☐
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2016
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ______________ to _______________
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☐
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SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this shell company report_________________
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Title of each class
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Name of each exchange on which
registered |
Ordinary Shares, nominal value 005p each
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American Depositary Shares, each representing two ordinary shares
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NASDAQ Capital Market
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Large accelerated filer
☐
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Accelerated filer
☐
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Non-accelerated filer
☒
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United States GAAP
☐
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International Financial Reporting Standards as issued by the International Accounting Standards Board
☒
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Other
☐
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PART I
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6
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6
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6
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38
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71
|
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71
|
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83
|
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96
|
|
98
|
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99
|
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101
|
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105
|
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106
|
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PART II
|
|
|
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108
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108
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109
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ITEM 16. [RESERVED]
|
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110
|
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111
|
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111
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111
|
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111
|
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112
|
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112
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112
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PART III
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112
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112
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113
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116
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·
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Phase I
clinical trials involve the assessment of the safety, pharmacodynamics and pharmacokinetics of a drug candidate in a small group of human subject (typically 20 to 100 patients).
|
|
·
|
Phase Ia
is a Phase I single ascending dose study, where a small number of participants receive a single dose, before ascending to the next dose once safety is determined.
|
|
·
|
Phase Ib
is a Phase I multiple ascending dose study, where a number of participants receive multiple low doses before escalating the dose for further groups to a predetermined level.
|
|
·
|
Phase II
clinical trials involve the assessment in patients of a drug to determine its safety, dose range and preliminary efficacy (typically 100 to 300 patients).
|
|
·
|
Phase IIa
is a form of Phase II study designed specifically to assess dosing requirements.
|
|
·
|
Phase IIb
is a form of Phase II study specifically designed to study efficacy.
|
|
·
|
Phase III
is a clinical trial involving the assessment of the efficacy and safety of a drug, usually in comparison with a marketed product or a placebo, in the patient population for which it is intended (typically 1,000 to 3,000 patients).
|
· |
our estimates regarding losses, expenses, future revenues, capital requirements and needs for additional financing;
|
· |
our ability to successfully test, manufacture, produce or commercialize products for conditions using the nanoparticle and sustained release drug delivery platforms;
|
· |
the successful commercialization and manufacturing of our licensed products, products originally licensed to Midatech US, and any future product we may commercialize;
|
· |
the success and timing of our preclinical studies and clinical trials;
|
· |
shifts in Midatech’s business and commercial strategy;
|
· |
the filing and timing of regulatory filings, including Investigational New Drug applications, with respect to any of our products and the receipt of any regulatory approvals;
|
· |
the anticipated medical benefits of our products;
|
· |
the difficulties in obtaining and maintaining regulatory approval of our product candidates, and the labeling under any approval we may obtain;
|
· |
the success and timing of the potential commercial development of our product candidates and any product candidates we may acquire in the future;
|
· |
our plans and ability to develop and commercialize our product candidates and any product candidates we acquire in the future;
|
· |
the rate and degree of market acceptance of any of our product candidates;
|
· |
the successful development of our commercialization capabilities, including sales and marketing capabilities;
|
· |
obtaining and maintaining intellectual property protection for our product candidates and our proprietary technology;
|
· |
the success of competing therapies and products that are or become available;
|
· |
the success of any future acquisitions;
|
· |
the difficulties of integrating DARA’s former business, and the business of any future acquisitions, into our own;
|
· |
the potential we will incur financial obligations to former DARA stockholders;
|
· |
the outcome of the Company
’
s remediation plan and approach to the material weaknesses in internal control over financial reporting;
|
· |
the impact of government laws and regulations;
|
· |
regulatory, economic and political developments in the United Kingdom, the European Union, the United States and other foreign countries;
|
· |
the difficulties doing business internationally;
|
· |
the ownership of our Ordinary Shares and Depositary Shares;
|
· |
our failure to recruit or retain key scientific or management personnel or to retain our executive officers;
|
· |
the impact and costs and expenses of any litigation we may be subject to now or in the future; and
|
· |
the performance of third parties, including joint venture partners, our sales force, our collaborators, third-party suppliers and parties to our licensing agreements.
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A.
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Selected Financial Data.
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(£’s in thousands, except share and per share data; all from
continuing operations) |
As of and for the
Year Ended
December 31,
|
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
Consolidated Statement of Comprehensive Income Data:
|
||||||||||||
Revenue
|
6,376
|
775
|
25
|
|||||||||
Loss from operations
|
(30,586
|
)
|
(12,918
|
)
|
(9,687
|
)
|
||||||
Loss before tax
|
(29,322
|
)
|
(11,232
|
)
|
(9,840
|
)
|
||||||
Loss for the year attributable to the owners of the parent
|
(20,162
|
)
|
(10,099
|
)
|
(8,822
|
)
|
||||||
Total other comprehensive income / (loss), net of tax
|
3,228
|
399
|
(151
|
)
|
||||||||
Total comprehensive loss attributable to the owners of the parent
|
(16,934
|
)
|
(9,700
|
)
|
(8,973
|
)
|
||||||
Loss Per Share Data:
|
||||||||||||
Basic and diluted loss per ordinary share-pence
|
(56p
|
)
|
(36p
|
)
|
(98p
|
)
|
||||||
Cash dividends declared per ordinary share
|
-
|
-
|
-
|
|||||||||
Weighted average number of ordinary shares used
|
36,072,752
|
28,229,814
|
9,026,347
|
|||||||||
|
||||||||||||
Consolidated Statement of Financial Position Data:
|
||||||||||||
Non-Current assets
|
34,386
|
43,710
|
15,035
|
|||||||||
Current assets
|
22,303
|
20,331
|
31,628
|
|||||||||
Cash and cash equivalents
|
17,608
|
16,175
|
30,325
|
|||||||||
Total assets
|
56,689
|
64,041
|
46,663
|
|||||||||
Non-Current liabilities
|
1,620
|
8,055
|
1,842
|
|||||||||
Borrowings
|
1,620
|
1,508
|
1,488
|
|||||||||
Current liabilities
|
9,345
|
9,099
|
2,832
|
|||||||||
Total liabilities
|
10,965
|
17,154
|
4,674
|
|||||||||
Total equity
|
45,724
|
46,887
|
41,989
|
|||||||||
Total equity and liabilities
|
56,689
|
64,041
|
46,663
|
|
High ($)
|
Low ($)
|
||||||
Recent Monthly Data
|
||||||||
March 2017
|
1.2583
|
1.2158
|
||||||
February 2017
|
1.2643
|
1.2427
|
||||||
January 2017
|
1.2620
|
1.2118
|
||||||
December 2016
|
1.2708
|
1.2222
|
||||||
November 2016
|
1.2546
|
1.2218
|
||||||
October 2016
|
1.2840
|
1.2155
|
|
Average
Rate ($) (1)
|
|||
Annual Data (12-month period ended December 31)
|
||||
2016
|
1.3444
|
|||
2015
|
1.5250
|
|||
2014
|
1.6461
|
|||
2013
|
1.5667
|
|||
2012
|
1.5924
|
|
(1)
|
The average rates were calculated by taking the simple average of the daily noon buying rates, as published by the Federal Reserve Bank of New York, on the last day of each month during the period.
|
B.
|
Capitalization and Indebtedness
|
C.
|
Reasons for the Offer and Use of Proceeds
|
D.
|
Risk Factors
|
|
·
|
successfully complete development activities, including preclinical development and clinical trials for its product candidates;
|
|
·
|
complete and submit new drug applications to the European Medicines Agency (the
“
EMA
”
), the Medicines and Healthcare Products Regulatory Agency in the United Kingdom (the
“
MHRA
”
), the United States Food and Drug Administration (the
“
FDA
”
), and any other foreign regulatory authorities, and obtain regulatory approval for testing and for products for which there is a commercial market;
|
|
·
|
set a commercially viable price for its products;
|
|
·
|
obtain commercial qualities of its products at acceptable cost levels;
|
|
·
|
develop a commercial organization capable of sales, marketing and distribution in its markets; and
|
|
·
|
obtain adequate reimbursement from third-parties, including government, departments and healthcare payors.
|
|
·
|
the success of products acquired in connection with the acquisition of DARA or any additional acquisitions and the commercialization of other assets;
|
|
·
|
the initiation, progress, timing, costs and results of clinical trials for its product candidates and future product candidates it may in-license or acquire;
|
|
·
|
the attainment of milestones and the need to make any royalty payments on any of its product candidates or any other future product candidates;
|
·
|
the number and characteristics of product candidates it in-license or acquires and develop;
|
|
·
|
the outcome, timing and cost of regulatory approvals by the EMA, the MHRA, the FDA and any other comparable foreign regulatory authorities, including the potential for such regulatory authorities to require that Midatech perform more studies than those it currently expects;
|
|
·
|
the cost of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights;
|
|
·
|
the effect of competing technological and market developments; and
|
|
·
|
the cost of establishing sales, marketing and distribution capabilities for any product candidates for which it may receive regulatory approval.
|
|
·
|
$0.11 per CVR if gross sales of Oravig and Gelclair, two drugs acquired in the acquisition of DARA, equal or exceed $15.0 million but are less than $16.5 million, in the aggregate, for the fiscal year ending December 31, 2017;
|
|
·
|
$0.13 per CVR if gross sales of Oravig and Gelclair equal or exceed $16.5 million but are less than $18.0 million, in the aggregate, for the fiscal year ending December 31, 2017; or
|
|
·
|
$0.16 per CVR if gross sales of Oravig and Gelclair equal or exceed $18.0 million, in the aggregate, for the fiscal year ending December 31, 2017.
|
|
·
|
delay or failure in reaching agreement with the applicable regulatory authorities on a trial design that Midatech is able to execute;
|
|
·
|
delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical study;
|
|
·
|
delay or failure in reaching agreement on acceptable terms with prospective contract research organizations (
“
CROs
”
), and clinical trial providers and sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
|
|
·
|
delay or failure in obtaining institutional review board approval (
“
IRB
”
) or the approval of other reviewing entities, including regulatory authorities, to conduct a clinical trial at each site;
|
|
·
|
withdrawal of clinical trial sites from Midatech
’
s clinical trials as a result of changing standards of care or the ineligibility of a site to participate in Midatech
’
s clinical trials;
|
|
·
|
delay or failure in recruiting and enrolling suitable subjects to participate in a trial;
|
|
·
|
delay or failure in having subjects complete a trial or return for post-treatment follow-up;
|
|
·
|
clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial;
|
|
·
|
inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same indication;
|
|
·
|
failure of Midatech
’
s third party clinical trial managers to satisfy their contractual duties or meet expected deadlines;
|
|
·
|
failure to receive the recommendation of the United Kingdom National Institute for Health and Care Excellence (
“
NICE
”
);
|
|
·
|
delay or failure in adding new clinical trial sites;
|
|
·
|
ambiguous or negative interim results, or results that are inconsistent with earlier results;
|
|
·
|
feedback from the EMA, the MHRA, the FDA, the IRB, data safety monitoring boards, or other regulatory authority, or results from earlier stage or concurrent preclinical and clinical studies, which might require modification to the protocol;
|
|
·
|
decisions by the EMA, the MHRA, the FDA, the IRB, other regulatory authorities, or Midatech, or recommendation by a data safety monitoring board or other regulatory authority, to suspend or terminate clinical trials at any time for safety issues or for any other reason;
|
|
·
|
unacceptable risk-benefit profile or unforeseen safety issues or adverse side effects;
|
|
·
|
failure to demonstrate a benefit from using a drug;
|
|
·
|
manufacturing, including manufacturing or obtaining from third parties sufficient quantities of a product candidate for use in clinical trials; or
|
|
·
|
changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.
|
|
·
|
disagreement with the design or implementation of Midatech
’
s clinical trials;
|
|
·
|
failure to demonstrate that a product candidate is safe and effective for its proposed indication;
|
|
·
|
failure of clinical trials to meet the level of statistical significance required for approval;
|
|
·
|
failure to demonstrate that a product candidate
’
s clinical and other benefits outweigh its safety risks;
|
|
·
|
disagreement with Midatech
’
s interpretation of data from preclinical studies or clinical trials;
|
|
·
|
the insufficiency of data collected from clinical trials of Midatech
’
s product candidates to support the submission and filing of a new drug application or other submission or to obtain regulatory approval;
|
|
·
|
disapproval of the manufacturing processes or facilities of third party manufacturers, if any, with whom Midatech contracts for clinical and commercial supplies; or
|
|
·
|
changes in the approval policies or regulations that render Midatech
’
s preclinical and clinical data insufficient for approval.
|
|
·
|
Midatech may suspend marketing of such product;
|
|
·
|
regulatory authorities may withdraw approvals of such product or may require additional warnings on the label;
|
|
·
|
Midatech may be required to develop a Risk Mitigation Strategy for each product or, if a strategy is already in place, to incorporate additional requirements;
|
|
·
|
Midatech may be required to conduct post-market studies; and
|
|
·
|
Midatech could be sued and held liable for harm caused to subjects or patients.
|
|
·
|
issue warning letter or untitled letters;
|
|
·
|
mandate modifications to, or the withdrawal of, marketing and promotional materials or require Midatech to provide corrective information to healthcare practitioners;
|
|
·
|
require Midatech to enter into a consent decree, which can include the imposition of various fines against Midatech, reimbursements of inspection costs, required due dates for specific actions and penalties for noncompliance;
|
|
·
|
seek an injunction or impose civil or criminal penalties or monetary fines;
|
|
·
|
suspend or withdraw its regulatory approval;
|
|
·
|
suspend any ongoing clinical studies;
|
|
·
|
refuse to approve pending applications or supplements to applications filed;
|
|
·
|
suspend or impose restrictions on operations, the products, manufacturing or Midatech itself;
|
|
·
|
require Midatech to change its product labeling; or
|
|
·
|
seize or detain products, refuse to permit the import or export of products or require Midatech to initiate a product recall.
|
|
·
|
Zuplenz, the only FDA-approved oral soluble film indicated for moderately emetogenic chemotherapy-induced nausea and vomiting (
“
CINV
”
), radiotherapy-induced nausea and vomiting (
“
RINV
”
), and post-operative nausea and vomiting (
“
PONV
”
);
|
|
·
|
Gelclair, an FDA-cleared product indicated for the management and relief of pain due to oral mucositis;
|
|
·
|
Oravig, an orally dissolving buccal tablet approved for oral thrush; and
|
|
·
|
Soltamox, an FDA-approved oral liquid solution of tamoxifen citrate, for the prevention of breast cancer.
|
|
·
|
the prevalence and severity of any side effects;
|
|
·
|
the efficacy and potential advantages of alternative treatments;
|
|
·
|
price;
|
|
·
|
the willingness of physicians to prescribe Midatech
’
s products; and
|
|
·
|
sufficient coverage or reimbursement by the Centers for Medicare and Medicaid Services and third party payers.
|
|
·
|
Directive 2001/83/EC of 6 November 2001 on the European Community code as regards medicinal products for human use;
|
|
·
|
Commission Directive 2003/94/EC of October 8, 2003 enforcing principles and guidelines of good manufacturing practice as they related to medicinal products and investigational medicinal products for human use;
|
|
·
|
Commission Directive 2005/28/EC of April 8, 2005 establishing the principles and guidelines for good clinical practice relating to investigational medicinal products for human use, and the authorization requirements for the manufacturing or import thereof; and
|
·
|
Council Directive 89/105/EEC, of December 21, 1988, addressing the transparency of measures that regulate pricing of medicinal products for human use and their inclusion in national health insurance systems.
|
|
·
|
the scope of Midatech
’
s patents provides and will provide Midatech with exclusivity with respect to any or all of its products and technologies, as well as any other technologies and/or products that address the same problems as Midatech
’
s technologies and products by a different means, whether in the same manner as Midatech or not;
|
|
·
|
pending or future patent applications will be issued as patents;
|
|
·
|
Midatech
’
s patents, and/or those patents to which Midatech is licensed, are and will remain valid and enforceable and will not be subject to invalidity or revocation proceedings and that such proceedings will not result in a complete or partial loss of rights;
|
|
·
|
Midatech
’
s entitlement to exploit patents from time to time (including patents registered solely in Midatech or its affiliates
’
name or in the joint names of Midatech or an affiliate and a third party or patents which are licensed to Midatech) is and will be sufficient to protect Midatech
’
s core intellectual property rights against third parties, its commercial activities from competition or to support comprehensively its ability to develop and market its proposed products either now or in the future;
|
|
·
|
the lack of any particular patents or rights to exploit any particular patents, and the scope of Midatech
’
s patents, will not have a material adverse effect on Midatech
’
s ability to develop and market its proposed products, either now or in the future;
|
|
·
|
Midatech has or will have the resources to pursue any infringer of: (i) patents registered in its name (whether solely or jointly with a third party) from time to time; or (ii) patents licensed to Midatech where Midatech or an affiliate has the financial responsibility to bring such infringement actions pursuant to the relevant license agreement;
|
|
·
|
Midatech will develop technologies or products which are patentable, either alone or in conjunction with third parties;
|
|
·
|
the ownership, scope or validity of any patents registered in Midatech
’
s name (either solely or jointly) from time to time will not be challenged by third parties, including parties with whom Midatech, or any affiliate, has entered into collaboration projects or co-ownership arrangements and that any such challenge will not be successful;
|
|
·
|
any patent or patent application owned solely or jointly by Midatech will not be challenged on grounds that Midatech failed to identify the correct inventors or that Midatech failed to comply with its duty of disclosure to the United States Patent and Trademark Office or any equivalent office in a foreign jurisdiction having a disclosure requirement;
|
|
·
|
any issued patent in Midatech
’
s sole or joint name from time to time will not be challenged in one or more post-grant proceedings, including but not limited to
inter partes
review, derivation proceedings, interferences, and that like; and that any such challenge will not result in a complete or partial loss of rights to such issued patent or patents;
|
|
·
|
any patent applications in Midatech
’
s sole or joint name from time to time will not be opposed by any third party, including parties to collaboration, co-existence and any other contractual relationship with Midatech or any of its members;
|
|
·
|
the license agreements between Midatech and third parties are and will be valid and subsisting in the future or until their expiry dates, and that Midatech has complied with its contractual obligations under the license agreements;
|
|
·
|
all intellectual property capable of being commercialized that is or has been generated pursuant to collaboration agreements between Midatech and third parties will be or has been identified;
|
|
·
|
all intellectual property generated pursuant to collaboration agreements and to which Midatech has a contractual entitlement or generated by employees has been lawfully assigned into Midatech
’
s sole name (or to one of its subsidiaries);
|
|
·
|
in respect of all intellectual property generated pursuant to a collaboration agreement between Midatech and a third party to which Midatech and that third party have a joint contractual entitlement, that such intellectual property has been lawfully assigned into joint names and the rights between Midatech and that third party are properly regulated by a co-ownership agreement; and
|
|
·
|
beyond contractual warranties, the licensors of intellectual property to Midatech or affiliate own the relevant patents and that those patents have not and will not be the subject of, or subject to, infringement, invalidity or revocation actions.
|
|
·
|
decreased demand for any product candidates or product that Midatech may develop;
|
|
·
|
termination of clinical trial sites or entire trial programs;
|
|
·
|
significant negative media attention and injury to Midatech
’
s reputation;
|
|
·
|
withdrawal of clinical trial participants;
|
|
·
|
significant costs to defend the related litigation;
|
|
·
|
substantial monetary awards to trial subjects or patients;
|
|
·
|
loss of revenue;
|
|
·
|
diversion of management and scientific resources from Midatech
’
s business operations; and
|
|
·
|
the inability to commercialize any products that Midatech may develop.
|
|
·
|
have economic or business interests or goals that are inconsistent with those of Midatech and be in a position to take or influence actions contrary to Midatech
’
s interests and plans, which may create impasses on decisions and affect Midatech
’
s ability to implement its strategies;
|
|
·
|
veto proposals in respect of joint venture operations;
|
|
·
|
be unable or unwilling to fulfill their obligations under the joint venture or other agreements; or
|
|
·
|
experience financial or other difficulties.
|
|
·
|
the federal healthcare anti-kickback statute prohibits any person from, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchasing, leasing, ordering or arranging for or recommending of any good or service for which payment may be made, in whole or in part, under federal and state healthcare programs such as Medicare and Medicaid. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand, and prescribers, purchasers, and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly and practices that involve remuneration to those who prescribe, purchase, or recommend pharmaceutical and biological products, including certain discounts, or engaging consultants for as speakers or consultants, may be subject to scrutiny if they do not fit squarely within the exemption or safe harbor. Midatech
’
s practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability. Moreover, there are no safe harbors for many common practices, such as educational and research grants or patient assistance programs;
|
|
·
|
the federal civil False Claims Act imposes civil penalties, and provides for whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment of government funds that are false or fraudulent, or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government, or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. In recent years, several pharmaceutical and other healthcare companies have faced enforcement actions under the federal False Claims Act for, among other things, allegedly submitting false or misleading pricing information to government health care programs and providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have faced enforcement actions for causing false claims to be submitted because of the company
’
s marketing the product for unapproved, and thus non-reimbursable, uses. In addition, violation of the federal anti-kickback statute may be actionable under the federal civil False Claims Act. Criminal prosecution is possible for making or presenting a false or fictitious or fraudulent claim to the federal government;
|
|
·
|
the federal Health Insurance Portability and Accountability Act of 1996 (
“
HIPAA
”
), as amended by the Health Information Technology for Economic and Clinical Health Act, among other things, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. HIPAA also prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services;
|
|
·
|
the federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, requires certain manufacturers of drugs, devices, biologics and medical supplies to engage in extensive tracking of payments and other transfers of value to physicians and teaching hospitals, including physician ownership and investment interests, and to publicly report such data. Pharmaceutical and biological manufacturers with products for which payment is available under Medicare, Medicaid or the State Children
’
s Health Insurance Program started tracking such payments in August 2013, and must submit a report on or before the 90th day of each calendar year disclosing reportable payments made in the previous calendar year; and
|
|
·
|
analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non
-
governmental third party payors, including private insurers. Several states also require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products in those states and to report gifts and payments to individual health care providers in those states. Some of these states also prohibit certain marketing-related activities, including the provision of gifts, meals, or other items to certain health care providers. In addition, several states require pharmaceutical companies to implement compliance programs or marketing codes.
|
|
·
|
currency exchange rate fluctuations;
|
|
·
|
restrictions on repatriation of earnings;
|
|
·
|
efforts to develop an international sales, marketing and distribution organization, which may increase Midatech
’
s expenses, divert management
’
s attention from the acquisition or development of product candidates or cause it to forgo profitable licensing opportunities in these geographies;
|
|
·
|
unexpected changes in foreign laws and regulatory requirements, including pharmaceutical regulations;
|
|
·
|
difficulty of effective enforcement of contractual provisions in local jurisdictions;
|
|
·
|
inadequate intellectual property (including confidentiality) protection in foreign countries;
|
|
·
|
trade-protection measures, import or export licensing requirements and fines, penalties or suspension or revocation of export privileges; and
|
|
·
|
changes in a specific country
’
s or a region
’
s political or economic conditions, particularly in emerging markets.
|
|
·
|
issue stock that would dilute its stockholders
’
percentage of ownership;
|
|
·
|
incur debt and assume liabilities; and
|
|
·
|
incur amortization expenses related to intangible assets or incur large and immediate write-offs.
|
|
·
|
problems integrating the purchased business, products or technologies, including the failure to achieve the expected benefits and synergies;
|
|
·
|
increases to Midatech
’
s expenses;
|
|
·
|
the failure to have discovered undisclosed liabilities of the acquired asset or company;
|
|
·
|
diversion of management
’
s attention from their day-to-day responsibilities;
|
|
·
|
harm to Midatech
’
s operating results or financial condition;
|
|
·
|
entrance into markets in which Midatech has limited or no prior experience; and
|
|
·
|
potential loss of key employees, particularly those of the acquired entity.
|
· |
the progress of preclinical development, laboratory testing and clinical trials of Midatech
’
s product candidates;
|
· |
the results from Midatech
’
s clinical programs and any future trials Midatech may conduct;
|
· |
developments in the clinical trials of potentially similar competitive products;
|
· |
EMA, FDA or international regulatory actions;
|
· |
failure of any of Midatech
’
s product candidates, if approved, to achieve commercial success;
|
· |
announcements of the introduction of new products by Midatech or its competitors;
|
· |
developments concerning intellectual property rights;
|
· |
litigation or public concern about the safety of Midatech
’
s products;
|
· |
market research and comments by securities analysts;
|
· |
actual and anticipated fluctuations in Midatech
’
s operating results;
|
· |
deviations in Midatech
’
s operating results from the estimates of securities analysts;
|
· |
rumors relating to Midatech or its competitors;
|
· |
additions or departures of key personnel;
|
· |
third party reimbursement policies;
|
· |
Brexit and any resulting economic or currency volatility;
|
· |
developments concerning current or future collaborations, strategic alliances, joint ventures or similar relationships; and
|
· |
reviews of long-term values of Midatech
’
s assets, which could lead to impairment charges that could reduce Midatech
’
s earnings.
|
|
·
|
the requirement to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies with securities registered under the Exchange Act;
|
|
·
|
the requirement to file financial statements prepared in accordance with GAAP;
|
|
·
|
the proxy rules, which impose certain disclosure and procedural requirements for proxy solicitations; and
|
|
·
|
the requirement to comply with Regulation FD, which imposes certain restrictions on the selective disclosure of material information.
|
· |
The incorrect presentation of credits for product returns, rebates, discounts and other incentives based on sales price throughout 2016 as part of cost of sales as opposed to being shown as deductions from revenue.
|
A.
|
History and Development of the Company
|
|
·
|
further expansion of the Group’s manufacturing facilities in Bilbao, Spain to enable the manufacture of material based around the Group’s sustained release technology costing £0.85 million; and
|
|
·
|
additional equipment purchased for the Group’s sustained release development facility, costing £0.24 million.
|
|
·
|
the fit-out and equipping of new laboratory and office facilities at the Group
’
s headquarters facility near Oxford, United Kingdom, costing
£
0.42 million;
|
|
·
|
an upgrade of the Group
’
s information technology infrastructure, including the acquisition of a new accounting and enterprise resource planning software, costing
£
0.14 million; and
|
|
·
|
ongoing development of commercial scale manufacturing equipment for the Group
’
s sustained release technology, costing
£
0.18 million.
|
B.
|
Business Overview
|
· |
Zuplenz
®
(ondansetron) Oral Soluble Film, the only FDA-approved oral soluble film indicated for CINV, RONV and PONV;
|
· |
Gelclair
®
bioadherent oral gel, an FDA-cleared product indicated for the management and relief of pain due to oral mucositis;
|
· |
Oravig
®
(miconazole), an orally dissolving buccal tablet approved for oral thrush;
|
· |
Soltamox
®
, an FDA-approved oral liquid solution of tamoxifen citrate, for the prevention of breast cancer;
|
· |
Ferralet® 90, a prescription iron supplement indicated for the treatment of all anemias that are responsive to oral iron therapy (co-promoted with Mission Pharmacal); and
|
· |
Aquoral, an artificial saliva spray that is intended to provide relief from chemotherapy/radiation therapy induced dry mouth (co-promoted with Mission Pharmacal).
|
|
Year ended December 31,
|
|||||||||||
(
£’
s in thousands)
|
2016
|
2015
|
2014
|
|||||||||
Revenue (United States)
|
5,850
|
677
|
--
|
|||||||||
Revenue (Europe) (1)
|
526
|
98
|
25
|
|||||||||
Grant revenue (2)
|
547
|
600
|
132
|
|||||||||
Total Revenue
|
6,923
|
1,375
|
157
|
|
_______________
|
|
(1)
|
Including the United Kingdom.
|
|
(2)
|
Grant revenue is not analyzed by geography.
|
· |
If the prepayment occurs on or prior to the first anniversary of the date of the initial credit extension, the borrowers must pay to the bank a fee of 3% of the total amount outstanding under the Loan Agreement;
|
· |
If the prepayment occurs after the first anniversary, but prior to the second anniversary, of the date of the initial credit extension, the borrowers must pay to the bank a fee of 2% of the total amount outstanding under the Loan Agreement; and
|
· |
If the prepayment occurs at any time following the second anniversary of the initial credit extension, the borrowers must pay to the bank a fee of 1% of the total amount outstanding under the Loan Agreement.
|
|
·
|
In-House Products.
Development and commercialization of products is done in-house without engaging partners to support the product. This applies particularly to oncology applications.
|
|
·
|
Partner Products.
Development and commercialization of Midatech
’
s partner-supported and licensed products where such programs can bring added value.
|
|
·
|
Acquisitions
. Acquisitions of later stage, strategic opportunities with complementary focused portfolios, such as DARA; or complementary technologies that are synergistic to that of Midatech, accelerate revenue, and are value accretive.
|
|
·
|
Establish Worldwide Commercial Organization
. Build on to Midatech
’
s United States commercial operations and establish a European commercial organization upon approval of its own product candidates.
|
|
·
|
Research and Development Collaborations
. In the near term, revenues are anticipated to be driven by collaborations such as those that currently exist and with new potential customers using Midatech
’
s technologies to address their pharmaceutical challenges.
|
|
·
|
Commercial Operations
. Midatech expects that the main growth driver in the period from 2016 to 2018 will be the Midatech US business, with sales coming from its existing commercial product portfolio.
|
|
·
|
Partner Licensing and Royalty Deals.
In the period from 2016 to 2018, revenue growth is anticipated to be supported by licensing transactions from those partnerships outlined herein, as well as new potential partnerships, with possible product royalties realized from 2018 to 2019.
|
|
·
|
In-House Products Commercialization.
In the third stage of Midatech
’
s evolution, expected to be from 2018 to 2019, Midatech
’
s own products are anticipated to reach market in the specialized orphan sector, and Midatech
’
s commercial sales organization to be deployed initially in the United States and then potentially in Europe, to drive sales and revenue growth from Midatech
’
s own product launches.
|
|
·
|
Acquisitional.
In support of and in addition to above, Midatech may from time to time seek value accretive and synergistic target companies, such as DARA, and portfolios, such as Zuplenz, that would accelerate its own product recurring revenues and profitability via products in market.
|
|
·
|
Solubility.
Carbohydrate properties of the GNP drug conjugates enable the transport of non-soluble and lipid soluble compounds to sites of disease.
|
|
·
|
Releasability.
GNP drug conjugates are designed to release the active compound inside the cell as a result of chemistry that keeps the compound stable in plasma, but dissociates and delivers the payload in the cell.
|
|
·
|
Mobility.
Due to the size and charge of the drug conjugates, compounds may be transported to sites of disease that are otherwise very difficult to reach, including across membranes, between cells and through cells to invading tumor margins.
|
|
·
|
Targetability.
Flexible functionalization of GNP chemistry and multiple binding sites provides a platform for several therapeutics and targeting agents all on a single nanoparticle which, together with solubility and mobility characteristics, may enable targeting of disease sites.
|
|
·
|
Stability.
Peptides may be stabilized by GNP drug conjugates due to the fact that the peptides have less freedom to degrade when bound to the fixed platform.
|
|
·
|
Excretability
. Due to their small size, GNP drug conjugates are believed to exit cells and become eliminated via the kidneys and liver.
|
|
·
|
Compatibility.
As a result of their inertness, biocompatibility and small size, GNP drug conjugates are believed to evade and not disturb the immune system since they are likely not recognized by such cells.
|
|
·
|
Scalability.
Midatech, as a result of having its own cGMP certified manufacturing facility, can execute rapidly, at scale, from discovery through to clinical development.
|
|
·
|
Protected.
Midatech patents and trade secrets currently secure its position within the field of GNPs.
|
|
·
|
Oncology and Endocrinology
-a lead program in acromegaly, an endocrine disorder in which the body produces too much growth hormone, and a second program in carcinoid syndrome, an oncologic disorder of neuro-endocrine tumors; and
|
|
·
|
Ophthalmology
-in uveitis (inflammation of the eye).
|
|
·
|
Acromegaly and Carcinoid Syndrome.
Octreotide is an existing, immediate-release injection product used to decrease the production of growth hormone in people suffering acromegaly. It is also the most important form of treatment for carcinoid syndrome that occurs with carcinoid tumors (hormone producing cell tumors in the body). Midatech is looking to develop a sustained release version of this product, called
“
Q-Octreotide
”
that will compete with the market leader Sandostatin (marketed by Novartis). This project is undergoing a final formulation optimization and in vivo studies, and is expected to commence a Phase I pharmacokinetic trial in humans in the first half of 2017. This may then lead to potential filings in 2017 and subsequent product sales in the United States and Europe in 2018 or 2019, depending on clinical trial outcomes. Midatech will look to partner this program in the Acromegaly indication prior to commercialization.
|
|
·
|
Uveitis.
Uveitis is an inflammatory process affecting the iris, the ciliary body, the choroid layer or all or part of these structures of the eye. Significant vision loss can occur in up to 35% of children and adults with uveitis and total blindness as a result of uveitis accounts for 10% to 15% of all cases. Cyclosporine is an immunosuppressant compound that is marketed by Allergan for use of chronic dry eye syndromes. Current treatments for uveitis such as systemic or local immunosuppressants and corticosteroids have limited efficacy and poor side effect profile. A treatment that permanently controls inflammation, with a good short- and long-term safety profile, has yet to be developed. Midatech is pursuing in-house development of
“
Q-Cyclosporin
”
sustained release treatment for uveitis. This internally funded project is in its formulation phase and is anticipated to reach clinical stage in the second half of 2017. Midatech will look to partner this program prior to the clinical development phase which is likely to be conducted through Phase Ib and Phase II studies, with marketing authorization filings potentially being approved in 2019.
|
|
·
|
concluding a license agreement with a third party in respect of any of the intellectual property rights comprising the subject matter of the agreement;
|
|
·
|
demonstrating therapeutic and/or diagnostic efficacy in an animal model derived from research sponsored by Midatech (or its affiliated companies);
|
|
·
|
demonstration of a diagnostic product in Phase I clinical trials arising from intellectual property rights; or
|
|
·
|
selling products made by Midatech, affiliated companies or licensees exploiting the intellectual property rights comprising the subject matter of the agreement which generate net sales royalties or net revenue royalties for CSIC.
|
Cumulative Sales Amount
|
|
Royalty
|
|
|
Net Sales to
€
1 million
|
|
|
6
|
%
|
Net Sales between
€
1 million and
€
9,999,999
|
|
|
5
|
%
|
Net Sales between
€
10 million and
€
99,999,999
|
|
|
4
|
%
|
Net Sales
€
100 million and above
|
|
|
3
|
%
|
|
·
|
Drug conjugate technology:
Midatech
’
s core platform is a pioneering drug conjugate delivery system based on GNPs (a class of carbohydrate-coated gold nanoparticles) combined with approved drugs for targeted release at specific organs, cells or sites of disease; and
|
|
·
|
Sustained release technology:
Midatech
’
s secondary platform (previously developed at Midatech Wales) involves the consistent and precise encapsulation of active drug compounds within polymer microspheres that are designed to release drugs and drug compounds into the body in a highly controlled manner over a prolonged period of time.
|
|
·
|
Oncology.
7 patent families, which have predicted expiration dates ranging from 2025 to 2036. These patent rights include 11 granted patents and 7 pending applications in Key Markets relating to products and methods for treating and imaging cancers. In addition to the radiative and immune-based therapies contemplated by many of these patent families, Midatech’s pipeline of GNP-drug conjugates for oncology benefits from protection by the foundation GNP patents of patent family 1.
|
|
·
|
Nanoparticle technology.
17 patent families, with expiration dates ranging from 2021 to 2036. These patent families include 50 granted patents and 48 pending patent applications in Key Markets protecting products in Midatech’s pipeline.
|
|
·
|
Sustained release technology.
