TIDMAMP
RNS Number : 0810S
Amphion Innovations PLC
19 September 2014
Amphion Innovations plc
Interims Results for the 6 months to 30 June 2014
London and New York, 19 September 2014- 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 2014.
Highlights
-- Generated revenue of US $240,000 during the period
-- Net Asset Value per share at 30 June 2014 was US $0.04 (GBP0.024p)
-- DataTern received favorable ruling from the Court of Appeals
in relation to Microsoft case in NY
-- Partner Company Axcess awarded US $40.5 million by jury which is now being appealed
-- Partner Company Motif starts to explore opportunity for IPO
-- Partner Company FireStar issued additional patents on key messaging technology
-- Agreed a loan facility with an institutional lender for up to
a maximum drawdown of US $10 million
Financial Results and Net Asset Value
Revenue for the six month period ended 30 June 2014 was US
$240,000; approximately in line with the US $264,638 recorded in
the first half of 2013. Revenue remained below prior periods mainly
due to the absence of licensing income from DataTern while we await
the ruling from the Federal Circuit Court of Appeals ("FCCA").
Regular operating costs of the business were lower than last year
but total administrative expenses were higher due to fees paid to
agents for fund-raising, combined with a further provision against
amounts receivable from Partner Companies. As a result, the
operating loss for the six months was US $1,769,275 compared with
US $1,025,023 as reported in the same period of last year.
During the six month period the share price of Kromek plc fell
from 75.5 pence to 46 pence and, as a result, the value of the
company's holding of Kromek shares fell to US $9,796,364 from US
$15,579,671. The Company's Net Asset Value at 30 June 2014 was US
$0.04 (GBP0.02) compared to US $0.10 (GBP0.06) at the year end.
Since the end of June, Kromek shares have staged a further recovery
of approximately 10%
Amphion's holding of intellectual property assets is valued at
amortised cost of US $507,642. The directors believe that the
realizable value of the intellectual property assets held by
DataTern is substantially in excess of the carrying value and the
incremental investments being made in the pursuit of infringers of
the IP will generate a significant profit. We believe that if we
are successful in concluding licensing agreements, with the various
infringing parties at levels that meet our expectations, the NAV
per share would be significantly higher.
DataTern and the Intellectual Property Licensing Programme
As we reported in our Annual Report and Accounts 2013, in April
2014 DataTern received a ruling from the FCCA, which its legal
advisors considered favorable. Following that ruling DataTern
submitted a request to the FCCA for a reconsideration of certain
aspects of the ruling, which were denied in July 2014 and so the
ruling received in April is now final. As a result the case in New
York has now been terminated, with the result that the previously
unfavorable Markman ruling of August 2012 has, in the case of
Microsoft, been nullified.
DataTern has recently filed its appeal in the MicroStrategy case
with the FCCA. This was on hold, pending the resolution of the New
York cases, but will now proceed and, if the court agrees to take
the case, a hearing should be held by the end of the year and a
ruling made by the end of the first quarter of 2015. There are 9
defendants in the MicroStrategy case. The cases in Texas which were
on hold pending the Microsoft appeal, are now moving ahead again
and we expect to have a Markman hearing in Texas within the next
six months. There are 8 defendants in Texas.
Our legal team, supported by our extensive team of technical and
patent experts, continues to believe in the strength of our
intellectual property. Both of the two key patents have completed a
comprehensive re-examination by the United States Patent and
Trademark Office ("USPTO") and successfully emerged both fully
validated and with additional claims added. It remains the 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 believe that a Claim Construction
ruling, which is fully reflective of our interpretation of the
claims of the patents, would establish significant infringement by
a large number of companies and we believe that we should be able
to generate a significant amount of revenue from this asset over
the next few years. Under the sharing agreement with DataTern,
FireStar Software, where the technology and patents were originally
developed, would share directly in this revenue stream.
Building Value in Our Partner Companies
Kromek completed its Initial Public Offering and was listed on
the AIM market in October 2013. The company has recently announced
final results for the fiscal year to 30 April 2014 which showed
revenue up about 122% on the previous year. Amphion has a 10.6%
shareholding of Kromek. The Annual Report for the last year can be
found on the company website at www.kromek.com.
Motif has made further progress in developing its primary
antibiotic programme and has been in discussion with two other
groups with a view to license additional antibiotic technology into
the company. The decision by the company to focus on its antibiotic
programme is proving very timely given the growing recognition of
the problem caused by resistance. In July, Prime Minister David
Cameron announced the launch of a global taskforce established to
coordinate an international effort to combat antibiotic resistant
superbugs. Prime Minister Cameron commented, "If we fail to act, we
are looking at an almost unthinkable scenario where antibiotics no
longer work and we are cast back to the dark ages of medicine where
treatable infections and injuries can kill once again". Motif's
mission is to address this global health crisis by developing new
antibiotics that work in different ways to those commonly used
today. Given the high level of investor interest in this area that
has recently emerged, we are now investigating the possibility of
an IPO for Motif in the next few months.
