TIDMAMP
RNS Number : 1359J
Amphion Innovations PLC
07 September 2016
Amphion Innovations plc
Interim Results for the six months to 30 June 2016
London and New York, 7 September 2016 - Amphion Innovations plc
(LSE: AMP) ("Amphion" or the "Company"), the developer of medical
and technology businesses, today announces its unaudited interim
results for the six months to 30 June 2016 (the "Period").
Period Highlights:
-- Net Asset Value per ordinary share in the Company ("Ordinary
Shares") up to 4.3p (US $0.057 cents)* at Period-end from 3.8p (US
$0.055 cents) as at year end. The success of the AIM IPO of
Amphion's Partner Company, Motif Bio plc ("Motif"), and the
subsequent increase in the value of Amphion's shareholding in
Motif, has been the driver behind the increase in the Company's Net
Asset Value over the last 15 months.
-- Total liabilities remained approximately unchanged over the period at US $29.1 million.
-- Motif began dosing patients in its iclaprim Phase III trials in March.
-- Satisfactory settlement with Berkeley Research Group LLC
("BRG") for US $1.6 million, of which US $0.6 million remains
payable by 31 December 2016.
Post-Period Highlights:
-- Concluded a new Memorandum of Understanding to merge m2m with another company.
-- DataTern's Markman Hearing in MicroStrategy Case scheduled
for September 26 in the U.S. District Court of Massachusetts.
-- Entered into additional draw-downs of loan facility of US
$750,000 and US $2,350,000, with US $6.2 million currently drawn
down.
* Exchange rate at 30 June 2016 - US $1.32 per GBP
Richard Morgan, CEO of Amphion Innovations plc, commented:
"Since completing the IPO on AIM in April last year, Motif has
moved quickly to get two trials underway and announced the dosing
of the first patient in March in its pivotal Phase III trial. Motif
recently announced that patient enrollment to date is ahead of
projections. Motif has a very bright future and is now on its way
to potentially becoming a significant player in the antibiotic
market, which has a growing need for novel therapies.
"We are committed to working closely with Motif to help it
achieve its goals. In addition, we now have the opportunity to move
forward a couple of our other Partner Companies. We look forward to
the future with confidence and to being able to report further
progress with Motif, DataTern, m2m, and other Partner Companies in
due course."
Financial Results and Net Asset Value
Revenue for the six-month period ended 30 June 2016 was US
$60,000 compared with US $267,601 recorded in the first half of
2015. We have continued to control costs and the Board has
continued to work with reduced levels of current cash compensation.
Total administrative expenses were on par with last year and, as a
result, the operating loss for the Period was US $1,505,488
compared with US $1,254,554 as reported in the same period of last
year.
The Pound fell against the Dollar in late June, following the
Leave vote in the Brexit referendum, and over the six month period
the exchange rate fell approximately 10%. However, because the
Company has assets and liabilities in both US Dollars and Pounds
Sterling, there was only a small, but marginally positive, impact
on the net assets of the Company. Total assets in US Dollars were
US $40,334,276 and the Net Asset Value per Share was 5.7 cents (up
3.6%) versus 5.5 cents at the end of last year. In Pounds Sterling,
NAV per Share was 4.3 pence at the end of the Period, up
approximately 15% versus the year end figure of 3.8 pence.
On 5 January 2016, the Company announced that it agreed, in
principle, to replace the US $3,308,600 of Notes payable to R.
James Macaleer, the former Chairman of the Company, and the US
$3,000,000 of Notes payable to the RJM Amphion Trust, a trust set
up for the benefit of Mr. Macaleer's children, with the issue of
new promissory notes that are now due to mature on 31 December 2016
("New Promissory Notes"). The rate of interest on the New
Promissory Notes will remain unchanged at 7%. The New Promissory
Notes also contain certain provisions for early repayment. However,
in no case will any payment be made on the New Promissory Notes
until the amounts outstanding under the Company's existing loan
facility are fully repaid. Final payment of the loan facility is
now scheduled for 1 December 2017.
In addition, on 2 March 2016 the Company announced that at a
meeting on 26 February 2016, the holders of GBP5,707,738
Convertible Promissory Notes previously due on 31 December 2015
(the "Notes", and the "Note Holders") unanimously agreed to amend
the terms of the Notes, which will now be redeemed on 31 December
2017 (subject to certain early partial redemption options) unless
previously converted. The Notes will be convertible into fully paid
Ordinary Shares at 8 pence per Ordinary Share and will pay interest
at 7% if the Company elects to pay in Ordinary Shares, or will pay
interest at 5% if the Company elects to pay in cash or additional
Notes, until conversion or redemption. In addition, for every GBP1
of Note held, the respective Noteholder will be issued two
warrants. Each warrant granted will entitle the holder to subscribe
for Ordinary Shares at 10 pence per Ordinary Share.
On 7 April 2016, the Company announced that it had reached a
settlement agreement with BRG for US $1,575,000 million. As
previously reported, in December 2012 BRG, an expert consultant
engaged by the Company's wholly owned subsidiary DataTern, filed
for arbitration claiming US $1,142,478 million was owed to them.
DataTern opposed the arbitration and vigorously contested the
amount owed. In January 2015, the arbitrator found in favour of BRG
and awarded them a total amount of US$2,090,865 million for the
balance due and legal costs. As a consequence of this settlement
agreement, the liability has been transferred from DataTern to
Amphion. Settling the BRG obligation and transferring the liability
to Amphion will allow DataTern to obtain non-recourse litigation
financing so that it may continue its patent litigation programme.
The Company had recorded US $2,090,865 as a liability in its
Consolidated Financial Statements for the year ended 31 December
2015. US $100,000 was paid upon signing the settlement agreement, a
further payment of US $400,000 was made on 30 April 2016, followed
by US $100,000 on 30 June 2016. An additional US $400,000 was paid
in early July, leaving US $575,000 due on 31 December 2016. The
Company has continued to record the larger original amount, less
payments made, on the books, so that the obligation showing in the
balance sheet at the end of June was US $1,490,865.
During the course of the Period, the Company has made additional
tranches of draw-downs on its loan facility with an institutional
lender, as announced originally on 5 June 2014 (the "Loan
Facility"). As at the period-end, the Company had drawn-down
approximately US $4.1 million, following which a further two
tranches have been drawn-down in addition to partial repayment of
the outstanding amount, resulting in the Company having a current
balance under the Loan Facility of US $6.2 million. Of this amount,
US $3.0 million plus interest is convertible into the ordinary
shares of Amphion at 6 pence and the remaining amount, plus
interest, is convertible at 8 pence. Under the terms of the Loan
Facility, the interest rate will be 10% with final repayment due on
1 December 2017. The Loan Facility is secured by the pledge by the
Company of 6.7 million ordinary shares of Kromek Group plc and 28.0
million ordinary shares of Motif.