11 patent families which protect devices, methods and formulations for sustained release drug delivery. Midatech’s pipeline products Q-Octreotide and Opsisporin are protected 29 granted and 16 pending international applications.
|
|
·
|
completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA
’
s good laboratory practice (
“
GLP
”
) regulations;
|
|
·
|
submission to the FDA of an investigational new drug application, which must take effect before human clinical trials may begin;
|
|
·
|
approval of clinical protocols by an independent institutional review board (
“
IRB
”
), representing each clinical site before each site may enroll subjects;
|
|
·
|
potential initiation and completion of successive clinical trials that establish safety dose ranges;
|
|
·
|
performance of adequate and well-controlled human clinical trials in accordance with good clinical practices (
“
GCP
”
) to establish the safety and efficacy of the proposed drug product for each indication;
|
|
·
|
preparation and submission to the FDA of a new drug application (
“
NDA
”
) or a biologics license application (“BLA”);
|
|
·
|
review of the submission by an FDA advisory committee, where appropriate or if applicable;
|
|
·
|
satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate to preserve the product
’
s identity, strength, quality and purity;
|
|
·
|
satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;
|
|
·
|
payment of user fees and securing FDA approval of the NDA or BLA; and
|
|
·
|
agree to comply with any post-approval requirements, including Risk Evaluation and Mitigation Strategies (
“
REMS
”
), and post-approval studies required by the FDA.
|
|
·
|
Phase I.
The drug is initially introduced into healthy human subjects or, in certain indications such as cancer, patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.
|
|
·
|
Phase II.
The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
|
|
·
|
Phase III.
The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.
|
|
·
|
restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
|
|
·
|
fines, warning letters or holds on post-approval clinical trials;
|
|
·
|
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;
|
|
·
|
product seizure or detention, or refusal to permit the import or export of products; or
|
|
·
|
injunctions or the imposition of civil or criminal penalties.
|
|
·
|
the required patent information has not been filed;
|
|
·
|
the listed patent has expired;
|
|
·
|
the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or
|
|
·
|
the listed patent is invalid, unenforceable or will not be infringed by the new product.
|
|
·
|
preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the applicable European Union Good Laboratory Practice regulations;
|
|
·
|
submission to the relevant national authorities of a clinical trial application (
“
CTA
”
) which must be approved before human clinical trials may begin;
|
|
·
|
performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed indication;
|
|
·
|
submission to the relevant competent authorities of a marketing authorization application (
“
MAA
”
) which includes the data supporting safety and efficacy as well as detailed information on the manufacture and composition of the product in clinical development and proposed labelling;
|
|
·
|
satisfactory completion of an inspection by the relevant national authorities of the manufacturing facility or facilities, including those of third parties, at which the product is produced to assess compliance with strictly enforced current cGMP;
|
|
·
|
potential audits of the non-clinical and clinical trial sites that generated the data in support of the MAA; and
|
|
·
|
review and approval by the relevant competent authority of the MAA before any commercial marketing, sale or shipment of the product.
|
|
·
|
a streamlined application procedure via a single entry point, the European Union portal;
|
|
·
|
a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures that will spare sponsors from submitting broadly identical information separately to various bodies and different member states;
|
|
·
|
a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts. Part I is assessed jointly by all member states concerned. Part II is assessed separately by each member state concerned;
|
|
·
|
strictly defined deadlines for the assessment of clinical trial application; and
|
|
·
|
the involvement of the ethics committees in the assessment procedure in accordance with the national law of the member state concerned but within the overall timelines defined by the Regulation (EU) No 536/2014.
|
|
·
|
medicinal products developed by means of one of the following biotechnological processes:
|
|
o
|
recombinant DNA technology;
|
|
o
|
controlled expression of genes coding for biologically active proteins in prokaryotes and eukaryotes including transformed mammalian cells; and
|
|
o
|
hybridoma and monoclonal antibody methods;
|
|
·
|
advanced therapy medicinal products as defined in Article 2 of Regulation (EC) No. 1394/2007 on advanced therapy medicinal products;
|
|
·
|
medicinal products for human use containing a new active substance that, on the date of effectiveness of this regulation, was not authorized in the European Union, and for which the therapeutic indication is the treatment of any of the following diseases:
|
|
o
|
acquired immune deficiency syndrome (AIDS);
|
|
o
|
cancer;
|
|
o
|
neurodegenerative disorder;
|
|
o
|
diabetes;
|
|
o
|
auto-immune diseases and other immune dysfunctions; and
|
|
o
|
viral diseases; and
|
|
·
|
medicinal products that are designated as orphan medicinal products pursuant to Regulation (EC) No 141/2000.
|
|
·
|
The decentralized procedure allows applicants to file identical applications to several European Union member states and receive simultaneous national approvals based on the recognition by European Union member states of an assessment by a reference member state.
|
|
·
|
The national procedure is only available for products intended to be authorized in a single European Union member state.
|
|
·
|
A mutual recognition procedure similar to the decentralized procedure is available when a marketing authorization has already been obtained in at least one European Union member state.
|
|
·
|
the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid;
|
|
·
|
the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
|
|
·
|
the federal Health Insurance Portability and Accountability Act of 1996 (
“
HIPAA
”
) imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
|
|
·
|
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
|
|
·
|
the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
|
|
·
|
the federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs, devices, biologics and medical supplies to report to the Department of Health and Human Services information related to payments and other transfers of value to physicians and teaching hospitals and physician ownership and investment interests; and
|
|
·
|
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.
|
|
·
|
brentuximab vedotin, marketed as Adectris by Seattle Genetics and Millennium Pharmaceuticals/Takeda Oncology, is an antibody drug conjugate directed to the protein CD30, and is used to treat lymphoma;
|
|
·
|
trastuzumab emtansine, marketed as Kadcyla by Genentech Inc., a subsidiary of F. Hoffman-La Roche AG, is an antibody drug conjugate used for the treatment of metastatic breast cancer;
|
|
·
|
Abraxane, marketed by Celgene Corporation, consists of paclitaxel protein-bound particles for injectivable suspension, and is used for treating breast, lung, pancreatic and various other cancers;
|
|
·
|
Doxil, marketed by Janssen Products, is a doxorubicin HCI liposome injection used for ovarian cancer, kaposi sarcoma (a form of cancer that develops from the cells that line lymph or blood vessels) and multiple myeloma;
|
|
·
|
ThermoDox, a variant of Doxil, is marketed by Celsion Corporation, is a lyso-thermosensitive liposomal doxorubicin, and is used for treating breast and liver cancer. A variant of ThermoDox, called DaunXome, marketed by Galen Pharmaceuticals, is a liposomal daunoubicin, and is used to treat karposi sarcoma;
|
|
·
|
Marquibo, marketed by Spectrum Pharmaceuticals, is a liposome-encapsulated vincristine, and is used to treat certain forms of leukemia.
|
C.
|
Organizational Structure
|
(1)
|
Joint venture between Midatech Limited and MonoSol.
|
(2)
|
Joint venture between Midatech Limited and Immunotope Inc. The percentage ownership of the entity is determined by reference to the partnership agreement and varies from time to time depending on capital committed. While 50% is the economic interest, Midatech Limited can currently direct 49% of the voting rights.
|
(3)
|
Dormant entity or entities in the process of being wound-down.
|
D.
|
Property, Plant and Equipment
|
UNRESOLVED STAFF COMMENTS.
|
OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
|
A.
|
Operating Results.
|
•
|
Payment discounts are reductions to invoiced amounts offered to customers for payment within a specified period and are estimated upon shipment utilizing historical customer payment experience.
|
•
|
The returns provision is based on management's experience of returns and is booked as a percentage of product sales recognized during the period. These recognized sales include shipments that have occurred out of wholesalers as well as direct shipments made by us to other third party purchasers. Actual returns by products inform the assumptions used to calculate future returns provisions and related reserves are adjusted accordingly. The returns reserve is recorded as a reduction of revenue in the same period the related product sales revenue is recognized and is included in accrued expenses.
|
•
|
Generally, credits may be issued to wholesalers for decreases that are made to selling prices for the value of inventory that is owned by the wholesaler at the date of the price reduction. Price adjustment credits are estimated at the time the price reduction occurs and the amount is calculated based on the level of the wholesaler inventory at the time of the reduction.
|
•
|
There are arrangements with certain parties establishing prices for products for which the parties independently select a wholesaler from which to purchase. Such parties are referred to as indirect customers. A chargeback represents the difference between the sales invoice price to the wholesaler and the indirect customer's contract price, which is lower. Provisions for estimating chargebacks are calculated primarily using historical chargeback experience, contract pricing and sales information provided by wholesalers and chains, among other factors. We recognize chargebacks in the same period the related revenue is recognized.
|
|
·
|
future expected cash flows from in-process research and development;
|
|
·
|
the fair value of the property, plant and equipment; and
|
|
·
|
discount rates.
|
|
·
|
volatility is estimated based on the average annualized volatility of a number of publicly traded peer companies in the biotech sector;
|
|
·
|
the estimated life of the option is estimated to be until the first exercise period, which is typically the month after the option vests; and
|
|
·
|
the dividend return is estimated by reference to our historical dividend payments. Currently, this is estimated to be zero as no dividend has been paid in the prior periods.
|
|
Year Ended
December 31,
|
|||||||
|
2016
|
2015
|
||||||
|
(£ in thousands)
|
|||||||
|
||||||||
Revenue
|
6,376
|
775
|
||||||
Grant revenue
|
547
|
600
|
||||||
Total revenue
|
6,923
|
1,375
|
||||||
Cost of Sales
|
(667
|
)
|
(70
|
)
|
||||
Gross Profit
|
6,256
|
1,305
|
||||||
Research and development costs
|
(6,684
|
)
|
(5,920
|
)
|
||||
Distribution costs, sales and marketing
|
(9,523
|
)
|
(374
|
)
|
||||
Administrative costs
|
(9,222
|
)
|
(7,929
|
)
|
||||
Impairment of intangible asset
|
(11,413
|
)
|
--
|
|||||
Loss from operations
|
(30,586
|
)
|
(12,918
|
)
|
||||
Finance income
|
1,337
|
1,691
|
||||||
Finance expense
|
(73
|
)
|
(5
|
)
|
||||
Loss before tax
|
(29,322
|
)
|
(11,232
|
)
|
||||
Taxation
|
9,160
|
1,133
|
||||||
Loss for the year attributable to the owners of the parent
|
(20,162
|
)
|
(10,099
|
)
|
|
Year Ended
December 31,
|
|||||||
|
2015
|
2014
|
||||||
|
(£ in thousands)
|
|||||||
Revenue
|
775
|
25
|
||||||
Grant revenue
|
600
|
132
|
||||||
Total revenue
|
1,375
|
157
|
||||||
Cost of Sales
|
(70
|
)
|
-
|
|||||
Gross Profit
|
1,305
|
157
|
||||||
Research and development costs
|
(5,920
|
)
|
(3,639
|
)
|
||||
Distribution cost, sales and marketing
|
(374
|
)
|
-
|
|||||
Administrative costs
|
(7,929
|
)
|
(4,405
|
)
|
||||
Impairment of intangible assets
|
-
|
(1,800
|
)
|
|||||
Loss from operations
|
(12,918
|
)
|
(9,687
|
)
|
||||
Finance income
|
1,691
|
8
|
||||||
Finance expense
|
(5
|
)
|
(161
|
)
|
||||
Loss before tax
|
(11,232
|
)
|
(9,840
|
)
|
||||
Taxation
|
1,133
|
1,018
|
||||||
Loss after tax attributable to the owners of the parent
|
(10,099
|
)
|
(8,822
|
)
|
|
·
|
the listing of the Depositary Shares on NASDAQ and the registration of such Depositary Shares, and the Ordinary Shares underlying them, with the SEC, the acquisition of Midatech US and Zuplenz and related professional fees of £2.99 million; and
|
|
·
|
an increase in the average number of staff employed by the Group from 36 to 74, as opposed to 38 in 2014, and the associated increase in payroll costs by £1.45 million to £4.52 million in the aggregate, as opposed to £3.07 million in the aggregate in 2014.
|
B.
|
Liquidity and Capital Resources.
|
|
·
|
providing resources to progress research and development on Midatech
’
s target products, including Q-Octreotide, and to further develop its technology platforms;
|
|
·
|
enhancing Midatech
’
s profile among current and prospective partners, suppliers and customers;
|
|
·
|
providing the potential to access capital to fund Midatech
’
s future growth and support further any potential expansion plans;
|
|
·
|
providing a platform for potential further acquisitions of companies, products and intellectual property; and;
|
|
·
|
providing opportunities for Midatech to attract, retain and incentivize high caliber employees.
|
|
Year ended December 31,
|
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
|
(£’s in thousands)
|
|||||||||||
Cash used in operating activities
|
(13,086
|
)
|
(12,421
|
)
|
(5,455
|
)
|
||||||
Cash used in investing activities
|
(1,202
|
)
|
(1,533
|
)
|
(907
|
)
|
||||||
Cash (used) provided by financing activities
|
15,255
|
(219
|
)
|
34,300
|
||||||||
Net (decrease) increase in cash and equivalents
|
967
|
(14,173
|
)
|
27,938
|
|
Year Ended
December 31,
|
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
|
(£’s in thousands)
|
|||||||||||
Current Assets
|
22,303
|
20,331
|
31,628
|
|||||||||
Current Liabilities
|
9,345
|
9,099
|
2,832
|
|||||||||
Working Capital
|
12,958
|
11,232
|
28,796
|
C.
|
Research and Development, Patents and Licenses, Etc.
|
D.
|
Trend Information.
|
E.
|
Off-Balance Sheet Arrangements.
|
F.
|
Tabular Disclosure of Contractual Obligations.
|
|
Payments due by period
|
|||||||||||||||||||
|
Total
|
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
|||||||||||||||
|
(£’s in thousands)
|
|||||||||||||||||||
Long-Term Debt Obligations
|
26
|
11
|
13
|
2
|
--
|
|||||||||||||||
Capital Lease Obligations
|
96
|
33
|
46
|
17
|
--
|
|||||||||||||||
Operating Leases
|
855
|
378
|
358
|
119
|
--
|
|||||||||||||||
Government Research Loans
|
1,872
|
449
|
528
|
502
|
393
|
|||||||||||||||
Total
|
2,849
|
871
|
945
|
640
|
393
|
G.
|
Safe Harbor
|
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.
|
A.
|
Directors and Senior Management
|
Name
|
|
Age at
12/31/2016
|
|
Position/Title
|
Directors:
|
|
|
|
|
James Phillips, MB, ChB (3) (4)
|
|
54
|
|
Chief Executive Officer, Director
|
Nicholas Robbins-Cherry (3) (4)
|
|
47
|
|
Chief Financial Officer, Director
|
Rolf Stahel (2) (3)
|
|
72
|
|
Non-Executive Chairman of the Board of Directors
|
John Johnston (1) (3) (4)
|
|
58
|
|
Non-Executive Director
|
Michele Luzi (2) (3)
|
|
59
|
|
Non-Executive Director
|
Pavlo (Paul) Protopapa (1) (3)
|
|
50
|
|
Non-Executive Director
|
Simon Turton, Ph.D. (1) (2) (3)
|
|
49
|
|
Senior Independent Non-Executive Director
|
Sijmen (Simon) de Vries, M.D. (2) (3)
|
|
57
|
|
Non-Executive Director
|
Executive Officers (5):
|
|
|
|
|
Craig Cook, MB, BCH
|
|
50
|
|
Chief Operating Officer and Chief Medical Officer
|
David Benharris
|
|
52
|
|
President, Midatech Pharma US, Inc.
|
(1)
|
Audit Committee member
|
(2)
|
Remuneration Committee member
|
(3)
|
Nominations Committee member
|
(4)
|
Disclosure Committee member
|
(5)
|
Other than directors who are also executive officers.
|
B.
|
Compensation
|
Name
|
|
Fees Earned or
Paid in Cash
(£)(1)
|
|
All Other
Compensation
(£)
|
|
Total
(£)
|
Rolf Stahel
|
|
50,000
|
|
50,000 (2)
|
|
100,000
|
John Johnston
|
|
38,000 (3)
|
|
-
|
|
38,000
|
Michele Luzi
|
|
38,000 (3)
|
|
-
|
|
38,000
|
Pavlo Protopapa
|
|
38,000
|
|
-
|
|
38,000
|
Simon Turton
|
|
38,000 (3)
|
|
-
|
|
38,000
|
Sijmen de Vries
|
|
38,000
|
|
-
|
|
38,000
|
|
(1)
|
Includes annual fees, committee chairpersonship fees and meeting fees.
|
|
(2)
|
Includes fees paid to Mr. Stahel in connection with a consultancy agreement with Chesyl Pharma Limited, a company wholly owned by Mr. Stahel.
|
|
(3)
|
A portion of the compensation paid to each of Messrs. Johnston and Turton for their services on the Board are paid to consulting firms owned by each of Mr. Johnston and Mr. Turton, respectively; however, Midatech does not receive any consulting services from Messrs. Johnston or Turton or their respective consulting firms.
|
Name
|
|
Number of
Options
|
|
Grant
Date
|
|
Exercise Price
per Share
(£)
|
|
Expiration
Date
|
||
Michele Luzi (1)
|
|
|
18,796
|
(2)
|
|
4/20/2012
|
|
4.19
|
|
4/20/2022
|
Sijmen de Vries
|
|
|
3,000
|
(2)
|
|
12/31/2008
|
|
1.425
|
|
12/31/2018
|
|
|
|
4,000
|
(2)
|
|
4/20/2012
|
|
4.19
|
|
4/20/2022
|
|
|
|
10,000
|
(3)
|
|
6/30/2014
|
|
0.075
|
|
6/30/2024
|
(1)
|
Stock options held by Mr. Luzi were granted as part of a prior investment in Midatech Limited in 2011 and not for service as a non-executive director.
|
(2)
|
The stock options are fully vested.
|
(3)
|
The stock options vest in the following installments: (i) 50% of the stock options vest when Midatech
’
s share price is
£
5.31 share, (ii) a further 25% of the stock options vest when Midatech
’
s share price is
£
13.72 a share and (iii) the remaining 25% of the stock options vest when Midatech
’
s share price is
£
18.86 a share.
|
|
·
|
by either party giving at least three months prior written notice;
|
|
·
|
by the Midatech Board of Directors reasonably determining that Mr. Stahel
’
s acceptance of any other employment, engagement, appointment, interest or involvement with any business or person competes or conflicts with his appointment and would result in a serious conflict of interest or Mr. Stahel reasonably determines such interest would result in a serious conflict of interest, and Mr. Stahel accepts such employment, engagement, appointment, interest or involvement; or
|
|
·
|
in accordance with Midatech
’
s articles of association or applicable law.
|
|
·
|
as to 122,442 shares held by Mr. Stahel (the
“
Relevant Shares
”
), Mr. Stahel is under an obligation not to dispose of such shares, subject to one-half of the Relevant Shares being released from such disposal restriction on each of March 1, 2017 and March 1, 2018. In the event of termination by Midatech of Mr. Stahel
’
s appointment as a non-executive director in certain circumstances for cause prior to such fourth anniversary, any shares which remain restricted will be able to be purchased by Midatech at a price of
£
0.075p per ordinary share, referred to as the Relevant Price. On the occurrence of other circumstances of termination, the restrictions shall cease to apply to the Relevant Shares;
|
|
·
|
as to 122,440 of such Relevant Shares held by Mr. Stahel, Mr. Stahel has agreed not to dispose of such shares until the first to occur of (i) Midatech achieving a target measured by the average market capitalization of Midatech on any public market over a 30 day period of at least
£155.0
million, provided the Share Increase Hurdle (as defined below) applies or a trade sale or a valuation carried out by an independent valuer (collectively, the
“
Trigger Events
”
); or (ii) the fourth anniversary of the Appointment Date, whereupon Midatech has the right to repurchase such shares at the Relevant Price if no Trigger Event at or above such value has occurred;
|
|
·
|
as to a further 122,440 of such Relevant Shares held by Mr. Stahel, Mr. Stahel has agreed not to dispose of such shares until the first to occur of (i) Midatech achieving a target measured by the average capitalization of Midatech on any public market over a 30 day period of at least
£213.0
million provided the Share Increase Hurdle applies on a Trigger Event; or (ii) the fourth anniversary of the Appointment Date, whereupon Midatech has the right to repurchase such shares at the Relevant Price if no Trigger Event at or above such value has occurred; and
|
|
·
|
the Relevant Shares that are subject to disposal restrictions are unable to be voted upon by Mr. Stahel during the periods described above in respect of the amount of such shares which remain under restriction.
|
|
·
|
is found guilty of any misconduct, gross negligence or dishonesty or acts in a manner which is materially adverse to the interests of Midatech;
|
|
·
|
commits any serious or repeated breach or non-observance of his obligations to Midatech;
|
|
·
|
becomes bankrupt, has an interim order made against him under the United Kingdom Insolvency Act 1986 or makes any composition or enters into any deed of arrangement with his creditors or the equivalent of any of these under any other jurisdictions;
|
|
·
|
becomes of unsound mind, becomes a patient under any statute relating to mental health or is unable, due to any accident, illness or injury, to undertake his duties for Midatech for a period of more than six consecutive months;
|
|
·
|
is convicted of a criminal offense (other than a motoring offense for which a non-custodial penalty is imposed);
|
|
·
|
is disqualified by law or an order of a court of competent jurisdiction from holding office; or
|
|
·
|
has failed to submit his resignation as Chairman and as a director of Midatech when required to so pursuant to the terms of the Stahel Appointment Agreement.
|
Name
|
|
Salary
(£)
|
|
Bonus
(1)(£)
|
|
All Other
Compensation
(2)(£)
|
|
Total
(£)
|
Dr. James Phillips
|
|
280,000
|
|
168,000
|
|
28,000
|
|
476,000
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
Nicholas Robbins-Cherry
|
|
160,000
|
|
49,600
|
|
16,000
|
|
225,600
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
All executive officers as a group (4 persons)
|
|
845,559
|
|
313,000
|
|
96,637
|
|
1,255,196
|
(1)
|
The Service Agreements also include a bonus target for Dr. Phillips and Mr. Robbins-Cherry of 50% and 33%, respectively, of their annual base salary, which bonus is payable upon attainment of objectives as determined in the subjective judgment of Midatech
’
s Board of Directors or a committee thereof, taking into account various factors without any preassigned weighting. For 2016, all of the executive officers received approximately 90% of their bonus target.
|
(2)
|
The amounts reflect the value of benefits payable pursuant to pension plans.
|
Name
|
|
Number of
Options
|
|
Grant Date
|
|
Exercise
Price per
Share (£)
|
|
Expiration
Date
|
James Phillips
|
|
400,000 (1)
|
|
6/30/2014
|
|
0.075
|
|
6/30/2024
|
|
|
200,000 (2)
|
|
5/9/2014
|
|
0.075
|
|
5/1/2023
|
250,000 (3)
|
10/31/2016
|
2.68
|
12/2/2025
|
|||||
490,000 (3)
|
12/19/2016
|
1.21
|
12/7/2026
|
|||||
Nick Robbins-Cherry
|
|
60,000 (1)
|
|
6/30/2014
|
|
0.075
|
|
6/30/2024
|
125,000 (3)
|
10/31/2016
|
2.68
|
12/2/2025
|
|||||
168,000 (3)
|
12/19/2016
|
1.21
|
12/7/2026
|
|||||
All executive officers as a group (4 persons)
|
|
2,503,000 (1) (4)
|
|
(5)
|
|
(6)
|
|
(7)
|
(1)
|
Stock options held by Messrs. Phillips, Robbins-Cherry and Cook vest in the following installments: (i) 50% of the stock options vest when Midatech
’
s share price is
£
5.31 share, (ii) a further 25% of the stock options vest when Midatech
’
s share price is
£
13.72 a share and (iii) the remaining 25% of the stock options vest when Midatech
’
s share price is
£
18.86 a share. In connection with the acquisition of DARA, stock options issued to Mr. Benharris exercisable for shares of DARA common stock were assumed by Midatech and became exercisable for Ordinary Shares (subject to certain adjustments based upon the exchange ratio for DARA common stock in the merger). All Ordinary Shares issuable upon exercise of such options are to be delivered in the form of Depositary Shares.
|
(2)
|
The stock options are fully vested.
|
(3)
|
25% of the options vest 12 months after the grant date, followed by vesting of 12 equal quarterly tranches, over a subsequent three-year period.
|
(4)
|
331,250 stock options are fully vested.
|
(5)
|
The grant dates range from May 9, 2014 to December 19, 2016.
|
(6)
|
The exercise price of the options range from £0.075 to £2.68.
|
(7)
|
The stock options expire between May 1, 2023 and July 1, 2024.
|
|
·
|
is guilty of serious misconduct or any other misconduct which affects, or is likely to affect, prejudicially the interests of Midatech or any of its subsidiaries;
|
|
·
|
fails or neglects to efficiently and diligently discharge his duties or commits any serious or repeated breach or non-observance of any of the provisions of the Service Agreement or any share dealing code adopted by Midatech or any of its subsidiaries;
|
|
·
|
has an interim receiving order made against him, becomes bankrupt or makes any composition or enters into any deed of arrangement with his creditors;
|
|
·
|
is charged with an arrestable criminal offense (other than a road traffic offense in the United Kingdom or elsewhere for which a fine or non-custodial penalty is imposed);
|
|
·
|
is disqualified from holding office in any company by reason of an order of a court of competent jurisdiction;
|
|
·
|
becomes of unsound mind or becomes a patient under any statute relating to mental health;
|
|
·
|
is convicted of an offense under the United Kingdom
’
s Criminal Justice Act 1993 in relation to insider dealings or under any other present or future statutory enactment or regulations relating to insider dealings;
|
|
·
|
is in breach of the Model Code on directors
’
dealings in listed securities, including securities trading on AIM, published by the London Stock Exchange; or
|
|
·
|
commits any other act warranting summary termination at common law including, but not limited to, any act justifying dismissal without notice in the terms of Midatech
’
s generally applicable disciplinary rules.
|
C.
|
Board Practices
|
D.
|
Employees
|
|
As of December 31,
|
|
||||||||
|
|
2016
|
|
2015
|
|
|
|
2014
|
|
|
Business functional area:
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
54
|
|
|
52
|
|
|
|
26
|
|
Sales and marketing
|
|
6
|
|
|
7
|
|
|
|
--
|
|
General and administration
|
|
19
|
23
|
10
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
79
|
|
|
82
|
|
|
|
36
|
|
|
As of December 31,
|
|
||||||||
|
|
2016
|
|
2015
|
|
|
2014
|
|
||
Geography:
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
37
|
|
|
40
|
|
|
|
12
|
|
North America
|
|
14
|
|
|
14
|
|
|
|
--
|
|
Spain
|
|
28
|
|
|
28
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
79
|
|
|
82
|
|
|
|
36
|
|
E.
|
Share Ownership
|
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
|
A.
|
Major Shareholders
|
|
·
|
each person that is known by Midatech to be a beneficial owner of 5% or more of Midatech ordinary shares (based on information in our share register and information provided by such persons);
|
|
·
|
each member of Midatech
’
s Board of Directors;
|
|
·
|
each of Midatech
’
s executive officers; and
|
|
·
|
all members of Midatech
’
s Board of Directors and its executive officers, taken as a group.
|
Name of Beneficial Owner
|
Amount and
Nature
Of Ownership (1)
|
Percent
of class
|
||||||
Major Stockholders:
|
||||||||
Woodford Fund Management Limited (2)
|
9,867,629
|
20.3
|
%
|
|||||
Legal & General Investment Management (3)
|
6,275,518
|
12.9
|
%
|
|||||
Ferracom Establishment (4)
|
3,043,164
|
6.3
|
%
|
|||||
Hargreave Hale (5)
|
2,988,055
|
6.1
|
%
|
|||||
|
||||||||
Directors and Executive Officers:
|
||||||||
David Benharris
|
3,808
|
*
|
||||||
Craig Cook, MB, BCH
|
37,500
|
*
|
||||||
Sijmen (Simon) de Vries, M.D.
|
12,802
|
*
|
John Johnston
|
14,981
|
*
|
||||||
Michele Luzi (6)
|
209,468
|
*
|
||||||
James N. Phillips, MB, ChB
|
309,396
|
*
|
||||||
Pavlo (Paul) Protopapa (7)
|
1,649,334
|
3.4
|
%
|
|||||
Nicholas Robbins-Cherry
|
31,750
|
*
|
||||||
Rolf Stahel
|
549,942
|
1.1
|
%
|
|||||
Simon Turton, Ph.D.
|
209,413
|
*
|
||||||
Directors and executive officers as a group (10
persons) |
3,028,394
|
6.2
|
%
|
*
|
Less than one percent of the outstanding Ordinary Shares.
|
(1)
|
Includes the following Ordinary Shares subject to outstanding stock options exercisable within 60 days of March 10, 2017: 4,000 for Dr. de Vries; 18,796 for Mr. Luzi; 262,500 for Dr. Phillips; 3,808 for Mr. Benharris; 37,500 for Dr. Cook; 31,500 for Mr. Robbins-Cherry; and 358,104 for all current directors and executive officers as a group.
|
(2)
|
The principal business address of Woodford Fund Management Limited is 9400 Garsington Road, Oxford, OX4 2HN, United Kingdom.
|
(3)
|
The principal business address of Legal & General Investment Management Limited is 1 Coleman St, London, United Kingdom EC2R 5AA.
|
(4)
|
The principal business address of Ferracom Establishment is Landstrasse 99, FL 9494, Schaan, Liechtenstein.
|
(5)
|
The principal business address of Hargreave Hale is Talisman House, Boardmans Way, Blackpool, FY4 5FY
.
|
(6)
|
Includes 69,382 Ordinary Shares held by JTC Trustees Limited, of which Mr. Luzi is a beneficiary.
|
(7)
|
Includes 1,649,334 Ordinary Shares directly held by Ippon Capital SA. Mr. Protopapa, a director of Ippon Capital SA, disclaims beneficial ownership of all shares held directly by Ippon Capital SA except to the extent of his pecuniary interest therein, if any.
|
B.
|
Related Party Transactions
|
C.
|
Interests of Experts and Counsel
|
FINANCIAL INFORMATION.
|
A.
|
Consolidated Statements and Other Financial Information
|
B.
|
Significant Changes
|
THE OFFER AND LISTING.
|
A.
|
Offer and Listing Details.
|
|
British Pounds Sterling
(Price per ordinary share) |
United States Dollars (Price
per ordinary share) |
||||||||||||||
|
High
|
Low
|
High
|
Low
|
||||||||||||
Annual:
|
||||||||||||||||
Year ended December 31, 2014 (1)
|
£
|
2.85
|
£
|
2.60
|
$
|
3.49
|
$
|
3.19
|
||||||||
Year ended December 31, 2015
|
£
|
3.30
|
£
|
1.50
|
$
|
4.04
|
$
|
1.84
|
||||||||
Year ended December 31, 2016
|
£
|
2.05
|
£
|
1.01
|
$
|
2.51
|
$
|
1.24
|
||||||||
Quarterly:
|
||||||||||||||||
First Quarter 2015
|
£
|
3.30
|
£
|
2.65
|
$
|
4.04
|
$
|
3.25
|
||||||||
Second Quarter 2015
|
£
|
3.20
|
£
|
2.60
|
$
|
3.92
|
$
|
3.19
|
||||||||
Third Quarter 2015
|
£
|
3.05
|
£
|
2.65
|
$
|
3.74
|
$
|
3.25
|
||||||||
Fourth Quarter 2015
|
£
|
2.85
|
£
|
1.50
|
$
|
3.49
|
$
|
1.84
|
||||||||
First Quarter 2016
|
£
|
2.05
|
£
|
1.33
|
$
|
2.51
|
$
|
1.63
|
|
British Pounds Sterling
(Price per ordinary share) |
United States Dollars (Price
per ordinary share) |
||||||||||||||
|
High
|
Low
|
High
|
Low
|
||||||||||||
Second Quarter 2016
|
£
|
1.85
|
£
|
1.01
|
$
|
2.27
|
$
|
1.24
|
||||||||
Third Quarter 2016
|
£
|
1.90
|
£
|
1.10
|
$
|
2.33
|
$
|
1.35
|
||||||||
Fourth Quarter 2016
|
£
|
1.33
|
£
|
1.10
|
$
|
1.63
|
$
|
1.35
|
||||||||
First Quarter 2017
|
£
|
1.48
|
£
|
1.16
|
$
|
1.82
|
$
|
1.43
|
||||||||
Monthly:
|
||||||||||||||||
October 2016
|
£
|
1.33
|
£
|
1.10
|
$
|
1.63
|
$
|
1.35
|
||||||||
November 2016
|
£
|
1.29
|
£
|
1.16
|
$
|
1.58
|
$
|
1.42
|
||||||||
December 2016
|
£
|
1.24
|
£
|
1.10
|
$
|
1.52
|
$
|
1.35
|
||||||||
January 2017
|
£
|
1.48
|
£
|
1.17
|
$
|
1.83
|
$
|
1.44
|
||||||||
February 2017
|
£
|
1.35
|
£
|
1.20
|
$
|
1.67
|
$
|
1.48
|
||||||||
March 2017
|
£
|
1.25
|
£
|
1.16
|
$
|
1.54
|
$
|
1.43
|
||||||||
April 2017 (through April 3, 2017)
|
£
|
1.21
|
£
|
1.18
|
$
|
1.49
|
$
|
1.46
|
(1)
|
The Ordinary Shares began trading on AIM on December 8, 2014. Prior to that, no established market for Ordinary Shares existed.
|
|
United States Dollars (Price
per Depositary Share) |
|||||||
|
High
|
Low
|
||||||
Annual:
|
||||||||
Year Ended December 31, 2015 (1)
|
$
|
8.09
|
$
|
4.09
|
||||
Year Ended December 31, 2016
|
$
|
5.72
|
$
|
2.40
|
||||
Quarterly:
|
||||||||
Fourth Quarter 2015
|
$
|
8.09
|
$
|
4.09
|
||||
First Quarter 2016
|
$
|
5.72
|
$
|
3.33
|
||||
Second Quarter 2016
|
$
|
5.44
|
$
|
2.62
|
||||
Third Quarter 2016
|
$
|
4.42
|
$
|
2.69
|
||||
Fourth Quarter 2016
|
$
|
3.25
|
$
|
2.40
|
||||
First Quarter 2017
|
$
|
3.65
|
$
|
2.42
|
||||
Monthly:
|
||||||||
October 2016
|
$
|
3.25
|
$
|
2.72
|
||||
November 2016
|
$
|
3.21
|
$
|
2.67
|
||||
December 2016
|
$
|
2.92
|
$
|
2.40
|
||||
January 2017
|
$
|
3.65
|
$
|
2.66
|
||||
February 2017
|
$
|
3.27
|
$
|
2.62
|
||||
March 2017
|
$
|
2.95
|
$
|
2.42
|
||||
April 2017 (through April 3, 2017)
|
$
|
2.80
|
$
|
2.66
|
B.
|
Plan of Distribution
|
C.
|
Markets
|
D.
|
Seller Shareholders
|
E.
|
Dilution
|
F.
|
Expenses of the Issue
|
ADDITIONAL INFORMATION.
|
A.
|
Share Capital
|
B.
|
Memorandum and Articles of Association
|
C.
|
Material Contracts
|
D.
|
Exchange Controls
|
E.
|
Taxation
|
|
·
|
an individual who is a citizen or resident of the United States;
|
|
·
|
a corporation or other entity taxable as a corporation that is created or organized in the United States or under the laws of the United States or any state thereof or the District of Columbia;
|
|
·
|
an estate the income of which is subject to United States federal income taxation regardless of its source; or
|
|
·
|
any trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (b) such trust has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.
|
F.
|
Dividends and Payment Agents
|
G.
