TIDMAMP
RNS Number : 1611S
Amphion Innovations PLC
29 September 2017
29 September 2017
AMPHION INNOVATIONS PLC
("Amphion" or the "Company")
Interim results for the six months to 30 June 2017
London and New York, 29 September 2017 - Amphion Innovations plc
(AIM: AMP), the developer of medical, life science, and technology
businesses, announces its audited results for the six months to 30
June 2017.
Financial Results
-- Net Asset Value ("NAV") per share was -1p (US -$0.02 cents)*
at Period-end from -2.4p (US -$0.03 cents) as at year end. This
increase was due almost entirely to the movement in value of the
Motif Bio plc share price
Highlights
Amphion
-- Sold the Company's remaining holding of Kromek Group plc
-- Richard Morgan and Robert Bertoldi, Directors of the Company,
entered into a Deed of Postponement where they agreed to postpone
the repayment of the amounts owed to them, which total US $4.3
million, until all other debts of the Company are repaid
Motif Bio
-- In January, Motif Bio completed treatment of patients in its
Phase III trial (REVIVE-1) for its product candidate iclaprim
-- In April, Motif Bio released data readout from REVIVE-1,
showing iclaprim to be well tolerated and met the non-inferiority
margin mandated by the FDA
Polarean
-- In May, m2m Imaging Corp. and Polarean Inc. merged to create
Polarean Imaging Limited, a clinical-stage, revenue generating,
medical imaging product company, in a cash and share merger
-- Also in May, Polarean Imaging Limited announces the closing
of its Pre-IPO financing of US $2.0 million
Post Period Events
-- Sold a total of 6,090,000 shares of Motif Bio in repayment of
the Loan Facility previously announced
on 5 June 2014, reducing the loan balance from US $6,149,013 at
30 June to US $4,289,407
-- Finalised an agreement with the Loan Facility provider that
no more shares of Motif Bio will be sold
until 15 January 2018
-- Motif Bio announced that the FDA granted iclaprim Orphan Drug
Designation for the treatment of Staphylococcus aureus lung
infections in patients with cystic fibrosis
-- Motif Bio completed treatment of patients in its REVIVE-2
Phase III trial for its product candidate, iclaprim
-- The net improvement in our NAV as the result of the
appreciation in the Motif Bio shares and exchange rate, net of the
last three months operations is US $1.2 million
*Exchange rate at 30 June 2017 - US $1.2995 per GBP
Richard Morgan, CEO of Amphion Innovations plc, commented: "We
were very pleased to see the announcement of the Orphan Designation
for Cystic Fibrosis for Motif Bio's iclaprim as well as the recent
recovery in the Motif Bio share price. The value of Motif has a
significant and proportional effect on the Net Asset Value of
Amphion. We are focused on retaining as much of our Motif Bio
shares as possible other than what is absolutely necessary to meet
the required repayments on Amphion's Loan Facility. Following the
long overdue improvement in the Motif Bio share price and the
repayments on the Loan Facility, we were quickly able to conclude
an agreement with the Lender to postpone further repayments on the
loan until January 2018, thus giving us more time to replace the
current loan with one that has a longer repayment terms.
We have also made good progress in the preparations to take
Polarean through an IPO on AIM. Our confidence in the future
prospects for Polarean has only increased as we have engaged in the
due diligence required to complete the IPO process. We believe
hyperpolarised Xenon could become an accepted and well regarded
diagnostic and monitoring tool for clinicians treating pulmonary
conditions and for companies developing drugs to treat these
conditions, which are widespread and growing around the world.
Progress has also been made in moving most of our other assets
forward and we believe that in due course they will also do well,
given our continued support."
This announcement contains insider information for the purposes
of Article 7 of Regulatory (EU) No596/2014.
For further information please contact:
Amphion Innovations Tel: +1 (212) 210 6224
Charlie Morgan
Panmure Gordon Limited Tel: +44 (0)20
(Nominated Adviser and Corporate Broker) 7886 2500
Freddy Crossley / Duncan Monteith
(Corporate Finance)
Charlie Leigh-Pemberton (Corporate
Broking)
Northland Capital Partners Limited Tel: +44 (0)20 3861
(Joint Corporate Broker) 6625
Patrick Claridge / David Hignell
(Corporate Finance)
John Howes (Corporate Broking)
Walbrook PR Tel: +44 (0)20 7933 8780 or
Mike Wort/ Paul McManus amphion@walbrookpr.com
About Amphion Innovations plc - www.amphionplc.com
Amphion Innovations is a developer of medical, life science and
technology businesses. We use our extensive experience in company
building to invest and build shareholder value in high growth
companies in the US and UK. Amphion has significant shareholding in
a small number of 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.
