DDDD.L Regulatory News (DDDD)

4D pharma plc

("4D" or the "Company")

Final Results and Notice of Annual General Meeting

4D (AIM: DDDD), a pharmaceutical company focusing on the development of live biotherapeutics, is pleased to announce its maiden set of final results for the period from 10 January 2014 to 31 December 2014.

Financial highlights for the period:

- admitted to trading on AIM on 18 February 2014 raising £16.55 million

- raised £21.5 million in a placing on 14 July 2014

- cash, cash equivalents, deposits and short-term investments increased to £31.8 million

- loss before tax of £2.38 million

- basic loss per share of 4.81 pence

Following the period end, a further £34.75 million was raised by the Company in a placing which completed on 10 February 2015.

Business highlights for the period:

- successful development of first generation programmes

- Blautix, a treatment for Irritable Bowel Syndrome (IBS), and Thetanix, a treatment for paediatric Crohn's, scheduled to enter first in man studies in 2015

- Rosburix, a treatment for paediatric ulcerative colitis, scheduled to enter clinical trials in H2 2016

- development of MicroRx methodology, identifying other therapeutically relevant bacteria

The Annual Report will be posted to shareholders later today and will also be available, in electronic form, for download on the Company's website www.4dpharmaplc.com and contains a notice of the Company's first Annual General Meeting, which will be held on Monday 29 June 2015 at 10:00am at the offices of Schofield Sweeney LLP, Springfield House, 76 Wellington Street, Leeds LS1 2AY.

Duncan Peyton, Chief Executive Officer of 4D, commented: "We are delighted to have had such a constructive first financial period, which has seen both the evolution of the Group's initial discovery projects, taking them towards clinical trials in the next 12 months, and the development, through its skilled team of researchers and MicroRx methodology, of the Group's pipeline of novel live biotherapeutics. We remain excited by the prospects for the coming period."

For further information please contact:

CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S JOINT REVIEW FOR THE PERIOD ENDED 31 DECEMBER 2014

4D pharma plc ("4D", the "Company" and, together with its subsidiaries, the "Group") is focussed on bringing to market a new class of therapeutics known as live biotherapeutics. Rather than chemical entities or antibodies, 4D uses carefully selected bacteria as the active ingredients in its products.

4D only uses bacteria that have a precise and evolved mechanism of action. As these bacteria are isolated from healthy humans we believe these bacteria are safe and have no toxic effects.

This belief is also currently held by the regulatory bodies, with the U.S. Food and Drug Administration (FDA) recognising live biotherapeutics as a new class of therapeutics. 4D is working together with the regulatory bodies to understand and help determine the regulatory agenda.

At the Group's inception it had two discovery projects; now after our first year 4D has products that we will take into clinical trials in the next 12 months, and a methodology that has allowed us to identify other bacteria that target asthma and rheumatoid arthritis.

Our first generation programmes address irritable bowel syndrome (IBS) and inflammatory bowel disease. Blautix, a treatment for IBS, and Thetanix, a treatment for paediatric Crohn's, will both enter first in man studies in 2015. Rosburix, a treatment for paediatric ulcerative colitis, is currently undergoing development and is scheduled to enter clinical trials in H2 2016.

With these, the Group's first generation programmes, we have had to address several challenges associated with taking a new class of therapeutics into the clinic. We are now capable of taking a pre-clinical programme through development and ready for clinical trial within a 12 month period. This has been an exceptional period of learning and something we can apply to our growing pipeline.

The biggest challenge we faced in 2014 was whether we could develop the capability to identify other bacteria that were therapeutically relevant. We began this project in May 2014, and by September 2014, we had identified several 'hits', i.e. bacteria we believed would be effective in certain autoimmune and inflammatory diseases.

By January 2015 we had the readouts from the Group's pre-clinical work. This work used industry standard models carried out by third party contract organisations who perform the same service for other biotechnology and pharmaceutical companies.

At that time the work showed we had seen a statistically significant result for a number of our bacteria in severe asthma, allergic asthma and rheumatoid arthritis.

The identification by our skilled research team, using our MicroRx methodology, of several candidate bacteria has shown that we can rationally identify bacteria that affect therapeutic pathways. Our challenge in the next 12 months is two-fold; firstly to take these candidates through development and our current programmes into the clinic and secondly to identify other diseases that we can target. We will keep the Company's shareholders updated as to our progress.

