Share Name Share Symbol Market Type Share ISIN Share Description
Tekcapital Plc LSE:TEK London Ordinary Share GB00BKXGY798 ORD �0.004
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.05 -0.88% 5.65 5.50 5.80 5.70 5.55 5.70 53,034 15:23:09
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Technology Hardware & Equipment 5.4 3.6 8.1 0.7 4

Tekcapital plc Half-year Report

22/08/2019 7:00am

UK Regulatory (RNS & others)


Tekcapital (LSE:TEK)
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3 Months : From Aug 2019 to Nov 2019

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Tekcapital plc

22 August 2019

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

22 August 2019

Tekcapital plc

("Tekcapital", "the Company" or "the Group")

Unaudited Half-Yearly Report for the period ending 31 May 2019

Record Total Revenue, Profits and Net Assets for the Period

Tekcapital plc (AIM: TEK) a UK intellectual property (IP) investment group focused on creating marketplace value from investing and commercializing university technology announces its results for the six-month period ended 31 May 2019.

Financial highlights

   --    Net Assets increased 27% to US$20.53m (30 Nov 2018: US$16.13m) 
   --    NAV per share US$0.38 (30 Nov 2018: US$0.30) 
   --    Total Revenue of US$5,401,568 (H1 2018: US$1,278,413) 

o Net increase of US$4,787,174 in fair value of portfolio companies

   --    Revenue from services US$614,394 (H1 2018: $639,561) 
   --    Reduction of cost of sales by 36% to US$239,342 (H1 2018: US$371,774) 
   --    Reduction of operating expenses by 7% to US$740,947 (H1 2018: US$800,643). 

o Service revenue cover appx. 63% of current cost base (H1 2018: 55%)

   --    Profit before tax of US$4,421,279 (H1 2018: US$105,996) 
   --    Post end of period placement of 9,375,000 shares to raise gross proceeds of $940,000. 

Operational highlights: Portfolio Companies

Salarius(R) (97.5% ownership) www.salarius.co

-- Appointed Javier Contreras as COO to further its commercialization efforts. Javier has significant experience in developing supply chains with Clorox and other leading companies

   --    Launched industrial production of MicroSalt(R) 
   --    Secured first snack food customer (California packaged nut manufacturer). 
   --    Conducted focus group testing and finalized consumer packaging for SaltMe!(R) Snacks 
   --    Manufactured sample production run of four different crisps flavoured with MicroSalt(R). 

Lucyd(R) (100% ownership) www.lucyd.co

-- Lucyd signed Richard Sherman, cornerback of the San Francisco 49ers, as its Chief Brand Officer

   --    Launched Loud 2.0 Bluetooth(R) designer glasses in ten styles/colours 
   --    Launched social media influencer program 

-- Filed 13 design patents for Loud 2.0 and one utility patent for integration of Lucyd Loud with a smart watch.

Guident (100% ownership) www.guident.co

-- Appointed Johan De Nysschen and Daniel Grossman as directors. Mr. De Nysschen recently served as Executive Vice President of General Motors and President of Cadillac Division. Daniel Grossman helped create General Motors' mobility division, "Maven", and led all operations as COO, was a Vice President at Zipcar, which was sold to Avis Budget for $500m

   --    Guident ltd has launched its commercial website and finalized its go-to-market plan 

-- Filed a new U.S. patent application (No. 16/386,530) entitled: Methods and Systems for Emergency Handoff of an Autonomous Vehicle. This patent application deals with the operation and control of an autonomous vehicle in the event of an accident.

Belluscura(R) (21.7% ownership) www.belluscura.com

   --    Continued progress with its unique and patented portable oxygen concentrator (POC) programme 

-- On 24 April 2019, Belluscura raised GBP500,000 with a crowdfunding program which Tekcapital participated approximately 10%

-- Belluscura filed an additional patent application entitled "Improved Extracorporeal Membrane Oxygenation Device, System and Related Methods," which involves incorporating and expanding their existing oxygen enrichment patent portfolio into an innovative, next generation portable artificial lung and a novel wound care treatment device

-- The company indicated it may receive FDA clearance later this year to be followed by commercial launch in H1 2020.

Operational highlights: Corporate

As part of continuing to expand our services in Latin America;

-- Tekcapital delivered a webinar on commercialising university IP with the Creativity and Innovation Center 4.0 of the Universidad Tecnológica de Querétaro. This resulted in the formation of a strategic alliance with Universidad Tecnológica de Querétaro for providing Tekcapital's services in Mexico, post end of period

-- Executed a strategic alliance agreement with Emprende UP, the incubator & accelerator platform of Universidad del Pacífico for providing Tekcapital's services in Perú.

Post period end highlights:

-- On 25 June 2019, Guident Ltd exclusively licensed patent application PCT US19 14 547 entitled: "Visual sensor fusion and data sharing across connected vehicles for active safety" from Michigan State University. This patent application describes methods for enhancing the safety of AV's by enabling them to share information with other AV's and drones regarding objects detected by their sensors. This proprietary method may improve safety by providing a more robust, real-time system for detecting pedestrians, traffic conditions and potential hazards.

-- On 27 June 2019, Guident Ltd exclusively licensed U.S. patent # 9,964,948 B2 entitled: "Remote Control and Concierge Service for an Autonomous Transit Vehicle Fleet" from Florida International University. This patent describes methods for assisting autonomous vehicles and drones by using their sensor inputs in coordination with a remote control centre with the ability to take over operation of a vehicle or drone from anywhere in the world, enabling it to navigate in a variety of difficult situations such as heavy weather, crowded and dangerous traffic scenarios, accident prevention and remediation, and off-grid and last mile package delivery.

