We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Amphion Innovations Plc | LSE:AMP | London | Ordinary Share | GB00B0DJNP99 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.15 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMAMP
RNS Number : 8683J
Amphion Innovations PLC
18 June 2014
Amphion Innovations plc
Preliminary Results for the year to 31 December 2013
London and New York - Amphion Innovations plc (LSE: AMP) and its subsidiaries ("Amphion" or "the Group"), the developer of medical and technology businesses, today announces its preliminary results for the year ended 31 December 2013.
Chairman and CEO's Statement
2013 proved to be another challenging year for Amphion and our Partner Companies but with Kromek's flotation late in the year we managed to take an important step forward. Revenue for 2013 was US $1,016,990 (2012: US $1,395,806) while total administrative expenses were down by US $4,235,983 in 2013 compared to 2012. Total administrative expenses have two different components: the general overheads and operating costs of the parent company and the expenses incurred within and by DataTern. The latter are consolidated into the total but are dictated by the activity related to the IP licensing programme, which is discussed further below. General overhead and operating expense (i.e. excluding expenses related to DataTern) were again tightly controlled and were lower than for the previous year. DataTern expenses were also significantly lower in 2013. As a result of these changes, the operating loss for the Company was reduced to US $2,576,745 (2012: US $6,433,912). The reduction in DataTern's expenses was due to the pursuit of an appeal of the Markman ruling handed down in August of 2012 in New York. As the Company waited for its Appeal to be heard, the cases in Texas and Massachusetts were stayed, pending the ruling from the New York Federal Circuit Court of Appeals.
Further reductions in the carrying value of several investments, combined with the operating loss, resulted in a further reduction in the reported Net Asset Value ("NAV") per Share, which was GBP0.06 (US $0.10) as at 31 December 2013 compared to GBP0.09 (US $0.14) at 31 December 2012 and GBP0.08 (US $0.12) at 30 June. We continue to take a cautious approach to valuation and it is important to note that Amphion's holding of intellectual property assets continue to be valued at amortised cost, or just US $585,184 at the year end. In addition to the initial purchase of these IP assets from our Partner Company FireStar, Amphion has made additional substantial investment in these assets. That investment has been expensed as incurred and the value of those assets continues to be carried only at amortized historical cost.
Operating cash flow was again negative in 2013 although lower than in 2012. The resulting cash requirement to fund the business was raised in the form of additional loans from the directors in the amount of US $1,012,000 during the year.
Including contributions from Amphion, a total of approximately US $1.2 million was raised directly by the Partner Companies, excluding Kromek which raised GBP15 million in its IPO. During the course of 2013, Amphion contributed US $521,370 to the Partner Companies mainly in the form of various convertible loans.
Kromek
In April 2013, Kromek completed the acquisition of eV Products, a company based in Saxonburg, Pennsylvania, with a long history of leadership in the development of materials and production processes related to Cadmium Zinc Telluride ("CZT"). CZT has for a long time held the promise of direct detection of x-rays and gamma rays used in medical imaging and aviation security applications. Until recently, the cost and quality of CZT and the supply chain had not reached a point where mainstream deployment was possible. Kromek was founded and subsequent investment by Amphion and others was made on the basis of a new approach to the production of CZT, using a vapour phase technology originally developed at the University of Durham.
The acquisition of eV in April of last year brought into the group the leading producer of CZT using traditional methods, which have steadily improved over the years. While the vapour phase technology continues to hold promise, the quality and cost of CZT is now reaching a level where it can be used in mainstream medical imaging applications, such as CT (x-ray imaging using computed tomography) and SPECT (a nuclear medicine imaging technique). In November 2013, Kromek announced an exclusive multi-year development contract had been secured by eV with a top four Original Equipment Manufacturer (OEM) customer in the Computed Tomography (CT) market. Kromek is developing and supplying CZT based multispectral (colour) detectors as part of an initial 2 year programme.
These developments during the first half of 2013 laid the groundwork for the IPO that got under way in August/September and was successfully completed in early October. Kromek raised GBP15 million before expenses, as targeted. Following the IPO Kromek was able to pay down a number of loans including an amount of approximately US $750,000 due to Amphion.
Amphion holds a 10.6% equity stake in Kromek and we continue to be very actively engaged, on the board and in other ways. We believe the company has an exciting future as demonstrated in Kromek's press release of 14 April 2014 in which the company announced a second multi-year exclusive development contract with a Chinese company for CZT-based system components for their new line of SPECT medical imaging systems. We expect the valuation of the company to rise considerably as the company makes further progress and the value of the technology platform and its potential in several multi-billion markets is more fully appreciated.
Our total investment in Kromek as of 31 December 2013 was US $3.4 million and is now valued at approximately US $10 million.
Intellectual Property Licensing Programme
As noted above, most of the activity in our IP licensing programme in 2013 was geared to the preparation, filing, and hearing of the appeal to the Federal Circuit Court of Appeals ("FCCA"). The appeal was a result of the ruling that was rendered in late August 2012 by the US District Court for the Southern District of New York in the declaratory judgment actions brought by SAP and Microsoft in April 2011. DataTern's appeal was based on its belief that the New York court lacked jurisdiction and that the Markman claim construction rendered on DataTern's patents was flawed.
The oral hearing was held in early November 2013 and in April 2014, DataTern received a ruling from the FCCA which its legal advisors consider favourable. If sustained or improved as a result of further review by the Court, the ruling should, at a minimum, allow the Texas cases to proceed. DataTern has 19 defendants in three programmes, including Microsoft and SAP and our goal remains unchanged. We believe we have two good patents which have each been re-examined and reissued by the USPTO. We believe, based on the enormous amount of work done over the last 7 years that many companies, including Microsoft and SAP, have infringed on these patents. Our goal is to arrive at fair licensing agreements with these and other users of the technology in order to give DataTern and FireStar, our Partner Company that developed this technology, a fair return on the substantial investment they have made. If we are successful, we believe that the value of the net income to DataTern should be substantially in excess of its carrying value.
Building Value in Other Partner Companies
Since flotation, our basic business model has been to start and build high potential companies based on innovative and proprietary, but basically proven, technology. Our 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 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 successful business models and operating capabilities that can utilise the technology to provide innovative products and generate revenue and make profits. The bad economic climate of the last few years has demanded continued attention to the evolution of these business models so they can be adapted to a different and generally harsher market environment.
We have adjusted our model and our span of activities to the extent possible to continue to move forward in this difficult environment. Although the pace of advance remains frustratingly slow, most of our Partner Companies continue to hold promise and are making progress.
Developments within each of the Partner Companies can be found in the Partner Company Summaries section.
Financing
Financial support for Amphion over the last few years has come, for the most part, from the directors and the management team. We believe in the strength of our business model and the potential of Kromek and the other companies. We have made a substantial investment in the pursuit of good outcomes for DataTern in the form of settlements with the many companies that we believe have infringed and are continuing to infringe this important technology. If we are successful in achieving these goals then cash flow from DataTern should support our six other companies and allow us to maintain our investment in Kromek until such time as it garners the valuation we think it deserves.
Cash Position and Post Period End Financing
In June 2014 the Company was granted a loan facility by an institutional lender. The Company has drawn down an initial sum of US $2 million with a further draw down facility of up to a maximum of US $10 million, subject to the consent of each party. The funds are to be used for working capital for Amphion and its Partner Companies. The Company's expectations are that there will be cash inflows from several sources over the next six to twelve months and that this facility provides the capital needed to bridge those inflows without incurring excessive dilution. These funds will enable Amphion to continue to support its IP licensing programme and the further development of its Partner Companies.
Prospects for 2014 and Beyond
We and our advisors remain steadfast in our belief in the strength and validity of the DataTern patents. With the Appeals Court decision in hand and activity under way with that court to strengthen our hand, we expect to see some tangible progress in these programmes during the next six to twelve months.
Although we remain cautious, the recovery in the stock market and the IPO market in particular has led to an improvement in the overall climate for our business. If conditions continue to improve, we believe we should start to see a recovery in the Net Asset Value. Progress by Kromek will be a key driver of such a recovery but developments within DataTern and the other Partner Companies will be equally important.
Anthony Henfrey is not standing for re-election and as a result will retire from the Board of Directors at the AGM. Tony has served on the board for ten years and has made an outstanding contribution to the board. On behalf of all shareholders, we wish to thank Tony for his great service to the Company and wish him well for the future.
R. James Macaleer Richard C.E. Morgan Chairman Chief Executive Officer
For further information please contact:
Amphion Innovations
Charlie Morgan
+1 212 210 6224
Novella
Tim Robertson/ Ben Heath
+44 (0)20 3151 7008
Panmure Gordon Limited
Freddy Crossley/ Fred Walsh (Corporate Finance)
Adam Pollock/ Charles Leigh-Pemberton (Corporate Broking)
+44 (0)20 7866 2500
Partner Company Summaries
Axcess International provides intelligent wireless ID systems under the ActiveTrac(TM) brand for improving security, safety, and productivity in business. Its patented MicroWireless(TM) technology platform delivers local location identification, tracking, and control solutions for enterprise personnel and assets. Axcess has a portfolio of important patents on many different aspects of RFID technology and is seeking licensing agreements with companies that are using its proprietary technology. Part of that programme is a suit against Savi Technologies ("Savi") for patent infringement. That case is on hold as the patent that is the basis of the suit is being re-examined by the US Patent Office. Another part of the programme is a suit against the former patent counsel Baker & Botts LLP for negligence, breach of fiduciary duty, and fraud for acting for both Savi and Axcess on patent matters without Axcess's consent. On 15 May 2014 the jury in the Baker & Botts case returned a verdict that found that Baker & Botts had acted with negligence and was liable to Axcess for damages of US $40.5 million. That verdict followed a direction by the judge to restrict Axcess's claim to an issue of negligence which is subject to a two year statute of limitations, which prevented Axcess from collecting the damages. Axcess is currently petitioning the court to allow a verdict of breach of fiduciary duty which carries a four year statute of limitations, which would allow Axcess to collect the US $40.5 million in damages. If the petition is not successful the company will appeal.
FireStar Softwarehas developed software that empowers application-to-application electronic message exchange between corporate and other entities. FireStar's EdgeNode(TM) messaging platform and MDMI data translation technologies empower companies to exchange electronic messages without detailed technical knowledge of other exchange members. They are the only solutions that provide a cost-point that is low enough to bring Small and Medium Businesses into comprehensive data exchanges. FireStar's products offer comprehensive B2B interoperability to industries that are currently dependent on fax, telephone, and paper mail. While these technologies can be applied to almost any industry, FireStar is concentrating on the US healthcare market where there are over 1 million unaffiliated providers who require such comprehensive data exchange abilities. FireStar also has a participation in the revenue stream from DataTern's IP licensing programme and has an equity holding in PrivateMarkets.
