”
You should also read carefully the factors described in “Item 3. Key Information-D. Risk Factors” and elsewhere in this annual report to better understand the risks and uncertainties inherent in Midatech’s business and underlying any forward-looking statements. As a result of these factors, Midatech cannot assure you that the forward-looking statements in this annual report will prove to be accurate. Furthermore, if Midatech’s forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by Midatech or any other person that Midatech will achieve its objectives and plans in any specified timeframe, or at all.
6
PART I
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS.
Not Applicable.
OFFER STATISTICS AND EXPECTED TIMETABLE.
KEY INFORMATION.
Selected Financial Data.
Midatech prepares its consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and as adopted by the European Union. The following table sets forth certain of Midatech’s consolidated financial data. The selected historical consolidated financial data as of December 31, 2017, 2016 and 2015 and for the years ended December 31, 2017, 2016 and 2015 is derived from Midatech’s consolidated financial statements, which are included elsewhere in this annual report. The selected historical consolidated financial data as of December 31, 2014 and 2013 and for the years ended December 31, 2014 and 2013 have been derived from Midatech’ consolidated financial statements, which are not presented herein.
The selected historical financial data presented below should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and Midatech’s financial statements and the related notes thereto, which are included elsewhere in this annual report. The selected historical financial information in this section is not intended to replace Midatech’s financial statements and the related notes thereto.
Acquisitions of Q Chip Limited and DARA BioSciences, Inc.
On December 8, 2014, Midatech acquired Q Chip Limited, a company incorporated under the laws of England and Wales, subsequently renamed Midatech Pharma (Wales) Limited (“Midatech Wales”). Midatech’s financial and operating data for fiscal 2014 includes the results of Midatech Wales from the date of Midatech’s acquisition of Midatech Wales.
On December 4, 2015, Midatech acquired DARA and subsequently changed its name to Midatech US. Midatech’s financial and operating data for fiscal 2015 and 2014 includes the results of Midatech US from the date of Midatech’s acquisition of DARA.
Thus Midatech’s financial and operating data are not fully comparable in this annual report.
Consolidated Statement of Comprehensive Income Data
(£’s in thousands, except share and per share data; all from continuing operations)
As of and for the
Year Ended
December 31,
2017
2016
2015
2014
2013
Revenue
6,758
6,376
775
157
147
Loss from operations
(17,578
)
(30,586
(12,918
(9,947
(4,499
Loss before tax
(17,329
(29,322
(11,232
(10,100
(4,883
Loss for the year attributable to the owners of the
parent
(16,064
(20,162
(10,099
(9,082
(4,084
Total other comprehensive (loss) income, net of
tax
(1,233
3,228
399
(151
5
Total comprehensive loss attributable to the
owners of the parent
(17,297
(16,934
(9,700
(9,233
(4,079
Loss Per Share Data:
Basic and diluted loss per ordinary share-pence
(31p
(56p
(36p
(101p
(71p
Cash dividends declared per ordinary share
-
Weighted average number of ordinary shares
used
51,317,320
36,072,752
28,229,814
9,026,347
5,715,576
Consolidated Statement of Financial Position
Data:
Non-Current assets
30,641
34,386
43,710
15,035
1,079
Current assets
18,583
22,303
20,331
31,628
4,095
Cash and cash equivalents
13,204
17,608
16,175
30,325
2,387
Total assets
49,224
56,689
64,041
46,663
5,174
Non-Current liabilities
6,185
1,620
8,055
1,842
2,119
Borrowings
1,508
1,488
Current liabilities
8,363
9,345
9,099
2,832
2,295
Total liabilities
14,548
10,965
17,154
4,674
4,414
Total equity
34,676
45,724
46,887
41,989
760
Total equity and liabilities
7
Exchange Rates
Midatech’s financial reporting currency is the British pound sterling. Fluctuations in the exchange rate between the British pound sterling and the United States dollar will affect the United States dollar amounts received by owners of Depositary Shares on conversion of dividends, if any, paid in British pound sterling on the Ordinary Shares and will affect the United States dollar price of the Depositary Shares on the NASDAQ Capital Market.
