Final Results

Amphion Innovations plc

 ("Amphion" or the "Company")

Final results

London and New York, 28 June 2017 - Amphion Innovations plc (AIM: AMP), the developer of medical, life science, and technology businesses, announces its audited results for the year ended 31 December 2016.

Financial Results:

· Net Asset Value ("NAV") fell to US -$5,886,381 (2015: US $10,892,072) as at year-end due almost entirely to the movement in value of the Motif Bio plc share price

Partner Companies' Highlights:

· Motif Bio completed treatment of patients in its Phase III trial (REVIVE-1) for its productcandidate iclaprim

· Motif Bio listed on NASDAQ, raising £20.0 million (US $25.0 million)

Post Period Events:

· Motif Bio released data readout from REVIVE-1, showing iclaprim to be well tolerated and met the non-inferiority margin mandated by the FDA

· Motif Bio raised an additional £20.0 million (US $25.8 million) to fund its REVIVE-2 study through to completion and the filing of a New Drug Application for iclaprim with the US FDA

· m2m Imaging Corp. and Polarean Inc. merged to create Polarean Imaging Limited, a clinical-stage, revenue generating, medical imaging product company, in a cash and share merger

· Polarean Imaging Limited announces the closing of its Pre-IPO financing of US $2.0 million

· Sold the Company's remaining holding of Kromek Group plc

· In May 2017, Richard Morgan and Robert Bertoldi, Directors of the Company, entered into a Deed of Postponement where they have agreed to postpone the repayment of the amounts owed to them, which total US $4.3 million, until all other debts of the company are repaid

· As of 26 June 2017, the increase in Motif's share price to 29.75p has increased Amphion's Net Asset Value by approximately US $3.2 million

· Mr. Paul Kennedy resigned as a Non-executive Director on 27 June 2017, with immediate effect

Richard Morgan, CEO of Amphion Innovations plc, commented: "2016 was a difficult year for Motif with the Brexit vote disrupting the company's funding plans. The sharp fall in sterling amplified the decline in the share price which in turn hit the value of Amphion's holding. The release of good data from the REVIVE-1 clinical trial in 2017 confirmed our belief that Motif has a good programme and is significantly undervalued. The formation of Polarean Imaging Limited and the closing of the pre-IPO has put this exciting company on track for a listing later this year. We look forward to helping both companies achieve their full potential and to progress the development of other assets in the Amphion portfolio. We would also like to thank Paul Kennedy for his contribution to the board and wish him well."

For further information please contact:

About Amphion Innovations plc - www.amphionplc.com

Amphion Innovations is a developer of medical, life science and technology businesses. We use our extensive experience in company building to invest and build shareholder value in high growth companies in the US and UK. Amphion has significant shareholding in seven partner companies developing proven technologies targeting substantial commercial marketplaces. The Amphion model has been refined to optimise the commercialisation of patents and other intellectual property within the partner companies. The partner companies collectively own or control over 200 separately identified pieces of intellectual property, a number which grows rapidly each year.

Chief Executive Officer's Statement

Financial Results and Net Asset Value

Revenue in 2016 was US $139,633 (2015: US $519,855) while total administrative expenses were US $3,474,045 (2015: US $4,680,212). As a result, the operating loss for the year was US $3,334,412 (2015: US $4,160,357).

Revenue was lower than in 2015 due mainly to a further reduction in management fees from our Partner Companies. Total administrative expenses were down sharply compared to the previous year despite incurring costs associated with DataTern of US $841,055, roughly similar to the previous year (2015: US $871,003).

The Net Asset Value ("NAV") fell sharply during the year from US $10,892,072 at 31 December 2015 to-US -$5,886,381 due nearly entirely to a large reduction in the value of Amphion's holding in Motif Bio plc ("Motif"), the clinical stage biopharmaceutical company specialising in developing novel antibiotics. The share price of Motif fell from 51.7 pence at the end of June 2016 to 24.7 pence at the end of December 2016. The fall in the value of the pound, which started in late June following the leave vote in the Brexit referendum, made the reduction in the value of the holding in US dollars even more severe. The pound fell from about US $1.50 just before the Brexit vote to US $1.23 at the end of December 2016. As result of these factors, the value of the holding fell by US $13.8 million over the financial year. As a result, the NAV per Share was -3.0 cents at 31 December 2016 versus 5.5 cents at the end of 2015. In Pounds Sterling, NAV per Share was -2.4 pence at the end of December 2016, versus the 2015 year end figure of 3.8 pence.