Kromek (LSE: KMK) is an Anglo-American platform technology company that provides digital colour x-ray and gamma ray detection and imaging solutions. Its products enable direct materials identification in the security, nuclear, and medical markets. The company has operations in the United Kingdom as well as Pennsylvania and California in the United States. Selling internationally, with partnerships or distribution channels in Asia, Europe, and North America, Kromek's global customer base includes national governments and regulatory bodies, international airports, research institutes, major energy providers, and some of the world's largest technology and medical equipment groups. On 16 October 2013, Kromek successfully completed its IPO. The company raised GBP15 million before expenses through the sale of new ordinary shares at a price of 51 pence per share in an oversubscribed fundraising. After the reporting period, Kromek announced a shortfall in revenue for the year ending 30 April 2014 but reaffirmed the underlying growth dynamic including the signature of a long term contract with a Chinese manufacturer for the development of SPECT cameras for the local market. The contract provides for revenues of US $1.4 million and US $10.2 million in the Financial Years 2014-15 and 2015-16 respectively and the overall value of the contract over the next seven years is up to US $159 million.
m2m Imaging has specialised capabilities in a range of technologies that allow novel materials and design of the coils that act as receivers in MRI systems. The company's focus to date has been on preclinical applications of imaging system accessories (coils and related products). m2m's products are being developed to serve systems that range from 0.2T to 21T in field strength. m2m specialises in custom developments to specific research requirements. The company's business plan envisages a family of surface coils, volume coils, arrays, and multi element Hi B1 field uniformity BioSAW coils, some of which are available as stand-alone coils or integrated into more complete systems. m2m builds coils and coil systems for a wide range of manufacturers and has over 4000 products in use in major university and pharmaceutical labs around the world. The company plans to build on its existing presence in the preclinical market and, in due course, to develop novel coil components for the clinical imaging systems market based on the same materials science and RF technologies.
Motif BioSciences is developing novel therapeutic agents for the antibiotic crisis. MRSA (Methicillin Resistant Staphylococcus aureus) and other multi-drug resistant bacteria are now a leading cause of serious, sometimes fatal, hospital-acquired infections, and a growing cause of difficult-to-treat infections in otherwise healthy people within the community. Motif is developing a best-in-class novel antibiotic based on a lead compound with significant flaws. The company is also looking to in-license a series of first-in-class antibiotic compounds with in vivo proof of concept from a leading university. Capital is being raised to develop both programmes to preclinical candidate stage within 18 months. In March 2013, Zaki Hosny stepped down as CEO in order to pursue other opportunities but remains Deputy Chairman of the company's Board of Directors. In May 2013, Graham Lumsden joined the company as CEO. Prior to joining Motif, Mr. Lumsden was Worldwide Business Leader, Contraceptives and Osteoporosis at Merck & Co., Inc. where he previously held other international senior leadership roles as well as senior marketing positions. In June 2013, Carolyn Kong joined the company as Chief Business Officer, bringing over 25 years of extensive business development and commercial experience. In 2014, Motif strengthened its Scientific Advisory Board with the recruitment of Dr. Richard H. Ebright, Professor of Chemistry and Chemical Biology at the Waksman Institute of Microbiology, Rutgers, the State University of New Jersey, a leading expert in antibacterial drug discovery.
PrivateMarkets has shifted its focus, due to the passage of new legislation, from the financial/commodities markets to applications in the US healthcare information technology industry. In 2009, the US government passed the HITECH Act to promote and expand the adoption of electronic health information technology. The HITECH Act mandates that all 1 million US healthcare providers establish electronic health records and that interoperability between entities must be implemented by 2015. PrivateMarkets' platform technology, based in part on FireStar's message exchange technology, has capabilities that, with some adaptations, make it well suited to solving this issue - one of the most pressing problems facing the US healthcare industry today. During the course of 2013, following a number of meetings with various healthcare providers, PrivateMarkets identified a number of applications the company feels hold potential for the early adoption of its solutions. The company's goal for 2014 is to develop a business plan to address one of these areas. In August 2013, PrivateMarkets was granted US Patent 8,510,204 B2, System,
Method, and Apparatus for Trading in a Decentralized Market. A second patent is pending and expected to be issued in 2014.
WellGen is at the crossroads of food and pharmaceuticals, developing natural products with medicinal properties, backed by rigorous scientific research. WellGen's products are in development for applications in the management of chronic inflammation-based disease, consumer products, and pet products. Each of these opportunities represents a multi-billion dollar market. In November 2013, WellGen was awarded a National Institute of Health Grant of US $293,244 for WellGen's Small Business Innovation Research ("SBIR") proposal, entitled "Controlling Type 2 Diabetes with Proprietary Natural Extracts in Medicinal Foods". The experiments are now complete and WellGen is awaiting the report on the response of the rats that are a model system for type 2 diabetes. Additional development work may be needed for that indication, depending on the initial results. After the reporting period, WellGen signed an MOU with a US based sports drink company in order to collaborate on new beverages based on WellGen's proprietary Black Tea Extract product. Progress continues with development testing by the major pet care company that WellGen partnered with in 2012. If the results continue to be encouraging clinical trials are expected to begin within the next 12 months.
Hot Features
Premium
Amphion Innovations plc
Consolidated statement of comprehensive
income
For the year ended 31
December
2013
Notes
Year ended Year ended
31 December 31 December
2013 2012
------------------------------- ------------------------------
Continuing operations US $ US $
Revenue 4 1,016,990 1,395,806
Cost of sales - -
Gross profit 1,016,990 1,395,806
Administrative expenses (3,593,735) (7,829,718)
Operating loss (2,576,745) (6,433,912)
Fair value (losses)/gains
on investments 15 (3,363,558) 101,270
Interest income 8 856,564 827,557
Other gains and losses (198,206) (428,875)
Finance costs 9 (1,103,471) (1,010,813)
Loss before tax 6 (6,385,416) (6,944,773)
Tax on loss 10 3,222 (1,461)
Loss for the year (6,382,194) (6,946,234)
------------------------------- ------------------------------
Other comprehensive
income
Exchange differences arising
on translation
of foreign operations 101 3,006
Other comprehensive income
for the year 101 3,006
------------------------------- ------------------------------
Total comprehensive loss
for the year (6,382,093) (6,943,228)
=============================== ==============================
The Directors consider that all results derive from
continuing activities.
Loss per share 11
Basic US $ (0.04) US $ (0.05)
=============================== ==============================
Diluted US $ (0.04) US $ (0.04)
=============================== ==============================
Amphion Innovations plc
Company statement of comprehensive
income
For the year ended 31 December
2013
Year ended Year ended
31 December
Notes 31 December 2013 2012
-------------------------------- ----------------------------
US $ US $
Continuing operations
Administrative expenses (1,099,965) (1,455,328)
Operating loss (1,099,965) (1,455,328)
Fair value (losses)/gains on
investments 15 (3,363,558) 389,860
Interest income 8 812,170 782,923
Other gains and losses (201,906) (409,506)
Finance costs 9 (1,074,721) (1,007,108)
Loss before tax 6 (4,927,980) (1,699,159)
Tax on profit 10 - -
Loss for the year (4,927,980) (1,699,159)
-------------------------------- ----------------------------
Other comprehensive income
for the year - -
Total comprehensive loss for
the year (4,927,980) (1,699,159)
================================ ============================
The Directors consider that all results derive from
continuing activities.
Amphion Innovations plc
Consolidated statement of financial
position
At 31 December 2013
31 December 31 December
Notes 2013 2012
------------------------------- ----------------------------
US $ US $
Non-current assets
Intangible assets 12 585,184 748,048
Property, plant, and equipment 13 308 1,639
Security deposit 13,600 70,735
Investments 15 35,746,087 38,904,686
36,345,179 39,725,108
------------------------------- ----------------------------
Current assets
Prepaid expenses and other
receivables 16 3,654,196 3,541,275
Cash and cash equivalents 353,964 413,276
4,008,160 3,954,551
------------------------------- ----------------------------
Total assets 40,353,339 43,679,659
=============================== ============================
Current liabilities
16,
Trade and other payables 17 9,411,563 7,528,514
Current portion of notes
payable 18 6,308,600 6,208,600
Current portion of convertible
promissory notes 18 9,543,671 9,364,014
25,263,834 23,101,128
------------------------------- ----------------------------
Non-current liabilities
Notes payable 18 1,012,000 -
1,012,000 -
------------------------------- ----------------------------
Total liabilities 26,275,834 23,101,128
=============================== ============================
Net assets 14,077,505 20,578,531
=============================== ============================
Equity
Share capital 19 2,693,319 2,682,757
Share premium account 36,042,868 36,009,331
Translation reserve (13,396) (13,497)
Retained earnings (24,645,286) (18,100,060)
Total equity 14,077,505 20,578,531
=============================== ============================
The financial statements were approved by the Board of Directors and
authorised for issue on
17 June 2014. They were signed on
its behalf by:
Director Director
R. James Macaleer Robert J. Bertoldi
Amphion Innovations plc
Company statement of financial
position
At 31 December 2013
Notes 31 December 2013 31 December 2012
-------------------------------- ---------------------------
US$ US$
Non-current assets
Security deposit - 70,735
Investments 15 34,214,717 37,373,316
Investment in subsidiaries 14 683,741 683,741
34,898,458 38,127,792
-------------------------------- ---------------------------
Current assets
Prepaid expenses and other receivables 16 4,815,932 5,269,685
Cash and cash equivalents 333,131 399,013
5,149,063 5,668,698
-------------------------------- ---------------------------
Total assets 40,047,521 43,796,490
================================ ===========================
Current liabilities
16,
Trade and other payables 17 3,726,887 2,708,600
Current portion of notes payable 18 6,308,600 6,208,600
Current portion of convertible
promissory notes 18 9,543,671 9,364,014
19,579,158 18,281,214
-------------------------------- ---------------------------
Total liabilities 19,579,158 18,281,214
================================ ===========================
Net assets 20,468,363 25,515,276
================================ ===========================
Equity
Share capital 19 2,693,319 2,682,757
Share premium account 36,042,868 36,009,331
Retained earnings (18,267,824) (13,176,812)
Total equity 20,468,363 25,515,276
================================ ===========================
The financial statements were approved by the Board
of Directors and authorised
for issue on 17 June 2014. They were signed on its
behalf by:
Director Director
R. James Macaleer Robert J. Bertoldi
Amphion Innovations
plc
Consolidated statement of changes
in equity
For the year ended 31
December
2013
Share
Share premium Translation Retained
Notes capital account reserve earnings Total
------------------ -------------------- ------------------- ------------------ ---------------
US $ US $ US $ US $ US $
Balance at 31
December
2011 2,498,749 35,652,903 (16,503) (11,549,002) 26,586,147
Loss for the year - - - (6,946,234) (6,946,234)
Other comprehensive income
for the year - - 3,006 - 3,006
-----------------
Total comprehensive
loss for the year - - 3,006 (6,946,234) (6,943,228)
----------------- -------------------- ------------------- ------------------ ---------------
Issue of share
capital 19 184,008 377,160 - - 561,168
Incremental costs
directly
attributable
to issue of
shares 20 - (20,732) - - (20,732)
Recognition of
share-based
payments 22 - - - 395,176 395,176
Balance at 31
December
2012 2,682,757 36,009,331 (13,497) (18,100,060) 20,578,531
Loss for the year - - - (6,382,194) (6,382,194)
Other comprehensive income
for the year - - 101 - 101
-----------------
Total comprehensive
loss for the year - - 101 (6,382,194) (6,382,093)
----------------- -------------------- ------------------- ------------------ ---------------
Issue of share
capital 19 10,562 33,537 - - 44,099
Recognition of
share-based
payments 22 - - - (163,032) (163,032)
Balance at 31
December
2013 2,693,319 36,042,868 (13,396) (24,645,286) 14,077,505
================= ==================== =================== ================== ===============
Amphion Innovations plc
Company statement of changes
in equity
For the year ended 31 December
2013
