13 Mar 2008 07:12
Amphion Innovations PLC13 March 2008 13 March 2008 Amphion Innovations plc Preliminary Results for the year to 31 December 2007 Amphion Innovations plc (LSE: AMP) ('Amphion' or 'the Company'), which buildsshareholder value in high growth companies in the medical and technologysectors, today announces its audited preliminary results for year ended 31December 2007. Financial Highlights * Strong growth in Net Asset Value per share up 29% to US $0.44 at 31 December 2007 (2006: US $0.34) * Net Asset Value in Sterling grew 26% over the past year to 22p from 17.5p despite the 1.3% adverse move in the dollar/pound exchange rate * Revenues grew by 132% (or 2.3x) to US $2.9 million (2006: US $1.2 million) * Profit before tax increased by 50% to US $10.6 million (2006: US $7.0 million) * Earnings per share of US $0.10 versus US $0.07 for 2006 * Year end cash balance of US $4.6 million Operating Highlights * Successfully raised over US $21 million of funding for 4 Partner Companies in 2007 * Added new Partner Company, PrivateMarkets Inc. * Significant progress on further establishing two other ventures: + MSA Holding B.S.C., a Gulf based joint venture, incorporated in Bahrain and fully capitalised + DataTern Inc., being established to exploit IP opportunities within the Company's Partner Companies Richard C.E. Morgan, Amphion's Chief Executive Officer said: "Amphion continued to make excellent progress in 2007 which is reflected in thecontinued growth of our Partner Companies and our strong financial performance,including the ongoing rapid growth of our NAV per share, up 29% from 2006. Our progress in 2007 confirms our confidence in the Amphion model. We enter 2008with a strong group of Partner Companies and an exciting joint venture takingshape in the Gulf region. We are optimistic we will achieve at least one tradesale or IPO in 2008 and look forward to even further growth in NAV, therebycreating substantial shareholder value." Enquiries: Amphion Innovations +1 (212) 210-6224Charlie Morgan Cardew Group +44 0207 930 0777Tim Robertson/ Jamie Milton/ Matthew Law Charles Stanley Securities, Nominated Advisor +44 020 7149 6000Mark Taylor/ Freddy Crossley Chairman and CEO's Statement Results We are pleased to present Amphion's results for the year to 31 December 2007which show continued improvement over 2006, with a 29% increase in Net AssetValue ("NAV") per Share on the back of significant progress made by our PartnerCompanies. With the addition of PrivateMarkets Inc., the number of PartnerCompanies has reached eight. In addition, we have one joint-venture company (MSAHolding), which we are building in partnership with local investors in the Gulfregion, and we are forming another specialised entity, called DataTern Inc., toaddress and exploit particular opportunities in the extensive intellectualproperty portfolio which resides within Amphion's Partner Companies. The NAV per Share rose by a further 16% in the second half of 2007 to 22p. Sincewe completed the IPO in August 2005, our NAV per Share has grown at a compoundrate of 35.7% per annum in US dollar terms and 27.5% per annum in PoundsSterling. The weakness in the dollar over this period had a negative impact onthe sterling results but this effect is now being partially offset by ourgrowing sterling asset base, represented by our holdings in DSC and Myconostica. Revenues for the year ended 31 December 2007 were US $2.9 million, net profitequaled US $10.4 million and operating loss was US $3.0 million, as compared torevenue of US $1.2 million, net profit of US $7.0 million, and operating loss ofUS $2.9 million for the year ended 31 December 2006. Funding We continue to operate to the original plan which we developed at the time ofour IPO in 2005. During 2007 we raised an additional £6.2 million in threeseparate placings in January, July, and November. That capital increase broughtthe total amount raised since the IPO to £13.8 million, close to the £15 milliontarget in our original plan. While the capital markets have become more volatileand inclement in recent months, we are optimistic we will achieve at least onetrade sale or IPO in 2008. Partner Companies The Amphion model is optimised to add one new Partner Company each year and toproduce, on average, one trade sale or IPO each year. Each of these PartnerCompanies is carefully selected and built to achieve a market valuation inexcess of US $100 million. Our objective is to maintain a relatively largeownership position in each company, which should ensure that each trade sale orIPO generates a significant amount of value for Amphion's shareholders.Consistent with our model, we started one new Partner Company in 2007. Thiscompany, initially named ETI and recently renamed PrivateMarkets Inc., wasformed as a spinout of one of our existing Partner Companies (FireStar SoftwareInc.). PrivateMarkets has made rapid progress over the last six months and weare pleased to report that it is already generating revenue. After the periodend, we raised US $3.75 million in a Series A fundraising and we believe thatthis company has great potential to show rapid growth over the next few years. We continue to be very active in helping our Partner Companies raise capital andcontinue to add to our network of agents who work with our companies to raisecapital. During 2007, we raised over US $21 million during the period, acrossfour Partner Companies. We continue to be able to raise funds for our PartnerCompanies, despite a more challenging fundraising environment, and since theperiod end, we have raised US $3.75 million for PrivateMarkets. During 2007, Amphion team members acted as CEO of one of our companies and asCFO in the case of another