As noted, the Brexit vote and resulting disruptions in the financial markets had an adverse impact on Motif and as a result on Amphion. Since the IPO on AIM in April 2015 Motif's intention was always to seek a listing on NASDAQ on the assumption that it would prove to be of value to the shareholders to be listed on the same market as the other leading antibiotic companies. Unfortunately, the biotech market experienced challenges in late 2015 and by the time a recovery started in the spring the main biotech indices were down over 40% from their highs in the summer of 2015. The volatility within the biotech indices meant that Motif's board and executives were forced to be flexible in achieving the goals of new capital and a public listing in the US markets. During this time, the Motif share price fell to around 30p, almost 30% below where it had been just twelve months prior and more than 50% below where it had been a year earlier in US dollars. The financing to raise £20 million (approximately US $26 million) was ultimately priced at 28p, which was disappointing, but necessary for Motif to continue towards its goals and deliver significant shareholder value.

Amphion continues to have confidence in the underlying value of Motif and despite the sharp fall in the market price late last year we continue to expect the value to be significantly in the short-to-medium term if the data readout from REVIVE-2, the second of the two pivotal clinical trials, meets expectations. The data readout for REVIVE-1, announced on 18 April 2017, did indeed meet those expectations and we have every reason to expect the readout from REVIVE-2, due in the next six months, to be very similar.

Since the period end, Motif raised an additional £20.0 million (US $25.8 million) in June 2017 which is expected to be sufficient to fund the company through the filing of a New Drug Application ("NDA") for its antibiotic product candidate iclaprim in the first half of 2018. Historically, most antibiotic companies that have reached the stage where the value of the drug is supported by good data have traded in the stock market at valuations significantly higher than Motif's current valuation. For example, Durata Therapeutics was acquired for US $675 million in late 2014 following approval of its antibiotic a few months earlier. At the time of writing, both Tetraphase Pharmaceuticals Inc. and Paratek Pharmaceuticals have valuations considerably higher of US $270 million and US $680 million respectively) and the valuation of Achaogen Inc. is approaching US $1 billion.

Motif Bio plc

Post period end, on 18 April 2017, Motif announced the data readout from REVIVE-1, the first of the two Phase III trials under way to provide the regulatory agencies with the information and data required for Motif to seek marketing approval of the drug in the US and Europe. The data show iclaprim to be well tolerated and to meet the non-inferiority margin mandated by the FDA. Data readout from REVIVE-2, the on-going second Phase III trial, is expected in the second half of 2017. REVIVE-2 uses the same protocol and trial design but at different sites and there is no reason to believe the data readout from the second trial should be materially different from the first. If REVIVE-2 is successful, as we expect it to be, iclaprim will have been used in close to 1,000 patients and demonstrated a good safety profile and efficacy comparable to other antibiotics in use today, many of which are already seeing the onset of antimicrobial resistance. Subject to the necessary regulatory approvals, Motif expects to begin marketing the drug in 2019. Amphion currently owns approximately 16.5% of Motif.

Polarean Imaging Limited

Post period end, on 31 May 2017, we announced that Amphion Partner Company, m2m Imaging Corp. ("m2m"), completed the merger with Polarean Inc. to form Polarean Imaging Limited ("Polarean"), a UK company, for which we plan to seek a listing on AIM later this year. In addition to the merger, we announced the successful completion of a pre-IPO placing which raised Polarean a total of US $2 million. Approximately 20% of the total financing was subscribed by Amphion. Polarean is a clinical-stage, revenue generating, medical imaging product company that expects to gain clinical approval for its drug/device combination product, which enables the visualisation of hyperpolarised Xenon129 via magnetic resonance imaging technology, within three years. The protocol for the clinical trials has been agreed with the FDA and, if successful, should garner a broad clearance to market "for use in pulmonary medicine." The FDA has recognised hyperpolarized Xenon129 as safe, given the history of use of Xenon gas in anesthesia. Polarean has a growing installed base of 15 systems currently in use at leading research institutions and the company expects to sell additional units and consumables for research purposes during the course of the next two years while the Phase III clinical trial is under way. The FDA has indicated a broad marketing label for the system if the trial is successful and launch of the system for clinical use should follow in early 2020.

