TIDMAMP
RNS Number : 5776M
Amphion Innovations PLC
19 September 2012
Amphion Innovations plc
Interims Results for the 6 months to 30 June 2012
London and New York, 19 September 2012 - Amphion Innovations plc
(LSE: AMP) ("Amphion" or the "Company"), the developer of medical
and technology businesses, today announces its unaudited interim
results for the six months to 30 June 2012.
CEO's Statement
Financial Results and Net Asset Value
Revenue for the six month period was $1,069,394, lower than the
$2,598,648 recorded in the first six months of 2011 but slightly
higher than in the second half of last year. The substantial
commitment we have made to the further expansion of DataTern's
intellectual property licensing programme has resulted in increased
expenses and delays in the pace of settlements. As a result, the
operating loss for the first six months of 2012 was $1,469,194,
mostly due to fees and expenses associated with the litigation
programme. The administrative expenses of the rest of the business
were down approximately 20% compared with the same period of last
year. The net profit before tax for the period increased sharply to
approximately $3 million compared to a profit of $270,403 in the
first six months of last year, due to the fair value gains in the
holdings of Axcess and Kromek.
As a result, the Company's Net Asset Value at 30 June 2012 was
$0.22 (GBP0.14) compared to the Net Asset Value at 31 December 2011
which was reported at $0.20 (GBP0.13). The increase in Net Asset
Value is largely due to the recovery in the share price of Axcess
since the year end, combined with the increase in the carrying
value for the holding of Kromek shares. The carrying value of the
Kromek shares have been adjusted from GBP7.20 to GBP8.40 to reflect
the new capital raised by Kromek at the higher price in its
financing round completed during the first few months of 2012.
DataTern and the IP Licensing Programme
The recent Claims Construction Order known as a Markman ruling
in the cases being heard in New York has, unfortunately, delayed
progress with DataTern. Our legal team, supported by our extensive
team of technical and patent experts, believe that the ruling is
not fully reflective of the claims of the patents, which have both
recently undergone a comprehensive reexamination by the USPTO and
successfully emerged both fully validated and with additional
claims added. A lot of work is currently being done by our team to
assess the immediate impact of this ruling. It is the very firm and
considered opinion of our team that the two patents are both valid
and being infringed by a wide range of companies that are
practicing this critical art. We continue to believe that a Markman
ruling which is fully reflective of the claims of the patents will
establish infringement. Our interest in pursuing these and other
cases has always been and remains to conclude fair license
agreements with the parties in question in order to obtain a return
on the considerable investment that has been made in this
technology.
While the Markman ruling has clearly been unhelpful, the
investment that we have made in these programmes over the last few
years has reinforced our belief that our technology is unique and
our patents are important. Under the law (validated by the Supreme
Court last year in a landmark case involving Microsoft) the patents
enjoy the presumption of validity and can only be undermined by
"clear and convincing evidence" which is a high standard. We see no
reason to doubt the importance or the novelty of these inventions
and the legitimacy of the patents that protect them.
Financing
Since the capital market conditions deteriorated rapidly
following the Northern Rock problems in late 2007, culminating in
the Lehman bankruptcy about a year later, Amphion has not attempted
to access the equity markets and has only sought to raise outside
capital through a convertible debt financing and the support of the
board and executive management teams. In the last two years the
loan financing provided by certain board members has allowed the
further expansion of the DataTern programme. While the IP licensing
programme was leading to settlements on a relatively regular basis,
this financing policy made sense. While we will continue to work on
settlements in the 24 cases currently outstanding, recent
developments in the programme, particularly the recent Markman
ruling, suggests that a different approach may be required if
Amphion is to make progress over the next year or two. To that end
we have recently been exploring various other financing options,
including litigation financing directly for the DataTern programme.
In September 2012, R. James Macaleer, Chairman of the Company,
provided an additional unsecured loan of $500,000. Mr. Macaleer has
a 17.43% interest in the share capital of the company. The loan
bears 7% interest and matures on 15 March 2013. The provision of
this unsecured loan is deemed a related party transaction for the
purposes of the AIM Rules. As a result, the Amphion directors, save
for Mr. R. James Macaleer who is deemed for the purpose of this
transaction not to be independent, consider, having consulted with
Seymour Pierce, the Company's nominated adviser, that the terms of
the transaction are fair and reasonable insofar as its shareholders
are concerned. As noted above, we have continued to make progress
in reducing our general operating costs and as noted below, three
of our Partner Companies are once again getting ready to raise
capital directly. If that is successful then their dependence on
Amphion will decrease. Our goal is to get the Company onto a more
solid financial footing overall by cutting costs further,
developing alternative revenue streams wherever possible to
complement the IP licensing activity, and to look for alternative
ways to finance the IP programme going forward.
Partner Companies
We are pleased to report progress in our Partner Companies
during the first half of the year.
During the first six months, Axcess made good progress in the
programme to obtain licensing revenue from Savi (a subsidiary of
Lockheed Martin) for infringement of Axcess' intellectual property.