two. In each case our goal was to establish a solidbridge to a full time executive. In many cases, we have seen that Amphion'ssupportive role and active involvement has helped in recruiting high calibremanagement talent, beyond what a small independent start-up could possiblyattract. In addition, we are extremely active on the boards of each one of ourcompanies, providing the role of Chairman on five of them and chairing keycommittees in others. Early in 2007 we announced the agreement we had reached with several prominentfamilies in the Gulf region to form a joint venture company, MSA Holding. Thiscompany was incorporated in Bahrain in the first half of 2007 and by year end wehad completed the initial organisational and financial steps to get MSAestablished. During the year we were also delighted to add Dr. Faisal H.Al-Refaei, based in Kuwait, to the Amphion team. The mission of MSA is topractice a variant of the Amphion model, tailored to suit the particular needsof the region and to act as a capital source for Amphion, our Partner Companies,and, of course, the projects we plan to start in the region. We are currentlyincubating two companies which will become the foundation of MSA's portfolio andonce we have accomplished that step, our goal is to take MSA out to the localmarkets for a substantial capital increase. Intellectual property is the lifeblood of each one of our Partner Companies. Wehave invested a lot of time and effort in assembling a range of specialisedresources and in developing various tools, designed to optimise the value of ourintellectual property portfolio. At the last count, Amphion and its PartnerCompanies owned or controlled over 150 separately identified pieces ofintellectual property, a number that is expected to grow to at least 200 in2008. Last year we mentioned that we were taking steps to reorganise part or allof these resources into a new company. We have since taken further steps in thisdirection and hope to be able to report further progress for this entity, nowcalled DataTern Inc., as the year unfolds. Outlook The prospects for Amphion remain very bright, however it is hard to envisage thegrowth in NAV being sustained at these high levels in the long term.Nevertheless, despite difficult market conditions, we were pleased to announce acompleted fundraise for PrivateMarkets Inc., after the end of the reportingperiod. We believe that at least two Partner Companies could soon be ready tocomplete trade sales or IPO's, public market conditions permitting. Leading universities in the UK and elsewhere continue to generate many excitingand potentially revolutionary ideas and inventions each year which have theright qualities to form the basis of a successful start up company. However, thechallenges faced by such young and immature ventures are considerable. Gettingorganised, raising capital, developing plans, recruiting talented management,and then dealing with the challenges of rapid growth and competition in themarketplace all represent significant challenges to young and fragile companies.Amphion brings a wealth of experience and a disciplined approach to the task ofhelping each of our Partner Companies address these issues as they arise. We entered 2008 with a strong group of Partner Companies and an exciting newventure taking shape in the Gulf region. We look forward to further progressthis year and to the further rapid growth in Net Asset Value that we expect toreport in the year ahead. Partner Companies' Summary Below we provide a summary of progress made with each of our Partner Companies. AXCESS International Inc. (OTCBB: AXSI) ("AXCESS") focuses on real-time businessactivity monitoring products, which enable companies to track personnel, assets,and vehicles wirelessly. The information gained through the use of its patentedDot(TM) micro-wireless technology platform then allows management to subsequentlymake changes to improve decision-making and control throughout the enterprise.Analysts estimate the market for such products will exceed US $5 billion by2010. Amphion's fully diluted ownership stake in AXCESS was 7.47% as of 31December 2007, valued at US $3.1 million (2006: US $2.7 million). 2007 Developments AXCESS announced record revenues for the year ended 31 December 2007. Revenuewas a record US $3.4 million, exceeding 2006 by 127%, on the back of increasedactivities, including provision of RFID and wireless sensor monitoring toBarbados Port Inc., to help provide security at the Cricket World Cup Games. Newcompany products entering the market included the Enterprise DotTM, the world'ssmallest, most powerful battery-powered wireless computer, which can track andidentify personnel, assets, and vehicles. Also during 2007, AXCESS received twonew patents, bringing the total number of awarded patents to seven. Durham Scientific Crystals, Ltd. ("DSC") is a spin-out from Durham University(UK) focused on the application of patented, unique semi-conducting materialswhich are used in detectors for medical, security, and defense digital x-rayimaging. DSC's current market opportunities are for radiation detectors forindustrial instrumentation markets and detector modules for the aviationsecurity markets. Future markets are predominantly in the industrial inspectionand the medical sector. Analysts estimate the total size of these markets to beover US $7 billion. Amphion's fully-diluted ownership stake in DSC was 25.32% asof 31 December 2007, valued at US $9.7 million (2006: US $4.1 million). 