10th Sep 2010 07:00
Amphion Innovations plc
Interims Results for the 6 months to 30 June 2010
London and New York, 10 September 2010 - 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 2010.
Highlights
·; Restructuring of the IP licensing programme reduced revenues in H1 to $1.63 million
·; New IP licensing structure will increase profit margins from the strong pipeline of licenses under negotiation
·; Kromek made excellent progress during the period raising a further £12.3 million and completing the acquisition of California-based NOVA
·; Myconostica raised $1 million and Motif BioSciences has attracted significant interest with its new approach to drug discovery
Amphion's Chairman and Chief Executive Officer, Richard Morgan, said:
"Market conditions remain challenging. However, the actions taken to restructure our IP licensing programme which together with some external factors reduced income in the first half have allowed us to take control internally of this key source of revenue. These actions will significantly increase the contribution it will make to the Group going forward. Following this restructuring, DataTern successfully concluded one non-exclusive license agreement in August. Currently, DataTern is in discussions with an additional 14 potential licensees through the suits already filed."
Amphion Innovations plc
Charlie Morgan +1 212 210 6224
Cardew Group
Tim Robertson/ James Milton +44 20 7930 0777
Charles Stanley (Nominated Advisor)
Mark Taylor +44 20 7149 6000
Notes to the editors
About Amphion Innovations plc
Amphion Innovations plc (LSE: AMP) builds 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.
Amphion has significant shareholding in 8 Partner Companies and two specialized entities, developing proven technologies targeting substantial commercial marketplaces, each in excess of US $1 billion. Each Partner Company is chosen with the goal of achieving an exit valuation in excess of US $100 million.
On the web: www.amphionplc.com
CEO's Statement
Results
The financial results for the first six months reflect the delay in generating revenue from the IP licensing programme through the wholly owned subsidiary, DataTern, Inc. Revenue was down from approximately $4 million in the first half of last year, to $1.63 million in the first half of the current financial year to 30 June 2010, with the entire decrease attributable to the shortfall in licensing revenue. Recognising this, we took steps to reduce administrative expenses further in the first half year, offsetting the revenue shortfall to some extent but the operating loss in the first half increased to about $1.077 million versus a loss of $22,304 in the first six months of 2009.
Amphion ended the first half of the current year with $122,311 in cash. Since then, we have concluded one additional licensing deal for $400,000, and that, combined with $300,000 in additional short term loans from Board members provided the cash required for the operation of the business and some capital to provide to our Partner Companies. If, as we expect, the IP licensing programme continues to recover, we believe that the net cash flow will be sufficient to provide enough working capital to support Amphion's own operations. Our biggest challenge is to mobilise additional capital that can be made available to support our Partner Companies, and we continue to work on ways to address this need.
Our goal is to run Amphion with positive operating cash flow so that in the near term any additional capital we raise on the outside or generate from flotation or realisation can be dedicated to the further development of our eight Partner Companies, DataTern, and, in due course, a new Partner Company. In the longer term, our goal is to move beyond that phase to the point where we can distribute part or all of the cash flow from realisations as dividends to our shareholders. If our assumptions about the stronger foundation of DataTern in 2011 and beyond prove correct, we should be able to achieve the first of these goals next year.
IP Licensing Programme
As we reported in the AGM Statement in June, Amphion's IP licensing programme was running behind plan in the first half of the year due to delays in filing new claims and in obtaining settlements in existing cases. In retrospect it is clear that some uncertainty was cast over the field by the decision expected from the US Supreme Court in the Bilski case and that uncertainty in turn had a negative impact on the pace of settlements. In short, while the particular claims being asserted by Bilski were not upheld by the Supreme Court, the decision was clear and positive for us and did not detract from our patent portfolio at all. This outcome gives us renewed confidence in the validity and strength of our patents and licensing activity.
We also reported at the time of the AGM that we were taking steps to improve the structure, management and economics of the DataTern programme. During the period, John Caruso joined us to provide new leadership as CEO of DataTern. I am delighted to report that we have now completed the restructuring of the programme and expect to see the benefits begin to accrue to the company over the remainder of 2010 and beyond.
While the delay to settlements has resulted in revenue below plan for the first half of the year, it is important to note that the claims we have made in the suits we filed last year and this year remain valid. We anticipate that the majority of them will be settled in the next few months. Our confidence in the fundamentals of the programme remains solid and Amphion should benefit from the more efficient and more predictable process now in place. It is doubtful we will make up for the shortfall in revenue reported for the first six months but we believe the pace of settlements in the second six months should end up being commensurate with our original plan, even if some of the revenue falls in the first quarter of 2011. The restructuring steps we have taken will result in an improvement in contribution margin from the licensing activity of at least 25% (taking the current margin from approximately 40% to approximately 50%) and we believe there remain opportunities to improve the margin further in the medium turn. DataTern has to date signed licenses with 21 leading companies, has started discussions with an additional 14 potential licensees through the suits now pending and expects to file more suits in the months ahead. In every case our objective is to grant a license to entities using our technology on reasonable terms in order to generate a fair return on the substantial investment we and FireStar, one of our Partner Companies, have made in developing this technology.
Partner Companies
At the present time the economic and financial climate remains very uncertain and raising money for our Partner Companies continues to be very challenging. Each one has been forced to cut costs, which has resulted in the loss of certain key personnel. The Partner Companies are continually reviewing financing alternatives to traditional straight equity financing, including novel financing mechanisms and specialised partnerships of various kinds.