In April the case Axcess brought against Baker & Botts LLP,
the law firm, went to the jury which returned a verdict in favour
of Axcess of US $40.5 million. This verdict was then overruled by
the judge and Axcess is now in the process of pursuing an appeal to
the Texas Court of Appeals which should be heard in the next six
months. In parallel, we have worked closely with Axcess' legal
advisors to evaluate the extent to which all 13 patents in its
portfolio are being infringed. It is clear that many companies are
now offering products or services that incorporate some of the
basic wireless technology developed by the company over the last 15
years. A thorough review is still underway but it is already clear
that a number of companies in the transportation and security
sectors appear to be infringing one or more of these patents.
FireStar has recently been notified by the USPTO of the
allowance of an additional patent relating to its innovative
messaging technology. FireStar's technology is incorporated in its
EdgeNode(TM) product and enables companies to facilitate low-cost,
secure machine-to-machine messaging, in a novel architecture, which
is well suited to the needs of the health care and financial
industries.
WellGen has made further progress in the development of a novel
functional beverage based on its patented anti-inflammatory
ingredient. It has reached an agreement in principle to move
forward with a US-based beverage company that has established
distribution channels in the Mid-West of the US, with an
opportunity to expand to other US markets and beyond.
Despite our cautious approach to valuation over the last two
years, we continue to see a lot of opportunity to build and, in due
course, extract value from each one of our Partner Companies, in
addition to the IP licensing programme being pursued directly by
DataTern.
Financing
In addition to continued support from the management team and
board, we managed to conclude an agreement with an institutional
lender on a loan facility, secured in part against the holding of
Kromek shares. The company initially drew down US $2 million under
the facility and has recently decided to draw an additional US $1
million under this facility in four monthly installments of US
$250,000 starting in September. The loan can be repaid in cash, or
Kromek shares, or the shares of Amphion in specified tranches over
the twelve months following the draw down.
We have continued to cut costs wherever possible and the
leadership team has continued to work with much reduced levels of
current cash compensation. Our goal is to get through this
challenging period in the market to the point where we can begin to
realize the fruits of our investment in DataTern and our Partner
Companies.
Prospects
While we remain cautious, the improvement in the public markets
over the last two years has improved the prospects for financing
and is a major development for Amphion. The return of a viable IPO
market is a critical and positive development and, if it continues
to improve, should have a positive effect on the availability of
capital for Amphion and our Partner Companies. We believe there is
significant inherent value to be developed and extracted from
DataTern and our Partner Companies and we continue to be committed
to the goal of generating and returning value to our shareholders
from our current assets.
For further information please contact:
Amphion Innovations
Charlie Morgan
+1 212 210 6224
Novella Communications
Tim Robertson/ Ben Heath
+44 (0)20 3151 7008
Panmure Gordon Limited
Freddy Crossley/ Fred Walsh/ Duncan Montieth (Corporate
Finance)
Charlie Leigh-Pemberton (Corporate Broking)
+44 (0)20 7866 2500
Amphion Innovations
plc
Condensed consolidated statement
of comprehensive income
For the six months
ended 30 June 2014
Unaudited Unaudited
Notes Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2014 2013 2013
---------------------- ---------------- -------------------------
Continuing operations US $ US $ US $
Revenue 4 240,000 264,638 1,016,990
Cost of sales - - -
Gross profit 240,000 264,638 1,016,990
Administrative expenses (2,009,275) (1,289,661) (3,593,735)
Operating loss (1,769,275) (1,025,023) (2,576,745)
Fair value losses on
investments 8 (5,783,308) (2,379,958) (3,363,558)
Interest income 419,467 288,783 856,564
Other gains and losses (426,678) 639,294 (198,206)
Finance costs (544,893) (524,177) (1,103,471)
Loss before tax (8,104,687) (3,001,081) (6,385,416)
Tax on loss 6 (63) (57,050) 3,222
Loss for the period (8,104,750) (3,058,131) (6,382,194)
---------------------- ---------------- -------------------------
Other comprehensive
income
Exchange differences
arising on translation
of foreign operations 18 (53) 101
Other comprehensive
income/(loss)
for the period 18 (53) 101
---------------------- ---------------- -------------------------
Total comprehensive
loss for the period (8,104,732) (3,058,184) (6,382,093)
====================== ================ =========================
Loss per share 7
Basic US $ (0.06) US $ (0.02) US $ (0.04)
====================== ================ =========================
Diluted US $ (0.06) US $ (0.02) US $ (0.04)
====================== ================ =========================
Amphion Innovations
plc
Condensed consolidated statement
of financial position
At 30 June 2014
Unaudited Unaudited Audited
30 June 30 June 31 December
Notes 2014 2013 2013
-------------------- -------------------- -----------------------------
US $ US $ US $
Non-current assets
Intangible assets 507,642 662,726 585,184
Property, plant, and
equipment - 805 308
