TIDMALM
RNS Number : 8827T
Allied Minds PLC
30 March 2021
30 March 2021
Allied Minds
Annual Results Release
Allied Minds plc (LSE: ALM) ("the Group" or the "Company"), the
IP commercialisation company focused on early stage company
development within the technology sector, announces its annual
results for the year ended 31 December 2020.
-- Net cash and cash equivalents at 31 December 2020: $24.5
million (FY19: $90.6 million), of which $22.3 million is held
within Allied Minds (FY19: $84.1 million).
-- $27.9 million invested in portfolio companies, of which $13.7
million was raised from third-party investment.
-- Revenues of $0.5 million (2019: $2.7 million) mainly from
non-recurring engineering (NRE) and service contracts, reflecting
the early stage nature of our portfolio companies.
-- On 14 February 2020, Allied Minds paid a special dividend of
12.62 pence per ordinary share totaling GBP30.49 million.
-- Post-period end, additional restructuring efforts announced,
including direct management of the
portfolio by the Board and elimination of the Chief Executive
Officer role.
Harry Rein, Chairman of Allied Minds, said:
"In 2020 we continued to execute our strategy of supporting our
existing portfolio companies and seeking to monetise opportunities
for portfolio company interests. We have instituted a new
governance structure which is efficient, streamlined and
cost-effective and is best suited to achieve value creation from
our portfolio. During 2020 we saw the benefit of this strategy with
the payment of a special dividend.
"A number of our portfolio companies made significant progress
during the year. We believe in the future prospects of our
portfolio companies, and are focused on achieving well-timed,
risk-adjusted returns for our shareholders.
"The Board remain of the view that the group as a whole remains
well positioned to maximise value and deliver additional returns to
shareholders."
Selected Portfolio Company Highlights
-- BridgeComm (consolidated subsidiary):
o Joint development agreement (JDA) with Boeing HorizonX
(Boeing) to collaboratively develop applications of the One-to-Many
(OTM) technology
o Additional $2.0 million of convertible debt financing from
Allied Minds on top of the $1.0 million invested by Boeing at the
end of 2019
o Secured additional $1.5 million of convertible debt financing from Boeing upon successful achievement of development milestones under the JDA, post-period end
o Entered into partnership with Nokia to develop ultra-high-speed throughput solutions to facilitate faster deployment of 5G networks
-- Federated Wireless (equity accounted investment):
o Announced new Connectivity-as-a-Service (CaaS) offering that
lets U.S. enterprises buy and deploy private 4G and 5G networks
with a single click through AWS(R) and Microsoft Azure(R)
marketplaces
o Raised $13.7 million of additional Series C funding from
Allied Minds and existing investor, Pennant Investors, to
accelerate expansion and adoption of its partnerships with AWS and
Microsoft Azure to offer Connectivity-as-a-Service and expand into
6 GHz band for 5G services
o Potential market opportunity expanded upon additional 100
megahertz of contiguous mid-band spectrum in the 3.45-3.55 GHz band
unlocked for commercial 5G deployment
-- Orbital Sidekick (preference share investment held at fair value):
o Awarded a multi-year contract by the Department of the Air
Force's commercial investment group (AFVentures) as part of its
Strategic Financing (STRATFI) programme, under which the company
received $4.0 million of non-dilutive financing and has the
opportunity to receive up to $12.0 million of additional
non-dilutive financing over the next three years to match private
funds raised
o Entered into definitive agreement to secure $16.0 million in a
Series A Preferred financing round expected to close in Q2 2021
subject to approval by the Committee on Foreign Investments in the
United States
-- Spin Memory (equity accounted investment):
o Raised $8.25 million of additional Series B funding from
existing investors, including Abies Ventures, Applied Ventures, LLC
(the venture capital arm of Applied Materials, Inc.), ARM
Technology Investments Limited ("ARM") and Allied Minds, to support
continued research in MRAM, including work with its existing
development partners, Applied Materials and ARM
o Facing significant liquidity issues due to its inability to
secure new customers coupled with the unexpected loss of a
government bid in late Q4 2020. Delays of the required testing of
its development chip with ARM for nearly nine months due to the
work-from-home orders in the State of California due to COVID-19
has had a direct effect
-- TableUp (preference share investment held at fair value)
acquired by TouchBistro, Inc. in stock-for stock transaction. The
stock held in TouchBistro is held at fair value under IFRS9
In compliance with Listing Rule 9.6.3R, the following document
will be submitted to the National Storage Mechanism and will
shortly be available for inspection at
https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism:
-- Annual Report and Accounts for the year ended 31 December 2020.
Printed copies of these docu ments will be posted to
shareholders shortly. Copies will also be available shortly on the
Investor Relations section of the Company's website at
http://www.alliedminds.com/investor/ .
The 2021 Annual General Meeting will be held at 10:00 a.m. ET on
12 May 2021 at the Company's headquarters located at 374 Congress
Street, Suite 308, Boston, Massachusetts 02210, USA.
For more information, please contac t:
Allied Minds plc c/o Instinctif Partners
Harry Rein
Instinctif Alliedminds@instinctif.com
Tim Linacre/ Kay Larsen/ Rozi
Morris
For further information, please visit www.alliedminds.com .
Notes
(i) Nature of announcement
This Annual Results Release was approved by the directors on 29
March 2021. The financial information set out in this Annual
Results Release does not constitute the Company's statutory
accounts for the years ended 31 December 2020 or 2019 but is
derived from those accounts. Statutory accounts for the year ended
31 December 2019 have been filed with the Registrar of Companies.
Statutory accounts for 2020 will be delivered to the registrar of
companies in due course. The auditor has reported on those
accounts; its report was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006. The text of the Auditor's report can be found in the
Company's full Annual Report and Accounts for the year ended 31
December 2020 (2020 Annual Report).
(ii) Forward looking statements
This Annual Results Release and the 2020 Annual Report contain
statements that are or may be forward-looking statements, including
statements that relate to the Company's future prospects,
developments and strategies. The Group considers any statements
that are not historical facts as "forward-looking statements". The
forward-looking statements are based on current expectations and
are subject to known and unknown risks and uncertainties that could
cause actual results, performance and achievements to differ
materially from current expectations, including, but not limited
to, those risks and uncertainties described in the risk management
section of the 2020 Annual Report. These forward-looking statements
are made in good faith based on assumptions regarding the present
and future business strategies of the Company and the environment
in which it will operate in the future and such statements should
be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any
such forward-looking information. Each forward-looking statement
speaks only as at the date of this Annual Results Release. Except
as required by law, regulatory requirement, the Listing Rules and
the Disclosure Guidance and Transparency Rules, neither the Company
nor any other party intends to update or revise these
forward-looking statements, whether as a result of new information,
future events or otherwise.
2020 Annual Report and Accounts
STRATEGIC REPORT
Chairman's Report
Allied Minds started 2020 with a new Board and a recalibrated
strategy focused exclusively on funding and operating our existing
investment portfolio of businesses and to operate a streamlined and
highly cost-efficient organisation.
During 2020, the Group undertook a critical assessment of its
portfolio of very early stage and pre-revenue companies. As a
result of this strategic review, the Board instituted a new form of
governance that is better suited to achieving value creation from
its venture-like portfolio. Under the new corporate structure,
announced in January 2021, the Group will be led by its
Non-Executive Directors (NEDs) and the role of Chief Executive
Officer will no longer be required.
Throughout 2020, alongside the thorough portfolio review, Allied
Minds continued to drive the strategic objectives first announced
in April 2019 of focusing exclusively on supporting the existing
portfolio companies and maximising monetisation opportunities for
portfolio company interests.
Early in 2020 we demonstrated the benefits of this approach to
delivering shareholder value with the payment of a 12.62 pence per
share dividend in February, which followed the sale of HawkEye 360
in the third quarter of 2019.
The Board aims to monetise the Group's ownership positions at
the appropriate time, recognising the value and benefit in
achieving well-timed risk-adjusted returns for the benefit of
shareholders.
Allied Minds remains a significant shareholder in each of its
portfolio companies, and all companies in the portfolio, regardless
of prior funding, are at the knee of the commercialisation curve.
While seeing significant opportunities, each company also needs to
manage the significant risks which are typical and customary for
emerging companies, including market development and penetration,
leading to revenue growth.
At the end of the first quarter of 2020 the coronavirus pandemic
and its impact both in the US and globally, meant we were equally
focused on ensuring the wellbeing, safety, and security of our
workforce across all our portfolio companies.
Swift and effective actions were taken to allow all of us to
continue operating safely using remote working environments and
virtual meeting platforms and I would like to pay tribute to all
employees for their resilience and commitment throughout this
highly challenging period.
Across the portfolio, several companies achieved milestone
funding events and delivered strong progress in technology
development, underpinned by blue-chip partnerships that were put in
place or continued to thrive during the year.
BridgeComm signed a JDA with Boeing HorizonX (Boeing) to
collaboratively develop applications of One-to-Many (OTM)
technology, and secured several additional rounds of convertible
debt financing. The company also entered into a partnership with
Nokia to develop ultra-high-speed throughput solutions to
facilitate faster deployment of 5G networks.
Federated Wireless (Federated) also delivered strong
technological progress involving blue chip partnerships, launching
a new Connectivity-as-a-Service (CaaS) offering that lets US
enterprises buy and deploy private 4G and 5G networks with a single
click through AWS(R) and Microsoft Azure(R) marketplaces. Federated
also raised additional funding during the year whilst its market
opportunity expanded with the unlocking of an additional 100
megahertz of contiguous mid-band spectrum in the 3.45-3.55 GHz band
for commercial 5G deployment.
Orbital Sidekick (Orbital) was awarded a multi-year contract by
the Department of the US Air Force's commercial investment group
(AFVentures) as part of its Strategic Financing (STRATFI) programme
and this brought further financing and financing opportunities.
Orbital then secured conditional funding, which is expected to
close in Q2 2021 subject to approval by the Committee on Foreign
Investments in the United States (CFIUS).
The Board also made further moves to rationalise the portfolio
with the acquisition of TableUp by TouchBistro, Inc. in a
stock-for-stock transaction.
However, COVID-19 had a negative impact on several companies in
the portfolio including Federated, Spin Memory (Spin), and Spark
Insights (Spark). Federated was able to mitigate against this
impact and is now back on track with its strategic plan and timing,
including meeting projected revenue targets for 2021.
Meanwhile, Spin continues to face commercial and financing
challenges that the Spin Board of Directors, with the support of
the NEDs, are working to address in 2021. In the event financing is
not obtained or projected revenue is not realised, Spin may need to
seek alternative paths that may include filing for bankruptcy,
selling its intellectual property assets, and/or other similar
avenues to orderly wind down the company in the near term.
Furthermore, while Spark is continuing to achieve development
milestones with respect to its intellectual property, the delay in
securing financing has put the company in a difficult cash
position. I n the event financing is not realised within the coming
weeks, Spark will need to immediately resort to alternative paths
that include selling its assets, filing for bankruptcy, winding
down and/or similar avenues.
In each case, the NEDs are working closely with the management
teams at Spin and Spark, respectively, to tackle the challenges
faced by these companies, including exploring all alternatives
available to such companies, and to determine how to achieve the
best outcome for its investors.
We remain in close communication with customers, suppliers and
partners, working together to navigate this changing environment.
In 2020, the Group was able to demonstrate the ability of its
portfolio companies to raise funds and achieve key technical and
commercial milestones, despite the global challenges of
COVID-19.
Going forward, while the NEDs and Allied Minds will continue to
support all our portfolio companies, and intend to continue
providing guidance, advice, assistance with fundraising and
strategic opportunities, it will be the qualified and strong
management teams in place who will be running the respective
businesses and responsible for advancing and progressing their
respective companies forward, including leading fundraising
activities and identifying and securing new investors. The NEDs
believe that on balance, and taking into consideration the
challenges facing some of the Group's portfolio companies that may
hinder success, the Group as a whole remains well-positioned to
maximise its value and deliver additional returns to our
shareholders within a reasonable timeframe.
Allied Minds' cash position will be used to strategically
support those portfolio companies that will enable it to further
its objective of maximising value and returns for its
shareholders.
Harry Rein, Chairman
29 March 2021
Company Overview
Overview
Allied Minds is an IP commercialisation company primarily
focused on early stage company development within the technology
sector.
We have historically invested in companies at an early stage,
including seed investments to build companies based on a technical
breakthrough or invention. As such, our investments have
significant upside potential, but also carry significant risk
inherent in the early stage model.
The Group is currently comprised of seven portfolio companies
based upon a broad range of underlying innovative technologies
ranging from semiconductors to wireless connectivity to space-based
imagery and analytics.
The ability of the Group's portfolio companies to raise funds
and continue achieving important technical and commercial
milestones while building upon key partnership relationships across
the portfolio signify the strength of the Group and demonstrates
that it remains on track as it works to execute on maximising the
value of its portfolio company interests and delivering well-timed,
risk-adjusted returns for its shareholders.
COVID-19
As we navigate the uncertainties brought by the coronavirus
pandemic, Allied Minds continues to closely monitor, assess, and
respond to the impacts of COVID-19 in order to ensure the continued
health, safety, and security of its workforce across its portfolio
companies. The Group has taken several actions to enable Allied
Minds and its portfolio companies to continue operating safely and
effectively, including implementing remote working environments,
using virtual meeting platforms, and reducing travel.
While COVID-19 has had varying degrees of commercial impact
across the portfolio in the past year, the actions and mitigation
put in place by the Group have enabled day-to-day operations to
continue effectively across the portfolio. As highlighted in this
report, while some of our companies have been impacted more
negatively than others, overall, the achievements across our
portfolio demonstrate that our companies are continuing to make
progress against their respective commercial and strategic
objectives even during this pandemic. We remain in close
communication with all our customers, suppliers and partners to
collaborate on how to best support each other's needs in this new
environment. Furthermore, Allied Minds continues to engage with
each of its portfolio companies to help manage and mitigate against
potential impacts on each company's business, including assisting
with employee support, cash management, and contingency
planning.
While we remain cautious and vigilant about what the coming
months may bring, we continue to be optimistic and expect to be
able to navigate these uncertain times whilst delivering the
results of our stated strategy in the coming years.
Model
As a manager of a technology-focused portfolio in which we hold
significant ownership positions, we seek to provide hands-on
support over the life of our companies to support their growth,
focusing on enabling and driving commercialisation, supporting
follow-on investment rounds, and positioning for superior
monetisation opportunities.
Allied Minds offers operational and management support to each
of its portfolio companies leveraging the deep domain expertise of
our management team in their respective careers as entrepreneurs,
operators, directors, advisors, and investors. Our employees have
expertise in business strategy, sales and marketing, operations,
finance, legal and transaction execution.
We play an active role in developing the strategic direction of
our portfolio companies and driving ongoing planning and
assessment. Our executives and Non-Executive Directors serve on the
boards of directors of our portfolio companies, working with them
to develop and implement strategic, operating and funding plans. We
evaluate on an on-going basis the progress and potential of each of
the portfolio company's businesses, and make strategic and funding
decisions based on the regular review of operational and financial
performance and the achievement of key milestones. Together with
our management, the respective portfolio company boards of
directors define the critical milestones, or inflection points, for
each portfolio company and measure tangible progress towards
commercialisation and the key factors for a successful monetisation
event. Portfolio company management is accountable for these
milestones, which are developed into annual management objectives
(MBOs).
As our portfolio companies meet the objectives identified for
success, we will participate in subsequent capital raises to
mitigate dilution, to the extent consistent with our goal to
maximise risk and time-adjusted returns for our shareholders and
taking into account competing uses of capital across our portfolio.
Co-investors in later rounds include financial, strategic and
commercial partners. Where appropriate, we seek to include partners
who validate the market opportunity and can provide support and/or
commercial commitments to accelerate, expand and/or de-risk the
path to commercialisation.
By helping our portfolio companies' management teams remain
focused on critical objectives through the provision of human,
financial and strategic resources, we believe we are able to
accelerate their development and success. We believe that Allied
Minds' experience and hands-on support provide our portfolio
companies with significant competitive advantages within their
respective markets.
Strategy
Allied Minds' strategy is focused on supporting its existing
portfolio companies and maximising monetisation opportunities for
portfolio company interests. The Board aims to monetise the Group's
ownership positions at the appropriate time, recognising the value
and benefit in achieving well-timed risk-adjusted returns for the
benefit of shareholders.
In general, we will hold our position in a portfolio company for
as long as we believe the risk and time-adjusted value of that
position is maximised by our continued ownership and effort. From
time to time, we engage in discussions with other companies
interested in our portfolio companies (or our interest in those
companies), either in response to enquiries or as part of a process
we initiate. To the extent we believe that a portfolio company's
further growth and development can best be supported by a different
ownership structure or if we otherwise believe it is in our
shareholders' best interests, we may seek to sell some or all of
our position in the portfolio company. These sales may take the
form of privately negotiated sales of stock or assets, mergers and
acquisitions, public offerings of the portfolio company's
securities and, in the case of publicly traded portfolio companies,
sales of their securities in the open market.
The value of Allied Minds is dependent upon the value of our
existing portfolio companies and our ability to translate that
value into cash as effectively and efficiently as possible and to
deliver that cash, net of our obligations and operating cash needs,
to our shareholders.
Upon the event of successful monetisation events from the sale
of portfolio companies or portfolio company interests, Allied Minds
anticipates distributing the net proceeds to its shareholders,
after due consideration of potential follow-on investment
opportunities within the existing portfolio and working capital
requirements.
Outlook
Allied Minds' portfolio companies, led by experienced, motivated
and resourceful management teams, have continued to make
substantial technical and commercial progress. The milestones
achieved demonstrate examples of solving difficult technical
problems, developing innovative products and services across a
range of large potential markets, establishing important
partnerships to develop technology and go to market channels, and
the creation of shareholder value.
The Board believes that the shareholder returns to date and
completion of successful fundraisings throughout its portfolio,
together with achieving portfolio company milestones, means that
Allied Minds is well positioned to maximise returns for its
shareholders.
Portfolio Company Valuation
Of the Company's seven active portfolio companies, three are
currently majority owned and/or controlled, and therefore fully
consolidated in the Company's consolidated financial statements
prepared in accordance with international financial reporting
standards conformity with the requirements of the Companies Act
2016.
Of the remaining four portfolio companies, the Company holds a
significant minority stake in three of these companies and a small
position in the fourth (TouchBistro, Inc.) as a result of the
stock-for-stock sale of TableUp, Inc. In each case, where Allied
Minds holds a significant minority stake, it is able to exercise
significant influence over the portfolio company by virtue of its
large, albeit minority, ownership stake in the portfolio company
and its representation on the board of directors. The investment in
preferred stock in these portfolio companies is accounted for under
IFRS 9 and is classified by the Company as an investment at fair
value in the Company's consolidated financial statements . Due to
the equity-like characteristics of the Company's common
stockholdings in Spin Memory and Federated Wireless, these two
investments are accounted for under IAS 28 and are classified by
the Company as investments in associates. Accordingly, since Allied
Minds has significant influence over these entities through the
voting rights/potential voting rights held at Spin Memory and
Federated Wireless, it gives access to the returns associated with
an ownership interest in these associates.
Allied Minds provides qualitative and quantitative disclosure in
relation to the commercial and financial progress of its portfolio
companies, and directional commentary on valuation. In addition,
where commercially possible, Allied Minds provides, for each
portfolio company: (i) the date of the last equity funding round,
(ii) the post-money valuation of such round, (iii) the named key
co-investors in such round, and (iv) the Company's issued and
outstanding ownership, and fully-diluted ownership, of such
portfolio company.
This information is set forth in the Portfolio Review and
Developments section below. The ownership interests are as of 29
March 2021. The fully-diluted percentages take into account
outstanding stock options granted to employees, directors and
advisors, current stock options available for grant pursuant to the
company's stock option plan, and outstanding warrants to purchase
common and preferred stock.
The post-money valuations disclosed for each entity below do not
represent IFRS 13 fair values but rather, are based on the
pre-money valuation set by the investors in the latest financing
round plus the total money raised in that round.
There can be no guarantee that the aforementioned post-money
valuations of the portfolio companies will be considered to be
correct in light of the future performance of the various
companies, or that the Company would be able to realise proceeds in
the amount of such valuations, or at all, in the event of a sale by
it of any of its portfolio companies or its ownership interest in
such portfolio companies.
Portfolio Review and Developments
----------
BridgeComm Inc. (BridgeComm) (consolidated subsidiary)
BridgeComm is developing high-speed optical wireless
communications to provide fast, secure, enterprise-grade broadband
service for space, terrestrial and 5G connectivity. BridgeComm's
newest technology is unique and IP protected which enables
one-to-many communications via optical wireless offering efficient
communication to satellites, planes and land-based networks
enabling 5G equivalent performance. The technology promises higher
throughput over longer distances with added security than what is
available today. The technology also has the ability to solve the
"last mile connectivity" challenge for 5G networks.
On 15 January 2020, Allied Minds announced the next stage in
BridgeComm's relationship with Boeing HorizonX whereby the two
companies were collaboratively pioneering the development of
BridgeComm's new technology for terrestrial, airborne and space
systems. Together, BridgeComm and Boeing are bidding on several US
government contracts requiring optical communications as they look
to commercialise the development work achieved to date. It is
anticipated that this process will lead to first revenue from the
newly developed technology in 2021.
On 28 September 2020, Allied Minds announced that BridgeComm
partnered with Nokia to jointly develop high-speed optical
communications to facilitate faster deployment of 5G networks. The
focus of the work with Nokia is to utilise optical communications
to solve the "well known" last mile connectivity problem prevalent
in the fixed wireless industry.
BridgeComm will need to seek additional financing to further
fund its next stage of development work. Allied Minds currently has
fully diluted ownership (ownership percentage including currently
issued shares and potential outstanding shares to be issued) of
62.92% in BridgeComm. The $4.5 million convertible bridge invested
by Boeing HorizonX and Allied Minds will convert into the next
round of financing.
Holdings and valuation:
-- Date of Last Funding Round: September 2018
-- Post-Money Valuation: $38.0 million
-- Co-Investors: Boeing HorizonX Ventures (venture arm of Boeing Company)
-- Allied Minds' Issued and Outstanding Ownership: 81.15%
-- Allied Minds' Fully-Diluted Ownership: 62.92%
Federated Wireless Inc. (Federated) ( equity accounted
investment)
Federated has developed technology and products to enable the
revolutionary shared spectrum model in the United States to further
enable wireless communications, adoption of the Internet-of-Things
("IoT") and edge computing. Federated also has the ability to
deploy private wireless networks through its newly announced
Connectivity-as-a-Service ("CaaS") offering.