Despite the challenging financial climate, some of our Partner Companies have managed to raise capital and most have continued to make progress, however slow, towards important milestones. In March, Kromek successfully raised £12.3 million in an over subscribed Series D financing and in June, His Royal Highness the Duke of York officially opened the company's new headquarters manufacturing facility which is now fully operational. Kromek also announced in July the completion of the acquisition of California-based NOVA. The deal will strengthen the company's position in the imaging and detection market, boost its capabilities in the field of electronics and application-specific integrated circuit (ASIC) design, and provide Kromek with a permanent presence in the US. Kromek is already starting to work with existing NOVA customers, many of whom are large defense and technology companies that are welcome additions to Kromek's client base. We continue to believe that when market conditions permit an IPO of Kromek should be an attractive pathway to liquidity for investors and a number of banking firms are currently advising on the timing of this option.
Myconostica was also able to raise additional capital in the first half of the year, with £1 million in new financing completed in July. Myconostica continues to make progress, with revenue still low but steadily growing as its products are adopted in critical care institutions.
In recent months Motif BioSciences has presented to analysts and bankers an important evolution of the company's business plan. This has been well received and discussions are now in process with several corporations about a partnership. About two years ago we realised that the company's focus on genomics had limited commercial attraction to pharmaceutical companies and we set out to add capabilities in chemistry, biology, and other related disciplines. Motif has assembled a first class team of drug discovery scientists - former senior executives at Merck, Schering Plough, Wyeth, GlaxoSmithKline, and Bayer - in medicinal and computational chemistry, biology, toxicology, pharmacology, and is embracing a specialised approach to the development of best-in-class pharmaceutical candidates, starting only with molecules that have shown proof of concept in humans. The new strategy is designed to capitalise on the growing trend of pharmaceutical companies to complement their own drug discovery programmes with smaller and more specialised players. Motif is applying proprietary technology and expertise in genomics, biology, and medicinal chemistry to discover and develop novel genetic targets and best-in-class small molecule drugs that can be partnered out to the pharmaceutical industry for further development.
Valuation of Holdings
Amphion has not changed the underlying valuation methodology of any of our holdings, other than making mechanistic adjustments for factors such as exchange rates, market prices of public stocks, and time value of options and warrants. Investments at 30 June continue to be carried at a value determined by management using the International Private Equity and Venture Capital Valuation Guidelines. However, the Board is currently evaluating Amphion's valuation methodology, which worked well when our Partner Companies were able to undertake regular rounds of financing. In some cases it is over two years since a valuation metric was established from an external financing event and in that period the capital markets in general have fallen. We hope to be able to develop and apply a new approach to valuations at the year-end; one which takes account of general or specific trends where valuations of Partner Company holdings have become too dated.
As a general rule micro-cap valuations (for example in the iShares Russell Microcap Index ETF) have fallen about one-third from mid-2007 to mid-2010. Applying this one-third reduction to the equity portion of those holdings that would be eligible for such adjustment (and leaving the debt portion unchanged) would result in a reduction in our Net Assets by about 23% or about $12 million, which would in turn reduce our pro-forma NAV per Share from the 26.7p reported at 30 June to 20.6p. However, the Board would need to consider a change in the valuation method for each Partner Company on a separate basis as changes in the financing environment will not impact each company equally. This is a complex area and more work needs to be done before we and our advisors could feel confident in changing the basis of our approach to valuation, but hopefully this rough outline gives some indication of the scale of the changes that might emerge from such a change of approach.
Outlook
In summary we remain very cautious about the current environment, the impact it will have on the Amphion model and our ability to finance and in due course to monetise our various Partner Company holdings. We are prepared to make further reductions in administrative expenses if necessary. However, we have made positive strides in improving the structure, management and economics of the IP licensing programme (DataTern). As a result of these positive changes and the number of pending suits and settlements anticipated in the second half of the current financial year and in 2011, the Board expects an increase in DataTern revenue in the second half of the current financial year and beyond. Improved performance by DataTern should lead to improved performance in Amphion's results as the year progresses and into the years ahead, with a positive impact on Amphion and its ability to fund and grow its Partner Companies.
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Amphion Innovations plc |
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Condensed consolidated statement of comprehensive income |
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For the six months ended 30 June 2010 |
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Unaudited |
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Notes |
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Six months |
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Six months |
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|||||||||
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ended |
|
ended |
|
Year ended |
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||||||||
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|
30 June 2010 |
|
30 June 2009 |
|
31 December 2009 |