|
Statements by Experts
|
H.
|
Documents on Display
|
I.
|
Subsidiary Information
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.
|
A.
|
Debt Securities
|
B.
|
Warrants and Rights
|
C.
|
Other Securities
|
D.
|
American Depositary Shares
|
Service
|
|
Fees
|
|
|
|
· to any person to whom Depositary Shares are issued or to any person to whom a distribution is made in respect of Depositary Share distributions pursuant to stock dividends or other free distributions of stock, bonus distributions, stock splits or other distributions (except where converted to cash)
|
|
Up to US$0.05 per Depositary Share issued
|
|
|
|
· to any person surrendering Depositary Shares for withdrawal of deposited securities or whose Depositary Shares are cancelled or reduced for any other reason including, inter alia, cash distributions made pursuant to a cancellation or withdrawal
|
|
Up to US$0.05 per Depositary Share cancelled
|
|
|
|
· Distribution of cash dividends
|
|
Up to US$0.05 per Depositary Share held
|
|
|
|
· Distribution of cash entitlements (other than cash dividends) and/or cash proceeds, including proceeds from the sale of rights, securities and other entitlements
|
|
Up to US$0.05 per Depositary Share held
|
|
|
|
· Distribution of Depositary Shares pursuant to exercise of rights.
|
|
Up to US$0.05 per Depositary Share held
|
|
|
|
· Depositary services
|
|
Up to US$0.05 annually per Depositary Share held on the applicable record date(s) established by the depositary bank
|
|
·
|
taxes (including applicable interest and penalties) and other governmental charges;
|
|
·
|
such registration fees as may from time to time be in effect for the registration of Ordinary Shares or other deposited securities with Midatech
’
s share registrar and applicable to transfers of Ordinary Shares or other deposited securities to or from the name of the custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively;
|
|
·
|
such cable, telex, facsimile and electronic transmission and delivery expenses as are expressly provided in the deposit agreement to be at the expense of the person depositing or withdrawing Ordinary Shares or Depositary Share holders and beneficial owners of Depositary Shares;
|
|
·
|
the expenses, fees and other charges incurred by the Depositary in the conversion of foreign currency, including, without limitation, the expenses, fees and other charges imposed by any affiliate of the Depositary (which may, in its sole discretion, act in a principal capacity in such transaction) that may be utilized in connection therewith;
|
|
·
|
such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Ordinary Shares, deposited securities, Depositary Shares and American Depositary Receipts;
|
|
·
|
the fees and expenses incurred by the Depositary in connection with the delivery of deposited securities, including any fees of a central depository for securities in the local market, where applicable; and
|
|
·
|
any fees, charges, costs or expenses that may be incurred from time to time by the Depositary and/or any of the Depositary
’
s agents, including the custodian, and/or agents of the Depositary
’
s agents in connection with the servicing of Ordinary Shares, deposited securities and/or Depositary Shares, the sale of securities (including, without limitation, deposited securities), the delivery of deposited securities or otherwise in connection with the Depositary
’
s or its custodian
’
s compliance with applicable law, rule or regulation (such fees, charges, costs or expenses to be assessed against Depositary Share holders of record as at the date or dates set by the Depositary as it sees fit and collected at the sole discretion of the Depositary by billing such Depositary Share holders for such fee or by deducting such fee from one or more cash dividends or other cash distributions).
|
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
|
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.
|
CONTROLS AND PROCEDURES.
|
A.
|
Disclosure Controls and Procedures
|
B.
|
Management’s Annual Report on Internal Control Over Financial Reporting
|
·
|
The incorrect presentation of credits for product returns, rebates, discounts and other incentives based on sales price throughout 2016 as part of cost of sales as opposed to being shown as deductions from revenue.
|
·
|
Implementing additional controls and procedures to facilitate senior management and audit committee review in order to remediate the underlying causes of the material error in Midatech
’
s financials; and
|
·
|
Seeking outside assistance, as necessary, from third party experts when or if Midatech enters into or effects future, non-routine transactions which involve complex accounting and related disclosure matters.
|
C.
|
Attestation Report of the Registered Public Accounting Firm
|
D.
|
Changes in Internal Control Over Financing Reporting
|
AUDIT COMMITTEE FINANCIAL EXPERT.
|
CODE OF ETHICS.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
|
|
2016
|
2015
|
||||||
|
(£’s in thousands)
|
|||||||
Audit Fees(1)
|
311
|
674
|
||||||
Audit-Related Fees(2)
|
-
|
-
|
||||||
Tax Fees(3)
|
-
|
7
|
||||||
All Other Fees(4)
|
-
|
-
|
||||||
Total
|
311
|
681
|
|
(1)
|
Audit fees consist of the aggregate fees billed in connection with the audit and UK statutory audit of Midatech
’
s annual consolidated financial statements, the issuance of comfort letters, interim reviews of Midatech’s half-yearly financial information and the listing of the Depositary Shares on NASDAQ.
|
|
(2)
|
Audit-related fees are fees for services that are traditionally performed by the independent accountants, including consultations concerning financial accounting and reporting, and employee benefit plan audits, and due diligence on mergers or acquisitions.
|
|
(3)
|
Represents the aggregate fees billed for tax compliance, tax advice and tax consulting services.
|
|
(4)
|
Represents the aggregate fees billed for all products and services provided that are not included under
“
audit fees
”
,
“
audit related fees or
“
tax fees,
”
including, but not limited to, fees billed for services relating to mergers, acquisitions and the listing of Midatech
’
s Ordinary Shares on AIM.
|
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
|
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
|
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTS.
|
CORPORATE GOVERNANCE.
|
|
·
|
Midatech does not follow NASDAQ
’
s requirements applicable to independent director oversight of director nominations, which require that director nominees either be selected or recommended by independent directors. In accordance with United Kingdom law and practice, the Company
’
s directors are nominated by the Nominations Committee, which is comprised of all of the directors of the company.
|
|
·
|
Midatech does not follow NASDAQ
’
s requirement that the compensation committee be comprised of Independent Directors, as defined under Rule 5605(a)(2). One of the members of Midatech
’
s compensation committee, Mr. Stahel, is not considered independent under the applicable NASDAQ rule. He is, however, considered to be independent under United Kingdom law and practice.
|
|
·
|
Midatech does not require that the compensation committee consider the specific factors affecting consultant independence that are set forth in NASDAQ Rule 5605(d)(3)(D). Midatech
’
s compensation committee may engage independent compensation consultants at its discretion.
|
|
·
|
Midatech does not follow NASDAQ
’
s requirements that non-executive directors meet on a regular basis without management present. Midatech
’
s Board of Directors may choose to meet in executive session at their discretion.
|
|
·
|
Midatech does not follow NASDAQ
’
s quorum requirements for stockholder meetings. In accordance with United Kingdom law and practice, Midatech
’
s Articles of Association provide alternative quorum requirements that are generally applicable to meetings of shareholders.
|
|
·
|
Midatech does not follow NASDAQ
’
s requirements to seek shareholder approval for the implementation of certain equity compensation plans and issuances of ordinary shares. In accordance with the AIM Rules, Midatech is not required to seek shareholder approval in such circumstances.
|
MINE SAFETY DISCLOSURE.
|
FINANCIAL STATEMENTS.
|
FINANCIAL STATEMENTS.
|
EXHIBITS.
|
Exhibit
Number
|
Title
|
|
|
1.1
|
Articles of Association of Midatech Pharma PLC (incorporated by reference to Exhibit 3.1 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
2.1
|
Specimen certificate representing ordinary shares of Midatech Pharma PLC (incorporated by reference to Exhibit 4.1 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
2.2
|
Form of Deposit Agreement by and among Midatech Pharma PLC, Deutsche Bank Trust Company Americas, as depositary, and all owners and holders from time to time of American Depositary Shares thereunder (incorporated by reference to Exhibit 99A to the Company
’
s Registration Statement on Form F-6/A (File No. 333-207186), filed with the SEC on October 27, 2015).
|
2.3
|
Form of American Depositary Receipt (included in Exhibit 2.2).
|
2.4
|
Form of Warrant Assumption Agreement by and between Midatech Pharma PLC and DARA BioSciences, Inc. (incorporated by reference to Exhibit 4.4 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
2.5
|
Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4 to DARA BioSciences, Inc.
’
s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, filed with the SEC on May 14, 2010).
|
2.6
|
Form of Class B Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.3 to DARA BioSciences, Inc.
’
s Current Report on Form 8-K filed with the SEC on December 29, 2010).
|
2.7
|
Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.2 to DARA BioSciences, Inc.
’
s Current Report on Form 8-K filed with the SEC on January 18, 2012).
|
2.8
|
Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.2 to DARA BioSciences, Inc.
’
s Current Report on Form 8-K filed with the SEC on April 9, 2012).
|
2.9
|
Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to DARA BioSciences, Inc.
’
s Current Report on Form 8-K filed with the SEC on October 22, 2013).
|
2.10
|
Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to DARA BioSciences, Inc.
’
s Current Report on Form 8-K filed with the SEC on February 12, 2014).
|
2.11
|
Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.2 to DARA BioSciences, Inc.
’
s Current Report on Form 8-K filed with the SEC on May 30, 2014).
|
2.12
|
Form of
“
Phase 2b
”
Common Stock Purchase Warrant issued to General Hospital Corporation d/b/a Massachusetts General Hospital (incorporated by reference to Exhibit 4.1 to DARA BioSciences, Inc.
’
s Current Report on Form 8-K filed with the SEC on December 15, 2014).
|
2.13
|
Form of
“
FDA Approval
”
Common Stock Purchase Warrant issued to General Hospital Corporation d/b/a Massachusetts General Hospital (incorporated by reference to Exhibit 4.2 to DARA BioSciences, Inc.
’
s Current Report on Form 8-K filed with the SEC on December 15, 2014).
|
4.1
|
Form of Contingent Value Rights Agreement by and among Midatech Pharma PLC, DARA BioSciences, Inc., Shareholder Representative Services LLC and American Stock Transfer & Trust Company, LLC, as rights agent (incorporated by reference to Exhibit 10.2 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.2*
††
|
Loan Agreement dated as of February 23, 2017, between Midatech Pharma PLC, Midatech Ltd., Midatech Pharma (Wales) Limited, and Midatech Pharma US Inc. as the Original Borrowers, Midatech Pharma PLC, Midatech Ltd., Midatech Pharma (Wales) Limited, and Midatech Pharma US Inc. as the Original Guarantors, and Silicon Valley Bank as the Bank.
|
4.3*
|
Warrant Instrument, dated as of February 24, 2017, constituting warrants to subscribe for ordinary shares in Midatech Pharma PLC.
|
4.4*
|
Debenture, dated as of February 24, 2017, between Midatech Pharma PLC, Midatech Ltd., and Midatech Pharma (Wales) Limited as the Original Chargors and Silicon Valley Bank as the Bank.
|
4.5#
|
Midatech Pharma PLC 2016 United States Option Plan (incorporated by reference to Exhibit 99.1 to the Company
’
s Registration Statement on Form S-8 (File No. 333-214969), filed with the SEC on December 8, 2016).
|
4.6#
|
Midatech Pharma PLC 2014 Enterprise Management Incentive Scheme (incorporated by reference to Exhibit 10.3 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.7#
|
Form of Option Agreement (included in Exhibit 4.6).
|
4.8
|
Form of Warrant Exchange Agreement dated as of November 28, 2014, by and between Midatech Pharma PLC and certain warrantholders of Midatech Limited (incorporated by reference to Exhibit 10.5 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.9
|
Nominated Advisor and Broker Agreement, dated as of December 2, 2014, by and between Midatech Pharma PLC and Panmure Gordon (UK) Limited (incorporated by reference to Exhibit 10.6 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.10
|
Form of Lock-in Agreement, dated as of December 3, 2014, by and among Midatech Pharma PLC, Panmure Gordon (UK) Limited and certain stockholders of Midatech Pharma PLC (incorporated by reference to Exhibit 10.8 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.11
|
Form of Lock-in Agreement, dated as of December 3, 2014, by and among Midatech Pharma PLC, Panmure Gordon (UK) Limited and certain directors, related parties and employees of Midatech Pharma PLC (incorporated by reference to Exhibit 10.9 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.12
|
Patent and Know-How Agreement, dated June 21, 2002, as amended on October 14, 2004, by and between Consejo Superior de Investigaciones Cientificas and Midatech Limited (incorporated by reference to Exhibit 10.10 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.13
|
Research Collaboration Agreement, dated as of February 16, 2012, by and between Middlesex University and Midatech Limited (incorporated by reference to Exhibit 10.13 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.14
|
Research Collaboration Agreement, dated as of December 14, 2012, by and between The Open University and Midatech Limited (incorporated by reference to Exhibit 10.14 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.15
|
Consortium Agreement, dated as of June 25, 2012, by and among Midatech Limited, Cardiff University, Inserm-Transfert SA, Nanopass Technologies Ltd., Leiden University Medical Center, Kings College London, Institut National de la Sante et de la Recherche Medicale, Marseille and Linkopings University (incorporated by reference to Exhibit 10.15 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.16
†
|
Asset Purchase Agreement, dated as of December 17, 2015, by and between Galena Biopharma, Inc. and Midatech Pharma PLC (incorporated by reference to Exhibit 4.30 to the Company
’
s Annual Report on Form 20-F (File No. 001-37652), filed with the SEC on April 14, 2016).
|
4.17
†
|
License and Supply Agreement dated as of July 17, 2014, by and between MonoSol RX, LLC and Galena Biopharma, Inc. (incorporated by reference to Exhibit 4.30 to the Company
’
s Annual Report on Form 20-F (File No. 001-37652), filed with the SEC on April 14, 2016).
|
4.18
†
|
License and Supply Transfer Agreement dated as of December 16, 2015, by and between MonoSol RX, LLC and Galena Biopharma, Inc. (incorporated by reference to Exhibit 4.30 to the Company
’
s Annual Report on Form 20-F (File No. 001-37652), filed with the SEC on April 14, 2016).
|
4.19
†
|
Distribution and Licence Agreement dated as of September 7, 2012, by and between Helsinn Healthcare SA and DARA BioSciences, Inc. (incorporated by reference to Exhibit 4.30 to the Company
’
s Annual Report on Form 20-F (File No. 001-37652), filed with the SEC on April 14, 2016).
|
4.20
†
|
Commercialization Agreement dated as of March 9, 2015, by and between Onxeo S.A. and DARA BioSciences, Inc. (incorporated by reference to Exhibit 4.30 to the Company
’
s Annual Report on Form 20-F (File No. 001-37652), filed with the SEC on April 14, 2016).
|
4.21
†
|
Master Service Agreement, dated as of October 25, 2013, by and between DARA Biosciences, Inc. and Alamo Pharma Services, Inc. including the Sales Representative Sharing Agreement by and among DARA Biosciences Inc., Alamo Pharma Services, Inc. and Mission Pharmacal Company (attached as Exhibit A), and the Co-Promotion Agreement by and among DARA BioSciences, Inc., Alamo Pharma Services, Inc. and Mission Pharmacal Company (attached as Attachment B) (incorporated by reference to Exhibit 4.30 to the Company
’
s Annual Report on Form 20-F (File No. 001-37652), filed with the SEC on April 14, 2016).
|
4.22#
|
Consultancy Agreement, dated as of April 15, 2014, by and between Midatech Limited and Chesyl Pharma Limited (incorporated by reference to Exhibit 10.17 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.23#
|
Service Agreement dated as of December 3, 2014, by and between Midatech Pharma PLC and Dr. James Phillips (incorporated by reference to Exhibit 10.18 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.24#
|
Service Agreement dated as of December 3, 2014, by and between Midatech Pharma PLC and Nicholas Robbins-Cherry (incorporated by reference to Exhibit 10.19 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.25#
|
Executive Employment Agreement dated as of January 1, 2016, by and between Midatech Pharma US, Inc. and David Benharris (incorporated by reference to Exhibit 4.30 to the Company
’
s Annual Report on Form 20-F (File No. 001-37652), filed with the SEC on April 14, 2016).
|
4.26#
|
Appointment Agreement, dated as of April 15, 2014, by and between Midatech Limited and Rolf Stahel (incorporated by reference to Exhibit 10.20 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.27#
|
Revised Appointment Agreement, dated as of December 2, 2014, by and between Midatech Pharma PLC and Rolf Stahel (incorporated by reference to Exhibit 10.21 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.28#
|
Form of Appointment Letter between Midatech Pharma PLC and certain directors of Midatech Pharma PLC (incorporated by reference to Exhibit 10.22 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.29#
|
Deed of Indemnity dated August 5, 2015 (incorporated by reference to Exhibit 10.23 to the Company
’
s Registration Statement on Form F-4 (File No. 333-206305), originally filed with the SEC on August 11, 2015, as amended).
|
4.30#
|
Contract of Employment dated September 1, 2014 by and between Midatech Limited and Craig Cook (incorporated by reference to Exhibit 4.30 to the Company
’
s Annual Report on Form 20-F (File No. 001-37652), filed with the SEC on April 14, 2016).
|
8.1*
|
Subsidiaries of Midatech Pharma PLC.
|
12.1*
|
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to
§
302 of the Sarbanes-Oxley Act of 2002.
|
12.2*
|
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to
§
302 of the Sarbanes-Oxley Act of 2002.
|
13.1*
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
§
1350, as adopted pursuant to
§
906 of the Sarbanes-Oxley Act of 2002.
|
15.1*
|
Consent of BDO LLP, independent registered public accounting firm.
|
|
MIDATECH PHARMA PLC
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
By:
|
/s/ James N. Phillips
|
|
|
Name:
|
James N. Phillips
|
|
|
Title:
|
Chief Executive Officer
|
|
|
Page
|
|
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-9
|
Note
|
2016
|
2015
|
2014
|
|||||||||||||
£’000
|
£’000
|
£'000
|
||||||||||||||
Revenue
|
3
|
6,376
|
775
|
25
|
||||||||||||
Grant revenue
|
547
|
600
|
132
|
|||||||||||||
Total revenue
|
6,923
|
1,375
|
157
|
|||||||||||||
Cost of sales
|
(667
|
)
|
(70
|
)
|
-
|
|||||||||||
Gross profit
|
6,256
|
1,305
|
157
|
|||||||||||||
Research and development costs
|
(6,684
|
)
|
(5,920
|
)
|
(3,639
|
)
|
||||||||||
Distribution costs, sales and marketing
|
4
|
(9,523
|
)
|
(374
|
)
|
-
|
||||||||||
Administrative costs
|
4
|
(9,222
|
)
|
(7,929
|
)
|
(4,405
|
)
|
|||||||||
Impairment of intangible assets
|
10
|
(11,413
|
)
|
-
|
(1,800
|
)
|
||||||||||
Loss from operations
|
4
|
(30,586
|
)
|
(12,918
|
)
|
(9,687
|
)
|
|||||||||
Finance income
|
6
|
1,337
|
1,691
|
8
|
||||||||||||
Finance expense
|
6
|
(73
|
)
|
(5
|
)
|
(161
|
)
|
|||||||||
Loss before tax
|
(29,322
|
)
|
(11,232
|
)
|
(9,840
|
)
|
||||||||||
Taxation
|
7
|
9,160
|
1,133
|
1,018
|
||||||||||||
Loss for the year attributable to the owners of the
parent |
(20,162
|
)
|
(10,099
|
)
|
(8,822
|
)
|
||||||||||
Other comprehensive income:
|
||||||||||||||||
Items that will or may be reclassified subsequently to
profit or loss when specific conditions are met: |
||||||||||||||||
Exchange gains/(losses) arising on translation of
foreign operations |
3,228
|
399
|
(151
|
)
|
||||||||||||
Total other comprehensive income/(loss), net of tax
|
3,228
|
399
|
(151
|
)
|
||||||||||||
Total comprehensive loss attributable to the
owners of the parent |
(16,934
|
)
|
(9,700
|
)
|
(8,973
|
)
|
||||||||||
Loss per share
|
||||||||||||||||
Basic and diluted loss per ordinary share - pence
|
8
|
(56p
|
)
|
(36p
|
)
|
(98p
|
)
|
Note
|
2016
|
2015
|
2014
|
|||||||||||||
Assets
|
|
£’000
|
£’000
|
£’000
|
||||||||||||
Non-current assets
|
||||||||||||||||
Property, plant and equipment
|
9
|
2,766
|
1,984
|
1,516
|
||||||||||||
Intangible assets
|
10
|
31,172
|
41,339
|
13,094
|
||||||||||||
Other receivables due in greater than one year
|
17
|
448
|
387
|
425
|
||||||||||||
34,386
|
43,710
|
15,035
|
||||||||||||||
Current assets
|
||||||||||||||||
Inventories
|
19
|
817
|
459
|
-
|
||||||||||||
Trade and other receivables
|
17
|
2,439
|
2,496
|
462
|
||||||||||||
Taxation
|
1,439
|
1,201
|
841
|
|||||||||||||
Cash and cash equivalents
|
18
|
17,608
|
16,175
|
30,325
|
||||||||||||
22,303
|
20,331
|
31,628
|
||||||||||||||
Total assets
|
56,689
|
64,041
|
46,663
|
|||||||||||||
Liabilities
|
||||||||||||||||
Non-current liabilities
|
||||||||||||||||
Borrowings
|
21
|
1,620
|
1,508
|
1,488
|
||||||||||||
Deferred tax liability
|
24
|
-
|
6,547
|
354
|
||||||||||||
1,620
|
8,055
|
1,842
|
||||||||||||||
Current liabilities
|
||||||||||||||||
Trade and other payables
|
20
|
8,407
|
7,084
|
2,341
|
||||||||||||
Borrowings
|
21
|
538
|
442
|
491
|
||||||||||||
Derivative financial liability – equity settled
|
22
|
400
|
1,573
|
-
|
||||||||||||
9,345
|
9,099
|
2,832
|
||||||||||||||
Total liabilities
|
10,965
|
17,154
|
4,674
|
|||||||||||||
Issued capital and reserves attributable to owners
of the parent |
||||||||||||||||
Share capital
|
25
|
1,002
|
1,002
|
1,001
|
||||||||||||
Share premium
|
26
|
47,211
|
31,643
|
31,643
|
||||||||||||
Merger reserve
|
26
|
53,003
|
52,803
|
37,776
|
||||||||||||
Shares to be issued
|
26
|
-
|
200
|
800
|
||||||||||||
Foreign exchange reserve
|
26
|
3,618
|
390
|
(9
|
)
|
|||||||||||
Accumulated deficit
|
26
|
(59,110
|
)
|
(39,151
|
)
|
(29,222
|
)
|
|||||||||
Total equity
|
45,724
|
46,887
|
41,989
|
|||||||||||||
Total equity and liabilities
|
56,689
|
64,041
|
46,663
|
Note
|
2016
|
2015
|
2014
|
|||||||||||||
|
£’000
|
£’000
|
£'000
|
|||||||||||||
Cash flows from operating activities
|
||||||||||||||||
Loss for the year
|
(20,162
|
)
|
(10,099
|
)
|
(8,822
|
)
|
||||||||||
Adjustments for:
|
||||||||||||||||
Depreciation of property, plant and equipment
|
9
|
772
|
501
|
321
|
||||||||||||
Amortisation of intangible fixed assets
|
10
|
3,583
|
236
|
1
|
||||||||||||
Loss on disposal of fixed assets
|
-
|
-
|
89
|
|||||||||||||
Net interest (income)/expense
|
6 |
(1,264
|
)
|
(1,686
|
)
|
153
|
||||||||||
Impairment of product and marketing rights
|
14
|
11,413
|
-
|
-
|
||||||||||||
Impairment of IPRD
|
14
|
-
|
-
|
1,800
|
||||||||||||
Gain on bargain purchase
|
13
|
-
|
(165
|
)
|
-
|
|||||||||||
Share based payment expense
|
5
|
203
|
170
|
-
|
||||||||||||
Taxation
|
7
|
(9,160
|
)
|
(1,133
|
)
|
(1,018
|
)
|
|||||||||
Cash flows from operating activities before
changes in working capital |
(14,615
|
)
|
(12,176
|
)
|
(7,476
|
)
|
||||||||||
Increase in inventories
|
(237
|
)
|
(62
|
)
|
-
|
|||||||||||
(Increase)/Decrease in trade and other receivables
|
(242
|
)
|
(1,540
|
)
|
761
|
|||||||||||
Increase in trade and other payables
|
358
|
711
|
466
|
|||||||||||||
Cash used in operations
|
(14,736
|
)
|
(13,067
|
)
|
(6,249
|
)
|
||||||||||
Taxes received
|
1,650
|
646
|
794
|
|||||||||||||
Net cash used in operating activities
|
(13,086
|
)
|
(12,421
|
)
|
(5,455
|
)
|
||||||||||
Investing activities
|
||||||||||||||||
Purchases of property, plant and equipment
|
(1,347
|
)
|
(922
|
)
|
(1,030
|
)
|
||||||||||
Purchase of intangibles
|
(19
|
)
|
(3
|
)
|
-
|
|||||||||||
Acquisition of subsidiary, net of cash acquired
|
12
|
-
|
1,867
|
115
|
||||||||||||
Acquisition of business, net of cash acquired
|
13
|
-
|
(2,528
|
)
|
-
|
|||||||||||
Interest received
|
164
|
53
|
8
|
|||||||||||||
Net cash used in investing activities
|
(1,202
|
)
|
(1,533
|
)
|
(907
|
)
|
||||||||||
Financing activities
|
||||||||||||||||
Interest paid
|
(74
|
)
|
(5
|
)
|
(48
|
)
|
||||||||||
Payments to finance lease creditors
|
(69
|
)
|
(49
|
)
|
(48
|
)
|
||||||||||
Repayment of borrowings
|
(235
|
)
|
(165
|
)
|
(346
|
)
|
||||||||||
New bank loan
|
65
|
-
|
-
|
|||||||||||||
Loan finance raised
|
-
|
-
|
890
|
|||||||||||||
Share issues net of costs
|
18
|
15,568
|
-
|
33,852
|
||||||||||||
Net cash generated from/(used in) financing
activities |
15,255
|
(219
|
)
|
34,300
|
||||||||||||
Net increase/(decrease) in cash and cash
equivalents |
967
|
(14,173
|
)
|
27,938
|
||||||||||||
Cash and cash equivalents at beginning of year
|
16,175
|
30,325
|
2,387
|
|||||||||||||
Exchange gains on cash and cash equivalents
|
466
|
23
|
-
|
|||||||||||||
Cash and cash equivalents at end of year
|
18
|
17,608
|
16,175
|
30,325
|
Share
capital
|
Share
premium
|
Merger reserve
|
Shares to be
issued |
Foreign
exchange
reserve
|
Accumulated
deficit
|
Total
equity
|
||||||||||||||||||||||
£'000
|
£'000
|
|
£’000
|
£’000
|
£'000
|
£'000
|
£'000
|
|||||||||||||||||||||
At 1 January 2016
|
1,002
|
31,643
|
52,803
|
200
|
390
|
(39,151
|
)
|
46,887
|
||||||||||||||||||||
Loss for the year
|
-
|
-
|
-
|
-
|
-
|
(20,162
|
)
|
(20,162
|
)
|
|||||||||||||||||||
Foreign exchange translation
|
-
|
-
|
-
|
-
|
3,228
|
-
|
3,228
|
|||||||||||||||||||||
Total comprehensive loss
|
-
|
-
|
-
|
-
|
3,228
|
(20,162
|
)
|
(16,934
|
)
|
|||||||||||||||||||
Transactions with owners
|
||||||||||||||||||||||||||||
Shares issued on 31 October
|
-
|
16,673
|
-
|
-
|
-
|
-
|
16,673
|
|||||||||||||||||||||
2016 – note 18 |
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
Costs associated with share
issue – note 18 |
(1,105
|
)
|
(1,105
|
)
|
||||||||||||||||||||||||
Share option charge
|
-
|
-
|
-
|
-
|
-
|
203
|
203
|
|||||||||||||||||||||
Shares issued as deferred
consideration for business combination |
-
|
200
|
(200
|
)
|
-
|
-
|
-
|
|||||||||||||||||||||
Total contribution by and
distributions to owners |
-
|
15,568
|
200
|
(200
|
)
|
-
|
203
|
15,771
|
||||||||||||||||||||
At 31 December 2016
|
1,002
|
47,211
|
53,003
|
-
|
3,618
|
(59,110
|
)
|
45,724
|
Share
capital
|
Share
premium
|
Merger
reserve
|
Shares to be
issued |
Foreign
exchange
reserve
|
Accumulated
deficit
|
Total
equity
|
||||||||||||||||||||||
£'000
|
£'000
|
|
£’000
|
£’000
|
£'000
|
£'000
|
£'000
|
|||||||||||||||||||||
At 1 January 2015
|
1,001
|
31,643
|
37,776
|
800
|
(9
|
)
|
(29,222
|
)
|
41,989
|
|||||||||||||||||||
Loss for the year
|
-
|
-
|
-
|
-
|
-
|
(10,099
|
)
|
(10,099
|
)
|
|||||||||||||||||||
Foreign exchange translation
|
-
|
-
|
-
|
-
|
399
|
-
|
399
|
|||||||||||||||||||||
Total comprehensive loss
|
-
|
-
|
-
|
-
|
399
|
(10,099
|
)
|
(9,700
|
)
|
|||||||||||||||||||
Transactions with owners
|
||||||||||||||||||||||||||||
Shares issued on exercise of
share options |
1
|
-
|
-
|
-
|
-
|
-
|
1
|
|||||||||||||||||||||
Shares, warrants and share
options issued as consideration for a business combination – 4 December 2015 |
-
|
-
|
14,427
|
-
|
-
|
-
|
14,427
|
|||||||||||||||||||||
Share option charge
|
-
|
-
|
-
|
-
|
-
|
170
|
170
|
|||||||||||||||||||||
Shares issued as deferred
consideration for business combination |
-
|
-
|
600
|
(600
|
)
|
-
|
-
|
-
|
||||||||||||||||||||
Total contribution by and
distributions to owners |
1
|
-
|
15,027
|
(600
|
)
|
-
|
170
|
14,598
|
||||||||||||||||||||
At 31 December 2015
|
1,002
|
31,643
|
52,803
|
200
|
390
|
(39,151
|
)
|
46,887
|
Share
capital
|
Share
premium
|
Merger
reserve |
Shares to be
issued |
Foreign
exchange
reserve
|
Accumulated
deficit
|
Total
Equity
|
||||||||||||||||||||||
£'000
|
£'000
|
|
£’000
|
£'000
|
£'000
|
£'000
|
£'000
|
|||||||||||||||||||||
At 1 January 2014
|
-
|
21,018
|
-
|
-
|
142
|
(20,400
|
)
|
760
|
||||||||||||||||||||
Loss for the year
|
-
|
-
|
-
|
-
|
-
|
(8,822
|
)
|
(8,822
|
)
|
|||||||||||||||||||
Foreign exchange translation
|
-
|
-
|
-
|
-
|
(151
|
)
|
-
|
(151
|
)
|
|||||||||||||||||||
Total comprehensive loss
|
-
|
-
|
-
|
-
|
(151
|
)
|
(8,822
|
)
|
(8,973
|
)
|
||||||||||||||||||
Issue of Midatech Limited shares - pre-share for
share exchange |
-
|
3,202
|
-
|
-
|
-
|
-
|
3,202
|
|||||||||||||||||||||
Transfer to merger reserve on the merger of
Midatech Pharma plc and Midatech Limited – 31 October 2014 |
-
|
(24,220
|
)
|
24,220
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
Transfer of A Preference shares from liability to
equity (28 October 2014) and subsequent conversion to Deferred shares – 8 December 2014 |
1,000
|
-
|
-
|
-
|
-
|
-
|
1,000
|
|||||||||||||||||||||
Issue of shares to settle A Preference share accrued
dividend – 8 December 2014 |
-
|
994
|
-
|
-
|
-
|
-
|
994
|
|||||||||||||||||||||
Shares issued as consideration for a business
combination – 8 December 2014 |
-
|
-
|
13,556
|
-
|
-
|
-
|
13,556
|
|||||||||||||||||||||
Shares to be issued as consideration for a business
combination – 8 December 2014 |
-
|
-
|
-
|
800
|
-
|
-
|
800
|
|||||||||||||||||||||
Issue of shares on placing – 8 December 2014
|
1
|
32,000
|
-
|
-
|
-
|
-
|
32,001
|
|||||||||||||||||||||
Costs associated with share placing
|
-
|
(1,351
|
)
|
-
|
-
|
-
|
-
|
(1,351
|
)
|
|||||||||||||||||||
Total contribution by and distributions to owners
|
1,001
|
10,625
|
37,776
|
800
|
-
|
-
|
50,202
|
|||||||||||||||||||||
At 31 December 2014
|
1,001
|
31,643
|
37,776
|
800
|
(9
|
)
|
(29,222
|
)
|
41,989
|
1 |
Accounting policies
(continued)
|
1 |
Accounting policies
(continued)
|
Entity
|
Summary description
|
Midatech Pharma PLC
|
Ultimate holding company
|
Midatech Limited
|
Trading company
|
Midatech Pharma (Espana) SL (formerly Midatech Biogune SL)
|
Trading company
|
Midatech Andalucia SL
|
Dormant
|
PharMida AG
|
Dormant
|
Midatech Pharma (Wales) Limited (formerly Q Chip Limited)
|
Trading company
|
Midatech Pharma US, Inc. (formerly DARA Biosciences, Inc.)
|
Trading company
|
Dara Therapeutics, Inc. | Dormant |
Midatech Pharma Pty
|
Trading company
|
1 |
Accounting policies
(continued)
|
- |
the fair value of the consideration transferred to the seller, plus
|
- |
the amount of any non-controlling interest in the acquiree, plus
|
- |
if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree re-measured at the acquisition date, less
|
- |
the fair value of the net identifiable assets acquired and assumed liabilities.
|
1 |
Accounting policies
(continued)
|
Goodwill
IPRD
|
-
-
|
Indefinite life
In process, not yet amortising
|
IT and website costs
|
-
|
4 years
|
Product and marketing rights
|
-
|
Between 2 and 13 years
|
· |
Completion of the asset is technically feasible so that it will be available for use or sale;
|
· |
The Group intends to complete the asset and use or sell it;
|
· |
The Group has the ability to use or sell the asset and the asset will generate probable future economic benefits (over and above cost);
|
· |
There are adequate technical, financial and other resources to complete the development and to use or sell the asset; and
|
· |
The expenditure attributable to the asset during its development can be measured reliably.
|
1 |
Accounting policies
(continued)
|
· |
Joint ventures: where the Group has rights to only the net assets of the joint arrangement.
|
·
|
Joint operations: where the Group has both the rights to assets and obligations for the liabilities of the joint arrangement.
|
· |
The structure of the joint arrangement;
|
· |
The legal form of joint arrangements structured through a separate vehicle;
|
· |
The contractual terms of the joint arrangement agreement; and
|
· |
Any other facts and circumstances (including any other contractual arrangements).
|
1 |
Accounting policies
(continued)
|
1 |
Accounting policies
(continued)
|
·
|
Borrowings
are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. Interest expense in this context includes initial transaction costs and premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
|
· |
Government loans received on favourable terms below market rate are discounted at a market rate of interest. The difference between the present value of the loan and the proceeds is held as a government grant within deferred revenue and is released to research and development expenditure in line with when the asset or expenditure is recognised in the income statement.
|
·
|
Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.
|
1 |
Accounting policies
(continued)
|
· |
Ordinary shares of £0.00005 each are classified as equity instruments; and
|
· |
Deferred shares of £1 each are classified as equity instruments.
|
· |
including any market performance conditions (including the share price);
|
· |
excluding the impact of any service and non-market performance vesting conditions (for example, remaining an employee of the entity over a specified time period); and
|
· |
including the impact of any non-vesting conditions (for example, the requirement for employees to save).