2007 Developments In 2007, DSC received a £0.35 million contribution from the UK Home Office todevelop a liquid and small object scanner and airport checkpoint baggagescanners that use Cadmium Telluride detectors for direct materials, liquid, andthreat object identification, due for delivery in the summer of 2008 and thecheckpoint detection system for spring 2009. DSC also received contracts fromthe CENAMPS (National Centre for Nanotechnology) and the European Space Agencyfor crystals growth. During 2007, DSC successfully raised an additional £5.1million in financing. FireStar Software, Inc. ("FireStar") has developed a patent protected softwaretechnology called EdgeNode(TM) that provides secure, private, and efficientcommunications for any set of different companies to exchange electronicbusiness transactions. Amphion's fully-diluted ownership stake in FireStar was16.21% as of 31 December 2007, valued at US $4.8 million (2006: US $4.0million). 2007 Developments In 2007, FireStar launched Energy Trading International Inc., now PrivateMarketsInc. After the reporting period, with PrivateMarkets' successful completion ofan additional US $3.75 million financing, FireStar now owns 48% of the company.FireStar also sold certain non-Edgenode(TM) intellectual property assets of theObjectSpark(TM) technologies including patents, trademarks, and software toDataTern Inc., a wholly owned subsidiary of Amphion Innovations plc, whilstretaining the right to use ObjectSpark(TM) technologies in current and futureFireStar products. Also during the reporting period, FireStar signed a letter ofunderstanding with Marsoft, the largest independent advisory firm to theshipping industry for bilateral trading in the maritime shipping industry, todevelop a trading application for the shipping industry. m2m Imaging Corp. ("m2m") specialises in developing high performance magneticresonance imaging ("MRI") coils and accessories for use in low cost, enhancedimaging for clinical and preclinical markets. The continued growth of the globalinstalled base of clinical and preclinical magnetic resonance systems continuesto provide m2m with enormous opportunities for growth and it is estimated thatthe market is valued at US $12 billion. Amphion's fully-diluted ownership stakein m2m was 23.53% as of 31 December 2007, valued at US $4.0 million (2006: US$3.7 million). 2007 Developments During 2007, m2m continued its growth from 2006 in worldwide preclinicalmarkets. During the reporting period, m2m successfully engineered a prototypepreclinical cryogenic coil to come to market in 2008, completed their ATPFederal grant, and continued both the development and delivery of new productsfrom the Australian subsidiary into the world's leading academic and commercialresearch communities. As of 1 March 2008, m2m moved its headquarters toCleveland, Ohio. Motif BioSciences Inc. ("Motif") works with a variety of Founder Populations toaccelerate discovery of genetic variation involved in common diseases, such asdiabetes, asthma, and cancer and aims to develop the commercial value of thesediscoveries by partnering with pharmaceutical and diagnostic companies.Amphion's fully-diluted ownership stake in Motif was 37.69% as of 31 December2007, valued at US $12.8 million (2006: US $10.3 million). 2007 Developments In 2007, Motif initiated the most comprehensive study of genetic variation inasthma in five of the Gulf countries: Kuwait, U.A.E., Yemen, Oman, Bahrain, andSaudi Arabia. Motif was also commissioned by the Harvard School of PublicHealth as its genetics partner in its large scale and long term Kuwait PostTraumatic Stress Disorder project. Also during the reporting period, Motif made significant progress in partnershipnegotiations with Kuwait University/Kuwait Cancer Control Centre in early-onsetBreast Cancer, and the Diabetes Foundation of Barbados. After the reportingperiod, Motif and Imperial College London signed a Research PartnershipAgreement. Under the agreement, Motif will partner with Professor PhilippeFroguel of Imperial College, and with appropriate permission, gain immediateaccess to genetic samples and clinical data collected by Professor Froguel andhis colleagues in Morocco in the field of diabetes. Other corporate developments in 2007 include the securing of US $1 million infinancing. MSA Holding B.S.C. ("MSA") is a Bahrain-based investment company formed in 2007by Amphion and its Kuwaiti partners to participate in the next stage of theGulf's technological and life sciences development by investing in localcompanies with a local focus, while attracting and developing the best youngArab and Western entrepreneurial talent. Amphion's fully-diluted ownership stakein MSA was 50% as of 31 December 2007, valued at US $2.9 million (2006: n/a). 2007 Developments During 2007, MSA successfully completed capital raisings under the terms of its2006 Heads of Agreement, as well as finalised the incorporation of its corecompanies: Saydanah and Suvani. Dr. Faisal H. Al-Refaei, Amphion's RegionalDirector, Middle East was appointed CEO of Saydanah, while Suvani has identifieda leading candidate for its CEO. Since the end of the reporting period, both Saydanah and Suvani have becomeoperational and are close to partnership deals with Amphion Partner Companies,WellGen and AXCESS, respectively. Myconostica Ltd. ("Myconostica") is a spin-out from Manchester University (UK)that specialises in a new type of molecular diagnostic test for clinical use infighting the growing problem of life-threatening, invasive fungal infections.The market size is estimated to be in excess of US $500 million. Amphion'sfully-diluted ownership stake in Myconostica was approximately 35.70% as of 31December 2007, valued at US $5.8 million (2006: US $1.9 million). 