The Markman ruling in April was favourable and the trial date is
set for 5 November 2012. Axcess' portfolio of patents covers key
functionality and applications in tagging and tracking people and
other assets. These features are believed to be widely used by
other companies who might require a license to continue to practice
the art. In addition, the management has done a very good job in
keeping the operations of the company intact in very difficult
conditions. While Axcess' financial condition has made it
impossible to expand marketing programmes, many existing customers
are continuing to place repeat orders and revenue has started to
pick up in recent months, albeit from a very low base.
Kromek also made good progress in most of its core programmes.
During the first six months, Kromek introduced a range of new
radiation detection products to complement the x-ray products in
development for security and medicine. The new products were
launched recently in Japan and are now being offered for sale in
other countries as well. The tragic Fukushima nuclear meltdown in
March 2011 led to a heightened awareness in Japan and elsewhere of
the need for improved monitoring and measurement systems at nuclear
facilities and other remote locations, including schools,
hospitals, and in the home. Kromek successfully raised additional
equity financing at GBP8.40 per share (up from GBP7.20 per share
previously) and this increase has been reflected in our half-year
results.
Motif recently agreed an important partnership with Jubilant
Life Sciences, which will cover a collaboration on the development
of two new compounds for MRSA and over-active bladder. Each of
these is an important medical condition with unmet needs. Motif's
programmes have been designed by Motif's team of pharmaceutical
executives, each of whom brings substantial experience and
specialised insight to the drug discovery process. Motif's business
model is to develop improved versions of existing compounds which
are known to have pharmaceutical activity and where the probability
is high of producing better therapies on a rapidly accelerated
timescale. Jubilant Life Sciences Limited is an integrated
pharmaceutical and life sciences company based in India. It was
recently ranked No.6 amongst the Top 10 Global contract
manufacturing and services outsourcing players in the
pharmaceutical industry and is a leading Drug Discovery and
Development Solution (DDDS) provider. The partnership with Jubilant
is expected to be a critical success factor, bringing substantial
world-class capabilities to bear on Motif's programmes.
WellGen is starting to move forward again under its new
leadership. It is now poised to launch an exciting beverage product
developed in collaboration with its new partners, aimed at the
sports recovery market. WellGen's proprietary ingredient has shown
in human clinical trials to reduce inflammation with no observed
side-effects. This new product is expected to be one of the first
in this growing market, combining attractive taste and appearance
with proven functional benefits to people recovering from
exercise-induced muscle soreness. In parallel with the new
initiative in beverages, WellGen is set to move forward again in
both the veterinary field and in further clinical development of
the products for the treatment of chronic human diseases, such as
diabetes and arthritis.
FireStar has also managed to make progress with the development
of its new messaging products. While current efforts are directed
at healthcare, the same functionality should prove useful in
high-value financial messaging. The healthcare programme is
currently aimed at getting MDMI established as an open source
product, supported by FireStar. The company is expecting to see
increased demand for EdgeNode, its proprietary message generation
platform, as use of MDMI, a message transformation (mapping)
utility, becomes widely adopted.
Last but not least, both PrivateMarkets and M2M have been in a
holding pattern pending the evolution of new business plans and
fresh financing.
Outlook
We have confidence in our business model, the strength of the IP
programme, and the potential of our Partner Companies. We are
working hard to develop and extract the inherent value in each one.
While market conditions remain challenging and volatile, we remain
focused on adapting and evolving new strategies to generate and
extract value for our shareholders. Critical to our future success
is getting access to sufficient capital to allow us to support our
licensing programme and our Partner Companies. To that end, we will
continue to explore a variety of alternative financing strategies
for Amphion and DataTern that will allow our shareholders to reap
the fruits of their investments.
Amphion Innovations plc
Charlie Morgan +1 212 210 6224
Cardew Group
Tim Robertson +44 20 7930 0777
Seymour Pierce Limited
Mark Percy (Corporate Finance) +44 20 7107 8000
David Banks (Corporate Broking)
Notes to the editors
About Amphion Innovations plc
Amphion (LSE: AMP) builds shareholder value in emerging
companies in the medical and technology sectors, by using a
focused, hands-on company building approach, based on decades of
experience in both the US and UK. Amphion has significant
shareholding in 7 Partner Companies developing proven technologies
targeting substantial commercial marketplaces. The Amphion model
has been refined to optimise the commercialisation of patents and
other intellectual property within the Partner Companies. The
Partner Companies collectively own or control over 200 separately
identified pieces of intellectual property, a number which grows
rapidly each year.