Share
Share premium Retained
Notes capital account earnings Total
---------------- -------------------- ----------------- ----------------
US $ US $ US $ US $
Balance at 31 December
2011 2,498,749 35,652,903 (11,872,829) 26,278,823
Loss for the year - - (1,699,159) (1,699,159)
Total comprehensive loss
for the year - - (1,699,159) (1,699,159)
---------------------- -------------------- ----------------- ----------------
Issue of share capital 19 184,008 377,160 - 561,168
Incremental costs directly
attributable
to issue of shares 20 - (20,732) - (20,732)
Recognition of share-based
payments 22 - - 395,176 395,176
Balance at 31 December
2012 2,682,757 36,009,331 (13,176,812) 25,515,276
Loss for the year - - (4,927,980) (4,927,980)
Total comprehensive loss
for the year - - (4,927,980) (4,927,980)
---------------------- -------------------- ----------------- ----------------
Issue of share capital 19 10,562 33,537 - 44,099
Recognition of share-based
payments 22 - - (163,032) (163,032)
Balance at 31 December
2013 2,693,319 36,042,868 (18,267,824) 20,468,363
====================== ==================== ================= ================
Amphion Innovations plc
Consolidated cash flow statement
For the year ended 31 December 2013
Year ended Year ended
31 December 31 December
Notes 2013 2012
----------------------- ----------------------
US $ US $
Operating activities
Operating loss (2,576,745) (6,433,912)
Adjustments for:
Depreciation of property, plant,
and equipment 13 1,331 8,697
Amortisation of intangible assets 12 162,864 173,662
Recognition of share-based payments (118,933) 440,116
Decrease in security deposit 57,135 -
(Increase)/decrease in prepaid and
other receivables (112,921) 223,015
Increase in trade and other payables 1,983,049 3,231,260
Interest expense (1,103,471) (1,010,813)
Other gains and losses 2,500 -
Income tax 3,222 (1,461)
Net cash used in operating activities (1,701,969) (3,369,436)
----------------------- ----------------------
Investing activities
Interest received 856,564 827,557
Purchases of investments (204,959) (309,521)
Purchases of equipment 13 - (963)
Proceeds from sale of furniture 1,200 2,400
Adjustment to note payable for foreign
exchange rate 179,657 373,447
Net cash from investing activities 832,462 892,920
----------------------- ----------------------
Financing activities
Proceeds on issue of promissory notes 18 1,012,000 2,708,600
Proceeds on issue of shares, net 19 - 495,496
Net cash from financing activities 1,012,000 3,204,096
----------------------- ----------------------
Net increase in cash and cash equivalents 142,493 727,580
Cash and cash equivalents at the
beginning of the year 413,276 114,014
Effect of foreign exchange rate changes (201,805) (428,318)
Cash and cash equivalents at the
end of the year 353,964 413,276
======================= ======================
Amphion Innovations plc
Company cash flow statement
For the year ended 31 December 2013
Year ended Year ended
31 December 31 December
Notes 2013 2012
------------------------ --------------------------
Operating activities US $ US $
Operating loss (1,099,965) (1,455,328)
Adjustments for:
Recognition of share-based payments (118,933) 440,116
Decrease in security deposit 70,735 -
Decrease/(increase) in prepaid and
other receivables 453,753 (2,229,800)
Increase in trade and other payables 1,118,287 1,002,497
Interest expense (1,074,721) (1,007,108)
Net cash used in operating activities (650,844) (3,249,623)
------------------------ --------------------------
Investing activities
Interest received 812,170 782,923
Purchases of investments (204,959) (309,521)
Adjustment to note payable for foreign
exchange rate 179,657 373,447
Net cash from investing activities 786,868 846,849
------------------------ --------------------------
Financing activities
Proceeds on issue of promissory notes 18 - 2,708,600
Proceeds on issue of shares, net 19 - 495,496
Net cash from financing activities - 3,204,096
------------------------ --------------------------
Net increase in cash and cash equivalents 136,024 801,322
Cash and cash equivalents at the
beginning of the year 399,013 7,197
Effect of foreign exchange rate changes (201,906) (409,506)
Cash and cash equivalents at the
end of the year 333,131 399,013
======================== ==========================
1. General information
Amphion Innovations plc (the "Company") is a public limited company incorporated in the Isle of Man 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 330 Madison Avenue, 6(th) Floor, New York, NY, 10017, USA. The principal activity of the Company and its subsidiaries (the "Group") 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 four wholly owned subsidiaries, Amphion Innovations US Inc. and DataTern, Inc., which are incorporated in the United States, Amphion Innovations UK Ltd., which is incorporated in the United Kingdom, 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 Chairman and CEO's Statement on pages 1-4 and elsewhere within the financial statements. In addition, note 16 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 is loss making and in a net current liabilities 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 licensing of intellectual property and the realization of the Group's investment in Partner Companies.
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 finance; the reduction in its working capital requirements; or from the sale of its intellectual property.
However, certain conditions exist which indicate the existence of a material uncertainty. These conditions and the Director's considerations in respect of these matters are discussed below:
-- In prior years, the Group has been able to meet its obligations through fund raising (issue of shares and convertible promissory notes ("CPNs")), 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 2013 and 2012 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 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 24 for further detail). The Group will continue to implement these measures and seek further financing as required. In June 2014, the Group entered into a US $2 million loan which is secured by the holdings in Kromek Group plc (see note 25 for further details). The progress of many of the Partner Companies has, as a result of reduced financial support from the Group and current economic conditions, been adversely impacted, resulting in a reduction in their valuations (see note 15 for further detail). 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 2013 the Group has US $16,864,271 in notes payable including US $9,543,671 of convertible promissory notes ("CPNs") that were due to mature on 31 December 2013. In January 2014 the terms of the CPNs were amended and the repayment date was extended to 31 December 2015 (see note 18 for further details). In March 2013 the repayment date of US $6,308,600 of the notes payable was extended from 31 December 2013 to 31 December 2014 (see note 24 for further details). However, the Directors of the Company agreed to a Deed of Postponement, as part of a loan facility, that defers the repayment of any debt to Directors until the loan facility has been paid in full (see note 25).
1. General information, (continued)
-- 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.
-- One of the Group's wholly owned subsidiary companies, DataTern Inc., ("Datatern") is subject to lawsuits which were brought by Microsoft Corporation ("Microsoft") and SAP AG, and SAP America, Inc. ("SAP") in April 2011. In December 2012, a summary judgment was entered in the lawsuits under which it was ruled that Microsoft and SAP do not infringe on the DataTern patents. DataTern and its legal team, supported by their extensive team of technical and patent experts, strongly refuted the basis for the summary judgment and filed an appeal. In April 2014, DataTern received a favourable decision on the appeal. The Group believes that the appeal ruling will allow DataTern to continue to try to reach equitable licensing agreements with the many companies that are infringing their patents. The Group is looking for litigation financing to continue to pursue the cases.
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") as issued by the International Accounting Standards Board ("IASB"), 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.
In accordance with the transitional provisions of IFRS 13, the Group has applied the new definition of fair value.
As a result, the Group has changed the valuation approach for financial assets and financial liabilities measured at fair value for which a quoted price in an active market is available. Management concluded that mid-market prices for such instruments are representative of fair value and generally to use mid-market prices for such instruments. In 2012, such financial assets were measured at bid price and such financial liabilities at asking price. The change in accounting policy did not have a significant impact on the measurement of the Group's assets and liabilities.
The Group has included new disclosures in the financial statements, which are required under IFRS 13. These new disclosure requirements are not included in the comparative information. However to the extent that disclosures were required by other standards before the effective date of IFRS 13, the Group has provided the relevant comparative disclosures under those standards.
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 following Adopted IFRSs have been issued but have not been applied in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:
-- Amendments to IAS 27, Separate Financial Statements (mandatory for year commencing on or after 1 January 2014)
-- Amendments to IFRS 10, Consolidated Financial Statements (mandatory for year commencing on or after 1 January 2014)
-- Amendments to IAS 32, Financial Instruments: Presentation (mandatory for year commencing on or after 1 January 2014)
-- IFRS 9 Financial Instruments (to be advised)
-- Amendments to IAS 36, Recoverable Amount Disclosures for Non-Financial Assets (applicable for year commencing on or after 1 January 2014)
-- Amendments to IAS 19, Employee Benefits (applicable for year commencing on or after 1 July 2014)
2. Significant accounting policies, (continued)
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 has the power to govern the financial and operating policies of any entity so as to obtain benefits from its activities.
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, where appropriate, provisions for impairment.
Financial instruments
The Group designates its assets and liabilities into the categories below in accordance with IAS 39 Financial instruments: Recognition and Measurement.
(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, 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.
-- 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
Policy applicable from 1 January 2013
"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.
2. Significant accounting policies, (continued)
Financial instruments, (continued)
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 Fund used 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.
Policy applicable before 1 January 2013
"Fair value" is the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date.
When available, then the Group measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as "active" if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm's length basis.
If a market for a financial instrument is not active, then the Group establishes fair value using a valuation technique. Valuation techniques include using recent arm's length transaction between knowledgeable, willing parties (if they are available), reference to the current fair value of other instruments that are substantially the same, discounted cash flow analyses and option pricing models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Group, incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument.
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 date 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.
2. Significant accounting policies, (continued)
Financial instruments, (continued)
-- 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.
Convertible promissory notes
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. However, since the Company issued the 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. The warrants that were issued with the CPNs have been 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.
2. Significant accounting policies, (continued)
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 balance 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 overseas 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.
2. Significant accounting policies, (continued)
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 balance sheet 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 15, 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 $20.2 million (2012: US $35.7 million) in the Group and US $18.6 million (2012: US $34.1 million) in the Company.
3. Key sources of estimation uncertainty, (continued)
Fair value of other receivables
As described in note 2, other receivables are stated at their amortised cost which approximates their fair value and are reduced by appropriate allowances for estimated irrecoverable amounts and do not carry any interest. Note 16 describes how the Group mitigates the counterparty credit risk associated with advisory fees due from Partner Companies including those that are past due at 31 December 2013. The recovery of the advisory fees due at 31 December 2013 of US $1.4 million (2012: US $1.6 million) is dependent on a number of uncertain factors including the ability of the Partner Companies to raise finances (through current investors and new financing rounds) in order to support their future growth plans and therefore generate enough cash to be able to settle any outstanding debts.