Chief Executive Officer's Statement
Partner Company Summaries
Motif Bio
The data from Motif's Phase III REVIVE-1 clinical trial support
our belief that its lead antibiotic, iclaprim, is safe and
effective. In August, Motif announced that the last patient
completed the treatment phase in REVIVE-2, the second Phase III
clinical trial investigating the safety and efficacy of iclaprim in
patients with Acute Bacterial Skin and Skin Structure Infections
(ABSSSI). Data from REVIVE-2, which uses an identical protocol to
REVIVE-1 but has different trial centres, are expected in the
fourth quarter of 2017. We believe that the successful completion
of these two pivotal Phase III trials satisfy both FDA and EMA
requirements for regulatory submission for an IV formulation of
iclaprim in the treatment of ABSSSI. The company remains on track
to submit a New Drug Application in the first quarter of 2018 in
the United States and a Marketing Authorisation Application in the
first half of 2018 in Europe for iclaprim for the treatment of
ABSSSI. Iclaprim has recently been granted Orphan Drug Designation
by the FDA for the treatment of Staphylococcus aureus lung
infections in patients with Cystic Fibrosis. This designation
grants special status to a drug or biologic under development to
treat a rare disease or condition and qualifies Motif for various
development incentives including tax credits for qualified clinical
testing, waiver of user fees, and potentially up to seven years of
market exclusivity for the given indication.
Polarean Imaging
In May, m2m Imaging Corp. completed a merger with Polarean Inc.
to form a new UK company, Polarean Imaging Limited. In addition to
the merger, we successfully completed the pre-IPO placing which
raised a total of US $2 million, giving the new company a fully
diluted company valuation slightly over US $20 million. Amphion
invested an additional US $400,000 in the pre-IPO, thereby
maintaining our ownership position. We continue to work diligently
on preparations for Polarean's IPO on AIM, which we are looking to
close before the end of 2017. Polarean's technology enables the
visualisation of hyperpolarised (129) Xenon via magnetic resonance
imaging technology. Polarean is a clinical stage, revenue
generating medical imaging product company that expects to gain
clinical approval for its drug/device combination product within
three years. The protocol for the Phase III clinical trial has been
agreed with the FDA and, if successful, should garner a broad
clearance to market "for use in pulmonary medicine". Polarean is
planning to hold the trial at two sites, each of which already has
at least one polariser, namely Duke University and the University
of Virginia. The company expects to start the clinical trial at the
beginning of 2018. Polarean continues to sell its polariser units
and consumables to leading research institutions and plans to
continue do so while the Phase III clinical trial is underway.
WellGen
Since year end, WellGen has signed a license agreement with
Rutgers University and is currently working on a sub-licensing
agreement with its joint venture partner, a US-based sports
beverage company. The joint venture has developed WorkOut Tea(TM) ,
the first true performance tea on the market. The functional
beverage market has been expanding rapidly in recent years and we
believe that WorkOut Tea's clinically tested and proven benefits
should help it stand out from the crowd. WellGen is focused on the
success of this functional beverage as we continue to explore
distribution channels in the mid-west of the United States, with
the possibility of expanding to other US markets and beyond.
WellGen's proprietary Black Tea Extract is scientifically derived
and the clinical trial demonstrated improved performance and
recovery benefits such as a reduction in muscle soreness and
reduced recovery time.
FireStar Software
The EdgeNode(TM) platform on which FireStar's new product is
based is a novel architecture that is protected by six patents.
FireStar has spent the last several years developing a product
which is aimed at the sponsors of outsourced clinical trials (such
as Motif Bio). The product, called Clinicon(c) , uses EdgeNode's
patented messaging capability to allow sponsors to monitor the huge
amount of diverse data flows generated in clinical trials and
facilitate early and decisive intervention if key performance
indicators (such as enrollment or dosing) are drifting off track.
At present, the sponsor is very much at the mercy of the Contract
Research Organisation's ("CRO's") ability to collect and analyse
the data from many different sources in many different locations
and is usually only aware there may be a problem after a
considerable delay, if at all while the trial is ongoing. Clinicon
automates all those activities and puts the control back into the
sponsor's hands, with little imposition on the CRO's existing data
processing systems. We have been able to get valuable input and
guidance from the Motif Bio team about their needs and concerns and
this has helped to guide the design of the product to date. The
next step is to demonstrate this capability with a prototype and
then sign up with one or two beta sites to stress test the
product.
Axcess continues to discuss litigation strategies and financing
opportunities with several legal and litigation financing firms.
Axcess has a rich portfolio of over a dozen patents in
Micro-Wireless systems solutions for real time business activity
monitoring and control. It is clear that many companies are now
offering products or services that incorporate some of the basic
wireless technology developed by Axcess over the last 15 years and
a number of companies in the transportation, security, and other
sectors appear to be infringing one or more of Axcess's patents. A
lot of work has been done on the patent portfolio by us and our
legal experts. This work has confirmed that we should be able to
get companies using the technology to sign up for equitable
licensing agreements.