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||||||||
|
Continuing operations |
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|
US$ |
|
US$ |
|
US$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Revenue |
3 |
|
1,630,942 |
|
4,010,503 |
|
8,658,271 |
|
||||||||
|
Cost of sales |
3 |
|
(286,450) |
|
(1,398,420) |
|
(2,867,253) |
|
||||||||
|
Gross profit |
|
|
1,344,492 |
|
2,612,083 |
|
5,791,018 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Administrative expenses |
|
|
(2,421,973) |
|
(2,634,387) |
|
(6,683,955) |
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating loss |
|
|
(1,077,481) |
|
(22,304) |
|
(892,937) |
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||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Fair value gains (losses) on investments |
7 |
|
(1,535,011) |
|
(146,832) |
|
(1,792,349) |
|
||||||||
|
Interest income |
|
|
271,419 |
|
188,959 |
|
415,780 |
|
||||||||
|
Other gains and losses |
|
|
(79,688) |
|
21,043 |
|
(5,377) |
|
||||||||
|
Finance costs |
|
|
(320,211) |
|
(148,198) |
|
(332,722) |
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||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Loss before tax |
|
|
(2,740,972) |
|
(107,332) |
|
(2,607,605) |
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||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Tax on profit |
5 |
|
(150,000) |
|
(87,000) |
|
(350,005) |
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||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Loss for the period |
|
|
(2,890,972) |
|
(194,332) |
|
(2,957,610) |
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||||||||
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Other comprehensive income |
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||||||||
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Exchange differences arising on translation |
|
|
|
|
|
|
|
|
||||||||
|
of foreign operations |
|
|
(6,361) |
|
39,955 |
|
24,431 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other comprehensive income for the period |
|
|
(6,361) |
|
39,955 |
|
24,431 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Total comprehensive loss for the period |
|
|
(2,897,333) |
|
(154,377) |
|
(2,933,179) |
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||||||||
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Earnings per share |
6 |
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||||||||
|
Basic |
|
US |
$ (0.02) |
US |
$ (0.00) |
US |
$ (0.02) |
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||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Diluted |
|
US |
$ (0.02) |
US |
$ (0.00) |
US |
$ (0.02) |
|
||||||||
|
Amphion Innovations plc |
|
|
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|
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|
Condensed consolidated statement of financial position |
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At 30 June 2010 |
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
Audited |
|
|
|
Notes |
|
30 June 2010 |
|
31 December 2009 |
|
|
|
|
|
US$ |
|
US$ |
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
Intangible assets |
|
|
1,182,203 |
|
1,269,034 |
|
|
Property, plant and equipment |
|
|
18,299 |
|
15,624 |
|
|
Security deposit |
|
|
70,735 |
|
70,735 |
|
|
Investments |
7 |
|
60,647,499 |
|
60,938,995 |
|
|
|
|
|
61,918,736 |
|
62,294,388 |
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Prepaid expenses and other receivables |
|
|
2,304,083 |
|
1,701,914 |
|
|
Cash and cash equivalents |
|
|
126,875 |
|
3,266,221 |
|
|
|
|
|
2,430,958 |
|
4,968,135 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
64,349,694 |
|
67,262,523 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Trade and other payables |
|
|
2,456,830 |
|
4,390,924 |
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
Convertible promissory notes |
8 |
|
8,968,555 |
|
7,518,290 |
|
|
|
|
|
8,968,555 |
|
7,518,290 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
11,425,385 |
|
11,909,214 |
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
52,924,309 |
|
55,353,309 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
Share capital |
9 |
|
2,462,835 |
|
2,457,657 |
|
|
Share premium account |
|
|
37,866,976 |
|
37,403,821 |
|
|
Translation reserve |
|
|
(20,318) |
|
(13,957) |
|
|
Retained earnings |
|
|
12,614,816 |
|
15,505,788 |
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
52,924,309 |
|
55,353,309 |
|
|
|
|
|
|
|
|
|
|
Amphion Innovations plc |
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statement of changes in equity |
|
|
|
|
|
|
|
||||
|
For the six months ended 30 June 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
|
|
|
Share |
|
currency |
|
|
|
|
|
|
|
|
Share |
|
premium |
|
translation |
|
Retained |
|
|
|
|
Notes |
|
capital |
|
account |
|
reserve |
|
earnings |
|
Total |
|
|
|
|
US$ |
|
US$ |
|
US$ |
|
US$ |
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2009 |
|
|
2,429,342 |
|
36,291,262 |
|
(38,388) |
|
18,463,398 |
|
57,145,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
|
- |
|
- |
|
- |
|
(194,332) |
|
(194,332) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences arising on |
|
|
|
|
|
|
|
|
|
|
|
|
translation of foreign operations |
|
|
- |
|
- |
|
39,955 |
|
|
|
39,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period |
|
- |
|
- |
|
39,955 |
|
(194,332) |
|
(154,377) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of share capital |
9 |
|
18,961 |
|
185,361 |
|
- |
|
- |
|
204,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition of share-based payments |
10 |
|
- |
|
327,064 |
|
- |
|
- |
|
327,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2009 |
|
|
2,448,303 |
|
36,803,687 |
|
1,567 |
|
18,269,066 |
|
57,522,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2010 |
|
|
2,457,657 |
|
37,403,821 |
|
(13,957) |
|
15,505,788 |
|
55,353,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
|
- |
|
- |
|
- |
|
(2,890,972) |
|
(2,890,972) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences arising on |
|
|
|
|
|
|
|
|
|
|
|
|
translation of foreign operations |
|
|
- |
|
- |
|
(6,361) |
|
- |
|
(6,361) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period |
|
- |
|
- |
|
(6,361) |
|
(2,890,972) |
|
(2,897,333) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of share capital |
9 |
|
5,178 |
|
76,617 |
|
- |
|
- |
|
81,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition of share-based payments |
10 |
|
- |
|
386,538 |