The valuation of the Private Investments and other receivables from Partner Companies at 31 December 2013 assumes that the Partner Companies continue to receive ongoing funding in accordance with their 2014/2015 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:
Group Company Group Company
Year ended Year ended Year ended Year ended
31 December
2013 31 December 2013 31 December 2012 31 December 2012
---------------- --------------------------------- ----------------- ---------------------------
US $ US $ US $ US $
Continuing
operations
Advisory fees 939,490 - 695,806 -
License fees 77,500 - 700,000 -
Fee income 1,016,990 - 1,395,806 -
================ ================================= ================= ===========================
A provision for doubtful accounts has been set up for US $480,000 for the advisory fees accrued from Partner Companies in 2013 and US $480,000 of bad debt expense was recognized in the statement of comprehensive income.
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 2013 and 2012 relating to the ME fee agreement and as a result no fees were paid to ME. In addition, ME was engaged to represent DataTern, Inc. in connection with the lawsuit filed by Microsoft Corporation and SAP AG and SAP America, Inc. in April 2011.
In September 2011, The Davis Firm, PC was engaged to represent DataTern, Inc. in the patent infringement cases in Texas. DataTern paid the Davis Firm, PC approximately US $234,000 during the course of the engagement. At the time DataTern terminated the Davis Firm, PC, they believed US $133,000 was owed to the Davis Firm, PC. The Davis Firm, PC claimed that US $280,000 was owed and in January 2013, they commenced a legal action to collect their fees. In February 2014, the parties negotiated a settlement where DataTern has to pay The Davis Firm, PC US $150,000 over 12 months starting 15 March 2014.
In September 2012, Braden, Varner & Aldous, P.C., was engaged to represent DataTern, Inc. in the patent infringement cases in Texas. In September 2013, Braden, Varner & Aldous, P.C. reduced their hourly rate in consideration for a partial contingency on the Texas cases and the Microsoft matters. Under the contingent fee agreement, Braden, Varner & Aldous, P.C. will receive 15% of any individual settlement up to US $500,000 and 25% on settlements above US $500,000 on the Texas cases. If the contingent fee from Texas does not equal 4x return on their total fee, Braden, Varner & Aldous, P.C. will make up the difference on a contingent fee with 5% from any settlements or recoveries on the Microsoft matters up to 4x return on their hourly fee. Prior to the later of 31 December 2013, or 14 days after the ruling on the NY appeal, but no later than 30 June 2014, DataTern Inc. can cancel the contingent fee portion of this agreement if it pays all time accrued at the standard hourly rates and by paying a bonus of 20% of the total time billed. Thereafter, the contingent fee agreement cannot be canceled without agreement between the parties. In February 2014, the engagement was moved to Forshey Prostok, LLP along with the move of one of the partners.
In December 2012, Berkeley Research Group, LLC ("Berkeley"), an expert consultant engaged by DataTern, filed for arbitration claiming US $1,142,478 was owed to them. DataTern has opposed the arbitration and vigorously contested the amount owed. As of 31 December 2013, the arbitration is still pending.
As part of the agreement for DataTern, Inc. to purchase certain of the intangible assets in December 2007, a portion of future revenues from these patents will be retained by FireStar Software, Inc. No amounts have become payable to FireStar Software, Inc. to date.
5. 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. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required an entity to identify two sets of segments. There has been no change to the identification of the Group's reportable segments as a result of the adoption of IFRS 8.
For management purposes for 2013, 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:
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Year ended Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December 31 December
2013 2013 2013 2013 2013
US $ US $ US $ US $ US $
REVENUE
External
advisory fees 939,490 - - - 939,490
External license
fees - - 77,500 - 77,500
Inter-segment
fees - - - - -
---------------------- ----------------------
Total revenue 939,490 - 77,500 - 1,016,990
Cost of sales - - - - -
---------------------- ---------------------- ---------------------- ---------------------- -----------------------
Gross
profit/(loss) 939,490 - 77,500 - 1,016,990
Administrative
expenses (1,201,239) (1,102,030) (1,290,466) - (3,593,735)
---------------------- ---------------------- ----------------------
Segment result (261,749) (1,102,030) (1,212,966) - (2,576,745)
Fair value
losses on
investments - (3,363,558) - - (3,363,558)
Interest income - 856,505 59 - 856,564
Other gains and
losses 1,200 (201,906) 2,500 - (198,206)
Finance costs - (1,074,721) (28,750) - (1,103,471)
Loss before tax (260,549) (4,885,710) (1,239,157) - (6,385,416)
Income taxes (583) 3,479 326 - 3,222
---------------------- ---------------------- ----------------------
Loss after tax (261,132) (4,882,231) (1,238,831) - (6,382,194)
OTHER
INFORMATION
Segment assets 3,706,645 40,323,494 627,489 (4,304,289) 40,353,339
Segment
liabilities 5,659,385 19,599,812 4,637,185 (3,620,548) 26,275,834
Capital
additions - - - - -
Depreciation 695 - 636 - 1,331
Amortisation - - 162,864 - 162,864
Recognition of
share-based
payments - (118,933) - - (118,933)
5. Business and geographical segments, (continued)
Business segments (continued)
For management purposes for 2012, the Group was also organised into three business segments - advisory services, investing activities, and intellectual property.
Advisory Investing Intellectual
services activities property Eliminations Consolidated
Year ended Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December 31 December
2012 2012 2012 2012 2012
US $ US $ US $ US $ US $
REVENUE
External
advisory fees 695,806 - - - 695,806
External license
fees - - 700,000 - 700,000
Inter-segment
fees - - - - -
---------------------- ----------------------
Total revenue 695,806 - 700,000 - 1,395,806
Cost of sales - - - - -
---------------------- ---------------------- ---------------------- --------------------- ----------------------
Gross
profit/(loss) 695,806 - 700,000 - 1,395,806
Administrative
expenses (2,248,507) (1,633,510) (3,947,701) - (7,829,718)
---------------------- ---------------------- ----------------------
Segment result (1,552,701) (1,633,510) (3,247,701) - (6,433,912)
Fair value gains
on investments - 64,493 - 36,777 101,270
Interest income - 827,400 157 - 827,557
Other gains and
losses (19,369) (409,506) - - (428,875)
Finance costs - (1,007,108) (3,705) - (1,010,813)
Loss before tax (1,572,070) (2,158,231) (3,251,249) 36,777 (6,944,773)
Income taxes (1,085) - (376) - (1,461)
---------------------- ---------------------- ----------------------
Loss after tax (1,573,155) (2,158,231) (3,251,625) 36,777 (6,946,234)
OTHER
INFORMATION
Segment assets 3,611,019 44,075,951 791,482 (4,798,793) 43,679,659
Segment
liabilities 5,346,962 18,306,871 3,562,347 (4,115,052) 23,101,128
Capital
additions - - - - -
Depreciation 2,580 4,323 1,794 - 8,697
Amortisation - - 173,662 173,662
Recognition of
share-based
payments - 440,116 - - 440,116
5. Business and geographical segments, (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 external advisory fees by geographical location of the investment:
External advisory fees by
geographical location
----------------------------
2013 2012
US $ US $
United States 480,000 480,000
United Kingdom 459,490 215,806
939,490 695,806
============= =============
The following table provides an analysis of the Group's external license fees by geographical location:
External license
fees by
geographical location
-------------------------
2013 2012
US $ US $
United States 77,500 700,000
Europe - -
77,500 700,000
=========== ============
The following is an analysis of the carrying amount of segment assets and capital additions 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
-------------------------- ---------------------------------------
2013 2012 2013 2012
US $ US $ US $ US $
United States 24,770,482 26,665,612 - -
United Kingdom 15,582,857 17,014,047 - 963
40,353,339 43,679,659 - 963
============ ============ =================== ==================
6. Loss before tax
Loss before tax has been arrived at after crediting/(charging) the following gains and losses:
Group Company Group Company
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2013 2013 2012 2012
US $ US $ US $ US $
------------ ------------ ------------ ------------
Net foreign exchange
losses (201,906) (201,906) (431,275) (409,506)
============ ============ ============ ============
Change in fair value
of financial assets
designated as at
fair value through
profit or loss (3,363,558) (3,363,558) 101,270 389,860
============ ============ ============ ============
Depreciation of
equipment 1,331 - 8,697 -
============ ============ ============ ============
Amortisation of
intangible assets 162,864 - 173,662 -
Auditors' remuneration
- audit services 123,728 49,376 107,563 33,454
============ ============ ============ ============
Auditors' remuneration
-- taxation services - - - -
7. Staff costs
The average monthly number of employees (including Executive Directors) was:
2013 2012
Number Number
Amphion Innovations plc, Amphion
Innovations
US Inc., and DataTern, Inc.
(some employees
and costs are shared) 4 6
Amphion Innovations UK Ltd. 0 1
Total for the Group 4 7
======= =======
Group Company Group Company
2013 2013 2012 2012
Their aggregate remuneration comprised: US $ US $ US $ US $
Wages and salaries 907,885 136,772 1,467,286 472,353
Social security costs 12,587 2,058 52,059 5,149
Other pension costs (see note 23) - - 20,918 -
920,472 138,830 1,540,263 477,502
============== ======== =============== ========
8. Interest income
Group Company Group Company
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2013 2013 2012 2012
------------ ------------ ------------ ------------
US $ US $ US $ US $
Interest income:
Bank deposits 79 20 206 29
Investments 856,485 812,150 827,351 782,894
Other - - - -
856,564 812,170 827,557 782,923
============ ============ ============ ============
At 31 December 2013, the receivable for accrued interest income from Partner Companies has been reduced by a provision for doubtful debts of US $792,191 (2012: US $579,220).
9. Finance costs
Group Company Group Company
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2013 2013 2012 2012
------------ ------------ ------------ ------------
US $ US $ US $ US $
Interest on promissory
notes 1,103,471 1,074,721 1,010,813 1,007,108
============ ============ ============ ============
10. Income tax expense
Group Group
Year ended Year ended
31 December 2013 31 December 2012
------------------------------ ------------------------------
US $ US $
Isle of Man income tax - -
Tax on US subsidiaries 257 1,461
Tax on UK subsidiary (3,479) -
Current tax (3,222) 1,461
============================== ==============================
From 6 April 2006, a standard rate of corporate 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 (2012: US $nil). 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 Ltd., is liable to UK Corporation tax at rates of up to 24 on its taxable profits and gains.