|
1 |
Accounting policies
(continued)
|
· |
the initial recognition of goodwill;
|
·
|
the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
|
·
|
investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
|
Fixtures and fittings
Leasehold improvements
|
-
-
|
25% per annum straight line
10% per annum straight line
|
Computer equipment
|
-
|
25% per annum straight line
|
Laboratory equipment
|
-
|
15% per annum straight line
|
2 |
Critical accounting estimates and judgements
|
· |
future expected cash flows from in-process research and development;
|
· |
the fair value of the property, plant and equipment; and
|
· |
discount rates.
|
2 |
Critical accounting estimates and judgements
(continued)
|
· |
Volatility is estimated based on the average annualized volatility of a number of publicly traded peer companies in the biotech sector;
|
· |
The estimated life of the option is estimated to be until the first exercise period, which is typically the month after the option vests; and
|
· |
The dividend return is estimated by reference to our historical dividend payments. Currently, this is estimated to be zero as no dividend has been paid in the prior periods.
|
3 |
Segment Information
|
2016
|
2015
|
2014
|
||||||||||
|
£’000
|
£’000
|
£'000
|
|||||||||
United Kingdom |
491
|
-
|
25
|
|||||||||
Turkey
|
-
|
73
|
-
|
|||||||||
Europe
|
35
|
25
|
-
|
|||||||||
United States
|
5,850
|
677
|
-
|
|||||||||
6,376
|
775
|
25
|
2016
|
2015
|
2014
|
||||||||||
Customer A (Pipeline R&D) |
-
|
11
|
% |
-
|
||||||||
Customer B (Commercial)
|
20
|
%
|
-
|
|
-
|
|||||||
Customer C (Commercial)
|
15
|
%
|
-
|
-
|
||||||||
Customer D (Commercial)
|
10
|
%
|
-
|
-
|
· |
Pipeline Research and Development: The Pipeline Research and Development (“Pipeline R&D”) segment seeks to develop products using the Group’s nanomedicine and sustained release technology platforms.
|
· |
Commercial: The Commercial segment distributes and sells the Group’s commercial products. Midatech Pharma US promotes the Group’s commercial, cancer supportive care products in the US market, in which the Group has exclusive licenses to Soltamox, Oravig and Zuplenz
®
, an exclusive license to distribute, promote and market Gelclair, and a marketing agreement to co-promote two other products: Ferralet 90 and Aquoral. As and when new products are introduced the Commercial segment will include revenues from the marketing of these commercial products.
|
3 |
Segment information
(continued)
|
Pipeline R&D
|
Commercial
|
Consolidated
|
||||||||||
|
£’000
|
£’000
|
£’000
|
|||||||||
Revenue
|
776
|
5,600
|
6,376
|
|||||||||
Grant revenue
|
547
|
-
|
547
|
|||||||||
Total revenue
|
1,323
|
5,600
|
6,923
|
|||||||||
Cost of sales
|
(8
|
)
|
(659
|
)
|
(667
|
)
|
||||||
Research and development costs
|
(6,684
|
)
|
-
|
(6,684
|
)
|
|||||||
Distribution costs, sales and
marketing |
(248
|
)
|
(5,692
|
)
|
(5,940
|
)
|
||||||
Administrative costs
|
(4,071
|
)
|
(4,379
|
)
|
(8,450
|
)
|
||||||
Depreciation
|
(762
|
)
|
(10
|
)
|
(772
|
)
|
||||||
Amortisation
|
(193
|
)
|
(3,390
|
)
|
(3,583
|
)
|
||||||
Impairment
|
-
|
(11,413
|
)
|
(11,413
|
)
|
|||||||
Segmental operating loss
|
(10,643
|
)
|
(19,943
|
)
|
(30,586
|
)
|
||||||
Finance income
|
1,337
|
|||||||||||
Finance expense
|
(73
|
)
|
||||||||||
Loss before tax
|
(29,322
|
)
|
||||||||||
Taxation
|
9,160
|
|||||||||||
Loss after tax
|
(20,162
|
)
|
3 |
Segment information
(continued)
|
Pipeline R&D
|
Commercial
|
Unallocated
Costs (1) |
Consolidated
|
|||||||||||||
£’000
|
|
£’000
|
£’000
|
£’000
|
||||||||||||
Revenue
|
273
|
502
|
-
|
775
|
||||||||||||
Grant revenue
|
600
|
-
|
-
|
600
|
||||||||||||
Total revenue
|
873
|
502
|
-
|
1,375
|
||||||||||||
Cost of sales
|
-
|
(70
|
)
|
-
|
(70
|
)
|
||||||||||
Research and development costs
|
(5,811
|
)
|
(109
|
)
|
-
|
(5,920
|
)
|
|||||||||
Distribution costs, sales and marketing
|
-
|
(374
|
)
|
(374
|
)
|
|||||||||||
Administrative costs
|
(3,983
|
)
|
(218
|
)
|
(2,991
|
)
|
(7,192
|
)
|
||||||||
Depreciation
|
(500
|
)
|
(1
|
)
|
-
|
(501
|
)
|
|||||||||
Amortisation
|
(5
|
)
|
(231
|
)
|
-
|
(236
|
)
|
|||||||||
Segmental result/operating loss
|
(9,426
|
)
|
(501
|
)
|
(2,991
|
)
|
(12,918
|
)
|
||||||||
Finance income
|
1,691
|
|||||||||||||||
Finance expense
|
(5
|
)
|
||||||||||||||
Loss before tax
|
(11,232
|
)
|
||||||||||||||
Taxation
|
1,133
|
|||||||||||||||
Loss after tax
|
(10,099
|
)
|
2016
|
2015
|
2014
|
||||||||||
|
£’000
|
£’000
|
£'000
|
|||||||||
Spain
|
2,125
|
1,433
|
1,578
|
|||||||||
United Kingdom
|
16,489
|
14,019
|
13,457
|
|||||||||
United States
|
15,772
|
28,258
|
-
|
|||||||||
34,386
|
43,710
|
15,035
|
4 |
Loss from operations
|
2016
|
2015
|
2014
|
||||||||||
Loss from operations is stated after
charging/(crediting): |
|
£’000
|
£’000
|
£'000
|
||||||||
Changes in inventories of finished goods and work in
progress |
256
|
62
|
-
|
|||||||||
Write down of inventory to net realisable value
|
287
|
-
|
-
|
|||||||||
Depreciation of property, plant and equipment
|
772
|
501
|
321
|
|||||||||
Amortisation of intangible assets – product and
marketing rights |
3,583
|
236
|
1
|
|||||||||
Impairment of intangible assets
|
11,413
|
-
|
1,800
|
|||||||||
Operating lease expense:
|
||||||||||||
-
Property
|
385
|
246
|
97
|
|||||||||
-
Plant and machinery
|
194
|
86
|
57
|
|||||||||
Foreign exchange loss/(gain)
|
31
|
(23
|
)
|
(37
|
)
|
|||||||
Acquisition costs
|
-
|
2,991
|
172
|
|||||||||
Loss on disposal of property, plant and equipment
|
-
|
-
|
89
|
|||||||||
Gain on bargain purchase
|
-
|
(165
|
)
|
-
|
||||||||
Share based payment
|
203
|
170
|
-
|
5 |
Staff costs
|
2016
|
2015
|
2014
|
||||||||||
|
£’000
|
£’000
|
£'000
|
|||||||||
Staff costs (including directors) comprise:
|
||||||||||||
Wages and salaries
|
6,314
|
3,731
|
2,322
|
|||||||||
Defined contribution pension cost (note 28)
|
206
|
183
|
169
|
|||||||||
Social security contributions and similar taxes
|
769
|
431
|
322
|
|||||||||
Share based payment
|
203
|
170
|
-
|
|||||||||
7,492
|
4,515
|
2,813
|
2016
|
2015
|
2014
|
||||||||||
£’000
|
£’000
|
£'000
|
||||||||||
Research and development
|
57
|
45
|
28
|
|||||||||
General and administration
|
19
|
22
|
10
|
|||||||||
Sales and marketing
|
8
|
7
|
-
|
|||||||||
84
|
74
|
38
|
2016
|
2015
|
2014
|
||||||||||
£’000
|
£’000
|
£'000
|
||||||||||
Wages and salaries
|
1,054
|
850
|
546
|
|||||||||
Defined contribution pension cost
|
59
|
59
|
36
|
|||||||||
Payments made to third parties
|
142
|
223
|
184
|
|||||||||
Social security contributions and similar taxes
|
152
|
88
|
78
|
|||||||||
Benefits in kind
|
2
|
7
|
36
|
|||||||||
Share based payment
|
184
|
170
|
-
|
|||||||||
1,593
|
1,397
|
880
|
6 |
Finance income and expense
|
2016
|
2015
|
2014
|
||||||||||
Finance income
|
|
£’000
|
£’000
|
£'000
|
||||||||
Interest received on bank deposits
|
164
|
53
|
8
|
|||||||||
Gain on equity settled derivative financial liability
|
1,173
|
1,638
|
-
|
|||||||||
Total finance income
|
1,337
|
1,691
|
8
|
2016
|
2015
|
2014
|
||||||||||
Finance expense
|
£’000
|
£’000
|
£'000
|
|||||||||
Bank loans
|
16
|
2
|
126
|
|||||||||
Other loans
|
57
|
3
|
-
|
|||||||||
Interest on convertible loans
|
-
|
-
|
35
|
|||||||||
Total finance expense
|
73
|
5
|
161
|
7 |
Taxation
|
2016
|
2015
|
2014
|
||||||||||
£’000
|
£’000
|
£'000
|
||||||||||
Current tax credit
|
||||||||||||
Current tax credited to the income statement
|
1,936
|
1,002
|
663
|
|||||||||
Taxation payable in respect of foreign subsidiary
|
(25
|
)
|
-
|
(5
|
)
|
|||||||
1,911
|
1,002
|
658
|
||||||||||
Deferred tax credit
|
||||||||||||
Reversal of temporary differences
|
7,249
|
131
|
360
|
|||||||||
Total tax credit
|
9,160
|
1,133
|
1,018
|
7 |
Taxation
(continued)
|
2016
|
2015
|
2014
|
||||||||||
£’000
|
£’000
|
£'000
|
||||||||||
Loss before tax
|
(29,322
|
)
|
(11,232
|
)
|
(9,840
|
)
|
||||||
Expected tax credit based on the standard rate of
United Kingdom corporation tax at the domestic rate of 20.25% (2014: 21.49%, 2013:20%) |
(5,864
|
)
|
(2,274
|
)
|
(2,115
|
)
|
||||||
Fixed asset differences
|
-
|
-
|
12
|
|||||||||
Expenses not deductible for tax purposes
|
1,022
|
185
|
385
|
|||||||||
Adjustments to brought forward values
|
-
|
(8
|
)
|
33
|
||||||||
Additional deduction for R&D expenditure
|
4
|
(789
|
)
|
(566
|
)
|
|||||||
Surrender of tax losses for R&D tax refund
|
(1,503
|
)
|
406
|
419
|
||||||||
Adjust deferred tax opening/closing rate
|
-
|
-
|
59
|
|||||||||
Income not taxable
|
-
|
-
|
(44
|
)
|
||||||||
Effects of other tax rates
|
(3,421
|
)
|
-
|
-
|
||||||||
Unrelieved tax losses and other deductions arising in
the period |
(166
|
)
|
(78
|
)
|
(35
|
)
|
||||||
Foreign exchange differences
|
712
|
-
|
-
|
|||||||||
Deferred tax not recognised
|
491
|
1,425
|
834
|
|||||||||
Adjustment in respect of prior years
|
(435
|
)
|
-
|
-
|
||||||||
Total tax credited to the income statement
|
(9,160
|
)
|
(1,133
|
)
|
(1,018
|
)
|
8 |
Loss per share
|
2016
|
2015
|
2014
|
||||||||||
Numerator
|
|
£’000
|
|
£’000
|
£'000
|
|||||||
Loss used in basic EPS and diluted EPS
|
(20,162
|
)
|
(10,099
|
)
|
(8,822
|
)
|
||||||
Denominator
|
||||||||||||
Weighted average number of ordinary shares used in
basic EPS |
36,072,752
|
28,229,814
|
9,026,347
|
|||||||||
Basic and diluted loss per share - pence
|
(56p
|
)
|
(36p
|
)
|
(98p
|
)
|
9 |
Property, plant and equipment
|
Fixtures
|
Leasehold
|
Computer
|
Laboratory
|
|||||||||||||||||
and fittings
|
improve-
ments |
equipment
|
equipment
|
Total
|
||||||||||||||||
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
||||||||||||||||
At 1 January 2014
|
748
|
767
|
165
|
162
|
1,842
|
|||||||||||||||
Additions
|
524
|
259
|
18
|
229
|
1,030
|
|||||||||||||||
Acquired through acquisition of
subsidiary |
3
|
19
|
15
|
207
|
244
|
|||||||||||||||
Exchange differences
|
(42
|
)
|
(41
|
)
|
(3
|
)
|
-
|
(86
|
)
|
|||||||||||
Disposals
|
(31
|
)
|
(124
|
)
|
-
|
(15
|
)
|
(170
|
)
|
|||||||||||
At 31 December 2014
|
1,202
|
880
|
195
|
583
|
2,860
|
|||||||||||||||
Additions
|
183
|
283
|
173
|
385
|
1,024
|
|||||||||||||||
Acquired through acquisition of
subsidiary |
-
|
-
|
-
|
16
|
16
|
|||||||||||||||
Exchange differences
|
(66
|
)
|
(51
|
)
|
(14
|
)
|
(1
|
)
|
(132
|
)
|
||||||||||
At 31 December 2015
|
1,319
|
1,112
|
354
|
983
|
3,768
|
|||||||||||||||
Additions
|
2
|
715
|
43
|
609
|
1,369
|
|||||||||||||||
Disposal
|
-
|
-
|
(1
|
)
|
-
|
(1
|
)
|
|||||||||||||
Transfer
|
(1,125
|
)
|
-
|
(122
|
)
|
1,247
|
-
|
|||||||||||||
Exchange differences
|
32
|
172
|
7
|
211
|
422
|
|||||||||||||||
At 31 December 2016
|
228
|
1,999
|
281
|
3,050
|
5,558
|
9 |
Property, plant and equipment
(continued)
|
Fixtures
|
Leasehold
|
Computer
|
Laboratory
|
|||||||||||||||||
and fittings
|
improve-
ments |
equipment
|
equipment
|
Total
|
||||||||||||||||
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
||||||||||||||||
Accumulated depreciation
|
||||||||||||||||||||
At 1 January 2014
|
430
|
495
|
118
|
115
|
1,158
|
|||||||||||||||
Charge for the year
|
102
|
67
|
24
|
128
|
321
|
|||||||||||||||
Exchange differences
|
(22
|
)
|
(33
|
)
|
(2
|
)
|
3
|
(54
|
)
|
|||||||||||
Disposals
|
(31
|
)
|
(50
|
)
|
-
|
-
|
(81
|
)
|
||||||||||||
At 31 December 2014
|
479
|
479
|
140
|
246
|
1,344
|
|||||||||||||||
Charge for the year
|
3
|
282
|
48
|
168
|
501
|
|||||||||||||||
Exchange differences
|
(24
|
)
|
(28
|
)
|
(8
|
)
|
(1
|
)
|
(61
|
)
|
||||||||||
At 31 December 2015
|
458
|
733
|
180
|
413
|
1,784
|
|||||||||||||||
Charge for the year
|
41
|
134
|
54
|
543
|
772
|
|||||||||||||||
Transfer
|
(369
|
)
|
(96
|
)
|
(118
|
)
|
583
|
-
|
||||||||||||
Exchange differences
|
19
|
101
|
6
|
110
|
236
|
|||||||||||||||
At 31 December 2016
|
149
|
872
|
122
|
1,649
|
2,792
|
|||||||||||||||
Net book value
|
||||||||||||||||||||
At 31 December 2016
|
79
|
1,127
|
159
|
1,401
|
2,766
|
|||||||||||||||
At 31 December 2015
|
861
|
379
|
174
|
570
|
1,984
|
|||||||||||||||
At 31 December 2014
|
723
|
401
|
55
|
337
|
1,516
|
10 |
Intangible assets
|
In-process
research and
development
|
Product
and
marketing
rights
|
Goodwill
|
IT/Website
costs
|
Total
|
||||||||||||||||
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
||||||||||||||||
Cost
|
||||||||||||||||||||
At 1 January 2014
|
-
|
-
|
-
|
12
|
12
|
|||||||||||||||
Acquired in business combinations
|
12,600
|
-
|
2,291
|
-
|
14,891
|
|||||||||||||||
At 31 December 2014
|
12,600
|
-
|
2,291
|
12
|
14,903
|
|||||||||||||||
Additions
|
-
|
-
|
-
|
3
|
3
|
|||||||||||||||
Acquired in business combinations
|
-
|
17,989
|
9,952
|
-
|
27,941
|
|||||||||||||||
Foreign exchange
|
-
|
332
|
213
|
-
|
545
|
|||||||||||||||
At 31 December 2015
|
12,600
|
18,321
|
12,456
|
15
|
43,392
|
|||||||||||||||
Additions
|
-
|
-
|
-
|
19
|
19
|
|||||||||||||||
Foreign exchange
|
-
|
3,160
|
2,032
|
-
|
5,192
|
|||||||||||||||
Disposals
|
-
|
-
|
-
|
(8
|
)
|
(8
|
)
|
|||||||||||||
At 31 December 2016
|
12,600
|
21,481
|
14,488
|
26
|
48,595
|
10 |
Intangible assets
(continued)
|
In-process
|
Product and
|
|||||||||||||||||||
research and
|
marketing
|
IT/Website
|
||||||||||||||||||
development
|
rights
|
Goodwill
|
Costs
|
Total
|
||||||||||||||||
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
||||||||||||||||
Accumulated amortisation
|
||||||||||||||||||||
At 1 January 2014
|
-
|
-
|
-
|
8
|
8
|
|||||||||||||||
Amortisation charge for the
year |
-
|
-
|
-
|
1
|
1
|
|||||||||||||||
Impairment charge for year
|
1,800
|
-
|
-
|
-
|
1,800
|
|||||||||||||||
At 31 December 2014
|
1,800
|
-
|
-
|
9
|
1,809
|
|||||||||||||||
Amortisation charge for the
year |
-
|
235
|
-
|
1
|
236
|
|||||||||||||||
Foreign exchange
|
-
|
8
|
-
|
-
|
8
|
|||||||||||||||
At 31 December 2015
|
1,800
|
243
|
-
|
10
|
2,053
|
|||||||||||||||
Amortisation charge for the
year |
-
|
3,578
|
-
|
5
|
3,583
|
|||||||||||||||
Impairment
|
-
|
11,413
|
-
|
-
|
11,413
|
|||||||||||||||
Foreign exchange
|
-
|
374
|
-
|
-
|
374
|
|||||||||||||||
At 31 December 2016
|
1,800
|
15,608
|
-
|
15
|
17,423
|
|||||||||||||||
Net book value
|
||||||||||||||||||||
At 31 December 2016
|
10,800
|
5,873
|
14,488
|
11
|
31,172
|
|||||||||||||||
At 31 December 2015
|
10,800
|
18,078
|
12,456
|
5
|
41,339
|
|||||||||||||||
At 31 December 2014
|
10,800
|
-
|
2,291
|
3
|
13,094
|
10 |
Intangible assets
(continued)
|
Carrying amount
|
Remaining amortisation period
|
|||||||||||||||||||||||
2016
|
2015
|
2014
|
2016
|
2015
|
2014
|
|||||||||||||||||||
|
£’000
|
|
£’000
|
|
£’000
|
(years)
|
(years)
|
(years)
|
||||||||||||||||
Midatech Pharma (Wales)
Limited acquired IPRD
|
10,800
|
10,800
|
10,800
|
n/a in process
|
n/a in process
|
n/a in process
|
||||||||||||||||||
Midatech Pharma US, Inc.,
product and marketing rights
|
3,557
|
15,570
|
-
|
Between 1 and 4
|
Between 2 and 5
|
-
|
||||||||||||||||||
Zuplenz
®
product and
marketing rights
|
2,316
|
2,508
|
-
|
12
|
13
|
-
|
||||||||||||||||||
16,673
|
28,878
|
10,800
|
11
|
Acquisition
of Q Chip Limited
|
a)
|
Add controlled-release technology to the Group’s gold nano-particle and portfolio;
|
b)
|
Expand the number of development projects; and
|
c)
|
Q-Chip’s product portfolio offered the Group a lower risk profile than the Group’s own technology thereby mitigating against potential future failure.
|
11
|
Acquisition of Q Chip Limited
(continued)
|
Final fair value
|
||||
|
£’000
|
|||
Identifiable intangible assets:
|
||||
In-process research and development
|
12,600
|
|||
Property, plant and equipment
|
244
|
|||
Receivables and other debtors
|
314
|
|||
Payables and other liabilities
|
(494
|
)
|
||
Deferred tax
|
(714
|
)
|
||
Cash
|
115
|
|||
Total net assets
|
12,065
|
|||
Equity instruments (5,077,122 ordinary shares)
|
13,556
|
|||
Deferred Equity instruments (299,624 deferred consideration shares held
as shares to be issued)
|
800
|
|||
Total consideration – non-cash movement
|
14,356
|
|||
Goodwill on acquisition
|
2,291
|
12
|
Acquisition of Midatech Pharma US, Inc.
|
12
|
Acquisition of Midatech Pharma US, Inc.
(continued)
|
Fair value
|
||||
|
£’000
|
|||
Identifiable intangible assets:
|
||||
Product and marketing rights
|
15,477
|
|||
Property, plant and equipment
|
16
|
|||
Receivables and other debtors
|
515
|
|||
Stock
|
152
|
|||
Payables and other liabilities
|
(4,150
|
)
|
||
Deferred tax
|
(6,191
|
)
|
||
Cash
|
2,289
|
|||
Total net assets
|
8,108
|
|||
Equity instruments (5,422,028 ordinary shares)
Deferred Equity instruments
|
14,427
|
|||
-
Share options*
|
1,056
|
|||
-
Warrants*
|
2,155
|
|||
-
Preference share redemption**
|
422
|
|||
Total consideration
|
18,060
|
|||
Goodwill on acquisition
|
9,952
|
12
|
Acquisition of Midatech Pharma US, Inc.
(continued)
|
|
£’000
|
|||
Cash paid on completion – preferred share redemption
|
(422
|
)
|
||
Net cash acquired
|
2,289 | |||
1,867
|
13
|
Acquisition of Zuplenz
®
|
Fair value
|
||||
|
£’000
|
|||
Identifiable intangible assets:
|
||||
Product and marketing rights
|
2,512
|
|||
Stock
|
231
|
|||
Total net assets
|
(2,743
|
)
|
||
Cash consideration
|
2,528
|
|||
Contingent consideration*
|
50
|
|||
Total consideration
|
2,578
|
|||
Gain from bargain purchase on acquisition
|
(165
|
)
|
*
|
The contingent consideration relates to various milestone payments which are dependent on the quarterly sales achieved in calendar years 2016 and 2017 and annual sales from 2018 to 2022 exceeding specified sales targets. The maximum amount payable is $26.0m however management does not consider it likely that the associated, very high sales targets will be achieved.
|
The net cash outflow in the year in respect of the business acquisition comprised:
|
||||
|
£’000
|
|||
Cash paid on completion
|
2,528
|
14
|
Impairment testing
|
Indefinite lived
|
|||||||
IPRD carrying amount
|
Goodwill carrying amount
|
Valuation
Basis
|
|||||
Name
|
2016
|
2015
|
2014
|
2016
|
2015
|
2014
|
|
£’000
|
£’000
|
£000
|
£’000
|
£’000
|
£000
|
||
CGU – Midatech
Pharma (Wales) Ltd
|
10,800
|
10,800
|
10,800
|
2,291
|
2,291
|
2,291
|
Value in use
|
14
|
Impairment testing
(continued)
|
Assumptions
|
2016
CGU – MPW Limited and subsidiaries |
2015
CGU – MPW Limited and subsidiaries |
2014
CGU – MPW Limited and subsidiaries |
||||||
Pre-tax discount rate
|
18.1%
|
|
17.7-19.5%
|
|
17.7-19.5%
|
|
|||
Cumulative probability of success of projects
|
46% to 81%
|
46% to 69%
|
23% to 57%
|
Pre-tax discount rate for all projects
|
increase to 26.4%
|
||
Cumulative probability of success of all projects
|
53%
|
|
Pre-tax discount rate for all projects
|
increase to 23.9%
|
||
Cumulative probability of success of all projects
|
44%
|
|
14
|
Impairment testing
(continued)
|
Definite lived
|
Indefinite lived
|
||||||
Product and marketing rights
carrying amount
|
Goodwill carrying amount
|
Valuation
Basis
|
|||||
Name
|
2016
|
2015
|
2016
|
2015
|
|||
£’000
|
£’000
|
£’000
|
£’000
|
||||
CGU – Midatech
Pharma US, Inc.
|
3,557
|
15,477
|
12,197
|
10,165
|
Value in use
|
Assumptions
|
2016
CGU – Midatech Pharma US, Inc |
|
Pre-tax discount rate
|
24.7%
|
|
Overall CGU 10-year growth rate
|
10.6%
|
14
|
Impairment testing
(continued)
|
Assumptions
|
2015
CGU – Midatech
Pharma US, Inc.
|
||
Pre-tax discount rate
|
23.2%
|
|
2016
CGU – Midatech
Pharma US, Inc.
|
|||
Pre-tax discount rate for all projects
|
increase to 25.2%
|
||
Overall CGU 10-year growth rate
|
10.5%
|
|
15
|
Subsidiaries
|
Registered
|
Nature of
|
||
Name
|
Office
|
Business
|
Notes
|
Midatech Limited
|
65 Innovation Drive, Milton Park, Milton, Abingdon, Oxfordshire, OX14 4RQ
|
Trading company
|
|
Midatech Pharma (Espana) SL
|
Parque Tecnológico de Vizcaya, Edificio 800 Planta 2, Derio, 48160, Vizcaya, Spain
|
Trading company
|
(a)
|
PharMida AG
|
c/o Kellerhals, Hirschgässlein 11, 4051 Basel, Switzerland
|
Dormant
|
(a) (b)
|
Midatech Pharma (Wales) Limited
|
Oddfellows House, 19 Newport Road, Cardiff, CF24 0AA
|
Trading company
|
|
Midatech Pharma US, Inc.
|
8601 Six Forks Road, Suite 160, Raleigh, North Carolina 27615, USA
|
Trading company
|
(c)
|
Dara Therapeutics, Inc.
|
8601 Six Forks Road, Suite 160, Raleigh, North Carolina 27615, USA
|
Dormant
|
(d)
|
Midatech Pharma PTY
|
c/o Griffith Hack Consulting, 300 Queen Street, Brisbane, QLD 4000, Australia
|
Trading company
|
(e)
|
(a) |
Wholly owned subsidiary of Midatech Limited
|
(b) |
PharMida AG became dormant in January 2016.
|
(c) |
DARA Bio Sciences, Inc. was acquired on 4 December 2015 through a merger with a specially incorporated subsidiary of Midatech Pharma PLC. This merger subsidiary was renamed Midatech Pharma US, Inc. on 4 December 2015.
|
(d) |
Wholly owned subsidiary of Midatech Pharma US, Inc.
|
(e) |
Midatech Pharma PTY was incorporated on 16 February 2015.
|
16
|
Joint arrangements
|
Country of
|
|||
Name
|
incorporation
|
Nature of business
|
Type of arrangement
|
Syntara LLC
|
USA
|
Dormant
|
Joint venture
|
MidaSol
Therapeutics GP
|
Cayman Islands
|
Research and development partner
|
Joint operation
|
2016
|
2015
|
2014
|
||||||||||
|
£’000
|
|
£’000
|
£'000
|
||||||||
Research and development spend on MidaSol
Therapeutics
|
-
|
776
|
248
|
|||||||||
Year-end receivable due from joint operation partner
|
-
|
219
|
-
|
17
|
Trade and other receivables
|
2016
|
2015
|
2014
|
||||||||||
|
£’000
|
|
£’000
|
£'000
|
||||||||
Trade receivables
|
1,428
|
985
|
189
|
|||||||||
Prepayments
|
586
|
685
|
49
|
|||||||||
Other receivables
|
873
|
1,213
|
649
|
|||||||||
Total trade and other receivables
|
2,887
|
2,883
|
887
|
|||||||||
Less: non-current portion (rental deposit and on bond)
|
(448
|
)
|
(387
|
)
|
(425
|
)
|
||||||
Current portion
|
2,439
|
2,496
|
462
|
18
|
Cash and cash equivalents and cash flow supporting notes
|
2016
|
2015
|
2014
|
||||||||||
|
£’000
|
|
£’000
|
£'000
|
||||||||
Cash at bank available on demand
|
17,608
|
16,175
|
30,325
|
|||||||||
Share issues net of costs – cash transactions
|
||||||||||||
2016
|
2015
|
2014
|
||||||||||
|
£’000
|
|
£’000
|
£'000
|
||||||||
Funds raised on Public Offering
|
16,673
|
-
|
32,000
|
|||||||||
Costs of raising funds on Public Offering
|
(1,105
|
)
|
-
|
(1,350
|
)
|
|||||||
Issue of shares in Midatech Limited pre-flotation
|
-
|
-
|
3,202
|
|||||||||
15,568
|
-
|
33,852
|
19
|
Inventories
|
2016
|
2015
|
2014
|
||||||||||
|
£’000
|
|
£’000
|
£'000
|
||||||||
Work in progress
Finished goods
|
-
817
|
230
229
|
-
-
|
|||||||||
Total inventories
|
817
|
459
|
-
|
20
|
Trade and other payables
|
2016
|
2015
|
2014
|
||||||||||
Current
|
|
£’000
|
|
£’000
|
£'000
|
|||||||
Trade payables
|
3,268
|
2,285
|
981
|
|||||||||
Other payables
|
1,166
|
35
|
177
|
|||||||||
Accruals
|
2,003
|
3,101
|
732
|
|||||||||
Total financial liabilities, excluding loans and
borrowings, classified as financial liabilities
measured at amortised cost
|
6,437
|
5,421
|
1,890
|
|||||||||
Tax and social security
|
670
|
183
|
274
|
|||||||||
Deferred revenue
|
1,300
|
1,480
|
177
|
|||||||||
Total trade and other payables
|
8,407
|
7,084
|
2,341
|
20
|
Trade and other payables
(continued)
|
21
|
Loan and Borrowings
|
2016
|
2015
|
2014
|
||||||||||
|
£’000
|
|
£’000
|
£'000
|
||||||||
Current
|
||||||||||||
Bank loans
|
23
|
9
|
9
|
|||||||||
Finance lease
|
31
|
70
|
37
|
|||||||||
Government and research loans
|
484
|
363
|
445
|
|||||||||
Total
|
538
|
442
|
491
|
|||||||||
Non-current
|
||||||||||||
Bank loans
|
-
|
20
|
31
|
|||||||||
Finance lease
|
52
|
68
|
-
|
|||||||||
Government and research loans
|
1,568
|
1,420
|
1,457
|
|||||||||
Total
|
1,620
|
1,508
|
1,488
|
22
|
Derivative financial liability - current
|
2016
|
2015
|
2014
|
||||||||||
£'000
|
|
£’000
|
£'000
|
|||||||||
Equity settled derivative financial liability
|
400
|
1,573
|
-
|
|||||||||
At 1 January/on acquisition – 5 December 2015
|
1,573
|
3,211
|
||||||||||
-
|
||||||||||||
Gain recognised in finance income within the
consolidated statement of comprehensive income
|
(1,173
|
)
|
(1,638
|
)
|
-
|
|||||||
At 31 December
|
400
|
1,573
|
-
|
23
|
Financial instruments - risk management
|
· |
Credit risk;
|
· |
Foreign exchange risk; and
|
· |
Liquidity risk.
|
23
|
Financial instruments - risk management
(continued)
|
· |
Trade and other receivables;
|
· |
Cash and cash equivalents;
|
· |
Trade and other payables;
|
· |
Accruals;
|
· |
Loans and borrowings; and
|
· |
Derivative financial liability.
|
2016
|
2015
|
2014
|
||||||||||
£'000
|
|
£’000
|
£'000
|
|||||||||
Cash and cash equivalents
|
17,608
|
16,175
|
30,325
|
|||||||||
Trade receivables
|
1,428
|
985
|
189
|
|||||||||
Other receivables
|
873
|
1,213
|
649
|
|||||||||
Total financial assets
|
19,909
|
18,373
|
31,163
|
2016
|
2015
|
2014
|
||||||||||
£'000
|
|
£’000
|
£'000
|
|||||||||
Trade payables
|
3,268
|
2,285
|
981
|
|||||||||
Other payables
|
1,166
|
35
|
177
|
|||||||||
Accruals
|
2,003
|
3,101
|
732
|
|||||||||
Loans and borrowings
|
2,158
|
1,950
|
1,979
|
|||||||||
Total financial liabilities - amortised cost
|
8,595
|
7,371
|
3,869
|
2016
|
2015
|
2014
|
||||||||||
£'000
|
|
£’000
|
£'000
|
|||||||||
Equity settled derivative financial liability
|
400
|
1,573
|
-
|
23
|
Financial instruments - risk management
(continued)
|
• |
Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities;
|
• |
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
|
• |
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
|
Financial
liabilities
|
Fair value
as at
31/12/2016
|
Fair value
hierarchy
|
Valuation
technique
(s) and key input(s)
|
Significant unobservable
input(s)
|
Relationship of
unobservable
inputs to fair
value
|
|||||
Equity
settled
financial
derivative
liability
|
£400k
|
|
Level 3
|
Black Scholes option pricing model
|
Volatility rates between a range of 60% and 76% determined using historical volatility of comparable companies.
|
The higher the volatility the higher the fair value.
|
||||
|
||||||||||
Expected life between a range of 0.1 and 8.6 years determined using the remaining life of the share options.
|
The shorter the expected life the lower the fair value.
|
|||||||||
Risk-free rate between a range of 0.0% and 1.14% determined using the expected life assumptions.
|
The higher the risk-free rate the higher the fair value.