|
- |
|
- |
|
386,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2010 |
|
|
2,462,835 |
|
37,866,976 |
|
(20,318) |
|
12,614,816 |
|
52,924,309 |
|
Amphion Innovations plc |
|
|
|
|
|
|
Condensed consolidated statement of cash flows |
|
|
|
|
|
|
For the six months ended 30 June 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months |
|
Six months |
|
|
|
|
ended |
|
ended |
|
Year ended |
|
|
30 June 2010 |
|
30 June 2009 |
|
31 December 2009 |
|
|
US$ |
|
US$ |
|
US $ |
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
(1,077,481) |
|
(22,304) |
|
(892,937) |
|
|
|
|
|
|
|
|
Adjustments for: |
|
|
|
|
|
|
Depreciation of property, plant and equipment |
4,846 |
|
5,288 |
|
10,296 |
|
Amortisation of intangible assets |
86,831 |
|
129,914 |
|
87,520 |
|
Adjustment of intangible assets |
- |
|
- |
|
793,861 |
|
Recognition of share based payments |
468,333 |
|
531,386 |
|
1,140,874 |
|
Increase in prepaid & other receivables |
(602,169) |
|
(783,057) |
|
(135,003) |
|
Decrease in security deposit |
- |
|
- |
|
50,959 |
|
(Decrease) increase in trade & other payables |
(1,934,094) |
|
281,783 |
|
1,297,406 |
|
Interest expense |
(320,211) |
|
(148,198) |
|
(332,722) |
|
Income tax |
(150,000) |
|
(87,000) |
|
(350,005) |
|
|
|
|
|
|
|
|
Net cash from (used in) operating activities |
(3,523,945) |
|
(92,188) |
|
1,670,249 |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received |
271,419 |
|
188,959 |
|
415,780 |
|
Proceeds from repayment of notes receivable |
- |
|
160,000 |
|
160,000 |
|
Purchases of investments |
(1,243,515) |
|
(1,479,849) |
|
(3,861,412) |
|
Purchases of intangible assets |
- |
|
- |
|
- |
|
Purchases of equipment |
(7,813) |
|
(4,967) |
|
(5,774) |
|
Acquisition of subsidiary |
- |
|
- |
|
19,824 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
(979,909) |
|
(1,135,857) |
|
(3,271,582) |
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds on issue of shares, net of share issuance costs |
- |
|
- |
|
- |
|
Proceeds on issue of promissory notes |
1,450,265 |
|
902,324 |
|
4,238,340 |
|
|
|
|
|
|
|
|
Net cash from financing activities |
1,450,265 |
|
902,324 |
|
4,238,340 |
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
(3,053,589) |
|
(325,721) |
|
2,637,007 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the period |
3,266,221 |
|
630,404 |
|
630,404 |
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes |
(85,757) |
|
60,451 |
|
(1,190) |
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period |
126,875 |
|
365,134 |
|
3,266,221 |
1. General information
The condensed consolidated interim financial statements for the six months ended 30 June 2010 are unaudited and do not constitute statutory accounts within the meaning of the Isle of Man Companies Acts 1931 to 2004. The statutory accounts of Amphion Innovations plc for the year ended 31 December 2009 have been filed with the Registrar of Companies and contain an unqualified audit report which includes an emphasis of matter reference for going concern and valuation of investments and other receivables. 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 2009 except for the impact of the adoption of the Standards and Interpretations described below.
IFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January 2009)
IFRS 8 is a disclosure Standard that has had no impact on the Group's reportable segments or on the reported results or financial position of the Group.
IAS 1 (revised 2007) Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009)
The revised Standard has introduced a number of terminology changes (including revised titles for the condensed financial statements) and has resulted in a number of changes in presentation and disclosure. However, the revised Standard has had no impact on the reported results or financial position of the Group.
3. Revenue
An analysis of the Group's revenue is as follows:
|
|
Six months ended |
|
Six months ended |
|
Year ended |
|
|
30 June 2010 |
|
30 June 2009 |
|
31 December 2009 |
|
|
US $ |
|
US$ |
|
US$ |
|
|
|
|
|
|
|
|
Continuing operations |
|
|
|
|
|
|
Advisory fees |
898,892 |
|
553,453 |
|
1,044,171 |
|
License fees |
732,050 |
|
3,457,050 |
|
7,614,100 |
|
|
|
|
|
|
|
|
|
1,630,942 |
|
4,010,503 |
|
8,658,271 |
In February 2008, DataTern Inc., a wholly owned subsidiary of the Company, entered into an agreement with IP Navigation Group, LLC which provides strategic advisory services including licensing and enforcement of various patents held by DataTern Inc. Under this agreement, LSC Holdings LLC ("LSC") could advance up to US $2,000,000 to DataTern Inc. under a promissory note to pay the expenses related to the licensing and enforcement of the patents. The promissory note has an 8% interest rate with repayment coming exclusively from the proceeds of the licensing and enforcement program. The promissory note had a balance of US $194,302 outstanding at 30 June 2010. In July 2009, the Company also entered into an agreement with LSC entitling it to subscribe to a maximum of 1,000,000 warrants in the Company of one ordinary share subject to certain milestones being met. Under the terms of the agreement, the Company will issue the warrants in tranches of 100,000 upon LSC meeting each milestone. The milestones are linked to the net proceeds received by the Group under the terms of the agreement between IP Navigation and DataTern Inc. As of 30 June 2010, the Company has issued 300,000 warrants to LSC.
3. Revenue, (continued)
During 2010, IP Navigation Group, LLC assisted in obtaining non-exclusive licenses of DataTern Inc.'s key database patents to various companies totaling US $725,000. As part of the agreement, IP Navigation Group, LLC received advisory fees of fifty percent of the gross proceeds less the repayment of expenses funded by IP Navigation Group, LLC and related interest which amounted to US $152,100, and expenses of third parties. The advisory fees payable to IP Navigation Group, LLC totaled US $286,450.
In June 2010, DataTern Inc. and IP Navigation Group LLC agreed to terminate the advisory services agreement effective as of 31 October 2010. DataTern Inc.'s obligations to IP Navigation Group LLC will be due when the gross proceeds received by DataTern Inc. after the date of the amendment exceed US $300,000 but no later than 1 November 2010. DataTern Inc. has entered into agreements with new lawyers and technical experts where they will receive 46% of the gross proceeds.
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.
