1. General information

Motif Bio plc (the "Company" or "Motif") is domiciled in England and Wales having originally been incorporated on November 20, 2014 as Motif Bio Limited, a private company, with company registration number 09320890.  On 1 April 2015, the Company was re-registered as a public company limited by shares and changed its name to Motif Bio plc.  The Company's registered office is at: 201 Temple Chambers, 3-7 Temple Avenue, London EC4Y 0DT, U.K. 

The Company's ordinary shares are listed on the AIM Market ("AIM") of the London Stock Exchange plc.  On 28 January 2020, the Company announced that it was reclassified as an AIM Rule 15 Cash Shell and, as such, was required to make an acquisition or acquisitions which constitute(s) a reverse takeover under AIM Rule 14 within six months to continue to have its shares traded on the AIM market.  On 29 July 2020, the London Stock Exchange suspended the trading in the Company's AIM listed ordinary shares pursuant to AIM Rule 40. The AIM rules initially provided that the Company had an additional six months from the suspension date, or 28 January 2021, to complete a qualifying transaction. On 27 January 2021 and 29 March 2021 Motif provided the market with updates regarding the proposed Reverse Takeover via RNS, in which the Company confirmed that it would remain suspended from trading while the proposed transaction was negotiated and advanced.  If the Company is unable to complete reverse takeover transaction for re-admission of trading on AIM the listing of the Company's common shares will be cancelled.

From November 2016 until December 2019, the Company had American Depository Shares ("ADS's") and ADS warrants that were traded on the NASDAQ Capital Market.  Effective December 2019 following a voluntary delisting, the Company's ADS's and ADS warrants are no longer traded on the NASDAQ Capital Market.

The financial statements presented represent the accounts of the Company. After shareholder approval of a corporate restructuring in November 2019, the Company's former wholly owned subsidiary, Motif BioSciences Inc., an entity incorporated in U.S. State of Delaware, was reported as discontinued operations as at 31 December 2019. During the first quarter of 2020, the Company appointed John Palmer of Tamarack Associates, Inc. as the sole Executive Officer of Motif Biosciences Inc.  As a result, the Company determined that it no longer had control over Motif BioSciences Inc. will no longer consolidate the financial results of the entity for financial reporting periods commencing in 2020.  In February 2021, the Company divested it's the ownership of Motif BioSciences Inc., to Orange Avenue Technologies, LLC, an entity controlled by John Palmer of Tamarack Associates Inc. 

The financial statements were approved by the Board of Directors on 10 May 2021.

Going concern

The Company had US $0.5 million and US $0.6 million in cash as of 31 December 2020 and 2019, respectively. The Company's Directors are focused on completing a reverse takeover over transaction for the Company. There is no assurance that the effort will be successful to complete a reverse takeover or qualifying transaction to avoid being delisted from the AIM market. Based on this condition, including recurring and expected continuing operating losses, the Directors have concluded that there is material uncertainty that may cast a significant doubt about the Company's ability to continue as a going concern and, therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business.

The financial statements have been prepared on the basis that the Company is a going concern, which contemplates the continuity of normal business activity, realization of assets and settlement of liabilities in the normal course of business. Should the entity not be able to continue as a going concern, it may be required to realize its assets and discharge its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities that might be necessary should the Company not continue as a going concern.

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 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 statement of comprehensive loss. A summary of the significant accounting policies is set out below.

2.    Significant accounting policies, continued 

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 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 recently adopted new standards that are potentially relevant to the Company are discussed below.

IFRS 3- Business Combination - effective date 1 January 2020 - The amendments confirm that a business must include inputs and a process and clarified that the process must be substantive, and the inputs and process must together significantly contribute to creating outputs.  The amendment also narrowed the definition of a business and included tests that make it easier to conclude whether a business or group of assets was acquired. Any future impact of adopting the amendment would be primarily dependent on future acquisition transactions, if any.

