Financing and Capital Raising - The Group raised gross proceeds of £13.4 million in February 2019 and £2.4 million in October 2019 through various offerings [771]. - A registered direct offering in May 2020 raised $3.0 million and £1.8 million in the UK, indicating ongoing capital-raising efforts [771]. - The Group anticipates requiring additional financing within the next 12 months to support development programs and operations, raising substantial doubt about its ability to continue as a going concern [771]. - The Group is evaluating near-term funding options, including fundraising and asset partnerships, as part of its strategic review [773]. - The Group's ability to continue as a going concern depends on obtaining additional capital or disposing of assets, with no assurance of timely or favorable terms [774]. Operational Risks - The impact of COVID-19 has introduced increased uncertainty over forecasts, potentially causing delays in operations [772]. - Liquidity risk arises from working capital management, with the aim to settle financial obligations as they become due [770]. Financial Risks - The total exposure to credit risk is equal to the total value of financial assets held at year-end, with a loss allowance recognized for expected credit losses [765]. - Foreign exchange risk is significant due to operations in Spain, with currency fluctuations impacting net assets when translated into British pounds sterling [768]. - The Group does not hedge its net investments in overseas operations due to the disproportionate cost relative to exposure [768].

Part I [ITEM 3. KEY INFORMATION](index=8&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section presents selected five-year financial data, detailing the impact of acquisitions and the Midatech US divestiture, alongside comprehensive risk factors across financial, operational, and ownership aspects [Selected Financial Data](index=8&type=section&id=A.%20Selected%20Financial%20Data) The company presents IFRS-compliant selected financial data for fiscal years 2014-2018, with historical continuing operations data made comparable by reclassifying Midatech US results as discontinued following its November 2018 sale - Effective November 1, 2018, Midatech US was sold, with its financial results reclassified as loss from discontinued operations for fiscal 2018 and all comparative prior periods[25](index=25&type=chunk) Selected Consolidated Financial Data (£ thousands) | Indicator | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue (Continuing)** | 149 | 149 | 776 | 273 | 25 | | **Loss from continuing operations** | (10,368) | (11,705) | (6,161) | (9,887) | (8,822) | | **Loss from discontinued operations, net of tax** | (4,662) | (4,359) | (14,001) | (211) | --- | | **Loss for the year** | (15,030) | (16,064) | (20,162) | (10,099) | (8,822) | | **Basic and diluted loss per ordinary share—pence - continuing** | (17p) | (23p) | (17p) | (40p) | (98p) | | **Cash and cash equivalents (End of Year)** | 2,343 | 13,204 | 17,608 | 16,175 | 30,325 | | **Total assets (End of Year)** | 20,444 | 49,224 | 56,689 | 64,041 | 46,663 | | **Total equity (End of Year)** | 16,924 | 34,676 | 45,724 | 46,887 | 41,989 | [Risk Factors](index=9&type=section&id=D.%20Risk%20Factors) The company faces significant risks including a history of losses, reliance on early-stage product development, and financing needs, alongside business, industry, and ownership risks such as clinical trial uncertainties, competition, and foreign private issuer complexities - The company has a history of significant losses, reporting a **net loss of £15.03 million** for 2018 and an **accumulated deficit of £89.72 million**, with losses expected to continue[33](index=33&type=chunk) - The company's early-stage operations have minimal recurring revenue, with success contingent on the development, regulatory approval, and commercialization of product candidates[36](index=36&type=chunk)[37](index=37&type=chunk) - The company faces political, regulatory, and economic risks from Brexit, potentially impacting marketing authorizations, manufacturing, and capital access[45](index=45&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk) - As of February 2019, China Medical System Holdings Limited (CMS) affiliated entities control approximately **50.8% of the company's voting power**, enabling substantial influence over corporate matters[192](index=192&type=chunk) - The company's status as a "foreign private issuer" and "emerging growth company" exempts it from certain SEC reporting and corporate governance requirements applicable to U.S. domestic companies[211](index=211&type=chunk)[218](index=218&type=chunk) [ITEM 4. INFORMATION ON THE GROUP](index=42&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20GROUP) This section outlines the company's history, including key acquisitions and the US commercial arm divestiture, and provides a comprehensive business overview focusing on its three proprietary drug delivery platforms, rare cancer pipeline, intellectual property, manufacturing, regulations, and competitive landscape [History and Development of the Group](index=42&type=section&id=A.%20History%20and%20Development%20of%20the%20Group) Midatech, formed in 2000 and publicly listed in 2014, strategically acquired Q Chip and DARA BioSciences, later divesting Midatech US in November 2018 to refocus on R&D, with capital expenditures primarily supporting manufacturing and R&D facilities - The company, formed in 2000, went public on AIM in December 2014, acquiring key technologies through the purchases of Q Chip (2014) and DARA BioSciences (2015)[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) - A significant strategic shift involved the sale of the US commercial subsidiary, Midatech US, to a Barings LLC affiliate for an initial consideration of **$13.0 million** and up to **$6.0 million** in potential milestone payments, effective November 1, 2018[243](index=243&type=chunk) Capital Expenditures (£ million) | Year | Capital Expenditure | | :--- | :--- | | 2018 | £0.24 million | | 2017 | £0.71 million | | 2016 | £1.35 million | [Business Overview](index=43&type=section&id=B.%20Business%20Overview) Midatech is an R&D-focused biopharmaceutical company specializing in rare cancer medicines, leveraging its Q-Sphera™, MidaSolve™, and MidaCore™ drug delivery platforms, with key clinical programs including MTD201 and MTX110, supported by a cGMP facility and robust intellectual property - The company focuses on developing rare cancer medicines using three proprietary drug delivery platforms: **Q-Sphera™** (sustained release), **MidaSolve™** (direct tumor administration), and **MidaCore™** (targeted delivery)[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) - Priority clinical programs include **MTD201** (Q-Octreotide) for acromegaly and neuroendocrine tumors, and **MTX110** for diffuse intrinsic pontine glioma (DIPG), a rare pediatric brain cancer[251](index=251&type=chunk) - Following the sale of its US commercial arm, the company's revenue from continuing operations is derived from R&D collaborations and attributed to Europe[258](index=258&type=chunk) - The company holds a strong intellectual property portfolio with **107 granted patents**, **83 pending applications**, and **36 patent families** covering its technologies[256](index=256&type=chunk) [ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=74&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides management's discussion and analysis of financial performance, detailing recent developments like a February 2019 share issuance and the Midatech US sale, comparing operating results across 2016-2018, and discussing liquidity, capital resources, critical accounting policies, and contractual obligations [Operating Results](index=75&type=section&id=A.%20Operating%20Results) For continuing operations, revenue remained consistent while R&D costs increased, leading to a reduced loss from continuing operations, with discontinued operations reporting a significant loss including the Midatech US sale impact Comparison of Operating Results (Continuing Operations, £ thousands) | Item | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Total revenue** | 1,938 | 989 | 1,323 | | **Research and development costs** | (9,359) | (8,329) | (7,730) | | **Administrative costs** | (4,394) | (4,266) | (3,245) | | **Impairment of intangible assets** | - | (1,500) | - | | **Loss from operations** | (11,815) | (13,276) | (9,652) | | **Loss from continuing operations** | (10,368) | (11,705) | (6,161) | - R&D costs increased by **12%** in 2018 to **£9.36 million**, primarily due to higher development activity for lead clinical programs MTD201 and MTX110[522](index=522&type=chunk) - The loss from discontinued operations (Midatech US) was **£4.67 million** in 2018, including a **£1.41 million** loss on the business disposal[528](index=528&type=chunk) - The 2017 financial statements were restated to correct a misclassification of a **£1.5 million** impairment charge, which was incorrectly deducted from administrative costs instead of research and development costs[478](index=478&type=chunk)[480](index=480&type=chunk) [Liquidity and Capital Resources](index=84&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company has a history of net losses and negative operating cash flows, primarily financed through equity offerings and asset sales, with recent fundraising expected to provide sufficient liquidity for the next 12 months - The company's cash and cash equivalents were **£2.34 million** at year-end 2018, a decrease from **£13.20 million** at year-end 2017[540](index=540&type=chunk) - Subsequent to year-end, in February 2019, the company raised net proceeds of approximately **£12.5 million** from an issuance of new Ordinary Shares and warrants[463](index=463&type=chunk)[540](index=540&type=chunk) - In November 2018, Midatech US was sold for an initial cash consideration of **$13.0 million**, with approximately **$7.7 million** of proceeds used to repay and terminate the MidCap credit facility[538](index=538&type=chunk)[542](index=542&type=chunk) Summary of Cash Flows (£ thousands) | Activity | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Cash used in operating activities** | (13,450) | (12,953) | (13,086) | | **Cash provided by (used in) investing activities** | 9,042 | (1,470) | (1,202) | | **Cash (used in) provided by financing activities** | (6,472) | 10,227 | 15,255 | | **Net (decrease) increase in cash** | (10,880) | (4,146) | 967 | [Tabular Disclosure of Contractual Obligations](index=89&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) As of December 31, 2018, the company's total contractual obligations amounted to **£1.97 million**, primarily comprising government research loans, operating leases, and finance leases Contractual Obligations as of December 31, 2018 (£ thousands) | Obligation Type | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Bank Loans | 5 | 5 | -- | -- | -- | | Government Research Loans | 1,104 | 284 | 544 | 276 | -- | | Finance Leases | 283 | 86 | 118 | 79 | -- | | Operating Leases | 577 | 384 | 193 | -- | -- | | **Total** | **1,969** | **759** | **855** | **355** | **--** | [ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=90&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, including directors and senior management compensation, board practices adhering to the QCA Corporate Governance Code, and employee data, alongside equity incentive plans [Directors and Senior Management](index=90&type=section&id=A.%20Directors%20and%20Senior%20Management) As of December 31, 2018, key leadership included Dr. Craig Cook (CEO), Nicholas Robbins-Cherry (CFO), and Rolf Stahel (Non-Executive Chairman), with Dr. Huaizheng Peng appointed in February 2019 following CMS investment - Key leadership includes **Dr. Craig Cook** (CEO), **Nicholas Robbins-Cherry** (CFO), and **Rolf Stahel** (Non-Executive Chairman)[577](index=577&type=chunk) - Dr. Craig Cook was appointed CEO on June 1, 2018, succeeding Dr. James Phillips[578](index=578&type=chunk) - Dr. Huaizheng Peng, a CMS executive, was appointed to the Board in February 2019 as part of the investment and collaboration agreement with CMS[582](index=582&type=chunk) [Compensation](index=91&type=section&id=B.%20Compensation) Executive compensation for 2018 included salaries of **£233,241** for the CEO and **£176,000** for the CFO, with no bonuses paid, while non-executive directors received annual fees and equity-based awards through incentive plans 2018 Executive Officer Compensation (£) | Name | Position | Salary (£) | Bonus (£) | Other Compensation (£) | Total (£) | | :--- | :--- | :--- | :--- | :--- | :--- | | Dr. Craig Cook | CEO | 233,241 | - | 17,000 | 250,241 | | Nicholas Robbins-Cherry | CFO | 176,000 | - | 17,600 | 193,600 | - Non-executive directors receive an annual fee of **£30,400**, while Non-Executive Chairman Rolf Stahel received a total of **£95,000** in 2018, comprising a director fee and a consultancy fee[589](index=589&type=chunk)[594](index=594&type=chunk) - In October 2017, the Board of Directors agreed to reduce base salaries and fees, with reversal contingent on the company's share price returning to a closing price of **£1.00**[586](index=586&type=chunk) [Board Practices](index=96&type=section&id=C.%20Board%20Practices) The six-member Board of Directors, adhering to the QCA Corporate Governance Code, has established Audit, Nomination, Remuneration, and Disclosure committees with delegated responsibilities, including an Audit Committee with Simon Turton as the financial expert - The Board has adopted the Quoted Companies Alliance (QCA) Corporate Governance Code[617](index=617&type=chunk) - The Board has four key committees: Audit, Nomination, Remuneration, and Disclosure, each with specific delegated responsibilities[620](index=620&type=chunk) - The Audit Committee comprises three independent directors, with Simon Turton designated as an "audit committee financial expert"[621](index=621&type=chunk) [Employees](index=98&type=section&id=D.%20Employees) As of December 31, 2018, the company employed **73 people**, a decrease from 85 due to US operations divestiture, with the majority of the workforce concentrated in Research and Development in the UK and Spain Employee Headcount by Function and Year | Business functional area | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Research and development | 62 | 62 | 54 | | Sales and marketing | -- | 6 | 6 | | General and administration | 11 | 17 | 19 | | **Total** | **73** | **85** | **79** | Employee Headcount by Geography and Year | Geography | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | United Kingdom | 35 | 39 | 37 | | North America | -- | 12 | 14 | | Spain | 38 | 34 | 28 | | **Total** | **73** | **85** | **79** | [ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=101&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details the company's ownership structure, with CMS-affiliated entities holding **50.8%** and Woodford Investment Management **19.0%** as of April 2019, and outlines related party transactions including a consultancy agreement with the Chairman's company and comprehensive agreements with CMS entities [Major Shareholders](index=101&type=section&id=A.%20Major%20Shareholders) As of April 15, 2019, the company's ownership is highly concentrated, with CMS-affiliated entities beneficially owning **50.8%** of Ordinary Shares and Woodford Investment Management Limited holding a **19.0%** stake, granting CMS significant influence Major Shareholders as of April 15, 2019 | Name of Beneficial Owner | Percent of Class | | :--- | :--- | | Entities affiliated with Dr. Lam Kong (CMS) | 50.8% | | Woodford Investment Management Limited | 19.0% | | Ora Capital | 4.1% | - CMS-affiliated entities acquired their significant stake in February 2019 and hold warrants that, if exercised, would increase their ownership to approximately **67%**[659](index=659&type=chunk) [Related Party Transactions](index=103&type=section&id=B.%20Related%20Party%20Transactions) The company has a consultancy agreement with Chairman Rolf Stahel's Chesyl Pharma Limited and, following a January 2019 investment, entered into several agreements with CMS entities, including a Subscription Agreement, License Agreement, Relationship Agreement, Warrant Instrument, and Lock-In Deed - A consultancy agreement with Chesyl Pharma Limited, owned by Chairman Rolf Stahel, provides management consultancy services for an annual payment of **£40,000** plus additional fees[660](index=660&type=chunk)[661](index=661&type=chunk) - In January 2019, the company entered into a series of agreements with CMS entities, including a Subscription Agreement for an **£8.0 million** investment, a License Agreement for product development in China, and a Relationship Agreement for independent governance[662](index=662&type=chunk)[663](index=663&type=chunk)[664](index=664&type=chunk) - The Relationship Agreement grants A&B (HK) Company Limited, a CMS affiliate, the right to appoint one non-executive director to the Board as long as it holds at least **10%** of the issued shares[668](index=668&type=chunk) [ITEM 8. FINANCIAL INFORMATION](index=105&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section confirms the inclusion of consolidated financial statements elsewhere in the report and states the company's policy of never having declared or paid cash dividends, with no present intention to do so - The company has never declared or paid any cash dividends on its shares and has no present intention of doing so in the foreseeable future[678](index=678&type=chunk) - The company is not currently a party to any material legal proceedings[677](index=677&type=chunk) [ITEM 10. ADDITIONAL INFORMATION](index=106&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides supplementary details, including the company's articles of association, confirmation of no UK exchange controls for non-resident shareholders, and a detailed summary of UK and US tax considerations for dividends, capital gains, and specific regulations like SDRT and PFIC rules [Taxation](index=107&type=section&id=E.%20Taxation) This subsection summarizes UK and US tax implications for shareholders, covering UK dividend and stamp duty exemptions for AIM-traded shares, and addressing US treatment of dividends, capital gains, and the potential adverse tax consequences of Passive Foreign Investment Company (PFIC) classification - **UK Taxation:** Dividend payments are made without UK withholding tax, and transfers of Ordinary Shares on AIM are currently exempt from UK stamp duty and stamp duty reserve tax (SDRT)[694](index=694&type=chunk)[708](index=708&type=chunk) - **US Taxation:** The company does not believe it was a Passive Foreign Investment Company (PFIC) for 2018, but its status is determined annually with no assurance for future years, and if classified as a PFIC, US holders could face adverse tax consequences, with the company not intending to provide information for a Qualified Electing Fund (QEF) election[233](index=233&type=chunk)[735](index=735&type=chunk)[736](index=736&type=chunk) [ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=114&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market, credit, and liquidity risks, with foreign exchange risk significant due to Euro and USD operations, and liquidity managed through expenditure control and recent fundraising, mitigating short-term concerns - The company's primary financial risks include market risk (foreign exchange, interest rate), credit risk, and liquidity risk[748](index=748&type=chunk) - Significant foreign exchange risk exists due to operations in Spain (Euro) and historical US operations (USD), which the company does not hedge due to disproportionate cost[754](index=754&type=chunk)[755](index=755&type=chunk) - Liquidity risk is actively managed, and following a Q1 2019 fundraising, the Board does not consider there to be a short-term liquidity risk, though long-term cash needs for development projects will continue to be monitored[757](index=757&type=chunk)[1019](index=1019&type=chunk) Part II [ITEM 15. CONTROLS AND PROCEDURES](index=117&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) This section addresses the company's internal controls, with management concluding disclosure controls were effective as of December 31, 2018, despite identified material weaknesses in 2018 (IFRS 5 discontinued operations accounting) and 2017 (impairment charge misclassification), for which remediation efforts have been implemented - Management concluded that disclosure controls and procedures were effective at a reasonable level of assurance as of December 31, 2018[769](index=769&type=chunk) - A material weakness in internal control over financial reporting was identified for fiscal year ended December 31, 2018, related to IFRS 5 classification adjustments for assets held for sale and discontinued operations following the Midatech US sale[772](index=772&type=chunk) - A material weakness from fiscal year ended December 31, 2017, related to the incorrect classification of a **£1.5 million** impairment charge, was identified and remediated in fiscal 2018[773](index=773&type=chunk)[778](index=778&type=chunk) - Remediation efforts for the 2018 material weakness include implementing additional senior management and audit committee reviews and seeking outside expert assistance for complex, non-routine transactions[783](index=783&type=chunk) [ITEM 16. CORPORATE GOVERNANCE AND OTHER INFORMATION](index=120&type=section&id=ITEM%2016.%20CORPORATE%20GOVERNANCE%20AND%20OTHER%20INFORMATION) This section covers corporate governance, including the Audit Committee's financial expert, the Code of Business Conduct and Ethics, principal accountant fees, and the company's adherence to UK home country practices as a foreign private issuer in lieu of certain NASDAQ standards - The Board has determined that Simon Turton qualifies as an "audit committee financial expert"[789](index=789&type=chunk) - The company has adopted a Code of Business Conduct and Ethics, available on its website[790](index=790&type=chunk) Principal Accountant Fees (£ thousands) | Fee Type | 2018 | 2017 | | :--- | :--- | :--- | | Audit Fees | 337 | 350 | | Audit-Related Fees | - | - | | Tax Fees | - | - | | All Other Fees | - | - | | **Total** | **337** | **350** | - As a foreign private issuer, the company follows UK home country practice in lieu of certain NASDAQ corporate governance rules, including those related to board independence, committee composition, and shareholder approval for certain equity plans[797](index=797&type=chunk)[798](index=798&type=chunk)[799](index=799&type=chunk) Part III [ITEM 18. FINANCIAL STATEMENTS](index=123&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the company's audited consolidated financial statements for fiscal years 2016-2018, prepared in accordance with IFRS, including the Independent Registered Public Accounting Firm's Report, Consolidated Statements of Comprehensive Income, Financial Position, Cash Flows, and Changes in Equity, and detailed notes - The financial statements, audited by BDO LLP, received an unqualified opinion, with the report noting the restatement of 2017 financial statements to correct a misclassification between administrative and R&D costs[817](index=817&type=chunk)[818](index=818&type=chunk) Consolidated Statement of Comprehensive Income Summary (£'000) | Line Item | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Total revenue (continuing)** | 1,938 | 989 | 1,323 | | **Loss from operations (continuing)** | (11,815) | (13,276) | (9,652) | | **Loss from continuing operations** | (10,368) | (11,705) | (6,161) | | **Loss from discontinued operations net of tax** | (4,662) | (4,359) | (14,001) | | **Loss for the year** | (15,030) | (16,064) | (20,162) | Consolidated Statement of Financial Position Summary (£'000) | Line Item | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Total assets** | 20,444 | 49,224 | 56,689 | | **Total liabilities** | 3,520 | 14,548 | 10,965 | | **Total equity** | 16,924 | 34,676 | 45,724 | [ITEM 19. EXHIBITS](index=124&type=section&id=ITEM%2019.%20EXHIBITS) This section lists all exhibits filed with the annual report, including the company's Articles of Association, depositary agreements, warrant instruments, equity incentive plans, material contracts like the Novartis license and CMS agreements, and CEO and CFO certifications