Notes to the consolidated financial statements of Motif Bio plc

For the year ended December 31, 2017

 

1. General information

 

Motif Bio plc is a clinical stage biopharmaceutical company which specializes in developing and commercializing novel antibiotics designed to be effective against serious and life-threatening infections caused by multi-drug resistant bacteria.

 

Motif Bio Limited ("the Company") was incorporated in England and Wales on November 20, 2014 with company registration number 09320890.  The Company's registered office is at: 201 Temple Chambers, 3-7 Temple Avenue, London EC4Y 0DT, U.K .  On April 1, 2015, the Company was re-registered as a public company limited by shares and changed its name to Motif Bio plc.  Motif BioSciences Inc. was incorporated in the US State of Delaware on December 2, 2003 and has its registered office at 251 Little Falls Drive, Wilmington, Delaware, 19808.  On April 1, 2015, Motif BioSciences Inc. became a wholly owned subsidiary of the Company by way of a group reorganization by plan of merger.  The principal place of business is 125 Park Avenue, 25^th Floor, New York, NY, 10017, USA. The Company's country of domicile is the U.K.

 

The consolidated financial statements include the accounts of Motif Bio plc and its wholly owned subsidiary, Motif BioSciences Inc. ("the Group").

 

The financial statements were approved by the Board of Directors on April 9 , 2018.

 

Going concern

 

As of December 31, 2017, the Group had $22.7 million in cash. Net cash used in operating activities was $37.4 million for the year ended December 31, 2017. Net loss for the year ended December 31, 2017 was $44.8 million. The Company had US $0.6 million in cash as of December 31, 2017. The Group and Company expect to incur losses for the next several years as it expands its research, development and clinical trials of iclaprim and prepare for commercialization upon regulatory approval of iclaprim. The Group and Company are unable to predict the extent of any future losses or when the Group and Company will become profitable, if at all.

The Group and Company will be required to raise additional capital within the next year to continue the development and commercialization of current product candidate and to continue to fund operations at the current cash expenditure levels. The Group and Company cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that the Group and Company raise additional funds by issuing equity securities, its stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact the Group's and Company's ability to conduct business. If the Group and Company are unable to raise additional capital when required or on acceptable terms, it may have to (i) significantly delay, scale back or discontinue the development and/or commercialization of one or more product candidates; (ii) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; or (iii) relinquish or otherwise dispose of rights to technologies, product candidates or products that the Group and Company would otherwise seek to develop or commercialize itself on unfavorable terms.

These financial statements have been prepared under the assumption that the Group and Company will continue as a going concern. Due to the Group's and Company's recurring and expected continuing losses from operations, as well as significant amounts of outstanding payables and accrued expenses, the Group and Company have concluded there is a material uncertainty which may cast significant doubt in the Group's and Company's ability to continue as a going concern within one year of the issuance of these financial statements without additional capital becoming available. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Significant events

 

On November 15, 2017, the Group entered into a credit agreement (the "Hercules Loan Agreement") with Hercules Capital, Inc. ("Hercules"). Pursuant to the credit agreement, Hercules agreed to loan the Group $20.0 million in two tranches. The first tranche of $15.0 million was drawn down at closing, with the remaining $5.0 million available upon the achievement of certain milestones anticipated in 2018, or at Hercules' discretion. The terms include an initial interest-only period of 15 months, extendable to 21 months on the achievement of certain milestones; a 30-month capital and interest repayment period thereafter; an interest rate of 10% tied to the U.S. prime rate and customary security over all assets of the Group, except for intellectual property where there is a negative pledge. Under the Hercules Loan Agreement, the Group issued Hercules warrants to purchase up to 73,452 of its American Depositary Shares (ADSs) at an exercise price of $9.53 per ADS, representing 3.5% warrant coverage of the total loan facility. Hercules also has the right, in its discretion, to participate in any subsequent financing, such as an equity offering, in an amount up to $1 million.

 

On June 23, 2017, the Group placed 66,666,667 new ordinary shares at 30 pence per share and received $23,681,739 of net proceeds.

 

 

On November 18, 2016, the Group announced the pricing of the underwritten U.S. offering and European placement, which were concurrently conducted, of 71,633,248 ordinary shares, comprised of 22,863,428 ordinary shares plus 2,438,491 ADSs (representing 48,769,820 ordinary shares at a 20 to 1 ratio). The Group offered 48,769,820 ordinary shares in a U.S. firm commitment offering in the form of 2,438,491 ADSs, together with warrants to purchase 1,219,246 ADS Warrants. Each ADS represents 20 of the Group's ordinary shares and was sold together with 0.5 of an ADS Warrant in a fixed combination. Each full ADS Warrant is exercisable for one ADS at an exercise price of $8.03 per ADS, exercisable from the date of issuance until five years thereafter. In Europe, the Group offered in a concurrent placement on a best efforts basis 22,863,428 ordinary shares, together with warrants to purchase 11,431,714 ordinary shares. Each ordinary share was sold together with 0.5 of an Ordinary Share Warrant in a fixed combination. Each full Ordinary Share Warrant is exercisable for one ordinary share at an exercise price of £0.32 ($0.40), exercisable from the date of issuance until five years thereafter. The offering price of the ADSs and ADS Warrants in the U.S. offering was $6.98 per ADS and ADS Warrant combination, and the offering price of the Group's ordinary shares and Ordinary Share Warrants in the European placement was £0.28 ($0.35) per ordinary share and Ordinary Share Warrant combination. Net proceeds to the Group following the offering, after deducting underwriting discounts and commissions and offering expenses of approximately $3.5 million, were approximately $21.5 million. None of the underwriting discounts and commissions or other offering expenses were paid to Directors or Officers of the Group or their associates or to persons owning 10 percent or more of any class of the Group's equity securities or to any affiliates of the Group. H.C. Wainwright & Co., LLC was the underwriter for the above described offering.

 

On September 7, 2016, the Group amended and restated the convertible notes with Amphion Innovations plc and Amphion Innovations US Inc. to provide that any outstanding principal under the notes as of the maturity date will be paid to the holders on the maturity date, at the Group's election, through the issuance of (i) a number of ordinary shares, based on the conversion price set forth in the notes, or (ii) a number of ADSs, which is equal to a number determined by dividing the number of ordinary shares the holder would otherwise be entitled to by the then applicable ADS to ordinary share ratio. The amended and restated convertible promissory notes also provide that except in the event of a default, no interest will accrue or be payable with respect to the amounts due under the notes. In consideration for its agreement to forego interest payments under its convertible promissory notes, the Group issued 409,000 ordinary shares to Amphion Innovations plc. The amended and restated notes also permit the Group or the holders to convert all or any portion of the outstanding principal under the notes into ordinary shares or ADSs (as determined by the Group) at any time prior to the maturity date.

 

In December 2016, the Group issued 14,510,770 new ordinary shares following the conversion of convertible promissory notes by Amphion Innovations plc and Amphion Innovations US Inc. The notes totaled US $3,550,786 and were converted in accordance with their terms at US $0.2447 per share.

 

Group reorganization and initial public offering

 

On February 18, 2015, the Company incorporated a Delaware subsidiary, Motif Acquisition Sub, Inc. On December 31, 2014 Motif BioSciences Inc., the Company, and Motif Acquisition Sub, Inc. entered into an agreement where, upon the Company's admission to AIM of the London Stock Exchange on April 2, 2015, Motif Acquisition Sub, Inc. merged with and into Motif BioSciences Inc. and Motif BioSciences Inc. continued as the surviving entity and became a wholly-owned subsidiary of the Company. Prior to the merger, Motif BioSciences Inc. completed a reverse stock split in order to increase the share price of Motif BioSciences Inc. so that the share price was closer to the Company's admission price. The former Motif BioSciences Inc. stockholders were issued 36,726,242 ordinary shares of the Company in a share-for-share exchange for their common stock in Motif BioSciences Inc. so that the former Motif BioSciences Inc. stockholders owned an equivalent number of ordinary shares in the Company as the number of shares of common stock that they had previously owned in Motif BioSciences Inc. All outstanding, unexercised, and vested stock options for shares of common stock in Motif BioSciences Inc. were converted into options for ordinary shares of the Company (Note 16).

 

This was a common control transaction and therefore outside the scope of IFRS 3-Business Combinations. The transaction has therefore been accounted for as a group reorganization and the Group is presented as if the Company has always owned Motif BioSciences Inc. The comparatives presented in these financial statements therefore represent the results and capital structure of the Company. The reserve on consolidation represents the difference between the nominal value of the shares of the Company issued to the former stockholders of Motif BioSciences Inc. and the share capital and share premium of Motif BioSciences Inc. at the date of the transaction. As stated, the nominal value of the Company shares was used in the calculation of the reorganization reserve.

 

On April 2, 2015, the Company was admitted to AIM and issued 14,186,140 ordinary shares at a price of £0.20 per share.