4. 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 2010 |
|
30 June 2010 |
|
30 June 2010 |
|
30 June 2010 |
|
30 June 2010 |
|
|
|
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
External advisory fees |
|
898,892 |
|
- |
|
- |
|
- |
|
898,892 |
|
|
External license fees |
|
- |
|
- |
|
732,050 |
|
- |
|
732,050 |
|
|
Inter-segment fees |
|
120,000 |
|
39,565 |
|
- |
|
(159,565) |
|
- |
|
|
Total revenue |
|
1,018,892 |
|
39,565 |
|
732,050 |
|
(159,565) |
|
1,630,942 |
|
|
Cost of sales |
|
- |
|
- |
|
(286,450) |
|
- |
|
(286,450) |
|
|
Gross profit |
|
1,018,892 |
|
39,565 |
|
445,600 |
|
(159,565) |
|
1,344,492 |
|
|
Administrative expenses |
|
(706,740) |
|
(1,053,580) |
|
(821,218) |
|
159,565 |
|
(2,421,973) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
312,152 |
|
(1,014,015) |
|
(375,618) |
|
- |
|
(1,077,481) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value losses on |
|
|
|
|
|
|
|
|
|||
|
investments |
|
- |
|
(1,535,011) |
|
- |
|
- |
|
(1,535,011) |
|
|
Interest income |
|
- |
|
271,379 |
|
40 |
|
- |
|
271,419 |
|
|
Other gains and losses |
|
- |
|
(79,688) |
|
- |
|
- |
|
(79,688) |
|
|
Finance costs |
|
- |
|
(320,211) |
|
- |
|
- |
|
(320,211) |
|
|
Profit (loss) before tax |
|
312,152 |
|
(2,677,546) |
|
(375,578) |
|
- |
|
(2,740,972) |
|
|
Income taxes |
|
(150,000) |
|
- |
|
- |
|
- |
|
(150,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) after tax |
|
162,152 |
|
(2,677,546) |
|
(375,578) |
|
- |
|
(2,890,972) |
|
4. Segment information, (continued)
|
|
|
|
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 2010 |
|
30 June 2010 |
|
30 June 2010 |
|
30 June 2010 |
|
30 June 2010 |
|
|
|
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
2,237,781 |
|
64,434,932 |
|
1,273,578 |
|
(3,596,597) |
|
64,349,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
2,165,160 |
|
10,200,931 |
|
741,682 |
|
(1,682,388) |
|
11,425,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital additions |
|
2,835 |
|
1,738 |
|
3,240 |
|
- |
|
7,813 |
|
|
Depreciation |
|
2,596 |
|
1,443 |
|
807 |
|
- |
|
4,846 |
|
|
Amortisation |
- |
|
- |
|
86,831 |
|
- |
|
86,831 |
||
|
Recognition of share based |
|
|
|
|
|
|
|
|
|
||
|
payments |
|
- |
|
486,333 |
|
- |
|
- |
|
486,333 |
|
4. Segment information, (continued)
For management purposes for 30 June 2009, 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 2009 |
|
30 June 2009 |
|
30 June 2009 |
|
30 June 2009 |
|
30 June 2009 |
|
|
|
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
External advisory fees |
|
553,453 |
|
- |
|
- |
|
- |
|
553,453 |
|
|
External license fees |
|
- |
|
- |
|
3,457,050 |
|
- |
|
3,457,050 |
|
|
Inter-segment fees |
|
120,000 |
|
- |
|
- |
|
(120,000) |
|
- |
|
|
Total revenue |
|
673,453 |
|
- |
|
3,457,050 |
|
(120,000) |
|
4,010,503 |
|
|
Cost of sales |
|
- |
|
- |
|
(1,398,420) |
|
- |
|
(1,398,420) |
|
|
Gross profit |
|
673,453 |
|
- |
|
2,058,630 |
|
(120,000) |
|
2,612,083 |
|
|
Administrative expenses |
|
(505,542) |
|
(1,433,756) |
|
(815,089) |
|
120,000 |
|
(2,634,387) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
167,911 |
|
(1,433,756) |
|
1,243,541 |
|
- |
|
(22,304) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value losses on |
|
|
|
|
|
|
|
|
|||
|
investments |
|
- |
|
(146,832) |
|
- |
|
- |
|
(146,832) |
|
|
Interest income |
|
1 |
|
192,700 |
|
27 |
|
(3,769) |
|
188,959 |
|
|
Other gains and losses |
|
- |
|
21,043 |
|
- |
|
- |
|
21,043 |
|
|
Finance costs |
|
- |
|
(137,769) |
|
(14,198) |
|
3,769 |
|
(148,198) |
|
|
Profit (loss) before tax |
|
167,912 |
|
(1,504,614) |
|
1,229,370 |
|
- |
|
(107,332) |
|
|
Income taxes |
|
- |
|
- |
|
(87,000) |
|
- |
|
(87,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) after tax |
|
167,912 |
|
(1,504,614) |
|
1,142,370 |
|
- |
|
(194,332) |
|
|
|
|
|
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 2009 |
|
30 June 2009 |
|
30 June 2009 |
|
30 June 2009 |
|
30 June 2009 |
|
|
|
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
1,490,762 |
|
61,953,337 |
|
2,884,973 |
|
(1,248,874) |
|
65,080,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
931,814 |
|
889,635 |
|
2,397,470 |
|
(843,618) |
|
3,375,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital additions |
|
3,081 |
|
- |
|
1,886 |
|
- |
|
4,967 |
|
|
Depreciation |
|
2,928 |
|
2,003 |
|
357 |
|
- |
|
5,288 |
|
|
Amortisation |
- |
|
- |
|
129,914 |
|
- |
|
129,914 |
||
|
Recognition of share based |
|
|
|
|
|
|
|
|
|
||
|
payments |
|
- |
|
531,386 |
|
- |
|
- |
|
531,386 |
|
4. 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 2010 |
|
30 June 2009 |
|
|
|
US $ |
|
US $ |
|
|
|
|
|
|
|
United States |
|
390,000 |
|
390,000 |
|
United Kingdom |
|
508,892 |
|
163,453 |
|
|
|
898,892 |
|
553,453 |
The following table provides an analysis of the Group's license fees by geographical location.