Financial results and finance review

Loss for the period before tax: £2.38 million

Staff costs for the period: £0.52 million

Basic loss per share: 4.81 pence

No dividend has been proposed

Cash flow and balance sheet

During the period cash, cash equivalents, deposits and short-term investments increased to £31.8 million.

During the period, after the initial share issue of 20,000,000 ordinary shares at 0.25 pence per share, the Company raised £16.55 million on its admission to trading on AIM, which completed on 18 February 2014; and £21.5 million in a placing that was completed on 14 July 2014. Post year end, a further £34.75 million was raised by the Company in a placing that completed on 10 February 2015.

Treasury activities and policies

The Group manages its cash deposits prudently and invests its funds across a number of financial institutions which have investment grade credit ratings. The deposits range from instant access to 12 month term deposits and are regularly reviewed by the board. Cash forecasts are updated monthly to ensure that there is sufficient cash available for the Group's foreseeable requirements. More details on the Group's treasury policies are provided in Note 22 to the financial statements.

Credit risk

The Group only trades with recognised, creditworthy third parties. Receivable balances are monitored on an on-going basis and any late payments are promptly investigated to ensure that the Group's exposure to bad debts is not significant.

Foreign exchange management

The Group does not take out forward contracts against uncertain or forecast expenditure, as the timings and extent of future cashflow requirement denominated in foreign currencies are difficult to predict. There were no open forward contracts as at 31 December 2014. Future currency needs are continually monitored and purchased when the extent and timings are known.

David Norwood Duncan Peyton

Non-executive Chairman Chief Executive Officer

4 June 2015 4 June 2015

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD 10 JANUARY 2014 TO 31 DECEMBER 2014

The loss for the period arises from the Group's continuing operations and is attributable to the equity holders of the parent.

There were no other items of comprehensive income for the period and therefore the loss for the period is also the total comprehensive loss for the period.

The basic and diluted loss per share are the same as there are no shares in the Company under option.

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD 10 JANUARY 2014 TO 31 DECEMBER 2014

GROUP STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2014

GROUP CASH FLOW STATEMENT

FOR THE PERIOD 10 JANUARY 2014 TO 31 DECEMBER 2014

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 DECEMBER 2014

1. GENERAL INFORMATION

4D pharma plc ("the Company") is an AIM listed company incorporated and domiciled in the UK. The locations and principal activities of the subsidiaries are set out in Note 12. 4D pharma plc is a Company incorporated in England and Wales. The registered office is 74 Gartside Street, Manchester, M3 3EL. These Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group' and individually as 'Group entities') for the period ended 31 December 2014.

The financial statements of 4D pharma plc and its subsidiaries (the "Group") for the period ended 31 December 2014 were authorised for issue by the Board of Directors on 4 June 2015 and the Statements of Financial Position was signed on the Board's behalf by Duncan Peyton.

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company's Statement of Comprehensive Income.

The significant accounting policies adopted by the Group are set out in Note 3.

2. BASIS OF PREPARATION

(a) Statement of compliance

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and IFRS Interpretations Committee ("IFRSIC") interpretations as they apply to the financial statements of the Group for the period ended 31 December 2014 and the requirements of the Companies Act 2006 applicable to companies reporting under IFRS.

(b) Basis of measurement

The parent company and Group financial statements have been prepared on the historical cost basis.

The methods used to measure fair values of assets and liabilities are discussed in the respective notes in Note 3.

(c) Going concern

The Chairman's and Chief Executive Officer's Review on pages 4 and 5 outlines the business activities of the Group along with the factors which may affect its future development and performance. The Group's financial position is discussed in the Financial Review on pages 4 and 5 along with details of its cash flow and liquidity. Note 22 to the financial statements sets out the Group's financial risks and the management of those risks.

Having prepared management forecasts and made appropriate enquiries, the Directors are satisfied that the Group has adequate resources for the foreseeable future as the Group is at the start up stage of its business life cycle. Accordingly they have continued to adopt the going concern basis in preparing the Group and Company financial statements.

(d) Functional and presentational currency

These financial statements are presented in pounds sterling, which is the Group's functional currency. All financial information presented has been rounded to the nearest thousand.

(e) Use of estimates and judgements

The preparation of financial statements requires management to make estimates and judgements that affect the amounts reported for assets and liabilities as at the reporting date and the amounts reported for revenues and expenses during the period. The nature of estimation means that actual amounts could differ from those estimates. Estimates and judgements used in the preparation of the financial statements are continually reviewed and revised as necessary. While every effort is made to ensure that such estimates and judgements are reasonable, by their nature they are uncertain and, as such, changes in estimates and judgements may have a material impact on the financial statements.

The key sources of estimation uncertainty and critical accounting policies that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.

● Taxation

Management judgement is required to determine the amount of tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. The carrying value of the unrecognised tax losses at 31 December 2014 was £4.319 million. The value of the additional deferred tax asset not recognised at the period-end is £846,000. Further information is included in Note 8.

● Research and development

Careful judgement by the directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain until such time as technical viability has been proven and commercial supply agreements are likely to be achieved. Judgements are based on the information available at each reporting date which includes the progress with testing and certification and progress on, for example, establishment of commercial arrangements with third parties. In addition, all internal activities related to research and development of new products are continuously monitored by the directors. Further information is included in Note 3.

● Intangible fixed assets and goodwill

Estimated impairment of intangible fixed assets and goodwill

The Group test annually whether intangible fixed assets and goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 3. The potential recoverable amounts of intangible fixed assets and goodwill have been determined based on value in use calculations. These calculations require the use of estimates both in arriving at the expected future cash flows and the application of a suitable discount rate in order to calculate the present value of these flows. There is a degree of judgement involved in making assessments of attributable values on acquisition and making impairment assessments. More detail is given in Notes 3(i) and 3(j).

Valuation of intangibles on acquisition

Valuation of an early stage drug discovery pharmaceutical company is a notoriously difficult task. Analysis of financial history gives little indication of future performance. Despite this, for products currently in development sales potentials can be estimated and management have used their own experience as well as consulting with external experts to establish best estimates of sales pricing and revenue forecasting and these can provide the starting point for valuing these products and ensuring that their value has not been impaired. In addition, clinical development risks, measured as product attrition failure rates incurred as drugs progress through the clinic are reasonably well documented and can be applied as meaningful risk-adjusters to account for the chance of development failure.

● Assessment of control for consolidation purposes

Subsidiaries

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies so as to obtain economic benefits from their activities. Subsidiaries are consolidated from the date on which control is transferred to the Group up until the date that control ceases.

The accounting policies set out below are applied consistently by Group entities.

The Group financial statements are presented in sterling and all values are rounded to the nearest thousand pounds except where otherwise indicated.

(a) Basis of consolidation

(i) Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date - i.e. when control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The Group measures goodwill at the acquisition date as:

● the fair value of the consideration transferred; plus

● the recognised amount of any non-controlling interests in the acquiree; plus

● if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less

● the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

(ii) Non-controlling interests

For each business combination, the Group elects to measure any non-controlling interests in the acquire either:

● at fair value; or

● at their proportionate share of the acquiree's identifiable net assets, which are generally at fair value.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.

(iii) Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

(iv) Investments in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 percent and 50 percent of the voting power of another entity.

Investments in associates are accounted for under the equity method and are recognised initially at cost. The cost of the investment includes transaction costs.

The consolidated financial statements include the Group's share of the profit or loss and other comprehensive income of equity-accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases.

When the Group's share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

(v) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currency transactions

Transactions in foreign currencies are initially recorded in the functional currency by applying the spot rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

(c) Segmental reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's chief operating decision maker, being the chief executive officer, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. As at the reporting date the Group operated as a single segment.

(d) Lease payments

Rentals payable under operating leases, which are leases where the lessor retains a significant proportion of the risks and rewards of the underlying asset, are charged in profit or loss on a straight-line basis over the expected lease term.

Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

(e) Revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or services, excluding discounts, rebates, VAT and other sales taxes or duties

Revenue from the sale of products is recognised at the point of transfer of risks and rewards of ownership which is generally on shipment of product.

(f) Finance income and finance expense

Finance income comprises interest income on funds invested and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as interest accrues using the effective interest rate method.

Finance expense comprises interest expense on borrowings, changes in the fair value of financial assets at fair value through the Group Statement of Comprehensive Income, impairment losses recognised on financial assets and losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised using the effective interest method.

(g) Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to, the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements with the following exceptions:

● where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination, that at the time of the transaction affects neither accounting nor taxable profit nor loss; and

● in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws that have been enacted or substantially enacted by the date and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which differences can be utilised. An asset is not recognised to the extent that the transfer or economic benefits in the future is uncertain.

(h) Property, plant and equipment

Property, plant and equipment are recognised initially at cost. After initial recognition, these assets are carried at cost less any accumulated depreciation and any accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.

Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life and is applied separately to each identifiable component.

The following bases and rates are used to depreciate classes of assets:

Office equipment, fixtures and fittings - straight line over five years

Plant and machinery - straight line over five years

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

A property, plant and equipment item is de-recognised on disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the de-recognition of the asset is included in the Income Statement in the period of de-recognition.

(i) Intangible assets

Intellectual property and patents

The carrying value of intangible fixed assets (with the exception of goodwill) is reviewed annually for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable.

At each reporting date the Group reviews the carrying value of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.

Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. A cash generating unit is the smallest identifiable group of assets that generates cash inflows from other assets or group assets.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset, for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the assets is increased to the revised climate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised in profit or loss immediately.

Amortisation is provided on the fair value of the asset and is calculated on a straight line basis over its useful life. Amortisation is recognised within the statement of comprehensive income. Intellectual property and patents acquired as part of a business combination are only amortised once technical viability has been proven and commercial agreements are likely to be achieved.

Patents includes the costs associated with acquiring and registering patents in respect of intellectual property rights. Patents are amortised, on a straight-line basis over their useful lives (ten years).

Goodwill

Goodwill on acquisitions, being the excess of the fair value of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities acquired, is capitalised and tested for impairment on an annual basis.

Any impairment is recognised immediately in profit or loss and is not subsequently reversed. For the purpose of impairment testing goodwill is allocated to cash generating units of 4D pharma plc, which represent the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Internally generated intangible assets

Expenditure on research activities is recognised in the statement of comprehensive income as incurred.

Expenditure arising from the Group's development is recognised only if all of the following conditions are met:

● an asset is created that can be identified;

● it is probable that the asset created will generate future economic benefits;

● the development cost of the asset can be measured reliably;

● the Group has the intention to complete the asset and the ability and intention to use or sell it;

● the product or process is technically and commercially feasible; and

● sufficient resources are available to complete the development and to either sell or use the asset.

Where these criteria have not been achieved, development expenditure is recognised in profit or loss in the period in which it is incurred.

(j) Impairment of assets

At each reporting date the Group reviews the carrying value of its plant, equipment and intangible assets to determine whether there is an indication that these assets have suffered an impairment loss. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an assessment of the asset's recoverable amount.

An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, an appropriate valuation model is used, these calculations corroborated by valuation multiples, or other available fair value indicators. Impairment losses on continuing operations are recognised in the Income Statement in those expense categories consistent with the function of the impaired asset.

(k) Investments in subsidiaries

Investments in and loans to subsidiaries are stated in the Company's Statement of Financial Position at cost less provision for any impairment.

(l) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost based on latest contractual prices includes all costs incurred in bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred to disposal. Provision is made for slow-moving or obsolete items.

(m) Cash, cash equivalents and short-term investments

Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less. Short-term investments comprise deposits with maturities of more than three months, but no greater than twelve months.

(n) Trade and other payables

Trade and other payables are non-interest bearing and are initially recognised at fair value. They are subsequently measured at amortised cost using the effective interest rate method.

(o) Borrowings

Borrowings are recognised when the Group becomes party to related contracts and are measured initially at fair value, net of directly attributable transaction costs incurred. After initial recognition, borrowings are stated at amortised cost.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

Costs of borrowing funds are expensed in the period in which they occur.

(p) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The expense relating to any provision is presented in the Income Statement, net of any expected reimbursement, but only where recoverability of such reimbursement is virtually certain.

Provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risk specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

There were no provisions at 31 December 2014.

(q) Financial assets and liabilities

Financial assets and liabilities are recognised when the Group becomes party to the contracts that give rise to them and are classified as financial assets and liabilities at fair value through the Group Statement of Comprehensive Income. The Group determines the classification of its financial assets and liabilities at initial recognition and re-evaluates this designation at each financial year end.

A financial asset or liability is generally de-recognised when the contract that gives rise to it is settled, sold, cancelled or expires.

At the period end, the Group had no financial assets or liabilities designated at fair value through the Group Statement of Comprehensive Income.

(r) Share capital

Proceeds on issue of shares are included in shareholders' equity, net of transaction costs. The carrying amount is not re-measured in subsequent years.

(s) New accounting standards and interpretations Adoption of IFRS

The Group and Company financial statements have been prepared in accordance with IFRS, IAS and IFRS Interpretations Committee ("IFRSIC") effective as at 31 December 2014. The Group and Company have not chosen to adopt any amendments or revised standards early.

IFRSs Issued but not yet effective

The following IFRS, IAS and IFRICs have been issued, are not yet effective, and have not been adopted by the Group or the Company in these financial statements. The directors do not believe the adoption will have a material impact on the business.

Directors' emoluments (excluding social security costs, but including benefits in kind) disclosed above include £97,000 paid to the highest paid director.

An analysis of the highest paid director's remuneration is included in the Report of the Remuneration Committee. The average number of employees during the period (including directors), was as follows:

6. FINANCE INCOME AND FINANCE EXPENSE

7. INTEREST IN ASSOCIATE

In January 2014 the Group acquired a non-controlling interest in 4D Pharma Research Limited (formerly GT Biologics Limited) when it purchased 46% of the ordinary share capital.

8. TAXATION

The tax charge is made up as follows:

The income tax expenses can be reconciled to the accounting loss as follows:

At 31 December, the Group had tax losses available for carry forward of approximately £4,662 million. The Group has not recognised deferred tax assets relating to such earned forward losses of approximately £932,000.

Group's management considers that there is insufficient evidence of future taxable income, taxable temporary differences and feasible tax-planning strategies to utilise all or the cumulative losses and therefore it is not considered certain that the deferred tax assets will be realised in full. If future income differs from current projections, this could significantly impact the tax charge or benefit in future periods.

The loss for the period and the weighted average number of ordinary shares for calculating the diluted loss per share for the period ended 31 December 2014 are identical to those for the basic loss per share. This is because there are no outstanding share options that would have the effect of reducing the loss per ordinary share and would therefore not be dilutive under the terms of International Accounting Standard (IAS) No 33 Earnings per Share.

10. PROPERTY, PLANT AND EQUIPMENT

Goodwill amounting to £3.316 million relates to a cash generating unit (CGU), being 4D Pharma Research Limited (formerly GT Biologics Limited) acquired on 10 June 2014 when the Group acquired 37.5% of the share capital for a total consideration of £1,730,255 and The Microbiota Company Limited acquired on 17 July 2014 when the Group acquired 100% of the share capital. Analysis of these acquisitions is detailed in Note 13.

This goodwill, which has arisen on the business combinations detailed in Note 13, represents staff and accumulated know how after a fair value has been attributed to all other assets and liabilities acquired.

During the period, goodwill was tested for impairment in accordance with IAS 36 Impairment of Assets. The recoverable amount of the CGU exceeds the carrying amount of goodwill. The recoverable amount of each CGU has been measured using a value in use calculation and as such no impairment was deemed necessary. The key assumptions used (which are based on management's past experience) for the value in use calculations are those relating to the number of potential new targets for future products that can be identified in each year, and the length of time that this rate can be maintained. The recoverable amount of goodwill exceeds the carrying amount by 171%. The directors consider the number of targets to be identified, and the number of years that they believe they will be able to successfully identify new product targets, to be the most sensitive assumptions used in the impairment reviews. A reduction in excess of 38% in the number of targets per annum identified, or a reduction in excess of 33% in the number of years during which these are identified, would result in the recoverable amount of the 4D Pharma Research Limited CGU being equal to its carrying amount.

Intellectual property amounting to £1.923 million relates to a CGU being 4D Pharma Research Limited, acquired as per above. This represents bacteria identified by the Group's know how and processes and at different stages of research and development, from early identification to patented strains of bacteria.

The key assumptions used, which are based on management's past experience, for the value in use calculations are those relating to discount rates, growth rates and direct costs during the period. The value in use calculations are based on the future cash flows from approved risk based net present value forecasts that have been extrapolated to cover a period of 25 years, and to apply prudence no terminal value is added. Valuation of an early stage drug discovery pharmaceutical company is a notoriously difficult task. Analysis of financial history gives little indication of future performance. Despite this, for products currently in development sales potentials can be estimated and management have used their own experience as well as consulting with external experts to establish best estimates of sales pricing and revenue forecasting and these can provide the starting point for valuing these products and ensuring that their value has not been impaired. In addition, clinical development risks, measured as product attrition failure rates incurred as drugs progress through the clinic are reasonably well documented and can be applied as meaningful risk-adjusters to account for the chance of development failure. We have therefore adopted a risk-adjusted net present value of future cash flows method for this analysis for each CGU. At 31 December 2014 a pre-tax discount rate of 13% was applied and was used in the value calculation.