Amphion's holding of intellectual property assets is valued at
amortised cost of US $197,474. In addition to the initial purchase
of these IP assets from our Partner Company FireStar Software,
Amphion has made additional substantial investment in these assets.
That investment has been expensed as incurred and the value of
those assets continues to be carried only at amortised historical
cost. The Directors believe that the realisable value of the
intellectual property assets held by DataTern is substantially in
excess of the carrying value and the incremental investments being
made in the pursuit of infringers of the IP will generate a
significant profit. We believe that if we are successful in
concluding licensing agreements with the various infringing parties
at levels that meet our expectations, the Company's NAV per
Ordinary Share would be significantly higher.
Motif Bio plc
Following Motif's AIM IPO on 2 April 2015, it raised an
additional GBP22 million from institutional investors in July 2015,
at which time the FDA designated iclaprim a Qualified Infectious
Diseases Product ("QIDP") for hospital acquired bacterial pneumonia
("HABP") and for acute bacterial skin and skin structure infections
("ABSSSI"). With QIDP designation, iclaprim is now eligible for a
total of ten years of market exclusivity from the date of
approval.
Iclaprim has a novel mechanism of action and enjoys a number of
important clinical and commercial attributes, such as a low
propensity to develop resistance, which has been demonstrated in
vitro. Iclaprim was originally developed by Hoffman-La Roche Inc.
and completed comprehensive development in 2008, including two
Phase III trials with over 900 patients, half of whom were treated
with this antibiotic. Although the FDA declined to approve the drug
at the time, despite having met the original goals agreed with the
agency, the FDA confirmed that they were satisfied with the safety
profile of iclaprim and this was confirmed in Motif's April 2015
meeting with the agency.
On 2 March 2016, Motif announced that the first person to enter
the new Phase III trial had been screened and dosed and Motif has
recently announced that the patient enrollment to date is ahead of
projections. The trial was originally expected to take about 18
months and, in light of the extensive development history and the
improvements in the trial design, Motif believes the drug will meet
the new endpoints. Subject to the necessary regulatory approvals,
Motif expects to begin marketing the drug in 2018. Motif announced
its filing for its intention to pursue a US public offering on 13
July 2016 for a listing of American depositary shares on the NASDAQ
Global Select Market. However, as a result of market conditions, it
has deferred pricing of its proposed public offering, but intends
to continue to engage with investors with a view to pursue the
listing in the near future. The Directors of Amphion believe that
the successful listing of ADSs in Motif on NASDAQ should, in due
course, give Motif access to a broader base of investors and a
deeper pool of development capital.
Motif's share price rose approximately 21% over the Period to
51.75 pence as at 30 June 2016, but remained below the high of
68.75 pence reached at the end of June 2015. Amphion holds
approximately 43 million shares of Motif Bio plc on a fully diluted
basis, of which approximately 28.0 million are pledged in relation
to the Loan Facility.
DataTern and the Intellectual Property Licensing Programme
DataTern Inc. ("DataTern"), a wholly owned subsidiary of the
Company, announced in September 2015 that it received a favourable
ruling by the U.S. District Court in Massachusetts (the "Court"),
which denied two motions for summary judgment filed by
MicroStrategy Inc. ("MicroStrategy") seeking dismissal of
DataTern's claims on the grounds of validity and infringement. In
May 2015, there was a hearing on the two motions: one motion argued
that DataTern's '502 patent is invalid under section 101 of the
United States Patent Act, and the second argued that MicroStrategy
did not infringe the '502 patent.
The Court found that the '502 patent solved a specific problem
in computing using an inventive concept and concluded that the
invention was eligible for patent protection under the U.S. Supreme
Court's most recent precedent. On the second motion, concerning the
issue of infringement, the Court denied MicroStrategy's motion
seeking a determination that it did not infringe because its
Business Platform did not use an "object model", leaving the door
open to revisit related issues in the future.
With these favourable results, the MicroStrategy case has
continued. A review of the MicroStrategy source code is expected to
take place in September 2016 and a Markman Hearing has been
scheduled for the end of the same month. Once the Markman Ruling is
received, a trial schedule will be set with the prospect that the
trial could be completed before the end of 2017.
Given the favourable ruling DataTern received from the Federal
Circuit Court of Appeals in its appeal in the MicroStrategy case in
December 2014 (which the Company's legal advisors considered to be
clearly favourable), DataTern believes that they have a strong
position entering the Markman Hearing.
MicroStrategy sells business intelligence and analytics software
platforms used by other defendants. There are seven defendants in
the MicroStrategy case.
DataTern's legal team, supported by the Company's extensive team
of technical and patent experts, continues to believe in the
strength of its intellectual property. Both of DataTern's key
patents have completed a comprehensive re-examination by the United
States Patent and Trademark Office ("USPTO") and successfully
emerged both fully validated and with additional claims added. It
remains the considered opinion of the Company's team that the two
patents are both valid and being infringed by a wide range of
companies that are practicing this critical art. The Board believes
that a Claim Construction ruling (Markman Ruling), which is fully
reflective of its interpretation of the claims of the patents,
would establish significant infringement by a large number of
companies and it believes that DataTern should potentially be able
to generate a significant amount of revenue from this asset over
the next few years.
Under the revenue sharing agreement with DataTern, Amphion's
Partner Company, FireStar Software Inc. (where the technology and
patents were originally developed), would share directly in the
revenue stream.
Building Value in the Partner Companies
Since flotation, our business model has been to start and build
companies with high value potential based on innovative and
proprietary, but fundamentally proven, technology. Our continued
ability to select promising IP and to develop the IP portfolios in
each of our Partner Companies is a critical success factor, and is
getting steadily stronger as we deepen our knowledge and experience
in this area. This knowledge underpins Amphion's investment in each
Partner Company at the outset and as it develops. However, our
primary goal in every company is the development of a successful
business model and operating capabilities that can utilise the
technology to develop and commercialise innovative products,
generate revenue, and make profits. Following the successful IPO
for Motif on AIM in April 2015, we have the opportunity to advance
m2m and to start to consider how best to grow the Company in the
future.
m2m is poised to make good progress. We are pleased to be able
to announce that we have renewed the Memorandum of Understanding
first announced in early November 2015. Those plans were adversely
affected by the steep fall in the biotech market but we have
continued to explore this opportunity and with a more stable
biotech market in recent months we have once again established a
basis to proceed with the proposed merger with an undisclosed
pioneer and leader in advanced pulmonary imaging technology ("the
Private Company"). Conditional upon the fulfillment of certain
terms and following the merger, Amphion expects to own a
significant stake in the combined merged entity. m2m is a US-based
company focused on developing a range of preclinical and clinical
imaging system accessories for Magnetic Resonance Imaging ("MRI")
systems. The Private Company owns an advanced pulmonary imaging
technology platform which is used to more accurately diagnose and
monitor major lung diseases, including COPD, asthma, and cystic
fibrosis. The combined company will have an array of products that
will be sold as add-on components to the substantial installed base
of MRI machines around the world. MRI is a medical imaging modality
that is being increasingly used in pre-clinical investigations as
well as for clinical diagnostics. Lung Disease is a major global
public-health issue affecting over 40 million people in the United
States and costs the United States US $150 billion annually.
We continue to believe that the technology platform of Kromek
Group plc ("Kromek") has significant potential. With the
acquisition of eV Products in 2013, Kromek gained one of the
leading cadmium zinc telluride ("CZT") production capabilities in
the world. As the cost of producing this material becomes
competitive with scintillator technology, the opportunity exists
for a lasting shift to CZT-based detector systems, bringing the
benefits of multispectral imaging to CT systems and nuclear
medicine, for example in SPECT systems. During its last fiscal year
to April 2016, Kromek announced a number of orders from the Defense
Advanced Research Projects Agency ("DARPA"), an agency of the U.S.
Department of Defense, and from other existing customers to be
recognised over the lifetime of the orders. As a result, Kromek is
entering its new fiscal year with a substantial backlog, and the
recently announced orders support our view that, in time, the
technology should be widely adopted for use across all of its
target markets, including medical imaging systems. Following the
institutional placing last year, Amphion's shareholding in Kromek
decreased to approximately 5.27%. While our policy is to continue
to hold as many shares as long as possible, we have recently
undertaken a process to dispose a certain proportion of our holding
in order to support the Loan Facility we are using to finance the
other projects in development. Our holding in Kromek as at the date
of this announcement is approximately 6.7 million shares, all of
which are pledged in relation to the Loan Facility.
In April 2014, the case Axcess brought against Baker & Botts
LLP, the law firm, went to the jury which returned a verdict in
favour of Axcess of US $40.5 million. The judge then overruled this
verdict. Axcess' appeal to the Texas Appeals Court for a new trial
was denied and they are now in the process of pursuing an appeal to
the Texas Supreme Court. Axcess is also appealing the decision by
the US Patent and Trademark Office to invalidate the patent that is
the subject of a suit against Savi Technologies. That appeal is
being made to the Federal Circuit Court of Appeals and will be
heard sometime in the third quarter of 2016. In parallel, Amphion
has worked closely with Axcess' legal advisers to evaluate the
extent to which all 13 patents in its portfolio are being
infringed. It is clear that many companies are now offering
products or services that incorporate some of the basic wireless
technology developed by Axcess over the last 15 years. A number of
companies in the transportation, security, and other sectors appear
to be infringing one or more of these patents. Axcess is currently
discussing litigation strategies and financing opportunities with
several legal and litigation financing firms. They hope to engage
with one or more of these firms in the near future with a plan of
initiating patent suits against infringers of their patents.
FireStar has continued to work on the development of its
patented technology, which was also the basis of the formation of
PrivateMarkets and is incorporated in its EdgeNode(TM) product.
PrivateMarkets, an Amphion Partner Company, offers an
internet-based marketplace that links together a network of
potential buyers and sellers who trade specific physical
commodities. EdgeNode enables companies to facilitate low-cost,
secure, machine-to-machine messaging, in a novel architecture,
which is well suited to the needs of the healthcare and financial
industries. The current focus is moving increasingly towards
healthcare and, in particular, the potential productivity gains
that should be possible with use of the technology in managing data
and images so vital to clinical trials. FireStar is looking to
start a pilot programme with a small clinical trial sponsor with
the plan to create a product offering by the end of 2016. FireStar
continues to build its patent portfolio in support of its product
offering and believes that there may also be opportunities to
license the technology.
WellGen continues to explore the opportunity to develop a novel
functional beverage based on a patented anti-inflammatory
ingredient. The market for such products has been expanding rapidly
in recent years. The company signed a joint venture and supply
agreement with a US-based sports drink company that has established
distribution channels in the mid-west of the United States, with an
opportunity to expand to other US markets and beyond.
Financing
Financial support for Amphion over the last few years has come,
for the most part, from the Directors and the management team.
Following the Kromek IPO in late 2013, Amphion was able, for the
first time, to access the Loan Facility in 2014, granted by an
institutional lender, using the value of the publicly traded assets
as security for a loan to bridge the Company financially through to
the IPO of Motif. That approach served the Company well. Since
then, the Company has borrowed additional funds under this loan
facility and, during 2015, Amphion was able, for the first time in
many years, to access the equity capital markets again on two
occasions in April and June 2015, raising a total of GBP2,119,683.
The support from the management team has continued but with reduced
prominence. Since the end of the Period, the Company has concluded
a new arrangement with the provider of the Loan Facility that has
enabled access to an additional US $2 million net of fees and
expenses. This additional capital will be used to support the
operations of the business and the development of other
projects.
The liabilities on the balance sheet stood at a total of
approximately US $29.1 million at the end of the Period, about the
same as at the end of last year. Some of the liabilities are at the
DataTern level, although consolidated into the Company's reporting
accounts. Adjusting for the settlement made with BRG (announced in
April 2016), the remainder of the third party payables at the
DataTern level stood at approximately US $1.3 million. Of the
remainder of the liabilities, US $13,838,425 were amounts owing to
current or former board members and US $6,301,716 were amounts due
to the other holders of the Company's Convertible Promissory Notes,
which was extended in maturity in February 2016. The remainder of
the Company's liabilities total approximately US $7.7 million
representing 19% of total assets. The management team has worked
closely with the main holders of Convertible Promissory Notes, the
Notes and other claims on the Company in order to extend the
maturity of these obligations to the maximum extent possible. The
most recent draws from the Loan Facility add approximately US $2.3
million to the total, but put US $2 million in cash at the
Company's disposal and, as noted above, the total owing BRG is
overstated by about US $1 million, assuming the final payment is
made.
Prospects
The success of Motif's AIM IPO and the subsequent increase in
the value of our shareholding in Motif has been the driver behind
the increase in our Net Asset Value over the last 15 months. It has
also demonstrated the value of our patient and persistent approach
to the development of our Partner Companies. Despite the sharp
increase in Motif's share price since the IPO, we believe that it
should be valued more in-line with comparable companies trading on
NASDAQ and that our holding could be worth considerably more than
the level shown on the balance sheet at the end of June 2016. We
continue to work closely with Motif to develop the business and
close the valuation gap. We believe Motif has a very bright future
and we are committed to helping the company to become a major
player in the antibiotic biopharmaceutical world.
The outlook for Amphion depends increasingly on the value we can
capture from our holdings in Motif, Kromek and, if we can move it
forward successfully, m2m. We are very actively supporting the
development of both Motif and m2m and view the future of all three
companies with optimism.
For further information please contact:
Amphion Innovations
Charlie Morgan
+1 212 210 6224
Yellow Jersey PR
Dominic Barretto
+44 (0)7768 537 739
Panmure Gordon (UK) Limited
Freddy Crossley / Duncan Monteith (Corporate Finance)
Charlie Leigh-Pemberton (Corporate Broking)
+44 020 7886 2500
Northland Capital Partners Limited (Joint Corporate Broker)
Gerry Beaney / David Hignell (Corporate Finance)
John Howes/ Mark Treharne (Corporate Broking)
+44 020 7382 1100
Amphion
Innovations
plc
Condensed consolidated statement
of comprehensive income
For the six
months
ended 30 June
2016
Unaudited Unaudited
Notes Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2016 2015 2015
Continuing
operations US $ US $ US $
Revenue 4 60,000 267,601 519,855
Cost of sales - - -
Gross profit 60,000 267,601 519,855
Administrative
expenses (1,565,488) (1,522,155) (4,680,212)
Operating loss (1,505,488) (1,254,554) (4,160,357)
Fair value gains
on investments 8 1,156,454 34,807,904 8,512,215
Realised gains
on
sale of
investment - - 1,595,429
Interest income 326,914 342,657 678,824
Other gains and
losses 948,995 (93,792) 505,015
Finance costs (606,848) (650,573) (1,187,427)
Profit before
tax 320,027 33,151,642 5,943,699
Tax on profit 6 - - (1,900)
Profit for the
period 320,027 33,151,642 5,941,799
-------------------- ---------------- ------------------------
Other
comprehensive
income
Exchange
differences
arising on
translation
of foreign
operations - - -
Other comprehensive
income/(loss)
for the period - - -
-------------------- ---------------- ------------------------
Total comprehensive
income
for the period 320,027 33,151,642 5,941,799
========================= ================ ========================
Earnings per
share 7
Basic US $ 0.00 US $ 0.21 US $ 0.03
==================== ================ ========================
Diluted US $ 0.00 US $ 0.15 US $ 0.02
==================== ================ ========================
Amphion Innovations
plc
Condensed consolidated statement
of financial position
At 30 June 2016
Unaudited Unaudited Audited
30 June 30 June 31 December
Notes 2016 2015 2015
---------------- ---------------- ------------------------
US $ US $ US $
Non-current assets
Intangible assets 197,474 352,558 275,016
Security deposit 20,000 13,600 22,008
Investments 8 38,766,523 61,602,246 37,444,316
38,983,997 61,968,404 37,741,340
---------------- ---------------- ------------------------
Current assets
Prepaid expenses and
other receivables 1,302,133 2,648,118 1,206,843
Cash and cash equivalents 48,146 1,690,277 936,981
1,350,279 4,338,395 2,143,824
---------------- ---------------- ------------------------
Total assets 40,334,276 66,306,799 39,885,164
================ ================ ========================
Current liabilities
Trade and other payables 10,121,740 10,288,182 10,346,011
Notes payable 10 11,326,234 8,316,734 10,334,901
Convertible promissory
notes 10 - 8,694,834 8,312,180
21,447,974 27,299,750 28,993,092
---------------- ---------------- ------------------------
Non-current liabilities
Convertible promissory
notes 10 7,652,133 - -
Notes payable 10 - 975,000 -
7,652,133 975,000 -
---------------- ---------------- ------------------------
Total liabilities 29,100,107 28,274,750 28,993,092
================ ================ ========================
Net assets 11,234,169 38,032,049 10,892,072
================ ================ ========================
Equity
Share capital 11 3,465,082 3,451,594 3,460,880
Share premium account 38,677,055 38,618,323 38,667,074
Retained earnings (30,907,968) (4,037,868) (31,235,882)
Total equity 11,234,169 38,032,049 10,892,072
================ ================ ========================
Amphion Innovations
plc
Condensed consolidated statement
of changes in equity
For the six months
ended 30 June 2016
Unaudited
Share
Share premium Retained
Notes capital account earnings Total
---------------- --------------- ---------------- ---------------
US $ US $ US $ US $
Balance at 1 January
2015 2,716,656 36,070,864 (37,201,341) 1,586,179
Profit for the period - - 33,151,642 33,151,642
Total comprehensive
income for the period - - 33,151,642 33,151,642
---------------- --------------- ---------------- ---------------
Issue of share capital 734,938 2,667,411 - 3,402,349
Costs of issuance - (119,952) - (119,952)
Recognition of share-based
payments - - 11,831 11,831
Balance at 30 June
2015 3,451,594 38,618,323 (4,037,868) 38,032,049
================ =============== ================ ===============
Balance at 1 January
2016 3,460,880 38,667,074 (31,235,882) 10,892,072
Profit for the period - - 320,027 320,027
Total comprehensive
income for the period - - 320,027 320,027
---------------- --------------- ---------------- ---------------
Issue of share capital 4,202 9,981 - 14,183
Recognition of share-based
payments 12 - - 7,887 7,887
Balance at 30 June
2016 3,465,082 38,677,055 (30,907,968) 11,234,169
================ =============== ================ ===============
Amphion Innovations plc
Condensed consolidated statement
of cash flows
For the six months ended
30 June 2016
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2016 2015 2015
-------------------- ----------------------- -------------------------
US $ US $ US $
Operating activities
Profit 320,027 33,151,642 5,941,799
Adjustments for:
Amortisation of intangible
assets 77,542 77,542 155,084
Recognition of share-based
payments 22,071 29,015 98,881
(Increase)/decrease in security
deposit 2,008 - (8,408)
(Increase)/decrease in prepaid
& other receivables (95,290) (78,738) 1,362,537
Increase/(decrease) in trade
& other payables (224,271) 17,598 75,427
Receivables reclassified
to investments - (106,041) (432,420)
Change in fair value of
investments (1,156,454) (33,587,887) (8,512,215)
Gain on sale of investments - (1,220,017) (1,595,429)
Transfer of assets to settle
interest expense - 89,480 89,480
Issue notes to settle interest
expense 205,221 227,061 -
(Gain)/loss from change
in foreign exchange rate
on
convertible promissory notes (865,269) 104,725 -
Net cash used in operating
activities (1,714,415) (1,295,620) (2,825,264)
-------------------- ----------------------- -------------------------
Investing activities
Purchases of investments (165,753) (139,799) (402,015)
Net cash used in investing
activities (165,753) (139,799) (402,015)
-------------------- ----------------------- -------------------------
Financing activities
Proceeds on issue of shares,
net of issuance costs - 3,265,213 3,265,213
Proceeds on issue of promissory
notes 1,765,000 300,000 3,300,000
Repayments of promissory
notes (773,667) (652,333) (2,609,167)
Net cash from financing activities 991,333 2,912,880 3,956,046
-------------------- ----------------------- -------------------------
Net increase/(decrease) in
cash and cash equivalents (888,835) 1,477,461 728,767
Cash and cash equivalents
at the beginning of the period 936,981 212,816 212,816
Effect of foreign exchange
rate changes - - (4,602)
Cash and cash equivalents
at the end of the period 48,146 1,690,277 936,981
==================== ======================= =========================
Interest received 18 19 43
==================== ======================= =========================
Interest paid 156,205 77,231 245,079
==================== ======================= =========================
Amphion Innovations plc
Notes to the condensed consolidated financial statements
(Unaudited)
For the six months ended 30 June 2016
1. General information
The condensed consolidated interim financial statements for the
six months ended 30 June 2016 are unaudited and do not constitute
statutory accounts within the meaning of the Isle of Man Companies
Act 2006. The statutory accounts of Amphion Innovations plc for the
year ended 31 December 2015 have been filed with the Registrar of
Companies and contain an unqualified audit report which includes an
emphasis of matter relating to significant uncertainty in respect
of going concern and valuation of Partner Company investments.
Copies are available on the company's website at
www.amphionplc.com/reports.php.
2. Accounting policies
These condensed consolidated interim financial statements have
been prepared in accordance with the recognition and measurement
requirements of International Financial Reporting Standards
(IFRS).
The accounting policies applied by the Group are consistent with
those followed in the preparation of the Group's annual financial
statements for the year ended 31 December 2015. Changes to
accounting standards in the current year had no material
impact.
3. Use of judgements and estimates
The preparation of the Group's interim financial statements
requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, and contingencies at
the date of the Group's interim financial statements, and revenue
and expenses during the reporting period. Actual results could
differ from those estimated. Significant estimates in the Group's
financial statements include the amounts recorded for the fair
value of the financial instruments and other receivables. By their
nature, these estimates and assumptions are subject to an inherent
measurement of uncertainty and the effect on the Group's financial
statements of changes in estimates in future periods could be
significant.
Investments that are fair valued through profit or loss, as
detailed in note 8, are all considered to be "Partner Companies".
Those "Partner Companies" categorised as Level 3 are defined as
investment in "Private Companies".
Fair value of financial instruments
The Directors use their judgement in selecting an appropriate
valuation technique for financial instruments not quoted in an
active market ("Private Investments"). The estimation of fair value
of these Private Investments includes a number of assumptions which
are not supported by observable market inputs. The carrying amount
of the Private Investments is US $6 million.
Fair value of other receivables
Other receivables are stated at their amortised cost which
approximates their fair value and are reduced by appropriate
allowances for estimated irrecoverable amounts and do not carry any
interest.
4. Revenue
An analysis of the Group's revenue is as follows:
Six months ended Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
US $ US $ US $
Continuing operations
Advisory fees 60,000 210,000 459,904
License fees - 57,601 59,951
60,000 267,601 519,855
======================= ========================= =========================
As part of the agreement for DataTern, Inc. to purchase certain
of the intangible assets in December 2007, a portion of future
revenues from these patents will be retained by FireStar Software,
Inc. No amounts have become payable to FireStar Software, Inc. to
date.
5. Segment information
For management purposes, the Group is currently organised into
three business segments - advisory services, investing, and
intellectual property. These business segments are the basis on
which the Group reports its primary segment information.
Information regarding these segments is presented below.
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Six months Six months Six months Six months Six months
ended ended ended ended ended
30 June 2016 30 June 2016 30 June 2016 30 June 2016 30 June 2016
US $ US $ US $ US $ US $
REVENUE
External advisory
fees 60,000 - - - 60,000
External license
fees - - - - -
---------------------- ----------------------
Total revenue 60,000 - - - 60,000
Cost of sales - - - - -
---------------------- ---------------------- ---------------------- ---------------- -----------------------
Gross profit 60,000 - - - 60,000
Administrative
expenses (341,193) (889,603) (334,692) - (1,565,488)
---------------------- ---------------------- ----------------------
Segment result (281,193) (889,603) (334,692) - (1,505,488)
Fair value gains on
investments - 1,176,171 - (19,717) 1,156,454
Interest income - 326,914 - - 326,914
Other gains and
losses 195 948,800 - - 948,995
Finance costs - (583,491) (23,357) - (606,848)
Profit/(loss)
before tax (280,998) 978,791 (358,049) (19,717) 320,027
Income taxes - - - - -
---------------------- ---------------------- ----------------------
Profit/(loss)
after tax (280,998) 978,791 (358,049) (19,717) 320,027
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Six
Six months months Six months Six months Six months
ended ended ended ended ended
30 June 30 June 30 June 30 June
30 June 2016 2016 2016 2016 2016
US $ US $ US $ US $ US $
OTHER
INFORMATION
Segment assets 7,858,227 40,836,766 229,627 (8,590,344) 40,334,276
Segment
liabilities 7,885,812 21,907,661 7,235,277 (7,928,643) 29,100,107
Amortisation - - 77,542 - 77,542
Recognition of
share-based
payments - 22,071 - - 22,071
5. Segment information, (continued)
For management purposes for 30 June 2015, the Group was
organised into three business segments - advisory services,
investing activities, and intellectual property.
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Six months Six months Six months Six months Six months
ended ended ended ended ended
30 June 2015 30 June 2015 30 June 2015 30 June 2015 30 June 2015
US $ US $ US $ US $ US $
REVENUE
External advisory
fees 210,000 - - - 210,000
External license
fees - - 57,601 - 57,601
---------------------- ----------------------
Total revenue 210,000 - 57,601 - 267,601
Cost of sales - - - - -
---------------------- ---------------------- ---------------------- --------------------- -----------------------
Gross profit 210,000 - 57,601 - 267,601
Administrative
expenses (472,570) (668,081) (381,504) - (1,522,155)
---------------------- ---------------------- ----------------------
Segment result (262,570) (668,081) (323,903) - (1,254,554)
Fair value gains on
investments - 35,084,408 - (276,504) 34,807,904
Interest income - 342,657 - - 342,657
Other gains and
losses - (93,792) - - (93,792)
Finance costs (342) (625,634) (24,597) - (650,573)
Profit/(loss)
before tax (262,912) 34,039,558 (348,500) (276,504) 33,151,642
Income taxes - - - - -
---------------------- ---------------------- ----------------------
Profit/(loss)
after tax (262,912) 34,039,558 (348,500) (276,504) 33,151,642
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Six
Six months months Six months Six months Six months
ended ended ended ended ended
30 June 30 June 30 June 30 June
30 June 2015 2015 2015 2015 2015
US $ US $ US $ US $ US $
OTHER
INFORMATION
Segment assets 11,705,260 60,892,631 396,170 (6,687,262) 66,306,799
Segment
liabilities 7,085,484 20,540,316 6,532,264 (5,883,314) 28,274,750
Amortisation - - 77,542 - 77,542
Recognition of
share-based
payments - 29,015 - - 29,015
5. Segment information, (continued)
Geographical segments
The Group's operations are located in the United States and the
United Kingdom.
The following table provides an analysis of the Group's advisory
fees by geographical location of the investment.
Advisory fees by
geographical location
------------------------------------------------
Six months ended Six months ended
30 June 2016 30 June 2015
US $ US $
United States - 210,000
United Kingdom 60,000 -
60,000 210,000
================= =============================
The following table provides an analysis of the Group's license
fees by geographical location.
License fees by
geographical location
---------------------------------------------------------
Six months Six months
ended ended
30 June 30 June
2016 2015
US $ US $
United
States - 50,551
Europe - 7,050
- 57,601
===================================== ============================
The following is an analysis of the carrying amount of segment
assets, and additions to fixtures, fittings, and equipment,
analysed by the geographical area in which the assets are
located:
Additions to fixtures,
Carrying amount fittings, and
equipment and intangible
of segment assets assets
------------------------ ---------------------------
Six months Six months Six months Six months
ended ended ended ended
30 June 30 June 30 June 30 June
2016 2015 2016 2015
US $ US $ US $ US $
United
States 7,520,429 13,733,409 - -
United
Kingdom 32,813,847 52,573,390 - -
40,334,276 66,306,799 - -
=========== =========== ============= ============
6. Income tax expense
Six months Six months
ended ended Year ended
31 December
30 June 2016 30 June 2015 2015
------------- ------------- -----------
US $ US $ US $
Isle of Man income tax - - -
Tax on US subsidiaries - - 1.900
Current tax / refund - - 1,900
============== ============== ===========
From 6 April 2006, a standard rate of corporate income tax of 0%
applies to Isle of Man companies, with exceptions taxable at the
10% rate, namely licensed banks in respect of deposit-taking
business, companies that profit from land and property in the Isle
of Man and companies that elect to pay tax at the 10% rate. No
provision for Isle of Man taxation is therefore required. The
Company is treated as a Partnership for U.S. federal and state
income tax purposes and, accordingly, its income or loss is taxable
directly to its partners.
The Company has three subsidiaries, two in the USA and one in
the Kingdom of Bahrain. The US subsidiaries, Amphion Innovations US
Inc. and DataTern, Inc., are Corporations and therefore taxed
directly. The US subsidiaries suffer US federal tax, state tax, and
New York City tax on their taxable net income.
The Group charge for the period can be reconciled to the profit
per the consolidated income statement as follows:
US $
Profit before tax 320,027
========================
Tax at the Isle of Man income tax rate of 0% -
Effect of different tax rates of subsidiaries
operating in other jurisdictions -
Current tax -
========================
7. Earnings per share
The calculation of the basic and diluted earnings per share
attributable to the ordinary equity holders of the parent is based
on the following data:
Six months Six months
Earnings ended ended Year ended
30 June 30 June 31 December
2016 2015 2015
------------------------ ----------------------- ----------------------
US $ US $ US $
Earnings for the purposes of
basic and diluted earnings
per share
(profit for the year attributable
to equity holders of the parent) 320,027 33,151,642 5,941,799
======================== ======================= ======================
Number of shares
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2016 2015 2015
------------------------ ----------------------- ----------------------
Weighted average number of
ordinary shares for
the purposes of basic earnings
per share 197,493,495 160,917,415 179,083,069
Effect of dilutive potential
ordinary shares:
Share options 2,405,083 3,671,872 3,925,501
Convertible promissory notes 72,233,543 55,286,030 56,369,051
Weighted average number of
ordinary shares for
the purposes of diluted earnings
per share 272,132,121 219,875,317 239,377,621
======================== ======================= ======================
Share options that could potentially dilute basic earnings per
share in the future have not been included in the calculation of
diluted earnings per share because they are antidilutive.
8. Investments
At fair value through profit or loss
Group
----------------------------------------------------------------------------------
Level Level Level
1 2 3 Total
------------------- ------------------- ------------------- -------------------
US $ US $ US $ US $
At 1 January
2016 31,655,446 - 5,788,870 37,444,316
Investments during
the year - - 165,753 165,753
Fair value gains 1,158,404 - (1,950) 1,156,454
At 30 June 2016 32,813,850 - 5,952,673 38,766,523
=================== =================== =================== ===================
At 1 January
2015 6,668,978 - 22,098,681 28,767,659
Investments during
the year - - 245,840 245,840
Disposition of
investment (2,219,157) - - (2,219,157)
Transfers between
levels 13,315,665 - (13,315,665) -
Fair value losses 34,807,904 - - 34,807,904
At 30 June 2015 52,573,390 - 9,028,856 61,602,246
=================== =================== =================== ===================
The Group is required to classify fair value measurements using
a fair value hierarchy that reflects the significance of the inputs
used in making the measurements. In the case of the Group,
investments classified as Level 1 have been valued based on a
quoted price in an active market. Investments classified as Level 2
have been valued using inputs other than quoted prices included
within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices). Fair values of unquoted investments classified as Level 3
in the fair value hierarchy have been determined in part or in full
by valuation techniques that are not supported by observable market
prices or rates. Investment valuations for Level 3 investments have
been arrived at using a variety of valuation techniques and
assumptions. For instance where the fair values are based upon the
most recent market transaction but which occurred more than twelve
months previously, the investments are classified as Level 3 in the
fair value hierarchy.
The net increase in fair value for the six months ended 30 June
2016 of US $1,156,454 includes a net increase of US $1,158,404 from
the change in value of the public companies and is based on quoted
prices in active markets.
Fair value determination
The Directors have valued the investments in accordance with the
guidance laid down in the International Private Equity and Venture
Capital Valuation Guidelines. The inputs used to derive the
investment valuations are based on estimates and judgements made by
management which are subject to inherent uncertainty. As such the
carrying value in the financial statements at 30 June 2016 may
differ materially from the amount that could be realised in an
orderly transaction between willing market participants on the
reporting date.
In making their assessment of fair value at 30 June 2016,
management has considered the total exposure to each entity
including equity, warrants, options, promissory notes, and
receivables.
8. Investments, (continued)
Further information in relation to the directly held private
investment portfolio that are at Level 3 at 30 June 2016 is set out
below:
Fair Unobservable
value Methodology inputs
----------
US $
Multiple methods used in combination
Private including: Discount to last Discount
investments 5,952,673 market price, (30%-100%),
discount to last financing round,
price of future financing round Price of
and third party fund raising.
valuation.
------------- ---------- ------------------------------------- ---------------
Given the range of techniques and inputs used in the valuation
process and the fact that in most cases more than one approach is
used, a sensitivity analysis is not considered to be a practical or
meaningful disclosure. Shareholders should note however that
increases or decreases in any of the inputs listed above in
isolation may result in higher or lower fair value
measurements.
9. Other financial assets and liabilities
The carrying amounts of the Group's financial assets and
financial liabilities at the statement of financial position date
are as follows.
30 June 2016 31 December 2015
Carrying Fair Carrying Fair
amount value amount value
US $ US $ US $ US $
Financial assets
Fair value through profit
or loss
Fixed asset investments - designated
as such upon initial recognition 38,766,523 38,766,523 37,444,316 37,444,316
Currents assets
Loans and receivables
Security deposit 20,000 20,000 22,008 22,008
Prepaid expenses and other
receivables 1,302,133 1,302,133 1,206,843 1,206,843
Cash and cash equivalents 48,146 48,146 936,981 936,981
Financial liabilities
Amortised cost
Trade and other payables 10,121,740 10,121,740 10,346,011 10,346,011
Notes payable 11,326,234 11,326,234 10,334,901 10,334,901
Convertible promissory notes 7,652,133 7,652,133 8,312,180 8,312,180
9. Other financial assets and liabilities, (continued)
The carrying value of cash and cash equivalents, the security
deposit, prepaid expenses and other receivables, and trade and
other payables, in the Directors' opinion, approximate to their
fair value at 30 June 2016 and 31 December 2015.
The following table sets out the fair values of financial
instruments not measured at fair value and analyses it by the level
in the fair value hierarchy into which each fair value measurement
is categorised at 30 June 2016.
Level Level Level
1 2 3 Total
US $ US $ US $ US $
------- ------------- ------ ---------------
Financial assets
Security deposit - 20,000 - 20,000
Prepaid expenses
and
other receivables - 1,302,133 - 1,302,133
Cash and cash equivalents - 48,146 - 48,146
- 1,370,279 - 1,370,279
----------------------------------- ------------- ------ ---------------
Financial liabilities
Trade and other
payables - 10,121,740 - 10,121,740
Notes payable - 11,326,234 - 11,326,234
Convertible promissory
notes - 7,652,133 7,652,133
- 29,100,107 - 29,100,107
----------------------------------- ------------- ------ ---------------
10. Promissory notes
Convertible promissory notes
At a meeting on 26 February 2016, the holders of GBP5,707,738 of
convertible promissory notes agreed to amend the terms of the note.
The notes will now be redeemed on 31 December 2017, will be
convertible into ordinary shares at 8 pence per share, and will pay
interest at 7% if paid in ordinary shares or 5% if paid in cash or
additional notes. In addition, for every GBP1 of note held, the
noteholder will be issued two warrants with an exercise price of 10
pence per share. Each note holder may serve at least 60 days'
notice on the Company to redeem up to a proportion of the notes
held by it on the following dates: 15% on 31 May 2016; 20% on 30
November 2016; 20% on 30 June 2017.
During 2016, US $205,221 (GBP141,778) additional convertible
promissory notes were issued in payment of the accrued interest
payable on the notes for the quarter ended 31 December 2015 and the
quarter ended 31 March 2016. The Company redeemed a total of
approximately GBP67,000 of convertible promissory notes at the 31
May 2016 redemption date. The amounts were paid in August 2016.
The net proceeds received from the issue of the convertible
promissory notes are classified as a financial liability due to the
fact that the notes are denominated in a currency other than the
Company's functional currency and that on any future conversion a
fixed number of shares would be delivered in exchange for a
variable amount of cash.
10. Promissory notes, continued
Promissory notes
In June 2014, the Company was granted a loan facility by an
institutional lender (the "Lender"). In April 2016, the Company
borrowed an additional US $1,765,000 increasing the amount borrowed
under the facility to US $4.1 million. Under the terms of the
additional draw, the interest rate will be 10% with repayments
starting on 1 May 2016 and with the final repayment due on 1
February 2017. The proceeds are to be used to repay the existing
amount due under the facility and for working capital for Amphion
and its Partners Companies. The loan is secured by the pledge by
the Company of 7,774,678 ordinary shares of Kromek Group plc and
14,906,145 ordinary shares of Motif Bio plc. Additional terms of
the facility allow the conversion of the drawn-down amount into
ordinary shares in the Company. Up to US $500,000 of the facility
may be converted at 6.5 pence per ordinary share and the remainder
of the amount drawn-down, approximately US $3.6 million, may be
converted at 8.0 pence per ordinary share. At 30 June 2016, the
balance of the note is US $3,998,333. As part of the loan facility,
the Directors agreed to a Deed of Postponement that regulates the
Directors' rights in respect to the repayment of any debt due to
them from the Company. The Directors agreed to defer payment of
their debt by the Company until the loan facility is repaid in
full. The loan facility was amended in July and August 2016 (see
note 14 for full details).
11. Share capital
Number GBP US $
---------------- ---------------- -----------------
Balance as at 31
December 2015 197,219,423 1,972,194 3,460,880
Issued and fully
paid:
Ordinary shares
of 1p each 291,806 2,918 4,202
Balance as at 30
June 2016 197,511,229 1,975,112 3,465,082
================ ================ =================
During the six months ended 30 June 2016, the following changes
occurred to the share capital of the Company:
On 12 January 2016, the Company issued 291,806 ordinary 1p
shares at a premium of 2.375 per share (US $9,982) to Directors in
payment of the 2015 fourth quarter and 2016 first quarter
Directors' fees.
12. Share based payments
In 2006 the Group established the 2006 Unapproved Share Option
Plan ("the Plan") and it was adopted pursuant to a resolution
passed on 8 June 2006. Under this plan, the Compensation Committee
may grant share options to eligible employees, including Directors,
to subscribe for ordinary shares of the Company. The number of
Shares over which options may be granted under the Unapproved Plan
cannot exceed ten percent of the ordinary share capital of the
Company in issue on a fully diluted basis. The Plan will be
administered by the Compensation Committee. The number of shares,
terms, performance targets, and exercise period will be determined
by the Compensation Committee. During 2016, no options were issued
under the Plan.
2016
Weighted
average
Number of exercise
share options price (in GBP)
Outstanding at beginning of period 12,450,000 0.07
Granted during the period - -
Cancelled during the period - -
Expired during the period (500,000) 0.11
Outstanding at the end of the period 11,950,000 0.07
======================
Exercisable at the end of the period 11,516,667 0.08
Options are recorded at fair value on the date of grant using
the Black-Scholes model. The Group recognised total costs of US
$7,887 relating to equity-settled share-based payment transactions
in 2016 which were expensed in the statement of comprehensive
income during the period.
13. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on
consolidation and are not disclosed in this note. Details of
transactions between the Group and other related partners are
disclosed below.