2007 Developments In 2007, Myconostica achieved CE marking (regulatory approval for use in Europeand recognised in several other territories) for the MycXtra(TM) fungal extractionsystem and developed the Myconostica FXG(TM) respiratory test, aimed atidentifying both the important Aspergillus and Pneumocystis fungal pathogens ina single test. This has achieved excellent clinical results and CE marking forthe Myconostica FXG(TM) is anticipated early in 2008. During the reporting period,Myconostica secured £0.6 million of funding in the first close of the Series Cfinancing, expected to have a second and final close in Q1 of 2008. PrivateMarkets, Inc. ("PrivateMarkets") is one of Amphion's new PartnerCompanies. Originally named Energy Trading International Inc., when it wasformed in February 2007, PrivateMarkets has introduced the first and onlyservice for the bilateral, structured trading of energy commodities.PrivateMarkets is initially marketing its product to the electricity and gasmarkets in the US, but plans to expand its operations to other commodity marketsin the US, as well as globally. In the US alone, the total addressable marketfor the company is well in excess of US $1 billion a year. Amphion'sfull-diluted ownership stake in PrivateMarkets was 13.06% as of 31 December2007, valued at US $1.7 million (2006: n/a). 2007 Developments During 2007, PrivateMarkets secured US $2.3 million in financing, primarily fromAmphion in the form of convertible promissory notes which were converted toequity upon the close of the Series A Preferred Stock financing after the periodend in February 2008. The funds were used to support initial product developmentand marketing. After the reporting period, PrivateMarkets successfully completed an additionalUS $3.75 million financing. WellGen, Inc. ("WellGen") applies proprietary nutrigenomics technology to thediscovery of food and dietary supplement ingredients from plants and foods forthe health and wellness markets which are estimated to be worth US $84 billionworldwide. Amphion's fully-diluted ownership stake in WellGen was 15.01% as of31 December 2007, valued at US $6.8 million (2006: US $4.9 million). 2007 Developments In 2007, WellGen moved into new headquarters and operating facilities located atthe Commercialization Center for Innovative Technologies in the New JerseyTechnology Center in North Brunswick, New Jersey. A patent, US Patent No.7,238,376, was awarded for the company's proprietary black tea extract, WG401,which has demonstrated inflammation-fighting properties. Over the course of thereporting period, WellGen completed two more corroborative human studies forWG401, which supported its performance, the known mechanism of its action at thecellular level and the quick onset of its activity. Three additional ingredientpatents were also awarded in 2007. Other corporate developments in 2007 include the appointment of Nancy Rawson,Ph.D. as Chief Scientific Officer and the securing of US $9.5 million infinancing. Since the close of the reporting period, WellGen has appointed Robert M.Hellauer as Chief Financial Officer. Amphion Innovations plcConsolidated income statementFor the year ended 31 December 2007 Notes Year ended Year ended 31 December 2007 31 December 2006 -----------------------------------Continuing operations US $ US $ Revenue 4 2,871,222 1,238,040 Other operating income - 1,650Administrative expenses (5,877,946) (4,092,028) -----------------------------------Operating loss (3,006,724) (2,852,338) Fair value gains on investments 13,549,980 9,681,104Interest income 8 136,467 170,490Other gains and losses (113,419) 37,337Finance costs (1,192) - -----------------------------------Profit before tax 6 10,565,112 7,036,593 Tax on profit 9 (125,977) (83,214) -----------------------------------Profit for the period 10,439,135 6,953,379 =================================== Earnings per share 10 Basic US $ 0.10 US $ 0.07 ===================================Diluted US $ 0.10 US $ 0.07 =================================== Amphion Innovations plcCompany income statementFor the year ended 31 December 2007 Year ended Year ended Notes 31 December 2007 31 December 2006 ------------------------------------- US $ US $Continuing operations Administrative expenses (2,998,360) (2,939,317) ------------------------------------- Operating loss (2,998,360) (2,939,317) Fair value gains on investments 13,459,980 9,515,820Interest income 8 137,543 167,724Other gains and losses (113,419) 30,017Finance costs (1,192) - ------------------------------------- Profit before tax 6 10,484,552 6,774,244 Tax on profit 9 - - ------------------------------------- Profit for the period 10,484,552 6,774,244 ===================================== Amphion Innovations plcConsolidated balance sheetAt 31 December 2007 Notes 31 December 2007 31 December 2006 -------------------------------------- US $ US $ Non-current assetsIntangible assets 11 2,274,636 -Fixtures, fittings, and equipment 12 28,161 30,116Security deposit 121,694 121,694Investments 14 51,642,725 32,254,563 -------------------------------------- 54,067,216 32,406,373 --------------------------------------Current assetsPrepaid expenses and other receivables 15 639,429 1,258,941Cash and cash equivalents 4,594,007 1,848,539 -------------------------------------- 5,233,436 3,107,480 -------------------------------------- Total assets 59,300,652 35,513,853 ======================================Current liabilitiesTrade and other payables 16 2,469,742 1,349,986 -------------------------------------- Total liabilities 2,469,742 1,349,986 ====================================== Net assets 56,830,910 34,163,867 ====================================== EquityShare capital 17 2,388,071 1,808,983Share premium account 34,772,046 23,114,093Translation reserve 2,860 11,993Retained earnings 19,667,933 9,228,798 -------------------------------------- Total equity 