CaaS is focused on enabling enterprise customers the ability to
build their own private networks in a low risk and low capital
expenditure manner. For the first time, enterprises will be able to
control their own network, bypassing traditional Internet Service
Providers, on the back of Federated's Spectrum Access System
("SAS"). These networks have the ability to be more powerful than
traditional WiFi while also providing more security, opening up a
new market for Federated.
On 18 February 2020, Federated announced that it entered into
agreements with both AWS and Azure to function as channel partners
to drive commercialisation of the CaaS offering through their
online marketplaces.
On 8 October 2020, the U.S. Department of Defense announced that
Federated had been awarded the project at the Marine Corps
Logistics Base Albany, GA to develop a 5G Smart Warehousing
solution focused on vehicular storage and maintenance. This award
represents the first CaaS-related opportunity for Federated from
its previously announced new channel partners. The list of
Federated partners involved in this project include GE Research,
KPMG LLP, Scientific Research Corporation as well equipment
suppliers, AWS and Cisco, Inc.
Since the Federal Communications Commission ("FCC") announced
the authorisation of the full commercial deployment of Federated's
SAS on 27 January 2020, Federated is now able to support its
customers as they deploy their new networks. A key feature of
Federated's SAS offering is that it is the only FCC authorised
company with a fully deployed Environmental Sensing Capability as
required by the FCC. This has allowed Federated to operate
unabated, providing a significant competitive advantage.
Federated's first customers to deploy are focused on the
Wireless Internet Service industry as well as Verizon's build out
of their network to add 3.5GHZ CBRS. This has led to Federated
realising its recurring revenue model for the first time since it
was granted authorisation. Federated expects more customers under
contract to begin to deploy soon who are looking to benefit by
adding access to 3.5GHz CBRS. This will further accelerate
Federated's valuable recurring revenue model into 2021. Federated
expects its revenue to grow by significant multiples in 2021
compared with 2020 when it was first able to initiate its
services.
Federated has sufficient cash to fund its growth into 2022.
Allied Minds currently owns 36.61% of Federated and expects that if
the company continues to achieve its planned key milestones, it
will be in a position to attract any future equity financing in an
upround.
Holdings and valuation:
-- Date of Last Funding Round: September 2019 (second closing post-period end in April 2020)
-- Post-Money Valuation: $215.0 million
-- Co-Investors: American Tower (NYSE: AMT), GIC (Singapore's
sovereign wealth fund), Pennant Investors and SBA Communications
(NASDAQ: SBAC)
-- Allied Minds' Issued and Outstanding Ownership: 43.11%
-- Allied Minds' Fully-Diluted Ownership: 36.61%
-- Federated Wireless has made significant progress against its
key operational objectives since its last funding round.
OcuTerra Therapeutics, Inc. (consolidated subsidiary)
OcuTerra (previously SciFluor Life Sciences, Inc.) is a drug
development company focused on creating best-in-class compounds,
initially targeting the field of ophthalmology. OcuTerra's lead
clinical asset, SF0166, is a topical eye droplet treatment for
Age-related Macular Degeneration (AMD) and Diabetic Macular Edema
(DME), both widely prevalent retinal diseases that lead to
blindness if left untreated.
OcuTerra has sought to raise external equity financing since
2018 to fund Phase II trials for SF0166, on the back of safety and
preliminary efficacy data from the Phase I/II trials. This process
has not been successfully completed to date. As a result, OcuTerra
has experienced clinical delays since its last funding round and
the valuation is substantially impaired due to a prolonged
inability to attract new external financing. Clinical development
activities at OcuTerra have been pared back, and are now focused
exclusively on the toxicology studies necessary to initiate the
Phase II trials for SF0166. To assist with its fundraising efforts,
OcuTerra engaged Maxim Group LLC. During Q4 2019 (and completing in
Q1 2020), OcuTerra raised $1.325 million of convertible debt
financing from third parties. In addition, in Q3 2020 and
post-period end in Q1 2021, OcuTerra raised an aggregate of $200K
of debt financing from third parties, half of which was raised from
Maxim Group LLC, and continues its fundraising efforts for an
external equity financing to fund Phase II trials. It is uncertain
if OcuTerra will be successful in securing the required funds in
2021.
Holdings and valuation:
-- Date of Last Funding Round: November 2019 (convertible debt into next preferred equity round)
-- Valuation: n/a
-- Co-Investors: Various third parties
-- Allied Minds' Issued and Outstanding Ownership: 62.67%
-- Allied Minds' Fully-Diluted Ownership: 54.16%
Orbital Sidekick Inc. (Orbital) (preference share investment
held at fair value)
Orbital has developed a proprietary analytics platform based
upon its hyperspectral technology that allows it to take a
proprietary "chemical fingerprint" from space. Initially, Orbital
is addressing the very current and large concerns about the
environment by focusing on potential energy pipeline failures. By
employing its space-based technology, it is able to detect and
identify natural gas, oil leaks and other failures much more
rapidly than current monitoring techniques in a more cost effective
way and the added benefit of helping to minimise environmental
damage.
Orbital's first fully dedicated hyperspectral imagery satellite
is scheduled to launch in 2021, which together with its existing
on-board processing technology deployed on the International Space
Station, will allow Orbital to realise revenue from its first pilot
programme participants from the oil and gas pipeline industry that
it has been able to convert to paying customers.
On 15 October 2020, Allied Minds announced that Orbital was
awarded a multi-year contract by the Department of the Air Force's
commercial investment group (AFVentures) as part of its Strategic
Financing ("STRATFI") programme. Orbital received $4.0 million of
non-dilutive financing in Q4 2020 from the programme and has the
opportunity to receive up to $12.0 million of additional
non-dilutive financing over the next three years to match private
funds raised.
On 24 December 2020, Allied Minds announced that Orbital had
conditionally secured $16.0 million in a Series A Preferred
financing round led by Temasek, an investment company headquartered
in Singapore. The Series A financing closing is subject to approval
by the Committee on Foreign Investments in the United States
(CFIUS). In March 2021, CFIUS informed Orbital that it will enter
an additional 45-day investigation period regarding the
transaction, which is not atypical of like transactions.
Accordingly, the financing is expected to close in Q2 2021.
The combined expected proceeds of $32.0 million raised from both
the Series A financing and the funds available from the STRATFI
programme is significant and will allow Orbital to focus on scaling
its business and growing its sales pipeline to rapidly bring its
products to market and enable the launch of additional satellites
to support its customers.
Holdings and valuation:
-- Date of Last Funding Round: April 2018
-- Post-Money Valuation: $11.7 million
-- Co-Investors: 11.2 Capital
-- Allied Minds' Issued and Outstanding Ownership in respect of preference shares: 33.23%
-- Allied Minds' Fully-Diluted Ownership: 29.67%
Spark Insights Inc. (Spark) (consolidated subsidiary)
Spark is an advanced analytics company developing data products
for the rapidly growing insurance analytics market. Allied Minds
formed Spark in late 2018.
Given the increasing prevalence of catastrophic events,
including hurricanes, floods, and wildfires, property insurers are
struggling to quantify the impact on their policies, both before
and after a catastrophic event occurs. Spark plans to leverage the
advent of unique data sets, including advances in satellite imagery
and weather data, combined with proprietary analytics to transform
critical workflows for these property insurers.
Spark's focus is at the intersection of several addressable
markets including insurance analytics, underwriting losses, and
catastrophe modeling platforms.
In June 2020, Spark achieved a key technical milestone and
successfully released version 1.0 of its post-catastrophe automated
damage assessment product.
As a result of challenges posed by COVID-19, Spark has faced
delays in fundraising and is now in a difficult cash position. If
Spark fails to raise additional financing in the coming weeks,
Spark will need to immediately consider and execute on alternative
paths that include selling its assets, filing for bankruptcy,
winding down and/or similar avenues.
Holdings and valuation:
-- Date of Last Funding Round: April 2019
-- Post-Money Valuation: $3.2 million
-- Co-Investors: n/a
-- Allied Minds' Issued and Outstanding Ownership: 70.59%
-- Allied Minds' Fully-Diluted Ownership: 60.00%
Spin Memory Inc. (Spin) ( equity accounted investment)
Spin is a leader in providing magnetoresistive random-access
memory ("MRAM") intellectual property. Through its collaboration
with industry leaders, Spin Memory is looking to transform the
semiconductor industry by addressing the biggest challenge, memory,
in next-generation electronics systems such as Artificial
Intelligence, Autonomous Driving, 5G Communication and Computing at
the Edge. Spin represents the last remaining portfolio company from
Allied Minds' original investment platform.
During 2020, Spin was able to "tape out" the demonstration chip
co-developed with Arm pursuant to its joint development agreement,
entered into in very late Q4 2018, representing the first time that
Spin was able to demonstrate its Endurance Engine technology in
silicon.
Unfortunately, the work-from-home orders in the State of
California due to COVID-19 delayed the required testing of the chip
for nearly nine months. The testing did commence in early Q4 2020
and the initial results are promising. However, this delay has
affected Spin's ability to secure new customers. As a result, this,
coupled with an unexpected loss of a government bid in late Q4
2020, Spin is now facing significant liquidity issues.
Spin's Board of Directors and management team have worked to
adjust the company's operating plan to account for the delays
described above and are currently working with its shareholders to
develop a funding plan that will allow it to identify and secure
commercial partners for its product, expertise and intellectual
property in 2021. As previously disclosed, any financing
contemplated by Spin is expected to be a significantly reduced
valuation and dilutive to any non-participants in the round. While
this is disappointing, a down-round financing is not uncommon in
early venture capital companies and the Board is hopeful that any
funding raised will give Spin an opportunity to maximise net value
for shareholders either through an asset sale or acquisition or
securing key partners and revenue-generating customers in the
coming months. In the event financing is not obtained or projected
revenue is not realised, Spin may need to seek alternative paths
that may include filing for bankruptcy, selling its intellectual
property assets, and/or other similar avenues to orderly wind down
the company in the near term.
Holdings and valuation:
-- Date of Last Funding Round: November 2018 (date of first closing, final closing in July 2020)
-- Post-Money Valuation: $180.25 million
-- Co-Investors: Arm Technology Investments Limited, Applied
Ventures, LLC, Abies Venture Fund, Woodford Investment Management
(now succeeded by Schroder Investment Management Limited) and
Invesco Asset Management
-- Allied Minds' Issued and Outstanding Ownership: 43.01%
-- Allied Minds' Fully-Diluted Ownership: 33.98%
TouchBistro, Inc. (acquirer of TableUp, Inc.) (common shares in
TouchBistro)
On 5 August 2020, TableUp was wholly acquired by TouchBistro,
Inc. in a stock-for-stock transaction. As a result of such
transaction, Allied Minds received common shares of TouchBistro
valued at $5.99 million.
The Group made its initial investment in TableUp in April 2018.
TableUp is a provider of loyalty and marketing solutions for the
restaurant industry and is highly regarded for its proprietary
guest retention solution, which is used by more than 600
restaurants throughout the U.S and will enable TouchBistro to fully
integrate customer loyalty and guest marketing into its all-in-one
point-of-sale (POS) and restaurant management platform.
Key Performance Indicators
The Key Performance Indicators (KPIs) selected to measure the
performance of the Company in 2020 were percentage level of
achievement of management by objectives (MBOs). These objectives
seek to link financial, operational, technical and other
performance milestones established by the Board directly to
remuneration and KPIs. Performance against 2019 KPIs is set out
below:
KPI 2020 2019 Performance
----------------------------- ------ ------ -------------
MBO Achievement; Percentage
of Target; See Detail
Below 75.0% 87.6% Below target
The MBOs set by the Board for 2020, along with the level of
achievement against such MBOs, is set forth below:
Threshold Target Maximum Achieved
MBO Weightings Weightings Weightings Weightings
Increase Aggregate Portfolio Value (NAV) 0.0% 12.5% 18.75% 0%
Increase ALM Share Price 0.0% 12.5% 18.75% 0%
Manage HQ Cash and Expenses 0.0% 25% 37.5% 25%
Secure Funding and Strategic Partners
at Portfolio Companies 0.0% 25% 37.5% 25%
Maintain Strong Operational Support 0.0% 25% 37.5% 25%
Total Percentage of Target 0.0% 100.0% 150.0% 75.0%
============ ============ ============ ============
Additional detail with respect to determination of such
achievement is set forth in the Remuneration Report of the 2020
Annual Report.
The following Key Performance Indicators (KPIs) were selected to
measure the performance of the Company in 2021. These objectives
seek to link financial, operational, technical and other
performance milestones established by the Board directly to
remuneration and KPIs.
1. Increase Company Non-Executive Director (NED) engagement at each portfolio company
2. Appoint at least one NED on each portfolio company's board
3. Provide strategic, operational and financing support and
assistance to the portfolio companies through representation on the
board of each portfolio company
4. Critically evaluate and monitor portfolio company progress
with objective of maximising shareholder return on investment
(ROI)
5. Maintain strong shareholder engagement, including annual capital markets day
6. Manage HQ cash and expenses to maximise shareholder ROI
We note that as a result of the strategic changes implemented by
the Board on 15 January 2021, the portfolio shall be managed by the
Board, all of whom are Non-Executive Directors, on a go-forward
basis. The Board places equal importance on each of the listed
KPIs.
Financial Review
During 2020, $27.9 million was invested into existing subsidiary
businesses and associates. This included $14.4 million from
subsidiary and associate fundraisings invested by Allied Minds,
with $13.6 million coming from third-party investment, to further
accelerate the development of the Group's existing companies.
Consolidated Statement of Comprehensive Profit
For the years ended 31 December 2020 2019
$ '000 $ '000
------------- -------------
Revenue 480 2,692
Cost of revenue (210) (1,433)
Selling, general and administrative expenses (10,497) (34,316)
Research and development expenses (4,712) (16,146)
Finance (cost)/ income, net (1,786) 9,992
Other (expense)/ income (38,779) 89,465
Other comprehensive (loss)/ income (116) 808
------------- -------------
Total comprehensive (loss)/ income (55,620) 51,062
of which attributable to:
Equity holders of the parent (53,141) 52,143
Non-controlling interests (2,479) (1,081)
Revenue decreased by $2.2 million, to $ 0.5 million in 2020
(2019: $2.7 million). This decrease is primarily attributable to
the ownership of Federated Wireless being an entity which was
previously consolidated. In the second half of 2019 control of this
entity was lost, and going forward has been equity accounted for
under IAS28 ("deconsolidated"). The decrease is partly offset by
revenue from new contracts in 2020 at BridgeComm of $0.1 million.
Cost of revenue at $0.2 million (2019: $1.4 million) was lower as a
percentage of revenue, when compared to the prior year, mainly due
to deconsolidation of the Company's subsidiaries and inventory
write-offs at closed and dissolved companies in 2019.
Selling, general and administrative (SG&A) expenses
decreased by $23.8 million, to $10.5 million (2019: $34.3 million).
This reduction was mainly due to the deconsolidation of one of the
company's subsidiaries in the second half of 2019, as well as cost
reductions at headquarters implemented during 2019.
Research and development (R&D) expenses decreased by $11.4
million, to $4.7 million (2019: $16.1 million). The decrease was
primarily due to the deconsolidated and closed and dissolved
subsidiaries in 2019. The remainder of the decrease reflects the
net effect from R&D spend at the remaining subsidiaries.
Net finance cost increased by $11.8 million in 2020 to $1.8
million (2019: income of $10.0 million). The increase reflects the
impact from deconsolidation of one of the company's subsidiaries in
the second half of 2019 partly offset by net finance cost of $1.5
million from IFRS 9 fair value accounting of the subsidiary
preferred shares liability balance (2019: finance income of $9.3
million), convertible note payable balance of $0.3 million (2019:
$nil) and interest income, net of interest expense, of $23 thousand
(2019: $0.7 million). The change was primarily from adjustments at
BridgeComm.
Other loss increased to $38.8 million (2019: income of $89.4
million) reflecting $31.9 million loss on investments held at fair
value as well as the company's share of loss of $6.8 million from
its associates.
As a result of these factors, total comprehensive loss increased
by $106.7 million to $55.6 million (2019: income of $51.1 million).
Total comprehensive loss attributed to the equity holders of the
Group was $53.1 million (2019: income of $52.1 million) and $2.5
million loss (2019: $1.1 million) was attributable to the owners of
non-controlling interests.
Consolidated Statement of Financial Position
As of 31 December 2020 2019
$ '000 $ '000
Non-current assets 44,416 72,695
Current assets 32,584 97,854
Total assets 77,000 170,549
Non-current liabilities 2,246 3,795
Current liabilities 16,468 14,183
Equity 58,286 152,571
Total liabilities and equity 77,000 170,549
Significant performance-impacting events and business
developments reflected in the Company's financial position at year
end include:
Non-current assets
Property and equipment increased by $ 0.1 million to $1.6
million (2019: $ 1.5 million ), primarily as a result of purchases
of approximately $ 1.0 million, mainly at BridgeComm, offset by
depreciation expense of $ 0.5 million and $0.4 million in
disposals.
Intangible assets decreased by $ 0.2 million to $nil million
(2019: $0.2 million) mainly as a result of amortisation expense of
$ 0.2 million.
Investments at fair value decreased to $39.1 million (2019:
$61.9 million). As a result of the fair value accounting for
investments held at fair value, Allied Minds recorded a loss of
$31.9 million in the Consolidated Statements of Comprehensive
(Loss)/ Income. The decrease is offset by $6.9 million in
additional funding by Allied Minds in April 2020 when Federated
Wireless completed the second closing of its $13.7 million Series C
Preferred Stock financing, as well as $4.0 million in additional
funding by Allied Minds in July 2020 when Spin Memory completed a
new closing of its $8.3 million Series B-1 Preferred Stock
financing. In addition, on 5 August 2020, TableUp, one of Allied
Minds' portfolio companies, was acquired by TouchBistro, Inc.
("TouchBistro"). The acquisition was structured as a
stock-for-stock transaction in which TouchBistro acquired 100% of
the shares of TableUp in exchange for the issuance of TouchBistro
common shares to the shareholders of TableUp. A total of 2,542,662
common shares of TouchBistro was paid to Allied Minds valued at
$5.99 million at the time of the transaction. Allied Minds' share
of common stock has been accounted as an investment at fair value.
At 31 December 2020, the fair value of Allied Minds' investment in
TouchBistro was subsequently measured at $2.8 million.
Investments in associates decreased to $nil million (2019: $6.8
million). As a result of the deconsolidation of Federated Wireless
in the second half of 2019 and equity method accounting for
remaining associate investments, Allied Minds recorded a share of
loss of $6.8 million in the Consolidated Statements of
Comprehensive (Loss)/ Income that reduced the investment in
Federated to a zero balance.
Right-of-use assets decreased to $0.6 million (2019: $1.0
million) primarily related to depreciation of $0.4 million.
Current assets
Cash and cash equivalents decreased by $66.0 million to $24.5
million (2019: $90.5 million). The decrease is mainly attributed to
$17.8 million of net cash used in operations, $10.7 million cash
used in investing activities and $37.5 million cash used in
financing activities primarily reflecting $39.7 million in cash
dividend payment to shareholders as a result of the sale of Allied
Minds' share in HawkEye in 2019 .
Trade and other receivables increased by $0.1 million due to an
increase in trade receivables of $0.3 million. This increase is
offset in part by a decrease in prepaid expenses of $0.2 million
mainly from write off advanced payments for unfinished inventory
units at BridgeComm.
Other financial assets have increased by $0.7 million to $2.3
million (2019: $1.6 million) primarily due to IFRS 9 fair value
accounting of TableUp's convertible note issued to Allied Minds in
2019, offset by the issuance of a SAFE note receivable of $1.5
million by Allied Minds to Orbital Sidekick. The fair market value
change of the notes was recorded as an offset to the $28.7 million
loss on investments held at fair value in the Consolidated
Statements of Comprehensive (Loss)/ Income.
Current liabilities
Subsidiary preferred shares increased by $ 1.5 million to $ 6.5
million (2019: $ 5.0 million) primarily driven by $1.5 million in
IFRS 9 fair value adjustment for the year .
Deferred revenue decreased by $0.2 million to $3.6 million
(2019: $3.4 million) primarily due to revenue recognised at
BridgeComm and offset by new revenue contract entered at Spark
Insights in 2020 .
Loans increased by $3.1 million (2019: $ nil) primarily due to
an increase in convertible promissory notes of $2.5 million at
BridgeComm.
Non-current liabilities
Lease liabilities decreased by $1.0 million (2018: $2.9 million)
primarily due to lease payments.
Other non-current liabilities decreased by $0.5 million (2019:
$1.9 million) primarily due to loan payments of convertible
promissory notes at OcuTerra Therapeutics.
Equity
Net equity decreased by $94.3 million to $58.3 million (2019:
$152.6 million) reflecting the combination of comprehensive loss
for the period of $55.6 million, dividend payments to shareholders
of $39.7 million and loss on non-controlling interest of $18,000
offset by $8,000 in issuance of ordinary shares and a $1.1 million
charge due to equity-settled share based payments.
Consolidated Statement of Cash Flows
For the years ended 31 December 2020 2019
$ '000 $ '000
--------- --------
Net cash outflow from operating activities (17,057) (44,851)
Net cash (outflow)/ inflow from investing
activities (11,341) 21,505
Net cash (outflow)/ inflow from financing
activities (37,684) 13,683
Net decrease in cash and cash equivalents (66,082) (9,663)
Cash and cash equivalents in the beginning
of the year 90,571 100,234
--------- --------
Cash and cash equivalents at the end of
the year 24,489 90,571
The Group's net cash outflow from operating activities of $17.1
million in 2020 (2019: $44.8 million, restated) was primarily due
to the losses for the year of $55.5 million and the net effect from
movement in working capital of $4.1 million offset by other finance
charges of $1.6 million, the adjustment for non-cash items such as
depreciation, amortisation, impairments and share-based expenses of
$2.1 million and $38.8 million in losses due to fair value
adjustments and equity method accounting.
The Group had a net cash outflow from investing activities of
$11.3 million in 2020 (2019: $21.5 million). This outflow
predominately related to purchases of property and equipment of
$0.5 million (2019: $3.6 million) and an additional investment in
Federated Wireless and Spin Memory of $10.9 million made by Allied
Minds in April and July 2020. The investing cash outflow was offset
by $0.1 million in receipt of payments from Allied Minds' finance
sub-lease.