Polarean designs, develops, and manufactures the equipment required to hyperpolarise the noble gas Xenon129, which is visible in magnetic resonance imaging ("MRI") for the purpose of quantitatively and non-invasively visualizing pulmonary function at high levels of resolution, sensitivity, and reproducibility. Polarean also designs, develops, and manufactures optimised high performance Radio Frequency ("RF") coils specifically required for the Xenon signal detection in MRI systems. Polarean has a proprietary position in the technology and equipment that enables all existing MRI systems to achieve a vastly improved level of pulmonary functional imaging.

Polarean's products address an acute unmet medical need. Current methods to diagnose and monitor lung disease are either imprecise (e.g. spirometry and scintigraphy), and/or deliver radiation to patients (scintigraphy, X-ray, computerised tomography ("CT")). None are able to visualise the function of the smallest airways where disease begins. Polarean's technology provides vastly improved imaging quality and diagnostic benefit.

The potential market for Polarean's products is very large, conditioned by the prevalence of pulmonary disease and by the over 10,000 MRI systems in operation in the US today (and a similar number overseas). The company's proprietary technology is used in conjunction with the existing installed base of MRI machines, allowing MRI equipment to function more profitably and in novel ways. Lung disease is widespread, costly, and growing. In the US alone, it affects approximately 40 million Americans and costs the healthcare delivery system more than US $150 billion annually. In China, 100 million people suffer from chronic obstructive pulmonary disease ("COPD"), 30 million from asthma, and respiratory disease accounts for 12% of all deaths.

Amphion invested about US $400,000 in the pre-IPO financing, and following the merger and pre-IPO raise, Amphion will own approximately 26% of Polarean.

DataTern Inc. and the Intellectual Property Licensing Programme

After a very long delay, DataTern Inc. ("DataTern"), a wholly owned subsidiary of the Company, received a Markman ruling in the MicroStrategy case that has been under review by DataTern's legal team. This followed favourable rulings by the U.S. District Court in Massachusetts (the "Court"), which earlier denied two motions for summary judgment filed by MicroStrategy Inc. ("MicroStrategy") seeking dismissal of DataTern's claims on the grounds of validity and infringement. DataTern has since been conferring with legal counsel on possible ways to move the programme forward.

The '502 patent and the '402 patent are directed to how object-oriented software applications access data stored in relational databases. Such applications are widely used and exist within most current databases which are relational databases. We continue to believe that companies that are using or want to use DataTern's patented technology should enter into equitable licensing agreements.

DataTern's legal team, supported by its extensive team of technical and patent experts, has for many years expressed confidence in the strength of the intellectual property. DataTern's two key patents have completed a comprehensive re-examination by the United States Patent and Trademark Office ("USPTO") and successfully emerged both fully validated and with additional claims added. It remains the considered opinion of the team that the two patents are both valid and being infringed by a wide range of companies that are practicing this critical art. Ultimately these opinions will be tested in the courts and the recent Markman ruling has clarified certain aspects of the patent which will be important as the case moves on to the next stage. In order to pursue these claims DataTern needs to be able to fund the expenses in the programme and efforts to find a suitable funding source are continuing.

Amphion's holding of intellectual property ("IP") assets is valued at amortised cost of US $119,932. In addition to the initial purchase of these IP assets from our Partner Company, FireStar Software Inc. ("FireStar"), Amphion has made significant additional investment in these assets, which has been expensed as incurred and the value of those assets continues to be carried only at amortised historical cost. The Directors continue to believe that the realisable value of the intellectual property assets held by DataTern should be greater than the carrying value.

Under the revenue sharing agreement with DataTern, (as fully described in Note 12 on page 43 of the Company's consolidated financial statements) Amphion's Partner Company, FireStar, (where the technology and patents were originally developed) would share directly in the revenue stream.

Building Value in the Partner Companies

Since flotation, Amphion's business model has been to create and build companies with high value potential based on innovative and proprietary, but basically proven, technology. Our continued ability to select good 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 saw the opportunity to advance other Partner Companies and to start to consider, for the first time in over five years, how best to grow the Company in the future.