56,830,910 34,163,867 ====================================== The financial statements were approved by the Board of Directors and authorised for issue on 12 March 2008. They were signed on its behalf by: Director DirectorRichard M. Mansell-Jones Robert J. Bertoldi Amphion Innovations plcCompany balance sheetAt 31 December 2007 Notes 31 December 2007 31 December 2006 ----------------------------------------------- US$ US$ Non-current assetsFixtures, fittings, andequipment 12 6,886 12,541Security deposit 121,694 121,694Investments 14 51,311,449 32,013,287Investment in subsidiaries 13 766,406 3 ----------------------------------------------- 52,206,435 32,147,525 ----------------------------------------------- Current assetsPrepaid expenses and otherreceivables 15 379,580 988,087Cash and cash equivalents 4,480,257 1,797,085 ----------------------------------------------- 4,859,837 2,785,172 ----------------------------------------------- Total assets 57,066,272 34,932,697 =============================================== Current liabilitiesTrade and other payables 16 588,049 1,176,067 ----------------------------------------------- Total liabilities 588,049 1,176,067 =============================================== Net assets 56,478,223 33,756,630 =============================================== EquityShare capital 17 2,388,071 1,808,983Share premium account 34,772,046 23,114,093Retained earnings 19,318,106 8,833,554 -----------------------------------------------Total equity 56,478,223 33,756,630 =============================================== The financial statements were approved by the Board of Directors and authorisedfor issue on 12 March 2008. They were signed on its behalf by: Director DirectorRichard M. Mansell-Jones Robert J. Bertoldi Amphion Innovations plcConsolidated statement of changes in equityFor the year ended 31 December 2007 Share Share premium Translation Retained Notes capital account reserve earnings Total --------- ---------- ----------- ---------- ---------- US $ US $ US $ US $ US $ Balance at 31 December 2005 1,685,160 20,101,328 2,220 2,275,419 24,064,127 Issue of share capital 123,823 3,047,600 - - 3,171,423 Incremental costs directly attributable to issue of shares 18 - (150,950) - - (150,950) Recognition of share-based payments 21 - 116,115 - - 116,115 Exchange differences arising ontranslation of foreign operations - - 9,773 - 9,773 Profit for the year - - - 6,953,379 6,953,379 --------- ---------- ----------- ---------- ---------- Balance at 31 December 2006 1,808,983 23,114,093 11,993 9,228,798 34,163,867 Issue of share capital 17 579,088 12,179,676 - - 12,758,764 Incremental costs directly attributable to issue of shares 18 - (778,379) - - (778,379) Recognition of share-based payments 21 - 256,656 - - 256,656 Exchange differences arising ontranslation of foreign operations - - (9,133) - (9,133) Profit for the year - - - 10,439,135 10,439,135 --------- ---------- ----------- ---------- ---------- Balance at 31 December 2007 2,388,071 34,772,046 2,860 19,667,933 56,830,910 ========= ========== =========== ========== ========== Amphion Innovations plcCompany statement of changes in equityFor the year ended 31 December 2007 Share Share premium Retained Notes capital account earnings Total --------- ---------- ---------- ---------- US $ US $ US $ US $ Balance at 31 December 2005 1,685,160 20,101,328 2,059,310 23,845,798 Issue of share capital 123,823 3,047,600 - 3,171,423 Incremental costs directly attributableto issue of shares 18 - (150,950) - (150,950) Recognition of share-based payments 21 - 116,115 - 116,115 Profit for the year - - 6,774,244 6,774,244 --------- ---------- ---------- ---------- Balance at 31 December 2006 1,808,983 23,114,093 8,833,554 33,756,630 Issue of share capital 17 579,088 12,179,676 - 12,758,764 Incremental costs directly attributableto issue of shares 18 - (778,379) - (778,379) Recognition of share-based payments 21 - 256,656 - 256,656 Profit for the year 10,484,552 10,484,552 --------- ---------- ---------- ----------Balance at 31 December 2007 2,388,071 34,772,046 19,318,106 56,478,223 ========= ========== ========== ========== Amphion Innovations plcConsolidated cash flow statementFor the year ended 31 December 2007 Year ended Year ended Notes 31 December 2007 31 December 2006 ---------------- ---------------- US $ US $Operating activities Operating loss (3,006,724) (2,852,338) Adjustments for: Depreciation of fixtures, fittings, and equipment 12 12,052 9,210 Recognition of share based payments 256,656 116,115 (Increase) decrease in prepaid & other receivables 619,512 (615,453) Increase in trade & other payables 1,119,756 995,667 Interest expense (1,192) - Income tax (125,977) (75,894) ---------------- ---------------- Net cash used in operating activities (1,125,917) (2,422,693) ---------------- ---------------- Investing activities Interest received 136,467 170,490Proceeds on disposal of investments 14 581,353 2,905,719Purchases of investments (6,419,535) (4,937,763)Purchases of intangible assets (2,274,636) -Proceeds from repayment of note - 637,000Purchases of equipment 12 (10,059) (12,899) ---------------- ---------------- Net cash used in investing activities (7,986,410) (1,237,453) ---------------- ---------------- Financing activities Proceeds on issue of shares, net of share issuance costs 11,980,385 3,020,473 ---------------- ---------------- Net cash from financing activities 11,980,385 3,020,473 ---------------- ---------------- Net increase/(decrease) in cash and cash equivalents 2,868,058 (639,673) Cash and cash equivalents at the beginning of the year 1,848,539 2,448,422 Effect of foreign exchange rate changes (122,590) 39,790 ---------------- ---------------- Cash