The Group's net cash outflow from financing activities of $37.7
million in 2020 (2019: $13.7 million) primarily reflects , in part,
the cash dividend payment to shareholders of $39.7 million as a
result of the sale of Allied Minds' share in HawkEye in 2019 and
$1.1 million in lease payments. The decrease was offset by $2.9
million proceeds from issuance of convertible notes and $0.2
million receipt of PPP loans. Additionally, cash inflows from
financing activities in the period included proceeds from issuance
of share capital at Allied Minds.
The Group's strategy is to maintain healthy, highly liquid cash
balances that are readily available for investment in a manner
consistent with the Board's strategy for the Company and Group. To
further minimise its exposure to risks the Group does not maintain
any material borrowings or cash balances in foreign currency.
The Directors have further considered the on-going viability of
the Company through to December 2023, as required pursuant to the
2018 version of the UK Corporate Governance Code, in the Management
and Governance section of the 2020 Annual Report.
Risk Management
The execution of the Group's strategy is subject to a number of
risks and uncertainties. The Board has adopted a system of
continuous review in which it regularly consults with management to
identify principal and emerging risks facing the Group and to
assess and determine how to address and mitigate against such risks
in a manner consistent with the Company's risk appetite to achieve
its strategic goals. Throughout the year, the Board considers and
reviews both risks arising from the internal operations of the
Group, and those arising from the business environment in which it
operates. It is possible that one or more of these identified risks
could impact the Group in a similar timeframe which may compound
their effects.
With our focus on early stage company development,
commercialisation and monetisation, the Group inherently faces
significant risks and challenges. The overall aim of the risk
management policy is to achieve an effective balance of risk and
reward, although ultimately, no strategy can provide an absolute
assurance against loss.
The Board has carried out a robust assessment of the principal
and emerging risks facing the Group, including those that would
threaten its business model, future performance, solvency and/or
liquidity. The major risks and uncertainties identified by the
Board are set out below, along with the consequences and mitigation
strategy of each risk.
1. The science and technology being developed or commercialised
by the Group's businesses may fail and/or the Group's businesses
may not be able to develop their innovations and intellectual
property into commercially viable products or technologies. There
is also a risk that some of the portfolio companies may fail or not
succeed as anticipated, whether as a result of technical, product,
market, fund-raising or other risks, resulting in an impairment of
the Group's value.
Impact : The failure of any of the Group's portfolio companies
would impact the Group's value. A failure of one of the major
portfolio companies could also impact the Group's reputation as a
builder of high value businesses and possibly make additional fund
raising at the Group or portfolio company level more difficult.
Mitigation :
-- Before making any follow-on investment in the current
portfolio, extensive due diligence is carried out by the Group
which covers all the major business risks including market size,
strategy, adoption and intellectual property. Where appropriate, we
seek validation through co-investment by other strategic and/or
financial parties.
-- A disciplined approach to capital allocation is pursued
whereby we closely monitor milestone developments before committing
additional capital. Should a project fail to achieve sufficient
progress or is unable to attract other co-investors, we may
terminate the investment.
-- Dedicated leadership with deep industry or sector knowledge,
and relevant technical and/or leadership experience, is recruited
to management positions, and the Group ensures that each portfolio
company has independent directors and/or other advisors, as
appropriate for the relevant stage of development.
-- Each portfolio company holds board of director meetings at
least quarterly, with participation from the Group's management
and/or investment team, along with senior management and
independent directors and/or advisors, as appropriate, of such
portfolio company.
-- The shared services model provides meaningful administrative
support to our earlier stage portfolio companies, including strong
budgetary and financial controls that ensure good governance.
-- Within the Group there is meaningful operating and investment
expertise that provide direct, hands-on and strategic, operating
and fund-raising support to its portfolio companies, as
appropriate.
-- The Group actively uses third party advisors and consultants,
specific to the particular domain in which a portfolio company
operates, to assist on market strategy and direction.
2. The Group expects to continue to incur substantial
expenditure in further research and development, product
development, sales and marketing and other operational activities
of its businesses. There is no guarantee that the Group or any of
its individual portfolio companies will become profitable prior to
the achievement of a portfolio company sale or other liquidity
event, and, even if the Group or any of its individual portfolio
companies does become profitable, such profitability may not be
sustainable. The Group may not be able to attract other
co-investors, or monetise its ownership interests in portfolio
companies, during any specific time frame or otherwise on desirable
terms, if at all.
Impact : Allied Minds' objective is to generate returns for its
shareholders through early stage company development within the
technology sector. Such value is expected to be delivered through
the commercialisation and monetisation of these businesses via a
sale or other liquidity event for each. The timing and size of
these potential inflows is uncertain and, should liquidity events
not be forthcoming, or in the event that they are achieved at
values significantly less than the amount of capital invested, then
it would be difficult to sustain the current levels of investment
in the other portfolio companies. This would lead to reduced
participation in funding rounds, which will result in a lower
ownership position, or potentially impact the ability of a company
to raise additional funds.
Mitigation :
-- The Group retains sufficient cash balances in order to
support its cash flow requirements, including Allied Minds'
investment requirements for each portfolio company and for
corporate resources.
-- The Group has close relationships with a wide group of
investors, including within its current shareholder base, and
continues to identify and develop strategic and financial
relationships for co-investing in the Group's portfolio
companies.
-- Senior management continually seeks to build and maintain
strategic and financial relationships for the Group, and each
portfolio company continually seeks to engage in strategic and
financial relationships relevant to their respective markets and to
maintain current information on, and awareness of, potential
fund-raising and monetisation strategies.
3. A significant portion of the Group's intellectual property
relates to technologies which originated in the course of research
conducted in, and initially funded by, US universities or other
federally-funded research institutions. Although the Group has been
granted exclusive licenses to use this intellectual property, there
are certain limitations inherent in these licenses, for example as
required by the Bayh-Dole Act of 1980.
Impact : There are certain circumstances where the US government
has rights to utilise the underlying intellectual property without
any economic benefit flowing back to the Group. In the event that
this were to happen, this could impact the financial return to the
Group on its investment in the applicable portfolio companies.
Mitigation :
-- To the Board's knowledge, while these so called "march in"
rights exist, the US government has never had cause to use
them.
-- The Group seeks to develop dual use capabilities for the
technology it licenses and generally tends to avoid use cases
directly applicable to government use.
-- This risk is also mitigated through employing experienced
technology transfer experts supported by our legal team to assess
risks that may arise out of this eventuality.
4. The Group, including certain of the portfolio companies,
currently has in place cooperative research and development
agreements with certain US Department of Defense laboratories and
other federally funded government institutions. Certain regulatory
measures apply to these agreements which restrict the export of
information and material that may be used for military or
intelligence applications by a non-US person. Compliance with these
regulatory measures may be complex and limit commercial
alternatives.
Impact : If the Group were to breach restrictions on the use of
certain licensed technologies, particularly those derived from
federally funded research facilities, this could materially impact
upon the Group's ability to license additional intellectual
property from these establishments. In certain circumstances, it
may also lead to the termination of existing licenses. In the event
that this were to happen, this could materially affect a number of
the Group's businesses, potentially harm the reputation and
standing of the Group and cause the termination of certain
important relationships with federally funded research
institutions.
Mitigation :
-- Prior to licensing any technology under these agreements, the
Group's management seeks to identify the commercial and other
alternatives available for products and services associated with
such technology and innovations, and to ensure that there are
sufficient markets available to justify the capital investment.
-- Prior to the commercialisation process, the Group's
management seeks to obtain all the necessary clearances from
applicable regulatory bodies to ensure that the export of products
based upon the licensed IP is strictly in accordance with
government guidelines.
-- The Group, including certain of the portfolio companies,
employs a number of individuals with experience in working with
various government agencies.
-- Senior management is fully cognisant of the regulations and
sensitivities in relation to this issue, in particular with
International Traffic in Arms Regulations (ITAR) which regulate the
use of technologies for export, and has numerous mitigating actions
available should issues arise.
5. The Group operates in complex and specialised business
domains and requires highly qualified and experienced management to
implement its strategy successfully. All of the operations of the
Group are located in the United States, which is a highly
competitive employment market. Furthermore, given the relatively
small size of the senior management at the corporate level, the
Group is reliant on a small number of key individuals.
Impact : There is a risk that the Group may lose key personnel,
or fail to attract or retain new personnel. The loss of key
personnel may negatively affect the Group's competitive
advantage.
Mitigation :
-- The Board annually seeks external expertise to assess the
competitiveness of the compensation packages of its senior
management, and to ensure that the structure of compensation is
designed to incentivise performance and retention properly.
-- Senior management continually monitor and assess compensation
levels to ensure the Group remains competitive in the employment
market.
6. A large proportion of the overall value of the Group's
businesses may be concentrated in a small proportion of the Group's
businesses. If one or more of the intellectual property rights
relevant to a valuable business were terminated, this would have a
material adverse impact on the overall value of the Group's
businesses.
Impact : The termination of critical IP licenses would
materially impact the value of the portfolio company and have a
consequent effect on the value of the overall Group.
Mitigation :
-- In each portfolio company, the management is specifically
directed to pursue a policy of generating and patenting additional
intellectual property to both provide additional protection and
create direct IP ownership for the company.
-- Where possible, the Group seeks to negotiate intellectual
property ownership rights in any research and development agreement
it enters into with a network partner, such that the Group becomes
a part owner of the underlying IP.
7. The US Investment Company Act of 1940 regulates companies
which are engaged primarily in the business of investing,
reinvesting, owning, holding or trading in securities. Securities
issued by companies other than consolidated partner companies are
generally considered "investment securities" for purposes of the
Investment Company Act, unless other circumstances exist which
actively involve the company holding such interests in the
management of the underlying company.
Impact : If the Company is deemed to be an "investment company"
subject to regulation under the Investment Company Act, applicable
restrictions could make it impractical for the Group to continue
its business as contemplated and could have a material adverse
effect on its business. If anything were to happen which would
cause the Company to be deemed to be an investment company under
the Investment Company Act, requirements imposed by the Investment
Company Act, including limitations on capital structure, ability to
transact business with portfolio companies and ability to
compensate key employees, could make it impractical for it to
continue its business as currently conducted.
Mitigation :
-- The Company intends to monitor and conduct its operations so
that it will not be deemed to be an investment company under the
Investment Company Act.
-- The Company seeks to build value through its current
portfolio of majority-owned or primarily controlled subsidiary
companies; it is not engaged primarily in the business of
investing, reinvesting, owning, holding or trading in securities
and does not own or propose to acquire investment securities above
prescribed thresholds under the Investment Company Act.
-- Currently the Company holds more than 50% of the voting
securities of certain of its portfolio companies, and more than 25%
of all of its other portfolio companies (except TouchBistro which
acquired TableUp in a stock-for-stock transaction), and intends to
continue to try to hold the majority of the voting securities in
its portfolio companies, or otherwise maintain primary control.
-- In addition to ownership levels, the Company seeks to
maintain significant influence in portfolio companies through a
combination of the following:
o Rights to elect representatives to the board of directors,
with ability to exercise influence over the portfolio company's
business strategy, operating plans, budgets and key corporate
decisions;
o Legal rights, such as access to information (books and
records) and financial statements, liquidation preferences,
registrations rights, rights of first refusal, pre-emptive rights
and co-sale rights;
o Protective provisions, such as rights to block certain
portfolio company actions; and
o Active involvement in the management of our earlier stage
portfolio companies, such as shared service support, business
development introductions, co-locating, and key management
recruiting.
8. As a result of the Group's strategy, the Group's overall
success is dependent on a limited, finite portfolio of businesses.
If one or more of such businesses were to fail, this would have a
material adverse impact on the overall value of the Group's
businesses and the Group's ability to return money to
shareholders.
Impact : The failure of one or more remaining Group businesses
would materially impact the overall value of the Group's portfolio
and have a consequent effect on the returns available to
shareholders.
Mitigation :
-- The Board is committed to engaging and working closely with
the remaining portfolio companies to provide guidance and advice as
they navigate funding, operational, and other needs.
-- The Board continues to monitor performance, progress, and
development of each portfolio company to critically assess the
return prospects of the remaining portfolio and make adjustments as
necessary.
9. Given its current cash and financial position, the Group
expects to remain operational through December 2023. However, if
the Group is unable to generate sufficient revenue, appropriately
manage expenses, attract co-investors to participate in follow-on
portfolio company financings, or generate a sale or other liquidity
event for any of its existing portfolio companies or portfolio
company interests prior to the end of such period, then the Group's
business, financial condition, results of operations, prospects and
future viability could be adversely affected.
Impact : Lack of capital could restrict the Group's ability to
further fund, develop and commercialise its existing businesses. In
turn, this could ultimately lead to failure of individual portfolio
companies and loss of investment as well as failure of the Group as
a whole.
Mitigation :
-- The Board and Senior management continually seek to build and
maintain close relationships with its shareholder base and other
strategic partners at the Group level, and each portfolio company
continually seeks to engage in strategic relationships relevant to
their respective markets and to maintain current information on and
awareness of potential fund-raising and monetisation
strategies.
-- The Company strives to maintain majority ownership and/or
primary control over all of the portfolio companies and/or
portfolio company board representation, so that it can seek to
influence optimal capital allocation, use of cash, and fund-raising
strategy.
-- The Company has built a valuable portfolio of companies since its inception.
-- The Company continuously and critically reviews the progress
of its portfolio companies against pre-set milestones to ensure its
financial capital and human resource is properly allocated to the
more promising areas of its portfolio to help strengthen and
accelerate the Group's path to monetisation.
Brexit
On 23 June 2016, the UK electorate voted to leave the European
Union (EU) in a so-called "Brexit" referendum. Following several
delays, parliament ratified the withdrawal agreement, and the UK
left the EU on 31 January 2020. This began a transition period that
ended on 31 December 2020. Effective as of 1 January 2021, new
rules for how the UK and EU will live, work and trade together were
put in place. The UK is no longer part of the EU's political bodies
or institutions and is now free to set its own trade policy with
other countries.
It is expected that companies based in the UK and with
significant UK and EU operational focus will be the most directly
impacted by Brexit. All of the Group's portfolio companies are
based in the US, and substantially all of the business and
operations of the Group are conducted in the US.
Brexit exposes the Group to increased foreign currency risk.
Foreign exchange risk is an exposure for the Group as it derives
substantially all of its revenue in US dollars and the Group's
businesses borrow, account in, and are valued in, US dollars, but
its shares trade in amounts denominated in pounds sterling. Any
capital raised by the Group in the UK would be denominated in
pounds sterling, but would be allocated to portfolio companies
which operate in the US and whose functional currency is US
dollars.
If the Group requires and fails to obtain sufficient capital on
acceptable terms, it may be forced to forego further investment in
developing certain of its current businesses, and otherwise be
subject to a material adverse impact on the Group's business and
financial condition.
COVID-19
The ongoing spread of the coronavirus disease (COVID-19) that
started in December 2019 has been declared a public health
emergency of international concern by the World Health
Organisation. COVID-19 has the potential to greatly disrupt all
aspects of the Group's business. Potential impacts include the risk
to the health and safety of our workforce, the ability for our
businesses to operate normally, global economics, and the flow of
goods and services. Our people could be at potential health risk if
they come into contact with confirmed cases of COVID-19. In
addition, given the mandatory health and safety restrictions across
the world, including travel and quarantine restrictions, it may
affect the ability of our workforce to continue working normally.
There could also be disruption to operations as a result of the
virus negatively impacting our suppliers, customers and partners,
including cancelled contracts, suppliers and customers going out of
business, and delays in performance. Finally, the virus has already
caused downturn to the global economy, which may become worse as it
continues to spread. This may make it difficult for our portfolio
companies to raise money, enter into new strategic partnerships,
retain customers, or continue operations.
In order to mitigate against these risks, we are closely
monitoring the health, safety and security of our workforce and
complying with applicable regulatory requirements and guidelines.
We have continued to implement temporary travel restrictions and
have made accommodations that will allow our workforce to work
remotely. We are also in close communication with all of our
customers, suppliers and partners to collaborate on how to best
support each other's needs in this difficult environment.
The Group is closely monitoring developments regarding COVID-19
and will continuously reassess and put in place appropriate
continuity plans to mitigate against the risks faced. Furthermore,
with the release and distribution of viable vaccinations for
COVID-19 in January 2021, we hope that the health and safety of all
will be better protected in the coming year.
Corporate and Social Responsibility
Details on the Group's policies, activities and aims with regard
to its corporate and social responsibilities, including diversity,
are included in the Sustainability section of the 2020 Annual
Report and are incorporated into this Strategic Report by
reference.
This Strategic Report has been approved by the Board of
Directors.
ON BEHALF OF THE BOARD
Harry Rein
Chairman
29 March 2021
Directors' Responsibilities Statement
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
are required to prepare the group financial statements, in
accordance with applicable law and international accounting
standards in conformity with the requirements of the Companies Act
2006 and International Financial Reporting Standards (IFRS) as
adopted by Regulation (EC) No 1606/2002 as it applies in the
European Union.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and company and of their
profit or loss for that period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume the group will continue in
business; and
-- prepare a director's report, a strategic report and
director's remuneration report which comply with the requirements
of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. The Directors are responsible for safeguarding the assets
of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The
Directors are responsible for ensuring that the annual report and
accounts, taken as a whole, are fair, balanced, and understandable
and provides the information necessary for shareholders to assess
the group's performance, business model and strategy.
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
-- the consolidated and Parent Company financial statements,
prepared in accordance with the relevant financial reporting
framework, give a true and fair view of the assets, liabilities,
financial position and loss of the Company and the undertakings
included in the consolidation taken as a whole; and
-- The annual report includes a fair review of the development
and performance of the business and the financial position of the
group and the parent company, together with a description of the
principal risks and uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole,
are fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position,
performance, business model and strategy.
ON BEHALF OF THE BOARD
Harry Rein
Chairman
29 March 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/ (LOSS)
For the year ended 31 December Note 2020 2019
$ '000 $ '000
--------- ---------
Revenue 3 480 2,692
Operating expenses:
Cost of revenue 4,5 (210) (1,433)
Selling, general and administrative
expenses 4,5 (10,497) (34,316)
Research and development expenses 4,5 (4,712) (16,146)
Operating loss (14,939) (49,203)
Other income:
Gain on disposal of assets 11 - 165
Gain on deconsolidation of subsidiary 11 - 69,828
(Loss)/ gain on investments held
at fair value (net) 11,20 (31,934) 41,194
Gain on dissolution of subsidiaries 4,15 - 7,128
Other (expense)/ income (31,934) 118,315
Finance income 7 291 1,008
Finance cost 7 (314) (267)
Finance (cost)/ income from IFRS9/
fair value accounting 7 (1,763) 9,251
--------- ---------
Finance (loss)/ income, net (1,786) 9,992
Share of net loss of associates
accounted for using the equity method 11 (6,845) (28,850)
--------- ---------
(Loss)/ income before taxation (55,504) 50,254
Taxation 23 - -
(Loss)/ income for the period (55,504) 50,254
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation differences (116) 808
Other comprehensive (loss)/ income,
net of taxation (116) 808
Total comprehensive (loss)/ income
for the period (55,620) 51,062
========= =========
(Loss)/ income attributable to:
Equity holders of the parent (53,025) 51,335
Non-controlling interests 15 (2,479) (1,081)
(55,504) 50,254
========= =========
Total comprehensive (loss)/ income attributable
to:
Equity holders of the parent (53,141) 52,143
Non-controlling interests 15 (2,479) (1,081)
(55,620) 51,062
========= =========
(Loss)/ income per share $ $
--------- ---------
Basic 8 (0.22) 0.21
--------- ---------
Diluted 8 (0.22) 0.21
--------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of 31 December Note 2020 2019
$ '000 $ '000
------------------------------ --------
Non-current assets
Property and equipment 9 1,596 1,485
Intangible assets 10 - 197
Investment at fair value 11,20 41,588 61,895
Investment in associate 11 - 6,845
Right-of-use assets 19 651 1,016
Other financial assets 20 581 1,257
Total non-current assets 44,416 72,695
Current assets
Cash and cash equivalents 12 24,489 90,571
Trade and other receivables 13 5,816 5,702
Other financial assets 20 2,279 1,581
Total current assets 32,585 97,854
Total assets 77,000 170,549
============================== ========
Equity
Share capital 14 3,767 3,759
Translation reserve 14 1,343 1,459
Accumulated profit 14 55,440 147,238
Equity attributable to owners
of the Company 60,550 152,456
Non-controlling interests 14,15 (2,264) 115
------------------------------ ----------
Total equity 58,286 152,571
Non-current liabilities
Lease liabilities 19 806 1,830
Other non-current liabilities 17,18 1,440 1,965
Total non-current liabilities 2,246 3,795
Current liabilities
Trade and other payables 17 2,101 4,685
Deferred revenue 3 3,697 3,457
Loans 18 3,149 _
Preferred shares 16 6,497 5,017
Lease liabilities 19 1,024 1,024
Total current liabilities 16,468 14,183
Total liabilities 18,714 17,978
Total equity and liabilities 77,000 170,549
============================== ==========
Allied Minds plc
Registered number: 08998697
The financial statements were approved by the Board of Directors
and authorised for issue on 29 M arch 2021 and signed on its behalf
by:
Harry Rein
Non-Executive Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020
Note Share Share Merger Translation Accumulated Total Non-controlling Total
capital premium reserve reserve Profit/(Deficit) parent interests equity
Amount equity
Shares
$' 000 $' 000 $' 000 $' 000 $' 000 $' 000 $' 000 $' 000
------------ -------- ---------- ---------- ------------ ----------------- --------- ---------------- ---------
Balance at 31
December 2018 240,314,745 3,743 160,170 263,367 651 (325,635) 102,296 18,484 120,780
------------ -------- ---------- ---------- ------------ ----------------- --------- ---------------- ---------
Total comprehensive
income for the year
Income from
continuing
operations - - - - - 51,335 51,335 (1,081) 50,254
Foreign currency
translation - - - - 808 - 808 - 808
Total comprehensive
income for the year 808 51,335 52,143 (1,081) 51,062
Issuance of ordinary
shares 14 1,248,378 16 - - - - 16 - 16
Gain/(loss) arising
from change in non
- controlling
interest 15
Capital reduction - - (160,170) (263,367) - 423,537 - - -
Deconsolidation of
subsidiaries 15 - - - - - - - 1,550 1,550
Dissolution of
subsidiaries 15 - - - - - - - (7,128) (7,128)
US subsidiary
distribution to
shareholders 6 - - - - - - - (12,050) (12,050)
Equity-settled share
based payments 6 - - - - - (1,999) (1,999) 534 (1,465)
------------ -------- ---------- ---------- ------------ ----------------- --------- ---------------- ---------
Balance at 31
December 2019 241,563,123 3,759 - - 1,459 147,238 152,456 115 152,571
Total comprehensive
loss for the year
Loss from
continuing
operations - - - - - (53,025) 55,440 (2,479) (55,504)
Foreign currency
translation - - - - (116) - (116) - (116)
Total comprehensive
loss for the year (116) (53,025) (53,141) (2,479) (55,620)
Issuance of ordinary
shares 14 624,862 8 - - - - 8 - 8
Loss arising from
change in
non-controlling
interest 15 - - - - - - - (18) (18)
Dividend payment 14 - - - - - (39,707) (39,707) - (39,707)
Equity-settled share
based payments 6 - - - - - 934 934 118 1,052
---------- ----------------- ----------------
Balance at 31
December 2020 242,187,985 3,767 - - 1,343 55,440 60,550 (2,264) 58,286
============ ======== ========== ========== ============ ================= ========= ================ =========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2020 2019
Note $ '000 $ '000
--------- ---------
Cash flows from operating activities:
Income/(loss) for the year (55,504) 50,254
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 9,19 819 2,273
Amortisation 10 197 551
Impairment losses on property and equipment 9 - 421
Impairment losses on intangible assets 10 - 250
Share-based compensation expense 5,6 1,052 (1,465)
Gain on disposal of assets 4 - (165)
Loss/ (gain) on investments held at fair value 11,20 31,934 (41,194)
Gain on deconsolidation of subsidiary 11 - (69,828)
Gain on dissolution of subsidiaries 4 - (7,128)
Share of net loss of associate 11 6,845 28,850
Changes in working capital:
Decrease in trade and other receivables 13 (114) (429)
(Increase)/decrease in other assets (874) (2,412)
Increase in trade and other payables 17 (876) (1,042)
Decrease in other non-current liabilities 17 (1,643) (2,929)
Increase in deferred revenue 3 240 1,136
(Decrease)/increase in other liabilities (780) 6,182
Unrealised loss/(gain) on foreign currency transactions (116) 808
Other finance expense/(income) 7 1,763 (8,984)
Net cash used in operating activities (17,057) (44,851)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment, net of disposals 9 (564) (3,604)
Purchases of intangible assets, net of disposals 10 - (71)
Purchase of investments at fair value 11 (10,855) (7,500)
Proceeds on disposal of assets 11 - 65
Receipt of payment for finance sub-lease 19 78 61
Proceeds on disposal of other investments 11 - 65,605
Cash derecognised upon loss of control over subsidiary 11 - (33,051)
Net cash (used in)/ provided by investing activities (11,341) 21,505
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of convertible notes 18 2,981 1,965
Receipt of PPP loan 18 184 -
Payment of lease liability 19 (1,150) (1,540)
Dividend payment 14 (39,707) -
US Subsidiary distributions to shareholders - (12,050)
Proceeds from issuance of share capital 6,14 8 16
Proceeds from issuance of preferred shares in subsidiaries 16 - 25,292
Net cash (used in)/ provided by financing activities (37,684) 13,683
--------- ---------
Net decrease in cash and cash equivalents, and restricted cash (66,082) (9,663)
Cash and cash equivalents, beginning of the period 90,571 100,234
Cash and cash equivalents, end of the period 24,489 90,571
========= =========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2020
(1) Accounting Policies
Basis of Preparation
The financial information set out in this document does not
constitute the Group's statutory accounts for the years ended 31
December 2019 or 2020. Statutory accounts for the years ended 31
December 2019 and 31 December 2020, which were approved by the
directors on 29 March 2021, have been reported on by the Group's
Independent Auditors. The Independent Auditor's Reports on the
Annual Report and Financial Statements for each of 2019 and 2020
were unqualified, did draw attention to a matter by way of
emphasis, being going concern and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2019 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2020 will be delivered to the Registrar
of Companies in due course and will be posted to shareholders
shortly, and thereafter will be available from the Group's
registered office at Beaufort House, 51 New North Road, Exeter,
Devon, England, United Kingdom, EX4 4EP, and from the Group's
website http://www.alliedminds.com/investor/.