|
23
|
Financial instruments - risk management
(continued)
|
2016
|
2015
|
2014
|
||||||||||
£'000
|
|
£’000
|
£'000
|
|||||||||
Cash and cash equivalents:
|
||||||||||||
Pounds Sterling
|
10,229
|
14,494
|
30,026
|
|||||||||
US Dollar
|
2,186
|
819
|
-
|
|||||||||
Euro
|
5,143
|
862
|
270
|
|||||||||
Other
|
50
|
-
|
29
|
|||||||||
Total
|
17,608
|
16,175
|
30,325
|
23
|
Financial instruments - risk management
(continued)
|
2016
|
2015
|
2014
|
||||||||||
£'000
|
|
£’000
|
£'000
|
|||||||||
Net Foreign Currency Assets/(Liabilities):
|
||||||||||||
US Dollar
|
(206
|
)
|
(1,691
|
)
|
-
|
|||||||
Euro
|
2,655
|
77
|
(460
|
)
|
||||||||
Other
|
58
|
(8
|
)
|
19
|
||||||||
Total
|
2,507
|
(1,622
|
)
|
(441
|
)
|
Year ended 31 December 2016
|
US Dollar
|
Euro
|
Other
|
|||||||||
£'000
|
|
£’000
|
£'000
|
|||||||||
Loss before tax
|
521
|
(73
|
)
|
(55
|
)
|
|||||||
Total equity
|
521
|
(73
|
)
|
(55
|
)
|
23
|
Financial instruments - risk management
(continued)
|
2016
|
Up to 3
months |
Between
3 and 12
months
|
Between
1 and 2
years
|
Between
2 and 5 years |
Over
5 years |
|||||||||||||||
|
|
£’000
|
|
£’000
|
|
£’000
|
|
£’000
|
|
£’000
|
||||||||||
Trade and other payables
|
6,437
|
-
|
-
|
-
|
-
|
|||||||||||||||
Bank loans
|
3
|
8
|
11
|
4
|
-
|
|||||||||||||||
Finance leases
|
7
|
26
|
30
|
33
|
-
|
|||||||||||||||
Government research loans
|
-
|
449
|
269
|
761
|
393
|
|||||||||||||||
Total
|
6,447
|
483
|
310
|
798
|
393
|
2015
|
Up to 3
months |
Between
3 and 12
months
|
Between
1 and 2
years
|
Between
2 and 5 years |
Over
5 years |
|||||||||||||||
|
|
£’000
|
|
£’000
|
|
£’000
|
|
£’000
|
|
£’000
|
||||||||||
Trade and other payables
|
5,421
|
-
|
-
|
-
|
-
|
|||||||||||||||
Bank loans
|
2
|
7
|
9
|
13
|
-
|
|||||||||||||||
Finance leases
|
7
|
71
|
27
|
56
|
-
|
|||||||||||||||
Government research loans
|
36
|
352
|
195
|
644
|
755
|
|||||||||||||||
Total
|
5,466
|
430
|
231
|
713
|
755
|
2014
|
Up to 3
months |
Between
3 and 12
months
|
Between
1 and 2
years
|
Between
2 and 5 years |
Over
5 years |
|||||||||||||||
|
|
£’000
|
|
£’000
|
|
£’000
|
|
£’000
|
|
£’000
|
||||||||||
Trade and other payables
|
1,890
|
-
|
-
|
-
|
-
|
|||||||||||||||
Bank loans
|
2
|
7
|
9
|
24
|
-
|
|||||||||||||||
Finance leases
|
11
|
27
|
-
|
-
|
-
|
|||||||||||||||
Government research loans
|
-
|
485
|
207
|
891
|
351
|
|||||||||||||||
Total
|
1,903
|
519
|
216
|
915
|
351
|
• |
Trade and payables – note 20
|
• |
Loans and borrowings – note 21
|
23
|
Financial instruments - risk management
(continued)
|
• |
to safeguard the entity’s ability to continue as a going concern; and
|
• |
to have sufficient resource to take development projects forward towards commercialisation.
|
24
|
Deferred tax
|
2016
|
2015
|
2014
|
||||||||||
|
£’000
|
|
£’000
|
£'000
|
||||||||
Liability at 1 January
|
6,547
|
354
|
-
|
|||||||||
Arising on business combination
|
-
|
6,191
|
714
|
|||||||||
Credited to income on impairment and amortisation of
intangibles
|
(5,509
|
)
|
-
|
(360
|
)
|
|||||||
Credited to income statement
|
(1,740
|
)
|
(131
|
)
|
-
|
|||||||
Foreign exchange gain
|
702
|
133
|
-
|
|||||||||
Liability at 31 December
|
-
|
6,547
|
354
|
24
|
Deferred tax
(continued)
|
Gross losses
|
Unrecognised
deferred tax
asset
|
|||||||
|
£’000
|
|
£’000
|
|||||
31 December 2014
|
16,017
|
3,203
|
||||||
31 December 2015
|
23,286
|
4,191
|
||||||
31 December 2016
|
26,956
|
5,049
|
2016
|
Asset
|
Liability
|
Net
|
|||||||||
|
£’000
|
|
£’000
|
£'000
|
||||||||
Business Combinations
|
3,668
|
(3,668
|
)
|
-
|
||||||||
2015
|
Asset
|
Liability
|
Net
|
|||||||||
|
£’000
|
|
£’000
|
£'000
|
||||||||
Business Combinations
|
1,625
|
(8,172
|
)
|
(6,547
|
)
|
|||||||
2014
|
Asset
|
Liability
|
Net
|
|||||||||
|
£’000
|
|
£’000
|
£'000
|
||||||||
Business Combinations
|
1,806
|
(2,160
|
)
|
(354
|
)
|
25
|
Share capital
|
2016
|
2016
|
2015
|
2015
|
2014
|
2014
|
|||||||||||||||||||
Authorised, allotted and fully paid – classified as equity
|
Number
|
|
£
|
Number
|
|
£
|
Number
|
|
£
|
|||||||||||||||
At 1 January
|
||||||||||||||||||||||||
Ordinary shares of 0.005p each
|
48,699,456
|
2,435
|
33,467,504
|
1,673
|
27,794,258
|
1,390
|
||||||||||||||||||
Deferred shares of £1 each
|
1,000,001
|
1,000,001
|
1,000,001
|
1,000,001
|
1,000,001
|
1,000,001
|
||||||||||||||||||
Total
|
1,002,436
|
1,001,674
|
1,001,391
|
25
|
Share capital
(continued)
|
(a) |
to receive notice of, to attend and to vote at all general meetings of the Company, in which case shareholders shall have one vote for each share of which he is the holder.
|
(b) |
to receive such dividend as is declared by the Board on each share held.
|
(a) |
shall not be entitled to receive notice of or to attend or speak at any general meeting of the Company or to vote on any resolution to be proposed at any general meeting of the Company;
|
(b) |
shall not be entitled to receive any dividend or other distribution of out of the profits of the Company.
|
25
|
Share capital
(continued)
|
Date of Issue
|
Type of Share Issue
|
Ordinary
Shares
|
A
Preference
Shares
|
B
Preference
Shares
|
C
Preference
Shares
|
Deferred
Shares
|
Share
Price
|
Total
considera-
tion
|
|||||||||||||||||||||
Number
|
Number
|
Number
|
Number
|
Number
|
£
|
£’000
|
|||||||||||||||||||||||
2014
|
|||||||||||||||||||||||||||||
As at 1 January 2014
|
2,889,229
|
1,000,000
|
75,000
|
565,064
|
-
|
-
|
9,093
|
||||||||||||||||||||||
30 January 2014
|
Equalisation round
|
39,853
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
19 April 2014
|
Subscription option
|
244,881
|
-
|
-
|
-
|
-
|
0.15
|
37
|
|||||||||||||||||||||
13 June 2014
|
Subscription option
|
8,250
|
-
|
-
|
-
|
-
|
0.15
|
1
|
|||||||||||||||||||||
4 September 2014
|
Rights issue
|
105,314
|
-
|
-
|
511,738
|
-
|
5.13
|
3,165
|
|||||||||||||||||||||
12 September 2014
|
Share redemption
|
-
|
-
|
(75,000
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
Total pre-share for share exchange –
Midatech Limited
|
3,287,527
|
1,000,000
|
-
|
1,076,802
|
-
|
12,296
|
|||||||||||||||||||||||
12 September 2014
|
Subscriber share – Midatech Pharma plc
|
1
|
1.0000
|
-
|
|||||||||||||||||||||||||
13 November 2014
|
Share for share exchange
|
3,287,527
|
1,000,000
|
-
|
1,076,802
|
-
|
-
|
-
|
|||||||||||||||||||||
13 November 2014
|
Sub-division of subscriber share
|
9,999
|
-
|
-
|
-
|
-
|
0.0001
|
-
|
|||||||||||||||||||||
28 November 2014
|
Warrant exchange share issue
|
628,356
|
-
|
-
|
-
|
-
|
0.0001
|
-
|
|||||||||||||||||||||
28 November 2014
|
Share conversion
|
(10,000
|
)
|
-
|
-
|
-
|
1
|
-
|
-
|
||||||||||||||||||||
28 November 2014
|
Share conversion
|
1,076,802
|
-
|
-
|
(1,076,802
|
)
|
-
|
-
|
-
|
||||||||||||||||||||
Total ordinary shares pre-subdivision
|
4,992,685
|
||||||||||||||||||||||||||||
28 November 2014
|
Share sub division
|
9,985,370
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
8 December 2014
|
Share issue on acquisition of Q Chip
Limited |
5,077,122
|
-
|
-
|
-
|
-
|
2.67
|
-
|
|||||||||||||||||||||
8 December 2014
|
Public offering (costs shown in note 18)
|
11,985,019
|
-
|
-
|
-
|
-
|
2.67
|
32,000
|
|||||||||||||||||||||
8 December 2014
|
Share conversion
|
746,747
|
(1,000,000
|
)
|
-
|
-
|
1,000,000
|
-
|
-
|
||||||||||||||||||||
27,794,258
|
-
|
-
|
-
|
1,000,001
|
32,000
|
25
|
Share capital
(continued)
|
26
|
Reserves
|
Reserve
|
Description and purpose
|
Share premium
|
Amount subscribed for share capital in excess of nominal value.
|
Merger reserve
|
Represents the difference between the fair value and nominal value of shares issued on the acquisition of subsidiary companies where the company has elected to take advantage of merger relief.
|
Shares to be issued
|
Shares for which consideration has been received but which are not yet issued and which form part of consideration in a business combination.
|
Foreign exchange reserve
|
Gains/losses arising on retranslating the net assets of overseas operations into sterling.
|
Accumulated deficit
|
All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.
|
27
|
Leases
|
Land and
|
||||||||
buildings
|
Other
|
|||||||
2016
|
£'000
|
£'000
|
||||||
Expiring In one year or less
|
371
|
7
|
||||||
Expiring Between one and five years
|
449
|
28
|
||||||
820
|
35
|
|||||||
Land and
|
||||||||
buildings
|
Other
|
|||||||
2015
|
£'000
|
£'000
|
||||||
Expiring In one year or less
|
313
|
1
|
||||||
Expiring Between one and five years
|
410
|
2
|
||||||
723
|
3
|
|||||||
Land and
|
||||||||
buildings
|
Other
|
|||||||
2014
|
£'000
|
£'000
|
||||||
Expiring In one year or less
|
150
|
79
|
||||||
Expiring Between one and five years
|
159
|
-
|
||||||
309
|
79
|
28
|
Retirement benefits
|
29
|
Share-based Payments
|
Date of grant
|
At 1
January
2016 |
Granted
in 2016
|
Exercised
in 2016
|
Forfeited
in 2016
|
At 31
December
2016 |
Exercise
Price
|
||||||||||||||||||
31 December 2008
|
26,122
|
-
|
-
|
-
|
26,122
|
£
|
1.425
|
|||||||||||||||||
31 December 2008
|
15,500
|
-
|
-
|
(12,500
|
)
|
3,000
|
£
|
3.985
|
||||||||||||||||
1 April 2010
|
25,110
|
-
|
-
|
-
|
25,110
|
£
|
4.00
|
|||||||||||||||||
20 August 2010
|
41,766
|
-
|
-
|
-
|
41,766
|
£
|
4.19
|
|||||||||||||||||
13 September 2011
|
3,000
|
-
|
-
|
-
|
3,000
|
£
|
4.19
|
|||||||||||||||||
20 April 2012
|
35,796
|
-
|
-
|
-
|
35,796
|
£
|
4.19
|
|||||||||||||||||
9 May 2014
|
200,000
|
-
|
-
|
-
|
200,000
|
£
|
0.075
|
|||||||||||||||||
30 June 2014
|
880,000
|
-
|
-
|
-
|
880,000
|
£
|
0.075
|
|||||||||||||||||
11 July 2014
|
5,000
|
-
|
-
|
(2,000
|
)
|
3,000
|
£
|
0.075
|
||||||||||||||||
31 October 2016
|
-
|
50,000
|
-
|
-
|
50,000
|
£
|
1.710
|
|||||||||||||||||
31 October 2016
|
-
|
607,600
|
-
|
-
|
607,600
|
£
|
2.680
|
|||||||||||||||||
14 December 2016
|
-
|
8,000
|
-
|
-
|
8,000
|
£
|
1.550
|
|||||||||||||||||
14 December 2016
|
-
|
10,000
|
-
|
-
|
10,000
|
£
|
1.700
|
|||||||||||||||||
14 December 2016
|
-
|
3,000
|
-
|
-
|
3,000
|
£
|
1.710
|
|||||||||||||||||
14 December 2016
|
-
|
3,000
|
-
|
-
|
3,000
|
£
|
1.730
|
|||||||||||||||||
14 December 2016
|
-
|
3,000
|
-
|
-
|
3,000
|
£
|
1.740
|
|||||||||||||||||
14 December 2016
|
-
|
40,000
|
-
|
-
|
40,000
|
£
|
1.870
|
|||||||||||||||||
14 December 2016
|
-
|
40,000
|
-
|
-
|
40,000
|
£
|
1.880
|
|||||||||||||||||
15 December 2016
|
-
|
197,000
|
-
|
-
|
197,000
|
£
|
1.210
|
|||||||||||||||||
19 December 2016
|
1,110,000
|
-
|
-
|
1,110,000
|
£
|
1.210
|
||||||||||||||||||
1,232,294
|
2,071,600
|
-
|
(14,500
|
)
|
3,289,394
|
Options exercisable at 31 December 2016
|
468,194
|
|||
Weighted average exercise price of outstanding options at 31 December 2016
|
|
£1.234
|
||
Weighted average exercise price of options exercised in 2016
|
n/a
|
|||
Weighted average exercise price of options forfeited in 2016
|
|
£3.446
|
||
Weighted average exercise price of options granted in 2016
|
|
£1.685
|
||
Weighted average remaining contractual life of outstanding options at 31 December 2016
|
8.6 years
|
29
|
Share-based payment
(continued)
|
Date of grant
|
At 1
January
2015
|
Granted in
2015
|
Exercised
in 2015
|
Forfeited
in 2015
|
At 31
December
2015
|
Exercise
Price
|
||||||||||||||||||
31 December 2008
|
26,122
|
-
|
-
|
-
|
26,122
|
£
|
1.425
|
|||||||||||||||||
31 December 2008
|
15,500
|
-
|
-
|
-
|
15,500
|
£
|
3.985
|
|||||||||||||||||
1 April 2010
|
25,110
|
-
|
-
|
-
|
25,110
|
£
|
4.00
|
|||||||||||||||||
20 August 2010
|
59,666
|
-
|
-
|
(17,900
|
)
|
41,766
|
£
|
4.19
|
||||||||||||||||
13 September 2011
|
3,000
|
-
|
-
|
-
|
3,000
|
£
|
4.19
|
|||||||||||||||||
20 April 2012
|
35,796
|
-
|
-
|
-
|
35,796
|
£
|
4.19
|
|||||||||||||||||
3 April 2014
|
26,500
|
-
|
(26,500
|
)
|
-
|
-
|
£
|
0.075
|
||||||||||||||||
9 May 2014
|
200,000
|
-
|
-
|
-
|
200,000
|
£
|
0.075
|
|||||||||||||||||
30 June 2014
|
880,000
|
-
|
-
|
-
|
880,000
|
£
|
0.075
|
|||||||||||||||||
11 July 2014
|
11,000
|
-
|
-
|
(6,000
|
)
|
5,000
|
£
|
0.075
|
||||||||||||||||
1,282,694
|
-
|
(26,500
|
)
|
(23,900
|
)
|
1,232,294
|
Options exercisable at 31 December 2015
|
366,044
|
|||
Weighted average exercise price of outstanding options at 31 December 2015
|
|
£0.502
|
||
Weighted average exercise price of options exercised in 2015
|
|
£0.075
|
||
Weighted average exercise price of options forfeited in 2015
|
|
£4.19
|
||
Weighted average exercise price of options granted in 2015
|
n/a
|
|||
Weighted average remaining contractual life of outstanding options at 31 December 2015
|
7.8 years
|
Date of grant
|
At 1
January
2014
|
Granted in
2014
|
Exercised
in 2014
|
Forfeited
in 2014
|
At 31
December
2014
|
Exercise
Price
|
||||||||||||||||||
31 December 2008
|
44,622
|
-
|
-
|
(18,500
|
)
|
26,122
|
£
|
1.425
|
||||||||||||||||
31 December 2008
|
15,500
|
-
|
-
|
-
|
15,500
|
£
|
3.985
|
|||||||||||||||||
1 September 2009
|
12,500
|
-
|
-
|
(12,500
|
)
|
-
|
£
|
3.985
|
||||||||||||||||
13 November 2009
|
25,000
|
-
|
-
|
(25,000
|
)
|
-
|
£
|
4.00
|
||||||||||||||||
1 April 2010
|
25,110
|
-
|
-
|
-
|
25,110
|
£
|
4.00
|
|||||||||||||||||
20 August 2010
|
59,666
|
-
|
-
|
-
|
59,666
|
£
|
4.19
|
|||||||||||||||||
13 September 2011
|
3,000
|
-
|
-
|
-
|
3,000
|
£
|
4.19
|
|||||||||||||||||
20 April 2012
|
47,796
|
-
|
-
|
(12,000
|
)
|
35,796
|
£
|
4.19
|
||||||||||||||||
1 May 2013
|
100,000
|
-
|
-
|
(100,000
|
)
|
-
|
£
|
6.85
|
||||||||||||||||
3 April 2014
|
-
|
43,000
|
(16,500
|
)
|
-
|
26,500
|
£
|
0.075
|
||||||||||||||||
9 May 2014
|
-
|
200,000
|
-
|
-
|
200,000
|
£
|
0.075
|
|||||||||||||||||
30 June 2014
|
-
|
880,000
|
-
|
-
|
880,000
|
£
|
0.075
|
|||||||||||||||||
11 July 2014
|
-
|
11,000
|
-
|
-
|
11,000
|
£
|
0.075
|
|||||||||||||||||
333,194
|
1,134,000
|
(16,500
|
)
|
(168,000
|
)
|
1,282,694
|
Options exercisable at 31 December 2014
|
125,847
|
|||
Weighted average exercise price of outstanding options at 31 December 2014
|
|
£0.54
|
||
Weighted average exercise price of options forfeited in 2014
|
|
£5.43
|
||
Weighted average exercise price of options granted in 2014
|
|
£0.08
|
||
Weighted average remaining contractual life of outstanding options at 31 December 2014
|
8.5 years
|
29
|
Share-based payment
(continued)
|
· |
25% (i.e. 495,400 options) vest on the first anniversary of the relevant date of grant; and
|
· |
A further 6.25% (i.e. 123,850 options) vest every 3 months following the first anniversary of the date of grant such that by the fourth anniversary all 1,981,600 options shall have vested.
|
· |
607,600 of these options related to 2015 but the acquisition of DARA BioSciences and other activities during that year meant that there was insufficient time during Open periods to make the awards until 2016. However, the effective date of grant and hence basis for vesting was in 2015. As a result, 151,900 of these options had vested by 31 December 2016.
|
· |
Vesting is conditional on the Midatech Pharma US, Inc. business achieving a revenue target for the year ended 31 December 2017;
|
· |
Subject to the achievement of the revenue target noted above, 25% (i.e. 22,500 options) vest on the first anniversary of the relevant date of grant;
|
· |
A further 6.25% (i.e. 5,625 options) vest every 3 months following the first anniversary of the date of grant such that by the fourth anniversary, and subject to the achievement of the revenue target noted above, all 90,000 options shall have vested.
|
|
2016
|
Number of options
|
2,071,600
|
Option pricing models used
|
Black Scholes
|
Share price
|
£1.143-£1.19*
|
Exercise price of options issued in
year
|
£1.21-£2.68
|
Contractual life
|
10 years
|
Expected life
|
5 years
|
Volatility
|
40%**
|
Expected dividend yield
|
0%
|
Risk free rate
|
0.63%-0.74%
|
* |
The share price used in the determination of the fair value of the options granted in 2016 was the average of the opening and closing share prices on the date of grant.
|
** |
Volatility was calculated with reference to the historic share price volatility of comparable companies measured over a five-year period.
|
· |
25,000 vested immediately;
|
· |
25,000 vest on 1 May 2015, a further 25,000 on 1 May 2016 and a further 25,000 on 1 May 2017;
|
· |
50,000 vest when the ordinary price of a share reaches £13.70;
|
· |
50,000 vest when the ordinary price of a share reaches £27.40; and
|
· |
On the event of an initial public offering all of the remaining unvested options vest immediately and have therefore vested due to the IPO in 2014.
|
29
|
Share-based payment
(continued)
|
· |
50% vest when the share price reaches £5.31 per share;
|
· |
A further 25% vests when the share price reaches £13.72; and
|
· |
The remaining 25% when the share price reaches £18.86.
|
|
2014
|
Number of options
|
1,134,000
|
Option pricing models used
|
Black Scholes/ Monte Carlo
|
Share price
|
£2.67*
|
Exercise price of options issued in
year
|
7.5p
|
Contractual life
|
9 -10 years
|
Volatility
|
60%**
|
Expected dividend yield
|
0%
|
Risk free rate
|
1.51%
|
* |
The share price used in the determination of the fair value of the options granted in 2014 was the price of ordinary shares issued at initial public offering in December 2014.
|
** |
Volatility was calculated with reference to the historic share price volatility of comparable companies measured over a four-year period.
|
30
|
Capital commitments
|
31
|
Related party transactions
|
31
|
Related party transactions
(continued)
|
32
|
Contingent liabilities
|
33
|
Ultimate controlling party
|
34
|
Post balance sheet events
|
1) |
The Companies listed in Part 1 of Schedule 1
(as Original Borrowers) |
2) |
The Companies listed in part 2 of Schedule 1
(as Original Guarantors) |
3) |
Silicon Valley Bank
(as Bank) |
1.
|
Definitions
|
1
|
2.
|
The Facilities.
|
20
|
3.
|
Purpose
|
20
|
4.
|
Conditions precedent
|
20
|
5.
|
Credit Extension
|
22
|
6.
|
Undisbursed Credit Extensions
|
23
|
7.
|
Repayment
|
23
|
8.
|
Interest
|
25
|
9.
|
Fees
|
25
|
10.
|
Tax gross up and Indemnities
|
26
|
11.
|
Other Indemnities
|
29
|
12.
|
Costs and Expenses
|
30
|
13.
|
Guarantee and Indemnity
|
30
|
14.
|
Representations and Warranties
|
33
|
15.
|
Security
|
40
|
16.
|
Financial undertakings
|
41
|
17.
|
Information Undertakings
|
41
|
18.
|
General Undertakings
|
44
|
19.
|
Negative covenants
|
47
|
20.
|
Events of Defaul
|
50
|
21.
|
Bank’s rights and remedies
|
55
|
22.
|
Changes to the Parties
|
56
|
23.
|
Accession of Obligors
|
57
|
24.
|
Payment mechanics
|
57
|
25.
|
Bank’s liability for Collateral
|
57
|
26.
|
Set-off
|
58
|
27.
|
Notices
|
58
|
28.
|
Partial Invalidity
|
59
|
29.
|
Remedies and Waivers
|
59
|
30.
|
Amendments
|
59
|
31.
|
Confidentiality
|
60
|
32.
|
Continuing obligations
|
61
|
33.
|
Counterparts
|
61
|
34.
|
Law
|
61
|
35.
|
Jurisdiction & Service of Process
|
61
|
36.
|
Marketing
|
62
|
1) |
THE COMPANIES LISTED IN PART 1 OF SCHEDULE 1 (The Original Borrowers) (together, the “
Original Borrowers
” and each, an “
Original Borrower
”);
|
2) |
THE COMPANIES LISTED IN PART 2 OF SCHEDULE 1 (The Original Guarantors) (together, the “
Original Guarantors
” and each, an “
Original Guarantor
”); and
|
3) |
SILICON VALLEY BANK, a California corporation, for the purposes of the Term Loan, acting through its branch at Alphabeta, 14-18 Finsbury Square, London EC2A 1BR (the “
Bank
”).
|
1. |
Definitions
|
1.1. |
Definitions
|
“2006” Act
|
the Companies Act 2006
|
“Accession Deed”
|
a document substantially in the form set out in Schedule 5 (
Form of Accession Deed
) or such other form as the Bank may require (acting reasonably).
|
“Account Debtor”
|
any person who is obligated on a Receivable
|
“Adjusted Quick Ratio”
|
is the ratio of (a) Quick Assets to (b) Current Liabilities minus the aggregate of the current portion of Deferred Revenue.
|
“Affiliate”
|
in relation to any person, a person that owns or controls directly or indirectly that person, any person that is controlled by or is under common control with that person.
|
“Availability Period”
|
a)
in relation to Tranche 1, the period from and including the Closing Date to and including the date falling ten (10) Business Days after the Closing Date;
b)
in relation to Tranche 2, the period from and including [***] to and including [***]; and
c)
in relation to Tranche 3, the period from and including [***] to and including [***].
|
“Bank Expenses”
|
a)
all audit fees and expenses and other reasonable costs or expenses (including legal fees and expenses) for preparing, negotiating, amending and administering the Loan Documents; and
b)
all fees and expenses and costs of defending and enforcing the Loan Documents (including, legal fees and expenses and those fees and expenses incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred in respect of any Obligor.
|
|
|
“Bank Services Agreement”
|
any agreement relating to any products, credit services and/or accommodations previously, now or hereafter provided to any Obligor or any Subsidiary of any Obligor by the Bank or any Affiliate of the Bank, including, any letters of credit, cash management services (including, merchant services, direct deposit of payroll, business credit cards and cheque-cashing services together “
Cash Management Services
”), interest rate swap arrangements and foreign exchange services as any such products or services may be identified in the Bank’s various agreements relating thereto.
|
“Borrowers”
|
the Original Borrowers and any company that becomes a Borrower in accordance with Clause 23 (
Accession of Obligors
) and “
Borrower
” means any one of them.
|
“Borrowers Books”
|
all of an Obligor’s books and records including ledgers, records regarding that Obligor’s assets or liabilities, the Collateral, business operations or financial condition and all computer programs or discs or any equipment containing such information.
|
“Borrowing Group”
|
the Obligors and their Subsidiaries from time to time.
|
“Business Day”
|
any day that is not a Saturday, Sunday or a day on which the Bank is closed in California, US or a day on which leading banks are closed in the City of London, England.
|
“Cash”
|
at any time, cash in hand or at bank and (in the latter case) credited to an account in the name of an Obligor and to which that Obligor is alone beneficially entitled and includes Cash Equivalents but for the avoidance of doubt, no customer deposits.
|
“Cash Equivalents”
|
a)
marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any state of the United States or the United Kingdom having maturities of not more than one (1) year from the date of acquisition;
b)
commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; and
c)
the Bank’s certificates of deposit issued maturing no more than one (1) year after issue.
|
|
|
“Closing Date”
|
the date of this Agreement.
|
“Code”
|
the US Internal Revenue Code of 1986.
|
“Collateral”
|
defined in Clause 15.1 (
Security
).
|
“Compliance Certificate”
|
the certificate in the form of Schedule 2 (
Compliance Certificate
).
|
“Contingent Obligation”
|
for any person, any direct or indirect liability, contingent or not, of that person for:
a)
any Indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, jointly made, discounted or sold with recourse by that person, or for which that person is directly or indirectly liable;
b)
any obligations for undrawn letters of credit for the account of that person; and
c)
all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a person against fluctuation in interest rates, currency exchange rates or commodity prices.
|
but “
Contingent Obligation
” does not include endorsements or trade credit incurred in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the person in good faith but such amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
|
|
“Copyrights”
|
all copyright rights, applications or registrations and like protections in each work or authorship or derivative work, whether published or not (whether or not it is a trade secret) now or later existing, created, acquired or held.
|
“Credit Extension”
|
each Term Loan Drawing, Letter of Credit, FX Contract, amount utilised for Cash Management Services or any other extension of credit by the Bank for a Borrower’s benefit under this Agreement.
|
“Current Liabilities”
|
are all obligations and liabilities of the Obligors to the Bank, plus, without duplication, the aggregate amount of the Obligor’s Total Liabilities (including all obligations and liabilities due to junior/ subordinated lenders) that mature within one (1) year (but, for the avoidance of doubt, excluding customer deposits).
|
“Debenture”
|
The English law debenture granted by the English Obligors in favour of the Bank on or about the date of this Agreement.
|
“Deferred Revenue”
|
all amounts invoiced or received, as appropriate, in advance of performance under contracts and not yet recognised as revenue as set out in the Monthly Financial Statements of the Obligors provided under Clause 17.1(b) (
Information undertakings
) and as certified in each Compliance Certificate.
|
“Disclosed Matters”
|
means those matters accurately and fairly disclosed, and with sufficient detail to identify the nature and scope of the matter disclosed, set out or referred to in the Perfection Certificates.
|
“Dollar Equivalent”
|
at any time:
a)
with respect to any amount denominated in USD, such amount, and
b)
with respect to any amount denominated in a Foreign Currency, the equivalent amount in USD as determined by the Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
|
“ English Obligors”
|
Midatech Pharma Plc (09216368), Midatech Ltd (04097593) and Midatech Pharma (Wales) Limited (04929486) and any entity incorporated in England or Wales who becomes an Obligor after the Closing Date.
|
“English Subsidiaries”
|
Midatech Ltd (04097593) and Midatech Pharma (Wales) Limited (04929486).
|
“Equipment”
|
all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which an Obligor has any interest.
|
“ERISA”
|
Employee Retirement Income Security Act of 1974 and its regulations.
|
“Euro” and “€”
|
the single European currency and in respect of all payments to be made under this Agreement means immediately available, freely-transferable cleared funds.
|
“Event of Default”
|
defined in Clause 20 (
Events of Default
).
|
“Excluded Taxes”
|
means any of the following Taxes imposed on or with respect to the Bank or required to be withheld or deducted from a payment to the Bank, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of the Bank being organized under the laws of, or having its principal office or, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of the Bank with respect to an applicable interest in an Obligation pursuant to a law in effect on the date on which (i) the Bank acquires such interest in the Obligation or (ii) the Bank changes its lending office, except in each case to the extent that, pursuant to Clause 10, amounts with respect to such Taxes were payable either to the Bank’s assignor immediately before the Bank became a party hereto or to the Bank immediately before it changed its lending office, Taxes attributable to the Bank’s failure to comply with Clause 10.4 and (d) any U.S. federal withholding Taxes imposed under FATCA.
|
“FATCA”
|
a)
sections 1471 to 1474 of the Code or any associated regulations or other official guidance;
b)
any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an inter-governmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of paragraph (a) above; or
c)
any agreement pursuant to the implementation of paragraph (a) or (b) above with the IRS, the US government or any governmental or taxation authority in any other jurisdiction.
|
“FATCA Application Date”
|
a)
in relation to a “withholdable payment” described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 January 2014;
b)
in relation to a “withholdable payment” described in section 1473(1 )(A)(ii) of the Code (which relates to “gross proceeds” from the disposition of property of a type that can produce interest from sources within the US), 1 January 2019; or
c)
in relation to a “pass thru payment” described in section 1471(d)(7) of the Code not falling within paragraph (a) or (b) above, 1 January 2019,
or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.
|
|
|
“FATCA Deduction”
|
a deduction or withholding from a payment under a Loan Document required by FATCA.
|
“FATCA Exempt Party”
|
a Party that is entitled to receive payments free from any FATCA Deduction
|
“FATCA FFI”
|
a foreign financial institution as defined in section 1471(d)(4) of the Code which, if the Bank is not a FATCA Exempt Party, could be required to make a FATCA Deduction.
|
“FATCA Payment”
|
the increase in a payment made by an Obligor to the Bank under Clause 10.5 (FATCA Deduction and gross up by Obligor).
|
“Financial Quarter”
|
each period of three months in a calendar year which commences on 1 January, 1 April, 1 July and 1 October.
|
“Financial Quarter Date”
|
the last day of a Financial Quarter.
|
“Foreign Currency”
|
any lawful money that is not USD or Sterling.
|
“FX Contract”
|
any foreign exchange contract by and between an Obligor and the Bank under which an Obligor commits to purchase from or sell to the Bank a specific amount of Foreign Currency on a specified date.
|
“Governmental Approval”
|
any consent, authorisation, approval, order, licence, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
|
“Governmental Authority”
|
any nation or government, any state or other political sub-division thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organisation.
|
“Grace Period”
|
for the purpose of clause 20.1, the period of three (3) Business Days.
|
“Guarantors”
|
the Original Guarantors and any company who becomes a Guarantor in accordance with Clause 23 (Accession of Obligors) and “Guarantor” means any one of them.
|
“IFRS”
|
International Financial Reporting Standards, a collection of guidelines and rules set by the International Accounting Standards Board (www.iasb.org) which is applicable to the circumstances as at the date of determination.
|
“Indebtedness
|
a)
Indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit;
b)
obligations evidenced by notes, bonds, debentures or similar instruments;
c)
capital lease obligations; and
d)
Contingent Obligations.
|
|
|
“Indemnified Taxes”
|
a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Obligors under any Loan Document and b) to the extent not otherwise described in (a), Other Taxes.
|
“Insolvency Proceeding”
|
defined in Clause 20.6 (
Insolvency Proceedings
).
|
“Intellectual Property”
|
all subsisting intellectual property rights presently or in the future owned by an Obligor in any part of the world including Patents and rights of a similar nature, applications for patents and such rights, divisions, prolongations, renewals, extensions, supplementary protection certificates and continuations of such applications for Patents, registered and unregistered trademarks, registered and unregistered service marks, registered and unregistered designs, utility models (in each case for their full period and all extensions and renewals of them), applications for any of them and the right to apply for any of them in any part of the world, inventions, processes, software, formulae, technology (whether patentable or not) data, drawings, specifications, business or trade secrets, technical information, confidential information, Know-how, business names, trade names, brand names, domain names, database rights, Copyright and rights in the nature of database rights and copyright, design rights, get-up and any uniform resource identifier and any similar rights existing in any country and all legal equitable and other rights in any of them owned by an Obligor and the benefit(subject to the burden) of any and all agreements, arrangements and licences (where such agreements and licences permit the creation of security without prior consent) in connection with any of the foregoing.
|
“Inventory”
|
present and future inventory in which an Obligor has any interest, including merchandise, stock in trade, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or in the custody or possession, actual or constructive, of an Obligor, including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other proceeds (including insurance proceeds) from the sale or disposition of any of the foregoing and any documents of title.
|
“Investment”
|
any beneficial ownership of (including shares, stock, partnership interest or other securities) any person, or any loan, advance or capital contribution to any person.
|
“Obligations”
|
the obligation of the Obligors to pay when due any debts, principal, interest, Bank Expenses and other amounts it owes the Bank now or later, whether under the Loan Documents or otherwise, including any interest accruing after Insolvency Proceedings begins and debts, liabilities, or obligations of the obligors (both actual and contingent) assigned to the Bank and the performance of the Obligors’ duties under the Loan Documents.
|
“Obligors”
|
together, the Borrowers and the Guarantors and “Obligor” means any one of them.
|
“Other Connection Taxes”
|
with respect to the Bank, Taxes imposed as a result of a present or former connection between the Bank and the jurisdiction imposing such Tax (other than connections arising from the Bank having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
|
“Other Taxes”
|
all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.
|
“Parent”
|
Midatech Pharma Pic (09216368).
|
“Participating Member State”
|
any member state of the European Community that adopts or has adopted the Euro as its lawful currency in accordance with legislation of the European Community relating to economic and monetary union.
|
“Parties”
|
the parties to this Agreement.
|
“Patents”
|
patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations in part of the same.
|
“Perfection Certificate”
|
defined in Clause 14.22 (
Perfection Certificates
).
|
“Permitted Indebtedness”
|
a)
the Obligors’ Indebtedness to the Bank under the Loan Documents;
b)
intercompany Indebtedness between and among the Obligors;
c)
Indebtedness between an Obligor and any of its subsidiaries as permitted under Clause 19.9 (
Subsidiary Restrictions
);
d)
Indebtedness existing on the Closing Date that the Bank has previously approved in writing;
e)
Subordinated Debt;
f)
unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
g)
Indebtedness in respect of capital lease obligations, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that
(i)
such Indebtedness is incurred within thirty (30) days after acquisition or completion of construction or improvement; and
(ii)
the aggregate principal amount of all such Indebtedness shall not exceed £100,000;
h)
Indebtedness relating to Permitted Security Interests;
i)
Other secured Indebtedness of Obligors of up to £100,000 at any time;
j)
Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business; and
k)
extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness set out in paragraphs (a) to (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon any Obligor or any Subsidiary, as the case may be.