and cash equivalents at the end of the year 4,594,007 1,848,539 ================ ================ Amphion Innovations plcCompany cash flow statementFor the year ended 31 December 2007 Year ended Year ended Notes 31 December 2007 31 December 2006 ---------------- ----------------Operating activities US $ US $ Operating loss (2,998,360) (2,939,317) Adjustments for: Depreciation of fixtures, fittings, and equipment 12 5,655 5,664 Recognition of share based payments 256,656 116,115 (Increase) decrease in prepaid & other receivables 608,507 (408,280) Increase (decrease) in trade & other payables (588,018) 897,631 Interest expense (1,192) - ---------------- ---------------- Net cash used in operating activities (2,716,752) (2,328,187) ---------------- ----------------Investing activities Interest received 137,543 167,724Proceeds on disposal of investments 14 581,353 2,905,719Purchases of investments (7,185,938) (4,937,763)Proceeds from repayment of note - 637,000Purchases of equipment 12 - (2,263) ---------------- ----------------Net cash used in investing activities (6,467,042) (1,229,583) ---------------- ---------------- Financing activities Proceeds on issue of shares, net of share issuance costs 11,980,385 3,020,473 ---------------- ---------------- Net cash from financing activities 11,980,385 3,020,473 ---------------- ---------------- Net increase/(decrease) incash and cash equivalents 2,796,591 (537,297) Cash and cash equivalents at the beginning of the year 1,797,085 2,304,365 Effect of foreign exchange rate changes (113,419) 30,017 ---------------- ---------------- Cash and cash equivalents at the end of the year 4,480,257 1,797,085 ================ ================ Amphion Innovations plcNotes to the consolidated financial statements For the year ended 31 December 2007 1. General information Amphion Innovations plc (the "Company") is a public limited company incorporatedin the Isle of Man under the Companies Acts 1931 to 2004 on 7 June 2005 withregistered number 113646C. The address of the registered office is 15-19 AtholStreet, Douglas, Isle of Man, IM1 1LB. The principal place of business is 330Madison Avenue, New York, NY, USA, 10017. The principal activity of the Companyand its subsidiaries (the "Group") is to build shareholder value in high growthcompanies in the medical and technology sectors, by using a focused, hands-oncompany building approach, based on decades of experience in both the US and UK. The consolidated financial statements include the accounts of AmphionInnovations plc and its three wholly owned subsidiaries, Amphion Innovations USInc. and DataTern, Inc., which are incorporated in the United States, andAmphion Innovations UK Limited, which is incorporated in the United Kingdom. These financial statements are presented in US dollars because that is thecurrency of the primary economic environment in which the Company operates. 2. Significant accounting policies The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS). However, the comparative consolidatedincome statement for the year ended 31 December 2006 does not reflect thepresentation and disclosures required by IFRS 5 "Non-current Assets Held forSale and Discontinued Operations" arising from Motif BioSciences Inc. ("Motif")ceasing to be a subsidiary during the year ended 31 December 2006, whenAmphion's ownership interest fell below 50%. Historically, the Company had notconsolidated Motif in the financial statements of the Group, as the Directorsbelieved that the presentation of this subsidiary on an unconsolidated basisprovided a fairer presentation of the Group's position. In the current year, the Group has adopted IFRS 7 Financial Instruments:Disclosures which is effective for annual reporting periods beginning on orafter 1 January 2007, and the related amendment to IAS 1 Presentation ofFinancial Statements. The impact of the adoption of IFRS 7 and the changes toIAS 1 has been to expand the disclosures provided in these financial statementsregarding the Group's financial instruments and management of capital. As of the date of authorisation of these financial statements, the followingStandards and Interpretations which have not been applied in these financialstatements were in issue but not yet effective: IFRS 8 Operating SegmentsIFRIC 8 Scope of IFRS 2IFRIC 11 IFRS 2: Group and Treasury Share TransactionsIFRIC 12 Service Concession ArrangementsIFRIC 13 Customer Loyalty ProgrammesIFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements andtheir Interaction The Directors anticipate that the adoption of these Standards andInterpretations in future periods will have no material impact on the financialstatements of the Group. The financial statements have been prepared on the historical cost basis,modified by the revaluation of investments. The principal accounting policiesadopted are set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries). Controlis achieved where the Company has the power to govern the financial andoperating policies of any entity so as to obtain benefits from its activities. The results of subsidiaries acquired during the year are included in theconsolidated income statement from the effective date of acquisition. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe Group. All intra-group transactions, balances, income, and expenses are eliminated onconsolidation. 