 

On July 22, 2015, the Company completed a subsequent placing of 44,000,000 ordinary shares at a price of £0.50 per share.

 

 

 

Acquisition of Nuprim Assets

 

On April 1, 2015, Motif BioSciences Inc. acquired the assets owned by Nuprim Inc. ("Nuprim"), a Maryland corporation, related to iclaprim (the "Nuprim Assets"). Motif BioSciences Inc. issued 1,513,040 (post-reverse stock split) shares of common stock to the shareholders of Nuprim that were held in escrow until the closing of the reorganization. These shares of common stock in Motif BioSciences Inc. were converted into ordinary shares of the Company upon the Company's admission to AIM on April 2, 2015. Upon admission, 9,805,400 ordinary shares of the Company and 9,432,033 warrants were issued to the former Nuprim shareholders (Note 9).

 

2.    Significant accounting policies

 

a.     Basis of preparation

 

The accounting policies set out below have been applied consistently to all periods presented in this financial information. The accounting policies have been applied consistently across the Group.

 

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and with the Companies Act 2006 applicable to companies reporting under IFRS. This basis of preparation describes how the financial statements have been prepared in accordance with IFRS. The financial statements have been prepared under the historical cost convention as modified for financial instruments (including derivative instruments) at fair value through the income statement. A summary of the more important Group accounting policies is set out below.

 

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial information and the reported amounts of revenue and expenses during the period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

 

The Company has taken advantage of the exemption in Section 408 of the Companies Act 2006 to not present its own Statement of Comprehensive Loss. The loss for the Company for the year was US $8.3 million (2016: US $2.2 million loss).

 

a.  New and amended standards effective from January 1, 2017

 

Amendments to IAS 7, Disclosure Initiative, was adopted with an effective date of January 1, 2017. The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes.  The Group believes that the disclosure contained herein adequately satisfy this requirement. The only balance sheet liability for which cash flows are classified as financing activities is the term loan with Hercules Capital, Inc. The cash inflow in the year in respect of the term loan was $14.4 million, net of issuance costs and non-cash movement of $0.4 million for the issuance of warrants. The net movement and resulting closing balance is further detailed in Note 13.

 

There are no other new standards and amendments that have been applied from January 1, 2017, which have had an impact on the Group's or Company's financial statements.

 

New standards and interpretations not yet effective

 

Certain new accounting standards and interpretations have been published that are not mandatory for the reporting periods covered by these consolidated financial statements and have not been early adopted by the Group or Company.

 

The new standards potentially relevant to the Group or Company are discussed below.

 

IFRS 2, Share-based Payments (as amended) - Effective date - January 1, 2018.  The Group currently plans to apply IRFS 2 initially on January 1, 2018.  IFRS 2 related to the classification and measurement of share-based payment transactions. The amendments are intended to eliminate diversity in practice regarding (i) accounting for cash-settled share-based payment transactions that include a performance condition, (ii) share-based payments in which the manner of settlement is contingent on future events, (iii) share-based payments settled net of tax withholdings, and (iv) modification of share-based payment transactions from cash-settled to equity-settled. Based on the initial assessment, this standard is not expected to have a material impact on the Group.

 

 

IFRS 9, Financial Instruments (as revised in 2014) - Effective date - January 1, 2018, with early adoption permitted.  The Group currently plans to apply IRFS 9 initially on January 1, 2018. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements.  Although the Group and Company are currently evaluating the potential implications of this standard, the Group and Company do not believe the adoption of this standard will have a material impact at this time, based on the current stage of the assessment.

 

IFRS 15, Revenue from Contracts with Customers - Effective date - January 1, 2018, with early adoption permitted. - IFRS 15 establishes a comprehensive guideline for determining when to recognize revenue and how much revenue to recognize. The Group currently has no revenues, therefore, the adoption of IFRS 15 is not expected to have a material impact on the Group, however, the Group will continue to reassess the potential impact of the adoption of this guidance.

 

IFRS 16, Leases - Effective date - January 1, 2019 - IFRS 16 will replace IAS 17.  It will eliminate the distinction between classification of leases as finance or operating leases for lessees.  The adoption of IFRS 16 is not expected to have a significant impact on the Group's net results or net assets, however, the Group will continue to reassess the potential impact of the adoption of this guidance as the effective date becomes closer.

 

Principles of consolidation

 

Subsidiaries are all entities (including structured entities) over which the Group has control.  The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.  Subsidiaries are fully consolidated from the date on which control is transferred to the Group.  They are deconsolidated from the date that control ceases.

 

Intercompany transactions, balances, and unrealized gains on transactions between Group companies are eliminated.  Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.  Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

When the Group ceases to consolidate because of a loss of control, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognized in profit or loss.  This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture, or financial asset.

 

b.   Segment reporting

 

The chief operating decision-maker is considered to be the Board of Directors of Motif Bio plc. The chief operating decision-maker allocates resources and assesses performance of the business and other activities at the operating segment level. In addition, they review the IFRS consolidated financial statements.

The chief operating decision-maker has determined that Motif has one operating segment-to support its strategy for the development and commercialization of pharmaceutical formulations. The Group maintains space and has some activities in the U.K.; however, the finance and most other management functions take place in the U.S.

 

c.   Foreign currency translation

 

(a) Functional and Presentation Currency

 

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in United States Dollars (US $), which is Motif Bio plc's functional and presentation currency.

 

(b) Transactions and balances

 

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are generally recognized in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.

 

 

Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other income or other expenses.

 

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value are recognized in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognized in other comprehensive income.

 

d.  Research and development costs

 

Expenditure on drug development activities is capitalized only if all of the following conditions are met:

 

·      it is probable that the asset will create future economic benefits;

·      the development costs can be measured reliably;

·      technical feasibility of completing the intangible asset can be demonstrated;

·      there is the intention to complete the asset and use or sell it;

·      there is the ability to use or sell the asset; and

·      adequate technical, financial, and other resources to complete the development and to use or sell the asset are available.

 

These conditions are generally met when a filing is made for regulatory approval for commercial production.  Otherwise, costs on research activities are recognized as an expense in the period in which they are incurred.

 

At this time, the Group does not meet all conditions and therefore development costs are recorded as expense in the period in which the cost is incurred.

 

The Company's preclinical studies and clinical trials have been performed utilizing third-party contract research organizations ("CROs") and other vendors. For preclinical studies, the significant factors used in estimating accruals include the percentage of work completed to date and contract milestones achieved. For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, duration of enrollment, percentage of work completed to date and contract milestones achieved. The Company monitors patient enrollment levels and related activities to the extent possible through internal reviews, correspondence and status meetings and review of contractual terms. Estimates are dependent on the timeliness and accuracy of data provided by the CROs and other vendors. In this event, the Company could record adjustments to research and development expenses in future periods when the actual activity levels become known.

 

e.   Intangible assets

 

Intangible assets acquired separately from a business are initially stated at cost, net of any amortization and any provision for impairment.  Where a finite useful life of the acquired intangible asset cannot be determined, the asset is not subject to amortization but is tested for impairment annually or more frequently whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

 

f.   Impairment of non-financial assets

 

Assets that have an indefinite useful life are not subject to amortization and are tested annually in the second half of each fiscal year for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.  Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount.  The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use.  For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).  Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

 

 

 

g.   Financial instruments-initial recognition and subsequent measurement

 

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

 

a) Financial assets, initial recognition and measurement

 

All financial assets, such as receivables and deposits, are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

 

The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred "loss event"), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

 

b) Financial liabilities, initial recognition and measurement

 

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, and payables, as appropriate. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

 

The Group's financial liabilities include trade and other payables, loans and borrowings and warrants classified as liabilities.

 

c) Subsequent measurement

 

The measurement of financial liabilities depends on their classification. Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method if the time value of money is significant.

 

h.   Financial assets and liabilities

 

Financial assets and financial liabilities are included in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

 

Non-derivative financial instruments

 

Cash and cash equivalents

 

Cash and cash equivalents include bank balances, demand deposits, and other short-term, highly liquid investments (with less than three months to maturity) that are readily convertible into a known amount of cash and are subject to an insignificant risk of fluctuations in value.

 

Financial liabilities and equity

 

The Group classifies an instrument, or its component parts, on initial recognition as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument.

 

An instrument is classified as a financial liability when it is either (i) a contractual obligation to deliver cash or another financial asset to another entity; or (ii) a contract that will or may be settled in the Group's own equity instruments and is a non-derivative for which the Group is, or may be, obliged to deliver a variable number of the Group's own equity instruments or a derivative that will, or may be, settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Group's own equity instruments. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

An equity instrument is defined as any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.  An instrument is an equity instrument only if the issuer has an unconditional right to avoid settlement in cash or another financial asset.

 

Trade payables

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

 

Trade payables are initially measured at fair value, and are subsequently measured at amortized cost, using the effective interest rate method.