Although we continue to believe that the technology platform of Kromek Group plc ("Kromek"), a former Partner Company, has significant potential, the company has continued to lose money, which led to the need for a further substantial fund raising in early 2017. Amphion's shareholding in Kromek had already fallen to 2% by the end of 2016 and, following the financing and subsequent rally in the share price, we decided to dispose of the remainder of our holding. Over the life of the investment Amphion invested a total of US $3.4 million dollars and realised a total gain of close to US $5 million dollars. We are pleased to have been instrumental in the development of the business and hope to see it do well in the future.

Amphion has continued to work closely with the legal advisers of Axcess International Inc. ("Axcess"), which provides Micro-WirelessTM system solutions for real-time business activity monitoring and control, to evaluate the extent to which all 13 patents in Axcess' 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, and 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. Axcess has already engaged with one law firm which is currently asserting claims against companies that are believed to be infringing one of the Company's patents. A second law firm is conducting a protracted review of the case for assisting Axcess in pursuing separate claims against another large company that is thought to be infringing a second patent.

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™ 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 2017. FireStar was recently advised that another patent will be shortly issued, bringing to five the total number of patents issued to the company in support of its product offering, and the company 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 a 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 in April 2015. Since then, the Company has borrowed additional funds under this loan facility. The sale of some of our holding in Kromek in 2016 provided US $0.9 million in financing that was used to fund working capital, the further development of m2m, and other Partner Companies. That has continued into 2017 with the sale of the remainder of the holding of Kromek shares. The support from the management team has continued but with reduced prominence and the Company has managed to continue to access the loan facility which has been secured by the holding of shares in Motif.

The liabilities on the balance sheet stood at a total of US $30,335,082 million at the end of the year, about US $1.2 million higher than at mid-year. Total assets at the end of 2016 stood at US $24,448,701 million. 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 about US $1 million. Of the remainder of the liabilities, US $14,356,476 were amounts owing to current or former board members and US $5,936,197 were amounts due to the other holders of the Company's Convertible Promissory Note ("CPN"), which was extended in February of 2016 to a maturity date at the end of 2017. The Executive Directors of the Company have entered into a Deed of Postponement with terms that postpone payments to these individuals of approximately US $4.3 million until all other debts of the Company are paid. The management team has worked closely with the main holders of notes and other claims on the Company in order to extend the maturity of these obligations to the maximum extent possible.

Earlier in the 2016 financial year/post period end, the Company entered into discussions with the estate of R. James Macaleer, the former Chairman of the Company, and has reached an agreement to extend the maturity of the Notes payable to the end of 2017, in return for the grant of 3 million warrants (1 million at 8p, 1 million at 9p, and 1 million at 10p). However, in no case will any payment be due on the Macaleer Notes until the amounts outstanding under the Company's existing loan facility are fully repaid.

When the terms of the CPN were amended in March 2016 the holders were offered an option to apply for early redemption on three specified dates. A small quantity of the CPN was redeemed on 31 May 2016 and 30 November 2016 and the next redemption date is on 30 June 2017. The amount to be redeemed at that date is approximately £55,000. The balance of the CPN is due to be repaid on 31 December 2017. The Notes are convertible into fully paid Ordinary Shares at 8 pence per Ordinary Share and pay interest at 7% if the respective Noteholder elects to be paid in Ordinary Shares, or at 5% if the respective Noteholder elects to be paid in cash or additional Notes, until conversion or redemption. In addition, for every £1 of Note held, the respective Noteholder was issued two warrants. Each warrant granted will entitle the holder to subscribe for Shares at 10 pence per Ordinary Share.

Prospects for 2017 and Beyond

Despite the setback to the Motif share price, we continue to 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 recorded on the balance sheet at the year-end. 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 Board and management of Amphion have supported the Company through several lean years, and 2016 proved to be more difficult than most. We are pleased to see our commitment to the development of m2m starting to bear fruit. Polarean is an exciting company addressing a major unmet medical need with an innovative, proprietary, and clinically useful technology that has already started to garner a following in the market.

The weighting of Amphion's shareholding in Motif relative to the total assets of the Company currently causes Amphion's share price to be correlated to the Motif share price. As a result of the further fall in the price of Motif's shares in the second half of 2016, we decided to raise more capital for Amphion in the short-term via an increase in the use of our loan facility, rather than attempt to approach the equity market for the time being. The additional loans are quite small in relation to the total value of our marketable assets and we believe this form of financing makes the most sense for our shareholders for the time being. The loan facility can be repaid at any time using Amphion shares, Motif shares or cash.