|
|
License fees by |
|
|
|
geographical location |
|
|
|
Six months ended |
Six months ended |
|
|
30 June 2010 |
30 June 2009 |
|
|
US$ |
US$ |
|
United States |
725,000 |
3,457,050 |
|
Europe |
7,050 |
- |
|
|
732,050 |
3,457,050 |
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:
|
|
Carrying amount |
|
Additions to fixtures, fittings and |
||||
|
|
of segment assets |
|
equipment and intangible assets |
||||
|
|
Six months ended |
|
Six months ended |
|
Six months ended |
|
Six months ended |
|
|
30 June 2010 |
|
30 June 2009 |
|
30 June 2010 |
|
30 June 2009 |
|
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
|
|
|
|
|
|
|
|
|
United States |
48,377,095 |
|
46,624,077 |
|
6,075 |
|
4,967 |
|
United Kingdom |
15,972,599 |
|
18,456,121 |
|
1,738 |
|
- |
|
|
64,349,694 |
|
65,080,198 |
|
7,813 |
|
4,967 |
5. Income tax expense
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
From 6 April 2006, a standard rate of corporate income tax of 0% applies to Isle of Man companies, with exceptions taxable at the 10% rate, namely licensed banks in respect of deposit-taking business, companies that profit from land and property in the Isle of Man and companies that elect to pay tax at the 10% rate. No provision for Isle of Man taxation is therefore required. The Company is treated as a Partnership for U.S. federal and state income tax purposes and, accordingly, its income or loss is taxable directly to its partners.
The Company has four subsidiaries, two in the USA, one in the UK, and one in the Kingdom of Bahrain. The US subsidiaries, Amphion Innovations US Inc. and DataTern, Inc., are Corporations and therefore taxed directly. The US subsidiaries suffer US federal tax, state tax and New York City tax on their taxable net income. The UK subsidiary, Amphion Innovations UK Limited, is liable to UK Corporation tax at rates up to 30% on its taxable profits and gains.
The Group charge for the period can be reconciled to the profit per the consolidated income statement as follows:
|
|
US $ |
|
|
|
|
Loss before tax |
(2,740,972) |
|
|
|
|
Tax at the Isle of Man income tax rate of 0% |
- |
|
|
|
|
Effect of different tax rates of subsidiaries |
|
|
operating in other jurisdictions |
150 ,000 |
|
|
|
|
Current tax |
150 ,000 |
6. 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:
|
Earnings |
|
Six months ended |
|
Six months ended |
|
Year ended |
|
|
|
30 June 2010 |
|
30 June 2009 |
|
31 December 2009 |
|
|
|
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) |
|
(2,890,972) |
|
(194,332) |
|
(2,957,610) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares |
|
|
|
|
|
|
|
|
|
Six months |
|
Six months |
|
|
|
|
|
ended |
|
ended |
|
Year ended |
|
|
|
30 June 2010 |
|
30 June 2009 |
|
31 December 2009 |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares for |
|
|
|
|
|
|
|
the purposes of basic earnings per share |
|
132,449,212 |
|
130,963,672 |
|
131,459,042 |
|
|
|
|
|
|
|
|
|
Effect of dilutive potential ordinary shares: |
|
|
|
|
|
|
|
Share options |
|
419,579 |
|
236,895 |
|
421,968 |
|
Convertible promissory notes |
|
31,990,100 |
|
15,598,744 |
|
26,990,361 |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares for |
|
|
|
|
|
|
|
the purposes of diluted earnings per share |
|
164,858,891 |
|
146,799,311 |
|
158,871,371 |
Share options that could potentially dilute basic earnings per share in the future have not been included in the calculation of dilute earnings per share because they are antidilutive. 7. Investments
At fair value through profit or loss
|
|
|
30 June 2010 |
|
31 December 2009 |
||||||||
|
|
|
|
|
|
|
Unrealised |
|
|
|
|
|
Unrealised |
|
|
|
Fair Value |
|
Cost |
|
gain/(loss) |
|
Fair Value |
|
Cost |
|
gain/(loss) |
|
|
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public companies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Axcess International, Inc. |
|
2,177,141 |
|
3,851,947 |
|
(1,674,806) |
|
2,589,613 |
|
4,026,947 |
|
(1,437,334) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private companies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
FireStar Software, Inc. |
|
4,478,283 |
|
4,714,283 |
|
(236,000) |
|
4,517,283 |
|
4,751,783 |
|
(234,500) |
|
Kromek |
|
13,253,506 |
|
3,274,915 |
|
9,978,591 |
|
14,302,945 |
|
3,274,915 |
|
11,028,030 |
|
Motif BioSciences, Inc. |
|
17,960,644 |
|
10,658,022 |
|
7,302,622 |
|
17,779,810 |
|
10,472,418 |
|
7,307,392 |
|
m2m Imaging Corp. |
|
7,310,196 |
|
2,878,685 |
|
4,431,511 |
|
6,939,550 |
|
2,593,685 |
|
4,345,865 |
|
Myconostica Ltd. |
|
2,683,413 |
|
3,051,366 |
|
(367,953) |
|
2,905,464 |
|
3,051,366 |
|
(145,902) |
|
PrivateMarkets, Inc. |
|
5,746,013 |
|
4,501,013 |
|
1,245,000 |
|
5,230,102 |
|
3,985,102 |
|
1,245,000 |
|
WellGen, Inc. |
|
7,038,303 |
|
5,389,936 |
|
1,648,367 |
|
6,674,228 |
|
4,957,936 |
|
1,716,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,647,499 |
|
38,320,167 |
|
22,327,332 |
|
60,938,995 |
|
37,114,152 |
|
23,824,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
30 June 2010 |
|
31 December 2009 |
||||||||
|
|
|
|
|
|
|
Unrealised |
|
|
|
|
|
Unrealised |
|
|
|
Fair Value |
|
Cost |
|
gain/(loss) |
|
Fair Value |
|
Cost |
|
gain/(loss) |
|
|
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
US $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks |
|
41,386,414 |
|
23,275,216 |
|
18,111,198 |
|
42,852,579 |
|
23,275,216 |
|
19,577,363 |
|
Promissory notes |
|
11,419,493 |
|
11,419,493 |
|
- |
|
10,175,978 |
|
10,175,978 |
|
- |
|
Warrants & options |
|
7,841,592 |
|
3,625,458 |
|
4,216,134 |
|
7,910,438 |
|
3,662,958 |
|
4,247,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,647,499 |
|
38,320,167 |
|
22,327,332 |
|
60,938,995 |
|
37,114,152 |
|
23,824,843 |
7. Investments, (continued)
At 30 June 2010 the one publicly traded company, Axcess International, Inc. ("Axcess") is valued based on its last quoted closing price. In regard to the Group's valuation of Axcess, the Directors have assumed an orderly sale of the stock over an extended period of time and have therefore chosen not to apply a discount to the quoted market price. Equity investments in Kromek, FireStar Software, Inc., Motif BioSciences Inc., m2m Imaging Corp, Myconostica Ltd, PrivateMarkets, Inc. and WellGen, Inc. are valued using the latest offering price from recently executed financing transactions by those companies. The prices used are as follows: for Kromek £7.20 from January 2010; for FireStar Software, Inc. US $7.00 from August 2006; for Motif BioSciences, Inc. US $3.00 from April 2007; for m2m Imaging Corp. US $7.00 from May 2008; for Myconostica Ltd. £1.00 from August 2009; for PrivateMarkets, Inc. US $1.00 from March 2008; and for WellGen, Inc. US $2.50 from October 2007. Convertible promissory notes held in these companies are valued at cost. Warrants for all companies are valued at the valuation price less the warrant exercise price plus a factor for the time value of the warrant. The time value factor is based on the premise that an in-the-money ten year warrant is worth half the exercise price.