 

Equity instruments

 

Equity instruments issued by the Company are recorded at the proceeds received. Direct issuance costs are processed as a deduction on equity.

 

Derivative financial instruments

 

The Group does not have a policy of engaging in speculative transactions, nor does it issue or hold financial instruments for trading purposes.

 

The Group has entered into various financing arrangements with its investors, including convertible loans. These convertible loans each include embedded financial derivative elements (being the right to acquire equity in the Group at a future date for a pre-determined price). Therefore, while the Group does not engage in speculative trading of derivative financial instruments, it may hold such instruments from time to time as part of its financing arrangements. The Group has also entered into financing arrangements that include the issuance of warrants. These warrants may be considered derivative financial instruments based on the terms of the agreements.

 

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The resulting gain or loss is recognized in the consolidated income statement, as the Group currently does not apply hedge accounting.

 

Impairment of financial assets

 

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

 

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

 

For loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument's fair value using an observable market price.

 

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor's credit rating), the reversal of the previously recognized impairment loss is recognized in the consolidated income statement.

 

i.    Offsetting financial instruments

 

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency, or bankruptcy of the Group or the counterparty.

 

j.   Share-based payment transactions

 

The fair value of options and warrants granted to employees, Directors, and consultants is recognized as an expense, with a corresponding increase in equity, over the period in which the option and warrant holders become unconditionally entitled to the options and warrants unless incremental and directly attributable to an equity transaction in which case it is deducted from equity. The fair value of the options and warrants granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted. 

 

k .     Financial income and expenses

 

Financial income comprises interest receivable on funds invested. Financial expenses comprise interest payable.

 

Interest income and interest payable are recognized in the income statement as they accrue, using the effective interest method.

 

l .      Taxation

 

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognized in the income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

 

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years.

 

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:  the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

 

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized.

 

m.    Earnings per share

 

The Group presents basic and diluted earnings per share (EPS) data for its shares.  Basic EPS is calculated by dividing the profit or loss attributable to shares of the Group by the weighted average number of shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to shareholders and the weighted average number of shares outstanding for the effects of all dilutive potential shares, which comprise share options and warrants granted to employees and non-employees. In periods when the Group has a loss attributable to shareholders, diluted EPS equates to basic EPS.

 

n.    Borrowings

 

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method.

 

o.   Equity

 

The Company classifies an instrument, or its component parts, on initial recognition as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument.

 

An instrument is classified as a financial liability when it is either (i) a contractual obligation to deliver cash or another financial asset to another entity; or (ii) a contract that will, or may be, settled in the Company's own equity instruments and is a non-derivative for which the Company is, or may be, obliged to deliver a variable number of the Company's own equity instruments or a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company's own equity instruments.

 

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

An equity instrument is defined as any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. An instrument is an equity instrument only if the issuer has an unconditional right to avoid settlement in cash or another financial asset.

 

Ordinary Shares

 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds

 

p.   Critical accounting estimates and judgments

 

In preparing the financial information, the Directors make judgments on how to apply the Group's accounting policies and make estimates about the future. The critical judgments that have been made in arriving at the amounts recognized in the financial information and the key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities in the next financial year, are discussed below:

 

Acquisition and valuation of the iclaprim assets (Judgement and Estimate)

 

The Directors, on assessing if the acquisition of the Nuprim iclaprim assets was of a business or of a group of assets, considered:

 

·      the identified elements of the acquired group;

·      the capability of the acquired group to produce outputs; and

·      the impact that any missing elements have on a market participant's ability to produce outputs with the acquired group.

 

As the acquired group was not accompanied by any associated processes and because the acquired assets do not have planned principal activities, or a plan to produce outputs, the Directors considered the acquisition to be of a group of assets, not a business.

 

The Directors use their judgment to identify the separate intangible assets and then determine a fair value for each based upon the consideration paid, the nature of the asset, industry statistics, future potential, and other relevant factors. Asset acquisitions are measured based on their cost to the acquiring entity, which generally includes transaction costs. An asset's acquisition cost or the consideration transferred by the acquiring entity is assumed to be equal to the fair value of the net assets acquired, unless contrary evidence exists. These fair values are tested for impairment annually, the assessment of which includes quantitative and qualitative factors, including projected future cash flow estimate. The projected future cash flows are also used to support the carrying value of the investment and intercompany receivable balances recognised on the Company's Statement of Financial Position.

 

Research and development expenditures (Judgement)

 

Research and development expenditures are currently not capitalized because the criteria for capitalization are not met. At each balance sheet date, the Group estimates the level of service performed by the vendors and the associated costs incurred for the services performed.

 

Although the Group does not expect the estimates to be materially different from amounts actually incurred, the understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in reporting amounts that are too high or too low in any particular period.

 

Share based payments and fair value of warrants (Estimate)

 

The Directors have to make judgments when deciding on the variables to apply in arriving at an appropriate valuation of share based compensation and warrants, including appropriate factors for volatility, risk-free interest rate, and applicable future performance conditions and exercise patterns.

 

 

 

3.   Financial risk management

 

This note explains the Group's exposure to financial risks and how these risks could affect the Group's future financial performance.

 

a.   Credit risk

 

Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, and if a counterparty will default on its contractual obligations resulting in financial loss to the Group.

 

The credit risk on liquid funds is limited because cash balances are held with bank and financial institutions with credit-ratings assigned by international credit-rating agencies.  All deposits are held with banks with S&P ratings of A-2 and AA- for short term deposits.

 

At December 31, 2017, no current asset receivables were aged over three months.  No receivables were impaired.

 

b.   Liquidity risk

 

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The principal risk to which the Group is exposed is liquidity risk. See discussion in Note 1 as it relates to the Group's ability to continue as a going concern.

 

The Group has financed its operations to date using cash raised through the issuance of debt and equity. The Directors acknowledge that uncertainty remains over the ability of the Group to have the resources to fully support advancing iclaprim through regulatory approval and commercialization in the United States and Europe.  Subject to the availability of funding, the Group also plans to commence additional phase 3 clinical trials of iclaprim in patients with hospital-acquired bacterial pneumonia, including those with ventilator-associated bacterial pneumonia. To fund the additional clinical trial and the commercialization of iclaprim, the Group will need additional funding through public markets, private financing, and/or partnering opportunities.

 

The Group is heavily dependent on the public markets both in the United States and United Kingdom.  A downturn in the public markets, especially in biotech, may make it difficult for the Group to obtain sufficient funds on acceptable terms.  A delay obtaining additional funding could lead to a decrease in the Group's prospects for the commercialization of iclaprim. 

 

In the event that the Group does not have adequate capital to maintain or develop its business, additional capital may not be available to the Group on a timely basis, on favorable terms, or at all, which could have a material and negative impact on the Group's business and results of operations.

 

Contractual maturities of financial liabilities:

 

				Between 1		Between 2
		< 1 year		and 2 years		and 5 years		Over 5 years		Total
At December 31, 2017		US $		US $		US $		US $		US $
Trade and other payables.........................................		10,889,554		-		-		-		10, 889,554
Payable on completion of clinical trial.................		500,000		-		-		-		500,000
Derivative liabilities..................................................		-		-		12,626,299		-		12,626,299
Term Loan and other non-current (Note 13)..........		-		4,699,701		10,730,299		-		15,430,000
		11,389,554		4,699,701		23,356,598		-		39,445,853

 

				Between 1		Between 2
		< 1 year		and 2 years		and 5 years		Over 5 years		Total
At December 31, 2016		US $		US $		US $		US $		US $
Trade and other payables.........................................		12,319,117		-		-		-		12,319,117
Payable on completion of clinical trial.................		500,000		-		-		-		500,000
Derivative liabilities..................................................		-		-		5,798,058		-		5,798,058
		12,819,117		-		5,798,058		-		18,617,175

 

 

 

c.   Market risk

 

Foreign currency risk

 

The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed by minimizing the balance of foreign currencies to cover expected cash flows during periods where there is strengthening in the value of the foreign currency. The Group holds part of its cash resources in US dollars and British pounds sterling. The valuation of the cash fluctuates along with the US dollar/sterling exchange rate.  No hedging of this risk is undertaken.

 

The carrying amounts of foreign currency denominated monetary net assets at the reporting date are as follows:

 

		December 31, 2017		December 31, 2016
		US $		US $
Sterling - Cash....................................................		461,857		17,795

 

At December 31, 2017, a change in foreign currency exchange rates is not expected to have a significant impact on the profit or losses of the Group.

 

Interest rate risk

 

The Group's exposure to interest rate risk is limited to interest earned on the cash and cash equivalent balance of $22.7 million and its financing exposures on the Hercules loan, which has an initial interest rate of 10% tied to the U.S. prime rate. A change in interest rates is not expected to have a significant impact on the profit or losses of the Group.