The Group charge for the year can be reconciled to the profit per the consolidated income statement as follows:
2013 2012
US $ US $
Loss before tax (6,385,416) (6,944,773)
=========================== ===========================
Tax at the Isle of Man income tax rate of 0% - -
Effect of different tax rates of subsidiaries
operating in other jurisdictions (3,222) 1,461
Current (refund)/tax (3,222) 1,461
=========================== ===========================
11. 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
Year ended Year ended
31 December 31 December
2013 2012
------------ ------------
US $ US $
Loss for the purposes of basic and
diluted earnings per share (6,382,194) (6,946,234)
============ ============
Number of shares
Year ended Year ended
31 December
31 December 2013 2012
------------
Weighted average number of ordinary
shares for
the purposes of basic earnings per
share 146,285,723 135,993,928
Effect of dilutive potential ordinary
shares:
Share options - -
Convertible promissory notes 31,990,100 31,990,100
Weighted average number of ordinary
shares for
the purposes of diluted earnings
per share 178,275,823 167,984,028
================= ============
Shareoptions that could potentially dilute basic earnings per share in the future have not been included in the calculation of diluted earnings per share because they are antidilutive.
Loss per share
Year ended Year ended
31 December 31 December
2013 2012
--------------------------- ------------------
US $ US $
Basic (0.04) (0.05)
=========================== ==================
Diluted (0.04) (0.04)
=========================== ==================
12. Intangible assets
Patents, software,
trademark, and
copyright
--------------------------------------------
COST US $
At 1 January 2012 1,610,489
Additions -
At 1 January 2013 1,610,489
Additions -
At 31 December
2013 1,610,489
--------------------------------------------
AMORTISATION
At 1 January 2012 688,779
Charge for the
period 173,662
At 1 January 2013 862,441
Charge for the
period 162,864
At 31 December
2013 1,025,305
--------------------------------------------
CARRYING AMOUNT
At 31 December
2013 585,184
============================================
At 31 December
2012 748,048
============================================
The intangible assets include certain intellectual property assets which were acquired on 20 December 2007 in a transaction between Amphion Innovations plc, DataTern, Inc. ("DataTern"), a wholly owned subsidiary of Amphion Innovations plc, and FireStar Software, Inc. ("FireStar"), a company in which Amphion Innovations plc holds an investment. The assets were purchased for the following consideration: discharge of debtor of US $415,000 and assumption by Amphion of certain third party payables totaling approximately US $1.8 million. In 2009, settlements were made with certain third parties which resulted in a decrease of US $793,861 in payables assumed by Amphion and as a result intangible assets acquired from FireStar were adjusted for the amount of the decrease. Under the terms of the purchase, FireStar retained an interest of 48.29% of any future distributions on the 502 Patent and 24.14% of any future distributions on the 402 and 077 Patents. In August 2012, the terms were amended so that FireStar will retain an interest of 5.5% of gross settlements for the first US $40 million of gross settlements. For gross settlements between US $40 million and up to US $80 million, payments to FireStar will be 11% of gross
settlements. For settlements above US $80 million, payments to FireStar from DataTern will be 12.1% of gross settlements. No amounts were due to FireStar at the year end (2012: US $nil).
13. Property, plant, and equipment
Group Company
Property, plant, Property, plant,
and equipment and equipment
------------------------- ------------------------------
COST US $ US $
At 1 January 2012 69,539 19,986
Additions 963 -
------------------------- ------------------------------
At 1 January 2013 70,502 19,986
Additions - -
At 31 December 2013 70,502 19,986
------------------------- ------------------------------
ACCUMULATED DEPRECIATION
At 1 January 2012 60,215 19,986
Charge for the period 8,697 -
Exchange difference (49) -
------------------------- ------------------------------
At 1 January 2013 68,863 19,986
Charge for the period 1,331 -
Exchange difference - -
At 31 December 2013 70,194 19,986
------------------------- ------------------------------
CARRYING AMOUNT
At 31 December 2013 308 -
========================= ==============================
At 31 December 2012 1,639 -
========================= ==============================
14. Investments in subsidiaries
Details of the Company's subsidiaries at 31 December 2013 and 2012 are as follows:
Place of
Proportion Proportion
incorporation of of
ownership voting power
Name of (or registration) interest held Share
Principal
subsidiary and operation 2013 2012 2013 2012 Class activity
--------------- ------------------- ----- ------ ----- ------ --------- ----------------
% % % %
Consolidated
Amphion
Innovations Delaware, Advisory
US Inc. USA 100 100 100 100 Common services
Amphion
Innovations England & Advisory
UK Ltd. Wales 100 100 100 100 Ordinary services
Intellectual
DataTern, Inc. Texas, USA 100 100 100 100 Common property
MSA Holding
Company Kingdom of
BSC Bahrain 100 100 100 100 Ordinary Investments
The investments in subsidiaries are all stated at cost less any provision for impairment where appropriate. Amphion Innovations UK Ltd. and MSA Holding Company BSC were dormant in 2013.
15. Investments
At fair value through profit or loss
Group Company
------------------------------------------------------------------------ -----------------------------------------------------------------------
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
----------------- ----------------- --------------- ----------------- ----------------- ----------------- -------------- -----------------
US $ US $ US $ US $ US $ US $ US $ US $
At 1 January
2013 - 3,225,783 35,678,903 38,904,686 - 3,225,783 34,147,533 37,373,316
Investments
during
the year - - 204,959 204,959 - - 204,959 204,959
Transfers
between
levels 17,007,373 (3,225,783) (13,781,590) - 17,007,373 (3,225,783) (13,781,590) -
Fair value
losses (1,427,702) - (1,935,856) (3,363,558) (1,427,702) - (1,935,856) (3,363,558)
At 31
December
2013 15,579,671 - 20,166,416 35,746,087 15,579,671 - 18,635,046 34,214,717
================= ================= =============== ================= ================= ================= ============== =================
At 1 January
2012 - 1,997,017 36,496,878 38,493,895 - 1,997,017 34,640,141 36,637,158
Investments
during
the year - 5,000 304,521 309,521 - 5,000 304,521 309,521
Disposals - - (3,625,458) (3,625,458) - - (3,625,458) (3,625,458)
Fair value
gains - 1,223,766 2,502,962 3,726,728 - 1,223,766 2,828,329 4,052,095
At 31
December
2012 - 3,225,783 35,678,903 38,904,686 - 3,225,783 34,147,533 37,373,316
================= ================= =============== ================= ================= ================= ============== =================
The Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. In the case of the Company, investments classified as Level 1 have been valued based on a quoted price in an active market. Investments classified as Level 2 have been valued using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Fair values of unquoted investments classified as Level 3 in the fair value hierarchy have been determined in part or in full by valuation techniques that are not supported by observable market prices or rates. Investment valuations for Level 3 investments have been arrived at using a variety of valuation techniques and assumptions. For instances where the fair values are based upon the most recent market transaction but which occurred more than twelve months previously, the investments are classified as Level 3 in the fair value hierarchy.
The net decrease in fair value for the year of US $3,363,558 (2012: increase of US $101,270) includes a net decrease of US $1,935,856 (2012: US $1,122,496) that has been estimated using valuation techniques in accordance with the International Private Equity and Venture Capital Valuation Guidelines.
During 2013, securities with a carrying value of US $15,579,671 at 31 December 2013 were transferred from Level 3 to Level 1 because the securities were listed on the AIM of the London Stock Exchange in 2013 and they are currently actively traded in that market. The securities now have a published price quotation in an active market.
Securities with a carrying amount of US $1,789,926 at 31 December 2013 were transferred from Level 2 to Level 3 because quoted prices in the market for such securities were no longer available.
There were no transfers between levels in 2012.
15. Investments, (continued)
Fair value determination
As described in note 2 the Directors have valued the investments in accordance with the guidance laid down in the International Private Equity and Venture Capital Valuation Guidelines. The inputs used to derive the investment valuations are based on estimates and judgments made by management which are subject to inherent uncertainty. As such the carrying value in the financial statements at 31 December 2013 may differ materially from the amount that could be realized in an orderly transaction between willing market participants on the reporting date.
In making their assessment of fair value at 31 December 2013, management has considered the total exposure to each entity including equity, warrants, options, promissory notes, and receivables.
Further information in relation to the directly held private investment portfolio at 31 December 2013 is set out below:
Unobservable
Fair value Methodology inputs
-----------
US $
Multiple methods used in combination including:
Private investments 20,166,416 Discount to last market price, Discount (30%-100%),
Discount to last financing round, price Price of fund
of future financing round and third party raising.
valuation.
-------------------- ----------- ------------------------------------------------ ---------------------
Given the range of techniques and inputs used in the valuation process and the fact that in most cases more than one approach is used, a sensitivity analysis is not considered to be a practical or meaningful disclosure. Shareholders should note however that increases or decreases in any of the inputs listed above in isolation may result in higher or lower fair value measurements.
The Group's ownership percentages of the investments are as follows:
2013 2012
Fully-diluted Fully-diluted
ownership ownership
Country of incorporation % %
Axcess International,
Inc. United States of America 15.07 16.16
FireStar Software,
Inc. United States of America 11.86 11.86
Kromek Group PLC England & Wales 10.60 14.69
Lab 21 Limited England & Wales 0.38 0.18
Motif BioSciences,
Inc. United States of America 32.09 34.46
m2m Imaging Corporation United States of America 25.88 25.88
PrivateMarkets, Inc. United States of America 25.33 25.33
WellGen, Inc. United States of America 24.34 24.34
The ownership percentages do not include the potential conversion of convertible promissory notes issued by the Partner Companies.
16. Other financial assets and liabilities
The carrying amounts of the Group's financial assets and financial liabilities at the statement of financial position date are as follows. The accounting policies described in note 2 explain how the various categories of financial instruments are measured.
Group Company
2013 2012 2013 2012
Carrying Fair Carrying Fair Carrying Fair Carrying Fair
amount value amount value amount value amount value
US $ US $ US $ US $ US $ US $ US $ US $
Financial assets
Fair value
through profit
or loss
Fixed asset investments -
designated
as such upon
initial
recognition 35,746,087 35,746,087 38,904,686 38,904,686 34,214,717 34,214,717 37,373,316 37,373,316
Currents assets
Loans and
receivables
Security deposit 13,600 13,600 70,735 70,735 - - 70,735 70,735
Prepaid expenses
and other
receivables 3,654,196 3,654,196 3,541,275 3,541,275 4,815,932 4,815,932 5,269,685 5,269,685
Cash and cash
equivalents 353,964 353,964 413,276 413,276 333,131 333,131 399,013 399,013
Financial
liabilities
Amortised cost
Trade and other
payables 9,411,563 9,411,563 7,528,514 7,528,514 3,726,887 3,726,887 2,708,600 2,708,600
Current portion
of convertible
promissory
notes 9,543,671 9,543,671 9,364,014 9,364,014 9,543,671 9,543,671 9,364,014 9,364,014
Current portion
of notes
payable 6,308,600 6,308,600 6,208,600 6,208,600 6,308,600 6,308,600 6,208,600 6,208,600
Notes payable 1,012,000 1,012,000 - - - - - -
The carrying value of cash and cash equivalents, the security deposit, prepaid expenses and other receivables, and trade and other payables, in the Directors' opinion, approximate to their fair value at 31 December 2013 and 2012.