Security deposit 13,600 13,600 13,600
Investments 8 30,104,315 36,596,983 35,746,087
30,625,557 37,274,114 36,345,179
-------------------- -------------------- -----------------------------
Current assets
Prepaid expenses and
other receivables 3,634,487 4,232,249 3,654,196
Cash and cash equivalents 1,147,354 22,643 353,964
4,781,841 4,254,892 4,008,160
-------------------- -------------------- -----------------------------
Total assets 35,407,398 41,529,006 40,353,339
==================== ==================== =============================
Current liabilities
Trade and other payables 9,191,443 8,486,383 9,411,563
Current portion of notes
payable 10 8,308,600 - 6,308,600
Current portion of convertible
promissory notes 10 - 8,758,250 9,543,671
17,500,043 17,244,633 25,263,834
-------------------- -------------------- -----------------------------
Non-current liabilities
Convertible promissory
notes 10 10,914,129 - -
Notes payable 10 1,012,000 6,658,600 1,012,000
11,926,129 6,658,600 1,012,000
-------------------- -------------------- -----------------------------
Total liabilities 29,426,172 23,903,233 26,275,834
==================== ==================== =============================
Net assets 5,981,226 17,625,773 14,077,505
==================== ==================== =============================
Equity
Share capital 11 2,693,319 2,682,757 2,693,319
Share premium account 36,042,868 36,009,331 36,042,868
Translation reserve - (13,550) (13,396)
Retained earnings (32,754,961) (21,052,765) (24,645,286)
Total equity 5,981,226 17,625,773 14,077,505
==================== ==================== =============================
Amphion
Innovations
plc
Condensed consolidated statement
of changes in equity
For the six months
ended
30 June 2014
Unaudited
Foreign
Share currency
Share premium translation Retained
Notes capital account reserve earnings Total
-------------------- --------------- ---------------- --------------- ------------------
US $ US $ US $ US $ US $
Balance at 1
January
2013 2,682,757 36,009,331 (13,497) (18,100,060) 20,578,531
Loss for the
period - - - (3,058,131) (3,058,131)
Exchange
differences
arising on
translation of
foreign
operations - - (53) - (53)
Total comprehensive
loss for the period - - (53) (3,058,131) (3,058,184)
-------------------- --------------- ---------------- --------------- ------------------
Recognition of
share-based
payments 12 - - - 105,426 105,426
Balance at 30
June
2013 2,682,757 36,009,331 (13,550) (21,052,765) 17,625,773
==================== =============== ================ =============== ==================
Balance at 1
January
2014 2,693,319 36,042,868 (13,396) (24,645,286) 14,077,505
Loss for the
period - - - (8,104,750) (8,104,750)
Exchange
differences
arising on
translation of
foreign
operations - - 18 - 18
Total comprehensive
loss for the period - - 18 (8,104,750) (8,104,732)
-------------------- --------------- ---------------- --------------- ------------------
Recognition of
share-based
payments 12 - - - 8,453 8,453
Dissolution of
subsidiary - - 13,378 (13,378) -
Balance at 30
June
2014 2,693,319 36,042,868 - (32,754,961) 5,981,226
==================== =============== ================ =============== ==================
Amphion Innovations plc
Condensed consolidated statement
of cash flows
For the six months ended
30 June 2014
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2014 2013 2013
----------------- ----------------- -------------------------
US $ US $ US $
Operating activities
Operating loss (1,769,275) (1,025,023) (2,576,745)
Adjustments for:
Depreciation of property,
plant, and equipment 308 834 1,331
Amortisation of intangible
assets 77,542 85,322 162,864
Recognition of share-based
payments 8,453 105,426 (118,933)
(Increase)/decrease in prepaid
& other receivables 19,709 (691,030) (112,921)
Decrease in security deposit - 57,135 57,135
Increase/(decrease) in trade
& other payables (220,118) 958,246 1,983,049
Interest expense (544,893) (524,177) (1,103,471)
Other gains and losses - - 2,500
Income tax (63) (57,050) 3,222
Net cash used in operating
activities (2,428,337) (1,090,317) (1,701,969)
----------------- ----------------- -------------------------
Investing activities
Interest received 419,467 288,783 856,564
Purchases of investments (141,536) (72,255) (204,959)
Proceeds from sale of furniture - 1,200 1,200
Adjustment to note payable
for foreign exchange rate 328,293 (605,764) 179,657
Net cash from/(used in) investing
activities 606,224 (388,036) 832,462
----------------- ----------------- -------------------------
Financing activities
Proceeds on issue of promissory
notes 2,000,000 450,000 1,012,000
Proceeds on issue of convertible
promissory notes 1,042,165 - -
Net cash from financing activities 3,042,165 450,000 1,012,000
----------------- ----------------- -------------------------
Net increase/(decrease) in
cash and cash equivalents 1,220,052 (1,028,353) 142,493
Cash and cash equivalents
at the beginning of the period 353,964 413,276 413,276
Effect of foreign exchange
rate changes (426,662) 637,720 (201,805)
Cash and cash equivalents
at the end of the period 1,147,354 22,643 353,964
================= ================= =========================
Notes to the condensed consolidated financial statements
(Unaudited)
For the six months ended 30 June 2014
1. General information
The condensed consolidated interim financial statements for the
six months ended 30 June 2014 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 2013 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 2013, except for the
adoption of new standards and interpretations effective as of 1
January 2014.