 

d.   Capital risk management

 

The Directors define capital as the total equity of the Group. The Directors' objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal structure to reduce the cost of capital. In order to maintain an optimal capital structure, the Directors may adjust the amount of dividends paid to shareholders, return capital to shareholders and issue new shares to reduce debt.

 

4.    Other income and expense items

 

This note provides a breakdown of the items included in other income, finance income, and costs and an analysis of expenses by nature for the years ended December 31, 2017, 2016 and 2015.

 

a.  Other income

 

		Year ended Dec 31, 2017		Year ended Dec 31, 2016		Year ended Dec 31, 2015
		US $		US $		US $
Gains on settlement of contract disputes...................................................		-		83,320		5,027

 

The gain on settlement of contract disputes for the year ended December 31, 2016 relates to a write off of a payable due to a consultant as a result of a settlement with him. The gain on settlement of contract disputes for the year ended December 31, 2015 primarily relates to payables to a Director for amounts owed to him for his services as Chief Executive Officer. These amounts were written off in a settlement agreement. 

 

 

 

b.  Breakdown of expenses by nature

		Year ended Dec 31, 2017		Year ended Dec 31, 2016		Year ended Dec 31, 2015
		US $		US $		US $
General and administrative expenses
Employee benefits expenses, including share-based payments............		2,778,854		1,445,110		1,146,566
Directors' fees..................................................................................................		728,798		423,051		380,969
Legal and professional fees..........................................................................		2,762,334		2,073,317		1,444,507
Investor and public relations advisory fees ............................................		1,283,012		647,919		292,949
Other expenses................................................................................................		988,398		322,753		312,189
		8,541,396		4,912,150		3,577,180
Research and development costs
Employee benefits expenses, including share-based payments............		1,468,719		677,412		-
Contract research organization expenses.................................................		22,066,179		30,445,967		3,055,421
Chemistry and manufacturing development and other non-clinical development................................................................................................		2,933,475		2,145,641		949,466
Other research and development costs......................................................		3,006,920		1,525,795		676,053
		29,475,293		34,794,815		4,680,940
		2017		2016		2015
Auditors' Remuneration		US $		US $		US $
Fees paid/payable to the company's auditors and its associates for the audit of the parent company and consolidated financial statements		60,630		40,000		73,730
- Audit of the Group's overseas filings		257,500		210,000
- Audit related assurance services		208,040		20,092		-
Advisory services in relation to F-1/A1 filings		-		601,431		-
		526,170		871,523		73,730

 

 

c.  Finance income and costs

 

		Year ended Dec 31, 2017		Year ended Dec 31, 2016		Year ended Dec 31, 2015
		US $		US $		US $
Finance income
Interest from financial assets......................................................................		133,612		69,754		15,028
		133,612		69,754		15,028
Finance costs
Interest expense..............................................................................................		(200,000	)	(383,259	)	(268,216	)
Accretion of end of term payment................................................................		(22,758	)	-		-
Amortisation of deferred financing costs..................................................		(52,691	)	-		-
		(275,449	)	(383,259	)	(268,216	)
Net finance costs.............................................................................................		(141,837	)	(313,505	)	(253,188	)

 

5.   Employee numbers and costs

 

The monthly average number of persons employed by the Group (including Executive Directors but excluding Non-executive Directors) and key management personnel during the year, analyzed by category, was as follows:

 

		Year ended Dec 31, 2017		Year ended Dec 31, 2016		Year ended Dec 31, 2015
Executive Directors.........................................................................................		1		2		2
Key management personnel..........................................................................		7		4		2
Total		8		6		4

 

The aggregate payroll costs of Executive Directors and key management personnel were as follows:

 

 

		Year ended Dec 31, 2017		Year ended Dec 31, 2016		Year ended Dec 31, 2015
		US $		US $		US $
Short-term benefits:
Wages and salaries........................................................................................		2,287,458		1,527,776		935,081
Social security and other employer costs..................................................		252,040		67,410		60,604
Share-based payments(1).................................................................................		1,120,374		119,845		150,881
		3,659,872		1,715,031		1,146,566

 

⁽¹⁾ The total share-based payments do not reflect the out-of-period adjustment recorded in 2017 (Note 16).

 

6.   Directors' remuneration

 

		Salaries				Social		2017		2016		2015
		and fees		Bonuses		Security		Total		Total		Total
		US $		US $		US $		US $ (2)		US $		US $
Executive
Graham Lumsden(1)(2).............		425,000		127,500		15,499		567,999		488,510		557,180
Non-executive.........................
Robert Bertoldi(2)...................		125,000		-		9,563		134,563		137,783		135,126
Richard Morgan....................		113,500		-		-		113,500		177,725		217,072
Charlotta Ginman(3)..............		67,279		-		-		67,279		57,475		32,042
Jonathan Gold.......................		194,004		-		-		194,004		114,094		25,881
Zaki Hosny..............................		63,000		-		-		63,000		57,475		28,756
Mary Lake Polan...................		60,000		-		-		60,000		54,094		25,881
John Stakes(4)..........................		-		-		-		-		30,869		28,756
Bruce Williams.....................		64,000		-		-		64,000		54,094		25,881
Craig T. Albanese		38,333		-		-		38,333		-		-
Total........................................		1,150,116		127,500		25,062		1,302,678		1,172,119		1,076,575

 

⁽¹⁾        On February 2, 2018, Dr. Lumsden was awarded a cash bonus of $127,500 for services provided in 2017.  A portion, or $42,500, of the cash bonus is contingent on meeting certain operational milestones in 2018.

⁽²⁾        Total remuneration for Dr. Lumsden and Mr. Bertoldi exclude employer 401k pension contributions of $7,950 and $6,075, respectively, during 2017.

⁽³⁾        Ms. Ginman's remuneration for 2017 was £52,195 or US $67,279 based on an average exchange rate of 1.289 for the period.

⁽⁴⁾        Mr. Stakes resigned from the Board of Directors effective July 1, 2016.

 

The Directors' remuneration included in the table above represents the amount paid and/or awarded to each director during the years ending December 31, 2017 and 2016. The highest paid director's aggregate emolument was $567,999 for the year ending December 31, 2017.  No director exercised share options during the year ending December 31, 2017.

 

 

 

 

Directors of the Company have been awarded rights to subscribe for shares in the Group as set out below.

 

								Exercise
		1 January				31 December		price			Grant		Expiry
		2017		Granted		2017		US $			date		date
Richard Morgan..............................		73,215		-		73,215		$	0.70		Jan 1, 2010		Jan 1, 2020
		6,179		-		6,179		$	0.70		Jan 1, 2011		Jan 1, 2021
		502,950		-		502,950		$	0.14		Dec 4, 2014		Dec 4, 2024
		582,344		-		582,344
Craig T. Albanese………………		-		100,000		100,000		$           0.44			May 4, 2017		May 4, 2027
		-		100,000		100,000
Robert Bertoldi................................		53,887		-		53,887		$	0.70		Jan 1, 2010		Jan 1, 2020
		251,475		-		251,475		$	0.14		Dec 4, 2014		Dec 4, 2024
		305,362		-		305,362
Charlotta Ginman...........................		251,475		-		251,475		$	0.14		Dec 4, 2014		Dec 4, 2024
		251,475		-		251,475
Jonathan Gold..................................		73,502		-		73,502		$	0.70		Jan 1, 2010		Jan 1, 2020
		5,964		-		5,964		$	0.70		Jan 1, 2011		Jan 1, 2021
		251,475		-		251,475		$	0.14		Dec 4, 2014		Dec 4, 2024
		330,941		-		330,941
Zaki Hosny........................................		53,888		-		53,888		$	0.70		Jun 18, 2009		Jun 18, 2019
		14,370		-		14,370		$	0.70		Jan 1, 2010		Jan 1, 2020
		2,587		-		2,587		$	0.70		Jan 1, 2011		Jan 1, 2021
		107,774		-		107,774		$	0.14		Jan 30, 2013		Jan 30, 2023
		251,475		-		251,475		$	0.14		Dec 4, 2014		Dec 4, 2024
		430,094		-		430,094
Graham Lumsden............................		574,800		-		574,800		$	0.14		May 25, 2013		May 25, 2023
		2,874,000		-		2,874,000		$	0.14		Dec 4, 2014		Dec 4, 2024
		-		1,000,000		1,000,000		$	0.33		Feb 7, 2017		Feb 7, 2027
		-		700,000		700,000		$	0.33		Feb 7, 2017		Feb 7, 2027
		3,448,800		1,700,000		5,148,800
Mary Lake Polan..............................		67,036		-		67,036		$	0.70		Jan 1, 2010		Jan 1, 2020
		5,461		-		5,461		$	0.70		Jan 1, 2011		Jan 1, 2021
		251,474		-		251,474		$	0.14		Dec 4, 2014		Dec 4, 2024
		323,971		-		323,971
Bruce Williams................................		67,252		-		67,252		$	0.70		Jan 1, 2010		Jan 1, 2020
		28,740		-		28,740		$	0.70		Jan 16, 2010		Jan 16, 2020
		71,850		-		71,850		$	0.70		Nov 15, 2010		Jan 16, 2020
		2,802		-		2,802		$	0.70		Jan 1, 2011		Jan 1, 2021
		251,474		-		251,474		$	0.14		Dec 4, 2014		Dec 4, 2024
		422,118		-		422,118

 

 

 

7.    Income tax expense

 

Recognized in the income statement:

 

		Year ended Dec 31, 2017		Year ended Dec 31, 2016		Year ended Dec 31, 2015
Current tax expense		US $		US $		US $
U.K. corporation taxes...................................................................................		-		-		-
Overseas taxes................................................................................................		22,000		287		774
		22,000		287		774

 

The main rate of U.K. corporation tax was reduced from 21% to 19% from April 1, 2015 and has been reflected in these consolidated financial statements.