The outlook for Amphion depends increasingly on the value we can capture from our holdings in Motif and Polarean, now that we have Polarean on the path to commercialisation. We are very actively supporting the development of both Motif and Polarean and view the future of both companies with optimism. In addition, we continue to support FireStar, Axcess, and WellGen. We are excited by the prospects for the development of FireStar's new product platform and hope that we can get that on the runway in 2018. As we look to the future beyond the horizon for these particular programmes, we will begin to consider how best to build on the platform we have created and maintained, in order to capitalise on our experience and knowledge in supporting emerging life science companies.

Richard C.E. Morgan

Chief Executive Officer

1. General information

Amphion Innovations plc (the "Company") is a public limited company incorporated in the Isle of Man under the Companies Act 2006 with registered number 011472V on 29 August 2014 (formerly registered under the Companies Acts 1931 to 2004 on 7 June 2005 with registered number 113646C). The address of the registered office is Fort Anne, Douglas, Isle of Man, IM1 5PD. The principal place of business is 125 Park Avenue, 25th Floor, New York, NY, 10017, USA. The principal activity of the Company and its subsidiaries is to build shareholder value in high growth companies in the medical and technology sectors, by using a focused, hands-on company building approach, based on decades of experience in both the US and UK.

The consolidated financial statements include the accounts of Amphion Innovations plc and its three wholly owned subsidiaries, Amphion Innovations US Inc. and DataTern, Inc., which are incorporated in the United States, and MSA Holding Company which is incorporated in the Kingdom of Bahrain.

These financial statements are presented in US dollars because that is the currency of the primary economic environment in which the Company operates.

Going concern

The Group's business activities, together with factors likely to affect its future development, performance, and financial position and commentary on the Group's financial results, its cash flows, and liquidity requirements are set out in the CEO's Statement on pages 2 - 7 and elsewhere within the financial statements. In addition, note 15 to the financial statements includes the Group's objectives, policies, and processes for managing its capital, its financial risk management objectives, details of its financial instruments, and its exposures to liquidity risk and credit risk.

These financial statements have been prepared on the basis that the Group is a going concern. Although the Group made an operating loss and is in a net current liability position with a negative net asset position, it is forecasting future positive cash flows.

The Directors have prepared cash flow forecasts extending at least 12 months from the date of approval of these financial statements, which include certain key assumptions about the ability of the Group to continue to generate revenue from the realisation of the Group's investment in Partner Companies and the ability to raise external debt and equity financing.

The Directors are also of the view that other viable options to allow the Group to continue as a going concern include the reduction in its financial support to Partner Companies in the short-term, although this may have an impact on the ability of the Partner Companies to develop their businesses and raise additional financing, the reduction in its working capital requirements and the more aggressive realisation of the Group's investments in Partner Companies.

However, certain conditions exist which indicate the existence of a material uncertainty. These conditions and the Directors' considerations in respect of these matters are discussed below:

• In prior years, the Group has been able to meet its obligations through fund raising (including the issue of shares, convertible promissory notes ("CPNs") and promissory notes), from revenue generated through the provision of advisory services to its Partner Companies, and from the revenue generated from the licensing of intellectual property. During 2016 and 2015 as a result of a lack of cash being generated from these activities, the Group has had to reduce its financial support to its Partner Companies and extend the payment dates for its trade payables and its convertible and non-convertible promissory notes. The Group has also reduced its operating costs where possible, including salary and fee reductions for employees and directors, and has obtained financial support from various related parties, through the issue of promissory notes and short-term loans (see note 22 for further detail). The Group will need to continue to implement these measures and seek further financing as required. The Group's primary method of financing during 2016 and 2015 was through a second loan facility, using its holdings in Kromek Group plc and Motif Bio plc as security. Further access to additional funds under the second loan facility will be dependent on a number of factors including the appreciation in value of the ordinary shares of Motif Bio plc. In that regard in June 2014, the Group entered into a US loan facility which is secured by 7,774,678 ordinary shares of Kromek Group plc. The securities will be released upon repayment of the loan (see note 17 for further details). This facility was further extended in April 2016 to include Motif Bio plc shares as security. As of the current date, 42,461,625 shares of Motif Bio plc are pledged as security. No Kromek Group plc shares are pledged as they have been disposed of post year end. Relations with significant trade suppliers have also been strained during the year. Should the Group fail to generate sufficient cash to support its Partner Companies and to pay trade payables on a timely basis, the Group may see additional adverse effects on its Partner Companies and their valuations and in its relationship with its vendors.  