|
“Permitted Investments”
|
a)
Investments that exist on the Closing Date and are disclosed by the Perfection Certificates delivered to the Bank as required under clause 14.22 (
Perfection Certificates
);
b)
(i) Cash Equivalents; and
(ii) any Investments permitted by the investment policies of any Obligor, as amended from time to time, provided that such investment policies (and any such amendments thereto) have been approved by the Bank;
c)
Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of an Obligor’s business;
d)
Investments consisting of deposit accounts in which the Bank has a perfected Security Interest;
e)
Investments accepted in connection with Transfers permitted by Clause 19.1(a) (
Dispositions
);
f)
Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of any Obligor or any Subsidiary pursuant to employee stock purchase plans or agreements approved by that Obligor’s board of directors;
g)
Investments (including debt obligations) received in connection with the bankruptcy or reorganisation of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; and
|
h)
Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates of the relevant Obligor, in the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of any Obligor in any Subsidiary.
|
|
“Permitted Security Interests”
|
a)
Security Interests existing on the Closing Date which are approved by the Bank in writing and Security Interests arising under the Loan Documents;
b)
Security Interests for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which any Obligor maintains adequate reserves on its books, to the extent that they have no priority over any of the Bank’s Security Interests and notified in writing to the Bank either prior or subsequently to the Closing Date;
c)
purchase money Security Interests (i) on Equipment acquired or held by any Obligor incurred for financing the acquisition of the Equipment securing no more than £100,000 in aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Security Interest is confined to the property and improvements and the proceeds of the Equipment;
d)
leases or sub-leases and non-exclusive licences or sub-licences granted in the ordinary course of any Obligor’s business, if the leases, sub-leases, licences and sub-licences permit granting the Bank a Security Interest;
|
e)
Security Interests incurred in the extension, renewal or refinancing of the indebtedness secured by Security Interests described in (a) to (c), provided that any extension, renewal or replacement Security Interest shall be limited to the property encumbered by the existing Security Interest and the principal amount of such indebtedness shall not increase;
f)
Security Interests arising by operation of law in the ordinary course of business;
g
)
Security Interests granted with the prior written consent of the Bank;
h)
the filing of UCC financing statements solely as a precautionary measure in connection with operating leases;
i)
deposits under worker’s compensation, unemployment insurance and social security and similar laws to secure statutory obligations or surety appeal or performance or other similar bonds incurred in the ordinary course of business or to secure performance as lessee under leases of real or personal property and other obligations of a like nature, in each case incurred in the ordinary course of business;
j)
Security Interests and rights of set off in favour of banking institutions arising by operation of statutory or common law encumbering deposits held by such banking institutions; and
k)
judgment liens to the extent they do not constitute an Event of Default pursuant to clause 20.8 (
Events of Default
) of this Agreement.
|
|
|
|
“Prepayment Fee”
|
has the meaning such term is given in clause 9.3 (
Fees
).
|
“Quick Assets”
|
is, on any date, the Obligors’ unrestricted Cash and net billed accounts receivable.
|
“Receivables”
|
all present and future book debts, accounts, accounts receivable, contract rights, and other obligations owed to the Obligors in connection with its sale or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guarantees, other security and all merchandise returned to or reclaimed by the Obligors and any Borrower’s Books relating to any of the foregoing, and each a “
Receivable
”.
|
“Repeat Representations”
|
means each of the representations and warranties in Clause 14 (
Representations and warranties
) other than 14.2 (
No filing
) and 14.6 (
No deduction
).
|
“Responsible Officer”
|
each of the chief executive officer, managing director, director, president, chief financial controller (or equivalent) of each Obligor.
|
“Security Agreement”
|
that certain security agreement dated on or about the date of this Agreement between the US Obligor and the Bank.
|
“Security Documents”
|
defined in Clause 15.1 (
Security
).
|
“Security Interest”
|
a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
|
“Sterling”
and
“£”
|
the lawful currency of the United Kingdom of Great Britain and Northern Ireland and in respect of all payments to be made under this Agreement means immediately available, freely-transferable cleared funds.
|
“Sterling Base Rate”
|
the Bank of England’s base rate of interest as published from time to time provided that if such rate is less than 0.25% it shall be deemed to be 0.25%.
|
“Subordinated Debt”
|
|
“Subsidiary”
|
a subsidiary undertaking as defined in section 1162 of the 2006 Act.
|
“Supplemental Charge”
|
the supplemental charge contained in each Debenture, in the form appended to such Debenture at Schedule 6.
|
“SVB Operating Accounts”
|
the Sterling, Euro and USD operating accounts maintained by the Obligors with the Bank.
|
“Taxes”
|
any present or future taxes, levies, duties, imposts or other charges or withholdings of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same), and “Tax” and “Taxation” have a corresponding meaning.
|
“Term Loan”
|
means Tranche 1 and/or Tranche 2 and/or Tranche 3 as applicable.
|
“Term Loan Commitment”
|
means an amount equal to the Tranche 1 Commitment, the Tranche 2 Commitment and the Tranche 3 Commitment in aggregate.
|
“Term Loan Drawing”
|
a drawing under the Term Loan.
|
“Term Loan Maturity Date”
|
30 June 2020.
|
“Tranche 1”
|
means the first tranche of the term loan facility made available under this Agreement as described in clause 2 (
The Facilities
).
|
“Tranche 1 Commitment”
|
means an amount of up to £2,000,000.
|
“Tranche 2”
|
means the second tranche of the term loan facility made available under this Agreement as described in clause 2 (
The Facilities
).
|
“Tranche 2 Commitment”
|
means an amount of up to £2,000,000.
|
“Tranche 3”
|
means the third tranche of the term loan facility made available under this Agreement as described in clause 2 (
The Facilities
).
|
“Tranche 3 Commitment”
|
means an amount of up to £2,000,000.
|
“Total Liabilities”
|
on any day, obligations that should, under IFRS, be classified as liabilities on the Borrowing Group’s consolidated balance sheet, including all Indebtedness, and the current portion of Subordinated Debt permitted by the Bank to be paid by the Borrowing Group, but excluding all other Subordinated Debt.
|
“Trademarks”
|
trademark and service mark rights, registered or not, applications to register and registrations and like protections, and the entire goodwill of the business of an Obligor connected with the trademarks.
|
“Treasury Regulations”
|
means the tax regulations issued by the IRS.
|
“United States”
or
“US”
|
the United States of America.
|
“USA Patriot Act”
|
the US Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub.L.107-56) (commonly known as the USA PATRIOT Act).
|
“USD”
and
“$”
|
the lawful currency of the United States and in respect of all payments to be made under this Agreement means immediately available, freely-transferable cleared funds.
|
“US Obligor”
|
Midatech Pharma US Inc., and any entity incorporated in the United States of America who becomes an Obligor after the Closing Date.
|
“US Tax Obligor”
|
a)
an entity that is resident for tax purposes in the United States: or
b)
an entity, some or all of whose payments under the Loan Documents are from sources within the United States for US federal income tax purposes.
|
“Utilisation Request”
|
means a utilisation request in the form set out in Schedule 2 (
Utilisation Request
).
|
“Warrant Certificate”
|
the certificate in the name of the Bank evidencing the issue of warrants to subscribe for shares in the Parent and dated on or about the Closing Date.
|
“Warrant Instrument”
|
the warrant instrument constituting warrants to subscribe for shares made by the Parent and dated on or about the Closing Date.
|
“Western Europe”
|
Republic of Ireland, Spain, Italy, Portugal, Austria, France, Germany, Switzerland, Belgium, The Netherlands, Norway, Sweden, Finland, and Denmark.
|
1.2. |
Interpretation
|
(a) |
Accounting terms not defined in this Agreement shall be construed following IFRS.
|
(b) |
Calculations and determinations must (where applicable) be made following IFRS.
|
(c) |
The term “financial statements” includes the notes and schedules attached thereto.
|
(d) |
The terms “including” and “includes” always mean “including (or includes) without limitation,” in any Loan Document.
|
(e) |
The term “person” means any individual, sole proprietorship, partnership, limited liability partnership, limited liability company, corporation, joint venture, company, trust, consortium, unincorporated organisation, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, government agency or entity (whether or not having a separate legal personality).
|
(f) |
“indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent.
|
(g) |
An Event of Default is “continuing” if it has not been remedied to the satisfaction of the Bank or waived in writing by the Bank.
|
(h) |
In this Agreement:
|
(i) |
the contents page and clause headings are included for convenience only and do not affect the construction of this Agreement;
|
(ii) |
words denoting the singular include the plural and vice versa; and
|
(iii) |
words denoting one gender include each gender and all genders.
|
(i) |
In this Agreement, unless the context otherwise requires, references to:
|
(i) |
documents, instruments and agreements (including, without limitation, this Agreement, the Security Documents and any document referred to in this Agreement) are references to such documents, instruments and agreements as modified, amended, varied, supplemented, restated, novated or otherwise modified from time to time;
|
(ii) |
receivers are references to receivers of whatsoever nature including receivers and managers and administrative receivers;
|
(iii) |
the terms the “
Bank
”, “
Borrower
”, “
Guarantor
”, “
Obligor
” and “
Receiver
” include, where the context so admits, references to successors, permitted, transferees and permitted assigns to any delegate of any such person;
|
(iv) |
recitals, Clauses and Schedules are references to recitals to this Agreement, Clauses of this Agreement and Schedules to this Agreement;
|
(v) |
and references to this Agreement include its Schedules;
|
(vi) |
paragraphs are references to paragraphs of the Schedule in which the references appear;
|
(vii) |
statutory provisions (where the context so admits and unless otherwise expressly provided) are construed as references to those provisions as amended, consolidated, extended or re-enacted from time to time, and to any orders, regulations, instruments or other subordinate legislation made under the relevant statute; and
|
(viii) |
unless otherwise stated, a time of day is a reference to London time.
|
1.3. |
Conflict with other Loan Documents
|
1.4. |
Third party rights
|
2. |
The Facilities.
|
(a) |
a term loan facility equal to the Tranche 1 Commitment;
|
(b) |
a term loan facility equal to the Tranche 2 Commitment; and
|
3. |
Purpose
|
4. |
Conditions precedent
|
4.1. |
Conditions precedent to initial Credit Extension
|
(a) |
receipt by the Bank of the relevant Utilisation Request not less than three Business Days in advance of the proposed date of the initial Credit Extension, or such shorter period as the Bank may in its discretion allow
|
(b) |
The Bank has received, in form and substance satisfactory to it, such documents, and completion of such other matters, as the Bank may reasonably deem necessary or appropriate, including all of the documents, evidence and payments listed in Schedule 3 (
Conditions precedent
).
|
(c) |
the representations and warranties in Clause 14 (
Representations and warranties
) being true in all material respects (with reference to the facts and circumstances then existing) on:
|
(i) |
the date of the Utilisation Request;
|
(ii) |
and the date that the initial Credit Extension is made,
|
(d) |
that no Event of Default has occurred and is continuing or would result from the marking of the Credit Extension.
|
4.2. |
Conditions precedent to all Credit Extensions (other than the initial Credit Extension)
|
(a) |
receipt by the Bank of the relevant Utilisation Request not less than three Business Days in advance of the proposed date of a Credit Extension, or such shorter period as the Bank may in its discretion allow;
|
(b) |
the Repeating Representations being true in all material respects with reference to the facts and circumstances then existing on the date of the Utilisation Request and on the date such Credit Extension is made and no Event of Default has occurred and is continuing or would result from the making of the Credit Extension; and
|
(c) |
the Bank has determined to its satisfaction that there has not been any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, or any material adverse deviation from the Borrower from the most recent business plan of the Borrower presented to and accepted by the Bank.
|
4.3. |
Covenant to deliver
|
(a) |
The Obligors agree to deliver or procure the delivery to the Bank, of each item required to be delivered to the Bank under this Agreement as a requirement to any Credit Extension.
|
(b) |
The Obligors expressly agree that a Credit Extension made prior to the receipt by the Bank of any such item shall not constitute a waiver by the Bank of the Obligors’ obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in the Bank’s sole discretion.
|
4.4. |
Availability Period
|
5. |
Credit Extension
|
5.1. |
Term Loan Drawing request
|
5.2. |
If notification pursuant to Clause 5.1 is by telephone or by email, the relevant Borrower must promptly confirm the notification by delivering to the Bank a completed Utilisation Request. For the avoidance of doubt, that Borrower may deliver such a Utilisation Request to the Bank by attaching a scan of the signed Utilisation Request to an email addressed to the Bank in accordance with Clause 27 (Notices).
|
5.3. |
The Bank shall credit Term Loan Drawings to the appropriate SVB Operating Account.
|
5.4. |
The Bank may make Term Loan Drawings under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Term Loan Drawings are necessary to meet Obligations which have become due. The Bank may rely on any telephone notice given by a person whom the Bank believes is a Responsible Officer or designee. The Obligors shall indemnify the Bank for any loss the Bank suffers due to such reliance.
|
5.5. |
Only one Term Loan Drawing may be made in respect of each of Tranche 1, Tranche 2 and Tranche 3.
|
5.6. |
Completion of a Utilisation Request
|
(a) |
the date on which the Term Loan Drawing is to be made, which day shall be a Business Day;
|
(b) |
the amount of such Term Loan Drawing; and
|
(c) |
such other requirements as the Bank determines are reasonable in connection with that Utilisation Request.
|
5.7. |
Currency and amount
|
5.8. |
Notice
|
6. |
Undisbursed Credit Extensions
|
(a) |
there is no Event of Default outstanding;
|
(b) |
no Event of Default would result from the Credit Extension in relation thereto; and
|
(c) |
the Repeating Representations are true and accurate in all material respects,
|
7. |
Repayment
|
7.1. |
Repayment
|
7.2. |
Repayment of Term Loan
|
(a) |
The Obligors shall repay the Term Loan Drawing in respect of Tranche 1 in instalments by repaying:
|
(i) |
on the first day of each month from the date of drawdown of Tranche 1 up to and including 30 June 2017 a payment of interest only; and
|
(ii) |
thirty six (36) equal instalments of principal, together with accrued interest thereon, the first of which being payable on 1 July 2017, and thereafter on the first day of each month.
|
(b) |
The Obligors shall repay the Term Loan Drawing in respect of Tranche 2 in instalments by repaying:
|
(i) |
on the first day of each month from the date of drawdown of Tranche 2 up to and including 31 March 2018 a payment of interest only; and
|
(ii) |
twenty seven (27) equal instalments of principal, together with accrued interest thereon, the first of which being payable on 1 April 2018, and thereafter on the first day of each month.
|
(c) |
The Obligors shall repay the Term Loan Drawing in respect of Tranche 3 in instalments by repaying on the first day of each month:
|
(i) |
from the date of drawdown of Tranche 3 up to and including 31 March 2019 a payment of interest only; and
|
(ii) |
fifteen (15) equal instalments of principal, together with accrued interest thereon, the first of which being payable on 1 April 2019, and thereafter on the first day of each month.
|
(d) |
The Term Loan terminates on the Term Loan Maturity Date, when the principal amount of all Term Loan Drawings and unpaid interest thereon, shall be immediately due and payable.
|
7.3. |
If a payment date under Clause 7.2 (
Repayment of Term Loan
) falls on a day which is not a Business Day, the relevant payment date shall be the next following Business Day.
|
7.4. |
Debit of accounts
|
(a) |
If any Obligor fails to timely pay any amounts owed hereunder when due, the Bank may debit any deposit or operating account of any Obligor held with the Bank for principal and interest payments when due, or any other amounts any Obligor owes to the Bank.
|
(b) |
The Bank shall promptly notify the Obligor after it debits that Obligor’s accounts.
|
(c) |
Any debit shall not constitute a set-off.
|
7.5. |
Prepayment
|
8. |
Interest
|
8.1. |
Calculation of interest
|
(a) |
The principal amounts outstanding under the Term Loan shall accrue interest at the rate equal to the Sterling Base Rate plus 7.25% per annum.
|
(b) |
Interest is computed on the basis of a 365 day year for the actual number of days elapsed.
|
8.2. |
Payment of interest
|
(a) |
The Borrowers shall pay interest monthly on the first calendar day of each month.
|
(b) |
Payments received after 12:00 noon are considered to be received at the opening of business on the next following Business Day.
|
(c) |
When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue.
|
8.3. |
Default interest
|
9. |
Fees
|
9.1. |
Arrangement fee
|
9.2. |
Exit Fee
|
9.3. |
Prepayment fee for Term Loan Drawings
|
(a) |
Subject to paragraph (b) below, if any part of any Term Loan Drawing is prepaid voluntarily (and not arising by virtue of an Event of Default) it shall incur a prepayment fee (the “
Prepayment Fee
”) as follows:
|
(i) |
if the prepayment occurs on or prior to the first anniversary of the date of the initial Credit Extension (the “
First Anniversary
”), the Borrowers shall pay to the Bank a fee of 3% of the total principal amount of all Term Loan Drawings outstanding immediately before the date of such prepayment;
|
(ii) |
if the prepayment occurs after the First Anniversary but on or prior to the second anniversary of the date of the initial Credit Extension (the “
Second Anniversary
”), the Borrowers shall pay to the Bank a fee of 2% of the total principal amount of all Term Loan Drawings outstanding immediately before the date of such prepayment; and
|
(iii) |
if the prepayment occurs at any time following the Second Anniversary, the Borrowers shall pay to the Bank a fee of 1% of the total principal amount of all Term Loan Drawings outstanding immediately before the date of such prepayment.
|
(b) |
Any such Prepayment Fee will be waived by the Bank if either (i) such prepayment occurs in connection with a refinancing with the Bank or (ii) such prepayment occurs within 30 days of the Bank exercising its rights under Clause 22.3.
|
10. |
Tax gross up and Indemnities
|
10.1. |
All payments to be made by the Obligors under this Agreement, whether in respect of principal, interest, fees or otherwise, shall (save insofar as required by law to the contrary) be paid in full without set-off or counterclaim and free and clear of and without any deduction or withholding or payment for or on account of any Taxes (other than a FATCA Deduction) that may be imposed in the United Kingdom or any other jurisdiction (a “
Tax Deduction
”) from which payment may be made by the Obligors under this Agreement. If any Obligor is required by law to effect Tax Deduction from or in connection with any payment made under this Agreement for the account of the Bank then:
|
(a) |
the Obligor shall promptly notify the Bank upon becoming aware of the relevant requirements to deduct any such Tax Deduction;
|
(b) |
the Obligor shall ensure that such Tax Deduction does not exceed the minimum legal liability therefor, shall remit the amount of such Tax to the appropriate Taxation authority and
|
(i) |
in relation to the US Obligor only, with respect to Indemnified Taxes only, shall forthwith pay to the Bank such additional amount as will result in the immediate receipt by the Bank of the full amount which would otherwise have been receivable under this Agreement had no such Tax Deduction been made; and
|
(ii) |
in relation to Obligors other than the US Obligor, shall forthwith pay to the Bank such additional amount as will result in the immediate receipt by the Bank of the full amount which would otherwise have been receivable under this Agreement had no such Tax Deduction been made; and
|
(c) |
the Obligor shall not later than fifty (50) days after each Tax Deduction forward to the Bank documentary evidence reasonably required by the Bank in respect of the payment of any such Taxes.
|
(d) |
The US Obligor shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of Bank timely reimburse it for the payment of, any Other Taxes.
|
10.2. |
If the Bank receives the benefit of any credit, payments or reimbursement in respect of the payment of any amount by an Obligor (including the US Obligor in relation to an Indemnified Tax) under this Clause 10 it shall (to the extent that it can do so without prejudice to the retention of such benefit) pay to the Obligor such part of that benefit as in its absolute discretion will leave it (after such payment) in no more or less favourable position than it would have been in if no Tax Payment had been required by the Obligor. For these purposes a “
Tax Payment
” means an increase in a payment made by the Obligor to the Bank under Clause 10.1 (
Withholding; gross up
).
|
10.3. |
Nothing in this Clause 10 requires the Bank to arrange its tax affairs in a particular way or to disclose any information regarding its tax affairs.
|
10.4. |
FATCA information
|
(a) |
Subject to paragraph (c) below, each Party shall, within ten Business Days of a reasonable request by another Party:
|
(i) |
confirm to that other Party whether it is:
|
(A) |
a FATCA Exempt Party;
|
(B) |
or not a FATCA Exempt Party;
|
(ii) |
supply to that other Party such forms, documentation and other information relating to its status under FATCA (including its applicable “pass thru payment percentage” or other information required under the Treasury Regulations or other official guidance including inter-governmental agreements) as that other Party reasonably requests for the purposes of that other Party’s compliance with FATCA; and
|
(iii) |
in addition, if the Bank is entitled to an exemption from or reduction of withholding Tax with respect to payments made to the US Obligor under any Loan Document, Bank shall deliver to the US Obligor, at the time or times reasonably requested by the US Obligor, such properly completed and executed documentation reasonably requested by the US Obligor as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, the Bank, if reasonably requested by the Borrower, shall deliver such other documentation prescribed by applicable law or reasonably requested by the US Obligor as will enable the US Obligor to determine whether or not the Bank is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the precedent two sentences, the completion, execution and submission of such documentation (other than Internal Revenue Service Form W-9 or the relevant Internal Revenue Service Form W-8) shall not be required if in the Bank’s reasonable judgement such completion, execution or submission would subject the Bank to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of the Bank.
|
(b) |
If a Party confirms to another Party pursuant to paragraph (a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
|
(c) |
Paragraph (a) above shall not oblige the Bank to do anything which would or might in its reasonable opinion constitute a breach of:
|
(i) |
any law or regulation;
|
(ii) |
any policy of the Bank;
|
(iii) |
any fiduciary duty; or
|
(iv) |
any duty of confidentiality
|
(d) |
If a Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with paragraph (a) above (including, for the avoidance of doubt, where paragraph (c) above applies), then:
|
(i) |
if that Party failed to confirm whether it is a FATCA Exempt Party, then such Party shall be treated for the purposes of the Loan Documents as if it is not a FATCA Exempt Party; and
|
(ii) |
if that Party failed to confirm its applicable “pass thru payment percentage”, then such Party shall be treated for the purposes of the Loan Documents (and payments made pursuant to the Loan Documents) as if its applicable “pass thru payment percentage” is 100%,
|
10.5. |
FATCA Deduction by Obligors
|
(a) |
If an Obligor is required to make a FATCA Deduction, the Obligor shall make that FATCA Deduction and any payment required in connection with that FATCA Deduction within the time allowed and in the minimum amount required by FATCA.
|
(b) |
Each Obligor shall promptly upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of a FATCA Deduction) notify the Bank accordingly.
|
(c) |
As soon as reasonably practicable after making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Obligor making that FATCA Deduction shall deliver to the Bank evidence reasonably satisfactory to the Bank that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental or taxation authority.
|
10.6. |
FATCA Deduction by the Bank
|
11. |
Other Indemnities
|
(a) |
all obligations, demands, claims, and liabilities (collectively, “
Claims
”) asserted by any other party in connection with the transactions contemplated by the Loan Documents (excluding the Warrant Instrument);
|
(b) |
and all losses or Bank Expenses incurred, or paid by such Indemnified Person from, following, or directly related to transactions between the Bank and the Obligors (including legal and audit fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or wilful misconduct.
|
12. |
Costs and Expenses
|
12.1. |
The Borrowers shall pay to the Bank all Bank Expenses (including legal and audit fees and expenses incurred up to and after the Closing Date), when due.
|
12.2. |
Any amounts paid by the Bank on behalf of the Obligors are Bank Expenses and are immediately due and payable, and shall bear interest at the then applicable rate.
|
12.3. |
No payments by the Bank shall be deemed an agreement to make similar payments in the future or the Bank’s waiver of any Event of Default.
|
13. |
Guarantee and Indemnity
|
13.1. |
Each Guarantor irrevocably and unconditionally jointly and severally:
|
(a) |
guarantees to the Bank punctual performance by each Obligor of all that Obligor’s obligations under the Loan Documents;
|
(b) |
undertakes with the Bank that whenever any Obligor does not pay any amount when due under or in connection with any Loan Document (excluding the Warrant Instrument), that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and
|
(c) |
agrees with the Bank that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify the Bank immediately on demand against any cost, loss or liability it incurs as a result of any Obligor not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Loan Document (excluding the Warrant Instrument) on the date when it would have been due. The amount payable by a Guarantor under this indemnity will not exceed the amount it would have had to pay under this Clause 13 if the amount claimed had been recoverable on the basis of a guarantee.
|
13.2. |
This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Loan Documents, regardless of any intermediate payment or discharge in whole or in part.
|
13.3. |
If any discharge, release or arrangement (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is made by the Bank in whole or in part on the basis of any payment, security or other disposition which is avoided or must be restored in insolvency, liquidation, administration or otherwise, without limitation, then the liability of each Guarantor under this Clause 13 will continue or be reinstated as if the discharge, release or arrangement had not occurred.
|
13.4. |
The obligations of each Guarantor under this Clause 13 will not be affected by an act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 13 (without limitation and whether or not known to it or the Bank) including:
|
(a) |
any time, waiver or consent granted to, or composition with, any Obligor or other person;
|
(b) |
the release of any Obligor or any other person under the terms of any composition or arrangement with any creditor of any Obligor;
|
(c) |
the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
|
(d) |
any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;
|
(e) |
any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Loan Document or any other document or security including without limitation any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Loan Document or other document or security;
|
(f) |
any unenforceability, illegality or invalidity of any obligation of any person under any Loan Document or any other document or security; or
|
(g) |
any insolvency or similar proceedings.
|
13.5. |
Without prejudice to the generality of this Clause 13, each Guarantor expressly confirms that it intends that this guarantee shall extend from time to time to any (however fundamental) variation, increase, extension or addition of or to any of the Loan Documents and/or any facility or amount made available under any of the Loan Documents for the purposes of or in connection with any of the following: business acquisitions of any nature; increasing working capital; enabling investor distributions to be made; carrying out restructurings; refinancing existing facilities; refinancing any other indebtedness; making facilities available to new borrowers; any other variation or extension of the purposes for which any such facility or amount might be made available from time to time; and any fees, costs and/or expenses associated with any of the foregoing.
|
13.6. |
Each Guarantor waives any right it may have of first requiring the Bank (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 13. This waiver applies irrespective of any law or any provision of a Loan Document to the contrary.
|
13.7. |
Unless:
|
(a) |
all amounts which may be or become payable by the Obligors under the Loan Documents have been irrevocably paid in full; or
|
(b) |
the Bank otherwise directs,
|
(i) |
present claims for the creditor’s meeting to the bankruptcy trustee or administrator of, or vote as a creditor of any Obligor that is bankrupt in competition with the Bank; or
|
(ii) |
receive, claim or have the benefit of any payment from or on account of any Obligor, or exercise any right of set-off against any Obligor.
|
13.8. |
Until all amounts which may be or become payable by the Obligors under or in connection with the Loan Documents have been irrevocably paid in full and unless the Bank otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Loan Documents or by reason of any amount being payable, or liability arising, under this Clause 13:
|
(a) |
to be indemnified by an Obligor;
|
(b) |
to claim any contribution from any other guarantor of any Obligor’s obligations under the Loan Documents;
|
(c) |
to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Bank under the Loan Documents or of any other guarantee or security taken pursuant to, or in connection with, the Loan Documents by the Bank;
|
(d) |
to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which any Guarantor has given a guarantee, undertaking or indemnity under Clause 13.1 (Guarantee and indemnity);
|
(e) |
to exercise any right of set-off against any Obligor; and/or
|
(f) |
to claim or prove as a creditor of any Obligor in competition with the Bank.
|
(g) |
If a Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Bank by the Obligors under or in connection with the Loan Documents to be repaid in full on trust for the Bank and shall promptly pay or transfer the same to the Bank or as the Bank may direct for application in accordance with Clause 24 (
Payment mechanics
).
|
13.9. |
If any Guarantor (a “
Retiring Guarantor
”) ceases to be a Guarantor in accordance with the terms of the Loan Documents for the purpose of any sale or other disposal of that Retiring Guarantor then on the date such Retiring Guarantor ceases to be a Guarantor:
|
(a) |
that Retiring Guarantor is released by the Bank and each other Guarantor from any liability (whether past, present or future and whether actual or contingent) to make a contribution to the Bank and any other Guarantor arising by reason of the performance by any other Guarantor of its obligations under the Loan Documents; and
|
(b) |
each other Guarantor waives any rights it may have by reason of the performance of its obligations under the Loan Documents to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Bank under any Loan Document or of any other security taken pursuant to, or in connection with, any Loan Document where such rights or security are granted by or in relation to the assets of the Retiring Guarantor.
|
13.10. |
This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by the Bank.
|
13.11. |
The terms of the guarantee in this clause 13 do not apply to any liability to the extent that it would result in this guarantee constituting unlawful financial assistance.
|
14. |
Representations and Warranties
|
14.1. |
Status and authorization
|
(a) |
The Parent is a public limited company, and is duly incorporated and validly existing under the laws of England and Wales with power to carry on its business as it is now being conducted and to own property and other assets;
|
(b) |
The English Subsidiaries are each a private limited company and each is duly incorporated and validly existing under the laws of England and Wales with power to carry on its business as it is now being conducted and to own property and other assets;
|
(c) |
The US Obligor represents that it is a corporation, duly incorporated and validly existing in good standing under the laws of Delaware in the United States and has power to carry on its business as it is now being conducted and to own property and other assets;
|
(d) |
No Obligor is a FATCA FFI or (other than the US Obligor) a US Tax Obligor.
|
(e) |
The execution, delivery and performance of the Loan Documents to which the Obligors are a party and the entry into of the transactions contemplated by the Loan Documents, is within the corporate powers of the Obligors, has been duly authorised by all necessary corporate and other action and do not and will not:
|
(i) |
conflict with:
|
(A) |
any law or regulation applicable to it to the extent such conflict could reasonably be expected to cause a Material Adverse Change;
|
(B) |
its constitutional and/or organisational documents;
|
(C) |
or any agreement or instrument binding on it to the extent such conflict could reasonably be expected to cause a Material Adverse Change;
|
(ii) |
result in the creation or imposition of (or enforceability of) any Security Interest on the whole or any part of its undertaking or assets pursuant to the provisions of any agreement or documents other than the Security Documents.
|
(f) |
The Obligors are not in default under any contractual, governmental or public obligation binding upon it to an extent such default could reasonably be expected to cause a Material Adverse Change.
|
14.2. |
No filing
|
14.3. |
Legal validity
|
14.4. |
Collateral
|
(a) |
The Obligors have good title to, has rights in, and the power to transfer each item of the Collateral upon which they purports to grant a Security Interest under the Loan Documents, free and clear of any and all Security Interests except Permitted Security Interests.
|
(b) |
The Receivables are bona fide, existing obligations of the Account Debtors, and the service or property has been performed or delivered to the Account Debtor or its agent for the shipment without undue delay to and unconditional acceptance by the Account Debtor.
|
(c) |
The Collateral is not in the possession of any third party bailee (such as a warehouse). In the event that an Obligor, after the date of this Agreement, intends to store or otherwise deliver any portion of the Collateral to a bailee, then the Obligor will first receive the written consent of the Bank and such bailee must acknowledge in writing that the bailee is holding such Collateral for the benefit of the Bank.
|
(d) |
All Inventory owned by it is in all material respects of good and marketable quality for its intended purpose, free from material defects, normal wear and tear and obsolescence excepted.
|
(e) |
Each Obligor is the sole owner of its owned Intellectual Property, except for non- exclusive licences granted to its customers in the ordinary course of business.
|
(f) |
Except to the extent that it could not reasonably be expected to cause a Material Adverse Change:
|
(i) |
each registered patent is valid and enforceable, and no part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and
|
(ii) |
to the best of the Obligor’s knowledge, no claim has been made that any part of the Intellectual Property infringes the rights of any third party.
|
14.5. |
No default
|
14.6. |
No deduction
|
14.7. |
No proceedings pending or threatened
|
14.8. |
Financial statements
|
(a) |
The financial information for each Obligors delivered to the Bank pursuant to Clause 17.1 (
Requirements as to financial statements, reports and certificates
) fairly present in all material respects that Obligor’s financial condition and results of operations.
|
(b) |
There has not been any deterioration in the financial condition of any Obligor since the date of the most recent financial information submitted to the Bank pursuant to Clause 17.1 (
Requirements as to financial statements, reports and certificates
) which could result in a Material Adverse Change.
|
(c) |
Each set of financial statements for the Group delivered to the Bank pursuant to Clause 17.1 (
Requirements as to financial statements, reports and certificates
) fairly present in all material respects the Group’s financial condition and results of operations.
|
(d) |
There has not been any deterioration in the Group’s financial condition since the date of the most recent set of financial statements submitted to the Bank pursuant to Clause 17.1 (
Requirements as to financial statements, reports and certificates
) which could result in a Material Adverse Change.
|
14.9. |
Solvency
|
14.10. |
Subsidiaries
|
14.11. |
Full disclosure
|
14.12. |
No winding-up
|
14.13. |
Taxation
|
14.14. |
Licences
|
(a) |
No Obligor is a party to, nor bound by, any material licence (other than over the counter software that is commercially available to the public) or other material agreement with respect to which the Obligor is the licensee that prohibits or otherwise restricts the Obligor from granting a Security Interest in the Obligor’s interests in such licences or agreements or any other property.
|
(b) |
Each Obligor shall provide written notice to the Bank within ten (10) days of entering or becoming bound by, any such licence or agreement which is reasonably likely to have a material impact on the Obligor’s business or financial condition.
|
(c) |
Each Obligor shall take such steps as the Bank reasonably requests to obtain the consent of, authorisation by or waiver by, any person whose consent or waiver is necessary for all such licences or contract rights to be deemed Collateral and for the Bank to have a Security Interest in it that might otherwise be restricted or prohibited by law or by the terms of any such licence or agreement, whether now existing or entered into in the future.
|
14.15. |
No undisclosed Security Interest
|
14.16. |
Forecasts and projections
|
14.17. |
Other circumstances
|
14.18. |
Intellectual Property rights
|
14.19. |
Jurisdiction
|
14.20. |
Foreign Activities Laws
|
(i) |
To the extent applicable, each of the Obligors and, to the knowledge of each of the Obligors, each of their Affiliates is in compliance, in all material respects, with US Executive Order No. 13224 of September 23, 2001 - Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism (the “
Executive Order
”); the USA PATRIOT Act; the Money Laundering Control Act of 1986, Public Law 99-570; the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq, the Trading with the Enemy Act, 50 U.S.C. App. §§ 1 et seq, any Executive Order or regulation promulgated thereunder and administered by the Office of Foreign Assets Control (“
OFAC
”) of the US Department of the Treasury; and any similar law enacted in the United States subsequent to the date of this Agreement (collectively the “
Foreign Activities Laws
”).
|
(ii) |
None of the Obligors or, to the knowledge of any of the Obligors, any of their Affiliates, is the subject of any action or investigation under any Foreign Activities Laws.
|
(b) |
None of the Obligors or, to the knowledge of any of the Obligors, any of their Affiliates,
|
(i) |
is, or is controlled by, a Restricted Party (being any person listed in the Annex to the Executive Order, on the “
Specially Designated Nationals and Blocked Persons
” list maintained by OFAC, or in any successor list to either of the foregoing); or
|
(ii) |
engages in any dealings or transactions with any Restricted Party. As used herein, a “
Restricted Party
”.