On the web: www.amphionplc.com
Amphion Innovations plc
Condensed consolidated statement of comprehensive
income
For the six months ended 30
June 2012
Unaudited Unaudited
Notes Six months Six months Audited
ended ended Year ended
31 December
30 June 2012 30 June 2011 2011
Continuing operations US$ US$ US$
Revenue 3 1,069,394 2,598,648 3,463,527
Cost of sales - (865,000) (959,444)
Gross profit 1,069,394 1,733,648 2,504,083
Administrative expenses (2,538,588) (1,863,872) (1,919,628)
Operating profit/(loss) (1,469,194) (130,224) 584,455
Fair value gains/(losses)
on investments 7 4,645,418 374,849 (1,672,362)
Interest income 409,562 396,556 800,000
Other gains and losses (61,695) (24,864) (36,290)
Finance costs (468,490) (345,914) (747,612)
Profit/(loss) before tax 3,055,601 270,403 (1,071,809)
Tax on profit/(loss) 5 (56,000) (72,469) 4,695
Profit/(loss) for the period 2,999,601 197,934 (1,067,114)
-------------------- ------------------ ----------------------
Other comprehensive
income
Exchange differences arising
on translation
of foreign operations (861) (8,029) 489
Other comprehensive income/(loss)
for the period (861) (8,029) 489
-------------------- ------------------ ----------------------
Total comprehensive income/(loss) for
the period 2,998,740 189,905 (1,066,625)
==================== ================== ======================
Earnings/(loss) per share 6
Basic US $ 0.02 US $ 0.00 US $ (0.01)
==================== ================== ======================
Diluted US $ 0.02 US $ 0.00 US $ (0.01)
==================== ================== ======================
Amphion Innovations plc
Condensed consolidated statement of financial position
At 30 June 2012
Unaudited Unaudited Audited
Notes 30 June 2012 30 June 2011 31 December 2011
-------------------- ----------------------- --------------------------
US$ US$ US$
Non-current assets
Intangible assets 834,879 1,008,541 921,710
Property, plant and equipment 8,047 12,013 9,324
Security deposit 70,735 70,735 70,735
Investments 7 43,318,945 39,910,226 38,493,895
44,232,606 41,001,515 39,495,664
-------------------- ----------------------- --------------------------
Current assets
Prepaid expenses and other
receivables 4,765,317 2,835,359 3,764,290
Cash and cash equivalents 124,653 855,235 114,014
4,889,970 3,690,594 3,878,304
-------------------- ----------------------- --------------------------
Total assets 49,122,576 44,692,109 43,373,968
==================== ======================= ==========================
Current liabilities
Trade and other payables 5,328,070 4,092,676 4,297,254
Current portion of notes payable 8 1,000,000 - 1,500,000
6,328,070 4,092,676 5,797,254
-------------------- ----------------------- --------------------------
Non-current liabilities
Convertible promissory notes 8 9,032,341 8,968,555 8,990,567
Notes payable 8 4,000,000 2,000,000 2,000,000
13,032,341 10,968,555 10,990,567
-------------------- ----------------------- --------------------------
Total liabilities 19,360,411 15,061,231 16,787,821
==================== ======================= ==========================
Net assets 29,762,165 29,630,878 26,586,147
==================== ======================= ==========================
Equity
Share capital 9 2,501,293 2,476,890 2,498,749
Share premium account 35,663,018 35,613,794 35,652,903
Translation reserve (17,364) (25,021) (16,503)
Retained earnings (8,384,782) (8,434,785) (11,549,002)
Total equity 29,762,165 29,630,878 26,586,147
==================== ======================= ==========================
Amphion Innovations plc
Condensed consolidated statement of
changes in equity
For the six months ended 30
June 2012
Unaudited
Foreign
Share currency
Share premium translation Retained
Notes capital account reserve earnings Total
--------------- ------------------- ------------------ ------------------- ---------------
US$ US$ US$ US$ US$
Balance at 1 January
2011 2,476,890 35,613,794 (16,992) (8,915,884) 29,157,808
Profit for the period - - - 197,934 197,934
Exchange differences
arising on
translation of foreign
operations - - (8,029) - (8,029)
Total comprehensive income
for the period - - (8,029) 197,934 189,905
--------------- ------------------- ------------------ ------------------- ---------------
Recognition of share-based
payments 10 - - - 283,165 83,165
Balance at 30 June 2011 2,476,890 35,613,794 (25,021) (8,434,785) 29,630,878
=============== =================== ================== =================== ===============
Balance at 1 January 2012 2,498,749 35,652,903 (16,503) (11,549,002) 26,586,147
Profit for the period - - - 2,999,601 2,999,601
Exchange differences arising
on
translation of foreign
operations - - (861) - (861)
Total comprehensive income
for the period - - (861) 2,999,601 2,998,740
--------------- ------------------- ------------------ ------------------- ---------------
Issue of share capital 2,544 10,115 - - 12,659
Recognition of share-based
payments 10 - - - 164,619 164,619
Balance at 30 June 2012 2,501,293 35,663,018 (17,364) (8,384,782) 29,762,165
=============== =================== ================== =================== ===============