 

The tax expense recognized for the years ended December 31, 2017, 2016 and 2015 is higher than the standard rate of corporation tax in the U.K. of 19%.  The differences are reconciled below:

 

		2017		2016		2015
Reconciliation of effective tax rate:		US $		US $		US $
Loss on ordinary activities before taxation..............................................		(44,788,366)		(40,324,015	)	(8,515,925	)
U.K. Corporation tax 19% .............................................................................		(1,570,723)		(449,929	)	(355,889	)
Overseas tax at higher rate...........................................................................		(7,669,495)		(12,954,729	)	(2,297,873	)
Effects of:
Unrecognized losses.......................................................................................		(9, 240,218)		(13,404,371	)	(2,652,988	)
Other adjustments-overseas taxes..............................................................		22,000		287		774
Total tax charge ...............................................................................................		22,000		287		774

 

There is an unrecognized cumulative deferred tax asset of US $1,783,102, relating to deferred tax on losses generated of US $10,488,833 the U.K. during the years ended December 31, 2017 and 2016.

 

8.    Loss per share

 

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Group by the weighted average number of shares in issue during the year.  In accordance with IAS 33, where the Group has reported a loss for the year, the shares are anti-dilutive.

 

		Year ended Dec 31, 2017		Year ended Dec 31, 2016		Year ended Dec 31, 2015
		US $		US $		US $
Loss after taxation.........................................................................................		(44,810,366	)	(40,324,302	)	(8,516,699	)
Basic and diluted weighted average shares in issue.............................		231,530,091		116,558,191		61,225,922
Basic and diluted loss per share ..................................................................		(0.19	)	(0.35	)	(0.14	)

 

The following potentially dilutive securities outstanding at December 31, 2017, 2016 and 2015 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive.

 

		2017		2016		2015
Convertible promissory notes.......................................................		-		-		14,510,770
Warrants...........................................................................................		49,399,947		5,726,364		6,925,962
Share options....................................................................................		17,065,534		6,810,357		7,182,674
		66,465,481		12,536,721		28,619,406

 

 

 

 

 

9.    Intangible assets (Group)

 

As of December 31, 2015
Cost.......................................................................................................................................................		6,195,748
Accumulated amortization and impairment.................................................................................		-
Net book amount at December 31, 2015........................................................................................		6,195,748
Additions..............................................................................................................................................		-
Amortization charge..........................................................................................................................		-
Net book amount at December 31, 2016 .....................................................................................		6,195,748
As of December 31, 2016
Cost.......................................................................................................................................................		6,195,748
Accumulated amortization and impairment.................................................................................		-
Net book amount at December 31, 2016........................................................................................		6,195,748
Additions..............................................................................................................................................		-
Amortization charge..........................................................................................................................		-
Net book amount at December 31, 2017 .....................................................................................		6,195,748

 

The Directors do not believe that the merger between Motif BioSciences Inc. and Nuprim Inc. meets the definition of an acquisition of a business as set out in IFRS 3 and is therefore accounted for as an acquisition of an asset.

 

The fair value of the assets acquired under the merger arrangement represent the aggregate estimated value of:

 

·      11,318,439 ordinary shares in Motif Bio plc at the placing price of 20 pence per share;

·      9,432,033 warrants at the placing price of 20 pence per ordinary share; and

·      a milestone payment of US $500,000 to be paid by Motif BioSciences Inc. to Acino Pharma AG upon completion of the first Phase III trial.

 

The value of the warrants has been estimated using the Black Scholes option pricing model with appropriate factors for volatility and risk-free interest rate. The Directors considered the separable value of the active pharmaceutical ingredients and determined it did not constitute a material component of the fair value of the assets acquired. No discount has been applied to the expected milestone payment of US $500,000 given management's expectation that the liability will be settled in early 2018.

 

Details of the purchase consideration and amounts attributed to net assets acquired are as follows:

 

		US $
Purchase consideration:
Ordinary shares in Motif Bio plc..................................................................		3,355,375
Warrants to subscribe for ordinary shares in Motif Bio plc..................		2,340,373
Total purchase consideration .............................................................................		5,695,748
Iclaprim assets.....................................................................................................		6,195,748
Milestone payment..........................................................................................		(500,000	)
Net assets acquired ..............................................................................................		5,695,748

 

As the IPR&D asset is not yet available for commercial use, no amortization has been charged to date.

 

The Group performs an impairment test over the asset on an annual basis or when a triggering event has occurred. Based on the results of the test, no impairment was recorded in the years ended December 31, 2017 or 2016.

 

10.    Prepaid expenses and other receivables

 

	Group		Company
	12 months	12 months	12 months	12 months
	ended	ended	ended	ended
Amounts due within one year	Dec 31, 2017	Dec 31, 2016	Dec 31, 2017	Dec 31, 2016
	US $	US $	US $	US $
Other receivables and prepayments…………………………	317,584	401,064	249,152	349,368
	317,584	401,064	249,152	349,368

 

 

The maximum exposure to credit risk at the end of each reporting period is the fair value of each class of receivables set out above. The Group held no collateral as security. The Directors estimate that the carrying value of receivables approximated their fair value.

 

11.    Cash and cash equivalents

 

	Group		Company
	Dec 31, 2017	Dec 31, 2016	Dec 31, 2017	Dec 31, 2016
	US $	US $	US $	US $
Cash at bank……………………………………………………………	22,651,475	21,829,632	629,257	21,817,489
	22,651,475	21,829,632	629,257	21,817,489

 

 

12.    Trade and other payables

 

	Group		Company
	12 months	12 months	12 months	12 months
	ended	ended	Ended	ended
Amounts due within one year	Dec 31, 2017	Dec 31, 2016	Dec 31, 2017	Dec 31, 2016
	US $	US $	US $	US $
Trade payables (1) …………………………………………	6,464,038	734,405	-	68,940
Accrued expenses - Contract research organization…	1,293,379	10,854,531	-	-
Accrued expenses other ………………………………	3,007,893	727,947	35,331	27,976
Amounts due to affiliates……………………………	-	78	-	-
Other payable……………………………………………	124,244	2,156	124,244	-
	10,889,554	12,319,117	159,575	96,916

 

⁽¹⁾        Trade payables include US $5,704,052 owed to the Group's contract research organization.

 

The Directors estimate that the carrying value of trade and other payables approximated their fair value.  The amounts due to the Group's contract research organization are due in 2018.  

 

13.    Interest bearing loans and borrowings (Group)

 

		Dec 31, 2017		Dec 31, 2016
Non-current liabilities		US $		US $
Term Loan		15,000,000		-
Deferred financing costs		(942,853)		-
Net non-current liabilities		14,057,147		-

 

On November 15, 2017, the Group entered into a credit agreement (the "Hercules Loan Agreement") for up to US $20 million in debt financing with Hercules Capital, Inc. ("Hercules"). Pursuant to the credit agreement, Hercules agreed to loan the Group $20.0 million in two tranches. The first tranche of US $15.0 million was drawn down at closing, with the remaining $5.0 million available upon the achievement of certain milestones anticipated in 2018, or at Hercules's discretion.

These milestones include (i) (x) the FDA has accepted Borrower's New Drug Application for marketing approval with respect to Borrower's "iclaprim" product for the treatment of patients with acute bacterial skin and skin structure infection ("ABSSSI"), and (y) Borrower has enrolled its first patient in its Phase 3 clinical study of Borrower's "iclaprim" product for the treatment of hospital-acquired bacterial pneumonia ("HABP"), (ii) Borrower has obtained market approval from the FDA with respect to Borrower's "iclaprim" product for the treatment of patients with ABSSSI, or (iii) at the discretion of Hercules. 