-- On 24 June 2019, Salarius Ltd secured a second customer (a Mexican seafood company) and shipped its first order for use with salted dried shrimp snacks.

-- On 26 June 2019 and August 6, 2019 Belluscura secured GBP725,000 and GBP750,000 respectively in additional equity funding, both at 15 pence per share. The funds will be used to complete regulatory clearance and launch its innovative XPLOR portable oxygen concentrator. This brings the total amount raised by Belluscura in 2019 to GBP2.15m. The Company did not participate in the last two rounds but did participate in several earlier rounds.

-- On 10 July 2019, the Company announced that it had completed a fundraising of $0.94 million in gross revenues through the placing of 9,375,000 new ordinary shares with new and existing investors at a price of 8 pence per share.

-- On 22 July 2019, Tekcapital signed strategic alliance with Technological University of Queretaro for expanding its services in Mexico.

-- On 12 August 2019, Salarius Ltd announced that it has filed an additional patent application #16/535,703 for Microsalt entitled "Improved Low Sodium Salt Composition". The application is directed to an improved low-sodium salt that attaches to a bulk carrier with enhanced electrostatic force, to help increase adhesion to a variety of food surfaces.

-- On 15 August 2019, Lucyd Ltd announced launch of its new product, Sherman Shades by Lucyd: Official Sunglasses of Richard Sherman.

Dr. Clifford M. Gross, Chairman said: 'We are pleased to report successful half-year performance for the Group, which has noted record total revenue, profits and net assets for the period whilst reporting important development milestones for its portfolio companies. We believe our unique approach of acquiring and commercialising university IP innovations, coupled with providing a range of IP services continues to deliver strong returns on invested capital.'

For further information, please contact:

 
Tekcapital Plc                                     Via Yellow Jersey PR 
Clifford M. Gross, Ph.D. 
 
finnCap Ltd (Nominated Adviser and Joint Broker)   +44 (0) 20 7220 0500 
Geoff Nash/ Max Bullen-Smith (Corporate Finance) 
Camille Gochez (ECM) 
 
  Novum Securities Limited (Joint Broker)          +44 (0) 20 7399 9427 
Colin Rowbury (Corporate Broking) 
 
  Yellow Jersey Limited                            +44 (0) 20 7933 8780 
Tim Thompson / Annabel Atkins                      tekcapital@yellowjerseypr.com 
 

About Tekcapital plc

Tekcapital creates value from investing in new, university-developed intellectual properties and provides a range of IP investment services to make it easy for organisations to commercialise university-developed technology. Tekcapital is quoted on the AIM market of the London Stock Exchange (AIM: symbol TEK) and is headquartered in Oxford, in the UK. For more information, please visit www.tekcapital.com

LEI: 213800GOJTOV19FIFZ85

Risk Factors and Forward-Looking Statements

The information contained in this document has been prepared and distributed by the Company and is subject to material updating, completion, revision, verification and further amendment. This Report is directed only at Relevant Persons and must not be acted on or relied upon by persons who are not Relevant Persons. Any other person who receives this Report should not rely or act upon it. By accepting this Report the recipient is deemed to represent and warrant that: (i) they are a person who falls within the above description of persons entitled to receive the Report; (ii) they have read, agree and will comply with the contents of this notice. The securities mentioned herein have not been and will not be, registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or under any U.S. State securities laws, and may not be offered or sold in the United States of America or its territories or possessions (the "United States") unless they are registered under the Securities Act or pursuant to an exemption from or in a transaction not subject to the registration requirements of

the Securities Act. Neither this Report nor any copy of it may be taken or transmitted into the United States, or distributed, directly or indirectly, in the United States, or to any "US person" as defined in Regulation S under the Securities Act of 1933, including US resident corporations or other entities organised under the laws of the United States or any state thereof or non-U.S. branches or agencies of such corporations or entities. This Report is not being made available to persons in Australia, Canada, Japan, the Republic of Ireland, the Republic of South Africa or any other jurisdiction in which it may be unlawful to do so and it should not be delivered or distributed, directly or indirectly, into or within any such jurisdictions.

All statements of opinion and/or belief contained in this Report and all views expressed represent the directors' own current assessment and interpretation of information available to them as at the date of this Report. In addition, this Report contains certain "forward-looking statements", including but not limited to, the statements regarding the Company's overall objectives and strategic plans, timetables and capital expenditures. Forward-looking statements express, as at the date of this Report, the Company's plans, estimates, valuations, forecasts, projections, opinions, expectations or beliefs as to future events, results or performance. Forward-looking statements involve a number of risks and uncertainties, many of which are beyond the Company's control, and there can be no assurance that such statements will prove to be accurate. No assurance is given that such forward looking statements or views are correct or that the objectives of the Company will be achieved. Further, valuations of Company's portfolio investments and net asset value can and will fluctuate over time due to a variety of factors. The Company does not undertake to update any forward-looking statement or other information that is contained in this Report.

Chairman's statement

Tekcapital brings innovations from lab to market. In the first half of 2019, many of our key portfolio companies have made significant progress and as a result, our net assets ended the period at record levels.

Key portfolio companies

Tekcapital Plc commercialises university intellectual property, a process known as technology transfer, both for its own portfolio and as a service for client companies.

