares up to a maximum of 0.9 pence per share after the holders of the Ordinary Shares and the Deferred Shares have received their return on capital.

 

Reserves

The equity structure presented in the Consolidated Financial Statements reflects the equity structure of the Group, including the equity instruments issued as part of the Reverse Takeover transaction which occurred in 2017 and followed accounting treatment in accordance with IFRS 2. 

 

The reverse acquisition reserve and the merger reserve are derived as part of the Reverse Takeover transaction and the balances within these reserves have had no movement since the point of the Reverse takeover in 2017.

 

Share premium reserve

The share premium reserve comprises the excess of consideration received over the par value of the shares issued, plus the nominal value of share capital at the date of redesignation at no par value.

 

Share option reserve

The share option reserve comprises the fair value of options granted, less the fair value of lapsed and expired options.

 

Retained earnings

Retained earnings comprises of accumulated results of the Group to date.

 

12. Earnings per share

 

The calculation of basic loss per share at 31 December 2022 was based on the loss of £1,029,261 (2021: £1,544,346), and a weighted average number of ordinary shares outstanding of 186,422,541 (2021:181,080,349), calculated as follows:

 

			2022	2021
			£	£
	Losses attributable to ordinary shareholders		(1,029,261)	(1,544,346)
	Weighted average number of ordinary shares
	Issued ordinary shares at 1 January		181,080,349	181,080,349
	Effect of shares issued during the year		5,342,192	-
	Weighted average number of shares at 31 December		186,422,541	181,080,349

 

			2022 pence per share	2021 pence per share
	Basic loss per share		(0.55)	(0.85)

 

Diluted loss per share

 

Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potential dilutive shares, namely share options and warrants. The calculation of diluted loss per share at 31 December 2022 was based on the loss of £1,029,261 (31 December 2021: £1,544,346), and a weighted average number of ordinary shares outstanding of 186,422,541 (2021: 181,080,349).

 

			2022 pence per share	2021 pence per share
	Diluted loss per share		(0.55)	(0.85)

 

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 £2,002,049 (2021: £2,342,383), being the total of the carrying amount of financial assets, shown in the Consolidated Statement of Financial Position.

 

(b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

 

Group:

Financial liabilities	Carrying amount	Contractual cash flows	6 months or less	6-12 months	1 -2 years
	£	£	£	£	£
31 December 2022
Trade and other payables	40,722	40,722	40,722	-	-
31 December 2021
Trade and other payables	184,820	184,820	184,820	-	-

 

Company:

Financial liabilities	Carrying amount	Contractual cash flows	6 months or less	6-12 months	1 -2 years
	£	£	£	£	£
31 December 2022
Trade and other payables	13,381	13,381	13,381	-	-
31 December 2021
Trade and other payables	8,966	8,966	8,966	-	-

 

(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:		2022 £	2021 £
	Variable rate instruments
	Cash and cash equivalents		1,919,529	1,784,024

 

 

 

			Carrying amount
	Company:		2022 £	2021 £
	Variable rate instruments
	Cash and cash equivalents		1,761,330	1,538,615

 

 

 

Cash flow sensitivity analysis for variable rate instruments

The Group's interest-bearing assets at the reporting date were invested with financial institutions in the United Kingdom with a S&P rating of A2 and comprised solely of bank accounts.

 

A change in interest rates would have increased/(decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. This analysis is performed on the same basis for 2021.

 

 

	Group:	2022		2021
		Profit or loss		Profit or loss
		100 bp increase	100 bp decrease	100 bp increase	100 bp decrease
	Variable rate instruments	19,195	(19,195)	17,840	(17,840)

 

 

 

	Company:	2022		2021
		Profit or loss		Profit or loss
		100 bp increase	100 bp decrease	100 bp increase	100 bp decrease
	Variable rate instruments	17,613	(17,613)	15,386	(15,386)

 

 

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.

 

			2022	2021
			£	£
	Short-term employee benefits		230,895	224,518
	Share based payments		12,006	16,665
			242,901	241,183

 

Directors' remuneration and interests

 

The below remuneration relates to the Directors of the Group.

 

2022	Remuneration			Interests
Director	Cash-based payments	Share-based payments	Totals	Shares	Options
	£	£	£	No.	No.
Nigel Theobald (Chief Executive Officer)	77,500	-	77,500	16,981,319	-
David Templeton	46,500	4,537	51,037	-	1,434,286
Luke Cairns	41,333	4,537	45,870	142,857	2,109,588
Christopher Britten	24,000	1,466	25,466	-	717,143
John Chiplin	24,000	1,466	25,466	-	717,143
	213,333	12,006	225,339	17,124,176	4,978,160

 

 

 

2021	Remuneration			Interests
Director	Cash-based payments	Share-based payments	Totals	Shares	Options
	£	£	£	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

 

No contributions are paid by the Group to a pension scheme on behalf of the Directors.

 

Nigel Theobald is the Group's highest paid director (2021: Nigel Theobald).  His remuneration in each year is disclosed above. 

 

N4 Pharma PLC has a loan receivable from N4 Pharma UK Limited at 31 December 2022 of £5,659,000 (2021: £5,259,000). It is repayable in December 2025, accrues interest at a rate of 5% and is unsecured.

 

There are no further related parties identified. There is no ultimate controlling party of the Company or Group.

 

15. Subsequent events

 

There have been no material events subsequent to the Consolidated Statement of Financial Position date that require adjustment or disclosure in these Consolidated Financial Statements.