The terms include an initial interest-only period of 15 months, extendable to 21 months on the achievement of certain milestones; a 30-month capital and interest repayment period thereafter; an interest rate of 10% tied to the US prime rate and customary security over all assets of the Group, except for intellectual property where there is a negative pledge. In addition, there is a payment of $0.4 million due at the end of the term of the loan. Under the credit agreement, the Group issued Hercules a warrant to purchase up to 73,452 of its ADS (each representing 20 ordinary shares) at an exercise price of US $9.53 per ADS, representing 3.5% warrant coverage of the total loan facility. Hercules also has the right, in its discretion, to participate in any subsequent financing, such as an equity offering, in an amount up to $1 million. In connection with the Hercules Loan Agreement closing, the Group incurred US $0.5 million in fees and issued warrants with a fair value of approximately $0.4 million. Both items are classified as a direct reduction from the Hercules Loan Agreement balance and will be amortized over the life of the Loan using the effective interest rate method. The Group is also subject to an end of term charge equal to 2.15% of the total loan capacity.  The end of term charge is payable upon loan maturity or the date that the Group prepays the outstanding loan balance. For the year ended December 31, 2017, the Group recognized total interest expense of US $275,449, comprised of interest expense of $200,000, accretion expense related to the end of term payment of US $22,758 and amortization expense related to the deferred financing costs of $52,691. Under the Hercules Loan Agreement, the Group was required to provide Hercules Capital, Inc. certain informational reports by December 30, 2017.  The Group did not provide such information in a timely manner. The Group believes and represents that it has since provided all required informational reports and is in compliance with covenant requirements as of December 31, 2017 and as of the date that these financial statements are issued, as we believe that the untimely provision of information did not result in an Event of Default under the terms of the loan agreement.

 

14.  Warrants (Group and Company)

 

Warrant activity

 

The Group has issued warrants for services performed and in conjunction with various equity financings. The Group's warrants represent the right to purchase ordinary shares or ADS's and have either a Pounds Sterling or US Dollar exercise price. The ADS warrants are exercisable to purchase ADS's, which each represent 20 ordinary shares. Depending on the terms of the warrant agreements, the ordinary share or ADS warrants are classified as either equity or a liability. Liability classified warrants are remeasured each reporting period, with changes in fair value recorded in the statements of comprehensive loss. The following is a summary of the Group's warrant activity during the year ended December 31, 2017:

		Number of Warrants				Weighted Average Exercise Price
		Ordinary shares		ADS		Ordinary shares			ADS
Outstanding as of January 1, 2017		23,729,865		1,219,246		£	0.278		$	8.03
Expired (1)		(416,645	)	-		$	0.56		-
Granted		-		133,452		-			$	8.51
Exercised		(640,353	)	(16,344	)	£	0.322		$	8.03
Outstanding as of December 31, 2017		22,672,867		1,336,354		£	0.272		$	8.08

 

⁽¹⁾        The ordinary warrants that expired in December 2017 had an exercise price denominated in US dollars. All other ordinary warrants have Pounds Sterling exercise prices.

 

The Group's warrants outstanding and exercisable as of December 31, 2017 were as follows:

 

Type of Warrant Outstanding	Number Outstanding and Exercisable		Exercise Price			Expiration Date
Ordinary shares (1)	1,367,089		GBP £	0.20		April 2, 2020
Ordinary shares (1)	1,082,384		GBP £	0.50		July 21, 2020
Ordinary shares (2)	10,791,361		GBP £	0.322		November 23, 2021
ADS (2)	1,202,902		US $	8.03		November 23, 2021
Ordinary shares (1)	9,432,033		GBP £	0.20		April 2, 2025
ADS (2)	60,000		US $	7.26		July 31, 2022
ADS (2)	73,452		US $	9.53		November 14, 2022

 

⁽¹⁾        Warrants totalling 11,881,506 of ordinary shares are equity classified.

⁽²⁾        Warrants totalling 10,791,361 of ordinary shares and 1,336,354 of ADS are liability classified.

 

Liability classified warrants

 

ADS warrants

On November 23, 2016, the Group closed an initial U.S. offering of 2,438,491 ADSs and 1,219,246 ADS warrants at a price of US $6.98 per ADS/Warrant combination. Each ADS represents 20 ordinary shares. The warrants have an exercise price of US $8.03 per ADS and expire on November 23, 2021.  In the event the Group fails to maintain the effectiveness of its Registration Statement and a Restrictive Legend Event has occurred, the warrant shall only be exercisable on a cashless basis. This would result in variability in the number of shares issued and therefore, the warrants were designated as a financial liability carried at fair value through profit and loss. On issuance of the ADS warrants, the Group recorded a derivative liability of US $3,849,160 using the Black-Scholes model.

 

 

 

The Group develops its own assumptions for use in the Black-Scholes option pricing model that do not have observable inputs or available market data to support the fair value. This method of valuation involves using inputs such as the fair value of the Group 's common stock, stock price volatility of comparable companies, the contractual term of the warrants, risk free interest rates and dividend yields. The Group has a limited trading history in its common stock, therefore, expected volatility is based on that of reasonably similar publicly traded companies. Due to the nature of these inputs, the valuation of the warrants is considered Level 1 and 2 measurements.

 

On August 1, 2017, the Group issued to a third party a warrant to purchase up to 60,000 ADSs at an exercise price of $7.26 per ADS. The warrant vests 5,000 ADS at issuance, with the remaining 55,000 ADS vesting upon satisfaction of various performance conditions related to the Group's stock price and trading volumes. Once vested, the warrant may be exercised on a cashless basis, and expires on July 31, 2022. Exercising on a cashless basis would result in variability in the number of shares issued and therefore, the warrants were designated as a financial liability carried at fair value through profit and loss. On issuance of the ADS warrants, the Group recorded a derivative liability of US $109,431 using the Black-Scholes model.

 

At issuance, the following assumptions were used in the Black-Scholes model.

 

	August 1, 2017
Share price (US $)..............................................................................................	7.26
Exercise price (US $).........................................................................................	7.26
Expected volatility............................................................................................	70	%
Number of periods to exercise.......................................................................	5.0
Risk-free rate......................................................................................................	1.80	%
Expected dividends...........................................................................................	-

 

On November 14, 2017, in conjunction with the Hercules Loan Agreement, the Group issued Hercules a warrant to purchase up to 73,452 ADS's at an exercise price of $9.53 per ADS, representing 3.5% warrant coverage of the total loan facility. The warrant may be exercised on a cashless basis, and is immediately exercisable through November 14, 2022. Exercising on a cashless basis would result in variability in the number of shares issued and therefore, the warrants were designated as a financial liability carried at fair value through profit and loss. On issuance of the ADS warrants, the Group recorded a derivative liability of US $419,573 using the Black-Scholes model. 

 

At issuance, the following assumptions were used in the Black-Scholes model.

 

	November 14, 2017
Share price (US $)..............................................................................................	9.53
Exercise price (US $).........................................................................................	9.53
Expected volatility............................................................................................	72	%
Number of periods to exercise.......................................................................	5.0
Risk-free rate......................................................................................................	2.06	%
Expected dividends...........................................................................................	-

 

At December 31, 2017 and 2016, the liability classified ADS warrants had a fair value of US $8,927,252 and $3,967,189 using the following weighted-average assumptions in the Black-Scholes model:

 

	December 31, 2017		December 31, 2016
Share price (US $)..............................................................................................	10.81		6.19
Exercise price (US $).........................................................................................	7.91		8.03
Expected volatility............................................................................................	74%		70%
Number of periods to exercise.......................................................................	3.82		4.92
Risk-free rate......................................................................................................	1.93%		1.91%
Expected dividends...........................................................................................	-		-

 

 

 

 

Ordinary warrants

 

On November 23, 2016 the Group placed 22,863,428 ordinary shares together with 11,431,714 warrants over ordinary shares at a price of £ 0.28 per share/warrant combination. The warrants have an exercise price of £0.322 per warrant and expire on November 23, 2021. In the event that the Group fails to maintain the effectiveness of the Registration Statement, the warrant shall only be exercisable on a cashless basis.  This would result in variability in the number of shares issued and therefore, the warrants were designated as a financial liability carried at fair value through profit and loss. On issuance of the warrants, the Group recorded a derivative liability of US $1,812,959 using the Black-Scholes model. 