Over the past three years we have built a compelling group of portfolio companies to commercialize high value properties we have uncovered. We believe that when you couple commercialization ready, compelling university IP with strong senior management, you increase the probability that vibrant companies will emerge, net assets will grow, returns on invested capital are likely to increase and exits should occur faster. When we realise exits, the Group's goal is to distribute the majority of proceeds as a special dividend to our shareholders.

The Company believes that there is considerable value to be realised from its portfolio companies and is continuing to further commercialise these operations. A common theme across our portfolio companies is that they have proprietary intellectual property, capable management and if successful, will improve the quality of life for the customers they serve. The Company's portfolio of investments includes:

-- Salarius ltd (www.salarius.co), of which Tekcapital owns 97.5%, owns a patented process for producing nano-particle sized salt crystals ("MicroSalt(R)"), which can reduce sodium consumption in snack foods by up to 50.0%, yet provide the same level of salty flavour found in traditional snacks. Salarius' goal is to make snack foods healthier. According to the World Health Organization, cardiovascular disease takes the lives of 17.9 million people per year and is responsible for 31% of global deaths and as such the low sodium ingredient market is estimated to reach US$1.76 billion by 2025.(1)

-- Lucyd ltd (www.lucyd.co), which is wholly owned by Tekcapital, sells innovative Bluetooth enabled glasses, regular spectacles and owns 13 design patent applications and one utility patent application for its augmented sound glasses. We believe Lucyd is the first company to offer proper prescription glasses online that allow the wearer to connect to their digital assistants. Their mission is to Upgrade your Eyewear(TM) . Lucyd is positioned at the intersection of the online eyewear and digital assistant markets. Online eyewear sales in the U.K. are projected to reach $824m(2) in 2019. The U.S. online eyewear market is projected to reach US$3.5b in 2019 and expected to grow annually by 1.3%(3) .

-- Guident, ltd (www.guident.co), which is wholly owned by Tekcapital, was established to commercialise new technology to enhance the utility, safety and enjoyment of autonomous vehicles ("AVs") and drones. Using its proprietary IP, Guident seeks to develop software Apps and IP that allow users of AV's and drones to dispatch their vehicles to join ridesharing fleets, find available parking spots and charging stations and report and respond to accidents as well as park themselves and make deliveries. The autonomous vehicle market is expected to reach US $65.3 billion by 2027(4) .

-- Belluscura plc (www.belluscura.com), of which Tekcapital now owns approximately 21.7%, has developed an improved portable oxygen concentrator to provide on-the-go supplemental O(2) . They have continued to report progress in their advanced portable oxygen concentrator program (POC), which they believe will be smaller, lighter and quieter then competitive products and will have a replaceable filter cartridge that will allow the user to upgrade the unit as their disease progresses. As a result of the global prevalence of COPD, the medical portable oxygen market is expected to grow from $1.4bn in 2018 to $2.4bn by 2024(5) .

Corporate

In H1 2019 we continued with the expansion of our consulting services into Latin America. Currently, approximately 63% of our administrative expenses are now covered by our service revenue. One of our goals over the next few years is to have all of our operating costs covered by our service revenues. To help achieve this, we have focused our business development in Latin America, to accelerate growth in this emerging yet vibrant market for university IP commercialisation.

Financial performance

H1 2019 saw another strong period for value creation in the Group's short history, as evidenced by a 27% increase in net assets. The Group was able to accomplish this whilst simultaneously reducing its cost-of-sales by 36% and administrative costs by 7%. The Group has now demonstrated 2.5 years of growth in Net Assets and Total Revenue. Due to the quickening pace of innovation, patented, exogenously developed university technologies are a valuable currency, and as a result, we continue to believe that the market opportunity for the Group is both large and should continue to grow apace in lock-step with the progress of our portfolio companies.

Fundraising

Post end of period, on 10 July 2019, the Company announced that it had completed a small fundraising of $0.94 million gross through the placing of 9,375,000 new ordinary shares with new and existing investors at a price of 8 pence per share. The new funds will be utilized for accelerating portfolio company growth and for working capital purposes including further expanding our services in Latin America.

Current Trading and Outlook

Having continued to develop and expand Tekcapital's existing business, the Board is confident that continued investment in our portfolio companies remains the right approach. In our 2018 year-end report we disclosed that we were exploring an investment in a new portfolio company in the cannabidiol space. Whilst we are still quite keen to do this, we think it is sagacious to wait until we report additional progress in our current portfolio before launching this effort.

We believe that we are executing on our strategy and this should result in further increases in returns on invested capital as our portfolio companies continue to grow. Whilst the Company is progressing very well, net asset values will fluctuate from period to period due to individual portfolio company performance, valuations and changes in market conditions and macro-economic financial conditions, which may be material.

We are grateful for the patience and support of our shareholders. We are also sincerely appreciative of our creative and incredibly hardworking team who together have produced the results reported herein.