• As at 31 December 2016 the Group has US $20,186,729 (2015: US $18,647,081) in notes payable including US $7,226,059 (2015: US $8,312,180) of convertible promissory notes ("CPNs") that are due to mature on 31 December 2017 and US $5,665,269 from a loan facility payable in monthly installments from 1 March 2016 to 1 December 2017. The repayment of the amounts is subject to uncertainty due to the factors noted above and below. The Group's ability to extend repayment, if required, is also uncertain.

• The timing and ability of the Group to realise its investments in Partner Companies is subject to inherent uncertainty due to numerous factors including, but not limited to: the liquidity of the investment; market conditions being favourable for realisation whether through a listing or otherwise; potential for restrictions being imposed that may limit full realisation of investments sold; such as lock-in periods; and other factors that are outside the control of the Group. The Group will realise investments where the terms of any potential arrangement are favourable to the Group and is confident of its ability to fund near term cash requirements through this process if required.

• In December 2012, Berkeley Research Group, LLC ("BRG"), an expert consultant engaged by DataTern filed for arbitration claiming US $1,142,478 was owed to them. DataTern opposed the arbitration and vigorously contested the amount owed. In January 2015, the arbitrator found in favor of BRG and awarded them an amount totaling US $2,090,865 for the balance due and legal costs. DataTern contested the award and filed a lawsuit seeking to overturn the award. In March 2016, the Company reached a settlement with BRG for US $1,575,000. The payment terms are US $100,000 paid upon signing the settlement agreement, and further payments of US $400,000 on 30 April 2016, US $500,000 on 30 June 2016 and US $575,000 on 31 December 2016. Should Amphion fail to make a payment, the full amount of the judgement, US $2,236,286.49, will be due less any amounts paid. As a consequence of this settlement, the liability has been transferred from DataTern Inc. to Amphion Innovations plc. On 22 December 2016, there was an amendment to the settlement agreement that extended the payment terms for the last payment of US $575,000 on 31 December 2016. Under the new terms, Amphion will pay US $650,000 in monthly payments from 23 December 2016 through 30 June 2017 plus interest at 10% per annum. At 31 December 2016, US $525,000 was due BRG under the new terms. As of the date of this report, the balance has been repaid.

· In May 2017, Richard Morgan and Robert Bertoldi, Directors of the Company, entered into a deed of postponement where they have agreed to postpone the repayment of the amounts owed to them, which total US $4,300,000, until all other debts of the company are repaid.

These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business. These financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

However, after making enquiries, and considering the uncertainties described above, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons they continue to adopt the going concern basis in preparing the annual report and financial statements.

2. Significant accounting policies

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRSs"), interpretations issued by the International Financial Reporting Committee of the IASB and applicable legal and regulating requirements of Isle of Man law and the AIM rules of the London Stock Exchange.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.

Adoption of new and revised Standards

The Group has adopted the following new standards and amendments to standards with a date of initial application of 1 January 2016:

· Annual Improvements to IFRSs - 2010-2012 Cycle and 2011-2013 Cycle

The Group also elected to adopt the following two amendments early:

· Annual Improvements to IFRSs 2012-2014 Cycle, and

· Disclosure Initiative: Amendments to IAS 1.

As these amendments merely clarify the existing requirements, they do not affect the Group's accounting policies or any of the disclosures.

Standards and interpretations issued but not yet effective

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2016 and earlier application is permitted; however, the Group and Parent Company has not early applied the following new or amended standards in preparing these financial statements. The new standards potentially relevant to the Group and Parent Company are discussed below. The Group and Parent Company do not plan to adopt these standards early.

The financial statements have been prepared on the historical cost basis, except for financial instruments classified as fair value through profit and loss. The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company 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 results of subsidiaries acquired during the year are included in the consolidated Statement of Comprehensive Income from the effective date of acquisition or up to the effective date of disposal.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income, and expenses are eliminated on consolidation.