|
(c) |
None of the Obligors has, nor, to the knowledge of any of the Obligors, has any person acting on its behalf including, without limitation, any director, officer, agent or employee, directly or indirectly:
|
(i) |
used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity;
|
(ii) |
made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds;
|
(iii) |
violated any provision of the United Kingdom Money Laundering Regulations 2007, the United Kingdom Proceeds of Crime Act 2002, or the United Kingdom Terrorism Act 2000; or
|
(iv) |
made and/or been involved with any other unlawful payment.
|
14.21. |
Regulatory compliance
|
14.22. |
Perfection Certificates
|
(i) |
its exact legal name is that indicated on the Perfection Certificate and on the signature page of this Agreement;
|
(ii) |
it is an organisation of the type and it is organised in the jurisdiction set out in the Perfection Certificate;
|
(iii) |
the Perfection Certificate accurately sets out its organisational identification number or accurately states that it has none;
|
(iv) |
the Perfection Certificate accurately sets out its place of business, or, if more than one, its chief executive office as well as its mailing address if different, and all other information set out in the Perfection Certificate pertaining to it is accurate, up to date and complete.
|
14.23. |
Repeating Representations
|
15. |
Security
|
15.1. |
All Obligations shall be secured over all properties, rights, assets and revenues of the Obligors (collectively, the “
Collateral
”), subject to the Security Interests, pursuant to any Debenture, any Supplemental Charge, the Security Agreement and any and all other security agreements, mortgages or other collateral granted by an Obligor to the Bank, now or in the future (collectively, the “
Security Documents
”). The Obligors (or any of them), will on the written request of the Bank provide the Bank with a US law security agreement over Intellectual Property if at any time after the Closing Date the Bank determines (in its opinion, acting reasonably) that any such Obligor owns material Intellectual Property registered in the US.
|
15.2. |
Each Obligor acknowledges that it previously has entered and/or may in the future enter into Bank Services Agreements with the Bank. Regardless of the terms of any Bank Services Agreement, each Obligor agrees that any amounts that it owes to the Bank pursuant to any Bank Services Agreement shall be deemed to be Obligations under this Agreement and that it is the intent of each Obligor and the Bank to have all such Obligations secured by the first priority perfected Security Interest in the Collateral granted pursuant to the Security Documents (subject only to Permitted Security Interests that may have superior priority to the Bank’s Security Interest in the Security Documents). Each Obligor agrees that, unless otherwise agreed in writing signed by the Bank and such Obligor, the Security Interest granted by such Obligor pursuant to the Security Documents shall survive the termination of this Agreement at all times when Obligations (other than any Obligations under the Warrant Instrument) exist and shall then terminate only upon the Obligors having fully satisfied the Obligations and the termination of all Bank Services Agreements.
|
15.3. |
Each Obligor hereby authorises the Bank to file financing statements without notice to it with all appropriate jurisdictions to perfect or protect the Bank’s interest or rights pursuant to the Loan Documents, including a notice that any disposition of the Collateral Assets, by either that Obligor or by any other person, shall be deemed to violate the rights of the Bank. Such financing statements may indicate the Collateral Assets as “all assets of the debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in the Bank’s discretion.
|
16. |
Financial undertakings
|
16.1. |
Financial covenants
|
(a) |
The Obligors shall maintain at all times an Adjusted Quick Ratio of no less than 1.10:1.00, to be tested monthly by reference to each Compliance Certificate delivered pursuant to Clause 17.2 (
Compliance Certificate
).
|
(b) |
The Obligors shall procure a minimum product revenue for the Borrowing Group (as set out in the Monthly Financial Statements and annual audited accounts, calculated on a trailing twelve month basis) of the amounts set out below on the dates set out below to be tested quarterly by reference to the relevant Compliance Certificates delivered pursuant to Clause 17.2 (
Compliance Certificate
):
|
(c) |
The Obligors and the Bank will work together and act in good faith to agree a revised set of financial covenants for the trailing twelve month periods ending after 30 June 2018 based on the financial projections provided to the Bank pursuant to Clause 17.1 (h) (Information undertakings).
|
17. |
Information Undertakings
|
17.1. |
Requirements as to financial statements, reports and certificates
|
(a) |
as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet, income statement and cash flow statement covering the Obligors’ and each Subsidiary’s operations for such month certified by a Responsible Officer and in a form acceptable to Bank (the “
Monthly Financial Statements
”);
|
(b) |
as soon as available, but no later than one hundred and twenty (120) days after the last day of each Obligor’s financial year, audited consolidated financial statements prepared under IFRS, consistently applied, with an unqualified opinion on the financial statements from an independent firm of chartered accountants reasonably acceptable to the Bank (other than a “going concern” or like qualification resulting solely from the maturity of the Obligations occurring within one-year from the time such opinion is delivered);
|
(c) |
as soon as available, but no later than thirty (30) days after each Financial Quarter Date, a schedule detailing all financial investment in any Subsidiary for that Financial Quarter;
|
(d) |
a prompt report of any legal actions pending or threatened in writing against an Obligor or any of its Subsidiaries that could result in damages or costs to such Obligor or any Subsidiary of, individually or in the aggregate, one hundred thousand Pounds Sterling (£100,000) (or its equivalent in any other currency) or more;
|
(e) |
not later than thirty (30) days after each Financial Quarter Date, a schedule with details of any material changes to any registered intellectual property held by it.
|
(f) |
as soon as they are available but no later than thirty (30) days after the last day of any month in which any Obligor’s holds a board meeting the board meeting package for such meeting;
|
(g) |
for the Parent, as soon as available but no later than thirty (30) days after the last day of each month, all performance reports and management accounts or other information which the management uses to track the financial and operational performance of the Parent, including sales performance, operations, cashflow, costs and expenses, strategy and issues relating to the Parent, other than that information which the Parent is prohibited by law or regulations (applicable to companies quoted on AIM) from disclosing;
|
(h) |
as soon as available but no later than thirty (30) days after the financial year end of each Obligor (and at least once in every twelve month period), such Obligor’s annual financial projections for the following financial year (on a monthly basis) as approved by such Obligor’s board of directors, together with any related business forecasts used in the preparation of such annual financial projections in a form acceptable to the Bank;
|
(i) |
within five (5) days of delivery, copies of all statements, reports and notices made available to the Parent’s shareholders; and
|
(j) |
budgets, sales projections, operating plans and other financial information reasonably requested by Bank.
|
17.2. |
Compliance Certificate
|
17.3. |
Valuation
|
17.4. |
Inventory; Returns
|
(a) |
The Obligors shall and shall keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between the Obligors and their Account Debtors shall follow the Obligors’ customary practices as they exist at the Closing Date.
|
(b) |
Each Obligor must promptly notify the Bank of all returns, recoveries, disputes “
Know your Customer
” checks
|
(c) |
If:
|
(i) |
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;
|
(ii) |
any change in:
|
(A) |
the status of an Obligor;
|
(B) |
the composition of the shareholders of or control of an Obligor (other than the Parent);
|
(C) |
or in relation to the Parent, any change to the shareholders where the new or existing shareholder holds more than 3% of total share capital of the Parent or where the Parent is otherwise required by either the AIM Rules or the Disclosure Guidance and Transparency Rules to disclose the change;
|
(iii) |
a proposed assignment or transfer by the Bank of any of its rights and/or obligations under this Agreement,
|
(d) |
In addition, the Bank hereby notifies the Obligors that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies each Obligor, which information includes the name and address of each Obligor and other information that will allow the Bank to identify each Obligor in accordance with the USA PATRIOT Act. Each Obligor shall, promptly following a request by the Bank provide all documentation and other information that the Bank requests in order to comply with its on-going obligations under applicable US “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act.
|
18. |
General Undertakings
|
18.1. |
Government compliance
|
(a) |
Each Obligor shall maintain its, and all of its Subsidiaries’, legal existence and good standing in their jurisdictions of formation and maintain its existence in each jurisdiction in which the failure to do so would reasonably be expected to cause a Material Adverse Change. Each Obligor shall comply, and shall procure that each of its Subsidiaries complies, with all laws, ordinances and regulations to which it is subject, the non-compliance with which could reasonably be expected to cause a Material Adverse Change.
|
(b) |
Each Obligor shall obtain all of the Governmental Approvals necessary for the performance by such Obligor of its obligations under the Loan Documents to which it is a party and the grant of a Security Interest to the Bank in all of its property.
|
(c) |
Each Obligor shall promptly provide copies of any Governmental Approvals to the Bank.
|
18.2. |
Taxes; pensions
|
18.3. |
Insurance
|
(a) |
Each Obligor shall keep its business and the Collateral insured for risks and in amounts standard for companies in such Obligor’s industry and location and as the Bank may reasonably request.
|
(b) |
Insurance policies shall be in a form, with companies, and in amounts that are satisfactory to the Bank in its reasonable discretion, provided that the Bank acknowledges and approves of the insurance policies at Closing and will give the Obligors thirty (30) days to obtain reasonably requested future insurance policies.
|
(c) |
All property or asset protection policies (each a “
Property Policy
”) shall if the Bank requires it, be in the joint names of the Obligors and the Bank and shall state the Bank as first loss payee on such policies in respect of any amount in excess of £100,000 and such policies shall provide that the insurer shall endeavour to give the Bank at least twenty (20) days’ notice before cancelling, amending, or declining to renew its policy.
|
(d) |
At the Bank’s request, the Obligors shall deliver promptly to the Bank certified copies of policies and evidence of all premium payments.
|
(e) |
All proceeds of insurance (other employer’s liability, public liability and third party liability insurances) in excess of £100,000 payable to an Obligor under any insurance policy shall be paid into a bank account of the Obligor held with the Bank and the Obligor shall notify the Bank in writing of any such payment.
|
(f) |
Following an Event of Default which is continuing, proceeds payable under any Property Policy taken out by or otherwise vested in an Obligor shall, at the Bank’s option, be payable to the Bank on account of the Obligations.
|
18.4. |
Intellectual Property rights
|
(a) |
Each Obligor shall:
|
(i) |
protect, defend and maintain the validity and enforceability of its Intellectual Property material to the business of each Obligor;
|
(ii) |
promptly advise the Bank in writing of material infringements of the Intellectual Property material to the business of each Obligor;
|
(iii) |
and not allow any Intellectual Property material to an Obligor’s business to be abandoned, forfeited, dedicated to the public or encumbered without the Bank’s written consent.
|
(b) |
If during a Financial Quarter, an Obligor:
|
(i) |
obtains any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or applies for any patent or the registration of any trademark or servicemark, then not later than thirty (30) days after the relevant Financial Quarter Date it shall provide written notice thereof to the Bank and shall execute such intellectual property security agreements and other documents and take such other actions as the Bank shall reasonably request in its good faith business judgement to perfect and maintain a first priority perfected Security Interest in favour of the Bank in such property.
|
(c) |
If an Obligor decides to register any copyrights or mask works in the United States Copyright Office, it shall:
|
(i) |
provide the Bank with at least fifteen (15) days prior written notice of its intent to register such copyrights or mask works together with a copy of the application it intends to file with the United States Copyright Office (excluding schedules thereto);
|
(ii) |
execute an intellectual property security agreement and such other documents and take such other actions as the Bank may request in its good faith business judgement to perfect and maintain a first priority perfected Security Interest in favour of the Bank in the copyrights or mask works intended to be registered with the United States Copyright Office; and
|
(iii) |
record such intellectual property security agreement with the United States Copyright Office contemporaneously with filing the copyright or mask work application(s) with the United States Copyright Office.
|
(d) |
Each Obligor shall promptly provide to the Bank upon its request, evidence of the recording of any intellectual property security agreement necessary for the Bank to perfect and maintain a first priority perfected Security Interest in such property.
|
18.5. |
Accounts to be held with the Bank
|
(a) |
Subject to the Bank providing terms of business reasonably acceptable to the Obligors, and being able to meet the Obligor’s reasonable commercial requirements, each Obligor shall conduct and arrange all its current account banking requirements (and a proportion of its other banking requirements to be agreed between the Bank and the Obligors (each acting in good faith)) in the United States and the United Kingdom with the Bank or its Affiliates.
|
(b) |
Each Obligor shall give the Bank the opportunity to quote on all foreign exchange spot trades and hedging transactions.
|
18.6. |
Litigation co-operation
|
18.7. |
Further assurances
|
18.8. |
Financial assistance
|
18.9. |
Conditions subsequent
|
(a) |
in respect of the US Obligor, Acord 25 and Acord 28 insurance certificates and endorsements in form and substance satisfactory to the Bank;
|
(b) |
account control agreements signed on behalf of each party to those agreements, from (a) Wells Fargo and (b) First Citizens Bank & Trust Company, for each account held by the Obligors with those banks, in a form acceptable to the Bank;
|
(c) |
and acknowledgements of notice of charge signed by Santander UK pic, in respect of each notice of charge of bank accounts held with Santander UK pic sent under the Security Agreement on the Closing Date.
|
19. |
Negative covenants
|
19.1. |
Dispositions
|
(a) |
Convey, sell, lease, transfer, assign or otherwise dispose of (collectively a “
Transfer
”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, including the Intellectual Property, except for Transfers:
|
(i) |
of Inventory in the ordinary course of business;
|
(ii) |
of non-exclusive licences for the use of the property of an Obligor or its Subsidiaries in the ordinary course of business;
|
(iii) |
of worn out or obsolete Equipment; or
|
(iv) |
in connection with Permitted Security Interests and Permitted Investments.
|
19.2. |
Changes in business, ownership, management or business locations
|
(a) |
Engage in or permit any of its Subsidiaries to engage in any business other than the business currently engaged in by the Obligors or reasonably related thereto.
|
(b) |
Permit a change in the ownership or control of any Obligor (other than the Parent) without the written consent of the Bank.
|
(c) |
Change its management such that any of the Key Persons depart from or ceases to be employed by or otherwise hold office at an Obligor, save that where the relevant Obligor:
|
(i) |
notifies the Bank in writing in advance of the change in management; and
|
(ii) |
ensures that the relevant Key Person is replaced promptly (and in any event within six months) upon departure or ceasing to be employed or hold office,
|
(d) |
without at least thirty (30) days prior written notice to the Bank:
|
(i) |
relocate its offices to a new location where the book value of the relevant assets involved is in excess of £150,000;
|
(ii) |
or change its jurisdiction of organisation;
|
(iii) |
or change its legal form;
|
(iv) |
or change its legal name.
|
19.3. |
Mergers or acquisitions
|
(a) |
Merge or consolidate, or permit any of their Subsidiaries to merge or consolidate, with any other person, or acquire, or permit any of their Subsidiaries to acquire, all or substantially all of the share capital or property of another person
|
(b) |
A Subsidiary of an Obligor may merge or consolidate into another Subsidiary of an Obligor or into an Obligor.
|
19.4. |
Indebtedness
|
19.5. |
Negative pledge
|
(a) |
Create, incur, allow, or suffer any Security Interest on any of the Collateral, or assets or undertaking, or assign or convey any right to receive income, including the sale of any accounts, or permit any of its Subsidiaries to do so, except for Permitted Security Interests.
|
(b) |
Permit any Collateral not to be subject to a first priority Security Interest in favour of the Bank, or enter into any agreement, document, instrument or other arrangement (except with or in favour of the Bank) with any person which directly or indirectly prohibits or has the effect of prohibiting an Obligor or any Subsidiary from assigning, mortgaging, pledging, granting a Security Interest in or upon, or encumbering any of such Obligor’s or any Subsidiary’s Intellectual Property, except for Permitted Security Interests.
|
19.6. |
Distributions; Investments
|
(a) |
Directly or indirectly acquire or own any person, or make any Investment in any person, other than Permitted Investments, or permit any of its Subsidiaries to do so.
|
(b) |
Other than in relation to the Parent, pay any dividends or make any distribution or payment or redeem, or purchase any of its share capital save in accordance with arrangements previously agreed in writing by the Bank.
|
19.7. |
Transactions with Affiliates
|
19.8. |
Subordinated Debt
|
(a) |
Make or permit any payment of any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject.
|
(b) |
Amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to the Bank.
|
19.9. |
Subsidiary Restrictions
|
19.10. |
Bank accounts
|
19.11. |
Compliance
|
(a) |
with respect to the US Obligor, become an “
investment company
” or a company controlled by an “
investment company
”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) or use the proceeds of any Credit Extension for that purpose.
|
(b) |
fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction (each as defined in ERISA) to occur.
|
(c) |
fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to result in a Material Adverse Change to the US Obligor’s business, or permit any of its Subsidiaries to do so.
|
(d) |
withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of the US Obligor, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
|
19.12. |
Application of FATCA
|
20. |
Events of Defaul
|
20.1. |
Payment default
|
(a) |
An Obligor fails to:
|
(i) |
make any payment of principal or interest on any Credit Extension (save where the failure to pay is caused by administrative or technical error or disruption to banking systems in which case a grace period of three (3) Business Days (the “
Grace Period
”) from the due date for the relevant payment, will apply); or
|
(ii) |
pay any other Obligations within the Grace Period for the amounts due in terms of those Obligations, although the Grace Period shall not apply to repayments and payments due on the Term Loan Maturity Date.
|
(b) |
During any Grace Period, the failure to cure the payment default is not an Event of Default (but no request for a Credit Extension can be made during a Grace Period).
|
20.2. |
Covenant default
|
(a) |
An Obligor fails or neglects to perform any obligation in Clause 14.14 (
Licences
), Clause 15 (
Security
), Clause 16 (
Financial Undertakings
) and Clause 16.1(a) (Information undertakings) or breaches any covenant in Clause 18 (
General undertakings
) or Clause 19 (
Negative covenants
).
|
(b) |
An Obligor fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in any Loan Document, any negative pledge agreement, or in any present or future agreement between an Obligor and the Bank and as to any default under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) Business Days after the occurrence of such default (“
Cure Period
”);
|
(c) |
provided, however, that if the default cannot by its nature be cured within the Cure Period or cannot after diligent attempts by the Obligor be cured within such Cure Period, and such default is likely to be cured within a reasonable time, then the Cure Period shall be extended for an additional period (which shall not in any case exceed twenty (20) days) to attempt to cure such default, and within such extended Cure Period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions can be requested during such Cure Period).
|
(d) |
Cure Periods provided under this Clause shall not apply to any provision set out in paragraph (a) above or in clause 20.1.
|
20.3. |
Material Adverse Change
|
20.4. |
Attachment
|
(a) |
Any material portion of an Obligor or any of its Subsidiary’s assets is attached, seized, levied on, or comes into possession of a trustee, receiver, creditor or encumbrancer and the attachment, seizure or levy is not removed in fifteen (15) days.
|
(b) |
The service of proceedings upon an Obligor or any of its Subsidiaries seeking to attach, by trustee or similar process, any funds in excess of £10,000 of an Obligor or any of its Subsidiary’s on deposit with the Bank, or any entity under control of the Bank (including any of its Subsidiaries).
|
(c) |
An Obligor or any of its Subsidiaries is the subject of an injunction, restrained, or prevented by court order from conducting a material part of its business.
|
(d) |
A judgment or other claim becomes a lien on a material portion of the Collateral of an Obligor or any of its Subsidiaries.
|
(e) |
A notice of lien, levy, or assessment is filed against an asset of an Obligor or any of its Subsidiaries by any government department or agency including HM Revenue & Customs and not paid within ten (10) Business Days after such Obligor or Subsidiary (as the case may be) receives notice.
|
(f) |
The occurrence of any of the events in paragraph (a) to paragraph (e) will not be an Event of Default if stayed or if a bond is posted pending appeal by the Obligor or Subsidiary (as appropriate) (but no Credit Extensions shall be made during the grace period).
|
20.5. |
Insolvency
|
(a) |
If any of the following occurs in respect of an Obligor or any of its Subsidiaries:
|
(i) |
it is, or is deemed for the purposes of any law to be, unable to pay its debts as they fall due is deemed to be or insolvent pursuant to any legislation affecting an Obligor;
|
(ii) |
it admits its inability to pay its debts as they fall due;
|
(iii) |
it suspends making payments on any of its debts or announces an intention to do so;
|
(iv) |
a moratorium is declared in respect of any of its indebtedness; or
|
(v) |
by reason of actual or anticipated inability to pay debts as they fall due or insolvency it begins negotiations with any creditor for the rescheduling of any of its indebtedness.
|
20.6. |
Insolvency Proceedings
|
(a) |
any step is taken with a view to a moratorium or a composition, assignment or similar arrangement with any of its creditors;
|
(b) |
a meeting of its shareholders, directors or other officers is convened for the purpose of considering any resolution for, to petition for or to make an application to or to file documents with a court or any registrar for, its winding-up, administration or dissolution or any such resolution is passed;
|
(c) |
an order is made for its winding-up, administration or dissolution, or any person presents a petition, or makes an application to or files documents with a court or any registrar, for its winding-up, administration or dissolution, or gives notice to the Bank of an intention to appoint an administrator save where vexatious or frivolous and discharged within 14 days;
|
(d) |
any liquidator, receiver, administrative receiver, administrator or similar officer is appointed in respect of it or any of its assets; or
|
(e) |
its shareholders, directors or other officers request the appointment of, or give notice of an intention to appoint, a liquidator, receiver, administrator or similar officer.
|
20.7. |
Other agreements
|
20.8. |
Judgments
|
20.9. |
Misrepresentations
|
20.10. |
Subordinated Debt
|
20.11. |
Governmental Approvals
|
(a) |
Any Governmental Approval has been revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term;
|
(b) |
or subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in paragraph (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal;
|
(i) |
is, or could reasonably be expected to be, a Material Adverse Change; or
|
(ii) |
adversely affects the legal qualifications of an Obligor or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non- renewal could reasonably be expected to affect the status of or legal qualifications of an Obligor or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.
|
20.12. |
Repudiation
|
20.13. |
Validity of agreement
|
(a) |
enable an Obligor lawfully to enter into, exercise their rights under or perform the material obligations expressed to be assumed by them in the Loan Documents to which it is a party;
|
(b) |
ensure that the obligations expressed to be assumed by an Obligor in the Loan Documents to which it is a party are legal, valid and binding save for any registration at Companies House under the 2006 Act; or
|
(c) |
make the Loan Documents to which it is a party admissible in evidence in England and Wales,
|
20.14. |
Unlawfulness
|
21. |
Bank’s rights and remedies
|
21.1. |
When an Event of Default occurs and continues, the Bank may, without notice or demand, do any or all of the following:
|
(a) |
declare all Obligations immediately due and payable (but if an Event of Default described in Clause 20.5 (Insolvency) occurs all Obligations are immediately due and payable without any action by the Bank);
|
(b) |
stop advancing money or extending credit for the benefit of any Borrower under this Agreement or under any other agreement between an Obligor and the Bank;
|
(c) |
for any Letter of Credit, demand by way of notice in writing that the Obligors: (i) deposit cash with the Bank in an amount equal to 110% of the Dollar Equivalent of the aggregate face amount of all Letters of Credit remaining undrawn, as collateral security for the repayment of any future drawings under such Letters of Credit, and the Obligors shall forthwith deposit and pay such amounts, and (ii) pay in advance all Letter of Credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit;
|
(d) |
terminate any FX Contracts;
|
(e) |
settle or adjust disputes and claims directly with Account Debtors for amounts, on terms and in any order that the Bank considers advisable and notify any person owing the Obligors money of the Bank’s Security Interest in such funds and verify and/or collect the amounts owed by such Account Debtors. After the occurrence of an Event of Default, any amounts received by any Obligor shall be held in trust by such Obligor for the Bank, and, if requested by the Bank, such Obligor shall immediately deliver such receipts to the Bank in the form received from the Account Debtor, with proper endorsements for deposit;
|
(f) |
make any payments and do any acts it considers necessary or reasonable to protect its Security Interest in the Collateral. Each Obligor shall assemble the Collateral if the Bank requests and make it available as the Bank designates. The Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Security Interest which appears to be prior or superior to its Security Interest and pay all expenses incurred. Each Obligor grants the Bank a licence to enter and occupy any of its premises, without charge, to exercise any of the Bank’s rights or remedies;
|
(g) |
apply towards the discharge of the Obligations any:
|
(i) |
balances and deposits of any Obligor it holds;
|
(ii) |
or any amount held by the Bank owing to or for the credit or the account of any Obligor;
|
(h) |
ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Each Obligor grants in favour of the Bank a non- exclusive, royalty-free licence or other right to use, without charge, any Obligor’s labels, Patents, Copyrights, rights of use of any name, trade secrets, trade names, Trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with the Bank’s exercise of its rights under this Clause 21, any Obligor’s rights under all licences and all franchise agreements inure to the Bank’s benefit;
|
(i) |
place a “hold” on any account maintained with the Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any control agreement or similar agreements providing control of any Collateral;
|
(j) |
demand and receive possession of the Borrower’s Books; and
|
(k) |
exercise any rights and remedies available to the Bank under the Security Documents or applicable law.
|
22. |
Changes to the Parties
|
22.1. |
This Agreement binds and is for the benefit of the successors and permitted assigns of each Party.
|
22.2. |
No Obligor may assign any of its rights or transfer any of its rights or obligations under the Loan Documents without the Bank’s prior written consent (which may be granted or withheld in the Bank’s sole discretion).
|
22.3. |
The Bank has the right, with prior written notice, but without the consent of the Obligors, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, the Bank’s obligations, rights and benefits under any Loan Document to any entity whether a corporation, partnership, trust, limited liability company or other entity that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business, other than, prior to an Event of Default, an entity who is a direct competitor of the Bank (in which case consent of the Obligors is required).
|
22.4. |
If so directed by the Bank, if an Obligor is a FATCA FFI or (other than the US Obligor) a US Tax Obligor it shall resign as an Obligor prior to the earliest FATCA Application Date relating to any payment by such Obligor (or any payment by the Bank which relates to a payment by such Obligor).
|
22.5. |
The Bank may, by providing the Obligor’s with 5 Business Days’ prior notice, change its facility office for the provision of either the Term Loan from time to time.
|
23. |
Accession of Obligors
|
23.1. |
The Bank may request that any of the Obligor’s material wholly owned Subsidiaries becomes a Borrower and/or a Guarantor. Upon such request from the Bank the Subsidiary and the Parent shall within 30 days of such request provide the Bank with:
|
(a) |
a duly completed and executed Accession Deed;
|
(b) |
and such Security and other documents and evidence as it may reasonably request (in form and substance similar to the items provided by the Obligors pursuant to Schedule 3 (Conditions Precedent).
|
23.2. |
The Bank shall notify the Obligors promptly upon being satisfied that it has received all of the items listed in Clause 23.1.
|
24. |
Payment mechanics
|
24.1. |
If the United Kingdom becomes a Participating Member State, then during any period when two currency or currency units may be recognised as the lawful currency or currencies units within the United Kingdom:
|
(a) |
any reference in, any obligations arising under, any Loan Document to one such currency or currency unit may be converted into, or paid in, any other currency unit as is recognised as the lawful currency or currency unit in the United Kingdom;
|
(b) |
and any conversion from one such currency or currency unit shall be at the official rate of exchange or conversion rate established by legislation for the conversion of that currency or currency unit into the other, rounded in accordance with such legislation.
|
24.2. |
If the United Kingdom becomes a Participating Member State, this Agreement and the other Loan Documents will be amended to the extent the Bank (acting reasonably and after consultation with the Obligors) determines if necessary to reflect the change in currency.
|
25. |
Bank’s liability for Collateral
|
25.1. |
So long as the Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of the Bank, the Bank shall not be liable or responsible for:
|
(a) |
the safekeeping of the Collateral;
|
(b) |
any loss or damage to the Collateral;
|
(c) |
any diminution in the value of the Collateral;
|
(d) |
or any act or default of any carrier, warehouseman, bailee, or other person.
|
25.2. |
The Obligors bears all risk of loss, damage or destruction of the Collateral.
|
26. |
Set-off
|
26.1. |
Each Obligor at any time whilst an Event of Default is continuing, authorises the Bank to apply (without prior notice) any credit balance (whether or not then due) to which such Obligor is at any time beneficially entitled on any account at, any sum held to its order by and/or any liability or obligation (whether or not matured) of, any office of the Bank in or towards satisfaction of any sum then due and payable by it to the Bank under the Loan Documents and unpaid and, for that purpose, to convert one currency into another, provided that nothing in this Clause 26 shall create a charge; provided that the Bank shall provide prompt notice to such Obligor of any exercise of the Bank’s rights pursuant to this clause 26.1.
|
26.2. |
The Bank shall not be obliged to exercise any of its rights under this Clause 26, which shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right (including the benefit of the Loan Documents) to which it is at any time otherwise entitled (whether by operation of law, contract or otherwise).
|
27. |
Notices
|
27.1. |
All notices or demands under, any Loan Document or any other related agreement must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when set by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addresses to the party to be notified and sent to the address, facsimile number, or email address listed below.
|
27.2. |
If to the Obligors:
|
Name:
|
Nick Robbins-Cherry (Finance Director)
|
Address:
|
Midatech Pharma plc
65 Innovation Drive
Milton Park
Abingdon Oxfordshire
OX14 4RQ
|
Email:
|
nickrc@midatechpharma.com
|
27.3. |
Any Party may, by prior giving written notice to the other Party, change its details set out in Clause 27 (
Notices
).
|
28. |
Partial Invalidity
|
29. |
Remedies and Waivers
|
29.1. |
The Bank’s rights and remedies under the Loan Documents, and all other agreements are cumulative. The Bank has all rights and remedies provided by law or in equity.
|
29.2. |
The Bank’s exercise of one right or remedy is not an election, and the Bank’s waiver of any Event of Default is not a continuing waiver. The Bank’s delay is not a waiver, election, or acquiescence. No waiver shall be effective unless signed by the Bank and then is only effective for the specific instance and purpose for which it was given.
|
29.3. |
Each Obligor waives demand, notice of default or dishonour, notice of payment and non- payment, notice of any default, non-payment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by the Bank on which such Obligor is liable.
|
29.4. |
Time is of the essence for the performance of all Obligations in this Agreement.
|
30. |
Amendments
|
30.1. |
All amendments to this Agreement must be in writing signed by both the Bank and the Obligors.
|
30.2. |
The Loan Documents represent the entire agreement about this subject matter, and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the Parties about the subject matter of the Loan Documents merge into the Loan Documents.
|
30.3. |
The Bank may acting reasonably correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the Parties.
|
31. |
Confidentiality
|
31.1. |
The Bank shall maintain as strictly confidential all proprietary information received from any Obligor under the terms of this Agreement and in handling any such confidential information, the Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made:
|
(a) |
to any of the Bank’s Subsidiaries, Affiliates or its senior executive officers, directors, partners who are required to have access to such information in connection with the Bank’s business with the Obligors;
|
(b) |
to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, the Bank shall use commercially reasonable efforts to obtain such prospective transferee’s or purchaser’s agreement to the terms of this provision);
|
(c) |
as required by law, regulation, subpoena, or other order;
|
(d) |
to the Bank’s regulators or as otherwise required in connection with the Bank’s examination or audit;
|
(e) |
as the Bank considers appropriate in exercising remedies under the Loan Documents; and
|
(f) |
to third-party service providers of the Bank so long as such service providers have executed a confidentiality agreement with the Bank with terms no less restrictive than those contained in this Clause 31.
|
31.2. |
Confidential information does not include information that either:
|
(a) |
is in the public domain or in the Bank’s possession when disclosed to the Bank, or becomes part of the public domain after disclosure to the Bank;
|
(b) |
or is disclosed to the Bank by a third party, if the Bank does not know that the third party is prohibited from disclosing the information.
|
31.3. |
The Bank may use confidential information for any purpose, including for the development of client databases, reporting purposes, and market analysis, so long as the Bank does not disclose the Obligors’ identities or the identity of any person associated with the Obligors unless otherwise expressly permitted by this Agreement. For the avoidance of doubt, no such use by the Bank will involve communication of patents, trade secrets or other intellectual property and no information will allow the identification of the relevant Obligor from the aggregate. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
|
32. |
Continuing obligations
|
32.1. |
All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied. The Security Documents shall survive until the termination of all Bank Services Agreements.
|
32.2. |
The obligations of the Obligors in Clause 11 (Other indemnities) to indemnify the Bank shall survive until the statute of limitations with respect to such claim or cause of action has expired.
|
33. |
Counterparts
|
34. |
Law
|
35. |
Jurisdiction & Service of Process
|
35.1. |
Jurisdiction
|
(a) |
The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement) (a “
Dispute
”).
|
(b) |
The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.
|
(c) |
This Clause 33 is for the benefit of the Bank only. As a result, the Bank shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Bank may take concurrent proceedings in any other jurisdiction.
|
35.2. |
Service of process
|
(a) |
Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in England and Wales):
|
(i) |
irrevocably appoints the Parent as its agent for service of process in relation to any proceedings before the English courts in connection with any Loan Document (and the Parent by its execution of this Agreement, accepts that appointment); and
|
(ii) |
agrees that failure by an agent for service of process to notify the relevant Obligor of the process will not invalidate the proceedings concerned.
|
(b) |
If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, the Parent (on behalf of all the Obligors) must immediately (and in any event within 5 days of such event taking place) appoint another agent on terms acceptable to the Bank. Failing this, the Bank may appoint another agent for this purpose.
|
36. |
Marketing
|
36.1. |
The Obligors agree that the Bank may issue a tombstone to highlight the transaction entered into pursuant to this Agreement in the Bank’s marketing materials.
|
36.2. |
The Bank shall consult with and work with the Obligors (who will act reasonably) in order to issue a press release, or otherwise announce the funding made available pursuant to this Agreement, provided that the Parent shall agree the terms of such release as being an acceptable press release or announcement, having regard to the AIM rules of the London Stock Exchange.
|
1. |
MIDATECH PHARMA PLC,
a public liability company incorporated under the laws of England & Wales with company number 09216368 and its registered office at 65 Innovation Drive, Milton Park, Milton, Abingdon, Oxfordshire, 0X14 4RQ.
|
2. |
MIDATECH LTD,
a limited liability company incorporated under the laws of England & Wales with company number 04097593 and its registered office at 65 Innovation Drive, Milton Park, Milton, Abingdon, Oxfordshire, OX14 4RQ.
|
3. |
MIDATECH PHARMA (WALES) LIMITED,
a limited liability company incorporated under the laws of England & Wales with company number 04929486 and its registered office at Oddfellows House, 19 Newport Road, Cardiff, CF24 0AA.
|
4. |
MIDATECH PHARMA US INC.,
a Delaware corporation with its principal place of business at 8601 Six Forks Road, Suite 160, Raleigh, NC 27615 US.
|
1. |
MIDATECH PHARMA PLC,
a public liability company incorporated under the laws of England & Wales with company number 09216368 and its registered office at 65 Innovation Drive, Milton Park, Milton, Abingdon, Oxfordshire, OX14 4RQ.
|
2. |
MIDATECH LTD,
a limited liability company incorporated under the laws of England & Wales with company number 04097593 and its registered office at 65 Innovation Drive, Milton Park, Milton, Abingdon, Oxfordshire, OX14 4RQ.
|
3. |
MIDATECH PHARMA (WALES) LIMITED,
a limited liability company incorporated under the laws of England & Wales with company number 04929486 and its registered office at Oddfellows House, 19 Newport Road, Cardiff, CF24 OAA.
|
4. |
MIDATECH PHARMA US INC.,
a Delaware corporation with its principal place of business at 8601 Six Forks Road, Suite 160, Raleigh, NC 27615 US.