The Group has adopted the following new standards and amendments
to standards with a date of initial application of 1 January
2014.
-- Amendments to IAS 27, Separate Financial Statements
-- Amendments to IFRS 10, Consolidated Financial Statements
-- Amendments to IAS 32, Financial Instruments: Presentation
-- Amendments to IAS 36, Recoverable Amount Disclosures for Non-Financial Assets
Application of these standards and amendments had no significant
impact on the Group's financial position or results of
operations.
3. Use of judgements and estimates
In preparing these interim financial statements, management has
made judgements, estimates, and assumptions that affect the
reported amounts of assets, liabilities, contingencies, income, and
expense. Actual results could differ from those estimated.
Significant estimates in the Group's financial statements include
the amounts recorded for the fair value of the financial
instruments and other receivables. By their nature, these estimates
and assumptions are subject to an inherent measurement of
uncertainty.
Investments that are fair valued through profit or loss, as
detailed in note 8, are all considered to be "Partner Companies".
Those "Partner Companies" categorized as Level 3 are defined as
investment in "Private Companies".
Fair value of financial instruments
The Directors use their judgement in selecting an appropriate
valuation technique for financial instruments not quoted in an
active market ("Private Investments"). The estimation of fair value
of these Private Investments includes a number of assumptions which
are not supported by observable market inputs. The carrying amount
of the Private Investments is US $20 million.
Fair value of other receivables
Other receivables are stated at their amortised cost which
approximates their fair value and are reduced by appropriate
allowances for estimated irrecoverable amounts and do not carry any
interest. The recovery of the advisory fees due at 30 June 2014 of
US $1.4 million is dependent on a number of uncertain factors
including the ability of the Partner Companies to raise finances
(through current investors and new financing rounds) in order to
support the future growth plans and therefore generate enough cash
to be able to settle any outstanding debts.
4. Revenue
An analysis of the Group's revenue is as follows:
Six months ended Six months ended Year ended
30 June 2014 30 June 2013 31 December 2013
US $ US $ US $
Continuing operations
Advisory fees 240,000 264,638 939,490
License fees - - 77,500
240,000 264,638 1,016,990
============================= ============================= =========================
A provision for doubtful accounts has been set up for US
$240,000 for the advisory fees accrued from Partner Companies and
US $240,000 of bad debt expense was recognized in the statement of
comprehensive income.
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.