The following table sets out the fair values of financial instruments not measured at fair value and analyses it by the level in the fair value hierarchy into which each fair value measurement is categorized at 31 December 2013.
Group Company
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
US $ US $ US $ US $ US $ US $ US $ US $
------- ----------- ------ --------------- ------ ----------- ------ ------------------
Financial assets
Security deposit - 13,600 - 13,600 - - - -
Prepaid expenses
and - -
other receivables - 3,654,196 - 3,654,196 - 4,815,932 - 4,815,932
Cash and cash
equivalents - 353,964 - 353,964 - 333,131 - 333,131
- 4,021,760 - 4,021,760 - 5,149,063 - 5,149,063
------------------------------ ----------- ------ --------------- ------ ----------- ------ ------------------
Financial liabilities
Trade and other
payables - 9,411,563 - 9,411,563 - 3,726,887 - 3,726,887
Current portion
of convertible
promissory notes - 9,543,671 - 9,543,671 - 9,543,671 - 9,543,671
Current portion
of notes payable - 6,308,600 - 6,308,600 - 6,308,600 - 6,308,600
Notes payable 1,012,000 - 1,012,000 - - - -
- 26,275,834 - 26,275,834 - 19,579,158 - 19,579,058
------------------------------ ----------- ------ --------------- ------ ----------- ------ ------------------
16. Other financial assets and liabilities, (continued)
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties, as a means of mitigating the risk of financial loss from defaults.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The maximum exposure to credit risk for the financial asset investments designated at fair value through the profit and loss is represented by their carrying value.
The Group's exposure to counterparty credit risk also arises from balances owed from Partner Companies relating to fees charged for services provided by Amphion. Amphion seeks to mitigate the risk noted above through its philosophy of working with a small number of rigorously selected Partner Companies, assisting them to grow by implementing a consistent and proven methodology developed over the management team's 20 years of company building experience. The Group's time tested model of company creation is built on a risk management process that relies on proven, defensible intellectual property sourced from some of the world's leading corporations and universities.
Included in the Group's other receivables are debtors of which US $1.4 million (2012: US $1.6 million) are past due at the reporting date and for which the Group has not provided as there has not been a significant change in credit quality of the Partner Companies and the Group believes that the amounts are still considered recoverable. (See note 3 for further details). The Group does not hold any collateral over these balances. The Company believes it can convert the receivables into the Partner Companies' equity.
The following table is an analysis of the age of financial assets:
Group
More than 3
Not past due Not more than months and not More than
or impaired 3 months more than 1 year 1 year Total
US $ US $ US $ US $ US $
2013
Fees
receivable
- gross - 120,000 360,000 2,720,000 3,200,000
Impairment - (120,000) (360,000) (1,370,000) (1,850,000)
Rebillable
expenses 726,487 - - - 726,487
Other
receivables 2,933,729 - - 44,536 2,978,265
Impairment (1,415,748) - - - (1,415,748)
Prepaid
expenses 15,192 - - - 15,192
2,259,660 - - 1,394,536 3,654,196
---------------------- -------------------------- -------------------------------- ------------------------- --------------
2012
Fees
receivable
- gross - 150,000 519,394 2,317,779 2,987,173
Impairment - - - (1,370,000) (1,370,000)
Rebillable
expenses 398,543 - - - 398,543
Other
receivables 1,435,618 46 - 44,536 1,480,200
Prepaid
expenses 45,359 - - - 45,359
---------------------- -------------------------- -------------------------------- ------------------------- --------------
1,879,520 150,046 519,394 992,315 3,541,275
---------------------- -------------------------- -------------------------------- ------------------------- --------------
The allowance account for fees receivable is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the fees receivable directly.
16. Other financial assets and liabilities, (continued)
Company
More than 3
Not past
due Not more than months and not More than
or impaired 3 months more than 1 year 1 year Total
US $ US $ US $ US $ US $
2013
Rebillable
expenses 670,061 - - - 670,061
Due from
subsidiaries 2,719,085 - - - 2,719,085
Other
receivables 1,389,335 - - 34,536 1,423,871
Prepaid
expenses 2,915 - - - 2,915
-------------------- ---------------------------- ----------------------------------- ------------------------- -----------------
4,781,396 - - 34,536 4,815,932
-------------------- ---------------------------- ----------------------------------- ------------------------- -----------------
2012
Rebillable
expenses 343,382 - - - 343,382
Due from
subsidiaries 3,565,665 - - - 3,565,665
Other
receivables 1,309,834 - - 34,536 1,344,370
Prepaid
expenses 16,268 - - - 16,268
-------------------- ---------------------------- ----------------------------------- ------------------------- -----------------
5,235,149 - - 34,536 5,269,685
-------------------- ---------------------------- ----------------------------------- ------------------------- -----------------
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The principal risk to which the Group is exposed is liquidity risk.
Amphion's investments are in Partner Companies that are often development stage companies and will likely experience significant negative cash flow. The Partner Companies may be unable to obtain financing to fund their negative cash flows due to market conditions or lack of operational progress. In these instances, though Amphion is not obligated to do so, the Group may feel it necessary to provide additional investment to the Partner Company and also defer payment of the advisory fees due. Amphion may also be required to spend additional management time on these companies.
Adverse market conditions may also delay liquidity events for the Partner Companies, thereby requiring additional rounds of financing in which Amphion may feel it necessary to participate. During these adverse market conditions Amphion may also find it difficult to raise additional capital.
Amphion seeks to mitigate the risk noted above through its philosophy of working with a small number of rigorously selected Partner Companies, assisting them to grow by implementing a consistent and proven methodology developed over the management team's 20 years of company building experience. The Group's time tested model of company creation is built on a robust risk management process that relies on proven, defensible intellectual property sourced from some of the world's leading corporations and universities. (See note 3 for further details).
16. Other financial assets and liabilities, (continued)
The following table is a maturity analysis that shows the remaining contractual maturity for the Group and Company's financial liabilities:
Group
Less
than 1-3 3 months Over
to 1
1 month months year 1 year Total
US
US $ $ US $ US $ US $
2013
Trade payables &
other payables 9,411,563 - - - 9,411,563
Current portion of
promissory notes - - 6,308,600 - 6,308,600
Convertible promissory
notes - 9,543,671 - - 9,543,671
Notes payable - - - 1,012,000 1,012,000
2012
Trade payables &
other payables 7,528,514 - - - 7,528,514
Current portion of
promissory notes - - 6,208,600 - 6,208,600
Convertible promissory
notes - - 9,364,014 - 9,364,014
Company
Less
than 1-3 3 months Over
to 1
1 month months year 1 year Total
US
US $ $ US $ US $ US $
2013
Trade payables &
other payables 3,726,887 - - - 3,726,887
Current portion of
promissory notes - - 6,308,600 - 6,308,600
Convertible promissory
notes - 9,543,671 - - 9,543,671
2012
Trade payables &
other payables 2,708,600 - - - 2,708,600
Current portion of
promissory notes - - 6,208,600 - 6,208,600
Convertible promissory
notes - - 9,364,014 - 9,364,014
Market risk
Market risk is the risk that changes in interest rates, foreign exchange rates, equity prices, and other rates, prices, volatilities, correlations, or other market conditions will have an adverse impact on the Group's financial position or results. Thus market risk comprises three elements - foreign currency risk, interest rate risk, and other price risk. Information to enable an evaluation of the nature and extent of these three elements of market risk are shown below.
16. Other financial assets and liabilities, (continued)
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed by minimising the balance of foreign currencies to cover expected cash flows during periods where there is strengthening in the value of the foreign currency. The Group has two UK Partner Companies which are denominated in GBP. The valuations of these two companies fluctuate along with the US dollar/Sterling exchange rate. No hedging of this risk is undertaken.
The carrying amounts of foreign currency denominated monetary net assets at the reporting date are as follows:
Group Company
2013 2012 2013 2012
US$ US$ US$ US$
Sterling - Cash equivalent 3,262 68,973 76 63,158
Sterling - Investment 15,579,671 17,007,373 15,579,671 17,007,373
Convertible promissory notes (9,543,671) (9,364,014) (9,543,671) (9,364,014)
A 10% (2012: 5%) strengthening of the US dollar against the British pound sterling at the reporting date would have increased profit or loss of the Group by approximately US $604,000 (2012: US $386,000). A 10% (2012: 5%) weakening of the US dollar against the British pound sterling would have decreased profit or loss of the Group by approximately US $604,000 (2012: US $386,000). A 10% (2012: 5%) strengthening of the US dollar against the British pound sterling at the reporting date would have increased profit or loss of the Company by approximately US $604,000 (2012: US $385,000). A 10% (2012: 5%) weakening of the US dollar against the British pound sterling would have decreased profit or loss of the Company by approximately US $604,000 (2012: US $385,000). The GBP/USD rate used at 31 December 2013 was 1.6574 (2012: 1.6262). In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the sensitivity analysis is based on balances at the end of the year and does not reflect the exposure during the year.
Interest rate risk
The Group's exposure to interest rate risk is restricted to the cash and cash equivalent balance of US $353,964 (2012: US $413,276). At 31 December 2013, the Group's bank accounts were in general not interest bearing due to the low base rate. Changes in interest rates would have no significant impact on the profit or losses of the Company.
Other price risks
The Group is exposed to equity price risks arising from equity investments. Equity investments are held for strategic, rather than trading purposes. The Group does not actively trade these investments.
At the reporting date, the potential effect of using reasonably possible alternative assumptions as inputs to valuation techniques from which the fair values of the investments are determined would be an increase of approximately US $nil (2012: US $0.3 million) to profit or loss of the Group and the Company using more favourable assumptions and an approximate decrease of US $3.5 million (2012: US $5.9million) to profit or loss of the Group and the Company using less favorable assumptions.
The amounts generated from the sensitivity analysis are estimates of the impact of market risk assuming that specified changes occur. Actual results in the future may differ materially from these results due to developments in the global financial markets which may cause exchange rates to vary from the hypothetical amounts disclosed above, which therefore should not be considered a projection of likely future events and losses.
17. Trade and other payables
Group
Trade and other payables principally comprise amounts outstanding for purchases and ongoing costs.
Company
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
18. Promissory notes
Convertible promissory notes
No convertible promissory notes were issued in the years ended 31 December 2013 and 2012. At 31 December 2013, the convertible promissory notes totaled US $9,543,671 (2012: US $9,364,014).
The notes were 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 was 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 would have automatically been converted into fully paid ordinary shares. The notes were paid interest at 7% on a quarterly basis.
For each note issued, the Company also issued 1.11 warrants. Each warrant entitled the holder to subscribe for one ordinary share at 20 pence per ordinary share during the subscription period which began on 30 December 2008 and expired on the fifth anniversary of that date.