|
(a) |
duly executed Loan Agreement;
|
(b) |
duly executed Warrant Instrument, together with a capitalisation table of the Parent;
|
(c) |
duly executed Warrant Certificate;
|
(d) |
duly executed Security Documents being:
|
(i) |
each Debenture together with a notice of charge in respect of any accounts held outside the Bank; and
|
(ii) |
the Security Agreement;
|
(e) |
a certified copy group structure chart;
|
(f) |
A Utilisation Request;
|
(g) |
a Perfection Certificate in respect of each Obligor;
|
(h) |
a certificate of a director of each Obligor (other than the US Obligor) with respect to the memorandum and articles of association (or other constitutional documents) of such Obligor and board and shareholder resolutions authorising the execution and delivery of all Loan Documents to which it is a party together with any applicable investor consents;
|
(i) |
a certificate of the Secretary of the US Obligor with respect to its constitutional and organisational documents and board resolutions authorising the execution and delivery of this Agreement and the Loan Documents to which it is a party;
|
(j) |
a bailee’s waiver in favour of the Bank for each location where US Obligor maintains property with a third party, by each such third party, together with the duly executed original signatures thereto;
|
(k) |
A long form certificate of good standing for the US Obligor from the State of Delaware;
|
(l) |
Certificates of good standing from each other state in which the US Obligor is qualified to transact business;
|
(m) |
UCC lien searches against all Obligors;
|
(n) |
evidence confirming that the UK Obligor has received not less than £15,000,000 (after deduction of fees and expenses) in relation to cash received for new equity from the Placing and Open Offer announced on 11 October 2016 and a copy of the Placing and Open Offer circular to shareholders the subject of the announcement;
|
(o) |
a legal opinion of Osborne Clarke LLP, legal advisers to the Bank in England and Wales, in form and substance acceptable to the Bank;
|
(p) |
a legal opinion of Brown Rudnick LLP, legal advisers to the US Obligor in the US, in form and substance acceptable to the Bank;
|
(q) |
the insurance policies and/or endorsements required pursuant to Clause 18.3 (Insurances);
|
(r) |
payment of the fees specified in Clause 9 (Fees) and Bank Expenses pursuant to Clause 12 (Costs and expenses) then due;
|
(s) |
the Bank’s logo consent form;
|
(t) |
duly signed EUIPO form and €1,300 for the registration fees in connection with the Trademarks charged pursuant to the Debenture;
|
(u) |
such other documents, and completion of such other matters, as the Bank may reasonably deem necessary or appropriate;
|
(v) |
in respect of Tranche 2 only:
|
(i) |
drawdown of Tranche 1;
|
(ii) |
a Compliance Certificate confirming ongoing compliance with the covenants set out in Clause 16 (
Financial undertakings
), and
|
(iii) |
evidence of a positive result in the Q-Octeotride phase I study;
|
(w) |
in respect of Tranche 3 only:
|
(i) |
drawdown of Tranche 1 & Tranche 2;
|
(ii) |
a Compliance Certificate confirming ongoing compliance with the covenants set out in Clause 16 (
Financial undertakings
), and
|
(iii) |
evidence of a positive result in the Q-Octeotride phase III study.
|
(1) |
[Parent] a company registered in [●] with registration number [●] and whose registered office is at [●] (the “
Parent
”)
|
(2) |
[●] a company registered [“] in with registration number [●] whose registered office is at [a] (the “
New Obligor
”); and
|
(3) |
SILICON VAL.LEY BANK
, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 US (the “
Bank
”),
|
1. |
Definitions and Interpretation
|
1.1 |
Unless a contrary intention appears, words and expressions defined in the loan Agreement have the same meaning in this Accession Deed and Clause 1.2 (Interpretation) of the Loan Agreement shall apply to this Accession Deed.
|
2 |
Confirmation
|
2.1 |
The New Obligor confirms it has read and understood the content of the Loan Agreement.
|
2.2 |
The Parent confirms that no Default’s continuing or will occur as a result of the accession of the New Obligor to the terms of the Loan Agreement.
|
3. |
Accession
|
3.1 |
With effect from the date of this Accession Deed, the New Obligor becomes a party to, and will be bound by the terms of, and assume the obligations and duties of a Borrower and Guarantor under, the loan Agreement as if it had been a party to the Loan Agreement from [●] 201[●].
|
4. |
Construction
|
4.1 |
The Loan Agreement shall continue and remain in full force and effect and this Accessor Deed shall be read and construed as one with the Loan Agreement so that all references to “this Agreement” in the Loan Agreement shall include reference to this Accession Deed.
|
4.2 |
This Accession Deed is a Loan Document.
|
5 |
Governing Law
|
5.1 |
This Accession Deed and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.
|
5.2 |
[Without prejudice to any other mode of service allowed under any relevant law, the New Obligor
|
(a) |
irrevocably appoints [●] as its agent tor service of process in relation to any proceedings before the English courts in connection with any Finance Document (and [●] by its execution of this Deed accepts that appointment); and
|
(b) |
agrees that failure by an agent for service of process to notify the New Obligor of the process will not invalidate the proceedings concerned.]
|
THE BORROWERS
|
||
SIGNED
for and on behalf of
|
)
|
|
MIDATECH PHARMA PLC
|
)
|
/s/ Nicholas Robbins-Cherry
|
SIGNED
for and on behalf of
|
)
|
|
MIDATECH LTD
|
)
|
/s/ Nicholas Robbins-Cherry
|
SIGNED
for and on behalf of
|
)
|
|
MIDATECH PHARMA
|
)
|
|
(WALES) LIMITED
|
)
|
/s/ Nicholas Robbins-Cherry
|
SIGNED
for and on behalf of
|
)
|
|
MIDATECH PHARMA US INC.
|
)
|
/s/ James Phillips
|
THE GUARANTORS
|
||
SIGNED
for and on behalf of
|
)
|
|
MIDATECH PHARMA PLC
|
)
|
/s/ Nicholas Robbins-Cherry
|
SIGNED
for and on behalf of
|
)
|
|
MIDATECH LTD
|
)
|
/s/ Nicholas Robbins-Cherry
|
SIGNED
for and on behalf of
|
)
|
|
MIDATECH PHARMA
|
)
|
|
(WALES) LIMITED
|
)
|
/s/ Nicholas Robbins-Cherry
|
SIGNED
for and on behalf of
|
)
|
|
MIDATECH PHARMA US INC.
|
)
|
/s/ James Phillips
|
THE BANK
|
||
SIGNED
for and on behalf of
|
)
|
|
SILICON VALLEY BANK
|
)
|
/s/ Ian Murchie |
(1) |
The entities listed in Schedule 1
(as Original Chargors) |
(2) |
Silicon Valley Bank
(as Bank) |
1.
|
Interpretation
|
2
|
2.
|
Covenant to Pay
|
5
|
3.
|
Security Assets
|
6
|
4.
|
Nature of Security
|
7
|
5.
|
Further Assurances and Protection of Priority
|
8
|
6.
|
Representations and Warranties
|
9
|
7.
|
Undertakings
|
9
|
8.
|
Enforcement and Powers of the Bank
|
14
|
9.
|
Appointment of a Receiver or Administrator
|
15
|
10.
|
Powers of a Receiver
|
16
|
11.
|
Application of Moneys
|
16
|
12.
|
Protection of Third Parties
|
17
|
13.
|
Protection of the Bank
|
18
|
14.
|
Cumulative Powers and Avoidance of Payments
|
18
|
15.
|
Ruling-off Accounts
|
18
|
16.
|
Power of Attorney
|
19
|
17.
|
Delegation
|
19
|
18.
|
Redemption of Prior Charges
|
19
|
19.
|
Miscellaneous
|
19
|
20.
|
Governing Law
|
20
|
21.
|
Jurisdiction
|
20
|
Schedule 1
|
||
The Original Chargors
|
||
Schedule 2
|
||
Security Assets
|
||
Schedule 3
|
||
Form of Notices
|
||
Schedule 4
|
||
Form of Accession Deed
|
||
Schedule 5
|
||
Form of Deed of Release
|
||
Schedule 6
|
||
Supplemental Debenture
|
This Deed
is made on
|
2017
|
(1) |
Each/The person listed in Schedule 1
to this Deed
(the
"Original Chargors"
);
and
|
(2) |
Silicon Valley Bank
a California corporation with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 US (the
"Bank"
).
|
1. |
Interpretation
|
1.1 |
Definitions
|
(a) |
any refinancing, novation, deferral or extension granted or agreed with the Bank; and
|
(b) |
any claim for breach of representation, warranty or undertaking or on an event of default or under any indemnity given under or in connection with any of the Loan documents.
|
(a) |
all freehold, leasehold or other immovable property of a Chargor situate in England and Wales;
|
(b) |
any buildings, fixtures, fittings, plant and machinery from time to time on or forming part of the property referred to in paragraph (a) above, other than that which belongs to any landlord, tenant or occupant other than a Chargor; and
|
(c) |
any Related Rights arising in relation to any of the assets described in paragraphs (a) and (b) above (inclusive),
|
(a) |
the proceeds of sale and/or other realisation of that asset (or any part thereof or interest therein);
|
(b) |
all Authorisations, options, agreements, rights, easements, benefits, indemnities, guarantees, warranties or covenants for title in respect of such asset;
|
(c) |
all allotments, rights, benefits and advantages at any time accruing, offered or arising in respect of or incidental to any asset and all money or property accruing or offered at any time by way of conversion, redemption, bonus, preference, option, dividend, distribution, interest or otherwise in respect of an asset; and
|
(d) |
all other rights derived from or incidental to such asset.
|
(a) |
the assets mortgaged, charged or assigned by way of security to the Bank by this Deed, any Accession Deed or any Supplemental Debenture; and
|
(b) |
any assets held on trust by a Chargor for the Bank.
|
(a) |
the shares described in Part 3 of Schedule 2 (
Security Assets
) and Part 3 of the schedule to each Accession Deed (if any); and
|
(b) |
all Related Rights in respect of paragraph (a) above.
|
1.2 |
Construction
|
(a) |
Unless otherwise defined in this Deed, terms defined in the Loan Agreement have the same meaning in this Deed as they do in the Loan Agreement.
|
(b) |
Unless a contrary intention appears, Clause 1.2 (
Interpretation
) and Clause 1.4 (
Third Party Rights
)
of the Loan Agreement apply to this Deed, and shall be deemed to be incorporated into this Deed as though set out in full in this Deed, with any reference to "
this Agreement
" being deemed to be a reference to "
this Deed
", subject to any other necessary changes.
|
(c) |
Any references to the Bank or any Receiver shall include its Delegates.
|
1.3 |
Law of Property (Miscellaneous Provisions) Act 1989
|
1.4 |
Implied Covenants for Title
|
1.5 |
Effect as a Deed
|
1.6 |
Loan Document
|
2. |
Covenant to Pay
|
3. |
Security Assets
|
3.1 |
Fixed Charges
|
(a) |
Each Chargor, as security for the payment discharge and performance of the Secured Liabilities, charges in favour of the Bank, with full title guarantee, the following assets, from time to time owned by it or in which it has an interest:
|
(i) |
by way of first legal mortgage, each Property legal title to which is vested in it on the date of this Deed specified in Part 5 of Schedule 2 (
Security Assets
); and
|
(ii) |
by way of first fixed charge:
|
(A) |
all Property not effectively mortgaged under Clause 3.1(a)(i));
|
(B) |
all Plant and Machinery;
|
(C) |
all Shares;
|
(D) |
all Investments other than the Shares;
|
(E) |
all Receivables directed to be paid into the SVB Blocked Accounts;
|
(F) |
all Receivables directed to be paid into the SVB Operating Accounts;
|
(G) |
all Receivables directed to be paid into the Third Party Accounts;
|
(H) |
the SVB Blocked Accounts;
|
(I) |
the SVB Operating Accounts;
|
(J) |
the Third Party Accounts;
|
(K) |
all Intellectual Property specified in Part 2 of Schedule 2 (
Security Assets
);
|
(L) |
all other Intellectual Property; and
|
(M) |
its goodwill and uncalled capital.
|
3.2 |
Security Assignment
|
(a) |
the Insurances and the Insurance Proceeds;
|
(b) |
each Assigned Contract; and
|
(c) |
all Related Rights in respect of each of the above,
|
3.3 |
Floating Charge
|
(a) |
As further security for the payment discharge and performance of the Secured Liabilities, each Chargor charges with full title guarantee in favour of the Bank by way of first floating charge its undertaking and all its present and future assets other than those assets which are effectively charged by way of first fixed charge or legal mortgage under Clause 3.1 (
Fixed Charges
) or which are effectively assigned by way of security under Clause 3.2 (
Security Assignment
).
|
(b) |
Paragraph 14 of Schedule B1 to the Insolvency Act 1986 shall apply to the floating charge created by this Deed.
|
3.4 |
Conversion of Floating Charge by Notice
|
(a) |
there occurs an Acceleration Event; or
|
(b) |
the Bank is of the view that (acting reasonably) any legal process or execution is being enforced against any Floating Charge Asset or (acting reasonably) that any Floating Charge Asset is in danger of being seized, sold or is otherwise in jeopardy,
|
3.5 |
Automatic Conversion of Floating Charge
|
(a) |
a Chargor creates any Security Interest (other than a Permitted Security Interest) over all or any of the Security Assets or attempts to do so;
|
(b) |
any person levies or attempts to levy any attachment, execution or other legal process against any of such Security Assets;
|
(c) |
a resolution is passed or an order is made for the winding up, dissolution, administration or other reorganisation of a Chargor; or
|
(d) |
any steps are taken for the appointment of, or notice is given of intention to appoint, or a petition is filed or application is made, or a competent court makes an order for the appointment of an administrator, in relation to a Chargor,
|
4. |
Nature of Security
|
4.1 |
Continuing Security
|
(a) |
The Security Interests created by this Deed are to be a continuing security interests notwithstanding any intermediate payment or settlement of all or any part of the Secured Liabilities.
|
(b) |
Until the Security Period has ended, the Bank may refrain from applying or enforcing any other moneys, Security Interest or rights held or received by the Bank in respect of that amount, and may or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and a Chargor shall not be entitled to the benefit of the same.
|
4.2 |
Non-merger of Security Interests
|
5. |
Further Assurances and Protection of Priority
|
5.1 |
General
|
(a) |
Each Chargor shall, at its own expense, promptly do all such acts or execute all such documents (including assignments, transfers, mortgages, charges, notices and instructions) as the Bank may reasonably specify (and in such form as the Bank may reasonably require in favour of the Bank or its nominee(s) or any purchaser):
|
(i) |
to perfect or protect the Security Interests created or intended to be created under, or evidenced by, this Deed (which may include the execution of a mortgage, charge, assignment or other Security Interests over all or any of the assets which are, or are intended to be, the subject of this Deed) or for the exercise of any rights, powers and remedies of the Bank provided by or pursuant to this Deed or by law;
|
(ii) |
to confer on the Bank, Security Interests over any assets of a Chargor, located in any jurisdiction, equivalent or similar to the Security Interests intended to be conferred by or pursuant to this Deed and, pending the conferring of such Security Interests, hold such assets upon trust (or in any manner required by the Bank) for the Bank; and/or
|
(iii) |
following the occurrence of an Acceleration Event, to facilitate the realisation or enforcement of the assets which are the subject of the Security Interests created by this Deed.
|
(b) |
Each Chargor shall take all such action as is available to it (including making all filings and registrations) as may be reasonably necessary for the purpose of the creation, perfection, protection or maintenance of any Security Interest conferred or intended to be conferred on the Bank by or pursuant to this Deed.
|
5.2 |
HM Land Registry
|
(a) |
In relation to any Property from time to time vested in a Chargor which is registered or is to be registered at HM Land Registry, such Chargor, hereby consents to the Bank applying to the Chief Land Registrar for the registration of a restriction to be entered on the Register of Title of all that Property (including any unregistered properties subject to compulsory first registration at the date of this Deed) on the prescribed Land Registry form and in the following or substantially similar terms:
|
(b) |
The Bank must perform its obligations under the Loan Agreement (including any obligation to make available further advances) and this Deed has been entered into in order to secure such further advances. In relation to any Property from time to time vested in a Chargor which is registered or is to be registered at HM Land Registry, the Bank and each Chargor consent to an application to the Chief Land Registrar for the registration of a notice to be entered onto the Register of Title of all that Property (including any unregistered properties subject to compulsory first registration at the date of this Deed) of the obligation to make further advances.
|
5.3 |
Register of Intellectual Property
|
5.4 |
Notices
|
(a) |
Promptly following the date of this Deed, the charge over its Third Party Accounts under this Deed to the person at which such accounts are maintained in the form set out in Part 1 of Schedule 3 (
Form of notice in relation to a Third Party Account);
|
(b) |
if the Bank so requires, the assignment or charge of any other Security Asset to the relevant third party (in the form of Part 2 of Schedule 3 (
Form of notice to counterparties
) or such other form as the Bank so requires,
|
6. |
Representations and Warranties
|
6.1 |
Each Chargor represents and warrants that:
|
(a) |
the Security Assets are legally and beneficially owned by the Chargor free from any Security Interest other than as created by this Deed;
|
(b) |
this Deed creates the Security Interest which it purports to create and is not liable to be avoided or otherwise set aside on the liquidation or administration of a Chargor or otherwise; and
|
(c) |
Save for the Disclosed Matters, there are no actions, arbitration or any administrative or other proceedings pending or, to the knowledge of each Chargor's Responsible Officers or legal counsel, threatened by or against a Chargor or any Subsidiary of a Chargor involving more than £100,000.
|
(d) |
.
|
6.2 |
Repetition
|
7. |
Undertakings
|
7.1 |
Duration of Undertakings
|
7.2 |
General Undertakings
|
(a) |
Negative Pledge and Disposal Restrictions
|
(i) |
It will not:
|
(A) |
create or agree to create or permit to subsist or arise any Security Interest over all or any part of the Security Assets; or
|
(B) |
sell, transfer, lease out, lend or otherwise dispose of all or any part of the Security Assets (save for Floating Charge Assets and other than in relation to Intellectual Property in the ordinary course of its business) or agree or attempt to do the same,
|
(ii) |
In relation to the Specified IP only, the Bank agrees that the Chargors are permitted to cease to maintain the registration of the Specified IP, by ceasing to make the payments required to maintain registered status.
|
(b) |
Deposit of Documents or Title Deeds
|
(i) |
to the extent that the relevant documents have not been deposited with a clearance system, settlement system or custodian acceptable to the Bank, all deeds, stock and share certificates or other documents of title (or documents evidencing title or the right to title) and agreements relating to a Security Asset (including all deeds and documents of title relating to the Property);
|
(ii) |
any stock transfer forms or other instruments of transfer duly completed and executed to the Bank’s satisfaction;
|
(iii) |
to the extent requested by the Bank from time to time:
|
(A) |
certified copies of all the Assigned Contracts; and
|
(B) |
all deeds and documents of title (if any) relating to the Receivables.
|
(C) |
details of all Plant and Machinery;
|
(iv) |
any other document which the Bank may reasonably require for the purposes of perfecting the Security Interests created or intended to be created by this Deed.
|
(c) |
Compliance with Laws
|
(d) |
Information
|
(e) |
Registration and Notifications
|
7.3 |
Investments and Shares
|
(a) |
Exercise of Rights
|
(i) |
Prior to the occurrence of an Acceleration Event, it shall not exercise or refrain from exercising (or direct the same) any of the powers or rights conferred upon or exercisable by the legal or beneficial owner of the Investments or the Shares which would place it in breach of the terms of the Loan Agreement or which would be prejudicial to the interests of the Bank hereunder.
|
(ii) |
Following the occurrence of an Acceleration Event, it shall not, without the prior written consent of the Bank, exercise or refrain from exercising (or direct the same) any of the powers or rights conferred upon or exercisable by the legal or beneficial owner of the Investments or the Shares.
|
(b) |
Registration of Transfers
|
(c) |
Clearance Systems etc
|
(d) |
Acquisition and Calls
|
(i) |
promptly notify the Bank of the acquisition of any Investment or Shares; and
|
(ii) |
duly and promptly pay all calls, instalments or other payments which may be due and payable in respect of any Investments or Shares and, for the avoidance of doubt, the Bank shall not incur any liability in respect of any amounts due from a Chargor in respect of such Investments or Shares.
|
(e) |
Dividends
|
(i) |
Prior to the occurrence of an Acceleration Event it shall be entitled to receive and retain all dividends, distributions and other monies paid on or derived from its Shares and Investments.
|
(ii) |
Following the occurrence of an Acceleration Event it shall promptly pay all dividends or other monies received by it in respect of the Investments and the Shares into a SVB Operating Account or an SVB Blocked Account (as directed by the Bank).
|
(f) |
Nominees
|
7.4 |
Receivables
|
(a) |
During the Security Period, each Chargor shall:
|
(i) |
direct all its customers and other debtors to pay the proceeds of all Receivables into the SVB Operating Accounts and pay into an SVB Operating Account all monies it may otherwise receive in respect of such Receivables
|
(ii) |
hold the proceeds of such collection and realisation of the Receivables upon trust for the Bank pending payment of such proceeds into an SVB Operating Account;
|
(iii) |
not at any time without the prior written consent of the Bank deal with the Receivables or other monies relating thereto otherwise than by getting in the same and making payment thereof into an SVB Operating Account. Without prejudice to the generality of the foregoing, the Chargors shall not at any such time factor or discount any of such debts or claims or enter into any agreement for such factoring or discounting; and
|
(iv) |
if called upon so to do by the Bank after an Acceleration Event, execute a legal assignment of the Receivables to the Bank in such terms as the Bank in its discretion may require, give such notice of that legal assignment to the debtors from whom the Receivables are due, owing or incurred and take any such other step as the Bank in its discretion may require to perfect such legal assignment.
|
(b) |
Blocked Accounts
|
(c) |
Other Bank Accounts
|
7.5 |
To repair
|
(a) |
at all times keep in good and substantial repair and condition all the Property including all buildings, erections and structures on and in the Property;
|
(b) |
keep all Plant and Machinery in good repair, working order and condition and fit for its purpose; and
|
(c) |
where it is uneconomic to repair any part of the Property, replace such property by another similar asset of equal or greater quality and value.
|
7.6 |
To allow entry
|
7.7 |
Alterations
|
(a) |
commit any waste, or in any manner lessen the value of the Property;
|
(b) |
carry out any work of demolition, construction, refurbishment, addition or otherwise in or to the Property; or
|
(c) |
except with the prior written consent of the Bank (not to be unreasonably withheld), make any alterations to the Property.
|
7.8 |
No creation of leases
|
(a) |
grant nor agree to grant (whether in exercise of any statutory power or otherwise) any lease, underlease, tenancy or agreement for lease affecting the Property;
|
(b) |
confer nor agree to confer on any person any other right or licence to occupy any land or buildings forming part of the Property nor grant any licence or permission to assign, underlet or sub-let nor part with, nor share occupation or possession of, the Property or any part thereof;
|
(c) |
waive, release nor vary or agree to waive, release or vary any of the terms of any lease, underlease, tenancy or agreement for lease affecting the Property including the determination or review of any rent payable thereunder nor exercise any power to terminate or extend the same;
|
(d) |
forfeit nor commence proceedings for forfeiture nor exercise any right of re-entry nor accept the surrender of any lease, underlease, tenancy or agreement for lease affecting the Property; nor
|
(e) |
change nor permit or suffer to be changed the present user of any part of the Property.
|
7.9 |
No creation of easements
|
7.10 |
Power to Remedy
|
8. |
Enforcement and Powers of the Bank
|
8.1 |
Enforcement
|
(a) |
enforce all or any part of the Security Interests created by this Deed and take possession of or dispose of all or any of the Security Assets (in accordance with its power of sale under section 101 LPA) in each case at such times and upon such terms as it sees fit; and
|
(b) |
whether or not it has appointed a Receiver, exercise all of the powers, authorities and discretions:
|
(i) |
conferred from time to time on mortgagees by the LPA (as varied or extended by this Deed) or by law; and
|
(ii) |
granted to a Receiver by this Deed or from time to time by law; and
|
(c) |
exercise all the rights, powers and discretions conferred on a Receiver by this Deed, the LPA, the Insolvency Act 1986 or otherwise by law, without first appointing a Receiver or notwithstanding the appointment of a Receiver.
|
8.2 |
Power of Sale, Leasing and Other Powers
|
8.3 |
Following the date that the Security Interests are enforceable pursuant to Clause 8.1 above:
|
(a) |
The Bank may lease, make agreements for leases at a premium or otherwise, accept surrenders of leases and grant options or vary or reduce any sum payable under any leases or tenancy agreements as it thinks fit, without the need to comply with any of the provisions of sections 99 and 100 of the LPA; and
|
(b) |
In the exercise of the powers conferred by this Deed, the Bank may sever and sell plant, machinery or other fixtures separately from the property to which they may be annexed and it may apportion any rent or other amount without the consent of any Chargor.
|
8.4 |
Statutory Restrictions
|
8.5 |
Appropriation
|
(a) |
In this deed,
"financial collateral"
has the meaning given to that term in the Financial Collateral Arrangements (No.2) Regulations 2003.
|
(b) |
At any time after the occurrence of an Acceleration Event, the Bank may appropriate all or part of the financial collateral forming part of the Security Assets in or towards satisfaction of the Secured Liabilities.
|
(c) |
The Parties agree that the value of any such Security Assets appropriated in accordance with paragraph (b) above shall be in the case of cash, the amount of cash so appropriated and in the case of other Security Assets the market price of such Security Assets at the time the right of appropriation is exercised as determined by the Bank by reference to such method or source of market valuation as the Bank may reasonably select, including by independent valuation. The Parties agree that the methods or sources of valuation provided for or selected by the Bank in accordance with this paragraph (c) shall constitute a commercially reasonable manner of valuation for the purposes of the Financial Collateral Arrangements (No.2) Regulations 2003.
|
(d) |
The Bank shall notify the relevant Chargor, as soon as reasonably practicable, of the exercise of its right of appropriation as regards such of the Security Assets as are specified in such notice.
|
9. |
Appointment of a Receiver or Administrator
|
9.1 |
Appointment
|
(a) |
At any time after the occurrence of an Acceleration Event, or at the request of a Chargor, the Bank may, without prior notice to the Chargors or any of them, in writing (under seal, by deed or otherwise under hand) appoint:
|
(i) |
a Receiver in respect of the Security Assets or any part thereof and may in like manner from time to time (and insofar as it is lawfully able to do) remove any Receiver and appoint another in his place; or
|
(ii) |
one or more persons to be an Administrator in accordance with paragraph 14 of Schedule B1 to the Insolvency Act 1986.
|
(b) |
Nothing in paragraph (a) above shall restrict the exercise by the Bank of any one or more of the rights of the Bank under Schedule B1 to the Insolvency Act 1986 and the rules thereunder or at common law.
|
9.2 |
Several Receivers
|
9.3 |
Remuneration of Receiver
|
9.4 |
Liability of Bank for Actions of a Receiver or Administrator
|
(a) |
Each Receiver shall be the agent of the relevant Chargor which shall be solely responsible for his acts or defaults, and for his remuneration and expenses, and be liable on any agreements or engagements made or entered into by him. The Bank shall not be responsible for any misconduct, negligence or default of a Receiver.
|
(b) |
The Bank shall not have any liability for the acts or omissions of an Administrator.
|
10. |
Powers of a Receiver
|
(a) |
all of the powers of an administrative receiver set out in Schedule 1 to the Insolvency Act 1986 (whether or not the Receiver is an administrative receiver);
|
(b) |
all of the powers conferred from time to time on receivers, mortgagors and mortgagees in possession by the LPA;
|
(c) |
all of the powers conferred on the Bank under this Deed;
|
(d) |
all the powers and rights of a legal and beneficial owner and the power to do or omit to do anything which a Chargor itself could do or omit to do;
|
(e) |
the power to do all things which, in the opinion of the Receiver, are incidental to any of the powers, functions, authorities or discretions conferred or vested in the Receiver pursuant to this Deed or upon receivers by statute or law generally (including the bringing or defending of proceedings in the name of, or on behalf of, a Chargor; the collection and/or realisation of Security Assets in such manner and on such terms as the Receiver sees fit; and the execution of documents in the name of a Chargor (whether under hand, or by way of deed or by utilisation of the company seal of a Chargor).
|
11. |
Application of Moneys
|
11.1 |
Order of Application
|
(a) |
in discharging any sums owing to the Bank or any Receiver or Administrator;
|
(b) |
in payment of all costs and expenses incurred by the Bank in connection with any realisation or enforcement of the Security Interests created by this Deed;
|
(c) |
in payment of any Secured Liabilities; and
|
(d) |
the balance of any Recoveries, after all amounts due under paragraphs (a) to (c) above have been paid in full, to the relevant Chargor or other person entitled thereto.
|
11.2 |
Prospective Liabilities
|
(a) |
any sum owed to the Bank; and
|
(b) |
any part of the Secured Liabilities,
|
11.3 |
Investment of Proceeds
|
11.4 |
Currency Conversion
|
(a) |
For the purpose of, or pending the discharge of, any of the Secured Liabilities the Bank may convert any moneys received or recovered by the Bank from one currency to another, at a market rate of exchange.
|
(b) |
To the extent that any amount converted pursuant to Clause 11.4(a) falls short of the amount due in respect of that part of the Secured Liabilities (whether due to costs of conversion or other matters) then the Chargors will remain liable for any such shortfall. .
|
11.5 |
Permitted Deductions
|
(a) |
to set aside by way of reserve, amounts required to meet, and to make and pay, any deductions and withholdings (on account of taxes or otherwise) which it is or may be required by any applicable law to make from any distribution or payment made by it under this Deed; and
|
(b) |
to pay all Taxes which may be assessed against it in respect of any of the Security Assets, or as a consequence of performing its duties, or by virtue of its capacity as Bank under any of the Loan Documents or otherwise.
|
12. |
Protection of Third Parties
|
12.1 |
No Obligation to Enquire
|
(a) |
the right of the Bank to exercise any of the powers conferred by this Deed has arisen or become exercisable or as to the propriety or validity of the exercise or purported exercise of any such power; or
|
(b) |
any of the Secured Liabilities remains outstanding or be concerned with notice to the contrary and the title and position of such a purchaser or other person shall not be impeachable by reference to any of those matters.
|
12.2 |
Receipt Conclusive
|
13. |
Protection of the Bank
|
13.1 |
No Liability
|
13.2 |
Possession of Security Assets
|
14. |
Cumulative Powers and Avoidance of Payments
|
14.1 |
Cumulative Powers
|
14.2 |
Amounts Avoided
|
14.3 |
Discharge Conditional
|
15. |
Ruling-off Accounts
|
16. |
Power of Attorney
|
16.1 |
Upon the occurrence of an Acceleration Event, each Chargor, by way of security, irrevocably and severally appoints each of the Bank and any Receiver as its attorney (with full power of substitution and delegation) in its name and on its behalf and as its act and deed to execute, seal and deliver (using the company seal where appropriate) and otherwise perfect and do any deed, assurance, agreement, instrument, act or thing which it ought to execute and do under the terms of this Deed, or which may be required or deemed proper in the exercise of any rights or powers conferred on the Bank or any Receiver under this Deed or otherwise for any of the purposes of this Deed, and each Chargor covenants with each of the Bank and any Receiver to ratify and confirm all such acts or things made, done or executed by that attorney.
|
17. |
Delegation
|
17.1 |
The Bank may, at any time, delegate by power of attorney or otherwise to any person for any period, all or any of the rights, powers and discretions vested in it by or pursuant to this Deed.
|
17.2 |
That delegation may be made upon any terms and conditions (including the power to sub delegate) and subject to any restrictions that the Bank may, in its discretion, think fit in the interests of the Bank and it shall not be bound to supervise, or be in any way responsible for any loss incurred by reason of any misconduct or default on the part of any such delegate or sub delegate.
|
18. |
Redemption of Prior Charges
|
19. |
Miscellaneous
|
19.1 |
Assignment
|
19.2 |
Counterparts
|
(a) |
This Deed may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Deed.
|
(b) |
Failure by one or more Parties ("
Non-Signatories
") to execute this Deed on the date of this Deed will not invalidate the provisions of this Deed as between the other Parties who do execute this Deed. Any Non-Signatories may execute this Deed (or a counterpart of this Deed) on a subsequent date and will thereupon become bound by its provisions.
|
(c) |
If any one or more of the Chargors is not bound by any or all of the provisions of this Deed (whether by reason of lack of capacity, improper execution, failure to execute or for any other reason whatsoever) the remaining Chargors shall nonetheless continue to be bound as if such Chargor had never been a party.
|
19.3 |
Covenant to Release
|
(a) |
executing a release substantially in the form set out in Schedule 5 (
Form of Deed of Release
) with such amendments as the Bank may agree;
|
(b) |
re-assigning any of the Security Assets to the Chargors;
|
(c) |
to the extent the Bank holds original documents or deeds by way of security in respect of Security Assets, by promptly delivering up such documents to the Chargors; or
|
(d) |
executing any other documents or taking any other action which may be necessary to release the Security Assets from the Security constituted by this Deed.
|
19.4 |
Notices
|
20. |
Governing Law
|
21. |
Jurisdiction
|
21.1 |
The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Deed (including a dispute relating to the existence, validity or termination of this Deed or any non-contractual obligation arising out of or in connection with this Deed) (a "
Dispute
").
|
21.2 |
The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.
|
21.3 |
This Clause 21 is for the benefit of the Bank only. As a result, the Bank shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Bank may take concurrent proceedings in any number of jurisdictions.
|
Original Chargors
|
|||
Executed as a deed by
|
)
|
||
Midatech Pharma Plc
|
)
|
/s/ Nicholas Robbins-Cherry
|
|
Executed as a deed by
|
)
|
||
Midatech Ltd
|
)
|
/s/ Nicholas Robbins-Cherry
|
|
Executed as a deed by
|
)
|
||
Midatech Pharma (Wales) Limited
|
)
|
/s/ Nicholas Robbins-Cherry
|
|
Bank
|
|||
Executed as a deed by
|
)
|
||
an authorised signatory
|
)
|
||
for and on behalf of
|
)
|
||
Silicon Valley Bank
|
)
|
/s/ Ian Murchie |
Subsidiaries
|
Country of Incorporation
|
Voting Interest
|
Subsidiaries of Midatech Pharma PLC
|
|
|
Midatech Pharma (Wales) Limited
|
England and Wales
|
100%
|
Midatech Limited
|
England and Wales
|
100%
|
Midatech Pharma US Inc.
|
United States (Delaware)
|
100%
|
Midatech Pharma Pty Limited
|
Australia
|
100%
|
Joint Ventures with Midatech Limited
|
|
|
MidaSol Therapeutics GP (1)(3)
|
Cayman Islands
|
50%
|
Syntara LLC (2)(3)
|
United States (Delaware)
|
50%
|
Subsidiaries of Midatech Limited
|
|
|
Midatech Pharma Espa
ñ
a SL
|
Spain
|
100%
|
Pharmida AG (3)
|
Switzerland
|
100%
|
Subsidiaries of Midatech Pharma US Inc.
|
|
|
DARA Therapeutics, Inc.
|
United States (North Carolina)
|
100%
|
(1)
|
Joint venture between Midatech Limited and MonoSol.
|
(2)
|
Joint venture between Midatech Limited and Immunotope Inc. The percentage ownership of the entity is determined by reference to the partnership agreement and varies from time to time depending on capital committed. While 50% is the economic interest, Midatech Limited can currently direct 49% of the voting rights.
|
(3)
|
Dormant entity or entities in the process of being wound-down.
|
1. |
I have reviewed this annual report on Form 20-F of Midatech Pharma PLC (the “Company”);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
|
4. |
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporitng (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Company and have:
|
5. |
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
|
Date: April 6, 2017
|
/s/ James N. Phillips
|
James N. Phillips
|
|
Chief Executive Officer
|
1. |
I have reviewed this annual report on Form 20-F of Midatech Pharma PLC (the “Company”);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
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4. |
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporitng (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
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5. |
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
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Date: April 6, 2017
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/s/ Nicholas Robbins-Cherry
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Nicholas Robbins-Cherry
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Chief Financial Officer
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1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: April 6, 2017
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/s/ James N. Phillips
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James N. Phillips
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Chief Executive Officer
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/s/ Nicholas Robbins-Cherry
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Nicholas Robbins-Cherry
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Chief Financial Officer
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