Amphion Innovations plc
Condensed consolidated statement of
cash flows
For the six months ended 30 June 2012
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 2012 30 June 2011 31 December 2011
-------------------- ------------------------- -----------------------------
US$ US$ US $
Operating activities
Operating profit/(loss) (1,469,194) (130,224) 584,455
Adjustments for:
Depreciation of property, plant and
equipment 2,240 2,587 5,157
Amortisation of intangible assets 86,831 86,831 173,662
Recognition of share based payments 177,278 283,165 (1,505,036)
Increase in prepaid & other
receivables (1,001,027) (910,947) (1,839,878)
Increase/(decrease) in trade &
other payables 1,030,816 (114,720) 89,861
Interest expense (468,490) (345,914) (747,612)
Other gains & losses - - 1,194
Income tax (56,000) (72,469) 4,695
Net cash used in operating activities (1,697,546) (1,201,691) (3,233,502)
-------------------- ------------------------- -----------------------------
Investing activities
Interest received 409,562 396,556 800,000
Purchases of investments (179,632) (411,691) (1,042,574)
Purchases of equipment (929) - -
Adjustment to note payable for
foreign exchange rate 41,774 - 22,012
Net cash from/(used in) investing
activities 270,775 (15,135) (220,562)
-------------------- ------------------------- -----------------------------
Financing activities
Proceeds on issue of promissory notes 1,500,000 1,500,000 3,000,000
Net cash from financing activities 1,500,000 1,500,000 3,000,000
-------------------- ------------------------- -----------------------------
Net increase/(decrease) in cash and
cash equivalents 73,229 283,174 (454,064)
Cash and cash equivalents at the
beginning of the period 114,014 605,127 605,127
Effect of foreign exchange rate
changes (62,590) (33,066) (37,049)
Cash and cash equivalents at the end
of the period 124,653 855,235 114,014
==================== ========================= =============================
1. General information
The condensed consolidated interim financial statements for the
six months ended 30 June 2012 are unaudited and do not constitute
statutory accounts within the meaning of the Isle of Man Companies
Acts 1931 to 2004. The statutory accounts of Amphion Innovations
plc for the year ended 31 December 2011 have been filed with the
Registrar of Companies and contain an unqualified audit report
which includes an emphasis of matter relating to significant
uncertainty in respect of going concern and valuation of Partner
Company investments. Copies are available on the company's website
at www.amphionplc.com/reports.php.
2. Accounting policies
These condensed consolidated interim financial statements have
been prepared in accordance with the recognition and measurement
requirements of International Financial Reporting Standards
(IFRS).
The accounting policies applied by the Group are consistent with
those followed in the preparation of the Group's annual financial
statements for the year ended 31 December 2011.
3. Revenue
An analysis of the Group's revenue is as follows:
Six months ended Six months ended Year ended
30 June 2012 30 June 2011 31 December 2011
US $ US$ US$
Continuing operations
Advisory fees 569,394 563,648 1,043,527
License fees 500,000 2,035,000 2,420,000
1,069,394 2,598,648 3,463,527
======================== ======================== =======================
In August 2010, DataTern, Inc. entered into an agreement with
Niro, Haller & Niro ("NHN") to represent DataTern, Inc. in
connection with the licensing and enforcement of its patents. In
June 2011, DataTern, Inc. and NHN agreed to terminate the agreement
effective as of 25 January 2012. Under the termination agreement,
NHN is to be paid US $400,000 by DataTern, Inc. in lieu of any
other fees they may have received for the outstanding cases. NHN is
to be paid as follows: US $40,000 within seven days of signing the
agreement; US $180,000 on 15 June 2012; and US $180,000 on 15
December 2012. At 30 June 2012, US $360,000 remains payable.
In July 2011, DataTern, Inc. entered into a fee agreement with
McCarter & English LLP ("ME"). Under this agreement, ME will
represent DataTern in the assertion of all patent infringement
claims, except for claims in Texas. In addition, ME was engaged to
represent DataTern, Inc. in connection with the lawsuit filed by
Microsoft and SAP AG and SAP America, Inc. in April 2011.
In September 2011, the Davis Firm, PC was engaged to represent
DataTern, Inc. in the patent infringement cases in Texas.
As part of the agreement for DataTern, Inc. to purchase certain
of the intangible assets in December 2007, a portion of future
revenues from these patents will be retained by FireStar Software,
Inc. No amounts have become payable to FireStar Software, Inc. to
date.
4. Segment information
For management purposes, the Group is currently organised into
three business segments - advisory services, investing, and
intellectual property. These business segments are the basis on
which the Group reports its primary segment information.
Information regarding these segments is presented below.
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Six months Six months Six months Six months Six months
ended ended ended ended ended
30 June 2012 30 June 2012 30 June 2012 30 June 2012 30 June 2012
US $ US $ US $ US $ US $
REVENUE
External advisory
fees 569,394 - - - 569,394
External license
fees - - 500,000 - 500,000
--------------------- ---------------------
Total revenue 569,394 - 500,000 - 1,069,394
Cost of sales - - - - -
--------------------- --------------------- ----------------------- ---------------------- -------------------
Gross profit 569,394 - 500,000 - 1,069,394
Administrative
expenses (406,503) (507,524) (1,624,561) - (2,538,588)
--------------------- --------------------- -----------------------
Segment result 162,891 (507,524) (1,124,561) - (1,469,194)
Fair value gains on
investments - 4,645,418 - - 4,645,418
Interest income 22,127 387,303 132 - 409,562
Other gains and
losses (5,912) (55,783) - - (61,695)
Finance costs - (467,197) (1,293) - (468,490)
Profit (loss)
before tax 179,106 4,002,217 (1,125,722) - 3,055,601
Income taxes (56,000) - - - (56,000)
--------------------- --------------------- -----------------------
Profit (loss)
after tax 123,106 4,002,217 (1,125,722) - 2,999,601
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Six months Six months Six months Six months Six months
ended ended ended ended ended
30 June 30 June 30 June 30 June
30 June 2012 2012 2012 2012 2012
US $ US $ US $ US $ US $
OTHER
INFORMATION
Segment assets 4,912,063 47,228,096 972,585 (3,990,168) 49,122,576
Segment
liabilities 4,685,654 16,324,001 1,617,547 (3,266,791) 19,360,411
Depreciation 914 429 897 - 2,240
Amortisation - - 86,831 - 86,831
Recognition of
share-based
payments - 177,278 - - 177,278
4. Segment information, (continued)
For management purposes for 30 June 2011, the Group was
organised into three business segments - advisory services,
investing activities, and intellectual property.
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Six months Six months Six months Six months Six months
ended ended ended ended ended
30 June 2011 30 June 2011 30 June 2011 30 June 2011 30 June 2011
US $ US $ US $ US $ US $
REVENUE
External advisory
fees 563,648 - - - 563,648
External license
fees - - 2,035,000 - 2,035,000
Inter-segment
fees 120,000 - - (120,000) -
--------------------- ----------------------
Total revenue 683,648 - 2,035,000 (120,000) 2,598,648
Cost of sales - - (865,000) - (865,000)
--------------------- ---------------------- ---------------------- ---------------------- ---------------------
Gross profit 683,648 - 1,170,000 (120,000) 1,733,648
Administrative
expenses (420,722) (727,468) (835,682) 120,000 (1,863,872)
--------------------- ---------------------- ----------------------
Segment result 262,926 (727,468) 334,318 - (130,224)
Fair value gains on
investments - 374,849 - - 374,849
Interest income 21,986 374,554 16 - 396,556
Other gains and
losses - (24,864) - - (24,864)
Finance costs - (341,457) (4,457) - (345,914)
Profit (loss)
before tax 284,912 (344,386) 329,877 - 270,403
Income taxes (4,545) - (67,924) - (72,469)
--------------------- ---------------------- ----------------------
Profit (loss)
after tax 280,367 (344,386) 261,953 - 197,934
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Six months Six months Six months Six months Six months
ended ended ended ended ended
30 June 30 June 30 June 30 June
30 June 2011 2011 2011 2011 2011
US $ US $ US $ US $ US $
OTHER
INFORMATION
Segment assets 3,599,426 42,438,794 1,390,700 (2,736,811) 44,692,109
Segment
liabilities 3,270,083 13,333,375 459,602 (2,001,829) 15,061,231
Depreciation 2,596 1,443 807 - 4,846
Amortisation - - 86,831 - 86,831
Recognition of
share-based
payments - 283,165 - - 283,165
4. Segment information, (continued)
Geographical segments
The Group's operations are located in the United States and the
United Kingdom.
The following table provides an analysis of the Group's advisory
fees by geographical location of the investment.
Advisory fees by
geographical location
------------------------------------
Six months ended Six months ended
30 June 2012 30 June 2011
US $ US $
United States 420,000 420,000
United Kingdom 149,394 143,648
569,394 563,648
================= =================
The following table provides an analysis of the Group's license
fees by geographical location.
License fees by
geographical location
----------------------------------------------------------------------------
Six months ended Six months ended
30 June 2012 30 June 2011
US$ US$
United States 500,000 2,035,000
Europe - -
500,000 2,035,000
===================================== =====================================
The following is an analysis of the carrying amount of segment
assets, and additions to fixtures, fittings and equipment, analysed
by the geographical area in which the assets are located:
Additions to fixtures, fittings
Carrying amount and
equipment and intangible
of segment assets assets
---------------------------- ----------------------------------
Six months Six months Six months Six months
ended ended ended ended
30 June 2012 30 June 2011 30 June 2012 30 June 2011
US $ US $ US $ US $
United States 32,492,510 30,071,593 - -
United Kingdom 16,630,066 14,620,516 929 -
49,122,576 44,692,109 929 -
============= ============= ================ ================
5. Income tax expense
Six months ended Six months ended Year ended
30 June 2012 30 June 2011 31 December 2011
---------------- ---------------- ----------------
US $ US $ US $
Isle of Man income tax - - -
Tax on US subsidiary 56,000 72,469 (6,997)
Tax on UK subsidiary - - 2,302
Current tax 56,000 72,469 (4,695)
================ ================ ================
From 6 April 2006, a standard rate of corporate income tax of 0%
applies to Isle of Man companies, with exceptions taxable at the
10% rate, namely licensed banks in respect of deposit-taking
business, companies that profit from land and property in the Isle
of Man and companies that elect to pay tax at the 10% rate. No
provision for Isle of Man taxation is therefore required. The
Company is treated as a Partnership for U.S. federal and state
income tax purposes and, accordingly, its income or loss is taxable
directly to its partners.