5. 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 2014 30 June 2014 30 June 2014 30 June 2014 30 June 2014
US $ US $ US $ US $ US $
REVENUE
External advisory
fees 240,000 - - - 240,000
External license
fees - - - - -
---------------------- ----------------------
Total revenue 240,000 - - - 240,000
Cost of sales - - - - -
---------------------- ---------------------- ---------------------- --------------------- -----------------------
Gross profit 240,000 - - - 240,000
Administrative
expenses (593,770) (1,019,364) (396,141) - (2,009,275)
---------------------- ---------------------- ----------------------
Segment result (353,770) (1,019,364) (396,141) - (1,769,275)
Fair value losses on
investments - (5,783,308) - - (5,783,308)
Interest income - 419,467 - - 419,467
Other gains and
losses - (426,678) - - (426,678)
Finance costs - (514,818) (30,075) - (544,893)
Loss before tax (353,770) (7,324,701) (426,216) - (8,104,687)
Income taxes (63) - - - (63)
---------------------- ---------------------- ----------------------
Loss after tax (353,833) (7,324,701) (426,216) - (8,104,750)
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Six
Six months months Six months Six months Six months
ended ended ended ended ended
30 June 30 June 30 June 30 June
30 June 2014 2014 2014 2014 2014
US $ US $ US $ US $ US $
OTHER
INFORMATION
Segment assets 3,847,271 35,867,334 549,897 (4,857,104) 35,407,398
Segment
liabilities 6,131,859 22,481,869 4,985,809 (4,173,365) 29,426,172
Depreciation 308 - - - 308
Amortisation - - 77,542 - 77,542
Recognition of
share-based
payments - 8,453 - - 8,453
5. Segment information, (continued)
For management purposes for 30 June 2013, 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 2013 30 June 2013 30 June 2013 30 June 2013 30 June 2013
US $ US $ US $ US $ US $
REVENUE
External advisory
fees 264,638 - - - 264,638
External license
fees - - - - -
--------------------- ----------------------
Total revenue 264,638 - - - 264,638
Cost of sales - - - - -
--------------------- ---------------------- ---------------------- --------------------- ----------------------
Gross profit 264,638 - - - 264,638
Administrative
expenses (337,448) (340,835) (611,378) - (1,289,661)
--------------------- ---------------------- ----------------------
Segment result (72,810) (340,835) (611,378) - (1,025,023)
Fair value losses on
investments - (2,379,958) - - (2,379,958)
Interest income 21,986 266,797 - - 288,783
Other gains and
losses 1,200 638,094 - - 639,294
Finance costs - (519,365) (4,812) - (524,177)
Profit/(loss)
before tax (49,624) (2,335,267) (616,190) - (3,001,081)
Income taxes (57,000) - (50) - (57,050)
--------------------- ---------------------- ----------------------
Loss after tax (106,624) (2,335,267) (616,240) - (3,058,131)
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Six
Six months months Six months Six months Six months
ended ended ended ended ended
30 June 30 June 30 June 30 June
30 June 2013 2013 2013 2013 2013
US $ US $ US $ US $ US $
OTHER
INFORMATION
Segment assets 4,094,132 41,763,222 705,141 (5,033,489) 41,529,006
Segment
liabilities 5,936,699 18,224,036 4,092,246 (4,349,748) 23,903,233
Depreciation 387 - 447 - 834
Amortisation - - 85,322 - 85,322
Recognition of
share-based
payments - 105,426 - - 105,426
5. 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 2014 30 June 2013
US $ US $
United States 240,000 120,000
United Kingdom - 144,638
240,000 264,638
================= =================
The following table provides an analysis of the Group's license
fees by geographical location.
License fees by
geographical location
---------------------------------------------------------------------
Six months Six months
ended ended
30 June 30 June
2014 2013
US $ US $
United
States - -
Europe - -
- -
=================================== ================================
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,
Carrying amount fittings, and
equipment and intangible
of segment assets assets
------------------------ ---------------------------
Six months Six months Six months Six months
ended ended ended ended
30 June 30 June 30 June 30 June
2014 2013 2014 2013
US $ US $ US $ US $
United
States 25,611,034 25,615,700 - -
United
Kingdom 9,796,364 15,913,306 - -
35,407,398 41,529,006 - -
=========== =========== ============= ============
6. Income tax expense
Six months Six months
ended ended Year ended
31 December
30 June 2014 30 June 2013 2013
------------ ------------ -----------
US $ US $ US $
Isle of Man income tax - - -
Tax on US subsidiary 63 57,050 257
Tax on UK subsidiary - - (3,479)
Current tax / refund 63 57,050 (3,222)
============ ============ ===========
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 24% 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 $
Loss before tax (8,104,687)
========================
Tax at the Isle of Man income tax rate of 0% -
Effect of different tax rates of subsidiaries
operating in other jurisdictions 63
Current tax 63
========================
7. 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
30 June 30 June 31 December
2014 2013 2013
------------------------------ ------------------------------ -----------------------------
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) (8,104,750) (3,058,131) (6,382,194)
============================== ============================== =============================
Number of shares
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2014 2013 2013
------------------------------ ------------------------------ -----------------------------
Weighted average number
of
ordinary shares for
the purposes of
basic earnings
per share 146,884,071 146,220,250 146,285,723
Effect of dilutive
potential
ordinary shares:
Share options - - -
Convertible
promissory notes 63,806,662 31,990,100 31,990,100
Weighted average number
of
ordinary shares for
the purposes of
diluted earnings
per share 210,690,733 178,210,350 178,275,823
============================== ============================== =============================
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.