DataTern's two patents (the '502 and '402 patents) are directed
to how object-oriented software applications access data stored in
relational databases. Such applications are widely used and most
current databases are relational databases. We continue to believe
that companies that are using or want to use DataTern's patented
technology should enter into equitable licensing agreements. Both
patents have successfully completed re-examinations by the United
States Patent and Trademark Office with new claims added.
Ultimately our confidence in the strength of the patents will be
tested in the courts and in order to pursue these claims DataTern
has been exploring alternative legal and financing
opportunities.
Financial review
Revenue for the six-month period ended 30 June 2017 was US
$153,000 compared with US $60,000 recorded in the first half of
2016. We have continued to control costs and the Board has
continued to work with reduced levels of current cash compensation.
Total administrative expenses were only slightly higher than last
year and, as a result, the operating loss for the Period was US
$1,599,817 compared with US $1,505,488 as reported in the same
period of last year.
At 30 June 2017 the Company's unrealized gains on investments
was US $4,277,373, mostly due to the increase in share price of
Motif Bio. Total assets were US $27,260,681 and Net Asset Value per
Share was US -$0.02 (up 33%) versus US -$0.03 at the end of last
year. In pounds Sterling, NAV per Share was -1p at the end of the
Period, up approximately 58% versus the year end figure of
-2.4p.
On 15 May 2017 the Company entered into a Deed of Postponement
with both Richard Morgan and Robert Bertoldi, Directors of the
Company, where they agreed to postpone the repayment of the amounts
owed to them, which total US $4.3 million, until all other debts of
the Company are repaid.
Financial support for Amphion over the last few years has come,
for the most part, from access to the Loan Facility first announced
in June 2014. The Facility was granted by an institutional Lender,
using the value of our publicly traded assets as security. As at 30
June 2017, the amount payable owed to the Lender was US $6,149,013.
In the months following the reporting period the Company sold
6,090,000 shares of Motif Bio in repayment of the Facility,
bringing the amount owed to US $4,289,407. The Company now has an
agreement in place with the Lender that no additional shares of
Motif Bio will be sold until January 2018. The Company is currently
in negotiation with a number of finance providers to seek
alternative longer term financing strategies. Support for Amphion
has also come from the Management team, but with reduced prominence
as prior years as the Company has managed to access the Loan
Facility.
Outlook
We continue to believe that the successful completion of Motif's
ABSSSI Phase III trials will satisfy both FDA and EMA requirements
for regulatory submission for an IV formulation of iclaprim. With
data from the REVIVE-2 trial expected in the fourth quarter of
2017, we look forward to Motif moving forward it its drug
development of iclaprim as it prepares and submits the New Drug
Application to the FDA. Our confidence in the future prospects for
Polarean has only increased as we have engaged in the due diligence
required to complete the IPO process. We believe their use of
hyperpolarized Xenon gas in diagnostic and monitoring medical
imaging will become a fundamental tool in the treatment of
pulmonary conditions, which are widespread and growing around the
world.
The outlook for Amphion depends increasingly on the value we can
capture from our holdings in Motif and now Polarean as it proceeds
down the path towards an IPO. We continue to support our other
Partner Companies FireStar, Axcess, and WellGen and are excited
about the prospects for each of them. As the other Partner
Companies further develop, they will each become more important
contributors to Amphion. We remain committed to seeing each of
their programmes develop and succeed.
We continue to look for a replacement to our loan facility that
extends the maturity and allows for the Company to hold on to its
holding in Motif. We expect our ability to replace the loan
facility and to access the equity markets will improve as Motif and
Polarean continue to progress.
Richard Morgan
Chief Executive Officer
Amphion
Innovations plc
Condensed consolidated statement of comprehensive
income
For the six months
ended 30 June
2017
Unaudited Unaudited
Notes Six months Six months Audited
ended ended Year ended
30 June 31 December
30 June 2017 2016 2016
Continuing
operations US $ US $ US $
Revenue 4 153,000 60,000 139,633
Cost of sales - - -
Gross profit 153,000 60,000 139,633
Administrative
expenses (1,752,817) (1,565,488) (3,474,045)
Operating loss (1,599,817) (1,505,488) (3,334,412)
Fair value
gains/(losses) on
investments 8 4,277,373 1,156,454 (12,702,464)
Realised losses on
sale of
investments (485,170) - (1,642,029)
Interest income 155,868 326,914 776,244
Other gains and
losses 33,201 948,995 1,507,321
Finance costs (696,601) (606,848) (1,446,659)
Profit/(loss)
before tax 1,684,854 320,027 (16,841,999)
Tax on
profit/(loss) 6 - - (1,235)
Profit/(loss) for
the period 1,684,854 320,027 (16,843,234)
---------------------- ---------------- ------------------------
Other
comprehensive
income
Exchange
differences
arising on
translation
of foreign
operations - - -
Other
comprehensive
income/(loss)
for the period - - -
---------------------- ---------------- ------------------------
Total comprehensive
income/(loss)
for the period 1,684,854 320,027 (16,843,234)
====================== ================ ========================
The Directors consider that all results derive from
continuing activities.
Earnings/(loss)
per share 7
Basic US $ 0.01 US $ 0.00 US $ (0.09)
====================== ================ ========================
Diluted US $ 0.01 US $ 0.00 US $ (0.09)
====================== ================ ========================
The notes are an integral part of these financial
statements.
Amphion Innovations plc
Condensed consolidated statement of financial
position
As at 30 June 2017
Unaudited Unaudited Audited
30 June 30 June 31 December
Notes 2017 2016 2016
--------------------- -------------------- -------------------
US $ US $ US $
Non-current assets
Intangible assets 42,390 197,474 119,932
Security deposit 20,000 20,000 20,000
Investments 8 25,314,069 38,766,523 22,844,324
25,376,459 38,983,997 22,984,256
--------------------- -------------------- -------------------
Current assets
Prepaid expenses and other
receivables 1,178,621 1,302,133 1,150,619
Cash and cash equivalents 705,601 48,146 313,826
1,884,222 1,350,279 1,464,445
--------------------- -------------------- -------------------
Total assets 27,260,681 40,334,276 24,448,701
===================== ==================== ===================
Current liabilities
Trade and other payables 9,872,969 10,121,740 10,148,353
Notes payable 10 13,440,632 11,326,234 12,960,670
Convertible promissory notes 10 7,765,923 - 7,226,059
31,079,524 21,447,974 30,335,082
--------------------- -------------------- -------------------
Non-current liabilities
Convertible promissory notes 10 - 7,652,133 -
- 7,652,133 -
--------------------- -------------------- -------------------
Total liabilities 31,079,524 29,100,107 30,335,082
===================== ==================== ===================
Net (liabilities)/assets (3,818,843) 11,234,169 (5,886,381)
===================== ==================== ===================
Equity
Share capital 11 3,593,032 3,465,082 3,465,082
Share premium account 38,897,769 38,677,056 38,677,056
Retained earnings (46,309,644) (30,907,969) (48,028,519)
Total equity (3,818,843) 11,234,169 (5,886,381)
===================== ==================== ===================
The notes are an integral part of these financial
statements.
Amphion Innovations plc
Condensed consolidated statement of changes
in equity
For the six months ended
30 June 2017
Unaudited
Share
Share premium Retained
Notes capital account earnings Total
------------- ----------------- ------------------ ---------------
US $ US $ US $ US $
Balance at 1 January 2016 3,460,880 38,667,074 (31,235,882) 10,892,072
Profit for the period - - 320,027 320,027
Total comprehensive income
for the period - - 320,027 320,027
------------- ----------------- ------------------ ---------------
Issue of share capital 4,202 9,982 - 14,184
Recognition of share-based
payments 12 - - 7,886 7,886
Balance at 30 June 2016 3,465,082 38,677,056 (30,907,969) 11,234,169
============= ================= ================== ===============
Balance at 1 January 2017 3,465,082 38,677,056 (48,028,519) (5,886,381)
Profit for the period - - 1,684,854 1,684,854
Total comprehensive income
for the period - - 1,684,854 1,684,854
------------- ----------------- ------------------ ---------------
Issue of share capital 127,950 220,713 - 348,663
Recognition of share-based
payments 12 - - 34,021 34,021
Balance at 30 June 2017 3,593,032 38,897,769 (46,309,644) (3,818,843)
============= ================= ================== ===============
Amphion Innovations plc
Condensed consolidated cash flow statement
For the six months ended 30 June 2017
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 31 December
30 June 2017 2016 2016
---------------- ---------------------- --------------------------
US $ US $ US $
Operating activities
Profit/(loss) 1,684,854 320,027 (16,843,234)
Adjustments for:
Amortisation of intangible assets 77,542 77,542 155,084
Recognition of share-based payments 34,021 22,071 64,781
Change in fair value of investments (4,277,373) (1,156,454) 12,702,464
Loss on sale of investments 485,170 - 1,642,029
Issue notes to settle interest expense 184,983 205,221 395,687
(Gain)/loss from change in foreign
exchange rate on
convertible promissory notes 389,956 (865,269) (1,392,038)
Received investment shares for interest
income - - (265,517)
Other income (4,338) - -
Issue shares for finance fee 348,664 - -
Decrease in security deposit - 2,008 2,008
(Increase)/decrease in prepaid &
other receivables (28,003) (95,290) 56,224
Decrease in trade & other payables (275,384) (224,271) (197,658)
Net cash used in operating activities (1,379,908) (1,714,415) (3,680,170)
---------------- ---------------------- --------------------------
Investing activities
Purchases of investments (461,278) (165,753) (395,015)
Proceeds from disposition of investment 1,783,736 - 916,031
Net cash provided by/(used in) investing
activities 1,322,458 (165,753) 521,016
---------------- ---------------------- --------------------------
Financing activities
Proceeds on issue of promissory notes 2,050,000 1,765,000 4,865,000
Repayments of promissory notes (1,600,775) (773,667) (2,329,001)
Net cash from financing activities 449,225 991,333 2,535,999
---------------- ---------------------- --------------------------
Net increase/(decrease) in cash and
cash equivalents 391,775 (888,835) (623,155)
Cash and cash equivalents at the beginning
of the period 313,826 936,981 936,981
Cash and cash equivalents at the end
of the period 705,601 48,146 313,826
================ ====================== ==========================
Interest received 12 18 314,205
================ ====================== ==========================
Interest paid 230,705 156,205 316,447
================ ====================== ==========================
1. General information
The condensed consolidated interim financial statements for the
six months ended 30 June 2017 are unaudited and do not constitute
statutory accounts within the meaning of the Isle of Man Companies
Act 2006. The statutory accounts of Amphion Innovations plc for the
year ended 31 December 2016 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 as
adopted by the EU (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 2016. No new standards
that have become effective in the period have had a material effect
on the Group's financial statements.
Going concern
After making inquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For these
reasons, they continue to adopt the going concern basis in
preparing the condensed consolidated interim financial
statements.
3. Use of judgements and estimates
The preparation of the Group's interim financial statements
requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, and contingencies at
the date of the Group's interim financial statements, and revenue
and expenses during the reporting period. 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 and the effect on the Group's financial
statements of changes in estimates in future periods could be
significant.
Investments that are fair valued through profit or loss, as
detailed in note 8, are all considered to be "Partner Companies".
Those "Partner Companies" categorised 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 $8 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.
4. Revenue
An analysis of the Group's revenue is as follows:
Six months ended Six months ended Year ended
30 June 2017 30 June 2016 31 December 2016
US $ US $ US $
Continuing
operations
Advisory fees 153,000 60,000 139,633
License fees - - -
153,000 60,000 139,633
============================= ============================= =============================
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 activities,
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 2017 30 June 2017 30 June 2017 30 June 2017 30 June 2017
US $ US $ US $ US $ US $
REVENUE
External advisory
fees 153,000 - - - 153,000
External license
fees - - - - -
---------------------- ----------------------
Total revenue 153,000 - - - 153,000
Cost of sales - - - - -
---------------------- ---------------------- ---------------------- ---------------------- -----------------------
Gross profit 153,000 - - - 153,000
Administrative
expenses (331,499) (1,077,680) (343,638) - (1,752,817)
---------------------- ---------------------- ----------------------
Segment result (178,499) (1,077,680) (343,638) - (1,599,817)
Fair value gains on
investments - 4,308,957 - (31,584) 4,277,373
Realized loss on
sale
of
investments - (485,170) - - (485,170)
Interest income - 155,868 - - 155,868
Other gains and
losses - (407,664) 440,865 - 33,201
Finance costs - (660,961) (35,640) - (696,601)
Profit/(loss)
before tax (178,499) 1,833,350 61,587 (31,584) 1,684,854
Income taxes - - - - -
---------------------- ---------------------- ----------------------
Profit/(loss)
after tax (178,499) 1,833,350 61,587 (31,584) 1,684,854
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 2017 30 June 2017 2017 2017 2017
US $ US $ US $ US $ US $
OTHER
INFORMATION
Segment assets 2,150,523 35,418,672 74,316 (10,382,830) 27,260,681
Segment
liabilities 8,500,757 24,878,056 7,526,804 (9,826,093) 31,079,524
Amortisation - - 77,542 - 77,542
Recognition of
share-based
payments - 34,021 - - 34,021
5. Segment information, (continued)
For management purposes for 30 June 2016, 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 2016 30 June 2016 30 June 2016 30 June 2016 30 June 2016
US $ US $ US $ US $ US $
REVENUE
External
advisory
fees 60,000 - - - 60,000
External license
fees - - - - -
---------------------- ----------------------
Total revenue 60,000 - - - 60,000
Cost of sales - - - - -
---------------------- ---------------------- ---------------------- ---------------------- -----------------------
Gross profit 60,000 - - - 60,000
Administrative
expenses (341,193) (889,603) (334,692) - (1,565,488)
---------------------- ---------------------- ----------------------
Segment result (281,193) (889,603) (334,692) - (1,505,488)
Fair value gains on
investments - 1,176,171 - (19,717) 1,156,454
Interest income - 326,914 - - 326,914
Other gains and
losses 195 948,800 - - 948,995
Finance costs - (583,491) (23,357) - (606,848)
Profit/(loss)
before tax (280,998) 978,791 (358,049) (19,717) 320,027
Income taxes - - - - -
---------------------- ---------------------- ----------------------
Profit/(loss)
after tax (280,998) 978,791 (358,049) (19,717) 320,027
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 2016 2016 2016 2016 2016
US $ US $ US $ US $ US $
OTHER
INFORMATION
Segment assets 7,858,227 40,836,766 229,627 (8,590,344) 40,334,276
Segment
liabilities 7,885,812 21,907,661 7,235,277 (7,928,643) 29,100,107
Amortisation - - 77,542 - 77,542
Recognition of
share-based
payments - 22,071 - - 22,071
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 2017 30 June 2016
US $ US $
United States - -
United Kingdom 153,000 60,000
153,000 60,000
================= ==========================
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 2017 30 June 2016
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, 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 2017 30 June 2016 30 June 2017 30 June 2016
US $ US $ US $ US $
United States 10,252,395 7,520,429 - -
United Kingdom 17,008,286 32,813,847 - -
27,260,681 40,334,276 - -
============= ============= ================= ================
6. Income tax expense
Six months ended Six months ended Year ended
30 June 2017 30 June 2016 31 December 2016
----------------- ----------------- ----------------
US $ US $ US $
Isle of Man income tax - - -
Tax on US subsidiaries - - 1,235
Current tax / refund - - 1,235
================== ================== ================
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 three subsidiaries, two in the USA 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 Group charge for the period can be reconciled to the profit
per the consolidated income statement as follows:
US $
Profit before tax 1,684,854
========================
Tax at the Isle of Man income tax rate of 0% -
Effect of different tax rates of subsidiaries
operating in other jurisdictions -
Current tax -
========================
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
31 December
30 June 2017 30 June 2016 2016
----------------------- ----------------------- -----------------------
US $ US $ US $
Earnings/(loss) for the purposes of
basic
and diluted earnings per
share (profit for the year
attributable
to equity holders of the parent) 1,684,854 320,027 (16,843,234)
======================= ======================= =======================
Number of shares
Six months Six months
ended ended Year ended
31 December
30 June 2017 30 June 2016 2016
----------------------- ----------------------- -----------------------
Weighted average number of ordinary
shares
for
the purposes of basic earnings per
share 199,500,179 197,493,495 197,502,435
Effect of dilutive potential ordinary
shares:
Share options 1,511,227 2,405,083 2,260,807
Convertible promissory notes 74,701,069 72,233,543 73,215,318
Weighted average number of ordinary
shares
for
the purposes of diluted earnings per
share 275,712,475 272,132,121 272,978,560
======================= ======================= =======================
Share options that could potentially dilute basic earnings per
share in the future have not been included in the calculation of
diluted earnings per share because they are antidilutive.
8. Investments
At fair value through profit or loss
Group
-----------------------------------------------------------------------------
Level 1 Level 2 Level 3 Total
------------------- ------------------- ------------------- --------------
US $ US $ US $ US $
At 1 January 2017 14,918,606 - 7,925,718 22,844,324
Investments during
the year - - 461,278 461,278
Disposals (1,783,736) - - (1,783,736)
Fair value gains 3,873,417 - (81,214) 3,792,203
At 30 June 2017 17,008,287 - 8,305,782 25,314,069
=================== =================== =================== ==============
At 1 January 2016 31,655,446 - 5,788,870 37,444,316
Investments during
the year - - 165,753 165,753
Fair value gains 1,158,404 - (1,950) 1,156,454
At 30 June 2016 32,813,850 - 5,952,673 38,766,523
=================== =================== =================== ==============
The Group 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 Group,
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 instances 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 increase in fair value for the six months ended 30 June
2017 of US $3,792,203 includes a net increase of US $4,358,587 from
the change in value of the public companies and is based on quoted
prices in active markets, a realized loss of US $485,170 from the
sale of Kromek Group plc and a net decrease of US $81,214 in Level
3 investments that has been estimated using valuation techniques in
accordance with the International Private Equity and Venture
Capital Valuation Guidelines.
The 2017 disposals include the sale of 6,024,255 Kromek Group
ordinary shares for US $1,783,736 that was used to pay the monthly
payments to the institutional lender.
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 2017 may
differ materially from the amount that could be realised in an
orderly transaction between willing market participants on the
reporting date.
8. Investments, (continued)
In making their assessment of fair value at 30 June 2017,
management has considered the total exposure to each entity
including equity, warrants, options, promissory notes, and
receivables.
Further information in relation to the directly held private
investment portfolio that are at Level 3 at 30 June 2017 is set out
below:
Unobservable
Fair value Methodology inputs
-----------
US $
Multiple methods used in combination including:
Private investments 8,305,782 Discount to last market price, Discount (0%-100%),
discount to last financing round, price Price of fund
of future financing round and third party 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. It should be noted 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 2017 31 December 2016
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 25,314,069 25,314,069 22,844,324 22,844,324
Currents assets
Loans and receivables
Security deposit 20,000 20,000 20,000 20,000
Prepaid expenses and other
receivables 1,178,621 1,178,621 1,150,619 1,150,619
Cash and cash equivalents 705,601 705,601 313,826 313,826
Financial liabilities
Amortised cost
Trade and other payables 9,872,969 9,872,969 10,148,353 10,148,353
Notes payable 13,440,632 13,440,632 12,960,670 12,960,670
Convertible promissory notes 7,765,923 7,765,923 7,226,059 7,226,059
9. Other financial assets and liabilities, (continued)
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 2017 and 31 December 2016.
The financial instruments at 30 June 2017 are categorized as
level 2 in the fair value hierarchy.
10. Promissory notes
Convertible promissory notes
During 2017, US $184,982 (GBP146,230) additional convertible
promissory notes were issued in payment of the accrued interest
payable on the notes for the quarters ended 31 December 2016 and 31
March 2017. The Company redeemed a total of GBP23,952 of
convertible promissory notes for the 30 November 2016 redemption
date. The amounts were paid in January 2017. Approximately
GBP56,000 will be redeemed for the 30 June 2017 redemption date. At
30 June 2017, the convertible promissory notes totaled US
$7,765,923 (GBP5,976,086) and the warrants issued totaled
11,952,173.
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
In June 2014, the Company was granted a loan facility by an
institutional lender (the "Lender"). In February 2017, the Company
borrowed an additional US $500,000. The additional draw may be
converted into ordinary shares in accordance with the additional
terms of the facility of August 2016. Under the terms of the
additional draw, the interest rate will be 10%. In May 2017, the
Company agreed to terms for the draw-down of an additional US
$1,500,000 under the loan facility. The draw-down was taken in two
tranches of US $750,000 in May and June 2017. The current loan
balance under the facility after both tranches is US $6,149,013
which may be repaid in cash or ordinary shares. Of this total
amount, US $3,000,000 may be converted into ordinary shares of the
Company at 6 pence per share, and $3,149,013 may be converted at 8
pence per share. Under the terms of the additional draw, the
interest rate will be 10% with repayment to be added to the
outstanding balance and amortized over the remaining life of the
loan, which matures on 15 December 2017. The current loan under the
facility is secured by the pledge of 42,461,625 ordinary shares of
Motif Bio plc. Amphion has transferred the legal title to, but
retains the beneficial interest in, the pledged shares. Under the
additional draw, the company issued 10,000,000 new ordinary shares
to the lender for nil consideration. 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.
In July 2017, the Company reached an agreement with the estate
of R. James Macaleer, the former Chairman of the Company, to extend
the maturity of the notes payable totaling US $6,308,600 to the end
of 2017 in return for the grant of 3 million warrants (1 million
with an exercise price of 8p, 1 million with an exercise price of
9p, and 1 million with an exercise price of 10p).
11. Share capital
Number GBP US $
-------------- -------------- ---------------
Balance as at 31 December
2016 197,511,229 1,975,112 3,465,082
Issued and fully paid:
Ordinary shares of 1p
each 10,000,000 100,000 127,950
Balance as at 30 June
2017 207,511,229 2,075,112 3,593,032
============== ============== ===============
During the six months ended 30 June 2017, the following changes
occurred to the share capital of the Company:
On 26 May, the Company issued 10,000,000 ordinary 1p shares at a
premium of 1.725 per share (US $220,714) to the institutional
lender as part of the terms of the additional draw-down.
12. Share based payments
On 31 October 2016, the Group established the 2016 Long Term
Incentive Plan ("LTIP") to replace the 2006 Unapproved Share Option
Plan that expired in June 2016. Under this plan, the Compensation
Committee may, at its discretion, grant an award to any eligible
employee. An award may be an invested shares award, a deferred
bonus share award, a performance award, or a matching award. The
number of shares which may be allocated under the LTIP shall not,
when added to the aggregate of the number of shares which have been
allocated in the previous 10 years under the LTIP and any other
employee share scheme, exceed the number of shares that represents
10% of the ordinary share capital of the Company in issue
immediately prior to that day. The number of shares, terms,
performance targets, and exercise period will be determined by the
Compensation Committee. During 2017, no options were issued under
the Plan.