 

At December 31, 2017 and 2016, the liability classified ordinary warrants had a fair value of US $3,699,047 and $1,830,869 using the Black-Scholes model and the following assumptions:

 

	December 31, 2017		December 31, 2016
Share price (GBP)..............................................................................................	0.41		0.25
Exercise price (GBP)..........................................................................................	0.322		0.322
Expected volatility............................................................................................	76	%	70	%
Number of periods to exercise.......................................................................	3.90		4.92
Risk-free rate......................................................................................................	2.09	%	1.91	%
Expected dividends...........................................................................................	-		-

 

The following is a summary of the Group's liability classified warrant activity, including both ADS and Ordinary warrants, during the years ended December 31, 2017 and 2016:

 

		Fair value
Liability classified warrants		US $
January 1, 2016.............................................................................................		-
Issued during the year.................................................................................		$       5,662,119
Loss from revaluation of derivative liabilities.......................................		135,939
Balance at December 31, 2016...................................................................		5,798,058
Issued during the year.................................................................................		529,004
Exercised during the year............................................................................		(284,402	)
Impact of foreign exchange.........................................................................		192,088
Loss from revaluation of derivative liabilities.......................................		6,391,551
Balance at December 31, 2017 ...................................................................		$  12,626,299

 

15.  Contingent liabilities

 

On February 28, 2018, the Group's Board of Directors awarded Dr. Lumsden a cash bonus of $127,500 for his performance and contributions during 2017.  A portion, or $42,500, of the cash bonus is contingent upon achieving certain operational milestones in 2018.  Dr. Lumsden received a separate supplemental bonus of $50,000 that is also contingent upon operational milestones in the first half of 2018.  Dr. Huang was awarded a cash bonus of $142,000 for his performance and contributions in 2017.  A portion, or $42,000, of the cash bonus is contingent upon achieving certain operational milestones in 2018. 

 

16.    Share based payments

 

Motif BioSciences Inc. issued options and warrants to employees, Directors, consultants, and note holders. As part of the merger between Motif Acquisition Sub, Inc. and Motif BioSciences Inc., described in Note 1, each outstanding share option granted by Motif BioSciences Inc. was assumed and converted by Motif Bio plc into options to subscribe for ordinary shares in Motif Bio plc. The number of share options and the exercise prices have been adjusted to reflect the reverse stock split in the capital of Motif BioSciences Inc. on March 13, 2015.

   

On December 4, 2014, Motif BioSciences Inc. adopted a Share Option Plan (the "Plan") under which options can be granted to employees, consultants, and Directors. The share price used for the Plan prior to being traded on AIM was based on management's assessment of the valuation of the Group given the net assets and future potential of the Group at the time of granting.

 

 

Motif Bio plc adopted a Share Option Plan (the "New Plan") on April 1, 2015. The New Plan replaces Motif BioSciences Inc.'s previous share plan.  There were no changes to the fair value of share options granted under the Plan with the only change being to grant the holders shares in Motif Bio plc rather than Motif BioSciences Inc. upon exercising options. The exercise price for each option will be established at the discretion of the Board provided that the exercise price for each option shall not be less than the nominal value of the relevant shares if the options are to be satisfied by a new issue of shares by the Group and provided that the exercise price per share for an option shall not be less than the fair market value of a share on the effective date of grant of the option. Options will be exercisable at such times or upon such events and subject to such terms, conditions and restrictions as determined by the Board on grant date. However, no option shall be exercisable after the expiration of ten years after the effective date of grant of the option.

 

				Weighted average
		Number of		exercise price
		share options		US $
Outstanding at January 1, 2016 ....................................................................................		13,427,495		0.33
Granted during the year.................................................................................................		3,261,577		0.58
Forfeited during the year................................................................................................		-		-
Exercised during the year ..............................................................................................		(263,690	)	0.14
Expired during the year..................................................................................................		(862,200	)	0.70
Outstanding at December 31, 2016 .............................................................................		15,563,182		0.37
Granted during the year.................................................................................................		5,800,000		0.33
Forfeited during the year................................................................................................		(4,153,948	)	0.53
Exercised during the year ..............................................................................................		(143,700	)	0.14
Expired during the year..................................................................................................		-		-
Outstanding at December 31, 2017 .............................................................................		17,065,534		0.32
Exercisable at December 31, 2017 ...............................................................................		11,334,173		0.29

 

The range of exercise prices of the options at December 31, 2017 was US $0.14 - $0.91.  The weighted average contractual term of options outstanding at December 31, 2017 and 2016 was 7.0 years and 7.3 years, respectively.  The weighted average remaining contractual term of options exercisable at December 31, 2017 was 6.1 years.

 

The fair value of options granted have been valued using the Black-Scholes option pricing model. The weighted-average fair value of options granted during the year ended December 31, 2017 was $0.26. Volatility is based on reported data from selected reasonably similar publicly traded companies for which the historical information is available. The Group does not have sufficient history to estimate the volatility of its share price. The weighted-average assumptions for option grants were as follows:

 

		Year ended Dec 31, 2017
Share price (US $).....................................................................................................................		0.34
Exercise price (US $)................................................................................................................		0.34
Expected volatility....................................................................................................................		70.86%
Term............................................................................................................................................		10 years
Risk-free rate.............................................................................................................................		2.11%
Expected dividends..................................................................................................................		-

 

 

 

 

The total expense recognized for the years arising from stock-based payments are as follows:

 

		Year ended  Dec 31, 2017		Year ended  Dec 31, 2016		Year ended  Dec 31, 2015
		US $		US $		US $
General and administrative expense......................................................		1,143,496		513,541		325,908
Research and development expense........................................................		564,579		-		-
Total share-based payment expense.......................................................		1,708,075		513,541		325,908

 

During the preparation of the interim financial statements for the six months ended June 30, 2017, the Group identified and corrected a prior period error whereby stock-based compensation expense was understated primarily due to recognizing expense only when an award vested, not over the required service period using a graded vesting approach as required under IFRS 2. The Group assessed the materiality of the out-of-period adjustments on all impacted periods and determined that they were not material to any of the periods and that a restatement of previously issued financial statements was not required.  The Group concluded that the cumulative adjustment to correct the error should be recorded in the year ended December 31, 2017.

 

The expense in fiscal years 2016 and 2015 and 2014 was understated by $802,282, $291,696 and $31,799, respectively. The out-of-period correction increased General and Administrative expense by $762,836 and Research and Development expense by $362,941 for the year ended December 31, 2017. None of these adjustments had an impact on the cash resources of the Group.

 

17.     Share capital (Company)

 

Allotted, called up and fully paid:		Number		US $
In issue at December 31, 2015......................................................................................................		108,601,496		1,645,291
Issued:
Ordinary shares of 1p each..................................................................................................		409,000		5,405
Ordinary shares of 1p each..................................................................................................		48,769,820		607,574
Ordinary shares of 1p each..................................................................................................		22,863,428		284,833
Ordinary shares of 1p each..................................................................................................		119,990		1,509
Ordinary shares of 1p each..................................................................................................		467,024		5,801
Ordinary shares of 1p each..................................................................................................		14,510,770		177,786
In issue at December 31, 2016......................................................................................................		195,741,528		2,728,199
Issued:
Ordinary shares of 1p each.................................................................................................		143,700		1,748
Ordinary shares of 1p each.................................................................................................		326,880		4,262
Ordinary shares of 1p each.................................................................................................		66,666,667		846,667
Ordinary shares of 1p each.................................................................................................		250,000		3,185
Ordinary shares of 1p each.................................................................................................		390,353		5,140
In issue at December 31, 2017......................................................................................................		263,519,128		3,589,201

 

On September 9, 2016, Motif Bio plc issued 409,000 ordinary shares to Amphion Innovations plc as part of the terms of the renegotiated convertible promissory notes.

 

On November 23, 2016, Motif Bio plc issued 2,438,491 ADSs upon the closing of an initial U.S. offering and 1,219,246 warrants over ADS at a price of US $6.98 per ADS/Warrant combination.   Each ADS represents 20 ordinary shares.

 

On November 23, 2016, Motif Bio plc issued 22,863,428 ordinary shares together with 11,431,714 warrants over ordinary shares at a price of 28 pence per share/warrant combination.

 

On November 29, 2016, 119,990 ordinary shares were issued upon the exercise of options.

 

In December 2016, 467,024 ordinary shares were issued upon the exercise of options and warrants.

 

In December 2016, Motif Bio plc issued 14,510,770 new ordinary shares following the conversion of convertible promissory notes by Amphion Innovations plc and Amphion Innovations US Inc.  The notes which totaled US $3,550,786 were converted in accordance with their terms at US $0.2447 per share.

 

In January 2017, 143,700 ordinary shares were issued upon the exercise of options.

 

In May 2017, 326,880 ordinary shares were issued upon the exercise of warrants.

 

In June 2017, Motif Bio plc issued 66,666,667 ordinary shares at a price of 30 pence per share.  The Company raised $24,569,634 in gross proceeds and incurred $1,734,562 of issuance costs in connection with this offering.  These issuance costs, which include placement fees, are recorded as a reduction in equity.

 

In July 2017, 250,000 ordinary shares were issued upon the exercise of warrants.

 

In November 2017, a total of 390,353   ordinary shares were issued upon the exercise of warrants.

 

Share premium represents the excess over nominal value of the fair value consideration received for equity shares net of expenses of the share issue.

 

Retained deficit represents accumulated losses.

 

The group re-organization reserve arose when Motif Bio plc became the parent of the Group.  The transaction, falling as it does outside the scope of IFRS 3, has been accounted for as a group re-organization and not a business combination.  The re-organization reserve can be derived by calculating the difference between the nominal value of the shares in Motif Bio plc issued to the former shareholders in Motif BioSciences Inc. and the share capital and share premium of Motif BioSciences Inc. at the date of the merger.

