TIDMDDDD
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$) and the Company's functional currency
(GBPGBP) together with the cashless exercise features, the warrants
and units are to be determined as liabilities. Therefore, the
Company has decided to reassess its accounting policy, changing the
reporting of the warrants and units to liabilities in its restated
financials. The restated IFRS financial statements are set out
below. The effect on IFRS reporting are as follows:
-- Income Statement: Restated comprehensive loss of (GBP49.2)
million compared to (GBP56.1) million as previously reported. This
is a reduction in comprehensive loss of GBP6.9 million due to the
change in fair value of the warrants as of June 30, 2021
-- Balance Sheet: Reduction in equity and net assets of GBP11.5
million, offset by an increase in liabilities of GBP11.5
million
GAAP Statements
As previously reported under GAAP, the Company had concluded
that the warrants and units were indexed to its own stock and were
equity based. According to Accounting Standards Codification "ASC"
815-40-15-71, equity linked financial instruments issued with a
strike price denominated in a currency (USD$) different than the
Company's functional currency (GBPGBP) 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(R), 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(R) (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(R) 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 Unaudited Unaudited Unaudited
six months six months six months six months Audited
ended ended ended ended Year to
30 June 30 June 30 June 30 June 31 December
2021 2021 2021 2020 2020
Reported Adjustment Restated Reported Reported
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------ ----------- ----------- ----------- ----------- ------------
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 At At At At
30 June 30 June 30 June 30 June 31 December
2021 2021 2021 2020 2020
Reported Adjustment Restated Reported Reported
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- --------- ---------- --------- --------- ------------
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 Unaudited Unaudited Unaudited
six months six months six months six months Audited
ended ended ended ended Year to
30 June 30 June 30 June 30 June 31 December
2021 2021 2021 2020 2020
Reported Adjustment Restated Reported Reported
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- ----------- ----------- ----------- ----------- ------------
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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