2017
Weighted
average
Number of exercise
share options price (in GBP)
Outstanding at beginning of period 12,844,250 0.07
Granted during the period - -
Cancelled during the period - -
Expired during the period (600,000) 0.21
Outstanding at the end of the period 12,244,250 0.04
=====================
Exercisable at the end of the period 9,628,930 0.05
Options are recorded at fair value on the date of grant using
the Black-Scholes model. The Group recognised total costs of US
$34,021 relating to equity-settled share-based payment transactions
in 2017 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 2017, the amount due from Motif is US $1,839.
On 1 April 2015, Motif Bio plc entered into an advisory and
consultancy agreement with Amphion Innovations US Inc. Richard
Morgan and Robert Bertoldi, Directors of the Company, are also
Chairman and Director of Motif Bio plc. The consideration for the
services is US $120,000 per annum. This agreement is for an initial
period of twelve months and will automatically renew each year on
the anniversary date unless either party notifies the other by
giving 90 days written notice prior to expiration. The agreement
was amended in December 2016 so that either party may terminate the
agreement at any time, for any reason, upon giving the other party
90 days advance written notice. Amphion Innovations US Inc.'s fee
for the period ended 30 June 2017 was US $60,000.
On 1 April 2015, Motif Bio plc entered into a consultancy
agreement with Amphion Innovations plc for Robert Bertoldi, a
Director of Amphion Innovations plc, to provide services to Motif
Bio plc. The consideration for the services was US $5,000 per
month. On 1 November 2015, the consideration increased to US
$180,000 annually. On 1 July 2016, the consideration decreased to
US $75,000 annually. In July 2017, Motif Bio plc increased the
consideration to US $125,000. The agreement was for an initial
period of twelve months and would automatically renew each year on
the anniversary date unless either party notified the other by
giving 90 days written notice prior to expiration. The agreement
was amended in December 2016 so that either party may terminate the
agreement at any time, for any reason, upon giving the other party
ninety days advance written notice.
On 7 September 2016, Motif Bio plc entered into an Advisory and
Consultancy Agreement with Amphion Innovations US Inc., pursuant to
which Amphion Innovations US Inc. will, following and subject to
the closing of the November 2016 Motif Bio plc offering, provide
consultancy services in relation to Motif Bio plc's obligation as a
NASDAQ listed company. The consideration for the services is US
$15,500 per month. The agreement is for an initial period of 12
months, after which the agreement will terminate automatically
unless renewed by the parties by mutual agreement. The fee for the
period ended 30 June 2017 was US $93,000.
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 Chairman and Director of Axcess, respectively. Amphion
Innovations US Inc. will receive a monthly fee of US $10,000
pursuant to this agreement. The agreement renews 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 2017.
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 Chairman and Director of WellGen, respectively.
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 2017 was suspended.
At 30 June 2017, US $1,320,000 of the advisory fees remain payable.
This balance has been reduced by a provision for doubtful debts in
the amount of US $1,320,000.
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 the
Chairman 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 2017 was suspended.
At 30 June 2017, US $770,000 remains payable by PrivateMarkets. The
payable has been reduced by a provision for doubtful debts in the
amount of US $770,000.
13. Related party transactions, (continued)
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 2017 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. In July 2014, the balance of this advance
was converted into a demand note that accrues interest at 5% per
annum. At 30 June 2017, US $81,301 remains outstanding. The net
amount payable by the Group at 30 June 2017 to Richard Morgan is US
$2,330,080. The amount payable includes a voluntary salary
reduction of US $1,962,187, US $341,779 of which will be payable at
the discretion of the Board at a later date.
At 30 June 2017, US $110,273 was due to Gerard Moufflet, a
retired Director of the Company, for Director's fees and US $8,337
for expenses.
At 30 June 2017, US $23,535 was due to Richard Mansell-Jones, a
Director of the Company for Director's fees.
At 30 June 2017, US $1,115,177 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.
In May 2017, Richard Morgan and Robert Bertoldi, Directors of
the Company, agreed to a Deed of Postponement where they have
agreed to postpone the repayment of the amounts owed to them, which
total US $4.3 million, until all other debts of the company are
repaid.
14. Subsequent Events
In August and September 2017, the institutional lender sold
6,090,000 shares of Motif Bio plc for approximately US $2.3
million. The proceeds were used to partially repay the loan and
interest, leaving a balance outstanding of US $4.3 million.
Payments on the facility are due on 15 October, 15 November and the
final payment on 15 December 2017. As part of the negotiation with
the lender, the Company has agreed to pay US $25,000 for each
missed payment and that amount together with any interest and
penalties will be due on 15 January 2018. The Company has further
agreed with the lender that there will be no additional sales of
Motif Bio plc shares until 15 January 2018. The Company is in
negotiation with a number of finance providers to seek alternative
longer term financing strategies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QVLFLDKFLBBB
(END) Dow Jones Newswires
September 29, 2017 02:00 ET (06:00 GMT)
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