Dr Clifford M Gross

Chairman and CEO

22 August 2019

[1] https://www.futuremarketinsights.com/reports/sodium-reduction-ingredient-market

[2] https://www.statista.com/outlook/12000000/156/eyewear/united-kingdom

[3] https://www.statista.com/outlook/12000000/109/eyewear/united-states#market-onlineRevenueShare

[4] https://www.statista.com/statistics/428692/projected-size-of-global-autonomous-vehicle-market-by-vehicle-type/

[5] Global Market Insights: Oxygen Cylinders Market Size and Competitive Market Share & Forecast, 2017 --2024

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 May 2019

 
                       Notes                 Six months                      Six months                     Year ended 
                                           ended 31 May                    ended 31 May                    30 November 
                                                   2019                            2018                           2018 
                                              Unaudited                       Unaudited                        Audited 
                                                    US$                             US$                            US$ 
 
  Continuing 
  Operations 
 Revenue from 
  services                                      614,394                         639,561                      1,040,830 
 Unrealised profit 
  on the 
  revaluation of 
  investments            7                    4,787,174                         638,852                      5,792,264 
--------------------  ------ 
 Total Revenue                                5,401,568                       1,278,413                      6,833,094 
--------------------  ------  -------------------------  ------------------------------  ----------------------------- 
 Cost of sales                                (239,342)                       (371,774)                      (559,630) 
--------------------  ------  -------------------------  ------------------------------  ----------------------------- 
 Gross Profit                                 5,162,226                         906,639                      6,273,464 
--------------------  ------  -------------------------  ------------------------------  ----------------------------- 
 
   Administrative 
   expenses                                   (740,947)                       (800,643)                    (1,717,570) 
--------------------  ------  ------------------------- 
 Operating Profit                             4,421,279                         105,996                      4,555,894 
--------------------  ------  ------------------------- 
 
   Gain on ordinary 
   activities 
   before income tax                                                            105,996                      4,555,894 
 Income tax expense                             (2,090)                         (1,194)                        (1,406) 
--------------------  ------  -------------------------  ------------------------------  ----------------------------- 
 Gain after tax for 
  the 
  period                                      4,419,189                         104,802                      4,554,625 
--------------------  ------  -------------------------  ------------------------------  ----------------------------- 
 
 Other comprehensive 
 income 
 Foreign exchange 
  gain/(loss)                                  (33,779)                        (51,796)                      (135,342) 
--------------------  ------  -------------------------  ------------------------------  ----------------------------- 
 Total other 
  comprehensive 
  (loss)                                       (33,779)                        (51,796)                      (135,342) 
--------------------  ------  -------------------------  ------------------------------  ----------------------------- 
 
 Total comprehensive 
  gain 
  for the period                              4,385,410                          53,006                      4,419,283 
--------------------  ------  -------------------------  ------------------------------  ----------------------------- 
 
 Gain per share          6 
 Basic earnings per 
  share                                           0.081                           0.002                          0.103 
 Diluted earnings 
  per share                                       0.081                           0.002                          0.103 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 May 2019

 
                                    Notes     As at 31                           As at 31   As at 30 November 2018 
                                              May 2019                           May 2018 
                                             Unaudited                          Unaudited                  Audited 
                                                   US$                                US$                      US$ 
 
 Assets 
 Non-current assets 
 Intangible assets                             838,769                            838,769                  838,769 
 Financial assets at fair value 
  through profit and loss             7     18,577,365                          8,411,856               13,704,354 
 Convertible Loan Notes                        294,720                                  -                  250,000 
 Property, plant and equipment                  25,167                             41,435                   33,489 
                                           -----------  ---------------------------------  ----------------------- 
                                            19,736,021                          9,292,060               14,826,612 
                                           -----------  ---------------------------------  ----------------------- 
 Current Assets 
 Trade and other receivables                   410,770                            345,157                  429,373 
 Cash and cash equivalents                     492,983                          1,418,889                1,165,442 
                                           -----------  ---------------------------------  ----------------------- 
                                               903,753                        1,764,046                  1,594,815 
 
 Total Assets                               20,639,774                         11,056,106               16,421,427 
                                           ===========  =================================  ======================= 
 
 Liabilities 
 Current liabilities 
 Trade and other payables                      114,124                            309,575                  285,957 
 Current income tax liabilities                    500                                500                      500 
 Total liabilities                             114,624                            310,075                 286,457 
 
 Net Assets                                 20,525,150                         10,746,031               16,134,970 
 
   Equity 
 Ordinary shares                      8        326,036                            264,221                  326,036 
 Share premium                        8     10,218,805                          9,271,098               10,218,805 
 Retained earnings                           9,940,614                          1,053,692                5,516,655 
 Translation reserve                           111,864                            229,189                  145,643 
 Merger reserve                               (72,169)                           (72,169)                 (72,169) 
 Total Equity                               20,525,150                         10,746,031               16,134,970 
                                           ===========  =================================  ======================= 
 
 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 May 2019

 
     Attributable to equity holders of the parent 
    --------------------------------------------- 
 
 
                          Ordinary   Share Premium      Translation   Merger Reserve         Retained   Total Equity 
                            shares                          Reserve                          Earnings 
                               US$             US$              US$              US$              US$            US$ 
 Unaudited 
 Balance at 1 
  December 2018            326,036      10,218,805          145,643         (72,169)        5,516,655     16,134,970 
 Gain for the 
  period                         -               -                                          4,419,189      4,419,189 
 Other 
  comprehensive 
  income                         -               -         (33,779)                                         (33,779) 
 Share based 
  payments                       -               -                                              4,770          4,770 
 Issue of                        -               - 
 ordinary shares 
 Balance at 31 
  May 2019                 326,036      10,218,805          111,864         (72,169)        9,940,614     20,525,150 
                   ===============  ==============  ===============  ===============  ===============  ============= 
 
 Unaudited 
 Balance at 1 
  December 2017            264,221       9,271,098          280,985         (72,169)          931,826     10,675,961 
 Gain for the 
  period                         -               -                -                -          104,802        104,802 
 Other 
  comprehensive 
  income                         -               -         (51,796)                -                -       (51,796) 
 Share based 
  payments                       -               -                -                -           17,064         17,064 
 Balance at 31 
  May 2018                 264,221       9,271,098          229,189         (72,169)        1,053,692     10,746,031 
                   ---------------  --------------  ---------------  ---------------  ---------------  ------------- 
 