 

18.    Financial assets and financial liabilities

 

The Group and Company hold the following financial instruments:

		Group		Company
		Financial assets		Financial assets
		at amortized cost		at amortized cost
Financial assets		US $		US $
2017
Prepaid expenses and other receivables.........................................................		317,584		249,152
Due from affiliates……………………………………………………………………………………….		-		47,733,088
Cash and cash equivalents................................................................................		22,651,475		629,257
		22,969,059		48,611,497
2016
Prepaid expenses and other receivables.........................................................		401,064		349,368
Due from affiliates……………………………………………………………………………………….		-		3,294,823
Cash and cash equivalents................................................................................		21,829,632		21,817,489
		22,230,696		25,461,680

 

		Group		Company
		Financial liabilities		Financial liabilities
		at amortized cost		at amortized cost
Financial liabilities		US $		US $
2017
Trade and other payables...................................................................................		10,889,554		159,575
Payable on completion of clinical trial...........................................................		500,000		-
Derivative liabilities............................................................................................		12,626,299		12,626,299
		24,015,853		12,786,274
2016
Trade and other payables...................................................................................		12,319,117		96,916
Payable on completion of clinical trial...........................................................		500,000		-
Derivative liabilities............................................................................................		5,798,058		5,798,058
		18,617,175		5,894,974

 

18.    Financial assets and financial liabilities, continued

 

Fair value disclosures

 

The Group's cash, prepaid expenses and other current assets and trade and other payables are stated at their respective historical carrying amounts, which approximates fair value due to their short-term nature. These are measured at fair value using Level 1 inputs. The Group's derivative liabilities are measured at fair value using Level 1 or 2 inputs. See discussion in Note 14 on the inputs utilized in the Black-Scholes option pricing model and for a rollforward of the derivative liability from December 31, 2016 to December 31, 2017. The Group determined that the book value of the Hercules Loan Agreement (Note 13) approximates its fair value as of December 31, 2107 due the proximity of the transaction date with December 31, 2017 and the interest being tied to the U.S. Prime Rate. There were no transfers between fair value levels during the years ended December 31, 2017 or 2016.

There were no non-recurring fair value measurements for the years ended December 31, 2017 or 2016.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible.  Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

·      Level 1:  quoted prices (unadjusted) in active markets for identical assets or liabilities.

·      Level 2:  inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

·      Level 3:  inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

19.  Subsidiaries

 

								Method used
		Country of		Percentage		Percentage		to account for
Company name		incorporation		shareholding		voting power		investment
Motif BioSciences Inc...............		Delaware, USA		100%		100%		Consolidation

 

The principal activity of Motif BioSciences, Inc. is proprietary drug discovery research and development. Motif BioSciences Inc. was incorporated in the US State of Delaware on December 2, 2003 and has its registered office at 251 Little Falls Drive, Wilmington, Delaware, 19808.

 

The Company's increase in its investment in Motif BioSciences, Inc. of $1,567,743 related to the Company's share options that were granted to BioSciences, Inc. employees during the fiscal 2017 year.

 

20.    Related party transactions

 

Transactions with Amphion Innovations plc and Amphion Innovations US, Inc.

At December 31, 2017, Amphion Innovations plc and its wholly owned subsidiary, Amphion Innovations US, Inc., or collectively, the Amphion Group, owned 14.48% of the issued ordinary shares in Motif Bio plc. In addition, the Amphion Group previously provided funding for the activities of Motif BioSciences Inc. through the issue of convertible interest bearing loan notes, which were converted to shares in December 2016. Total interest expense recorded for the year ended December 31, 2016 related to these notes was $390,485. Richard Morgan and Robert Bertoldi were Directors of both the Company and Amphion Innovations plc in the period. Transactions between the Group and the Amphion Group are disclosed below:

Advisory and Consultancy Agreement with Amphion Innovations US, Inc.

On April 1, 2015, the Group entered into an Advisory and Consultancy Agreement with Amphion Innovations US, Inc. The consideration for the services is US$120,000 per annum. The agreement was amended in December 2016 so that either party may terminate the agreement at any time, for any reason, upon giving the other party ninety-days advance written notice. The Group paid $120,000 to Amphion Innovations US, Inc. during each year ending December 31, 2017 and 2016 in accordance with the terms of the agreement. As of the date of this annual report, the agreement continues to be in force.

Consultancy Agreement with Amphion Innovations plc

On April 1, 2015, the Group entered into a Consultancy Agreement with Amphion Innovations plc for the services of Robert Bertoldi, an employee of Amphion Innovations plc. The consideration for his services was US $5,000 per month. On November 1, 2015, the consideration was increased to US $180,000 per annum. On July 1, 2016, the consideration decreased to US $75,000 per annum. The agreement was for an initial period of 12 months and would automatically renew each year on the anniversary date unless either party notifies the other by giving 90-days written notice prior to expiration. The agreement was amended in December 2016 so that either party may terminate the agreement at any time, for any reason, upon giving the other party ninety-days advance written notice.  In July 2017, the Group amended the consulting agreement with Amphion Innovations plc to increase the annual consideration to $125,000 to better reflect Robert Bertoldi's time commitment to the Group with and effective date of 1 January 2017. The Group paid Robert Bertoldi US $125,000 and US $127,500 during the years ended December 31, 2017 and 2016 in accordance with the terms of the agreement.

Consultancy Agreement with Amphion Innovations US, Inc.

On September 1, 2016, the Group entered into a Consultancy Agreement with Amphion Innovations US, Inc., pursuant to which Amphion Innovations US, Inc. will provide consultancy services in relation to the Group's obligations as a NASDAQ listed company. The consideration for the services was US $15,500 per month. The agreement was for an initial period of 12 months, after which the agreement will terminate automatically unless renewed by the parties by mutual agreement. The agreement was not extended past the initial term.  The Group paid US $170,500 and US $19,633 during the years ended December 31, 2017 and 2016 in accordance with the terms of the agreement. 

Consultancy Agreement with Jonathan Gold

 

On April 13, 2016, we entered into a consultancy agreement with Jonathan Gold, a member of the Board of Directors. Under the terms of this agreement, Mr. Gold received a fixed fee of US $10,000 per month for strategic financial expert advice and guidance. The term of this agreement was six months, commencing January 1, 2016. The term of the agreement would automatically renew each month following the initial term, provided that each party provided its mutual agreement to renew in a signed writing, no later than 30 days prior to the expiration of the term. This agreement was not extended beyond the initial term.

 

On April 7, 2017, the Group entered into a new consultancy agreement with Mr. Gold. Under the terms of this agreement, Mr. Gold received a fixed fee of US $16,167 per month for strategic financial expert advice and guidance. The term of this agreement was twelve months, commencing January 1, 2017. The term of the agreement would automatically renew each month following the initial term, as long as either party did not provide notice to the other party of its election not to continue to renew the agreement with at least 30-days advance notice.  This agreement was suspended as of December 31, 2017.

 

Intercompany Receivable (Company)

 

The Company had a net due from Motif BioSciences, Inc. of $47,733,088 and $3,294,823 at December 31, 2017 and 2016, respectively.  The receivable is payable on demand and does not bear interest.

 

21.    Subsequent events

 

On January 19, 2018, the Group announced that it filed a "universal" shelf registration statement on Form F-3 with the SEC, which was declared effective by the SEC on January 31, 2018. The filing of a shelf registration statement, a common practice by NASDAQ-listed companies, is intended to provide the Group with more timely and efficient access to the U.S. capital markets. The shelf registration, which can remain effective for up to three years, will enable the Company to offer, issue and sell, in one or more offerings at any time (as long as the shelf registration statement remains effective), up to an aggregate of $80 million of ordinary shares, including ADSs, where each ADS represents 20 ordinary shares), preference shares, warrants, subscription rights, debt securities and a combination of such securities, separately or as units. The Group currently has no specific plans to issue securities under this shelf registration. The specifics of any future offering, including the prices and terms of any securities offered by the Group, would be determined at the time of any such offering and would be described in detail in a prospectus supplement filed in connection with such offering.

 

Effective February 2, 2018, Jonathan Gold assumed the executive role of Chief Financial Officer upon the resignation of Robert Dickey IV, the Group's former Chief Financial Officer.

 

On April 3, 2018, the Group announced the initiation of a rolling submission of a New Drug Application (NDA) to the U.S. Food & Drug Administration (FDA) for iclaprim. The Group commenced the submission before the end of the first quarter of 2018 and is expecting to complete the submission of the full NDA during the second quarter of 2018.  The Group also announced that it received correspondence from the FDA that a small business waiver has been granted for the NDA application fee which is typically due upon submission of an NDA under the Prescription Drug User Fee Act (PDUFA).  As a result, the Group did not have to pay a $2.4 million application fee for this NDA submission.