The following table shows, for the periods indicated, information concerning the exchange rate between the British pound sterling and the United States dollar. This information is provided solely for your information, and Midatech does not represent that the British pound sterling could be converted into United States dollars at these rates or at any other rate. These rates may differ from the actual rates used in the preparation of the consolidated financial statements included in this annual report and other financial data appearing in this annual report.
The data provided in the following table is expressed in United States dollars per British pound sterling and is based on noon buying rates published by the Federal Reserve Bank of New York for the British pound sterling. On March 30, 2018, the noon buying rate was £1.00 = $1.4027.
High ($)
Low ($)
Recent Monthly Data
March 2018
1.4236
1.3755
February 2018
1.4247
1.3794
January 2018
1.4264
1.3513
December 2017
1.3529
1.3316
November 2017
1.3506
1.3067
October 2017
1.3304
1.3063
Average
Rate ($)
(1)
Annual Data (12-month period ended December 31)
2017
1.3444
2016
2015
1.5250
2014
1.6461
2013
1.5667
_____________
(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.
8
Capitalization and Indebtedness
Not Applicable
Reasons for the Offer and Use of Proceeds
Risk Factors
Our business has significant risks. In addition to the other information included in this annual report, including the matters addressed in the section of the annual report entitled “Cautionary Note Regarding Forward-Looking Statements” and in our financial statements and the related notes, you should consider carefully the risks described below. The risks and uncertainties described below are not the only risks and uncertainties we may face. Additional risks and uncertainties not presently known to us, or that we currently consider immaterial could also negatively affect our business, financial condition, results of operations, prospects, profits and stock prices. If any of the risks described below actually occur, our business, financial condition, results of operations, prospects, profits and stock prices could be materially adversely affected.
Risks Related to Midatech’s Financial Operations and Capital Needs
Midatech (including its predecessor entity, Midatech Limited) has incurred significant losses since its inception and anticipates that it will continue to incur losses in the future.
Midatech is an early-stage biopharmaceutical company. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory approval or become commercially viable. Prior to the acquisition of DARA in December 2015, Midatech had not generated any revenue from product sales, and it continues to incur significant development and other expenses related to its ongoing operations. As a result, Midatech is not profitable and has incurred substantial losses since its inception. For the year ended December 31, 2017, Midatech had a net loss of £17 million, and an accumulated deficit of £75 million.
Midatech expects to continue to incur losses for the foreseeable future, and expects these losses to increase as it continues its development of, and seeks regulatory approvals for, its product candidates, and begins to commercialize any approved products. For example, recent challenges have temporarily slowed Midatech’s development program progression and reduced its ability to invest in key programs.
Midatech may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect its business. The size of Midatech’s future net losses will depend, in part, on the rate of future growth of its expenses and its ability to generate revenues, particularly from Midatech US operations. If any of Midatech’s or its subsidiaries products fail to develop a market, or if any of their product candidates fail in clinical trials or do not gain regulatory approval, or if approved, fail to achieve market acceptance, Midatech may never become profitable. Even if Midatech achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. Midatech’s prior losses and expected future losses have had and will continue to have an adverse effect on its stockholders’ equity and working capital.
A substantial part of Midatech’s operations are in early-stage development with no source of revenue and there is no assurance that Midatech will successfully develop and commercialize its product candidates or ever become profitable.
Midatech is at a relatively early stage of its commercial development. To date, Midatech has not generated any revenue from its product candidates. Midatech’s ability to generate revenue and become and remain profitable depends, in part, on its ability to successfully commercialize products, including any of its product candidates, or other product candidates it may in-license or acquire. Even if Midatech were to successfully achieve regulatory approval of its product candidates, Midatech does not know when any of the product candidates will generate revenue, if at all. Midatech’s ability to generate revenue from its current or future product candidates also depends on a number of additional factors, including its ability to:
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;