 

Audited

 
 Balance at 1 December 2017      264,221   9,271,098             280,985   (72,169)     931,826   10,675,961 
 Share issue                      61,815   1,097,216                                               1,159,031 
 Cost of share issue                        (149,509)                                              (149,509) 
 Gain for the year                     -                -              -          -   4,554,625    4,554,625 
 Other comprehensive income            -                -      (135,342)          -           -    (135,342) 
 Share based payments                  -                   -           -          -      30,204       30,204 
 Balance at 30 November 2018     326,036          10,218,805     145,643   (72,169)   5,516,655   16,134,970 
                                ========  ==================  ==========  =========  ==========  =========== 
 

Share capital represents the amount subscribed for share capital at nominal value.

Share premium represents the amount subscribed for share capital in excess of nominal value and net of any directly attributable issue costs.

The merger reserve arose on the share for share exchange undertaken by the Company with Tekcapital Europe Limited on 18 February 2014.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 31 May 2019

 
                                                           Six months            Six months   For the year 
                                                                ended                 ended          ended 
   Group                               Note               31 May 2019                31 May    30 Nov 2018 
                                                                                       2018 
                                                                 US $                  US $           US $ 
----------------------------------  --------  -----------------------  --------------------  ------------- 
 Cash flows from operating 
  activities 
 Cash outflows from operations                              (553,436)             (345,397)      (866,377) 
 Taxation paid                                                (2,090)               (1,994)        (1,269) 
 
 Net cash outflows from operating 
  activities                                                (555,526)             (347,391)      (867,646) 
--------------------------------------------  -----------------------  --------------------  ------------- 
 
 Cash flows from investing 
  activities 
 Purchase of financial assets 
  at fair value through profit 
  and loss*                                                 (109,643)                     -      (693,413) 
 Purchases of property, plant 
  and equipment                                                  (96)              (44,558)       (45,841) 
 Proceeds from sale of property, 
  plant and equipment                                                                                   80 
 
 Net cash outflows from investing 
  activities                                                (109,739)              (44,558)      (739,174) 
 
 Cash flows from financing 
  activities 
 Proceeds from issuance of 
  ordinary shares                                                   -                     -      1,159,031 
 Costs of raising finance                                           -                     -              - 
 Proceeds from the exercise 
  of warrants                                                       -                     -      (149,508) 
 Cash from non-controlling                                          -                     -              - 
  interest 
 
 Net cash inflows from financing 
  activities                                                        -                     -      1,009,523 
--------------------------------------------  -----------------------  --------------------  ------------- 
 
 Net decrease in cash and 
  cash equivalents                                          (665,266)             (391,950)      (597,297) 
 Cash and cash equivalents 
  at beginning of year                                      1,165,442             1,797,729      1,797,729 
 Exchange gain/(loss) on cash 
  and cash equivalents                                        (7,193)                13,110       (34,990) 
 Cash and cash equivalents 
  at end of the period                                        492,983             1,418,889      1,165,442 
--------------------------------------------  -----------------------  --------------------  ------------- 
 
 

Notes to the financial information

   1.    General information 

Tekcapital PLC is a company incorporated in England and Wales and domiciled in the UK. The address of the registered office is 12 New Fetter Lane, London, United Kingdom, EC4A 1JP. The Company is a public limited company, which is quoted on the AIM market of the London Stock Exchange in 2014.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

   2.    Basis of preparation 

The financial information for the six months ended 31 May 2019 set out in this interim financial information is unaudited and does not constitute statutory financial statements. The interim condensed financial information has been presented in US Dollars ("$").

   3.    Accounting policies 

3.1 Statement of compliance

The accounting policies applied by the Group in these unaudited half year results are consistent with those applied in the annual financial statements for the year ended 30 November 2018.

The financial statements of Tekcapital PLC Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4 of the FY 2018 accounts. The estimates that changed since then are disclosed in Note 7.

   4.    Going concern 

The Group meets its day to day working capital requirements through its service offerings, bank facilities and monies raised in follow-on offerings. The Group's forecasts and projections indicate that the Group has sufficient cash reserves to operate within the level of its current facilities, if the group forecasts are not achieved the Directors are confident that additional funds could be raised through equity issues if required. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.

The Company therefore continues to adopt the going concern basis in preparing both its consolidated financial statements and for its own financial statements.

   5.    Taxation 

Immaterial charge of $2,090 has arisen in the six-month period ended 31 May 2019 (31 May 2018: $1,194).

   6.    Earnings per share 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of Ordinary Shares outstanding during the period.

Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the sum of weighted average number of (1) Ordinary Shares outstanding during the period and (2) Ordinary Shares to be issued assuming exercise of outstanding stock options with intrinsic value above $0 at 31 May 2019.

 
                                          Six months ended 31 May 2019    Six months ended 31 May 2018       Year ended 30 November 2018 
                                                                   US$                             US$                               US$ 
 
                       Profit 
                        attributable 
                        to equity 
                        holders of 
                        the Company                          4,419,189                         104,802                         4,554,625 
 
                       Weighted 
                       average 
                       number of 
                       Ordinary 
                       Shares in 
                       issue: 
 
                       Basic                                54,353,042                      42,654,707                        44,100,930 
                       Diluted                              54,653,042                      42,654,707                        44,120,817 
 
                       Basic profit 
                        (loss) per 
                        share ($)                                0.081                           0.002                             0.103 
                       Diluted 
                        profit 
                        (loss) per 
                        share ($)                                0.081                           0.002                             0.103 
 
 
    7.    Financial Assets at Fair Value through Profit or Loss 

Group's investments in portfolio companies are listed below and classified as equity instruments. The principal place of business for portfolio companies listed below is England and Wales.

 
 
                                                                        31 May   1 December   Additions      Exchange     Fair value       31 May 
                                                                          2018         2018                difference    gain/(loss)         2019 
                                                                          US $         US $        US $          US $           US $         US $ 
 Guidant Limited                                                        21,860    8,545,103           -             -      4,111,218   12,656,321 
 Lucyd Ltd                                                           4,676,745    3,040,616                   (2,889)    (1,642,916)    1,394,811 
 Belluscura 
  Limited                                                            1,405,588    1,126,315     109,022      (19,892)        553,717    1,769,162 
 Salarius Ltd                                                        2,000,000      923,830         621         (261)      1,765,155    2,689,345 
 Non Invasive 
  Glucose Tek 
  Limited                                                               23,797          667           -          (12)              -          655 
 Smart Food 
  Tek Limited                                                           43,749       43,073           -         (745)              -       42,328 
 eGravitas Limited                                                     165,018            -           -             -              -            - 
 Frigidus Ltd                                                           52,202            -           -             -              -            - 
 eSoma Limited                                                          22,897       24,750           -           (7)              -       24,743 
 
 Total Balance                                                       8,411,856   13,704,354     109,643      (23,807)      4,787,174   18,577,365 
------------------------------------------------------------------  ----------  -----------  ----------  ------------  -------------  ----------- 
 
 

The valuation techniques used fall under, Level 2 - Observable techniques, other than quoted prices, and Level 3- Other techniques as defined by IFRS 13. There has been no transfer between levels during the period. Fair value measurement hierarchy for financial assets as at 31 May 2019 with comparative amounts as of 30 November 2018:

 
 
                        Date of Valuation                   Significant      Significant 
                                                             observable     unobservable 
                                                          inputs (Level    inputs (Level 
                                                 Total               2)               3) 
                                                  US $             US $             US $ 
 Guident and others           31 May 2019   16,808,203                        16,808,203 
 Belluscura Limited           31 May 2019    1,769,162        1,769,162 
--------------------  -------------------  -----------  ---------------  --------------- 
 Total Balance                31 May 2019   18,577,365        1,769,162       16,808,203 
--------------------  -------------------  -----------  ---------------  --------------- 
 
 Guident and others      30 November 2018   12,578,039                        12,578,039 
 Belluscura Limited      30 November 2018    1,126,315        1,126,315 
 Total Balance                              13,704,354        1,126,315       12,578,039 
-----------------------------------------  -----------  ---------------  --------------- 
 

Guident ($4.1m gain)

An external valuation prepared by an independent patent valuation expert in June 2019 for US patent 9,429,943 as of 31 May 2019 resulted in the fair value gain of $4.1m compared to 30 November 2018. The Group retained the valuation expert who prepared the 30 November 2018 valuation. The total fair value of $12.7m reflects the fair value of Guident's net assets as determined by:

-- Valuation of US patent 9,429,943 of $15.4m conducted by an external, qualified valuation expert using the Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:

Ø Total US market size of $35b for autonomous vehicles and drones (as the patent applies to both) for the 12 years period ended 30 September 2033. 1% market penetration of Guident's patent starting in 2021 with annual increase of 1% leading to a 12% market penetration by 2033, resulting in projected $3b in sales of drones/vehicles underlying licensing revenue between 2021 and 2033. These market penetration assumptions are based on a number of factors:

o Broad protection and claims included in the IP

o The protection given to the product by its US patent, likely provides Guident with a barrier to entry in the US through 2033

o The strength and experience of the board, whose proven expertise is in the exact areas required to bring the product to market and build the brand;

o There are no foreseeable software development barriers in the commercialisation process

o Other foreseeable challenges for the team to deliver successful commercialisation appear to be well within the abilities of the directors to handle.

o Commercialisation milestones accomplished in the short history of the company, including launches of its new website and the go to market efforts in H1 2019

o Addition of Guident's EH 6530 patent application filed in H1 2019, aimed to provide additional protection for Emergency Handoff of AV Control in the case of a reportable event such as an accident.

Ø Total estimated 6% licence royalty rate, with 3% royalty attributable to the university and 3% (2.375% as of 30/11/2018) comprising Guident's licensing revenue based on comparable market transactions. The adjustment in the license royalty rate was made by the independent expert compared to 30/11/2018 valuation as a result of addition of two new comparable market transactions and removal of one agreement due to its lack of recency.

Ø 17% discount rate (18% as at 30/11/2018) which was used to discount proceeds as determined by opportunity cost (10%), inflation rate (2%) and technology risk (5%). The inflation rate was adjusted from 3% to 2% compared to 30/11/2018 based on revised Federal Reserve inflation targets.

Ø Corporate income tax rate of 17% applied to projected licensing costs

The NPV of $14.46m calculated based on the above was further adjusted by $0.93m of the Tax Amortization Benefit ("TAB") to arrive at $15.4m representing valuation of the patent.

-- The deferred tax liability of ($2.6m) recorded by Guident based on UK corporate tax rate of 17% applied to the fair value gain associated with the patent.

   --    Net book value of other assets and liabilities of (0.1m). 

Salarius ($1.8m gain)

Due to commercialisation advancements as of 31 May 2019, an external valuation prepared by an independent patent valuation expert in June 2019 for US patent 8,900,650 resulted in the fair value gain of $1.8m compared to 30 November 2018. The Group retained the valuation expert who prepared the 30 November 2018 valuation. The total fair value of $2.7m reflects the fair value of Salarius net assets as determined by:

-- Valuation of US patent 8,900,650 of $3.5m conducted by an external, qualified valuation expert using the Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:

Ø Projected underlying revenue from sales from following operating segments:

(1) Sales of low sodium salt to snack food manufacturers ("B2B") of $50.1m for the 11-year period ended 2030. Market penetration of 0.1% in 2019 growing to 10% in 2029. These market penetration assumptions are based on a number of factors:

o MicroSalt(R) is a unique product believed to be substantially in advance of alternatives, and has been developed, and tested in terms of taste acceptability and ready to market;

o The protection given to the product by its US patent, which is believed to effectively provide Salarius a barrier to entry in the US for 11 more years;

o The strength and experience of the management team, whose proven expertise is in the exact areas required to bring the product to market and build the brand;

o The company has already secured first customer (California packaged nut manufacturer) and shipped first two orders; the second customer (Mexican seafood company) had its first order for salted dried shrimp snacks shipped after the period end;

o There are no foreseeable manufacturing barriers in the commercialisation process. Manufacturing has been already established and outsourced, and relationships with vendors in the supply chain put in place;

o Other foreseeable challenges for management to deliver successful commercialisation appear to be well within the abilities of management to handle. The go to market strategy has been finalised and the business development team strengthened.

(2) Sales of salty snacks ("B2C") estimated at $121m for the 11-year period ended in 2030. The projections assume Salarius' product being sold in 300 individual stores by the end of 2019, growing annually to a total of 18,431 stores by 2030.

These market assumptions are based on a number of factors, in addition to first three points covered in p.1:

o The company is ahead of schedule with regards to initial stages for the launch of its SaltMe(R) line of full-flavor, low-sodium chips by H1 2020 in four varieties: original, barbecue, sour cream & onion and cheddar & sour cream. Panel testing amongst salty snack buyers was completed and resulted in a weighted purchase intent of 27.75%, which is believed to be significantly higher than average new product initiatives. Manufacturing has been already established and outsourced, and relationships with vendors in the supply chain (e.g. chips packaging) established. The go to market strategy has been finalised and the business development team strengthened.

Ø Licence royalty rate of 8.2% with 3% royalty attributable to the university and 5.2% (4.8% at 30 November 2018) comprising Salarius' licensing revenue based on comparable market transactions. The adjustment in the license royalty rate was made by the independent expert compared to 30/11/2018 valuation as a result of addition of new comparable market transactions to address Company's expansion into the snack food market (B2C segment)

Ø 12% discount rate used to discount proceeds as determined by opportunity cost (10%) and inflation rate (2%). The inflation rate was adjusted from 3% to 2% compared to 30/11/2018 based on revised Federal Reserve inflation targets. Technology risk was determined at 0%, as the patent describes easily manufactured salt compositions, maybe manufactured in many production facilities without extensive modifications. The end product has already been manufactured and used to conduct consumer acceptance tests.

-- The deferred tax liability of ($0.6m) recorded by Salarius based on UK corporate tax rate of 17% applied to the fair value gain associated with the patent

   --    Net book value of liquid assets, creditors and debtors of ($0.2m). 

Lucyd Ltd ($1.6m loss)

The fair value of $1.4m reflects the fair value of Lucyd's net asset as determined by:

-- Valuation of the following Lucyd assets performed by an external, qualified valuation expert in June 2019 (The Group retained the valuation expert who prepared the 30 November 2018 valuation):

Ø Lucyd's e-commerce platform selling advanced and fashionable eyewear valued at $0.9m as determined by applying an 17% discount rate on $5m of gross profit projected through 2022. The 17% discount rate was calculated as a total of 10% opportunity cost, 2% inflation rate and 5% technology risk. The inflation rate was adjusted from 3% to 2% compared to 30 November 2018 based on revised Federal Reserve inflation target.

Ø Lucyd's 46.5m LCD tokens held in treasury valued at $0.1m based on the observable price of $0.0076, discounted by 66% for market discount to reflect market's volatility and liquidity

Ø Lucyd's trademarks valued at $0.2m, assessed using Cost Approach Reproduction Method. Through cost analysis, the fair value approximates cost recognized in Lucyd's balance sheet

-- The deferred tax liability of ($0.15m) recorded by Lucyd based on UK corporate tax rate of 17% applied to the fair value gain associated with the ecommerce platform

   --    Net book value of creditors, debtors and liquid assets of $0.3m. 

Lucyd will be re-valuated in subsequent reporting periods. The future value of Lucyd could fluctuate significantly, either up or down, based on the performance of the business, the achievement of product development milestones, available capital, customer receptivity to the products, and the change in the value of the Lucyd token (LCD) held on the balance sheet, amongst other factors.

Belluscura ($0.5m gain)

The Group contributed $0.1m in a private placement held in March and April 2019 at 15 pence a share. The fair value of the holding increased by $0.5m as a result. The Group did not participate in the post period end private placements executed by Belluscura in June 2019 and August 2019, both at 15 pence per share.

Other investments (Nil Gain / Nil loss)

Given early stage of commercialisation, fair value of remaining portfolio companies was recorded based on the cost of acquired IP, as their carrying amounts represent a reasonable approximation of fair value.