8. Investments
At fair value through profit or loss
Group
------------------------------------------------------------------------
Level Level Level
1 2 3 Total
-------------- ------------------- ------------------- --------------
US $ US $ US $ US $
At 1 January
2014 15,579,671 - 20,166,416 35,746,087
Investments during
the year - - 141,536 141,536
Transfers between
levels - - - -
Fair value losses (5,783,308) - - (5,783,308)
At 30 June 2014 9,796,363 - 20,307,952 30,104,315
============== =================== =================== ==============
At 1 January
2013 - 3,225,783 35,678,903 38,904,686
Investments during
the year - - 204,959 204,959
Transfers between
levels 17,007,373 (3,225,783) (13,781,590) -
Fair value losses (1,427,702) - (1,935,856) (3,363,558)
At 31 December
2013 15,579,671 - 20,166,416 35,746,087
============== =================== =================== ==============
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. Investments classified as Level 2
have been valued using inputs other than quoted prices included
within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices). Fair values of unquoted investments classified as Level 3
in the fair value hierarchy have been determined in part or in full
by valuation techniques that are not supported by observable market
prices or rates. Investment valuations for Level 3 investments have
been arrived at using a variety of valuation techniques and
assumptions. For instance where the fair values are based upon the
most recent market transaction but which occurred more than twelve
months previously, the investments are classified as Level 3 in the
fair value hierarchy.
The net decrease in fair value for the six months ended 30 June
2014 of US $5,783,308 is from the change in value of the public
company and is based on a quoted price in an active market.
There were no transfers between levels in 2013.
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 2014 may
differ materially from the amount that could be realized in an
orderly transaction between willing market participants on the
reporting date.
In making their assessment of fair value at 30 June 2014,
management has considered the total exposure to each entity
including equity, warrants, options, promissory notes, and
receivables.
8. Investments, (continued)
Further information in relation to the directly held private
investment portfolio at 30 June 2014 is set out below:
Fair Unobservable
value Methodology inputs
-----------
US $
Multiple methods used in combination
Private including: Discount to last Discount
investments 20,307,952 market price, (30%-100%),
discount to last financing round,
price of future financing round, Price of
and third party fund raising.
valuation.
------------- ----------- ------------------------------------- ---------------
Given the range of techniques and inputs used in the valuation
process and the fact that in most cases more than one approach is
used, a sensitivity analysis is not considered to be a practical or
meaningful disclosure. Shareholders should note however that
increases or decreases in any of the inputs listed above in
isolation may result in higher or lower fair value
measurements.
9. Other financial assets and liabilities
The carrying amounts of the Group's financial assets and
financial liabilities at the statement of financial position date
are as follows.
30 June 2014 31 December 2013
Carrying Fair Carrying Fair
amount value amount value
US $ US $ US $ US $
Financial assets
Fair value through
profit or loss
Fixed asset investments - designated
as such upon initial recognition 30,104,315 30,104,315 35,746,087 35,746,087
Currents assets
Loans and receivables
Security deposit 13,600 13,600 13,600 13,600
Prepaid expenses and other
receivables 3,634,487 3,634,487 3,654,196 3,654,196
Cash and cash equivalents 1,147,354 1,147,354 353,964 353,964
Financial liabilities
Amortised cost
Trade and other payables 9,191,443 9,191,443 9,411,563 9,411,563
Current portion of notes payable 8,308,600 8,308,600 6,308,600 6,308,600
Current portion of convertible promissory notes - - 9,543,671 9,543,671
Convertible promissory notes 10,914,129 10,914,129 - -
Notes payable 1,012,000 1,012,000 1,012,000 1,012,000
The carrying value of cash and cash equivalents, the security
deposit, prepaid expenses and other receivables, and trade and
other payables, in the Directors' opinion, approximate to their
fair value at 30 June 2014 and 31 December 2013.
9. Other financial assets and liabilities, (continued)
The following table sets out the fair values of financial
instruments not measured at fair value and analyses it by the level
in the fair value hierarchy into which each fair value measurement
is categorized at 30 June 2014.
Level Level Level
1 2 3 Total
US $ US $ US $ US $
------- --------------- ------ ---------------
Financial assets
Security deposit - 13,600 - 13,600
Prepaid expenses
and
other receivables - 3,634,487 - 3,634,487
Cash and cash equivalents - 1,147,354 - 1,147,354
- 4,795,441 - 4,795,441
----------------------------------- --------------- ------ ---------------
Financial liabilities
Trade and other
payables - 9,191,443 - 9,191,443
Current portion
of notes payable - 8,308,600 - 8,308,600
Convertible promissory
notes - 10,914,129 10,914,129
Notes payable - 1,012,000 - 1,012,000
- 29,426,172 - 29,426,172
----------------------------------- --------------- ------ ---------------
10. Promissory notes
Convertible promissory notes
The convertible promissory notes were to mature on 31 December
2013 but the due date was extended to 31 January 2014 by a meeting
of the Noteholders on 6 December 2013. At a meeting of the
Noteholders on 24 January 2014, it was agreed to extend the
convertible promissory notes to 31 December 2015 on revised terms.
The new notes can be convertible into ordinary shares of the
Company at a conversion price of 10 pence and will pay interest of
7% if paid in ordinary shares or 5% if paid in cash or additional
notes on a quarterly basis. Prior to maturity, the notes will be
automatically converted into ordinary shares of the Company at the
time that the closing price of the ordinary shares is equal or
greater than 15 pence for 25 trading days. The Company is obliged
to use 50% of its cash balances over GBP2 million (excluding any
cash raised through any fund raising) to repay the notes. If, on or
before 15 December 2014, the notes have not been converted or
repaid in cash, the Noteholder will have the right to exchange part
or the whole note into Kromek Group PLC ("Kromek") shares. The
exchange rights will be exercisable from 15 December 2014 to 30
December 2014. In the event that the notes are not converted,
repaid in cash, or exchanged for Kromek shares by 31 December 2015,
the notes will be repaid by transferring Kromek shares held by the
Company on the date of repayment to the Noteholders. For every GBP1
note, two warrants were issued. The warrants have an exercise price
of 12 pence per share with an expiration date of 31 December 2015
or within 30 days of the early repayment of the note. In the event
that the cash balances of the Company immediately following any
repayment of the notes exceed GBP7 million, an amount equal to 20%
of the surplus over GBP7 million but not exceeding 20% of the
original principal amount of the notes will be paid to the
Noteholders in proportion to the amounts of notes held by them at
the time of repayment.
In April 2014, US $1,064,698 (GBP622,448) additional convertible
promissory notes were issued in payment of the accrued interest
payable on the notes as of 31 December 2013 and the quarter ended
31 March 2014. At 30 June 2014, the convertible promissory notes
totaled US $10,914,129 and the warrants issued totaled
12,761,337.
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.
10. Promissory notes, (continued)
Promissory notes
In June 2014, the Company was granted a loan facility by an
institutional lender (the "Lender"). The Company has drawn down an
initial sum of US $2 million with a further draw down facility of
up to a maximum of US $10 million, subject to the consent of each
party. The facility is secured by part of Amphion's holding in
Kromek Group plc ("Kromek") and may be repaid at the Company's
discretion in cash, the issue of Amphion shares, or the payment of
Kromek shares where the Lender will be subject to certain
limitations including adherence to any existing lock-in and an
orderly market agreement. Repayment will be on a monthly basis
starting on 1 September 2014 with final payment due 1 June 2015.
The interest rate of the loan is 12% per annum of the gross amount
provided to the Company. As part of the loan terms the Lender
received 8,532,350 3-year warrants in Amphion with an exercise
price of 4.375 pence per share. In addition, Amphion will be
issuing the Lender 663,627 3-year simulated warrants at an exercise
price of 56.25 pence per share. If the Lender exercises the
warrants, Amphion will pay the difference between the exercise
price and the Kromek market price. The Company also paid a further
8% of the gross amount provided as an implementation fee. As part
of the loan facility, the Directors agreed to a Deed of
Postponement that regulates the Directors' rights in respect to the
repayment of any debt due to them from the Company. The Directors
agreed to defer payment of their debt by the Company until the loan
facility is repaid in full. The funds are to be used for working
capital for Amphion and its Partner Companies.
11. Share capital
30 June 2014
GBP
Authorised:
250,000,000 ordinary shares of 1p each 2,500,000
=====================
Number GBP US $
--------------------- ----------------- ------------------
Balance as at 31 December 2013 146,884,071 1,468,840 2,693,319
Issued and fully paid:
Ordinary shares of 1p each - - -
Balance as at 30 June 2014 146,884,071 1,468,840 2,693,319
===================== ================= ==================
12. 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 2014, no options were issued
under the Plan.
12. Share based payments, (continued)
2014
Weighted
average
Number of exercise
share options price (in GBP)
Outstanding at beginning of period 8,983,333 0.11
Granted during the period - -
Cancelled during the period - -
Expired during the period - -
Outstanding at the end of the period 8,983,333 0.11
======================
Exercisable at the end of the period 8,941,668 0.11
Options are recorded at fair value on the date of grant using
the Black-Scholes model. The Group recognized total costs of US
$8,453 relating to equity-settled share-based payment transactions
in 2014 which were expensed in the statement of comprehensive
income during the period.
13. 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 2014, the amount due from Motif is US $12,246.
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 2015 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 2014.