The notes were to mature on 31 December 2013 but the due date was extended to 31 January 2014 by a meeting of the Noteholders on 6 December 2013. At a meeting of the Noteholders on 24 January 2014, it was agreed to extend the convertible promissory notes to 31 December 2015 on revised terms. The new notes can be convertible into ordinary shares of the Company at a conversion price of 10 pence and will pay interest of 7% if paid in ordinary shares or 5% if paid in cash or additional notes on a quarterly basis. Prior to maturity, the notes will be automatically converted into ordinary shares of the Company at the time that the closing price of the ordinary shares is equal or greater than 15 pence for 25 trading days. The Company is obliged to use 50% of its cash balances over GBP2 million (excluding any cash raised through any fund raising) to repay the notes. In the event that the notes are not converted, repaid in cash, or exchanged for Kromek Group PLC ("Kromek") shares by 31 December 2015, the notes will be repaid by transferring Kromek shares held by the Company on the date of repayment to the Noteholders. If, on or before 15 December 2014, the notes have not been converted or repaid in cash, the Noteholder will have the right to exchange part or the whole note into Kromek shares. The exchange rights will be exercisable from 15 December 2014 to 30 December 2014. For every GBP1 note, two warrants will be issued. The warrants will have an exercise price of 12 pence per share with an expiration date of 31 December 2015 or within 30 days of the early repayment of the note. In the event that the cash balances of the Company immediately following any repayment of the notes exceed GBP7 million, an amount equal to 20% of the surplus over GBP7 million but not exceeding 20% of the original principal amount of the notes will be paid to the Noteholders in proportion to the amounts of notes held by them at the time of repayment.
The net proceeds received from the issue of the convertible promissory notes and warrants 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 (see note 2).
Promissory notes
During 2013, the Company cancelled US $6,308,600 of promissory notes issued to the Chairman of the Company and replaced them with promissory notes that mature on 31 December 2014. The promissory notes accrue interest at the rate of 7% per annum. In addition, 3,500,000 warrants issued in connection with the original notes were cancelled and replaced with warrants that expire on 31 December 2014 and have an exercise price of 8 pence per ordinary share. Refer to note 24 for further details.
During 2013 Amphion Capital Management LLC, a related party, advanced DataTern Inc., a subsidiary of the Company, US $222,000 under promissory notes. The promissory notes accrue interest at 5% and are payable three years from issuance. Terms include a requirement that 50% of the gross profits (defined as gross settlement revenue, less direct expenses, contingency fees, and FireStar's profit share) will be dedicated to repayment of the note. There is an additional contingent return of 1.002% of the gross profits up to 100% return on the note and thereafter 0.498% of gross profits up to a total return of 300% on the note.
18. Promissory notes, (continued)
During 2013 Richard Morgan, a Director of the Company, advanced DataTern Inc., a subsidiary of the Company, US $190,000 under promissory notes. The promissory notes accrue interest at 5% and are payable three years from issuance. Terms include a requirement that 50% of the gross profits (defined as gross settlement revenue, less direct expenses, contingency fees, and FireStar's profit share) will be dedicated to repayment of the note. There is an additional contingent return of 0.501% of the gross profits up to 100% return on the note and thereafter 0.249% of gross profits up to a total return of 300% on the note.
During 2013 R. James Macaleer, the Chairman of the Company, advanced DataTern Inc., a subsidiary of the Company, US $600,000 under promissory notes. The promissory notes accrue interest at 5% and are payable three years from issuance. Terms include a requirement that 50% of the gross profits (defined as gross settlement revenue, less direct expenses, contingency fees, and FireStar's profit share) will be dedicated to repayment of the note. There is an additional contingent return of 2.00% of the gross profits up to 100% return on the note and thereafter 1.00% of gross profits up to a total return of 300% on the note.
In June 2014, the Company was granted a loan facility by an institutional lender. As part of the terms of the loan agreement, the Directors agreed to a Deed of Postponement that regulates the Directors' rights in respect to the repayment of any debt due to them from the Company. In regard to the promissory notes to the Company's Directors mentioned above, the Directors agreed to defer payment of their promissory notes by the Company until the loan facility is repaid in full. (See note 25 for details.)
19. Share capital
2013 2012
GBP GBP
Authorised:
250,000,000 ordinary shares
of 1p each 2,500,000 2,500,000
=============== ===========
Number GBP US $
Balance as at 31 December 2011 134,848,552 1,348,485 2,498,749
Issued for cash or services:
Ordinary shares of 1p each 160,486 1,605 2,545
Ordinary shares of 1p each 365,129 3,651 5,740
Ordinary shares of 1p each 226,083 2,261 3,647
Ordinary shares of 1p each 10,620,000 106,200 172,076
Balance as at 31 December 2012 146,220,250 1,462,202 2,682,757
Issued for cash or services:
Ordinary shares of 1p each 663,821 6,638 10,562
Balance as at 31 December 2013 146,884,071 1,468,840 2,693,319
============ ========== ==========
Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.
During the year ended 31 December 2013, the following changes occurred to the share capital of the Company:
On 26 November 2013, the Company issued 663,821 ordinary 1p shares at a premium of 3.175p per share (US $33,537) to Directors in lieu of 2012 fourth quarter and 2013 first, second, and third quarter Directors' fees.
20. Issue costs
The Company incurred costs of US $nil (2012: US $20,732) relating to the issue of shares. The costs were primarily for fees paid to agents. These equity transaction costs were deducted from equity in accordance with IAS 32, Financial Instruments Disclosure and Presentation.
21. Operating lease arrangements
At the balance sheet date, the Group has outstanding commitments under non-cancellable operating leases, which fall due as follows:
2013 2012
US$ US$
Within one year 7,200 47,600
In the second to fifth years inclusive - -
After five years - -
7,200 47,600
====== =======
Operating lease payments represent rentals payable by the Group for certain of its office properties. On 1 August 2013, the lease was renewed for a New York office for three months expiring on 31 October 2013. The agreement automatically renews for an additional term for the same number of calendar months unless either party gives notice to the other that it elects not to renew the agreement at least 60 days prior to the expiration date. The Group recognised expenses of US $76,730 in respect of operating lease arrangements in the year ended 31 December 2013.
22. 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 Plan cannot exceed 10% 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.
As of 31 December 2013, a total of 31,778,869 options have been issued (2012: 28,278,869) and 22,795,536 have been forfeited or expired (2012: 12,011,445).
Options issued under the Plan total 21,650,000 and 18,000,000 have been forfeited or expired. At 31 December 2013, a total of 3,650,000 options under the Plan were vested (2012: 7,420,000).
As of 31 December 2013, a balance of 10,128,869 options not in the Plan have been issued (2012: 6,628,869) and at 31 December 2013, 5,241,670 of these options were vested (2012: 5,175,765). These options have expiration dates that range from one and a half to nine years from the date of grant.
2013 2012
Number of Weighted Number of Weighted
share options average share options average
exercise exercise
price (in GBP) price (in GBP)
Outstanding at beginning of period 16,267,424 0.08 13,321,144 0.08
Granted during the period 3,500,000 0.08 5,500,000 0.09
Forfeited during the period (7,250,000) 0.04 (2,000,000) 0.12
Expired during the period (3,534,091) 0.08 (553,720) 0.22
--------------- ---------------
Outstanding at the end of the period 8,983,333 0.11 16,267,424 0.08
=============== ===============
Exercisable at the end of the period 8,891,670 0.11 12,595,765 0.09
22. 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:
2013 2012
US$ US$
Weighted average share price 0.04 0.07
Weighted average exercise price 0.13 0.15
Expected volatility 73% 75-77%
Expected life 1.75 years 1.5-2 years
Risk free rate 0.23% 0.24-0.25%
Expected dividends - -
Expected volatility was determined by calculating the historical volatility of the Group's share price from the date listing to the end of the year.
In 2013, options were granted on 15 March. The aggregate of the estimated fair value of the options granted is US $9,527. In 2012, options were granted on 25 January, 21 February, 10 April, and 13 July. The aggregate of the estimated fair value of the options granted was US $308,195.
The Company and Group recognised total gains of US $163,032 and costs of US $395,176 relating to equity-settled share-based payment transactions in 2013 and 2012 respectively. The 2013 cost includes US $189,465 of costs that have been reversed due to the performance conditions not being met. In 2013, US ($163,032) was expensed in the statement of comprehensive income during the year.
23. Retirement benefit plans
The Company established a defined contribution plan under Section 401(k) of the Internal Revenue Code. The plan enables qualified employees to reduce their taxable income by contributing up to 15% of their salary to the plan. The Company may elect to make a matching contribution to the plan. The Company has elected not to make a contribution for the years ended 31 December 2013 or 2012.
The UK subsidiary has a defined contribution pension scheme. The total pension expense recognised in the income statement of US $nil (2012: US $20,918) represents contributions paid by the Company to the plan.
24. 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 parties are disclosed below.
During the year, the Group paid miscellaneous expenses on behalf of Motif BioSciences, Inc. ("Motif") such as office expenses. At 31 December 2013, the amount owed by Motif to the Group was US $10,914 (2012: US $9,782).
Amphion Innovations US Inc., a subsidiary of the Company, has entered into an agreement with Axcess International, Inc. ("Axcess") to provide advisory services. Richard Morgan and Robert Bertoldi, Directors of the Company, are also Chairman and Director of Axcess, respectively. Amphion Innovations US Inc. will receive a monthly fee of US $10,000 pursuant to this agreement. The agreement was effective until 1 March 2013 and will renew thereafter 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 US $nil for the year ended 31 December 2013 (2012: US $nil) on the basis that the cash has fallen below the US $500,000 level.
24. Related party transactions, (continued)
Amphion Innovations US Inc. has entered into an agreement with Kromek Group PLC to provide advisory and consulting services. Richard Morgan, a Director of the Company, is also Chairman 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. The agreement was terminated on 31 December 2013. The subsidiary's fee for the year ended 31 December 2013 was US $120,000 (2012: US $120,000). Amphion Innovations US Inc. also earned US $339,490 as a fund raising fee for the year ended 31 December 2013 (2012: US $89,394).
Amphion Innovations US Inc. 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 the Chairman of Motif. The annual fee for the services is US $240,000. The agreement was effective until 1 April 2014 and shall automatically renew for successive one year periods. Amphion Innovations US Inc.'s fee for the period ended 31 December 2013 was US $240,000 (2012: US $240,000). At 31 December 2013, US $720,000 (2012: US $480,000) remains payable. The balance has been reduced by a provision for doubtful debts in the amount of US $240,000.
Amphion Innovations US Inc. 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 the Chairman of m2m. The monthly fee under this agreement is US $15,000. This agreement renews on an annual basis until terminated by either party. Amphion Innovations US Inc.'s fee for the periods ended 31 December 2013 and 2012 were suspended. At 31 December 2013, US $630,000 (2012: US $630,000) remains payable. This balance has been reduced by a provision for doubtful debts in the amount of US $600,000.
Amphion Innovations US Inc. has entered into an agreement with WellGen, Inc. ("WellGen") to provide advisory and consulting services. Richard Morgan and Robert Bertoldi, Directors of the Company, are also Chairman and Directors of WellGen, respectively. The fee under this agreement is US $60,000 per quarter. The agreement renews annually until terminated by either party. The subsidiary's fee for the year ended 31 December 2013 was US $240,000 (2012: US $240,000) of which US $1,080,000 (2012: US $840,000) remains payable at 31 December 2013. This balance has been reduced by a provision for doubtful debts in the amount of US $240,000.