The Group's ownership percentages of the investments are as follows:
|
|
|
|
|
Fully-diluted |
|
|
|
|
|
ownership |
|
|
|
Country of incorporation |
|
% |
|
|
|
|
|
|
|
Axcess International, Inc. |
|
United States of America |
|
9.81 |
|
FireStar Software, Inc. |
|
United States of America |
|
13.78 |
|
Kromek |
|
England & Wales |
|
16.40 |
|
Motif BioSciences, Inc. |
|
United States of America |
|
32.26 |
|
m2m Imaging Corp. |
|
United States of America |
|
25.46 |
|
Myconostica Ltd. |
|
England & Wales |
|
19.03 |
|
PrivateMarkets, Inc. |
|
United States of America |
|
25.10 |
|
WellGen, Inc. |
|
United States of America |
|
15.16 |
8. Convertible promissory notes
During 2010, £899,953 of convertible promissory notes were issued of which £20,618 were subscribed for by Directors of the Company. The notes are convertible into ordinary shares of the Company at any time prior to 31 December 2013 at a conversion price of eighteen pence per ordinary share. In the event that the closing market price of the ordinary shares is equal to or greater than 25 pence per ordinary share for 25 consecutive trading dates at any time prior to 31 December 2013, the notes will automatically be converted into fully paid ordinary shares.
If the notes have not been converted, they will be repaid on 31 December 2013. Interest of 7% will be paid quarterly until the date of repayment.
For each note issued, the Company also issued 1.11 warrants. Each warrant will entitle the holder to subscribe for one ordinary share at 20 pence per ordinary share.
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.
9. Share capital
|
|
30 June 2010 |
|
|
|
|
|
|
£ |
|
|
|
|
|
Authorised: |
|
|
|
|
|
|
250,000,000 ordinary shares of 1p each |
2,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
£ |
|
US$ |
|
|
|
|
|
|
|
|
Balance as at 31 December 2009 |
132,258,897 |
|
1,322,589 |
|
2,457,657 |
|
|
|
|
|
|
|
|
Issued and fully paid: |
|
|
|
|
|
|
Ordinary shares of 1p each |
167,188 |
|
1,672 |
|
2,705 |
|
Ordinary shares of 1p each |
162,838 |
|
1,628 |
|
2,473 |
|
|
|
|
|
|
|
|
Balance as at 30 June 2008 |
132,588,923 |
|
1,325,889 |
|
2,462,835 |
During the six months ended 30 June 2010, the following changes occurred to the share capital of the Company:
On 12 January 2010, the Company issued 167,188 ordinary 1p shares at a premium of 15.25p per share (US $41,255) to Directors in lieu of 2009 fourth quarter Directors' fees.
On 25 May 2010, the Company issued 162,838 ordinary 1p shares at a premium of 14.30p per share (US $35,362) to Directors in lieu of first quarter Directors' fees.
10. Share based payments
In 2006 the Group established the 2006 Unapproved Share Option Plan ("the Plan") and it was adopted pursuant to a resolution passed on 8 June 2006. Under this plan, the Compensation Committee may grant share options to eligible employees, including Directors, to subscribe for ordinary shares of the Company. The number of Shares over which options may be granted under the Unapproved Plan cannot exceed ten percent of the ordinary share capital of the Company in issue on a fully diluted basis. The Plan will be administered by the Compensation Committee. The number of shares, terms, performance targets and exercise period will be determined by the Compensation Committee.
During 2010, 2,000,000 options have been issued under the Plan. The options issued expire after ten years from the date of grant and have a four year vesting period.
|
|
2010 |
||
|
|
|
|
Weighted |
|
|
|
|
average |
|
|
Number of |
|
exercise |
|
|
share options |
|
price (in £) |
|
|
|
|
|
|
Outstanding at beginning of period |
12,503,869 |
|
0.2000 |
|
Granted during the period |
2,000,000 |
|
0.1200 |
|
Outstanding at the end of the period |
14,503,869 |
|
0.1909 |
|
|
|
|
|
|
Exercisable at the end of the period |
9,625,132 |
|
0.2010 |
10. Share based payments, (continued)
The options are recorded at fair value on the date of grant using the Black-Scholes model. The inputs into the model are as follows:
|
|
2010 |
|
|
US$ |
|
|
|
|
Weighted average share price |
0.127 |
|
Weighted average exercise price |
0.120 |
|
Expected volatility |
60.08% |
|
Expected life |
10 years |
|
Risk free rate |
3.24% |
|
Expected dividends |
- |
Expected volatility was determined by calculating the historical volatility of the Group's share price from the date of the listing to the end of the period.