Cash and cash equivalents

Cash and cash equivalents include balances with banks and demand deposits, which have maturities of less than three months.

Investments in subsidiaries

Investments in subsidiaries are stated at cost less provisions for impairment where appropriate.

Financial instruments

The Group designates its assets and liabilities into the categories below.

(i) Financial assets and liabilities designated at fair value through profit or loss at inception: These include equity, warrants, options, and convertible promissory notes held in Partner Companies. These are financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Group's documented investment strategy. These investments have been designated at fair value through profit or loss and accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement, therefore IAS 28, Investments in Associates and Joint Ventures, has not been applied by the Group to the investments that it holds in associates.

· Recognition

All regular way purchases and sales of financial instruments are recognised on the trade date, which is the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial instruments that require delivery of assets within the period generally established by regulation or convention in the market place. Realised gains and losses on disposals of financial instruments are calculated using the first-in-first-out ("FIFO") method or the average cost per share when a capital change has occurred.

· Initial measurement

Financial instruments categorised at fair value through profit or loss, are recognised initially at fair value, with transaction costs for such instruments being recognised directly in the Statement of Comprehensive Income.

· Subsequent measurement

"Fair value" is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as "active" if transactions for the asset or liability take place with sufficient frequency and

volume to provide pricing information on an ongoing basis. The Group measures instruments quoted in an active market at a mid-price.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred.

The fair value of unlisted securities is established using valuation techniques. Whenever possible the Group uses valuation techniques which make maximum use of market-based inputs. Accordingly, the valuation methodologies and principals used most commonly by the Group are those contained in the International Private Equity and Venture Capital Valuation Guidelines (the "IPEVCV Guidelines") endorsed by the British & European Venture Capital Associations.

Assets and long positions are measured at a bid price; liabilities and securities sold short are measured at an asking price.

Given the nature of the Group's investments in seed, start-up, and early-stage companies where there are often no current and no short-term future earnings or positive cash flows it can be difficult to gauge the probability and financial impact of the success or failure of development or research activities and to make reliable cash flow forecasts. Consequently, the most appropriate approach to determine fair value is a methodology that is based on market data, that being the price of a recent investment. Where the Group considers that the price of recent investment, unadjusted, is no longer relevant, and there are limited or no comparable companies or transactions from which to infer value, the Group carries out an enhanced assessment taking into consideration the key market drivers of the investee company and the overall economic environment.

Where the Group considers that there is an indication that the fair value has changed, an estimation is made of the required amount of any adjustment from the last price of recent investment. Wherever possible, this adjustment is based on objective data from the investee company and the experience and judgment of the Group; however, any adjustment is, by its very nature, subjective. Where a deterioration in value has occurred, the Group reduces the carrying value of the investment; however, in the absence of additional financing rounds or profit generation it can be difficult to determine the value that a purchaser may place on positive developments given the potential outcome and the costs and risks to achieving that outcome and accordingly caution is applied.

Factors that the Group considers include, inter alia, technical measures such as product development phases and patent approvals, financial measures such as cash burn rate and profitability expectations, and market and sales measures such as testing phases, product launches and, market introduction.

· De-recognition

The Group de-recognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for de-recognition in accordance with IAS 39. The Group de-recognises a financial liability when the obligation specified in the contract is discharged, cancelled, or expired.

Impairment of financial assets

Financial assets, other than those classified as at fair value through profit and loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangement entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Financial liabilities are derecognised when its contractual obligations are discharged, or cancelled, or expire. Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.

Compound financial instruments are required by IAS 32 Financial Instruments: Presentation, to be separated into their liability and equity components upon initial recognition. To meet the definition of equity, the contract must be settled by a fixed amount of cash in exchange for a fixed amount of equity instruments. Where the Company issues convertible promissory notes ("CPNs") in a currency other than its functional currency, a fixed number of shares will be delivered in exchange for a variable amount of cash, therefore the definition of equity is not met. Consequently, the CPNs are classified wholly as liabilities at fair value through the Statement of Comprehensive Income. Where warrants are issued with CPNs, they are accounted for as part of the same financial instrument as the CPNs in accordance with IAS 39: Financial instruments - Recognition and Measurement, since they were entered into at the same time and in contemplation of each other, they have the same counterparty, they relate to the same risk and are non-transferable.