Amphion Innovations US Inc. has entered into an agreement with PrivateMarkets, Inc. ("PrivateMarkets") to provide advisory services. Richard Morgan, a Director of the Company, is also the Chairman of PrivateMarkets. The fee under this agreement is US $30,000 per quarter until the successful sale of at least US $3,000,000 of equity and thereafter, US $45,000 per quarter. This agreement will renew annually unless terminated by either party. The subsidiary's fee for the years ended 31 December 2013 and 2012 were suspended. At 31 December 2013, US $770,000 (2012: US $770,000) remains payable by PrivateMarkets. The payable has been reduced by a provision for doubtful debts in the amount of US $770,000.
Amphion Innovations US Inc. has entered into an agreement with DataTern, Inc. ("DataTern") (a wholly owned subsidiary of the Company) to provide advisory and consulting services. Richard Morgan and Robert Bertoldi, Directors of the Company, are also Directors of DataTern. The quarterly fee under this agreement is US $60,000 and renews annually unless terminated by either party. The subsidiary's fee for the year ended 31 December 2013 was suspended (2012: US $nil).
During 2013 Richard Morgan, a Director of the Company, advanced US $190,000 to a subsidiary of the Company under a promissory note. The promissory note accrues interest at 5% per annum and is payable March 2016. (See note 18). In 2010 Richard Morgan, a Director of the Company, advanced US $352,500 to the Company. This advance is interest free and repayable on demand. At 31 December 2013, US $211,837 remains outstanding. The net amount payable by the Company at 31 December 2013 to Richard Morgan is US $1,995,693 (2012: US $1,428,809). The amount payable includes a voluntary salary reduction of US $1,348,398, US $341,779 of which will be payable at the discretion of the Board at a later date.
During 2013, the Company cancelled US $6,208,600 of promissory notes payable to R. James Macaleer, the Chairman of the Company. The promissory notes accrued interest at 7% per annum and were payable in 2012 and 2013. The notes were replaced with promissory notes that mature on 31 December 2014 and accrue interest at 7%. In addition, 3,500,000 warrants that were issued with the original notes that had an expiration date of 31 December 2013 and an exercise price of 8 pence per share were cancelled and replaced with 3,500,000 warrants that expired on 31 December 2014 and have an exercise price per share of 8 pence. During 2013, R. James Macaleer advanced US $600,000 to a subsidiary of the Company under a promissory note. The promissory note accrues interest at 5% per annum and is payable three years from issuance. (See note 18). At 31 December 2013, US $8,451 (2012: US $7,965) was due to Mr. Macaleer for Director's fees. At 31 December 2013, Mr. Macaleer was due US $914,701 (2012: US $464,687) for accrued interest on the promissory notes.
24. Related party transactions, (continued)
At 31 December 2013, US $102,201 (2012: US $77,744) was due to Gerard Moufflet, a Director of the Company, for Director's fees and US $8,337 (2012: US $8,337) for expenses.
At 31 December 2013, US $7,211 (2012: US $7,119) was due to Anthony Henfrey, a Director of the Company, for expenses. Dr. Henfrey waived his entitlement to receive his director's fees for 2013 and 2012.
At 31 December 2013, US $23,535 (2012: US $23,535) was due to Richard Mansell-Jones, a retired Director of the Company for Director's fees.
At 31 December 2013, US $720,530 was due to Robert Bertoldi, a Director of the Company, for voluntary salary deductions in 2009 through 2013 of which US $188,769 is payable by the discretion of the Board.
Directors' interests
The Directors' direct ownership in the Partner Companies is as follows:
Fully diluted
%
Investment company owned by Directors
----------------------- ---------------------
2013 2012
Axcess International,
Inc. 5.41% 4.63%
FireStar Software,
Inc. 1.59% 1.65%
Kromek Group PLC 0.96% 1.75%
Lab 21 Limited 0.01% 0.00%
Motif BioSciences,
Inc. 4.06% 4.36%
m2m Imaging Corp. 1.46% 1.46%
PrivateMarkets, Inc. 2.74% 2.74%
WellGen, Inc. 3.08% 3.08%
The Directors who held office at 31 December 2013 had the following interests in the Company's ordinary share capital:
2013 2012 2013 2012 2013 2012
Number of Number of Convertible Convertible
Number Number
ordinary ordinary promissory promissory of of
shares shares notes notes warrants warrants
Richard C.E.
Morgan 25,442,499 24,692,499 GBP900,000 GBP900,000 999,000 999,000
Robert J.
Bertoldi 6,436,431 6,436,431 - - - -
R. James
Macaleer 24,480,266 23,978,945 GBP10,027 GBP10,027 4,011,130 4,011,130
Anthony W.
Henfrey 1,190,735 1,190,735 GBP13,932 GBP13,932 15,465 15,465
Gerard
Moufflet 862,500 700,000 - - - -
Jerel
Whittingham 2,964,303 2,964,303 - - - -
Aggregate Directors' remuneration
The total amounts for Directors' remuneration was as follows:
Year ended Year ended
31 December 2013 31 December 2012
US$ US$
Emoluments 760,179 930,500
24. Related party transactions, (continued)
Directors' emoluments and compensation
(1) Group
Fees/Basic
salary
accrued Period
Group Payment Group Year ended ended
not subject
Fees/Basic to Benefits 31 December 31 December
salary
paid board discretion In kind 2013 total 2012 total
US $ US $ US $ US $ US $
Name of dirc
Name of Director
Executive -
s
Executive-salary
Richard C.E.
Richard C.E.
Morgan - 350,000 17,237 367,237 368,418
Robert J. Ber
Robert J.
Bertoldi 30,000 270,000 24,838 324,838 324,586
Jerel WhittiJe
Jerel
Whittingham - - - - 168,588
Non-executi
Non-executive
- fees
R. James Ma
R. James
Macaleer 33,429 - - 33,429 32,272
Anthony W.
Anthony W.
Henfrey - - - - -
Gerard Mouff
Gerard Moufflet 34,675 - - 34,675 36,636
Aggregate e
Aggregate
emoluments 98,104 620,000 42,075 760,179 930,500
================= ============================ ================== ===================== =====================
(1) Deferred fees/basic salary refers to voluntary salary reductions taken by the Executive Directors in 2013 which were recorded as a liability in 2013 in the Group accounts, payment of which is not subject to the discretion of the Board.
Directors' share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the Company granted to or held by the Directors. Details of options for Directors who served during the year are as follows:
Date
1 31 from
Name of January December Exercise which Expiry
Director Scheme 2013 Granted Forfeited 2013 price exercisable date
2006
Unapproved
Share
Richard Option 24 Mar 24 Mar
Morgan Plan 500,000 - - 500,000 GBP0.1075 2010 2019
2006
Unapproved
Share
Richard Option 31 Dec 30 Nov
Morgan Plan 2,000,000 - (2,000,000) - GBP0.0400 2013 2021
2006
Unapproved
Share
Robert Option 24 Mar 24 Mar
Bertoldi Plan 350,000 - - 350,000 GBP0.1075 2010 2019
2006
Unapproved
Share
Robert Option 31 Dec 30 Nov
Bertoldi Plan 2,000,000 - (2,000,000) - GBP0.0400 2013 2021
2006
Unapproved
Share
Jerel Option 24 Mar 24 Mar
Whittingham Plan 250,000 - - 250,000 GBP0.1075 2010 2019
2006
Unapproved
Share
Jerel Option 31 Dec 30 Nov
Whittingham Plan 1,750,000 - (1,750,000) - GBP0.0400 2013 2021
6,850,000 - (5,750,000) 1,100,000
=========== ============== ============== ===============
25. Subsequent events
In January to April 2014, the Company made advances of US $15,078 under a promissory note from PrivateMarkets, Inc.
In January to April 2014, the Company made advances of US $115,085 under a promissory note from Motif BioSciences, Inc.
In April 2014, DataTern, Inc. received a favorable decision on its appeal to the US Court of Appeals for the Federal Circuit. The appeal was a result of the ruling that was rendered in December 2012 by the US District Court for the Southern District of New York in the declaratory judgment actions brought by SAP and Microsoft in April 2011.
Between the reporting date and the date of issuance of the financial statements, the fair value of the Kromek Group plc investment has decreased by approximately 37%.
In June 2014, the Company was granted a loan facility by an institutional lender (the "Lender"). The Company has drawn down an initial sum of US $2 million with a further draw down facility of up to a maximum of US $10 million, subject to the consent of each party. The facility is secured by part of Amphion's holding in Kromek Group plc ("Kromek") and may be repaid at the Company's discretion in cash, the issue of Amphion shares, or the payment of Kromek shares where the Lender will be subject to certain limitations including adherence to any existing lock-in and an orderly market agreement. Repayment will be on a monthly basis starting on 1 September 2014 with final payment due 1 June 2015. The interest rate of the loan is 12% per annum of the gross amount provided to the Company. As part of the loan terms the Lender will receive 8,532,350 3-year warrants in Amphion with an exercise price of 4.375 pence per share. In addition, Amphion will be issuing the Lender 663,627 3-year simulated warrants at an exercise price of 56.25 pence per share. If the Lender exercises the warrants, Amphion will pay the difference between the exercise price and the Kromek market price. The Company also paid a further 8% of the gross amount provided as an implementation fee. The funds are to be used for working capital for Amphion and its Partner Companies. As part of the loan facility, the Directors agreed to a Deed of Postponement that regulates the Directors' rights in respect to the repayment of any debt due to them from the Company. The Directors agreed to defer payment of their debt by the Company until the loan facility is repaid in full.
In April 2014, R. James Macaleer, Chairman of the Company, advanced the Company US $250,000 under a promissory note. The promissory note and accrued interest were repaid in June 2014 with the proceeds from a loan from an institutional lender. The promissory note accrued interest at 5%.
Notice
The financial information set out above does not constitute the Group's statutory accounts for the year ended 31 December 2013 or 2012, but is derived from those accounts. The auditors have reported on those accounts; their report was unqualified, but did draw attention to matters by way of emphasis relating to significant uncertainty in respect of going concern and valuation of Partner Company investments and other receivables from Partner Companies for both the 2013 and 2012 year ends, and did not contain statements under s. 15(4) or (6) Companies Act 1982 of the Isle of Man.
Approval
This statement was approved by the Board of Directors on 17June 2014.
Copies of the Annual Report and Accounts
Copies of the Annual Report and Accounts will be sent to all shareholders. Further copies will be obtainable from the Company's primary office: Amphion Innovations plc, Attn: Investor Relations, 330 Madison Avenue, 6(th) Floor, New York, NY 10017, USA.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR QKODBFBKDPAD
1 Year Amphion Innovations Chart |
1 Month Amphion Innovations Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