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 financial statements.

The chief operating decision-maker had determined that the Company currently has one segment-to support its strategy as an AIM 15 cash shell entity focused on sourcing a reverse-take-over candidate. In 2019 prior to the corporate restructuring approved by shareholders in November 2019, the Company had one segment to support the development and commercialization of pharmaceutical formulations.

c.   Foreign currency translation

(a) Functional and Presentation Currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The 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 the statement of comprehensive loss.

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 comprehensive loss.

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.   Financial assets and liabilities

Financial assets and financial liabilities are included in the Company's statement of financial position when it 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 Company has transferred substantially all risks and rewards of ownership.

e.   Fair value disclosures

The Company'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. The Company's derivative liability is measured at fair value using Level 1 and 2 inputs (Note 11).

There were no non-recurring fair value measurements for the years ended 31 December 2020 or 2019.

When measuring the fair value of an asset or a liability, the Company 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).

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 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 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 and accrued liabilities

Trade payables and accrued liabilities are obligations to pay for goods or services that have been acquired in the ordinary course of business from or rendered by suppliers. All 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 and accrued liabilities are initially measured at fair value, and, where applicable, 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 Company does not have a policy of engaging in speculative transactions, nor does it issue or hold financial instruments for trading purposes. 

The Company has 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 statement of comprehensive loss, as the Company does not apply hedge accounting.

f.   Impairment of financial assets

The Company assessed at the end of each reporting period whether there was 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.

Prior to being classified as discontinued operations, the Company's former wholly owned subsidiary Motif BioSciences, Inc. was in proprietary drug discovery research and development. In early 2020, the Company determined that it no longer has control of Motif BioSciences Inc. in accordance with IFRS 10 Consolidated Financial Statements and, as a result, the Company will not consolidate Motif BioSciences Inc. (Note 1). 

The Company evaluated the investment and intercompany receivable balances for impairment as of the 31 December 2019.  Based on the operations of Motif BioSciences Inc. being discontinued, the Company determined that the probability of recovering both balances was unlikely.  As a result, the Company recorded an impairment charge equal to the full amount of the respective balances as of 31 December 2019.

g.   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. 

h.     Financial income

Financial income comprises interest receivable on funds invested.

Interest income is recognized in the statement of comprehensive loss as they accrue, using the effective interest method.

i.      Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognized in the consolidated statement of comprehensive loss 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 reporting 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 reporting 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.

j.   Earnings per share

The Company 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 Company 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. Refer to Note 9 for calculation of EPS for all periods presented.

k.   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.

l.   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:

Going concern

Refer to going concern assessment described in Note 1.

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 warrants, including appropriate factors for volatility, risk-free interest rate, and applicable future performance conditions and exercise patterns.

3.   Financial risk management

The Company's exposure to financial risks and how these risks could affect the Company's future financial performance is primarily limited to credit risk from a counterparty, liquidity risk and market risk.

All deposits are held with banks that have a minimum S&P rating of A or A-3 for short term deposits. At 31 December 2020, no current assets were impaired.

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

The Company has financed its operations to date using cash raised through the issuance equity. The Directors acknowledge that uncertainty remains over the ability of the Company to have the resources to support the Company's foreseeable operating needs as an AIM Rule 15 cash shell and complete a qualifying transaction.  An inability to complete a qualifying transaction will result in the Company being delisted from the AIM Market of the London Stock Exchange.

The Company 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 Company 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:

The exchange rate between British Pound and the United States Dollar at 31 December 2020 and 2019 was 1.37 and 1.33, respectively. A change in foreign currency exchange rates may have a significant impact on the profit or losses of the Group.

4.    Other income and expense items

This note provides a breakdown of the items included in other income, finance income and expenses by nature for the years ended 31 December 2020 and 2019.

a.     Breakdown of expenses by nature

The Company had one male Executive Director and one male employee at 31 December 2020.

b.    Auditors' Remuneration

c.     Finance income and cost

5.   Directors' remuneration

As part of the corporate restructuring approved by the Company's shareholders on 14 November 2019 (Note 1) directors Dr. Craig Albanese, Charlotta Ginman, Zaki Hosny, Dr. Mary Lake Polan, and Andrew Powell resigned from the board and all directors forfeited all previously outstanding vested and non-vested option and waived accrued cash fees owed at that time.

The table below summarizes the director's cash remuneration for the periods presented.

⁽¹⁾        The compensation for Dr. Lumsden and Mr. Gold excludes US $8,400 and US $8,400 in employer provided 401k pension contribution during 2019.  There was no contribution in 2020.

⁽²⁾        Effective 18 March 2019, Richard Morgan resigned from the Board of Directors and his role as Chairman. Bruce Williams was appointed interim Chairman of the Board at that time.

⁽³⁾        Members' resignation effective 15 November 2019 (Note 1).

The compensation for Board members continuing in 2020 is outlined below by individual.

Bruce Williams is to receive a monthly salary of US $2,500 and is entitled to receive an additional monthly salary of US $2,500 that is deferred and payable only upon the occurrence of a reverse takeover transaction or similar transaction. Mr. Williams has voluntarily agreed to waive all deferred cash compensation related to the occurrence of a reverse takeover.

Graham Lumsden, in his capacity as Non-Executive Director, is to receive a monthly salary of US $1,250 and is entitled to receive an additional monthly salary of US $2,500 that is deferred and payable only upon the occurrence of a reverse takeover transaction or similar transaction. Further, as a result of his executive service earlier to May 2020, Dr. Lumsden is entitled to an additional US $100,000 that is deferred and payable only upon the occurrence of a reverse takeover transaction or similar transaction.  Dr. Lumsden has voluntarily agreed to waive all deferred cash compensation related to the occurrence of a reverse takeover.

Chris Wardhaugh, appointed as a Non-Executive Director on 4 May 2020, is to receive a monthly salary of £1,000 (GBP) and is entitled to receive an additional monthly salary of £2,000 (GBP) that is deferred and payable only upon the occurrence of a reverse takeover transaction or similar transaction.  Mr. Wardhaugh has voluntarily agreed to waive all deferred cash compensation related to the occurrence of a reverse takeover.

Jonathan Gold, in his capacity as Chief Financial Officer, President and Chief Business Officer and Executive Director is to receive a monthly salary of US $25,000 and is entitled to receive an additional monthly salary of US $25,000 that is deferred and payable only upon the occurrence of a reverse takeover transaction or similar transaction.  Mr. Gold has voluntarily agreed to waive all deferred cash compensation related to the occurrence of a reverse takeover.

6.    Income tax expense

The Company did not recognize U.K. corporate tax expense in the statement of comprehensive loss during the years ended 31 December 2020 and 2019.  The main rate of U.K. corporation tax was reduced from 21% to 19% from 1 April 2015. The Company has an unrecognized net deferred tax asset of US $18 million related to net cumulative operating losses of US $107 million, which includes the impairment charges relating to the Company's operating receivable from and investment in its previously discontinued subsidiary Motif BioSciences, Inc.  Net operating loss are subject to review and possible adjustment by taxing authorities and may become subject to an annual limitation, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. There is no assurance as to the extent and timing of the Company's ability to realize the possible tax benefits derived from cumulative net operating losses.

7.    Loss per share

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of shares in issue during the year.  Diluted EPS is computed by dividing net income (loss) by the weighted average of all potentially diluted share of common stock that were outstanding during the periods presented.

The treasury stock method is used in the calculation of diluted EPS for potentially dilutive liability classified options and warrants, which assumes that any proceeds received from the exercise of in-the-money options and warrants, would be used to purchase common shares at the average market prices for the period.

The following table shows the derivation of loss per share for continuing operations.

The following potentially dilutive securities outstanding at 31 December 2020 and 2019 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive.

8.    Prepaid expenses and other receivables

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 Company held no collateral as security. The Directors estimate that the carrying value of receivables approximated their fair value.

9.    Cash and cash equivalents

10.    Financial liabilities

The Directors estimate that the carrying value of trade and accrued expenses approximated their fair value. Trade payables are generally payable on normal trade terms, usually 30 days.

11.  Warrants

Warrant activity

The Company has issued warrants for services performed and in conjunction with various equity financings. The Company's warrants represent ordinary shares or ADS 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 Company's warrant activity during the year ended 31 December 2020:

The warrants outstanding and exercisable as of 31 December 2020 were as follows:

⁽¹⁾        Warrants are equity classified.

⁽²⁾        Warrants totalling 137,654,293 of ordinary shares and 1,212,902 of ADS are liability classified.

⁽³⁾        Each ADS represents 20 ordinary shares.

⁽⁴⁾        Warrants totalling 134,479,904 of ordinary shares were issued on 27 January 2017.  The accounting treatment thereof was recorded as of 31 December 2019 as an adjusting subsequent event. A total of 7,142,857 of these warrants were exercised prior to 31 December 2020.

Liability classified warrants

ADS warrants

On 23 November 2016, the Company closed an initial U.S. offering of 2,438,491 ADS and 1,219,246 ADS warrants at a price of US $6.98 per ADS/Warrant combination. Each ADS represented 20 ordinary shares. The warrants have an exercise price of US $8.03 per ADS and expire on 23 November 2021.  As the Company failed to maintain the effectiveness of its Registration Statement, the warrant is only exercisable on a cashless basis. This results 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 Company recorded a derivative liability of US $3.8 million using the Black-Scholes model.

On 1 August 2017, the Company issued to a third party a warrant to purchase up to 60,000 ADSs at an exercise price of US $7.26 per ADS. A total of 10,000 ADSs were vested and outstanding as of 30 June 2020. The remaining 50,000 ADSs were forfeited. On issuance of the ADS warrants, the Company recorded a derivative liability of $0.1 million using the Black-Scholes model.

The Company 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 Company's common stock, stock price volatility of comparable companies, the contractual term of the warrants, risk free interest rates and dividend yields. November 26, 2019, the Company notified NASDAQ Capital Market of its intention to delist the ADS shares and ADS warrants from trading.  The ADS shares and ADS warrants were voluntarily delisted from trading in December 2019.

At 31 December 2020 and 2019, the liability classified ADS warrants had a fair value of US $ nil value using the following weighted-average assumptions in the Black-Scholes model:

⁽¹⁾        Effective December 2019 following a voluntary delisting, the Company's ADS shares are no longer traded on the NASDAQ Capital Market. The share price utilized represent the Company's ordinary share price to reflect the conversion to ADS equivalents and conversion to the U.S. dollar.

Ordinary warrants

On 23 November 2016, the Company 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 23 November 2021. This results 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 Company recorded a derivative liability of US $1.8 million using the Black-Scholes model.

On 27 January 2020, the Company granted to Hercules Capital Inc. warrants over an aggregate of 121,337,041 ordinary shares. These warrants will expire on 27 January 2025 and have an exercise price of 0.42 pence per share. The Company also granted warrants over 6,000,000 ordinary shares to certain former board members at an exercise price of 0.24 pence per share that will expire on 27 January 2025.  The issuance of these warrants was presented as an adjusting subsequent event at 31 December 2019 (Note 1).  

At 31 December 2020 and 2019, the liability classified ordinary warrants had a fair value of US $0.1 million and US $0.2 million, respectively, using the following weighted-average assumption in the Black-Scholes model:

The following is a summary of the liability classified warrant activity, including both ADS and Ordinary warrants, during the years ended 31 December 2020 and 2019:

12.    Share based payments

Motif Bio plc adopted a Share Option Plan (the "New Plan") on 1 April 2015. 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 Company 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.

All options at 31 December 2020 had a per share exercise price of US $0.14 and a remaining contractual term of 2 years.

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

For the year ended 31 December 2019, the Company recorded a net gain of $0.4 million due to the forfeitures that occurred during the period.  No gain was recorded for the forfeitures that occurred during the year ended 31 December 2020.

13.     Share capital

On 14 November 2019, each of the Company's ordinary shares of 1 pence par value were divided into one New Ordinary Share of 0.01 pence par value and one deferred share of 0.99 pence stated value. The deferred shares have no rights and the Company did not issue any share certificates or credit CREST accounts in respect of them. The deferred shares are not admitted to trading on AIM and have no rights to participate in the profits of the Company.  In the event of a wind-down or dissolution of the Company, the deferred shares shall be entitled to participate pari-passu in the dissolution of the Company's assets that are in excess of GBP £1 trillion. 

The number of New Ordinary Shares in issue and held by each Shareholder at the time of the Share Capital Reorganisation, was equal to the number of existing Ordinary Shares in issue immediately prior to the Share Capital Reorganisation. Only the nominal value changed with respect to the New Ordinary Share. The New Ordinary Shares will continue to carry the same rights as those attached in the previously existing Ordinary Shares, save for the reduction in nominal value.

The net effect is that the par value for the Company's ordinary shares changed to 0.01 pence as a result of this sub-division.

¹ On 14 November 2019, each ordinary share of 1 pence were divided into one New Ordinary Share of 0.01 pence par value and one deferred share of 0.99 pence stated value, as previously described. The Deferred shares have no rights to participate in profits and losses of the Company.

During 2019, 830,780 ordinary shares were issued upon the exercise of warrants.

On 5 May 2020, the Company issued 162,500,000 new ordinary shares at 0.004 pence per share and received US $0.8 million of net proceeds.

On 14 May 2020, the Company issued 7,142,857 new ordinary shares upon the exercise of a warrant.

On 18 November 2019, the Company issued 142,857,143 new ordinary shares at 0.42 pence per share and received US $0.7 million of net proceeds.

On 25 March 2019, the Company placed 45,000,000 new ordinary shares at 6 pence per share and received US $3.3 million of net proceeds.

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

The Deferred shares were issued pursuant to a corporate restructuring and consequent capital reorganization approved by the Company's shareholders on 14 November 2019 in accordance with which each Ordinary Share of 1 penny was subdivided into one new ordinary share of 0.01 pence and one deferred share of 0.99 pence. The deferred shares have no rights to participate in the profits of the company and the Company has not issued any share certificates or credited CREST accounts in respect of them. The deferred shares were not admitted to trading on AIM.

Retained deficit represents accumulated losses and a Formation reserve that arose when Motif Bio plc re-organized and became the parent entity of Motif Biosciences, Inc.in 2015.  Being a common control transaction and, therefore, outside the scope of IFRS 3, it was accounted for as a group re-organization and not a business combination. 

14.    Subsequent events

In January 2021, the Company divested the ownership of Motif Biosciences, Inc. to Orange Avenue Technologies, LLC ('Orange'), an entity controlled by John Palmer of Tamarack Associates Inc.  Mr. Palmer, through Tamarack Associates Inc., was previously appointed in early 2020 as the sole Executive Officer of Motif BioSciences.  Under the Stock Purchase Agreement with Orange, the Company will receive 90% of the revenues received by Inc. from iclaprim, above a $250,000 threshold.

On 27 January 2021 and 29 March 2021 Motif provided the market with updates regarding the proposed Reverse Takeover via RNS, in which the Company confirmed that it would remain suspended from trading while the proposed transaction was negotiated and advanced.  If the Company is unable to complete reverse takeover transaction for re-admission of trading on AIM the listing of the Company's common shares will be cancelled.