Prepaid expenses and other receivables

Prepaid expenses and other receivables are stated at their amortised cost which approximates their fair value. Other receivables are reduced by appropriate allowances for estimated irrecoverable amounts and do not carry any interest.

Trade and other payables

Trade and other payables are not interest bearing and are stated at amortised cost which approximates their fair value.

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Share-based payments

The Group has applied the requirements of IFRS 2 Share-based payments.

The Group issues equity-settled share-based payments to certain employees and consultants. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest. The fair value of equity-settled share-based payments attributable to the issue of equity instruments is charged against equity.

Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted based on management's best estimate for effects of non-transferability, exercise restrictions, and behavioral considerations.

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves, and retained earnings.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for, and services provided, in the normal course of business, net of VAT and other sales related taxes.

Revenue from license agreements is recognised in accordance with the substance of the agreement and when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of the revenue can be measured reliably.

Where assignment of rights for a fixed fee under a non-cancellable contract permits the licensee to exploit those rights freely and the licensor has no remaining obligations to perform, the revenue is recognised at the time of sale.

Where a license fee is contingent on the occurrence of a future event, the revenue is only recognised when it is probable that the fee will be received.

Cost of sales

Revenue related costs only include the direct fees paid for strategic advisory services for licensing and enforcing various patents.

Interest income

Interest income is recognised on an accruals basis.

Dividend income

Dividend income from investments is recognised when the shareholders' right to receive payment has been established.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Foreign currencies

The individual financial statements of each company in the Group are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each company in the Group are expressed in US dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

Transactions in currencies other than US dollars are recorded at the rates of exchange prevailing on the dates of the transactions. At each Statement of Financial Position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the Statement of Financial Position sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.

Gains and losses arising on retranslation are included in net profit or loss for the year, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity.

On consolidation, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the Statement of Financial Position date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly in which case they are translated at the rate on the date of the transaction. Exchange differences arising, if any, are recognised in the Statement of Comprehensive Income and are transferred to the Group's translation reserve.

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expenditure that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the Statement of Financial Position date.

Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the liability is settled or the asset realised.

Property, plant, and equipment

Property, plant, and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives of 3-5 years, using the straight-line method.

Intangible assets

Intangible assets comprise patents and other intellectual property with finite useful lives and are measured initially at purchase cost and are amortised on a straight-line basis over their estimated useful lives of 5-10 years.

Impairment of tangible and intangible assets

At each Statement of Financial Position date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and an intangible asset which is amortised is tested for impairment only when there is an indication that the asset may be impaired.

3. Key sources of estimation uncertainty

The preparation of the Group's 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 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 14, are all considered to be 'Partner Companies'. Those 'Partner Companies' categorised as Level 3 are defined as investments in 'Private Companies'.

Fair value of financial instruments

As described in note 2, the Directors use their judgment 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 $7.9 million (2015: US $5.8 million) in the Group and US $7.9 million (2015: US $5.8 million) in the Company.

Fair value of other receivables

The valuation of the Private Investments and other receivables from Partner Companies at 31 December 2016 assumes that the Partner Companies continue to receive ongoing funding in accordance with their 2017/2018 forecasts. If this funding is not received, this would have an adverse impact on the valuation of the investments and the ability of the Partner Companies to settle their debts, which in turn would impact the valuation of other receivables.

4. Revenue

An analysis of the Group's and Company's revenue for the period is as follows:

In July 2011, DataTern, Inc. entered into a fee agreement with McCarter & English LLP ("ME"). Under this agreement, ME will represent DataTern in the assertion of all patent infringement claims, except for claims in Texas and conflicts with existing ME clients. There were no license settlements in 2016 and 2015 relating to the ME fee agreement and as a result no fees were paid to ME.

As part of the December 2007 agreement for DataTern, Inc. to purchase certain of the intangible assets from FireStar Software, Inc. ("FireStar"), a portion of future revenues from these patents will be retained by FireStar. No amounts have become payable to FireStar to date.

5. Business and geographical segments

Business segments

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

For management purposes for 2016, the Group is organised into three business segments - advisory services, investing activities, and intellectual property. These business segments are the basis on which the Group reports its primary segment information.

Segment information about these businesses is presented below: