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| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 8.15 | 7.80 | 8.50 | 8.15 | 8.15 | 8.15 | 525,282 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Computer Programming Service | 615k | -12.75M | -0.0715 | -1.14 | 14.52M |
From Apr 2019 to Apr 2024
TIDMTEK
RNS Number : 8389J
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
Hot Features
Premium
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
(END) Dow Jones Newswires
August 22, 2019 02:00 ET (06:00 GMT)
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