The recoverable amount of the 4D Pharma Research Limited CGU exceeds the carrying amount of this CGU by 953%. The directors consider the discount rate and revenues to be the most sensitive assumptions used in the impairment reviews. An increase in the discount rate of 31% or a reduction in certain revenues of in excess of 30% would result in the recoverable amount of the 4D Pharma Research Limited CGU being equal to its carrying amount.

Intangible assets, other than goodwill and intangible assets purchased as part of the acquisition of a subsidiary, are amortised on a straight line basis over ten years. Amortisation provided during the period is recognised in administrative expenses. The Group does not believe that any of its patents in isolation is material to the business. Patents amounting to £1.076 million were purchased by The Microbiota Company Limited immediately prior to its acquisition by the Group on 17 July 2014 via a loan advanced by 4D pharma plc.

12. INVESTMENT IN SUBSIDIARIES

*Formerly GT Biologics Limited

Additions were made as follows:

Prior to 4 June 2014 the acquisition was accounted for as an associate under IAS28.

The Microbiota Company Limited

With the exception of the companies noted below all other shareholdings are owned by 4D pharma plc.

* The remaining 16.5% ordinary share capital of 4D Pharma Research Limited was acquired on the 30 March 2015 taking the holding to 100%.

** GT Prohealth Limited is a 100% subsidiary of 4D Pharma Research Limited.

*** GT Therapeutics Limited is a 100% subsidiary of 4D Pharma Research Limited.

Goodwill relates to the accumulated knowledge and know how inherent within 4D Pharma Research Limited.

Impact of acquisition on the results of the Group

Included in the loss for the period is £2.175 million attributable to the additional business generated by 4D Pharma Research Limited (formally GT Biologics Limited).

Had this business combination been effected at 10 January 2014, 4D Pharma Research Limited (formally GT Biologics Limited) would have added £3.122 million to the loss from continuing operations.

Subsidiary acquired:

Goodwill relates to the accumulated knowledge and know how inherent within The Microbiota Company Limited.

Impact of acquisition on the results of the Group

Included in the loss for the period is £49,000 attributable to the additional business generated by The Microbiota Company.

Had this business combination been effected at 10 January 2014, The Microbiota Company Limited would have added £49,000 to the loss from continuing operations.

14. INVENTORIES

15. TRADE AND OTHER RECEIVABLES

The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

16. CASH, CASH EQUIVALENTS AND DEPOSITS

Under IAS 7 Statement of Cashflows, cash held on long-term deposits (being deposits with maturity of greater than three months and no more than twelve months) that cannot readily be converted into cash has been classified as a short-term investment. The maturity on this investment was less than twelve months at the reporting date.

Cash and cash equivalents at 31 December 2014 include deposits with original maturity of three months or less of £28,823,000 (Group) and £28,784,000 (Company).

The Directors consider that the carrying value of cash and cash equivalents approximates their fair value. For details on the Group's credit risk management refer to Note 22.

17. TRADE AND OTHER PAYABLES

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. Trade payables are non-interest bearing and are typically settled on 30 to 45 day terms.

The Director's consider that the carrying value of trade payables, other payables and accruals approximates to their fair value.

All trade and other payables are denominated in Sterling.

The Group has financial risk management policies in place to ensure that any trade payables are settled within the credit time frame; and no interest has been charged by any suppliers as a result of late payment of invoices during the reporting period presented herein.

18. DEFERRED TAX

19. SHARE CAPITAL

The balances classified as share capital and share premium include the total net proceeds (nominal value and share premium respectively) on issue of the Company's equity share capital, comprising 0.25 pence ordinary shares.

The Company issued in aggregate 20,000,000 ordinary shares of 0.25p at par value between 10 January 2014 and 18 January 2014.

The Company raised gross proceeds of £16,550,000 from a placing on 18 February 2014 through the issue of 16,550,000 new ordinary shares at an issue price of 100 pence per share. Issue costs associated with the placing totalled £504,212.

The Company raised gross proceeds of £21,500,000 from a placing on 14 July 2014 through the issue of 14,333,334 new ordinary shares at an issue price of 150 pence per share. Issue costs associated with the placing totalled £433,000.