During the period, the Group paid miscellaneous expenses for
Motif BioSciences, Inc. ("Motif") such as office expenses. At 30
June 2016, the amount due from Motif is US $459.
On 1 April 2015, Motif Bio plc entered into an advisory and
consultancy agreement with Amphion Innovations US Inc. Richard
Morgan, a Director of the Company, is also the Chairman of Motif
Bio plc and Robert Bertoldi, a Director of the Company, is also a
Director of Motif Bio plc. The consideration for the services is US
$120,000 per annum. The period is for an initial period of twelve
months and will automatically renew each year on the anniversary
date unless either party notifies the other by giving 90 days
written notice prior to expiration. Amphion Innovations US Inc.'s
fee for the period ended 30 June 2016 was US $60,000.
On 1 April 2015, Motif Bio plc entered into a consultancy
agreement with Amphion Innovations plc for Robert Bertoldi, an
employee of Amphion Innovations plc, to provide services to Motif
Bio plc. The consideration for the services is US $180,000
annually. On 1 July 2016, the consideration decreased to US $75,000
annually. The agreement is for an initial period of twelve months
and will automatically renew each year on the anniversary date
unless either party notifies the other by giving 90 days written
notice prior to expiration.
A subsidiary of the Company has entered into an agreement with
Axcess International, Inc. ("Axcess") to provide advisory services.
Richard Morgan and Robert Bertoldi, Directors of the Company, are
also Directors of Axcess. Amphion Innovations US Inc. will receive
a monthly fee of US $10,000 pursuant to this agreement. The
agreement renews on an annual basis until terminated by one of the
parties. The monthly fee is suspended for any month in which
Axcess' cash balance falls below US $500,000. Amphion Innovations
US Inc. received no fee during the period ended 30 June 2016.
A subsidiary of the Company has entered into an agreement with
m2m Imaging Corp. ("m2m") to provide advisory and consulting
services. Robert Bertoldi, a Director of the Company, is also a
Director of m2m. The quarterly fee under this agreement is US
$45,000. This agreement renews on an annual basis until terminated
by either party.
Amphion Innovations US Inc.'s fee for the period ended 30 June
2016 was suspended. At 30 June 2016, US $630,000 of the advisory
fees remain payable by m2m. This balance has been reduced by a
provision for doubtful debts in the amount of US $600,000.
A subsidiary of the Company has entered into an agreement with
WellGen, Inc. ("WellGen") to provide advisory and consulting
services. Richard Morgan and Robert Bertoldi, Directors of the
Company, are also Directors of WellGen. The fee under this
agreement is US $60,000 per quarter. The agreement renews annually
until terminated by either party. The subsidiary's fee for the
period ended 30 June 2016 was suspended. At 30 June 2016, US
$1,320,000 of the advisory fees remain payable. This balance has
been reduced by a provision for doubtful debts in the amount of US
$1,320,000.
A subsidiary of the Company has entered into an agreement with
PrivateMarkets, Inc. ("PrivateMarkets") to provide advisory
services. Richard Morgan, a Director of the Company, is also a
Director of PrivateMarkets. The fee under this agreement is US
$30,000 per quarter until the successful sale of at least US
$3,000,000 and thereafter, US $45,000 per quarter. This agreement
will renew annually unless terminated by either party. The
subsidiary's fee for the period ended 30 June 2016 was suspended.
At 30 June 2016, US $770,000 remains payable by PrivateMarkets. The
payable has been reduced by a provision for doubtful debts in the
amount of US $770,000.
Amphion Innovations US Inc. has entered into an agreement with
DataTern, Inc. ("DataTern") (a wholly owned subsidiary of the
Company) to provide advisory and consulting services. Richard
Morgan and Robert Bertoldi, Directors of the Company, are also
Directors of DataTern. The quarterly fee under this agreement is US
$60,000 and renews annually unless terminated by either party. The
subsidiary's fee for the period ended 30 June 2016 was
suspended.
13. Related party transactions, (continued)
During 2013, Richard Morgan, a Director of the Company, advanced
US $190,000 to a subsidiary of the Company under promissory notes.
The promissory notes accrue interest at 5% per annum and are
payable in three years. In 2010, Richard Morgan advanced US
$352,866 to the Company. In July 2014, the balance of this advance
was converted into a demand note that accrues interest at 5% per
annum. At 30 June 2016, US $81,301 remains outstanding. The net
amount payable by the Group at 30 June 2016 to Richard Morgan is US
$2,307,787. The amount payable includes a voluntary salary
reduction of US $1,804,879, US $341,779 of which will be payable at
the discretion of the Board at a later date.
At 30 June 2016, US $110,273 was due to Gerard Moufflet, a
Director of the Company, for Director's fees and US $8,337 for
expenses.
At 30 June 2016, US $988,254 was due to Robert Bertoldi, a
Director of the Company, for voluntary salary reductions of which
US $188,769 is payable by the discretion of the Board at a later
date.
14. Subsequent Events
In July 2016, the Company borrowed an additional US $750,000
under the YA Global Master SPV Ltd. loan facility. Under the terms
of the additional draw, nil interest is charged with a repayment
amount of US $881,250 due on 6 October 2016. The additional draw
may be converted into ordinary shares in accordance with the
additional terms of the facility in April 2016. The additional draw
is to be secured by the Company pledging 1,400,000 ordinary shares
of Motif Bio plc. In July and August 2016, the Company sold
2,070,000 ordinary shares of Kromek Group plc in repayment of the
US $881,250. Pursuant to the terms of the additional draw, the net
proceeds of US $720,995 was used to repay the additional draw
leaving the balance remaining of US $160,255.
At the annual general meeting in July 2016, Mr. Richard
Mansell-Jones was appointed Chairman of the Company and Mr. Paul
Kennedy was appointed as a Director. Mr. Gerard Moufflet did not
stand for re-election.
In July 2016, the Company issued 300,000 warrants to a
consultant with a subscription price of 3.5 pence per share and an
expiration date of 28 July 2019.
In August 2016, the Company borrowed an additional US $2,350,000
under the YA Global Master SPV Ltd. loan facility increasing the
loan balance to US $6,198,333. Of this amount, US $3,000,000, plus
interest is convertible into ordinary shares of Amphion Innovations
plc at 6 pence and the remaining amount, plus interest is
convertible at 8 pence. Under the terms of the additional draw, the
interest rate will be 10% with repayments starting on 1 January
2017 and with the final repayment due on 1 December 2017. The
proceeds are to be used to repay the existing amount due under the
facility and for working capital for Amphion and its Partner
Companies. The loan is secured by the pledge by the Company of
6,684,255 ordinary shares of Kromek Group plc and 27,961,625
ordinary shares of Motif Bio plc.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EANNKEEXKEFF
(END) Dow Jones Newswires
September 07, 2016 02:00 ET (06:00 GMT)
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