The financial information set out in these results has been
prepared using the recognition and measurement principles of
International Accounting Standards, International Financial
Reporting Standards and Interpretations in conformity with the
requirements of the Companies Act 2006. The accounting policies
adopted in these results have been consistently applied to all the
years presented and are consistent with the policies used in the
preparation of the financial statements for the year ended 31
December 2019, except for those that relate to new standards and
interpretations effective for the first time for periods beginning
on (or after) 1 January 2019. There are deemed to be no new
standards, amendments and interpretations to existing standards,
which have been adopted by the Group, that have had a material
impact on the financial statements.
The Group's financial information has been presented in US
Dollars (USD).
Basis of Measurement
The consolidated financial statements have been prepared on the
historical cost basis except that the following assets and
liabilities are stated at their fair value: investments held at
fair value and financial instruments classified as fair value
through the profit or loss.
Use of Judgments and Estimates
In preparing these consolidated financial statements, management
has made judgments, estimates and assumptions that affect the
application of the Group's accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates. Estimates and underlying
assumptions are reviewed on an on-going basis. Revisions to
estimates are recognised prospectively. The effects on the amounts
recognised in the consolidated financial statements, or on other
alternative performance measures, is included in the following
notes:
Significant estimates made include:
-- Note 11 and 17 - Valuation of financial instruments measured
at fair value through profit/loss : There is uncertainty in
estimating the fair value of subsidiary note payables, subsidiary
preferred shares, and convertible note assets and investments
carried at fair value through profit and loss (FVTPL) according to
IFRS 9 at initial recognition and upon subsequent measurement. This
includes determining the appropriate valuation methodology and
making certain estimates including future earnings potential of the
subsidiary businesses, appropriate discount rate and earnings
multiple to be applied, marketability, the probability weighting of
the scenarios and other industry and company specific risk factors
.
Significant judgements made include:
-- Note 11 - there is judgement in considering when the power to
control the subsidiary exists or retaining significant influence as
it is dependent on certain factors including the voting power the
entity exercises over the company, the proportion of seats the
company controls on the board and the investees dependence on the
investor for funding, knowledge and its operations. . Further to
the above the group has considered its position under IFRS10 in
respect of whether it is an investment entity for the purposes of
this standard. Management have reviewed the operations of the group
in line with the standard, and whilst there are characteristics
which indicate the group could be considered an investment company,
the underlying measurement of success for the consolidated
portfolio investments is progress in relation to key strategic
milestones in bringing their products to market and not the fair
value of the business. Based on this management have judged the
business to not be an investment entity and consolidate its
subsidiaries under IFRS10.
-- Note 11 - as the entities in the group progress they require
further external funding which in some scenarios reduces the
Group's shareholding to an extent that it loses control under IFRS
10 which results in them no longer being able to consolidate the
entity. There is a significant judgement in relation to whether the
shares are accounted for as an investment in associate per IAS 28
or as a financial asset per IFRS 9 and therefore held at fair
value. This judgement includes, among others, an assessment of
whether the Company has representation on the board of directors of
the investee, whether the Company participates in the policy making
processes of the investee, whether there is any interchange of
managerial personnel, whether there is any essential technical
information provided to the investee and if there are any
transactions between the Company and the investee .
-- Note 17 and 20 - financial instrument liability
classification: when determining the classification of financial
instruments in terms of liability or equity. These judgements
include an assessment whether the financial instrument include any
embedded derivative features, whether they include a contractual
obligations upon the Group to deliver cash or other financial
assets or to exchange financial assets or financial liabilities
with another party, and whether that obligation will be settled by
the Company's exchanging a fixed amount of cash or other financial
assets for a fixed number of its own equity instruments. Further
information about these critical judgments is included below under
Financial Instruments.
-- Note 11 and 17 - financial instrument valuations and
investment at fair value valuations: when determining the
appropriate valuation methodology.
Other estimates and judgments:
-- Note 3 - revenue recognition: in determining the correct
amount of revenue to be recognised, the Directors make estimates of
the fair values of each component of a contract to be able to
allocate the overall consideration to each component based on the
relative fair value method or make estimates of future costs when
applying the inputs method.
-- Note 3 - timing of revenue recognition: making certain
judgements when determining the appropriate accounting treatment of
key customer contract terms in accordance with the applicable
accounting standards and in determining whether revenue should be
recognised at a point in time or over a period of time.
-- Note 19 - discount rate used in lease treatment: in
determining the appropriate discount rate to calculate the present
value of lease payments. These judgements include an assessment
whether the Group will use the rate implicit in the lease, or if
that rate was not readily determinable, to use the Group's
incremental borrowing rate. This is because both rates, as they
have been defined in IFRS 16, take into account the credit standing
of the lessee, the length of the lease, the nature and quality of
the collateral provided and the economic environment in which the
transaction occurs.
Changes in Accounting Policies
There are no new standards impacting the Group that have been
adopted in the annual financial statements for the year ended 31
December 2020, which have given rise to material changes in the
Group's accounting policies.
Going Concern
The Directors have taken proactive cost management measures that
include reduction in expenses of the management function of the
head office at the parent level. They have also decided to focus
exclusively on supporting the seven existing portfolio companies
and maximising monetisation opportunities for portfolio company
interests, and not to deploy any capital into new portfolio
companies. In the event of successful monetisation events from the
sale of portfolio companies or portfolio company interests, the
Directors anticipate distributing the net proceeds to shareholders,
after due consideration of potential follow-on investment
opportunities within the existing portfolio and working capital
requirements. The Directors expect this strategy to take at least
three years to be fully implemented, and as a matter of good
governance, will continue to keep this strategy under review at
appropriate intervals. They have prepared trading and cash flow
forecasts for the parent covering the period to 31 December 2023
after taking into account the $39.7 million dividend paid to
shareholders in February 2020 after the successful disposal of its
ownership in Hawkeye 360. Reflecting this revised strategy,
although the Group is currently loss making and is likely to
continue to be so, at least in the short term, after making
enquiries and considering the impact of risks and opportunities on
expected cash flows, and given the fact that the Group has $24.4
million of available funds in the form of cash and cash equivalents
as at 31 December 2020, the Directors have a reasonable expectation
that the Group has adequate cash to continue in operational
existence for a period of not less than 12 months from the date of
approval of the financial statements. Furthermore, the directors
have considered the timeline of when it plans to dispose of, divest
or reinvest in its portfolio companies and there is no intention to
cease trading or liquidate the business for the period under the
going concern review.
The Directors have also put in measures to mitigate against the
risks to the business due to the impact of COVID-19. Specifically,
these include closely monitoring the health, safety and security of
our workforce; complying with applicable regulatory requirements
and guidelines; implementing temporary travel restrictions; making
accommodations to allow our workforce to work remotely; and
remaining in close communication with all of our customers,
suppliers and partners to collaborate on how to best support each
other's needs in this new environment.
Despite all of this, any impact from COVID-19 will not affect
Allied Minds from a going concern perspective. In fact, the impact
of COVID-19 is adding cost savings during 2020 as a result of
suspension of all travel for board meetings, investor meetings and
the 2020 Annual General Meeting. These savings have a positive
impact on Allied Minds as a going concern.
For this reason, they have adopted the going concern basis in
preparing the financial statements.
Basis of Consolidation
Allied Minds plc was formed on 15 April 2014 and the
consolidated financial statements for each of the years ended 31
December 2020 and 2019 comprises the financial statements of Allied
Minds plc and its subsidiaries.
Subsidiaries
The financial information of the subsidiaries is prepared for
the same reporting period as the parent Company, using consistent
accounting policies. Subsidiaries are entities controlled by the
Group. The Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over
the entity. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control
commences until the date that control ceases. Losses applicable to
the non-controlling interests in a subsidiary are allocated to the
non-controlling interests even if doing so causes the
non-controlling interests to have a deficit balance.
Changes in the Group's interest in a subsidiary that do not
result in a loss of control are accounted for as equity
transactions. Where the Group loses control of a subsidiary, the
assets and liabilities are derecognised along with any related NCI
and other components of equity. Any resulting gain or loss is
recognised in profit or loss. Any interest retained in the former
subsidiary is measured at fair value when control is lost.
Associates
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Significant influence is presumed to exist when the Group
holds between 20 and 50 percent of the voting power of another
entity.
Associates are accounted for using the equity method (equity
accounted investees) and are initially recognised at cost. The
Group's investment includes goodwill identified on acquisition, net
of any accumulated impairment losses. The consolidated financial
statements include the Group's share of the total comprehensive
income and equity movements of equity accounted investees, from the
date that significant influence commences until the date that
significant influence ceases. When the Group's share of losses
exceeds its interest in an equity accounted investee, the Group's
carrying amount is reduced to $nil and recognition of further
losses is discontinued except to the extent that the Group has
incurred legal or constructive obligations or made payments on
behalf of an investee. T o the extent the Group holds interests in
associates that are not providing access to returns underlying
ownership interests and are more akin to debt like securities, the
instrument held by Allied Minds is accounted for in accordance with
IFRS 9.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra- group transactions, are
eliminated. Unrealised gains arising from transactions with
equity-accounted investees are eliminated against the investment to
the extent of the Group's interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
Changes of non-controlling interests
Non-controlling interests ("NCI") are measured at their
proportionate share of the acquiree's identifiable net assets at
the acquisition date. Changes in the Group's interest in a
subsidiary that do not result in a loss of control are accounted
for as equity transactions.
Changes of non-controlling interests that do not result in a
change of control are accounted for as transactions with owners in
their capacity as owners and therefore no goodwill is recognised as
a result of such transactions. The adjustments to non-controlling
interests are based on a proportionate amount of the net assets of
the subsidiary. Any difference between the price paid or received
and the amount by which non-controlling interests are adjusted is
recognised directly in equity and attributed to the owners of the
parent.
Functional and Presentation Currency
These consolidated financial statements are presented in US
dollars, which is the functional currency of most of the entities
in the Group. All amounts have been rounded to the nearest thousand
unless otherwise indicated.
Foreign Currency
Transactions in foreign currencies are translated to the
respective functional currencies of Group entities at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are retranslated to the functional currency at
the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the
consolidated statement of comprehensive loss. Non-monetary assets
and liabilities that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate at the date
of the transaction. Non-monetary assets and liabilities denominated
in foreign currencies that are stated at fair value are
retranslated to the functional currency at foreign exchange rates
ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation, are
translated to the Group's presentational currency (US dollar) at
foreign exchange rates ruling at the balance sheet date. The
revenues and expenses of foreign operations are translated at an
average rate for the year where this rate approximates to the
foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign
operations are reported as an item of other comprehensive income
and accumulated in the translation reserve or non- controlling
interest, as the case may be. When a foreign operation is disposed
of, such that control, joint control or significant influence (as
the case may be) is lost, the entire accumulated amount in the
translation reserve, net of amounts previously attributed to
non-controlling interests, is reclassified to profit or loss as
part of the gain or loss on disposal. When the Group disposes of
only part of its interest in a subsidiary that includes a foreign
operation while still retaining control, the relevant proportion of
the accumulated amount is reattributed to non-controlling
interests. When the Group disposes of only part of its investment
in a subsidiary or an associate that includes a foreign operation
while still retaining significant influence or joint control, the
relevant proportion of the cumulative amount is reclassified to
profit or loss.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments
with original maturities of three months or less.
Financial Instruments
Classification - Financial Assets
IFRS 9 contains a classification and measurement approach for
financial assets that reflects the business model, in which assets
are managed, and their cash flow characteristics. IFRS 9 contains
three principal classification categories for financial assets:
measured at amortised cost, fair value through other comprehensive
income ("FVOCI") and fair value through profit or loss ("FVTPL").
Under IFRS 9, derivatives embedded in contracts where the host is a
financial asset in the scope of the standard are never bifurcated.
Instead, the hybrid as a whole is assessed for classification.
Cash and cash equivalents : Represent basic cash balances in
banks used to fund operations. These are classified as assets at
amortised cost under IFRS 9.
Trade Receivables : Under IFRS 9 trade receivables that do not
have a significant financing component have to be initially
recognised at their transaction price rather than at fair value.
The Group initially recognises receivables and deposits on the date
that they are originated at their transaction price, which is the
same as their fair value. As such, Trade and other receivables are
classified as assets at amortised cost under IFRS 9.
Security and other deposits : These generally represent security
deposits paid by the Group to landlords as part of operating lease
commitments. As the Company's objective is that those deposits will
be collected back, they are classified as assets at amortised cost
under IFRS 9.
Investments at fair value: Reflect investments made by the Group
in non-derivative instruments of the investees that are designated
in this category or not classified in any other category. These
financial assets are initially measured at fair value and
subsequently re-measured at fair value at each reporting date, and
on derecognition. The Company elects if the gain or loss will be
recognised in the Consolidated Statements of Comprehensive Income/
(Loss) in Other Comprehensive Income/(Loss) or through the profit
and loss on an instrument by instrument basis. Investments at fair
value are presented in the Consolidated Statements of Financial
Position as non-current assets, unless the Group intends to dispose
of them within 12 months after the end of the reporting period. If
the investments at fair value continue to be held for the same
long-term strategic purposes, per the application of IFRS 9, the
Group may elect then to classify them as FVOCI or FVTPL. The Group
classifies them as FVTPL. In the former case, all fair value gains
and losses would be reported in other comprehensive income, no
impairment losses would be recognised in profit or loss and no
gains or losses would be reclassified to profit or loss on
disposal. In the latter case, all fair value gains and losses would
be recognised in profit or loss as they arise, increasing
volatility in the Group's profits. These financial assets do not
have exposure to credit risk and are not considered
credit-impaired. As a result, there are no adjustments considered
for movement in credit risk as this is not applicable within the
specific valuation frameworks utilised for the fair values of the
Group's preferred stock assets. To the extent the Group holds
interests in associates that are not providing access to returns
underlying ownership interests and are more akin to debt like
securities, the instrument held by Allied Minds is accounted for in
accordance with IFRS 9.
Classification - Financial Liabilities
Under IFRS 9 all fair value changes of liabilities designated as
at fair value through profit or loss are generally presented in
profit or loss.
The Group designates the subsidiary preferred shares liability
at FVTPL under IFRS 9. Hence, any gains and losses on the preferred
shares liability are recognised in profit or loss, unless they
relate to changes in the entity's own credit risk for financial
liability designated as at fair value through profit or loss. The
effect of changes in the entity's own credit risk in the fair value
of the financial liabilities are presented in other comprehensive
income. For the underlying financial instruments no adjustments are
considered for movement in credit risk as this is not applicable
within the specific valuation frameworks utilized for the fair
values of the Group's preferred share liability.
Trade and other payables and loans are designated at amortised
cost under IFRS 9.
Impairment
IFRS 9 includes a 'forward looking expected credit loss' ("ECL")
model. The impairment methodology applied depends on whether there
has been a significant increase in credit risk. For trade
receivables, the group applies the simplified approach permitted by
IFRS 9, which requires expected lifetime losses to be recognised
from initial recognition of the receivables.
Financial Instruments Issued by the Group
Under IAS 32, financial instruments issued by the Group are
treated as equity only to the extent that they meet the following
two conditions:
-- they include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
-- where the instrument will or may be settled in the Company's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Company's own
equity instruments or is a derivative that will be settled by the
Company's exchanging a fixed amount of cash or other financial
assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial
instrument is classified as a financial liability. Where the
instrument so classified takes the legal form of the Company's own
shares, the amounts presented in the financial information for
share capital and merger reserve account exclude amounts in
relation to those shares.
Where a financial instrument that contains both equity and
financial liability components exists, these components are
separated and accounted for individually under the above
policy.
Share Capital
Ordinary shares are classified as equity. The Group considers
its capital to comprise share capital, share premium, merger
reserve, translation reserve, and accumulated deficit.
Property and Equipment
Property and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses. Cost includes
expenditure that is directly attributable to the acquisition of the
asset. Assets under construction represent machinery and equipment
to be used in operations, R&D activities, or to be leased to
customers once completed.
When parts of an item of property and equipment have different
useful lives, they are accounted for as separate items (major
components) of property and equipment. Depreciation is calculated
using the straight-line method over the estimated useful lives of
the related assets:
Computers and electronics 3 years
Furniture and fixtures 5 years
Machinery and equipment 5 - 20 years
Under construction Not depreciated until transferred into
use
Leasehold improvements Shorter of the lease term or estimated
useful life of the asset
Right-of-Use Assets Shorter of the lease term or estimated
useful life of the asset
Depreciation methods, useful lives and residual values are
reviewed at least annually and adjusted if appropriate.
The Directors have considered the value of fixed assets without
revaluing them.
The Directors are satisfied that the aggregate value of those
assets at the time in question is or was not less than aggregate
amount at which they are or were for the time being stated in the
company's accounts
Intangible Assets
Licenses (or Options to License) and Purchased In Process
Research & Development
Licenses or options to license represent licenses or such
options provided by universities, federal laboratories, and
scientists in exchange for an equity ownership in the entities or
cash. Purchased in process research & development ("IPR&D")
represents time and expertise already invested by the scientist and
provided in exchange for an equity interest in the entity. Licenses
or options to license and purchased IPR&D are valued based on
the amount of cash directly paid to acquire those assets or based
on the amount of cash contributed by Allied Minds, at inception of
the subsidiary, and the proportionate amount of equity ascribed to
Allied Minds. The licenses or options to license and purchased
IPR&D are capitalised only when they meet the criteria for
capitalisation, namely separately identifiable and measurable and
it is probable that economic benefit will flow to the entity.
Capitalised Development Costs
Research and development costs include charges from universities
based on sponsored research agreements ("SRAs") that the
subsidiaries of Allied Minds enter into with universities. Under
these agreements, the universities perform research on the
technology that is being licensed to the subsidiaries. Research and
development costs also include charges from independent research
and development contractors, contract research organisations
("CROs"), and other research institutions.