Under level 3 unobservable inputs. In the absence of observable inputs, the directors have considered the entities own data to determine the fair value, which equates to the original funds invested. They do not consider that any other available information would materially change or give a more reliable representation of the value.

This is the only category of financial instruments measured and re-measured at fair value.

Description of significant unobservable inputs to valuation:

The significant unobservable input used in the fair value measurements categorised within Level 3 of the fair value hierarchy, together with a quantitative sensitivity analysis as at 31 May 2019 are shown as below:

 
 
               Valuation        Significant     Estimate     Sensitivity of the input 
               Technique        unobservable     applied           to fair value 
                                   input 
 Lucyd      Income            Discount to       17%        2% increase in the discount 
             Approach          Future Cash                  factor would decrease 
             (Eshop)/Net       Flows from                   the Lucyd valuation 
             Asset Approach    Eshop Sales                  by $72,000, a 2% decrease 
             (Treasury                                      in the discount factor 
             Tokens)                                        would increase the value 
                                                            by $78,400. 
                              Eshop net         $2m        A 20% increase in gross 
                               profit through               profit would increase 
                               June 2023                    the Lucyd valuation 
                                                            by $695,851. A 20% decrease 
                                                            in gross profit would 
                                                            decrease the Lucyd valuation 
                                                            by $578,390. 
 Guident    Income            Discount to       17%        5% increase in the discount 
             Approach          Future Cash                  factor would decrease 
             Royalty           Flows from                   the Guident valuation 
             Relief            licensing                    by $2,690,000, a 5% 
             Method                                         decrease in the discount 
                                                            factor would increase 
                                                            the value by $11,812,000 
                              Royalty Relief    5.375%     A 1% increase in the 
                               Rate                         royalty relief rate 
                                                            would increase the Guident 
                                                            valuation by $3,487,000, 
                                                            a 1% decrease in the 
                                                            royalty relief rate 
                                                            would decrease the valuation 
                                                            by $1,747,000 
                              Gross licensing   $3.1B      A 20% increase in the 
                               proceeds                     gross licensing proceeds 
                                                            would increase the Guident 
                                                            valuation by $6,309,000. 
                                                            A 20% decrease would 
                                                            decrease the Guident 
                                                            valuation by $5,221,000. 
 Salarius   Income            Discount to       12%        2% increase in the discount 
             Approach          Future Cash                  factor would decrease 
             Royalty           Flows from                   the Salarius valuation 
             Relief            licensing                    by $356,000, a 2% decrease 
             Method                                         in the discount factor 
                                                            would increase the value 
                                                            by $426,000 
                              Licence Royalty   8.2%       A 2% increase in the 
                               Rate                         royalty rate would increase 
                                                            the Salarius valuation 
                                                            by $1,121,277 a 2% decrease 
                                                            in the royalty rate 
                                                            would decrease the Salarius 
                                                            valuation by $1,121,277. 
                              Projected         $172m      A 20% increase in the 
                               sales                        projected sales would 
                                                            increase the Salarius 
                                                            valuation by $583,064. 
                                                            A 20% decrease in the 
                                                            projected sales would 
                                                            decrease the Salarius 
                                                            valuation by $485,887. 
 
   No sensitivities have been included on the other investments 
   as their fair value equates to cost. 
   The Group exercised judgment in determination of sufficiency 
   of portfolio companies' cash reserves, forecasts and ability 
   to raise money to achieve their fair values. Directors reviewed 
   and questioned the forecasts used, standing liquidity and 
   working capital balances, as well as discussed capability 
   and plans to raise money in the future with directors or management 
   of portfolio companies. Based on the review, the Group made 
   a positive determination as to portfolio companies' likely 
   ability to achieve fair values considering liquidity factors. 
 
   8.    Share Capital 

The Company's ordinary shares are of GBP0.004 par value.

All of the Company's issued ordinary shares have full voting, dividend and capital distribution (including winding up) rights; they do not confer any rights of redemption. The Company does not hold any ordinary shares in treasury.

 
 
            Issued and fully                  Shares                        Share                         Share 
            paid                                                           capital                       premium 
                                              Number                         US$                           US$ 
            Ordinary shares 
            of GBP0.004 each 
 
            At 1 December 2017              42,654,707                       264,221                     9,271,098 
            Shares issued in 
            further public 
            offering 
            Shares issued on                         -                             -                             - 
            exercise of 
            warrants 
                                                     -                             -                             - 
                                ----------------------  ----------------------------  ---------------------------- 
            As at 31 May 2018               42,654,707                       264,221                     9,271,098 
                                ======================  ============================  ============================ 
 
            At 1 December 2017              42,654,707                       264,221                     9,271,098 
            Shares issued in 
             further public 
             offering                       11,698,335                        61,815                       947,708 
 
            As at 30 November 
             2018                           54,353,042                       326,036                    10,218,806 
                                ======================  ============================  ============================ 
 
            Shares issued in                         -                             -                             - 
            further public 
            offering 
 
            As at 31 May 2019               54,353,042                       326,036                    10,218,806 
                                ======================  ============================  ============================ 
 
   9.    Related party transactions 

The Group has taken advantage of the exemption in IAS 24 "related parties" not to disclose transactions with other Group companies. During the period the Group did not employ any services of non-Group companies meeting the definition of related parties.

10. Interim results

The interim results for the six months ended 31 May 2019 will not be sent to shareholders but will be available from the Company's website at http://tekcapital.com/investors/.

- Ends -

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR PBMFTMBBTBRL

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