In 2010, options were granted on 28 May. The aggregate of the estimated fair values of the options is US $264,800. The Group recognized total costs of US $386,538 relating to equity-settled share based payment transactions in 2010 which were expensed in the income statements during the period.
11. Events after the balance sheet date
In July 2010, the Company made advances of US $25,000 under a promissory note from WellGen, Inc.
In August 2010, the Company made advances of US $7,661 under a promissory note from Motif BioSciences Inc.
In July and August 2010, the Company made advances of US $32,900 under a promissory note from PrivateMarkets Inc.
In July 2010, the Company made advances of US $50,000 under a promissory note from Axcess International Inc.
In July 2010, Richard Morgan, a Director of the Company, advanced $185,000 to the Company.
In August 2010, the Company was listed on Xetra on the Frankfurt Stock Exchange.
12. 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 2010, the net amount due from Motif is US $22,210.
A subsidiary of the Company has entered into an agreement with Axcess International Inc. ("Axcess") to provide advisory services. Richard Morgan and Robert Bertoldi, Directors of the Company, are also Directors of Axcess. Amphion Innovations US Inc. will receive a monthly fee of US $10,000 pursuant to this agreement. The agreement is effective until 1 March 2011 and will renew on an annual basis until terminated by one of the parties. The monthly fee is suspended for any month in which Axcess' cash balance falls below US $500,000. Amphion Innovations US Inc. received no fee during the period ended 30 June 2010.
12. Related party transactions, (continued)
A subsidiary of the Company has entered into an agreement with Kromek to provide advisory and consulting services. Richard Morgan, a Director of the Company, is also a Director of Kromek. The monthly fee under this agreement is the lesser of US $10,000 and 50% of the gross compensation paid to directors and management of Kromek in that month and can be terminated by one of the parties. The subsidiary's fee for the period ended 30 June 2010 was US $60,000. Amphion Innovations US Inc. also received US $403,703 as a fund raising fee for the period ended 30 June 2010.
A subsidiary of the Company has entered into an agreement with FireStar Software Inc. ("FireStar') to provide advisory and consulting services. Richard Morgan, a Director of the Company, is also a Director of FireStar. The annual fee under this agreement was US $120,000. The agreement expired on 31 December 2009 and the companies are negotiating a renewal.
A subsidiary of the Company has entered into an agreement with Motif BioSciences, Inc. ("Motif") to provide advisory and consulting services. Richard Morgan, a Director of the Company, is also a Director of Motif. The annual fee for the services is US $240,000. The agreement is effective until 1 April 2011 and shall automatically renew for successive one year periods. Amphion Innovations US Inc.'s fee for the period ended 30 June 2010 was US $120,000. At 30 June 2010, US $720,000 of the advisory fee remains payable by Motif.
A subsidiary of the Company has entered into an agreement with Myconostica Ltd. ("Myconostica") for Jerel Whittingham, a Director of the Company, to act as Executive Chairman of Myconostica. Richard Morgan, a Director of the Company, is also a Director of Myconostica. The monthly fee for these services is £5,000. The agreement is effective on a month to month basis subject to two months notice prior to cancellation. Amphion Innovations US Inc.'s fee for the period ended 30 June 2010 was US $45,189. The advisory and consulting services agreement expired 31 December 2009.
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 is effective until 1 November 2010 and will renew on an annual basis until terminated by either party. Amphion Innovations US Inc.'s fee for the period ended 30 June
2010 was US $90,000. At 30 June 2010, US $360,000 of the advisory fee remains payable by m2m.
A subsidiary of the Company has entered into an agreement with WellGen, Inc. ("WellGen") to provide advisory and consulting services. Richard Morgan, a Director of the Company, is also a Director of WellGen. The fee under this agreement is US $60,000 per quarter. The agreement is effective until 20 June 2011 and will renew annually for subsequent 12-month periods until terminated by either party. The subsidiary's fee for the period ended 30 June 2010 was US $120,000. At 30 June 2010, US $240,000 of the advisory fee remains payable.
A subsidiary of the Company has entered into an agreement with PrivateMarkets, Inc. ("PMI") to provide advisory services. Richard Morgan, a Director of the Company, is also a Director of PMI. The fee under this agreement is US $15,000 per quarter beginning 7 February 2007 until 31 October 2007, US $30,000 per quarter from 1 November 2007 until the successful sale of at least US $3,000,000 and thereafter, US $45,000 per quarter. This agreement is effective until 7 February 2010 and will renew annually for subsequent 12-month periods unless terminated by either party. The subsidiary's fee for the period ended 30 June 2010 was US $60,000. At 30 June 2010, US $365,000 remains payable from PrivateMarkets.
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 2010 is US $120,000.
During 2010 Richard C.E. Morgan, a Director of the Company, advanced US $100,000 to the Company. This advance is interest free and repayable on demand. The net amount payable by the Company at 30 June 2010 to Richard C.E. Morgan is US $458,206 which includes deferred salary, expenses and advances.
12. Related party transactions, (continued)
The Directors' direct ownership in the Partner Companies is as follows:
|
|
|
Fully diluted |
|
|
|
% owned by |
|
Investment company |
|
directors |
|
|
|
|
|
Axcess International, Inc. |
|
7.99% |
|
FireStar Software, Inc. |
|
1.44% |
|
Kromek |
|
1.25% |
|
Motif BioSciences, Inc. |
|
3.95% |
|
Myconostica Ltd. |
|
0.36% |
|
PrivateMarkets, Inc. |
|
2.71% |
|
WellGen, Inc. |
|
4.62% |
Related Shares:
AMP.L