The Company has four subsidiaries, two in the USA, one in the
UK, and one in the Kingdom of Bahrain. The US subsidiaries, Amphion
Innovations US Inc. and DataTern, Inc., are Corporations and
therefore taxed directly. The US subsidiaries suffer US federal
tax, state tax and New York City tax on their taxable net income.
The UK subsidiary, Amphion Innovations UK Limited, is liable to UK
Corporation tax at rates up to 28% on its taxable profits and
gains.
The Group charge for the period can be reconciled to the profit
per the consolidated income statement as follows:
US $
Profit before tax 3,055,601
========================
Tax at the Isle of Man income tax rate of 0% -
Effect of different tax rates of subsidiaries
operating in other jurisdictions 56,000
Current tax 56,000
========================
6. Earnings per share
The calculation of the basic and diluted earnings per share
attributable to the ordinary equity holders of the parent is based
on the following data:
Six months Six months
Earnings ended ended Year ended
31 December
30 June 2012 30 June 2011 2011
------------------------ ------------------------------ -----------------------------
US $ US $ US $
Earnings for the purposes of
basic
and diluted earnings per
share
(profit for the year
attributable
to equity holders of the
parent) 2,999,601 197,934 (1,067,114)
======================== ============================== =============================
Number of shares
Six months Six months
ended ended Year ended
31 December
30 June 2012 30 June 2011 2011
------------------------ ------------------------------ -----------------------------
Weighted average number of
ordinary
shares for
the purposes of basic
earnings per
share 134,952,603 133,498,743 133,954,099
Effect of dilutive potential
ordinary
shares:
Share options 439,824 - -
Convertible promissory
notes 31,990,100 31,990,100 31,990,100
Weighted average number of
ordinary
shares for
the purposes of diluted
earnings per
share 167,382,527 165,488,843 165,944,199
======================== ============================== =============================
Share options that could potentially dilute basic earnings per
share in the future have not been included in the calculation of
dilute earnings per share because they are antidilutive.
7. Investments
At fair value through profit or loss
Level 1 Level 3 Total
-------------------- -------------------- -----------------
US$ US$ US$
At 1 January 2012 1,997,017 36,496,878 38,493,895
Investments during the year 5,000 174,632 179,632
Fair value gains 2,172,226 2,473,192 4,645,418
At 30 June 2012 4,174,243 39,144,702 43,318,945
==================== ==================== =================
At 1 January 2011 1,762,048 37,361,635 39,123,683
Investments during the year 279,000 763,575 1,042,574
Fair value losses (44,031) (1,628,332) (1,672,362)
At 31 December 2011 1,997,017 36,496,878 38,493,895
==================== ==================== =================
As required by IFRS 7: Financial instruments - Disclosures, the
Company is required to classify fair value measurements using a
fair value hierarchy that reflects the significance of the inputs
used in making the measurements. In the case of the Company,
investments classified as level 1 have been valued based on a
quoted price in an active market. The other private investments
have been classified as level 3 since the inputs to the valuation
are not based on observable market data.
Fair value determination
The Directors have valued the investments in accordance with the
guidance laid down in the International Private Equity and Venture
Capital Valuation Guidelines. The inputs used to derive the
investment valuations are based on estimates and judgements made by
management which are subject to inherent uncertainty. As such the
carrying value in the financial statements at 30 June 2012 may
differ materially from the amount that could be realized in an
orderly transaction between willing market participants on the
reporting date.
8. Promissory notes
Convertible promissory notes
The notes are convertible into ordinary shares of the Company at
any time prior to 31 December 2013 at a conversion price of
eighteen pence per ordinary share. In the event that the closing
market price of the ordinary shares is equal to or greater than 25
pence per ordinary share for 25 consecutive trading dates at any
time prior to 31 December 2013, the notes will automatically be
converted into fully paid ordinary shares.
If the notes have not been converted, they will be repaid on 31
December 2013. Interest of 7% will be paid quarterly until the date
of repayment.
For each note issued, the Company also issued 1.11 warrants.
Each warrant will entitle the holder to subscribe for one ordinary
share at 20 pence per ordinary share during the subscription period
which began on 30 December 2008 and expires on the fifth
anniversary of that date.