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 2015 and shall
automatically renew for successive one year periods. Amphion
Innovations US Inc.'s fee for the period ended 30 June 2014 was US
$120,000. At 30 June 2014, US $840,000 of the advisory fees remain
payable by Motif. The balance has been reduced by a provision for
doubtful debts in the amount of US $360,000.
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 renews on an annual basis until terminated
by either party.
Amphion Innovations US Inc.'s fee for the period ended 30 June
2014 was suspended. At 30 June 2014, US $630,000 of the advisory
fees remain payable by m2m. This balance has been reduced by a
provision for doubtful debts in the amount of US $600,000.
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 renews annually
until terminated by either party. The subsidiary's fee for the
period ended 30 June 2014 was US $120,000. At 30 June 2014, US
$1,200,000
13. Related party transactions, (continued)
of the advisory fees remain payable. This balance has been
reduced by a provision for doubtful debts in the amount of US
$360,000.
A subsidiary of the Company has entered into an agreement with
PrivateMarkets, Inc. ("PrivateMarkets") 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 2014 was suspended.
At 30 June 2014, US $770,000 remains payable from PrivateMarkets.
The payable has been reduced by a provision for doubtful debts in
the amount of US $770,000.
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 2014 was
suspended.
During 2013 Richard Morgan, a Director of the Company, advanced
US $190,000 to a subsidiary of the Company under promissory notes.
The promissory notes accrue interest at 5% per annum and are
payable in three years. In 2010, Richard Morgan advanced US
$352,866 to the Company. This advance is interest free and
repayable on demand. At 30 June 2014, US $115,837 remains
outstanding. The net amount payable by the Group at 30 June 2014 to
Richard Morgan is US $2,196,060. The amount payable includes a
voluntary salary reduction of US $1,515,766, US $341,779 of which
will be payable at the discretion of the Board at a later date.
During 2010 through 2012, R. James Macaleer, the Chairman of the
Company, advanced US $6,308,600 to the Company under promissory
notes. The promissory notes accrue interest at 7% per annum and
mature on 31 December 2014. In 2013, R. James Macaleer advanced US
$600,000 to a subsidiary of the Company under a promissory note.
The promissory note accrues interest at 5% per annum and is payable
three years from issuance. As part of the terms of the loan
facility the Company entered into in June 2014, the Directors
agreed to a Deed of Postponement that defers payment of their
promissory notes by the Company until the loan facility is repaid
in full (note 10). At 30 June 2014, US $23,787 was due to Mr.
Macaleer for Director's fees and US $1,148,564 was due for accrued
interest on the promissory notes.
At 30 June 2014, US $117,537 was due to Gerard Moufflet, a
Director of the Company, for Director's fees and US $8,337 for
expenses.
At 30 June 2014, US $7,367 was due to Anthony Henfrey, a
Director of the Company, for expenses. Dr. Henfrey waived his
entitlement to receive his Director's fees for 2014.
At 30 June 2014, US $23,535 was due to Richard Mansell-Jones, a
retired Director of the Company, for Director's fees.
At 30 June 2014, US $812,992 was due to Robert Bertoldi, a
Director of the Company, for voluntary salary reductions of which
US $188,769 is payable by the discretion of the Board at a later
date.
14. Subsequent Events
In July and August 2014, the Company made advances of US $90,589
under a promissory note from Motif BioSciences, Inc.
In July and August 2014, the Company made advances of US $16,282
under a promissory note from PrivateMarkets Inc.
In July and August 2014, the Company made advances of US $40,000
under a promissory note from Axcess International Inc.
14. Subsequent Events, (continued)
On 1 July 2014, the Company issued GBP79,334 additional
convertible promissory notes and 158,668 additional warrants in
payment of the second quarter accrued interest expense on the
convertible promissory notes.
On 8 July 2014, Amphion Innovations UK Ltd., a subsidiary of the
Company, was dissolved.
In July 2014, the Company issued 690,663 ordinary shares to
certain Directors in payment of their directors' fees for the
fourth quarter of 2013 and the first two quarters of 2014 priced at
2.175 pence.
On 7 August 2014, Anthony W. Henfrey retired as Director of the
Company.
In August 2014, the Company was re-registered as a company
incorporated under the Companies Act 2006 (as amended).
In August 2014, the Company increased its authorized share
capital to 500,000,000 ordinary shares from 250,000,000 ordinary
shares.
In August 2014, Miroslaw Izienicki was appointed Non-executive
Director to the Board of Amphion Innovations plc.
In August 2014, the Company signed a supplemental loan agreement
deed with an institutional lender to make an additional US
$1,000,000 draw down on the loan facility in four monthly advances
of US $250,000 starting in September. Repayment will be on a
monthly basis starting on 1 October 2014. (See note 10).
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GMGMLNRFGDZM
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