20. CAPITAL AND RESERVES

The components of equity are as follows:

Called up share capital

The share capital account includes the par value for all shares issued and outstanding.

Share premium account

The share premium account is used to record amounts received in excess of the nominal value of shares on issue of new shares less the costs of new share issues.

Merger reserve

The merger reserve comprises the premium arising on share issued as consideration for the acquisition of subsidiary undertakings where merger relief under section 612 of the Companies Act 2006 applies.

Retained earnings

Retained earnings includes the accumulated profits and losses arising from the Group Statement of Comprehensive Income and certain items from Other Comprehensive Income attributable to equity shareholders net of distributions to shareholders.

Non-controlling interest

This reserve includes the accumulated profits and losses arising from the Group Statement of Comprehensive Income and certain items from Other Comprehensive Income attributable to the minority equity shareholders of subsidiary undertakings not wholly owned by the Group.

21. COMMITMENTS

Operating lease commitments

The Group leases premises under non-cancellable operating lease agreements. The future aggregate minimum lease and service charge payments under non-cancellable operating leases are as follows:

The Company has no lease commitments.

Capital expenditure

The Group has no committed capital expenditure at 31 December 2014.

The Company has no committed capital expenditure at 31 December 2014.

22. FINANCIAL RISK MANAGEMENT Overview

This Note presents information about the Group's exposure to various kinds of financial risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital.

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The executive directors report regularly to the Board on Group risk management.

Capital risk management

The Company reviews its forecast capital requirements on a half-yearly basis to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders.

The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in Notes 19 and 20 and in the Group Statement of Changes in Equity. Total equity was £37.048 million at 31 December 2014.

The Company is not subject to externally imposed capital requirements.

Liquidity risk

The Group's approach to managing liquidity is to ensure that, as far as possible, it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

The Group manages all of its external bank relationships centrally in accordance with defined treasury policies. The policies include the minimum acceptable credit rating of relationship banks and financial transaction authority limits. Any material change to the Group's principal banking facility requires Board approval. The Group seeks to mitigate the risk of bank failure by ensuring that it maintains relationships with a number of investment grade banks.

At the reporting date the Group was cash positive with no outstanding borrowings.

The values disclosed in the above table are carrying values. The Board considers that the carrying amount of financial assets and liabilities approximates to their fair value.

Interest rate risk

As the Group has no significant borrowings the risk is limited to the reduction of interest received on cash surpluses held at bank which receive a floating rate of interest. The exposure to interest rate movements is immaterial.

Maturity profile

The Directors consider that the carrying amount of the financial liabilities approximates to their fair value.

As all financial assets are expected to mature within the next twelve months an aged analysis of financial assets has not been presented.

As all financial liabilities are expected to mature within the next twelve months an aged analysis of financial assets has not been presented.

23. RELATED PARTY TRANSACTIONS

Group:

During the period Aquarius Equity Partners Limited, an entity controlled by Duncan Peyton and Alexander Stevenson, charged the Group £155,549 for consultancy and other office expenses and were owed £26,735 at 31 December 2014.

During the period Thomas Engelen charged the Group £15,015 for consultancy services and was owed £nil at 31 December 2014.

During the period Fommir Limited, an entity controlled by Douglas Thomson, charged the Group £73,092 for consultancy services and was owed £12,123 at 31 December 2014.

On 10 January 2014 a loan of £500,000 carrying an interest rate of 4% above Bank of England base rate was novated by agreement between David Norwood and Schosween 17 Limited (Company Registered Number 8795203) to 4D pharma plc. This loan was repaid on 18 February 2014 by 4D pharma plc and £5,178 interest was charged.

Company:

Transactions between 100% owned Group companies have not been disclosed as these have all been eliminated in the preparation of the Group financial statements.

During the period the Company recharged 4D Pharma Research Limited, a 83.5% owned subsidiary £86,000 for various expenses incurred on behalf of the subsidiary. The net inter-company balance due to the Company at 31 December 2014 totalled £2.727 million.

24. SUBSEQUENT EVENTS

On 10 February 2015 4D pharma plc raised a further £34.225 million (net of expenses) via the placing of 8,475,610 new ordinary shares at 410 pence per share.

On 30 March 2015, 4D pharma plc acquired a further 16.5% of the ordinary share capital of 4D Pharma Research Limited for a cost of £230,000 taking their holding to 100%.