8. Promissory notes, (continued)
The net proceeds received from the issue of the convertible
promissory notes are classified as a financial liability due to the
fact that the notes are denominated in a currency other than the
Company's functional currency and that on any future conversion a
fixed number of shares would be delivered in exchange for a
variable amount of cash.
Promissory notes
During 2012, the Company issued US $1,500,000 of promissory
notes to the Chairman of the Company. The total promissory notes
payable to the Director at 30 June 2012 is US $5,000,000. Refer to
note 11 for further details.
9. Share capital
30 June 2012
GBP
Authorised:
250,000,000 ordinary shares of 1p each 2,500,000
================
Number GBP US$
Balance as at 31 December 2011 134,848,552 1,348,485 2,498,749
Issued and fully paid:
Ordinary shares of 1p each 160,486 1,605 2,544
Balance as at 30 June 2012 135,009,038 1,350,090 2,501,293
================ ============== ===============
On 5 March 2012, the Company issued 160,486 ordinary 1p shares
at a premium of 3.975p per share (US $10,114) to Directors in lieu
of 2011 fourth quarter Directors' fees.
10. Share based payments
In 2006 the Group established the 2006 Unapproved Share Option
Plan ("the Plan") and it was adopted pursuant to a resolution
passed on 8 June 2006. Under this plan, the Compensation Committee
may grant share options to eligible employees, including Directors,
to subscribe for ordinary shares of the Company. The number of
Shares over which options may be granted under the Unapproved Plan
cannot exceed ten percent of the ordinary share capital of the
Company in issue on a fully diluted basis. The Plan will be
administered by the Compensation Committee. The number of shares,
terms, performance targets and exercise period will be determined
by the Compensation Committee. During 2012, no options were issued
under the Plan.
During 2012, 2,500,000 options were issued that were not under
the Plan. The options are fully vested and expire on 31 December
2013.
10. Share based payments, (continued)
2012
Weighted
average
Number of exercise
share options price (in GBP)
Outstanding at beginning of period 13,321,144 0.08
Granted during the period 2,500,000 0.08
Expired during the period (136,472) 0.22
Outstanding at the end of the period 15,684,672 0.08
================
Exercisable at the end of the period 9,264,683 0.10
Options are recorded at fair value on the date of grant using
the Black-Scholes model. The Group recognized total costs of US
$164,619 relating to equity-settled share-based payment
transactions in 2012 which were expensed in the statement of
comprehensive income during the period.
11. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on
consolidation and are not disclosed in this note. Details of
transactions between the Group and other related partners are
disclosed below.
During the period, the Group paid miscellaneous expenses for
Motif BioSciences, Inc. ("Motif") such as office expenses. At 30
June 2012, the amount due from Motif is US $9,379.
A subsidiary of the Company has entered into an agreement with
Axcess International, Inc. ("Axcess") to provide advisory services.
Richard Morgan and Robert Bertoldi, Directors of the Company, are
also Directors of Axcess. Amphion Innovations US Inc. will receive
a monthly fee of US $10,000 pursuant to this agreement. The
agreement is effective until 1 March 2013 and will renew on an
annual basis until terminated by one of the parties. The monthly
fee is suspended for any month in which Axcess' cash balance falls
below US $500,000. Amphion Innovations US Inc. received no fee
during the period ended 30 June 2012.
A subsidiary of the Company has entered into an agreement with
Kromek to provide advisory and consulting services. Richard Morgan
and Jerel Whittingham, Directors of the Company, are also Directors
of Kromek. The monthly fee under this agreement is the lesser of US
$10,000 and 50% of the gross compensation paid to directors and
management of Kromek in that month and can be terminated by one of
the parties. The subsidiary's fee for the period ended 30 June 2012
was US $60,000. Amphion Innovations US Inc. is also to receive US
$89,394 as a fund raising fee for the period ended 30 June 2012. At
30 June 2012, US $70,000 of advisory fees and US $157,173 of fund
raising fees remain payable by Kromek.
A subsidiary of the Company has entered into an agreement with
FireStar Software, Inc. ("FireStar') to provide advisory and
consulting services. Richard Morgan, a Director of the Company, is
also a Director of FireStar. The annual fee under this agreement
was US $120,000. The agreement expired on 31 December 2011. The
Company is currently negotiating for renewal.
A subsidiary of the Company has entered into an agreement with
Motif BioSciences, Inc. ("Motif") to provide advisory and
consulting services. Richard Morgan, a Director of the Company, is
also a Director of Motif. The annual fee for the services is US
$240,000. The agreement is effective until 1 April 2013 and shall
automatically renew for
11. Related party transactions, (continued)
successive one year periods. Amphion Innovations US Inc.'s fee
for the period ended 30 June 2012 was US $120,000. At 30 June 2012,
US $360,000 of the advisory fees remain payable by Motif.