Expenditure on research activities is recognised in profit or
loss as incurred. Development expenditure is capitalised only if
the expenditure can be measured reliably, the product or process is
technically and commercially feasible, future economic benefits are
probable, the Group intends to and has sufficient resources to
complete development and to use or sell the asset, and if the Group
can measure reliably the expenditure attributable to the intangible
asset during its development. The point at which technical
feasibility is determined to have been reached is when regulatory
approval has been received, where applicable. Management determines
that commercial viability has been reached when a clear market and
pricing point have been identified, which may coincide with
achieving recurring sales. Development activities involve a plan or
design for the production of new or substantially improved products
or processes. The expenditure considered for capitalisation
includes the cost of materials, direct labour and an appropriate
proportion of overhead costs. Otherwise, the development
expenditure is recognised in profit or loss as incurred. Subsequent
to initial recognition, development expenditure is measured at cost
less accumulated amortisation and any accumulated impairment
losses.
Software
Software intangible assets that are acquired by the Group and
have finite useful lives are measured at cost less accumulated
amortisation and any accumulated impairment losses.
Finite-lived intangible assets are amortised on a straight-line
basis over their estimated useful lives, from the date that they
are available for use. Intangible assets which are not yet
available for use (and therefore not amortised) are tested for
impairment at least annually.
Amortisation
Amortisation is charged to the consolidated statement of
comprehensive loss on a straight-line basis over the estimated
useful lives of intangible assets unless such lives are indefinite.
Intangible assets with an indefinite useful life and goodwill are
systematically tested for impairment at each balance sheet date.
Other intangible assets are amortised from the date they are
available for use. Amortisation methods, useful lives and residual
values are reviewed at least annually and adjusted if
appropriate.
The estimated useful lives of the Group's intangible assets are
as follows:
Licences and Options Over the remaining life of the underlying
to License patents
Purchased IPR&D Over the remaining life of the underlying
patents, once commercial viability has
been achieved
Software 2 years
Leases
IFRS 16 is a single, on-balance sheet lease accounting model for
lessees and requires leases to be accounted for using a
right-of-use model, which recognises that, at the date of
commencement, a lessee has a financial obligation to make lease
payments to the lessor for the right to use the underlying asset
during the lease term. The lessee recognises a corresponding
right-of-use asset related to this right.
Upon adoption, the Group applied the following practical
expedients:
-- excluding initial direct costs from the right-of-use assets;
-- use hindsight when assessing the lease term;
-- not reassessing whether a contract is or contains a lease; and
-- not separating the lease components from the non-lease components in lease contracts.
The Group accounts for lease payments as an expense on a
straight-line basis over the life of the lease for:
-- Leases with a term of 12 months or less and containing no purchase options; and
-- Leases where the underlying asset has a value of less than $5,000.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the transition date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group used its incremental
borrowing rate. The right-of-use asset is depreciated on a
straight-line basis and the lease liability will give rise to an
interest charge.
Finance leases will continue to be treated as finance leases. In
November 2019 the Company has relocated its corporate headquarters
as part of management's initiative to minimise headquarters
expenses. As a result, starting November 2019, the Company entered
into a sublease for the remaining period of the head lease.
Under IFRS 16, a sublease leads to the de-recognition of the
right of use asset and the recognition of an investment receivable
in respect of this sublease. The lease liability remains in respect
of the head lease as a lease liability on the balance sheet.
The Group recognised lease liabilities of $1.8 million and $0.6
million in lease assets at 31 December 2020. Those rights and
obligations are primarily related to operating leases for office
and laboratory space.
No new leases were entered into in 2020. Further information
regarding the right of use asset and lease liability can be found
in Note 19.
On 28 May 2020, the IASB issued final amendments to IFRS 16
related to Covid-19 rent concessions for lessees. The amendments
modify the requirements of IFRS 16 to permit lessees to not apply
modification accounting to certain leases where the contractual
terms have been affected due to Covid-19 (e.g. rent holidays or
other rent concessions). The amendments are effective for periods
beginning on or after 1 June 2020, with earlier application
permitted. The Group did not adopt this standard as no such
concessions were applicable.
Taxation
Tax on the profit or loss for the year comprises current and
deferred tax. Tax is recognised in the income statement except to
the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity.
Current Income Tax
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantially enacted at the reporting date, and any adjustment to
tax payable in respect of previous years.
Deferred Income Tax
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax assets are recognised for unused tax losses,
unused tax credits and deductible temporary differences to the
extent that it is probable that future taxable profits will be
available against which they can be used. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be
realised.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to taxes levied by the same tax authority
on the same taxable entity, or on different tax entities where the
Group intends to settle current tax liabilities and assets on a net
basis or their tax assets and liabilities will be realised
simultaneously.
Deferred taxes are recognised in profit or loss except to the
extent that it relates to items recognised directly in equity or in
other comprehensive income.
Impairment
Impairment of Non-Financial Assets
Non-financial assets consist of property and equipment and
intangible assets, including licences, purchased IPR&D,
capitalised development cost, with finite lives and such intangible
assets which are not yet available for use.
The Group reviews the carrying amounts of its property and
equipment and finite-lived intangibles at each reporting date to
determine whether there is any indication of impairment. If any
such indication exists, then the asset's recoverable amount is
estimated. Intangible assets which are not yet available for use
are tested annually for impairment.
For impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or cash-generating units ("CGUs").
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs to sell. Value in use is
based on the estimated future cash flows, discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset or CGU.
An impairment loss is recognised in profit and loss if the
carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are allocated to reduce the carrying amounts of
assets in a CGU on a pro rata basis.
Impairment of Financial Assets
The company recognises loss allowances for expected credit
losses (ECLs) on financial assets measured at amortised cost.
The company measures loss allowances at an amount equal to
lifetime ECL, except for other debt securities and bank balances
for which credit risk (i.e. the risk of default occurring over the
expected life of the financial instrument) has not increased
significantly since initial recognition, which are measured as
12-month ECL.
Loss allowances for trade receivables and contract assets are
always measured at an amount equal to lifetime ECL.
When determining whether the credit risk of a financial asset
has increased significantly since initial recognition and when
estimating ECL, the company considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on the company's historical experience and
informed credit assessment and including forward-looking
information.
Share-based Payments
Share-based payment arrangements in which the Group or its
subsidiaries receive goods or services as consideration for their
own equity instruments are accounted for as equity-settled
share-based payment transactions, regardless of how the equity
instruments are obtained by the Group or its subsidiaries. Grants
of equity instruments under the subsidiary stock option incentive
plans are accounted for as equity-settled in the consolidated
accounts of the parent and are reflected in equity as a credit to
Non-Controlling Interest.
The grant date fair value of share-based payment awards granted
to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the
employees become unconditionally entitled to the awards. The fair
value of the options granted is measured using an option pricing
valuation model, taking into account the terms and conditions upon
which the options were granted. The amount recognised as an expense
is adjusted to reflect the actual number of awards for which the
related service and non-market vesting conditions are expected to
be met, such that the amount ultimately recognised as an expense is
based on the number of awards that do meet the related service and
non-market performance conditions at the vesting date. For
share-based payment awards with market or non-vesting conditions,
the grant date fair value of the share-based payment is measured to
reflect such conditions and there is no true-up for differences
between expected and actual outcomes.
Employee Benefits
Short-term Employee Benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided. A liability is recognised for the amount expected to be
paid if the Group has a present legal or constructive obligation to
pay this amount as a result of past service provided by the
employee, and the obligation can be estimated reliably.
Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and has no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution
plans are recognised as an employee benefit expense in the periods
during which related services are rendered by employees. Prepaid
contributions are recognised as an asset to the extent that a cash
refund or a reduction in future payments is available.
Phantom Plan
The Phantom Plan is a cash settled bonus plan. Expense is
accrued when it is determined that it is probable that a payment
will be made and when the amount can be reasonably estimated.
Provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a
past event, that can be reliably measured and it is probable that
an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects risks specific to
the liability.
Revenue Recognition
The Group recognises revenue to depict the transfer of promised
goods to customers in an amount that reflects the consideration to
which it expects to be entitled in exchange for those goods. In
order to achieve this, the Group uses the five step model outlined
in IFRS 15: 1) to identify the contract with the customer; 2)
identify the performance obligation(s) in the contract; 3)
determine the transaction price; 4) allocate the transaction price
to the performance obligation(s); and 5) recognise revenue when (or
as) we satisfy the performance obligation(s).
IFRS 15 implements a uniform method of recognising revenue based
on the actual contract and performance obligation. Under IFRS 15,
revenue is recognised when the Company satisfies a performance
obligation by transferring a promised good or service to its
customer. As such, the amount of revenue recognised is the amount
allocated to the satisfied performance obligation. A performance
obligation may be satisfied at a point in time (typically for
promises to transfer goods to a customer) or over time (typically
for promises to transfer services to a customer).
Determining the timing of the transfer of control - at a point
in time or over time - requires judgement. Based on Group's
assessment, it was concluded that the majority of the Company's
projects that:
-- Render a service is performed on a time and materials basis
and revenue is recognised as services are provided based on actual
hours worked for a set period. The performance obligations
identified within these projects are distinct and meet the criteria
resulting in transfer of control over time.
-- Sell goods , revenue is recognised when the control of the
products were transferred to the customer. The performance
obligations identified within these projects are distinct and meet
the criteria resulting in transfer of control at a point in
time.
Refer to Note 3, "Revenue Recognition," for additional
information related to the net revenue recognised in the
consolidated statements of operations.
Finance Income and Finance Costs
Finance income mainly comprises interest income on funds
invested and foreign exchange gains. Finance costs mainly comprise
fair value movements on preferred share liabilities, loan interest
expense and foreign exchange losses. Interest income and interest
payable are recognised as they accrue in profit or loss, using the
effective interest method.
Fair Value Measurements
A number of the Group's accounting policies and disclosures
require the measurement of fair values, for both financial and
non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the
Group uses market observable data as far as possible. Fair values
are categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as
follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a
liability might be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in
its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire
measurement.
The Group recognises transfers between levels of the fair value
hierarchy at the end of the reporting period during which the
change has occurred.
The carrying amount of cash and cash equivalents, accounts
receivable, deposits, accounts payable, accrued expenses and other
current liabilities in the Group's Consolidated Statements of
Financial Position approximates their fair value because of the
short maturities of these instruments.
Operating Segments
Allied Minds determines and presents operating segments based on
the information that internally is provided to the executive
management team, the body which is considered to be Allied Minds'
Chief Operating Decision Maker ("CODM").
An operating segment is a component of Allied Minds that engages
in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Allied Minds' other components. The
operating segment's operating results are reviewed regularly by the
CODM to make decisions about resources to be allocated to the
segment, to assess its performance, and for which discrete
financial information is available.
Newly adopted standards
New standards and interpretations adopted in the current year
that did not have a material impact on the Company's financial
statements were as follows:
Effective date New standards or amendments
1 January 2020 Amendments to References to Conceptual Framework in IFRS Standards
--------------------------------------------------------------------
Definition of a Business (Amendments to IFRS 3)
--------------------------------------------------------------------
Definition of Material (Amendments to IAS 1 and IAS 8)
--------------------------------------------------------------------
Amendments to IFRS 9, IAS 39 and IFRS 17: Interest Benchmark reform
--------------------------------------------------------------------
(2) New Standards and Interpretations not yet effective
There are a number of new standards, amendments to standard, and
interpretations which have been issued by the IASB that are
effective in future periods that the group has decided not to adopt
early.
The following amendments are effective for the period beginning
1 January 2022:
-- Onerous contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (amendments to IAS16;
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and
IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
In January 2020, the IASB issued amendments to IAS 1, which
clarify the criteria used to determine whether liabilities are
classified as current or non-current. These amendments clarify that
current or non-current classification is based in whether an entity
has a right at the end of the reporting period. The amendments also
clarify that 'settlement' includes the transfer of cash, goods,
services, or equity instruments unless the obligation to transfer
equity instruments arises from a conversion feature classified as
an equity instrument. The amendments were originally effective for
annual reporting period beginning on or after 1 January 2022.
However, in May 2020, the effective date was deferred to annual
reporting periods beginning on or after 1 January 2023.
Allied Minds Plc is currently assessing the impact of these new
accounting standard and amendments. The Group does not believe that
the amendments to IAS 1 will have a significant impact on the
classification of its liabilities, as the conversion feature in its
convertible debt instrument is classified as an equity instrument
and therefore, does not affect the classification of its
convertible debt as non-current liability.
The Group does not expect any other standard issued by the IASB,
but not yet effective, to have a material impact on the group.
(3) Revenue
Revenue recorded in the statement of comprehensive income/
(loss) consists of the following:
For the year ended 31 December: 2020 2019
$'000 $'000
------ ------
Product revenue - 61
Service revenue 480 2,631
Total revenue in consolidated statement
of (loss)/ income 480 2,692
====== ======
Revenue is measured based on the consideration specified in a
contract with a customer. The Group recognises revenue when it
transfers control over a good or service to a customer. The Group
disaggregates contract revenue based on the transfer of control of
the underlying performance obligations:
For the year ended 31 December: 2020 2019
$'000 $'000
------ ------
Transferred at a point in time _ _
Transferred over time 480 2,692
Total revenue in consolidated statement
of (loss)/ income 480 2,692
====== ======
Product revenue includes license revenue of $nil and $61,000
during 2020 and 2019, respectively.
Contract Balances
Contract liabilities represent the Group's obligation to
transfer products or services to a customer for which consideration
has been received. When applicable, contract assets and liabilities
are reported on a net basis at the contract level, depending on the
contracts position at the end of each reporting period. Contract
liabilities are included within deferred revenue on the
Consolidated Statement of Financial Position.
As of 31 December: 2020 2019
$'000 $'000
-------- --------
Deferred revenue, current (3,697) (3,457)
(4) Operating Segments
Basis for Segmentation
For management purposes, the Group's principal operations are
currently organised in three types of activities:
(i) Early stage companies - subsidiary businesses that are in
the early stage of their lifecycle characterised by incubation,
research and development activities;
(ii) Later stage companies - subsidiary businesses that have
substantially advanced with or completed their research and
development activities, are closer in their lifecycle to commercialisation,
and/or have a potential of realising material return on investment
through a future liquidity event;
(iii) Minority holdings companies - reflects the activity related
to portfolio companies other than consolidated subsidiary businesses
where the Group has made a minority investment and does not
control or exercise joint control over the financial and operating
policies of those entities.
Minority holdings : As of year-end 2019, as a result of its
investment activities in 2018, Allied Minds captured its minority
and deconsolidated portfolio companies within the minority holdings
segment. The Group did not have any companies that were
deconsolidated during the year ending 31 December 2020. This
operating segment included the following:
-- Spin Memory, Inc., one of the company's subsidiaries that was
deconsolidated during the second half of 2018 as a result of
financing events at the company;
-- Orbital Sidekick, Inc., a company in which Allied Minds holds a significant minority stake.
-- TouchBistro, Inc. a company in which Allied Minds holds a minority stake.
-- Federated Wireless, Inc., one of the company's subsidiaries
that was deconsolidated during the second half of 2019 as a result
of financing events at the company
The Group's CODM reviews internal management reports on these
segments at least quarterly in order to make decisions about
resources to be allocated to the segment and to assess its
performance.
Other operations include the management function of the head
office at the parent level of Allied Minds.
Information about Reportable Segments
The following provides detailed information of the Group's
reportable segments as of and for the years ended 31 December 2020
and 2019, respectively:
2020
$'000
-----------------------------------------------------------------------
Early Later Minority Other
stage stage Holdings operations Consolidated
---------- ----------- ---------- ----------- -----------------
Statement of Comprehensive
Loss
Revenue _ 480 _ _ 480
Cost of
revenue _ (210) _ _ (210)
Selling, general and
administrative expenses (526) (2,788) _ (7,183) (10,497)
Research and development
expenses (1,420) (3,292) _ _ (4,712)
Other expense _ _ _ (31,934) (31,934)
Finance cost, net (20) (5,241) _ 3,475 (1,786)
Share of net loss of
associates accounted for
using the equity method _ _ _ (6,845) (6,845)
-----------
Loss for the period (1,966) (11,051) _ (42,487) (55,504)
Other comprehensive loss _ _ _ (116) (116)
Total comprehensive income
loss (1,966) (11,051) _ (42,603) (55,620)
========== =========== ========== =========== =================
Total comprehensive loss
attributable to:
Equity holders of the
parent 58 (10,596) _ (42,487) (53,025)
Non-controlling interests (2,024) (455) _ _ (2,479)
Total comprehensive loss (1,966) (11,051) _ (42,487) (55,504)
========== =========== ========== =========== =================
Statement of financial
position
Non-current
assets 320 1,288 _ 42,808 44,416
Current assets 502 7,105 _ 24,977 32,584
---------- ----------- ---------- ----------- -----------------
Total assets 822 8,393 _ 67,785 77,000
Non-current
liabilities (105) (1,380) _ (761) (2,246)
Current
liabilities (3,756) (27,707) _ 14,995 (16,468)
Total liabilities (3,861) (29,087) _ 14,234 (18,714)
---------- ----------- ---------- ----------- -----------------
Net assets/(liabilities) (3,039) (20,694) _ 82,019 58,286
========== =========== ========== =========== =================
2019
$'000
-----------------------------------------------------------------------
Early Later Minority Other
stage stage holdings operations Consolidated
---------- ----------- ---------- ----------- -----------------
Statement of Comprehensive
Loss
Revenue _ 1,226 1,466 _ 2,692
Cost of
revenue _ (805) (628) _ (1,433)
Selling, general and
administrative expenses (2,475) (3,347) (11,501) (16,993) (34,316)
Research and development
expenses (2,963) (4,068) (9,115) _ (16,146)
Other income 7,273 21 - 111,021 118,315
Finance income/(cost), net 6,687 6,653 3,546 (6,894) 9,992
Share of net loss of
associates accounted for
using the equity method _ _ _ (28,850) (28,850)
-----------
Income/(loss) for the
period 8,522 (320) (16,232) 58,284 50,254
Other comprehensive income _ _ _ 808 808
Total comprehensive
income/(loss) 8,522 (320) (16,232) 59,092 51,062
========== =========== ========== =========== =================
Total comprehensive income/
(loss) attributable to:
Equity holders of the
parent 8,906 (658) (15,197) 58,284 51,335
Non-controlling interests (384) 338 (1,035) _ (1,081)
Total comprehensive
income/(loss) 8,522 (320) (16,232) 58,284 50,254
========== =========== ========== =========== =================
Statement of financial
position
Non-current
assets 494 1,302 _ 70,899 72,695
Current assets 2,173 9,209 _ 86,472 97,854
---------- ----------- ---------- ----------- -----------------
Total assets 2,667 10,511 _ 157,371 170,549
Non-current
liabilities (265) (1,992) _ (1,538) (3,795)
Current
liabilities (3,417) (20,303) _ 9,537 (14,183)
Total liabilities (3,682) (22,295) _ 7,999 (17,978)
---------- ----------- ---------- ----------- -----------------
Net assets/(liabilities) (1,015) (11,784) _ 165,370 152,571
========== =========== ========== =========== =================
Early stage companies comprise those that receive an array of
business support resources and services from Allied Minds in order
to successfully develop early stage technologies. Those currently
include Spark Insights. In addition, all closed or dissolved
subsidiaries were presented in the Early Stage segment up to the
time at which they were all dissolved.
Later stage companies comprise those that have graduated from
Early stage by way of further advancements in their development as
described above. Those currently include BridgeComm, and OcuTerra
Therapeutics.
The results of the management function of the head office at the
parent level of Allied Minds are reported separately as Other
operations. As the investment in associate is a parent activity,
the share of loss, gain on deconsolidation, remeasurement of the
investments to fair value and investment in associate are disclosed
in the Other operations segment. In December 2020, Allied Minds has
decided to dissolve Allied Minds Federal Innovations, a holding
company. The results of Allied Minds Federal Innovations to the
date it was closed were also included in the Other operations
segment.
Summarised information related to the Company's operating
revenues by reporting segment for the years ended 31 December 2020
and 2019 is as follows:
2020 2019
Service revenue Software revenue Total Service revenue Software revenue Total
Early Stage - - - - - -
Later Stage - 480 480 1,225 - 1,225
Minority - - - 1,406 61 1,467
---------------- ----------------- ------ ---------------- ----------------- ------
Total revenue - 480 480 2,631 61 2,692
---------------- ----------------- ------ ---------------- ----------------- ------
In 2020, Cost of revenue and Selling, general and administrative
expenses of Early stage, Later stage, Minority holdings and Other
operations segments included depreciation and amortisation expense
of $10,100, $460,880, $0, and $179,637, respectively (2019:
$115,000, $664,000, $597,000, and $233,000, respectively).
The proportion of net assets shown above that is attributable to
non-controlling interest is disclosed further in notes 11 and
15.
Geographic Information
The Group revenues and net operating losses for the years ended
31 December 2020 and 2019 are considered to be entirely derived
from its operations within the United States and accordingly no
additional geographical disclosures are provided.
(5) Operating Expenses
The average number of persons employed by the Group (including
Directors) during the year, analysed by category, was as
follows:
For the year ended 31 December: 2020 2019
----- -----
Selling, general and administrative 28 41
Research and development 46 71
Total 74 112
===== =====
The aggregate payroll costs of these persons were as
follows:
For the year ended 31 December: 2020 2019
$'000 $'000
------ -------
Selling, general and administrative 5,873 17,960
Research and development 2,619 8,043
Total 8,492 26,003
====== =======
Total operating expenses were as follows:
For the year ended 31 December: 2020 2019
$'000 $'000
------- --------
Salaries and wages 5,903 23,727
Payroll taxes 158 1,290
Healthcare benefit 1,338 1,942
Other payroll cost 41 509
Share-based payments 1,052 (1,465)
Total 8,492 26,003
------- --------
Cost of revenue 210 1,433
Other SG&A expenses 4,624 16,356
Other R&D expenses 2,093 8,103
Total operating expenses 15,419 51,895
======= ========
2020 2019
$'000 $'000
------- --------
Auditor's remuneration
Audit of these financial statements 419 544
Audit of the financial statements - -
of subsidiaries
Audit-related assurance services 96 122
515 666
======= ========
The Group recorded an impairment charge on property and
equipment of $nil million (2019: $0.5 million) and on intangible
assets of $nil million (2019: $0.1 million).
See note 6 for further disclosures related to share-based
payments and note 22 for management's remuneration disclosures.
(6) Share-Based Payments
UK Long Term Incentive Plan
Under the UK Long Term Incentive Plan ("LTIP"), awards of
Ordinary Shares may be made to employees, officers and directors,
and other individuals providing services to the Company and its
subsidiaries. Awards may be granted in the form of share options,
share appreciation rights, restricted or unrestricted share awards,
performance share awards, restricted share units, phantom-share
awards and other share-based awards. Vesting is subject to the
achievement of certain performance conditions and continued
services of the participant.
Awards have been granted under the LTIP based on the following
vesting criteria:
-- awards subject to performance conditions based on the
Company's total shareholder return ("TSR") performance or relative
total shareholder return (rTSR) performance over a defined of
time;
-- awards subject to performance conditions based on a basket of
shareholder value metrics ("SVM"). Performance is assessed on these
measures on a scorecard basis over a defined period of time;
-- awards that vest 100 per cent after a period of time subject
to continued service condition only.
On 10 June 2019, the Board has determined to retire the long
term incentive plan (LTIP) scheme for executive directors,
management and other employees. New annual LTIP awards planned for
issuance in May 2019 subsequent to the release of annual results,
were cancelled and no future awards will be made to executive
directors, management and other employees. Historic awards will
remain outstanding and eligible to vest in accordance with their
terms. A significant majority of the outstanding awards are subject
to relative total shareholder return (TSR) performance; however, at
the current share price, the performance criteria of these awards
will not be met and therefore, no shares are expected to be issued
under such awards.
The Company issued shares in respect of historic awards under
the LTIP during 2020 and 2019 in respect of a total of 387,000 and
343,383 Ordinary Shares, respectively. A summary of stock option
activity under the UK LTIP for the year ended 31 December 2020 and
2019, respectively, is shown below:
For the year ended
31 December: 2020 2019
----------------------------------------- -------------------------------------
rTSR SVM Time rTSR SVM Time
-------- -------------- ------------- ------- ------------- -------------
Number of shares
granted
at maximum ('000) - - 387 - - 343
Weighted average fair
value ( $ ) - - 0.36 - - 0.63
Fair value measurement Monte Market Market Monte Market Market
basis Carlo value value Carlo value value
of ordinary of ordinary of ordinary of ordinary
share share share share
The share grants that vest upon the occurrence of a market
condition (i.e. the TSR performance) and service condition were
adjusted to current market price at the date of the grant to
reflect the effect of the market condition on the non-vested
shares' value. The Company used a Monte Carlo simulation analysis
utilising a Geometric Brownian Motion process with 50,000
simulations to value those shares. The model takes into account
share price volatilities, risk-free rate and other covariance of
comparable UK public companies and other market data to predict
distribution of relative share performance. This is applied to the
reward criteria to arrive at expected value of the TSR awards.
The share grants that vest only upon the occurrence of a
non-market performance condition (i.e. the SVM grants) and service
condition or upon passage of time were valued at the fair value of
the shares on the date of the grants the vesting conditions are
taken into account. The number of instruments included in the
measurement of the transaction amount is subsequently adjusted so
that, ultimately, the amount of recognised share-based expense is
based on the number of instruments that eventually vest. None of
the outstanding awards under the LTIP as of 31 December 2020 are
subject to SVM vesting.
The accounting charge does not necessarily represent the
intended value of share-based payments made to recipients, which
are determined by the Remuneration Committee according to
established criteria. The share-based payment charge for the fiscal
year ended 31 December 2020 related to the UK LTIP was $0.9 million
(2019: $ 1.9 million).
U.S. Stock Option/Stock Issuance Plan
The U.S. Stock Option/Stock Issuance Plan (the "U.S. Stock
Plan") was originally adopted by Allied Minds, Inc. (now Allied
Minds, LLC) in 2008. The U.S. Stock Plan provides for the grant of
share option awards, restricted share awards, and other awards to
acquire common stock of Allied Minds, Inc. (now Allied Minds, LLC).
All stock options granted to employees under this plan are equity
settled, for a ten-year term. Pursuant to the Company's IPO in
2014, Allied Minds plc adopted and assumed the rights and
obligations of Allied Minds, Inc. (now Allied Minds, LLC) under
this plan except that the obligation to issue Common Stock is
replaced with an obligation to issue ordinary shares to satisfy
awards granted under the U.S. Stock Plan. As of 19 June 2014, the
maximum number of options reserved under the plan were issued and
outstanding and as a result of the Company's IPO in 2014, all
issued and outstanding options vested on 19 June 2014. The Company
does not intend to make any further grants under the U.S. Stock
Plan.
No new stock option grants were awarded in 2020 and 2019 under
the Allied Minds 2008 Plan. A summary of stock option activity in
the U.S. Stock Plan is presented in the following table:
For the twelve months ended: 31 December 2020 31 December 2019
-------------------------------- ----------------------------- -------------------------------
Number of Weighted average Number of Weighted average
options exercise price options exercise price
---------- ----------------- ------------ -----------------
Outstanding as of 1 January 230,000 $ 2.49 1,300,000 $ 2.15
Exercised during the period - - - $ 0.00
Forfeited during the period (230,000) $ 2.49 (1,070,000) $ 1.80
Outstanding as of period end - - 230,000 $ 2.49
---------- ----------------- ------------ -----------------
Exercisable at period end - - 230,000 $ 2.49
Intrinsic value of exercisable $ nil $ nil
As of 31 December 2020 no options were exercised (2019: nil )
resulting in $ nil (2019: $ nil ) additional share premium for the
period.
Allied Minds Phantom Plan
In 2007, Allied Minds established a cash settled plan for Allied
Minds employees, also known as its Phantom Plan. In 2012, the Board
of Directors adopted the Amended and Restated 2007 Phantom Plan.
Under the terms of the Amended and Restated Plan, upon a liquidity
event Allied Minds will allocate 10% of the value (after deduction
of the amount invested by Allied Minds and accrued interest at a
rate not exceeding 5% per annum) of the invested capital owned by
Allied Minds of each operating company to the plan account. Upon a
liquidity event, plan participants holding units will receive their
proportionate share of the plan account. The allocated shares at
all times remain the sole and exclusive property of Allied Minds
and holders of units have no rights or interests in Allied
Minds.
Allied Minds has not accrued any expense relating to the Phantom
Plan as of 31 December 2020 and 2019. Management records an expense
relating to this plan when it is probable that a subsidiary will be
sold and the amount of the payout is reasonably estimable or will
be paid out in accordance with the plan. Given the current
valuation of the investments and the thresholds required for
payments to be made, management have judged that is unlikely there
will be any future payouts in respect of this plan based on the
position as at 31 December 2020.
Share-based Payment Expense
The Group recorded share-based payment charge/ credit related to
stock options of approximately $1,052,000 and $1,465,000 for the
years ended 31 December 2020 and 2019, respectively. There was no
income tax benefit recognised for share- based payment arrangements
for the years ended 31 December 2020 and 2019, respectively, due to
operating losses.
The following table provides the classification of the Group's
consolidated share-based payment expense/ income as reflected in
the Consolidated Statement of (Loss) / Income:
For the year ended 31 December: 2020 2019
$'000 $'000
------ --------
Selling, general and administrative 991 (1,597)
Research and development 61 132
Total 1,052 (1,465)
====== ========
(7) Finance Cost, Net
The following table shows the breakdown of finance income and
cost:
For the year ended 31 2020 2019
December:
$'000 $'000
-------- ------
Interest income on:
- Bank deposits 292 1,007
Foreign exchange gain (1) 1
Finance income 291 1,008
-------- ------
Interest expense on:
- Financial liabilities
at amortised cost (313) (267)
Foreign exchange loss (1) -
-------- ------
Finance cost contractual (314) (267)
(Loss)/ income on fair
value measurement of
subsidiary preferred
shares (1,763) 9,251
Finance (cost)/ income (2,077) 8,984
-------- ------
Total finance (cost)/
income, net (1,786) 9,992
======== ======
See note 16 for further disclosure related to subsidiary
preferred shares.
(8) (Loss)/ income Per Share
The calculation of basic and diluted income per share as of 31
December 2020 was based on the loss attributable to ordinary
shareholders of $53.0 million (2019: income of $ 51.3 million) and
a weighted average number of ordinary shares outstanding of
241,901,871 (2019: 240,981,168), calculated as follows:
(Loss)/ Income attributable to ordinary shareholders
2020 2019
$'000 $'000
-------------------- --- -----------------
Basic Diluted Basic Diluted
--------- --------- ------- --------
(Loss)/ income for the year attributed to the
owners of the Company (53,025) (53,025) 51,335 51,335
--------- --------- ------- --------
(Loss)/ income for the year attributed to the
ordinary shareholders (53,025) (53,025) 51,335 51,335
========= ========= ======= ========
Weighted average number of ordinary shares
2020 2019
-------------------------- --------------------------
Basic Diluted Basic Diluted
------------ ------------ ------------ ------------
Issued ordinary shares on 1 January 241,563,123 241,563,123 240,314,745 240,314,745
Effect of RSUs issued 338,748 338,748 666,423 666,423
Effect of dilutive shares _ _ _ _
Weighted average ordinary shares 241,901,871 241,901,871 240,981,168 240,981,168
============ ============ ============ ============
(Loss)/ Income per share
2020 2019
$ $
------- -------- ----------------
Basic Diluted Basic Diluted
------- -------- ------ --------
(Loss)/ income per
share (0.22) (0.22) 0.21 0.21
======= ======== ====== ========
(9) Property and Equipment
Property and equipment, net, consists of the following at:
Cost
Machinery Furniture Computers
and and Leasehold and Under
in $'000 Equipment Fixtures Improvements Electronics Construction Total
---------------------- ----------- ---------- ------------- ------------ ------------- --------
Balance as of
31 December
2018 2,463 709 3,082 911 1,639 8,804
Additions,
net of transfers (71) 122 26 185 3,341 3,603
Disposals (1,233) (455) (272) (166) - (2,126)
Deconsolidation
of subsidiaries (110) (305) (1,965) (575) (4,772) (7,727)
----------- ---------- ------------- ------------ ------------- --------
Balance as of
31 December
2019 1,049 71 871 355 208 2,554
Additions 64 - - 353 147 564
Transfers (454) - - - 454 0
Balance as of
31 December
2020 659 71 871 708 809 3,118
=========== ========== ============= ============ ============= ========
Accumulated
Depreciation
and Impairment
loss
Machinery Furniture Computers
and and Leasehold and Under
in $'000 Equipment Fixtures Improvements Electronics Construction Total
---------------------- ----------- ---------- ------------- ------------ ------------- --------
Balance as of
31 December
2018 (1,009) (381) (841) (576) _ (2,807)
Depreciation (280) (101) (535) (141) - (1,057)
Impairment
loss (305) (101) - (15) _ (421)
Disposals 1,233 455 272 166 _ 2,126
Deconsolidation
of subsidiaries 61 125 611 293 1,090
----------- ---------- ------------- ------------ ------------- --------
Balance as of
31 December
2019 (300) (3) (493) (273) _ (1,069)
Depreciation (175) (14) (143) (121) _ (453)
Impairment
loss _ _ _ _ _ _
Disposals _ _ _ _ _ _
Balance as of
31 December
2020 (475) (17) (636) (394) - (1,522)
=========== ========== ============= ============ ============= ========
Property and
equipment,
net
Machinery Furniture Computers
in and and Leasehold and Under
$'000 Equipment Fixtures Improvements Electronics Construction Total
------------------ ----------- ---------- ------------- ------------ ------------- --------
Balance as of
31 December
2019 749 68 378 82 208 1,485
Balance as of
31 December
2020 184 54 235 314 809 1,596
Impairment of property and equipment of $nil and $421,000 for
the years ended 31 December 2020 and 2019, respectively, is mainly
attributed to the closing of subsidiary companies, which resulted
in the associated assets being impaired. Impairment of property and
equipment is included in selling, general and administrative
expenses in the consolidated statement of comprehensive income.
Property and equipment under constructions represents assets
that are in the process of being built and not placed in service as
of the reporting date.
(10) Intangible Assets
Information regarding the cost and accumulated amortisation of
intangible assets is as follows:
Cost
in $'000 Licenses Purchased IPR&D Software Total
---------------------------------- ---- --- --------- ---------------- --------- ------
Balance as of 31 December 2018 163 277 1,690 2,130
Additions - Acquired separately 29 192 4 225
Disposals (142) (384) (66) (592)
Deconsolidation of subsidiaries (50) (85) (702) (837)
--------- ---------------- --------- ------
Balance as of 31 December 2019 - - 926 926
Additions - Acquired separately - - - -
Disposals - - - -
Balance as of 31 December 2020 - - 926 926
============= ================ ========= ======
Accumulated amortisation
and Impairment loss
in $'000 Licenses Purchased IPR&D Software Total
---------------------------------- ---- --- --------- ---------------- --------- ------
Balance as of 31 December 2018 (64) - (845) (909)
Amortisation (4) - (546) (550)
Impairment loss (58) (192) - (250)
Disposals 111 192 66 369
Deconsolidation of subsidiaries 15 - 596 611
--------- ---------------- --------- ------
Balance as of 31 December 2019 - - (729) (729)
Amortisation - - (197) (197)
Impairment loss - - - -
Disposals - - - -
Balance as of 31 December 2020 - - (926) (926)
============= ================ ========= ======
Intangible assets, net
in $'000 Licenses Purchased IPR&D Software Total
---------------------------------- ---- --- --------- ---------------- --------- ------
Balance as of 31 December 2019 - - 197 197
Balance as of 31 December 2020 - - - -
Amortisation expense is included in selling, general and
administrative expenses in the consolidated statement of
comprehensive loss. Amortisation expense, recorded using the
straight-line method, was approximately $197,000 and $551,000 for
the years ended 31 December 2020 and 2019, respectively.
Impairment of intangible assets of $nil and $250,000 for the
years ended 31 December 2020 and 2019, respectively, is mainly
attributed to the closing of subsidiary companies, which resulted
in the associated intangible assets being impaired to zero.
Impairment expense is included in selling, general and
administrative expenses in the consolidated statement of
comprehensive income.
At each reporting period, management considers qualitative and
quantitative factors that define the future prospects of the
respective investment and assesses whether it supports the value of
the underlying intangible.
(11) Investments
Group Subsidiaries, associates and investments
As of 31 December 2020, Allied Minds has seven portfolio
companies, including subsidiaries, associates and investments. As
at the 31 December 2020 the investments in each of the companies
and the accounting treatment is summarized below:
Portfolio company Financial instruments Accounting treatment of
held financial instruments
Allied Minds LLC Ordinary shares Consolidated by the group
in line with IFRS 10 and
following management assessment
of significant control.
Allied Minds Securities Ordinary shares Consolidated by the group
Corp. in line with IFRS 10 and
following management assessment
of significant control.
BridgeComm, Inc. Ordinary share capital Consolidated by the group
and preferred shares in line with IFRS 10 and
following management assessment
of significant control.
Preferred shares are eliminated
on consolidation between
group companies, preferred
shares held by third parties
are fair valued through
profit and loss under
IFRS 9.
Spark Insights, Inc. Ordinary share capital Consolidated by the group
and preferred shares in line with IFRS 10 and
following management assessment
of significant control.
Preferred shares are eliminated
on consolidation between
group companies.
OcuTerra Therapeutics, Ordinary share capital Consolidated by the group
Inc. and preferred shares in line with IFRS 10 and
following management assessment
of significant control.
Preferred shares are eliminated
on consolidation between
group companies.
Federated Wireless, Ordinary share capital The ordinary share capital
Inc. and preferred shares ownership means that the
group has significant
influence but not control
over the entity. Therefore,
the investment in ordinary
shares is accounted for
by the equity method of
accounting under IAS 28.
Preferred share holdings
are accounted for at fair
value through profit and
loss as investments held
by the group.
Spin Memory, Inc. Ordinary share capital The ordinary share capital
and preferred shares ownership means that the
group has significant
influence but not control
over the entity. Therefore,
the investment in ordinary
shares is accounted for
by the equity method of
accounting under IAS 28.
Preferred share holdings
are accounted for at fair
value through profit and
loss as investments held
by the group.
Orbital sidekick, Preferred shares No ordinary shares are
Inc. owned by Allied Minds
and the directors have
judged that the group
does not have significant
influence over the entity
through is preferred share
holding.
Preferred share holdings
are accounted for at fair
value through profit and
loss as investments held
by the group.
TouchBistro, Inc. Ordinary shares The group has a minority
stake in the investment
and does not have significant
influence over the company.
Therefore, the investment
in ordinary shares is
accounted for at fair
value through the profit
and loss under IFRS 9.
The following outlines the formation of each subsidiary and
evolution of Allied Minds' ownership interest over the two year
period ended 31 December 2019:
Issued and Outstanding
Ownership percentage
at 31 December
(1) (2)
----------- -------------------------
Inception Location
Date (4) 2020 2019
----------- ---------------- ------------ -----------
Active subsidiaries
Holding companies
Allied Minds, LLC 19/06/14 Boston, MA 100.00% 100.00%
Allied Minds Securities Corp. 21/12/15 Boston, MA 100.00% 100.00%
Early stage companies
Spark Insights, Inc. 09/10/18 Boston, MA 70.59% 70.59%
Later stage companies
BridgeComm, Inc. 09/02/15 Denver, CO 81.15% 81.38%
OcuTerra Therapeutics, Inc. Cambridge,
(SciFluor Life Sciences) 14/12/10 MA 62.67% 62.67%
Closed subsidiaries
Allied Minds Federal Innovations,
Inc. 09/03/12 Boston, MA _ 100.00%
Number of active subsidiaries at 31
December: 5 6
Associates
Spin Memory, Inc.(3) 03/12/07 Fremont, CA 43.01% 42.69%
Federated Wireless, Inc. (3 Arlington,
() 08/08/12 VA 43.11% 42.57%
Federated Wireless Government Arlington,
Solutions, Inc. (3 () 04/05/16 VA 43.11% 42.57%
Other investments
TouchBistro, Inc (TableUp, Inc.)
(3) 04/20/07 Boston, MA 1.52% 35.52%
San Francisco,
Orbital Sidekick, Inc. (3) 02/08/16 CA 33.23% 33.23%
Notes:
(1) Represents ownership percentage held by Allied Minds Plc
based on the equity interest owned in ordinary shares plus
potential equity interest owned in convertible preference shares.
The current percentage ownership of each company ordinary share
capital is as follows: Allied Minds LLC 100%, Allied Minds
Securities Corp. 100%, Spark Insights 0.07%, BridgeComm, Inc.
98.47%, OcuTerra Therapeutics, Inc. 75.26%, Spin Memory 56.31%,
Federated Wireless 93.60%, TouchBistro 1.52%, Orbital Sidekick
0%.
(2) Allied Minds LLC, Spark Insights, Inc., BridgeComm, Inc.,
OcuTerra Therapeutics, Inc., Federated Wireless, Inc. and Federated
Wireless Government Solutions, Inc. have a registered office
address at CT Corporation System, Corporation Trust Center, and
1209 Orange Street, Wilmington, DE 19801, United States. Allied
Minds Securities Corp. has a registered office address at CT
Corporation System, 155 Federal Street, Suite 700, Boston, MA
02110, United States. Spin Memory Inc. and TableUp Inc. have a
registered office address at 1209 Orange Street, Wilmington, DE
19801. Orbital Sidekick Inc. has a registered office at Corporation
Service Company, 251 Little Falls Drive, Wilmington, DE 19808.
(3) The preferred shares that allied Minds has in these
companies is accounted for under IFRS 9.
On 24 December 2020, Orbital Sidekick, Inc., has conditionally
secured $16.0 million in a Series A Preferred financing round led
by Temasek, an investment company headquartered in Singapore. Round
participants also include other new investors and existing
investors Allied Minds, committing $2.5 million (including
conversion of its SAFE), and 11.2 Capital. The financing round is
scheduled to close in the first quarter of 2021.
On 16 July 2020, Allied Minds and 11.2 Capital collectively
invested $2.0 million in the form of SAFEs (simple agreements for
equity), which will convert into shares of preferred stock in the
company's next equity financing round expected in Q2 of 2021 as
noted above. The receivables are included in current assets in the
group accounts and are held at fair value through profit and loss
at 31 December 2020. Orbital Sidekick was awarded a multi-year
contract by the Department of the Air Force's commercial investment
group (AFVentures) as part of its Strategic Financing (STRATFI)
programme, under which the company received $4.0 million of
non-dilutive financing in Q4 2020, with the opportunity to receive
up to $12.0 million of additional non-dilutive financing over next
three years to match private funds raised.
On 5 August 2020, TableUp, one of Allied Minds' portfolio
companies, has been acquired by TouchBistro, Inc. ("TouchBistro").
The acquisition was structured as a stock-for-stock transaction in
which TouchBistro acquired 100% of the shares of TableUp in
exchange for the issuance of TouchBistro common shares to the
shareholders of TableUp. A total of 2,542,662 common shares of
TouchBistro was paid to Allied Minds valued at $5.99 million at the
time of the transaction.
On 26 August 2020, as a result of achieving certain development
milestones under the JDA with Boeing, BridgeComm secured the
remaining $1.5 million of convertible debt from Boeing.
On 4 February 2020, BridgeComm issued $2,000,000 in convertible
notes to Allied Minds, following the issuance of $1,000,000 in
convertible notes to Boeing HorizonX Ventures in December 2019.
On 17 July 2020, Spin Memory, the leading MRAM developer,
secured $8.25 million in additional Series B funding on the same
terms as the last closing in April 2019. Allied Minds committed
$4.0 million to the round. The Group invested alongside existing
investors, Arm, Applied Ventures and Abies Ventures, who
collectively committed the remaining $4.25 million. Following this
investment, Allied Minds' ownership of Spin's issued share capital
is 43.01%.
On 20 April 2020, Federated Wireless raised an additional $13.7
million from existing shareholders in a second closing of the
preferred financing round from September 2019, half of which was
contributed by Allied Minds. Following this investment, Allied
Minds' ownership of Federated's issued share capital is 43.11%
compared to 52.17% at 31 December 2019. This transaction increases
the company's investment at fair value in Federated Wireless from
$22.4 million, as reported at 31 December 2019, to $29.2 million at
30 June 2020.
On 10 January 2020, OcuTerra Therapeutics raised an additional
$375K in the second closing of its convertible note financing.
On 29 December 2020, the Group ceased operations and dissolved
Allied Minds Federal Innovations, Inc.
The following tables summarise the financial information related
to the Group's subsidiaries with material non-controlling
interests, aggregated for interests in similar entities, and before
intra-group eliminations.
As of and for the year ended 31 December:
2020
$'000
--------------------------------------
Minority
Early stage Later stage holdings
------------ ------------ ----------
Statement of Comprehensive Loss
Revenue - 480 -
Loss for the year (1,966) (11,051) -
Other comprehensive loss - - -
Total comprehensive loss (1,966) (11,051) -
Comprehensive loss attributed
to NCI (2,024) (455) -
Statement of Financial Position
Non-current assets 320 1,288
Current assets 502 7,105 -
Total assets 822 8,393
Non-current liabilities (105) (1,380)
Current liabilities (3,756) (27,707) -
Total liabilities (3,861) (29,087) -
------------ ----------
Net liabilities (3,039) (20,694) -
Carrying amount of NCI
Statement of Cash Flows
Cash flows from operating
activities (1,953) (6,621) -
Cash flows from investing
activities (20) (538) -
Cash flows from financing
activities 184 4,707 -
(1,789) (2,452) -
2019
$'000
--------------------------------------
Minority
Early stage Later stage holdings
------------ ------------ ----------
Statement of Comprehensive Loss
Revenue - 1,226 1,466
Loss for the year 8,522 (320) (16,232)
Other comprehensive loss - - -
Total comprehensive loss 8,522 (320) (16,232)
Comprehensive loss attributed
to NCI (384) 338 (1,035)
Statement of Financial Position
Non-current assets 494 1,302 -
Current assets 2,173 9,209 -
Total assets 2,667 10,511 -
Non-current liabilities (265) (1,992) -
Current liabilities (3,417) (20,303) -
Total liabilities (3,682) (22,295) -
------------ ----------
Net assets/(liabilities) (1,015) (11,784) -
Carrying amount of NCI (1,418) 1,533 -
Statement of Cash Flows
Cash flows from operating
activities 27,511 (3,199) 11,064
Cash flows from investing
activities 16,244 (133) (3,315)
Cash flows from financing
activities (61,347) 915 4,701
(17,592) (2,417) 12,450
Investment in Associates
The Group has two associates that are material to the Group,
both of which are equity accounted.
Spin Memory Federated Wireless
Nature of relationship with the Group Portfolio company of the Group Portfolio company of the Group
Principal place of business Fremont, CA Arlington, VA
Ownership interest 43.01% (2019: 42.69 %) 43.11% (2019: 42.57 %)
Spin Memory : As of November 2018, Spin Memory was
deconsolidated from the Group's financial statements as a result of
its Series B Preferred Stock financing round as the voting rights
associated with this stock meant that Allied Minds would no longer
control the business but would maintain significant influence over
the operations. As of 31 December 2019, Allied Minds' ownership
percentage went from 41.63% to 42.69% and the investment in common
stock in Spin Memory continues to be subject to the equity method
accounting. In accordance with IAS 28, the Company's investment was
adjusted by the share of profits and losses generated by Spin
Memory subsequent to the date of deconsolidation. In 2019, Allied
Minds recognised $19.5 million as its share of loss from Spin
through the Consolidated Statements of Comprehensive Income/ (Loss)
that reduced Allied Minds' investment in Spin Memory down to
zero.
As of 31 December 2020, Allied Minds' ownership percentage went
from 42.69% to 43.01% as a result of the entity's latest financing
round in July 2020. In accordance with IAS 28, once the share of
losses of an associate equals or exceeds its "interest in the
associate", the investor discontinues recognising its share of
further losses. Once Allied Minds' interest in Spin Memory was
reduced to zero no further adjustments were made to the investment
balance at 31 December 2020. If Spin Memory subsequently reports
profits, Allied Minds will resume recognising its share of those
profits only after its share of the profits equals the share of
losses not recognised.
Ownership percentage
Location 31 December 2020 31 December 2019
Spin Memory, Inc. Fremont, CA 43.01% 42.69%
31 December 2020 31 December 2019
$'000 $'000
Group's interest in net assets of investee,
beginning of period _ 19,543
Share of loss from continuing operations _ (19,543)
Carrying amount for equity accounted investees _ _
Unrecognised share of losses in associate (37,393) (406.5)
Total outstanding (37,393) (406.5)
Federated Wireless : As of September 2019, Federated Wireless
was deconsolidated from the Group's financial statements as a
result of its latest Series C Preferred Stock financing round as
the voting rights associated with this stock meant that Allied
Minds would no longer control the business but would maintain
significant influence over the operations. Allied Minds' ownership
percentage as of 31 December 2019 dropped from 52.23% to 42.57%.
Upon the date of deconsolidation, Allied Minds recognised an
investment in Federated Wireless related to its common shares of
$16.2 million. At 31 December 2019, Allied Minds' investment was
adjusted by the share of losses generated by Federated Wireless
from 3 September through 31 December 2019 of $9.3 million. As a
result of the deconsolidation, Allied Minds recorded an unrealised
gain of $69.8 million in the Consolidated Statements of
Comprehensive Income/ (Loss).
In accordance with IAS 28, the Company's investment was adjusted
by the share of profits and losses generated by Federated Wireless
subsequent to the date of deconsolidation. In 2019, Allied Minds
recognised $9.3 million as its share of loss from Federated
Wireless through the Consolidated Statements of Comprehensive
Income/ (Loss).
As of 31 December 2020, Allied Minds' ownership percentage went
from 42.57% to 43.11% and the investment in Federated Wireless
continues to be subject to the equity method accounting. In
accordance with IAS 28, the Company's investment was adjusted by
the share of profits and losses generated by Federated Wireless
subsequent to the date of deconsolidation. As a result, Allied
Minds recorded a share of loss of $6.8 million in the Consolidated
Statements of Comprehensive Income/ (Loss) that reduced the
investment in Federated to a zero balance as follows:
Ownership percentage
Location 31 December 2020 31 December 2019
Federated Wireless, Inc. Arlington, VA 43.11% 42.57%
31 December 2020 31 December 2019
$'000 $'000
Group's interest in net assets of
investee, beginning of period 6,845 _
Addition in the year _ 16,151
Share of loss from continuing
operations (6,845) (9,306)
Carrying amount for equity accounted investees _ 6,845
Unrecognised share of losses in associate (19,432) _
Total outstanding (19,432) _
The following is summarised financial information for Spin
Memory and Federated Wireless, based on their perspective
consolidated financial statements prepared in accordance with
IFRS:
Spin Memory Federated Wireless
$'000 $'000
2020 2019 2020 2019
Revenue 1,181 2,080 2,882 2,322
Loss for the period (65,684) (35,429) (28,073) (28,816)
Total non-current assets 12,918 14,694 17,948 19,874
Total current assets 1,850 5,315 30,597 44,319
Total assets 14,768 20,009 48,545 64,193
Total non-current liabilities (1,871) (209) (5,804) (4,315)
Total current liabilities (19,151) (96,206) (133,917) (125,039)
Net assets (6,254) (76,406) (91,176) (65,161)
Investments at fair value
The Group's investments at fair value represent securities of
portfolio companies where Allied Minds holds preferred shares or a
minority stake in those companies. This includes preferred shares
held in Federated Wireless, Spin Memory and Orbital Sidekick and a
minority holding in TouchBistro as at 31 December 20. These
investments are initially measured at fair value through profit or
loss and are subsequently re-measured at fair value at each
reporting date and on derecognition.
The fair value of these investments is derived using the option
pricing model ("OPM"), the Probability-Weighted Expected Return
Method ("PWERM") or a hybrid of the two.
The key inputs into these valuation models include the equity
value of the portfolio company , the term of the instrument, risk
free rate and volatility.
The valuation methodologies utilised for determining the equity
value include market approach, income approach or cost approach or
hybrid of these approaches. Other methodologies such as asset based
and cash in are also utilised where deemed appropriate. It is noted
that in the current year none of the equity values were determined
using the income approach.
Other valuation approaches
In certain cases, the value of a portfolio company is determined
using a market instead of income- based approach.
Where there has been a third party funding round in the year
this has been used as the implied value of the portfolio company or
comparable guideline public companies or comparable transactions ,
adjusted for indexation where this is deemed to be appropriate.
Whilst the Board considers the methodologies and assumptions
adopted in the valuation are supportable, reasonable and robust,
because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have
been used had a ready market for the investment existed and the
differences could be significant.
PWERM and OPM
The principal methods the Group applies for allocation of value
are the PWERM, the OPM as well as a hybrid of the two. These models
take assumptions such as the equity values, term of the
instruments, risk free rate and volatility to determine the fair
value of each share class.
The PWERM estimates the value of equity securities based on an
analysis of various discrete future outcomes, such as an IPO,
merger or sale, dissolution, or continued operation as a private
enterprise until a later exit date. The equity value today is based
on the probability-weighted present values of expected future
investment returns, considering each of the possible outcomes
available to the enterprise, as well as the rights of each security
class. The key judgement relates to probability weighting of the
scenarios.
The OPM treats common stock or derivatives thereof as call
options on the enterprise's value or overall equity value. The
value of a security is based on the optionality over and above the
value securities that are senior in the capital structure (e.g.
preferred stock), considering the dilutive effects of subordinate
securities. In the OPM, the exercise price is based on a comparison
with the overall equity value rather than per-share value.
Those investments are presented in the below table:
Finance (income)/cost
from IFRS
31 December 9 fair value 31 December
2020 Disposals accounting Additions 2019
$'000 $'000 $'000 $'000 $'000
Federated Wireless,
Inc. 28,532 _ (677) 6,855 22,354
Spin Memory,
Inc. 4,821 _ (29,151) 4,000 29,972
Orbital Sidekick,
Inc. 5,464 _ 1,438 _ 4,026
TableUp, Inc. _ (5,016) (508) _ 5,524
TouchBistro,
Inc. (TableUp,
Inc.)- Common
Stock 2,771 _ (3,213) 5,984 _
Total investments
at fair value 41,588 (5,016) (32,111) 16,839 61,876
The company's investment at fair value in Federated Wireless has
changed from $22.4 million, as reported at 31 December 2019, to
$28.5 million at 31 December 2020. The increase in fair value
primarily relates to the additional investment made by Allied Minds
in Federate Wireless during the period.
The company's investment at fair value in Spin Memory has
changed from $29.9 million, as reported at 31 December 2019, to
$4.8 million at 31 December 2020. The change was primarily due to
COVID-19 related delays in the required testing of its development
chip with a strategic partner that affected Spin's ability to
secure new customers. As a result, this, coupled with an unexpected
loss of a government bid in late Q4 2020, Spin is now facing
significant liquidity issues.
On 6 April 2018, Allied Minds made an investment in Orbital
Sidekick, a company developing capabilities in aerial and
space-based hyperspectral imaging and analytics, initially for the
oil and gas industry. Allied Minds has significant influence over
financial and operating policies of the investee by virtue of its
large, albeit minority, stake in the company and its representation
on the entity's board of directors. Allied Minds only held shares
of preferred stock in Orbital Sidekick. The preferred shares held
by Allied Minds are not equity-like and therefore these fall under
the guidance of IFRS 9 and will be treated as a financial asset
held at fair value where all movements to the value of Allied
Minds' share in the preferred stock will be recorded through the
Consolidated Statements of Comprehensive Income/(Loss). On 24
December 2020, Orbital Sidekick, Inc., has conditionally secured
$16.0 million in a Series A Preferred financing round. Following
this investment, Allied Minds' ownership of Orbital Sidekick's
issued share capital is 26.52% compared to 33.23% at 31 December
2020. As of 31 December 2020 , Allied Minds recognised an
investment held at fair value related to its Preferred Shares in
Orbital Sidekick of $5.5 million (31 December 2019: $4.0
million).
On 6 April 2018, Allied Minds made an investment in TableUp, a
software provider enabling end-to-end transparency through the
restaurant supply chain to enable more effective inventory and
operations management . On 5 August 2020, TableUp was acquired by
TouchBistro, Inc. ("TouchBistro"). The acquisition was structured
as a stock-for-stock transaction in which TouchBistro acquired 100%
of the shares of TableUp in exchange for the issuance of
TouchBistro common shares to the shareholders of TableUp. As such,
Allied Minds's investment in preferred stock, along with the
convertible note, was fully converted into common shares in
TouchBistro. A total of 2,542,662 common shares of TouchBistro was
paid to Allied Minds valued at $5.99 million at the time of the
transaction. As a result of the acquisition, Allied Minds'
ownership percentage was 1.52% at 31 December 2020. Allied Minds
does not have significant influence over the investee as it does
not hold 20% or more of the voting power of the investee as well as
it does not have any board representation. As such, the investment
does not meet the definition of an associate under IAS 28 Equity
Accounting ("IAS 28") and therefore, the common shares are
classified as an investment at fair value, under IFRS 9 Financial
Instruments ("IFRS 9"). At 31 December 2020, the fair value of
Allied Minds' investment in TouchBistro was subsequently measured
at $2.8 million.
Allocation Model Inputs
Allied Minds holds shares of preferred stock in Spin Memory,
Federated Wireless and Orbital sidekick and has significant
influence over financial and operating policies of the investee by
virtue of its stake in the companies and representation on the
entity's board of directors. Allied Minds hold a minority interest
in the ordinary share capital of TouchBistro, where significant
influence is not held. The preferred shares and investment note
above fall under the guidance of IFRS 9 and will be treated as a
financial asset held at fair value and all movements to the value
of Allied Minds' share of these assets will be recorded through the
Consolidated Statements of Comprehensive Income/(Loss). The
following presents the quantitative information about the
significant unobservable inputs used in the fair value measurement
of the Group's financial assets:
As of 31 December: 2020 2019
Volatility 38.8%-73.5% 26.7%-62.1%
Time to Liquidity (years) 1.50 - 3.27 0.5 - 3.27
Risk-Free Rate 0.10% - 0.2% 1.58% - 1.6%
IPO/M&A/Sale Probability 0%/ 100% / n/a 40%-60%/ 40%-60%/ n/a
Sensitivity Analysis
The following summarises the sensitivity from the assumptions
made by the Company in respect to the unobservable inputs used in
the fair value measurement of the Group's financial assets. The
sensitivities provided reflect reasonably possible changes to the
key assumptions:
As of 31 December: 2020 2019
$'000 $'000
Input Sensitivity
range Financial assets increase/(decrease)
Enterprise Value -2% (451) (819)
+2% 613 846
Volatility -10% 602 1,136
+10% (290) (1,133)
Time to Liquidity -6 months 445 886
+6 months (198) (915)
Risk-Free Rate
(1) -0.02%/0.01% 445 886
0.02% /0.02% (198) (915)
M&A vs. IPO Probability 100%/ 40% _ (865)
0%/ 60% _ 842
(1) Risk-free rate is a function of the time to liquidity input
assumption.
(12) Cash and Cash Equivalents
As of 31 December: 2020 2019
$'000 $'000
Bank balances 24,489 90,571
Total cash and cash equivalents 24,489 90,571
(13) Trade and Other Receivables
As of 31 December: 2020 2019
$'000 $'000
Trade receivables 394 60
Prepayments and other current assets 5,422 5,642
Total trade and other receivables 5,816 5,702
(14) Equity
On 8 November 2019, Allied Minds plc completed the sale of its
entire stake in its portfolio company HawkEye 360 to Advance for
cash consideration of $65.6 million. As a result, the Company
remeasured the investment to the fair value on the on the date of
the sale and derecognised its investment of $65.6 million. In
addition, Allied Minds made a distribution of $4.9 million to
participants under the terms of the Company's Phantom Plan.
On 5 December 2019, Allied Minds plc completed a court--approved
reduction of the Company's capital by way of: (i) the
capitalisation of the amount standing to the credit of the
Company's merger reserve by way of the issue and subsequent
cancellation of the Capital Reduction Shares; and (ii) the
cancellation of the amount standing to the credit of the Company's
share premium account, so as to create distributable reserves (the
"Capital Reduction"). The Capital Reduction created realised
profits sufficient to eliminate the accumulated losses of the
Company and establish positive distributable reserves of
approximately $191.4 million. The purpose of the reduction of
capital was to provide distributable reserves which enabled the
Company to make a special dividend payment of $39.7 million to
shareholders and provided the flexibility for future dividend
payments. Following the reduction of capital, the number of issued
shares and the rights attached to those shares remained
unchanged.
During 2020 and 2019, there were no options exercised under the
U.S. Stock Plan. Additionally, 624,862 (2019: 1,248,378) shares
were issued to existing and former employees of the Group during
the year as result of vesting of RSUs under the LTIP.
As of 31 December 2020, 11,551,496 ordinary shares were reserved
under the U.S. Stock Plan and 24,781,174 were reserved under the
LTIP , see note 6 for further discussion of the share-based payment
plans .
The table below explains the composition of share capital:
As of 31 December: 2020 2019
$'000 $'000
Equity
Share capital, $0.01 par value,
issued and fully paid 3,767 3,759
242,187,985 and 241,563,123,
respectively
Translation reserve 1,343 1,459
Accumulated profit 55,440 147,238
Equity attributable to owners
of the Company 60,550 152,456
Non-controlling interests (2,264) 115
Total equity 58,286 152,571
Holders of Ordinary Shares are entitled to vote, on all matters
submitted to shareholders for a vote. Each Ordinary Share is
entitled to one vote. Each ordinary share is entitled to receive
dividends when and if declared by the Company's Board of Directors.
The Company has not declared any dividends in the past. In February
2020, Allied Minds made a special cash dividend payment to
shareholders of $ 39.7 million as a result of the sale of Allied
Minds' share in HawkEye in the second half of 2019 .
Translation reserve comprises all foreign exchange differences
arising from the translation of the financial statements of foreign
operations.
(15) Changes in Non-Controlling Interest ("NCI")
For the two years ended 31 December 2020, the Group recognised
the following changes in common stock ownership in subsidiaries
resulting in changes to non-controlling interest:
-- On 10 January 2020, OcuTerra Therapeutics raised an
additional $375K in the second closing of its convertible note
financing.
-- On 4 February 2020, BridgeComm issued $2,000,000 in
convertible notes to Allied Minds, following the issuance of
$1,000,000 in convertible notes to Boeing HorizonX Ventures in
December 2019. In August 2020, as a result of achieving certain
development milestones under the JDA with Boeing, BridgeComm
secured the remaining $1.5 million of convertible debt from
Boeing.
The following summarises the changes in the non-controlling
ownership interest in subsidiaries by reportable segment:
Early stage Later stage Consolidated
$'000 $'000 $'000
Non-controlling interest as of 31 December 2018 18,181 303 18,484
Share of comprehensive loss (384) (697) (1,081)
Effect of change in Company's ownership interest (105) (89) (194)
Equity-settled share based payments 61 473 534
US Subsidiary distributions to shareholders (12,050) - (12,050)
Deconsolidation of subsidiaries 7 1,543 1,550
Dissolution of subsidiaries (7,128) - (7,128)
Non-controlling interest as of 31 December 2019 (1,418) 1,533 115
Share of comprehensive loss (2,024) (455) (2,479)
Effect of change in Company's ownership interest - (18) (18)
Equity-settled share based payments 1 117 118
Non-controlling interest as of 31 December 2020 (3,441) 1,177 (2,264)
(16) Preferred Shares
Certain of the Group's subsidiaries have outstanding preferred
shares which have been classified as a subsidiary preferred shares
in current liabilities in accordance with IFRS 9 as the
subsidiaries have a contractual obligation to deliver cash or other
assets to the holders under certain future liquidity events, and/or
a requirement to deliver an uncertain number of common shares upon
conversion. The preferred shares do not contain mandatory dividend
rights. The preferred shares are convertible into common stock of
the subsidiary at the option of the holder and mandatorily
convertible into common stock of the subsidiary upon a qualified
public offering at or above certain value and gross proceeds
specified in the agreements or upon the vote of the holders of a
majority of the subsidiary preferred shares. Under certain
scenarios the number of common stock shares receivable on
conversion will change. The Group has elected not to bifurcate the
variable conversion feature as a derivative liability, but account
for the entire instrument at fair value through the income
statement.
The preferred shares are entitled to a vote with holders of
common stock on an as converted basis. The holders of the preferred
shares are entitled to a liquidation preference amount in the event
of a liquidation or a deemed liquidation event of the respective
subsidiary. The Group recognises the subsidiary preferred shares
balance upon the receipt of cash financing, and records the change
in its fair value for the respective reporting period through
profit and loss. Preferred shares are not allocated shares of the
subsidiary losses.
The following summarises the subsidiary preferred shares
balance:
Fair value gain or loss under
As of 31 December: 2020 IFRS 9 Additions Disposals 2019
$'000 $'000 $'000 $'000 $'000
BridgeComm 6,497 1,480 - - 5,017
Total subsidiary preferred shares 6,497 1,480 - - 5,017
The redemption is conditional on occurrence of uncertain future
events beyond the control of the Group. The amount that would be
payable in case of such events is as follows:
2020 2019
As of 31 December: $'000 $'000
BridgeComm 6,500 5,020
Total liquidation preference 6,500 5,020
For the two years ended 31 December 2020, the Group recognised
the following changes in subsidiary preferred shares:
-- On 4 February 2020, BridgeComm issued $2,000,000 in
convertible notes to Allied Minds, following the issuance of
$1,000,000 in convertible notes to Boeing HorizonX Ventures in
December 2019. In August 2020, as a result of achieving certain
development milestones under the JDA with Boeing, BridgeComm
secured the remaining $1.5 million of convertible debt from
Boeing.
The fair value is derived using the option pricing model
("OPM"), the Probability-Weighted Expected Return Method ("PWERM")
or a hybrid of the two.
The key inputs into these valuation models include the equity
value of the subsidiary, the term of the instrument, risk free rate
and volatility.
The valuation methodologies utilised for determining the equity
value include the market approach, income approach or cost approach
or hybrid of these approaches. Other methodologies such as asset
based are also utilised where deemed appropriate. It is noted that
in the current year none of the equity values were determined using
the income approach.
Where there has been a third party funding round in the year
this has been used as the implied value of the portfolio company or
comparable guideline public companies or comparable transactions,
adjusted for indexation where this is deemed to be appropriate.
Whilst the Board considers the methodologies and assumptions
adopted in the valuation are supportable, reasonable and robust,
because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have
been used had a ready market for the investment existed and the
differences could be significant.
PWERM and OPM
The principal methods the Group applies for allocation of value
are the PWERM, the OPM as well as a hybrid of the two. These models
take assumptions such as the equity values, term of the
instruments, risk free rate and volatility to determine the fair
value of each share class.
The PWERM estimates the value of equity securities based on an
analysis of various discrete future outcomes, such as an IPO,
merger or sale, dissolution, or continued operation as a private
enterprise until a later exit date. The equity value today is based
on the probability-weighted present values of expected future
investment returns, considering each of the possible outcomes
available to the enterprise, as well as the rights of each security
class. The key judgement relates to probability weighting of the
scenarios.
The OPM treats common stock or derivatives thereof as call
options on the enterprise's value or overall equity value. The
value of a security is based on the optionality over and above the
value securities that are senior in the capital structure (e.g.
preferred stock), considering the dilutive effects of subordinate
securities. In the OPM, the exercise price is based on a comparison
with the overall equity value rather than per-share value.
Allocation Model Inputs
The following presents the quantitative information about the
significant unobservable inputs used in the fair value measurement
of the Group's subsidiary preferred shares liability:
As of 31 December: 2020 2019
Volatility 53.6% n/a*
Time to Liquidity (years) 2.00 1.64
Risk-Free Rate 0.10% n/a*
Probability M&A 100% 15%-85%
*In 2019, The Group valued BridgeComm using PWERM as opposed to
OPM used in the current year and as such not applicable.
Sensitivity Analysis
The following summarises the sensitivity from the assumptions
made by the Company in respect to the unobservable inputs used in
the fair value measurement of the Group's subsidiary preferred
shares liability. Option Pricing Model and Probability Weighted
Expected Return Method Inputs for Investments Held at Fair Value at
31 December 2020 and 2019 respectively:
OPM Measurement Date
As of 31 December: 2020
$'000
Input Sensitivity
range
Enterprise Value -2% (112)
+2% 114
Volatility -10% 266
+10% (264)
Time to Liquidity -6 months 117
+6 months (112)
Risk-Free Rate
(1) -0.02/ -n/a 117
0.02/ n/a (112)
PWERM Measurement Date
As of 31 December: 2019
$'000
Input Sensitivity
range
Enterprise Value -2% (38)
2% 76
Discount rate -5% 378
5% (304)
Time to Liquidity -2.0 months 304
+2.0 months (228)
(1) Risk-free rate is a function of the time to liquidity input
assumption.
The subsidiary preferred shares are measured at fair value
through profit/loss (FVTPL) according to IFRS 9 at initial
recognition and upon subsequent measurement. Hence, any gains and
losses on the preferred shares liability are recognised in profit
or loss, unless they relate to changes in the entity's own credit
risk for financial liability designated as at fair value through
profit or loss. The effect of changes in the entity's own credit
risk in the fair value of the financial liabilities are presented
in other comprehensive income. There were no adjustments considered
for movement in credit risk as this is not applicable within the
specific valuation frameworks utilized for the fair values of the
Group's preferred share liability. The subsidiary preferred shares
values and movement in credit risk, if applicable, are being
constantly monitored as new information becomes available. For the
year ended 31 December 2020, the change in fair value of the
subsidiary preferred shares is recorded in Finance cost, net in the
consolidated statement of comprehensive loss.
(17) Trade and Other Payables
As of 31 December: 2020 2019
$'000 $'000
Trade payables 319 1,195
Accrued expenses 1,457 3,100
Other current liabilities 325 390
Trade and other payables,
current 2,101 4,685
(18) Loans
As of 31 December: 2020 2019
$'000 $'000
Current liabilities
- Loans:
Unsecured loans 2,965 -
PPP loans 184 -
Non- Current liabilities
- Loans:
Unsecured loans 1,440 1,965
Total loans 4,589 1,965
The terms and conditions of outstanding loans are as
follows:
2020 2019
$'000 $'000
Currency Nominal Year Face Carrying Face Carrying
interest of maturity value amount value amount
As of 31 December: rate
Unsecured loan(1) USD 5.0% 2019-21 2,500 2,862 1,000 1,000
Unsecured loan(2) USD 12.0% 2020-21 100 103
Unsecured loan(3) USD 8.0% 2019-22 1,325 1,440 950 965
Total interest
bearing liabilities 3,825 4,589 1,950 1,965
BridgeComm convertible note (1)
On 16 December 2019, BridgeComm secured $1.0 million of funding
through the issuance of a convertible bridge note to Boeing
HorizonX Ventures, LLC ("Boeing"). All principal and accrued
interest shall be due and payable on 31 January 2021. In August
2020, as a result of achieving certain development milestones under
the JDA with Boeing, BridgeComm secured the remaining $1.5 million
of convertible debt from Boeing. The $2.5 million promissory note
was issued at a 5.0% interest rate that will be compounded monthly
and computed on the basis of a year of 365 days for the actual
number of days elapsed and shall be paid on the maturity date. The
entire instrument and the offsetting discount will be measured at
fair value through profit or loss as the conversion feature fails
the fixed for fixed equity classification. At 31 December 2020, the
entire instrument was adjusted by a fair market change of $0.3
million.
OcuTerra Therapeutics promissory note (2)
On 23 September 2020, OcuTerra Therapeutics secured $0.1 million
of funding through the issuance of a promissory note to multiple
investors at annual interest rate of 12.0% payable within one year
from the date of issuance. The note was issued at an interest rate
that will accrue on the unpaid Principal Amount at the rate of
twelve (12%) per annum computed on the basis of a 365-day year.
OcuTerra Therapeutics convertible note (3)
On 5 November 2019, OcuTerra Therapeutics secured $0.95 million
of funding through the issuance of a convertible bridge note to
multiple investors at annual interest rate of 8.0%. On 10 January
2020, OcuTerra Therapeutics raised an additional $0.4 million in
the second closing of its convertible note financing. The note was
issued at an interest rate that will accrue on the unpaid Principal
Amount at the rate of eight (8%) per annum, payable at the maturity
date (36 month anniversary of the closing date). All accrued
interest shall be computed on the basis of a 360-day year
consisting of twelve 30-day months, and shall be payable on the
date the outstanding principal amount shall become due and payable,
whether on the Maturity Date or by acceleration or otherwise, or
upon conversion. The entire instrument and the offsetting discount
will be measured at fair value through profit or loss as the
conversion feature fails the fixed for fixed equity
classification.
(19) Leases
Office and laboratory space is rented under non-cancellable
operating leases. These lease agreements contain various clauses
for renewal at the Group's option and, in certain cases, escalation
clauses typically linked to rates of inflation.
Right of use asset
2020 2019
$000s $000s
Balance at 1 January 1,016 4,205
Additions - 6,897
Derecognition of right-of-use assets* - (1,693)
Depreciation (365) (1,216)
Deconsolidation - (7,177)
Balance at 31 December 651 1,016
* Derecognition of the right-of-use assets during 2019 is as a
result of entering into a finance sub-lease.
Lease liability
2020 2019
$000s $000s
Balance at 1 January 2,854 4,490
Additions - 6,898
Cash paid (1,150) (1,540)
Interest expense 126 209
Deconsolidation - (7,203)
Balance at 31 December 1,830 2,854
The following details the short term and long-term portion of
the lease liability as at 31 December 2020:
Total lease liability
$000s
Lease liability released in < 1 year 1,024
Lease liability released in over 1 year 806
Total Lease Liability 1,830
During 2019, the Group relocated its corporate headquarters and
as a result it sub-leased the office space that has been presented
as part of a right-of-use asset. As the sub-lease is for all of the
remaining useful economic life of the right-of-use asset, the
sub-lease is classified as a finance lease.
The following table sets out a maturity analysis of lease
receivables, showing the undiscounted lease payments to be received
after the reporting date. Under IAS 17, the Group did not have any
finance leases as a lessor.
In thousands of $ 31 December 2020
Less than 1 year 740
Between 1 and 5 years 438
More than 5 years -
Total undiscounted lease receivable 1,178
Unearned finance income 47
Net investment in the lease 1,131
Additions in the period relate to site leases that were entered
into by Allied Minds' consolidated subsidiaries during 2019.
Amounts were arrived at using the contractual minimal lease
payments, present valued using the applicable incremental borrowing
rate of 5.50%.
Amounts recognised in profit or loss
In thousands of $ 31 December 2020
2020 - Leases under IFRS 16
Interest on lease liabilities 126
Income from sub-leasing right-of-use assets presented in 'interest income' 78
(20) Financial Instruments and Related Disclosures
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy:
As of 31 December: 2020
$'000
Carrying Fair value
Level Level Level
Amount 1 2 3 Total
Financial assets designated
as fair value through
profit or loss
Investments at fair
value 41,588 - - 41,588 41,588
Convertible note receivable 1,500 - 1,500 - 1,500
Loans and receivables
Cash and cash equivalents 24,489
Trade and other receivables 5,816
Security and other
deposits 1,360
Total 74,753 - 1,500 41,588 43,088
Financial liabilities
designated as fair value
through profit or loss
Convertible notes 4,590 - 4,590 - 4,590
Subsidiary preferred
shares 6,497 - - 6,497 6,497
Financial liabilities
measured at amortised
cost
Trade and other payables 2,101
Lease liability 1,830
Total 15,018 - 4,590 6,497 11,087
As of 31 December: 2019
$'000
Carrying Fair value
Level Level Level
Amount 1 2 3 Total
Financial assets designated
as fair value through
profit or loss
Investments at fair
value 61,895 - - 61,895 61,895
Convertible note
receivable(1) 750 - 750 - 750
Loans and receivables
Cash and cash equivalents 90,571
Trade and other receivables 5,702
Security and other
deposits 2,088
Total 161,006 - 750 61,895 62,645
Financial liabilities
designated as fair
value through profit
or loss
Convertible notes 1,965 - 1,965 - 1,965
Subsidiary preferred
shares 5,017 - - 5,017 5,017
Financial liabilities
measured at amortised
cost
Trade and other payables 4,685
Lease liability 2,854
Total 14,521 - 1,965 5,017 6,982
(1) On 5 August 2020, TableUp has been acquired by TouchBistro,
Inc. ("TouchBistro"). As a result of the acquisition, the entire
instrument was converted into common shares during the year to 31
December 2020.
Total other financials assets were as follows:
For the year ended 31 December: 2020 2019
$'000 $'000
------ ------
Deposits 81 122
Other long term assets 500 1,135
Total 581 1,257
------ ------
Convertible note receivable 1500 750
Other current assets 779 831
Total 2,279 1,581
2,860 2,838
The fair value of financial instruments that are not traded is
determined by using valuation techniques that maximise the use of
observable market data where it is available and rely as little as
possible on entity specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument
is included in Level 2. Where the inputs for determining the fair
value of financial instruments are not based on observable market
data, the instrument is included in Level 3. For assumptions used
in the fair value measurement of the Group's convertible notes
designated as Level 2, see note 18.
For assumptions used in the fair value measurement of the
Group's subsidiary preferred shares liability designated as Level
3, see note 16. For assumptions used in the fair value measurement
of Investments at fair value designated as Level 3, see note
11.
Cash and cash equivalents, trade receivables, and trade payables
are carried at cost, which approximates fair value because of their
short-term nature.
(21) Capital and Financial Risk Management
The Group's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business. Management monitors the level
of capital deployed and available for deployment in subsidiary
projects. The Board of Directors seeks to maintain a balance
between the higher returns that might be possible with higher
levels of deployed capital and the advantages and security afforded
by a sound capital position.
The Group's executive management and Board of Directors have
overall responsibility for establishment and oversight of the
Group's risk management framework. The Group is exposed to certain
risks through its normal course of operations. The Group's main
objective in using financial instruments is to promote the
commercialisation of intellectual property through the raising and
investing of funds for this purpose. The Group's policies in
calculating the nature, amount and timing of funding are determined
by planned future investment activity. Due to the nature of
activities and with the aim to maintain the investors' funds secure
and protected, the Group's policy is to hold any excess funds in
highly liquid and readily available financial instruments and
reduce the exposure to other financial risks.
The Group has exposure to the following risks arising from
financial instruments:
Credit Risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. Financial instruments that potentially
subject the Group to concentrations of credit risk consist
principally of cash and cash equivalents, investments held at fair
value, and trade and other receivables.
The Group held following balances:
As of 31 December: 2020 2019
$'000 $'000
Cash and cash equivalents 24,489 90,571
Investments held at
fair value 41,588 61,895
Trade and other receivables 5,816 5,702
71,893 158,168
=======
The Group maintains money market funds, certificates of
deposits, and fixed income securities with financial institutions,
which the Group believes are of high credit quality. Risk control
assesses the credit quality of the customer, taking into account
its financial position, past experience and other factors.
Individual risk limits are set based on ratings in accordance with
limits set by the Board. The utilisation of credit limits is
regularly monitored. The credit quality of financial assets that
are neither past due nor impaired can be assessed by reference to
credit ratings (if available) or to historical information about
counterparty default rates.
Group policy is to maintain its funds in highly liquid deposit
accounts with reputable financial institutions.
The Group's investments in preferred stock are accounted for at
fair value through profit or loss (FVTPL) in accordance with IFRS
9. This measurement is appropriate as these financial assets are
not held with the objective to collect contractual cash flows which
are solely payments of principal and interest (SPPI) on the
principal amount outstanding . The entity is primarily focused on
fair value information and uses that information to assess the
asset's performance and to make decisions. The subsidiary preferred
shares values and movement in credit risk are being constantly
monitored as new information becomes available.
The aging of trade receivables that were not impaired was as
follows:
As of 31 December: 2020 2019
$'000 $'000
Neither past due nor
impaired 135 60
Past due 30-90 days 259 _
Past due over 90 days _ _
Reserve for bad debt _ _
394 60
The Group has a concentration of credit risk in respect of it
financial asset held at fair value through the profit or loss which
relate to preferred share liabilities of $38.8 million. Of this
balance $28.5 million relates specifically to the preferred shares
held in Federate Wireless. These investments are reviewed in detail
in note 11. The Group assesses the credit quality of customers,
taking into account their current financial position. An analysis
of the credit quality of trade receivables that are neither past
due nor impaired is as follows:
As of 31 December: 2020 2019
$'000 $'000
Customers with less than
three years of 394 60
trading history with the
Group
394 60
Liquidity Risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Group's approach to managing liquidity is to
ensure, as far as possible, that it will have sufficient liquidity
to meet its liabilities when they are due, under both normal and
stressed conditions, without incurring unacceptable losses or
risking damage to the Group's reputation.
The Group seeks to manage liquidity risk, ensuring that
sufficient liquidity is available to meet foreseeable
requirements.
The following are the remaining contractual maturities of
financial liabilities at the reporting date. The amounts are gross
and undiscounted, and include estimated interest payments and
exclude the impact of netting agreements. The current portion of
the carrying amount of lease obligations is included in trade and
other payables.
As of 31 December Contractual cash flows
2020:
More
Carrying Less than than
$'000 amount Total 1 year 2-5 years 5 years
Trade and other
payables 2,101 2,101 2,101 - -
Subsidiary notes
payable 4,590 4,302 3,150 1,440 -
Subsidiary preferred
shares 6,497 6,497 6,497 - -
Lease liability 1,830 1,830 1,830 - -
15,018 14,730 13,578 1,440 -
As of 31 December Contractual cash flows
2019:
More
Carrying Less than than
$'000 amount Total 1 year 2-5 years 5 years
Trade and other
payables 4,685 4,685 4,685 - -
Subsidiary notes
payable 1,965 1,965 1,965 - -
Subsidiary preferred
shares 5,017 5,017 5,017 - -
Lease liability 2,854 2,854 2,854 - -
14,521 14,521 14,521 - -
It is not expected that the cash flows included in the maturity
analysis could occur significantly earlier, or at significantly
different amounts.
Market Risk
Market risk is the risk that changes in market prices - such as
foreign exchange rates, interest rates and equity prices - will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising the return. The Group maintains the exposure to
market risk from such financial instruments to insignificant
levels. The Group exposure to changes in interest rates is
determined to be insignificant.
Capital Risk Management
The Group is funded by equity finance and long term borrowings.
Total capital is calculated as 'total equity' as shown in the
consolidated statement of financial position.
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the capital
structure, the Group may issue new shares or borrow new debt. The
Group has some external debt in the form of preferred shares and no
material externally imposed capital requirements. The Group's share
capital is set out in note 16.
(22) Related Parties
Transactions with Key Management Personnel
Key Management Personnel Compensation
Key management personnel compensation received comprised the
following:
For the year ended 31 December: 2020 2019
$'000 $'000
Short-term employee benefits 1,022 608
Share-based payments 105 -
Total 1,127 608
Short-term employee benefits of the Group's key management
personnel include salaries and bonuses, health care and other
non-cash benefits.
Share-based payments include the value of awards granted under
the LTIP during the year. Share-based payments under the LTIP are
subject to vesting terms over future periods. See further details
of the two plans in note 6.
Bonuses to key management for the year of $ 375,000 were
outstanding at 31 December 2020 (2019: $522,600) and were paid in
January of 2021.
Key Management Personnel Transactions
Directors' remuneration for the year comprised the
following:
For the year ended 31 December: 2020 2019
$'000 $'000
Executive Directors' fees 1,127 3,086
Non-executive Directors' fees 359 254
Total 1,486 3,340
Executive management and Directors of the Company control 0.6%
of the voting shares of the Company as of 31 December 2020 (2019:
0.8 %).
In October 2020, Bruce Failing (Chair of Remuneration Committee)
purchased 80,000 shares of the company.
The Group has not engaged in any other transactions with key
management personnel or other related parties.
(23) Taxation
Amounts recognised in profit or loss
No current income tax expense was recorded for the years ended
31 December 2020 and 2019 due to accumulated losses.
For the year ended 31 December: 2020 2019
$'000 $'000
Net income/(loss) (53,025) 50,254
Income taxes - -
Net income/(loss) before taxes (53,025) 50,254
Reconciliation of Effective Tax Rate
The Group is primarily subject to taxation in the US, therefore
the reconciliation of the effective tax rate has been prepared
using the US statutory tax rate. A reconciliation of the US
statutory rate to the effective tax rate is as follows:
2020 2019
% %
US federal statutory rate 21.0 21.0
Effect of state tax rate in US 5.3 5.1
Research credits 0.7 (2.5)
Share-based payment remeasurement (0.4) (1.2)
Permanent differences from consolidation 1.2 (38.3)
Other permanent differences (0.7) 0.1
Current year income/(losses) for
which no deferred
tax asset/(liability) is recognised (27.1) 15.8
- -
Factors that may affect future tax expense
The Group is primarily subject to taxation in the US and UK.
Additionally, the Group is exposed to state taxation in various
jurisdictions throughout the US. Changes in corporate tax rates can
change both the current tax expense (benefit) as well as the
deferred tax expense (benefit). A UK corporation rate of 19%
(effective 1 April 2020) was substantively enacted on 17 March
2020, reversing the previously enacted reduction in the rate from
19% to 17%. This will increase the company's future current tax
charge accordingly.
The Tax Act reduces the U.S. federal corporate tax rate from 35%
to 21%. The change in our future effective tax rate is not
anticipated to have an effect on our tax until all of our U.S.
federal net operating losses and credits have been utilised.
Unrecognised Deferred Tax Assets
Deferred tax assets have not been recognised in respect of the
following items, due to history of operating losses and no
convincing evidence that future taxable profit will be available
against which the Group can use the benefits therefrom, as well as
due to potential permanent restrictions under Internal Revenue Code
Section 382 rules:
As of 31 December: 2020 2019
$'000 $'000
Tax loss carry forward 79,285 78,472
Research credits 7,022 6,739
Temporary differences 15,494 5,931
Deferred tax assets 101,801 91,142
Other temporary differences - -
Deferred tax liabilities - -
Deferred tax assets, net, not recognised 101,801 91,142
Deferred tax is measured at the rates that are expected to apply
in the period when the temporary differences are expected to
reverse, based on tax rates and laws that have been enacted or
substantially enacted by the statement of financial position
date.
As of 31 December 2020 the Company had United States federal net
operating losses carry forwards ("NOLs") of approximately $292.7
million (2019: $288.4 million) available to offset future taxable
income, if any. These carryforwards start to expire in 2024 and are
subject to review and possible adjustment by the Internal Revenue
Service. The Company may be subject to limitations under Section
382 of the Internal Revenue Code as a result of changes in
ownership. The Company's preliminary analysis on the impact from
Section 382 limitations suggests that there is unlikely to be a
material restriction on NOLs. A detailed exercise is ongoing. Upon
the completion of the study, there may or may not be limitations on
the Company's ability to utilise its current NOLs against future
profits, although these are not expected to be material.
(24) Subsequent Events
The Company has evaluated subsequent events through 29 March
2021, which is the date the consolidated financial information is
available to be issued.
On 11 January 2021, OcuTerra Therapeutics, Inc. issued $100K in
the form of a promissory note to Maxim Partners LLC.
(25) Cautionary Statement
This document contains certain forward-looking statements
relating to Allied Minds plc (the "Group"). The Group considers any
statements that are not historical facts as "forward-looking
statements". They relate to events and trends that are subject to
risk and uncertainty that may cause actual results and the
financial performance of the Company to differ materially from
those contained in any forward-looking statement. These statements
are made by the Directors in good faith based on information
available to them and such statements should be treated with
caution due to the inherent uncertainties, including both economic
and business risk factors, underlying any such forward-looking
information.
Company Information
Company Registration Number 08998697 Broker
Numis Securities Limited
Registered Office The London Stock Exchange Building
Beaufort House 10 Paternoster Square
51 New North Road London EC4M 7LT
Exeter EX4 4EP United Kingdom
United Kingdom TEL: +44 207 260 1000
Website Registrar
www.alliedminds.com Link Group
The Registry
Board of Directors Unit 10
Harry Rein Central Square
(Non-Executive Chairman) 29 Wellington Street
Leeds
Bruce Failing LS1 4DL
(Senior Independent Director) TEL UK: 0871 664 0300
TEL Overseas: +44 208 639 3399
Mark Lerdal
(Independent Non-Executive Director) Solicitors
DLA Piper UK LLP
Company Secretary 160 Aldersgate Street
Nina Thayer London EC1A 4HT
United Kingdom
TEL: +44 207 349 0296
Independent Auditor
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
TEL: 020 7486 5888
Media Relations
Instinctif Partners
65 Gresham Street,
London EC2V 7NQ
United Kingdom
TEL: +44 20 7457 2020
LEI: 213800YB4G7YN21NLL72
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FFFELVDIAFIL
(END) Dow Jones Newswires
March 30, 2021 02:00 ET (06:00 GMT)
Allied Minds (LSE:ALM)
Historical Stock Chart
From Apr 2024 to May 2024
Allied Minds (LSE:ALM)
Historical Stock Chart
From May 2023 to May 2024