A subsidiary of the Company has entered into an agreement with
m2m Imaging Corp. ("m2m") to provide advisory and consulting
services. Robert Bertoldi, a Director of the Company, is also a
Director of m2m. The quarterly fee under this agreement is US
$45,000. This agreement is effective until 1 November 2012 and will
renew on an annual basis until terminated by either party. Amphion
Innovations US Inc.'s fee for the period ended 30 June 2012 was US
$90,000. At 30 June 2012, US $720,000 of the advisory fees remain
payable by m2m.
A subsidiary of the Company has entered into an agreement with
WellGen, Inc. ("WellGen") to provide advisory and consulting
services. Richard Morgan and Robert Bertoldi, Directors of the
Company, are also Directors of WellGen. The fee under this
agreement is US $60,000 per quarter. The agreement is effective
until 20 June 2013 and will renew annually for subsequent 12-month
periods until terminated by either party. The subsidiary's fee for
the period ended 30 June 2012 was US $120,000. At 30 June 2012, US
$720,000 of the advisory fees remain payable.
A subsidiary of the Company has entered into an agreement with
PrivateMarkets, Inc. ("PrviateMarkets") to provide advisory
services. Richard Morgan, a Director of the Company, is also a
Director of PrivateMarkets. The fee under this agreement is US
$30,000 per quarter until the successful sale of at least US
$3,000,000 and thereafter, US $45,000 per quarter. This agreement
will renew annually unless terminated by either party. The
subsidiary's fee for the period ended 30 June 2012 was US $90,000.
At 30 June 2012, US $860,000 remains payable from
PrivateMarkets.
Amphion Innovations US Inc. has entered into an agreement with
DataTern, Inc. ("DataTern") (a wholly owned subsidiary of the
Company) to provide advisory and consulting services. Richard
Morgan and Robert Bertoldi, Directors of the Company, are also
Directors of DataTern. The quarterly fee under this agreement is US
$60,000 and renews annually unless terminated by either party. The
subsidiary's fee for the period ended 30 June 2012 was
suspended.
In 2010 Richard Morgan, a Director of the Company, advanced US
$352,500 to the Company. This advance is interest free and
repayable on demand. The net amount payable by the Company at 30
June 2012 to Richard C.E. Morgan is US $1,321,660. The amount
payable includes a voluntary salary reduction of US $897,773, US
$341,779 of which will be payable at the discretion of the Board at
a later date.
During 2012, R. James Macaleer, the Chairman of the Company,
advanced US $1,500,000 to the Company under three promissory notes.
Warrants were issued with the notes to purchase 2,500,000 ordinary
shares at 8 pence per share that expire 31 December 2013. At 30
June 2012, the promissory notes payable to R. James Macaleer total
US $5,000,000. The promissory notes accrue interest at the rate of
7% per annum. The promissory notes are due as follows: US $500,000
on 30 September 2012, US $500,000 on 4 November 2012, and US
$4,000,000 on 31 December 2013. At 30 June 2012, US $16,709 was due
to Mr. Macaleer for Director's fees and US $257,370 was due for
accrued interest on the promissory notes.
At 30 June 2011, US $19,234 was due to Gerard Moufflet, a
Director of the Company, for Director's fees and US $8,337 for
expenses.
At 30 June 2012, US $6,949 was due to Anthony Henfrey, a
Director of the Company, for expenses. Dr. Henfrey waived his
entitlement to receive his Director's fees for 2012.
At 30 June 2012, US $23,535 was due to Richard Mansell-Jones, a
retired Director of the Company, for Director's fees.
At 30 June 2012, US $365,434 and US $304,125 were due to Robert
Bertoldi and Jerel Whittingham, respectively, Directors of the
Company, for voluntary salary reductions of which US $188,769 and
US $154,705 are payable by the discretion of the Board at a later
date.
12. Events after the balance sheet date
In July 2012, R. James Macaleer, the Chairman of the Company,
advanced the Company US $500,000 under a promissory note that
accrues interest at the rate of 7% per annum and is payable on 31
December 2012. Warrants were issued with the note to purchase
1,000,000 ordinary shares of the Company at an exercise price of 8
pence per share. The warrants expire on 31 December 2013. In
September 2012, R. James Macaleer, advanced the Company US $500,000
under a promissory note that accrues interest at the rate of 7% per
annum and is payable on 5 March 2013. In addition, Mr. Macaleer
agreed to extend the maturity date of a promissory note issued in
February 2012 from 21 August 2012 to September 30, 2012.
In July 2012, the Company purchased 35,714 K preferred shares of
Kromek Limited for GBP299,998.
In July through September 2012, the Company made advances of US
$30,100 under a promissory note from Motif BioSciences, Inc.
In July and August 2012, the Company made advances of US $16,600
under a promissory note from PrivateMarkets, Inc.
In July, the Company issued 365,129 ordinary shares to certain
of its Board members as their directors' fees for the first and
second quarters of 2012.
In August, Niro, Haller & Niro (NHN) filed a UCC Financing
Statement on DataTern Inc. patents and commenced a legal action to
collect the $360,000 owed to NHN by DataTern Inc. DataTern denies
that NHN has any claim over its patents.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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