2. Significant accounting policies, (continued) Cash and cash equivalents Cash and cash equivalents include balances with banks and demand deposits, whichhave maturities of less than three months Investments Investments comprise equity investments, warrants, options and promissory notes.Investments are recognised and derecognised on a trade date where a purchase orsale of an investment is under a contract whose terms require delivery of theinvestment within the timeframe established by the market concerned, and areinitially measured at fair value, net of transaction costs except for thosefinancial assets classified as fair value through profit or loss which areinitially measured at fair value. Investments are classified as fair value through profit and loss. Investmentsare carried at value as determined by management using the International PrivateEquity and Venture Capital Valuation Guidelines. The following broad guidelinesare generally used in security valuations: a) marketable securities which arefreely tradable and for which quotations are readily available are valued usingtheir last closing prices, (b) all other securities are valued at fair value asestimated by management in good faith. Factors generally considered indetermining fair value are the latest offering price from recently executedfinancing transactions related to the investee companies and comparison tosimilar instruments of similar companies. Investments that do not have a quotedmarket price in an active market and whose fair value cannot be reliablymeasured are valued at cost until such time as a fair value can be determined. Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Prepaid expenses and other receivables Prepaid expenses and other receivables are stated at their nominal value whichapproximates their fair value. Other receivables are reduced by appropriateallowances for estimated irrecoverable amounts and do not carry any interest. Financial liabilities and equity Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the Group afterdeducting all of its liabilities. Trade and other payables Trade and other payables are not interest bearing and are stated at nominalvalue which approximates their fair value. Equity instruments Equity instruments issued by the Group are recorded at the proceeds received,net of direct issue costs. Share based payments The Group has applied the requirements of IFRS 2 Share-based Payments. The Group issues equity-settled share-based payments to certain employees andconsultants. Equity-settled share-based payments are measured at fair value atthe date of grant. The fair value determined at the grant date of theequity-settled share-based payments is expensed on a straight-line basis overthe vesting period, based on the Group's estimate of the shares that willeventually vest. The fair value of equity-settled share-based paymentsattributable to the issue of equity instruments is charged against equity. Fair value is measured using the Black-Scholes pricing model. The expected lifeused in the model has been adjusted based on management's best estimate foreffects of non-transferability, exercise restrictions, and behavioralconsiderations. 2. Significant accounting policies, (continued) Financial instruments, (continued) Capital risk management The Group manages its capital to ensure that entities in the Group will be ableto continue as going concerns while maximizing the return to stakeholdersthrough the optimisation of the debt and equity balance. The capital structureof the Group consists of cash and cash equivalents and equity attributable toequity holders of the parent, comprising issued capital, reserves, and retainedearnings as disclosed in note 17. Impairment of financial assets Financial assets are assessed for indicators of impairment at each balance sheetdate. Financial assets are impaired where there is objective evidence that, as aresult of one or more events that occurred after the initial recognition of thefinancial asset, the estimated future cash flows of the investment have beenimpacted. Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable and represents amounts receivable for and services provided in thenormal course of business, net of VAT and other sales related taxes. Interest income Interest income is accrued on a time basis. Dividend income Dividend income from investments is recognised when the shareholders' right toreceive payment has been established. Leasing Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases. Foreign currencies The individual financial statements of each group company are presented in thecurrency of the primary economic environment in which it operates (itsfunctional currency). For the purpose of the consolidated financial statements,the results and financial position of each group company are expressed in USdollars, which is the functional currency of the Company, and the presentationcurrency for the consolidated financial statements. Transactions in currencies other than US dollars are recorded at the rates ofexchange prevailing on the dates of the transactions. At each balance sheetdate, monetary assets and liabilities that are denominated in foreign currenciesare retranslated at the rates prevailing on the balance sheet date. Non-monetaryassets and liabilities carried at fair value that are denominated in foreigncurrencies are translated at the rates prevailing at the date when the fairvalue was determined. Gains and losses arising on retranslation are included innet profit or loss for the period, except for exchange differences arising onnon-monetary assets and liabilities where the changes in fair value arerecognised directly in equity. On consolidation, the assets and liabilities of the Group's overseas operationsare translated at exchange rates prevailing on the balance sheet date. Incomeand expense items are translated at the average exchange rates for the periodunless exchange rates fluctuate significantly. Exchange differences arising, ifany, are classified as equity and transferred to the Group's translationreserve. Such translation differences are recognised as income or as expenses inthe period in which the operation is disposed of. Retirement benefit costs Payments to defined contribution retirement benefit schemes are charged as anexpense as they fall due. 2. Significant accounting policies, (continued) Taxation Income tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the period. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expenditure that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted at the balance sheet date. Deferred taxation is the tax expected to be payable or recoverable ondifferences between the carrying amount of assets and liabilities in thefinancial statements and the corresponding tax basis used in the computation oftaxable profit. Deferred tax is calculated at the tax rates that are expected to apply to theperiod when the liability is settled or the asset realised. Deferred tax assetsand liabilities are not discounted. Fixtures, fittings, and equipment Fixtures, fittings, and equipment are stated at cost less accumulateddepreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost or valuation of assets overtheir estimated useful lives of 3-5 years, using the straight-line method. Intangible assets Intangible assets comprise patents and other intellectual property and aremeasured initially at purchase cost and are amortised on a straight-line basisover their estimated useful lives. Impairment of tangible and intangible assets At each balance sheet date, the Group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss (if any). Where the asset does not generate cashflows that are independent from other assets, the Group estimates therecoverable amount of the cash-generating unit to which the asset belongs. Anintangible asset with an indefinite useful life is tested for impairmentannually and whenever there is an indication that the asset may be impaired. 3. Key sources of estimation uncertainty The preparation of the Group's financial statements requires management to makeestimates and assumptions that affect the reported amounts of assets,liabilities, and contingencies at the date of the Group's financial statements,and revenue and expenses during the reporting period. Actual results coulddiffer from those estimated. Significant estimates in the Group's financialstatements include the amounts recorded for the fair value of the investments.By their nature, these estimates and assumptions are subject to measurementuncertainty and the effect on the Group's financial statements of changes inestimates in future periods could be significant. 4. Revenue An analysis of the Group's and Company's revenue for the period is as follows: Group Company Group Company Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2007 2007 2006 2006 ----------- ----------- ----------- ----------- US $ US $ US $ US $ Settled in cash 2,871,222 - 1,238,040 - ----------- ----------- ----------- ----------- Advisory fee income 2,871,222 - 1,238,040 - ----------- ----------- ----------- ----------- 5. Business and geographical segments Business segments For management purposes for 2007, the Group is organised into three businesssegments - advisory services, investing activities, and intellectual property.These business segments are the basis on which the Group reports its primarysegment information. Segment information about these businesses is presented below. Advisory Investing Intellectual services activities property Eliminations Consolidated Year ended Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 31 December 2007 2007 2007 2007 2007 US $ US $ US $ US $ US $REVENUEExternal advisory fees 2,871,222 - - - 2,871,222Inter-segment fees - 606,352 - (606,352) - ---------- ---------- ---------- ---------- ----------Total revenue 2,871,222 606,352 - (606,352) 2,871,222Administrative expenses (2,552,990) (3,610,129) (321,179) 606,352 (5,877,946) ---------- ---------- ---------- ---------- ---------- Segment result 318,232 (3,003,777) (321,179) - (3,006,724) Fair value and realised gains on investments - 13,549,980 - - 13,549,980Interest income 345 138,954 - (2,832) 136,467Other gains and losses - (113,419) - - (113,419)Finance costs - (1,192) (2,832) 2,832 (1,192) ---------- ---------- ---------- ---------- ----------Profit before tax 318,577 10,570,546 (324,011) - 10,565,112Income taxes (115,548) (10,429) - (125,977) ---------- ---------- ---------- ---------- ---------- Profit after tax 203,029 10,560,117 (324,011) - 10,439,135 OTHER INFORMATIONSegment assets 788,102 57,194,434 2,274,636 (956,520) 59,300,652 Segment liabilities 202,558 611,749 2,183,132 (527,697) 2,469,742 Capital additions 7,656 2,403 2,274,636 - 10,059Depreciation 5,068 6,984 - - 12,052Recognition of share basedpayments - 256,656 - - 256,656 5. Business and geographical segments, (continued) For management purposes for 2006, the Group was organised into two businesssegments - advisory services and investing activities. Advisory Investing services Activities Eliminations Consolidated Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2006 2006 2006 2006 US $ US $ US $ US $REVENUEExternal advisory fees 1,238,040 - - 1,238,040Inter-segment fees - 444,027 (444,027) - ---------- ---------- ---------- ----------Total revenue 1,238,040 444,027 (444,027) 1,238,040Other operating income 1,650 - 1,650Administrative expenses (1,040,195) (3,495,860) 444,027 (4,092,028) ---------- ---------- ---------- ---------- Segment result 199,495 (3,051,833) - (2,852,338) Fair value and realisedgains on investments - 9,681,104 - 9,681,104Interest income 1,152 169,338 - 170,490Other gains and losses 7,323 30,014 - 37,337 ---------- ---------- ---------- ----------Profit before tax 207,970 6,828,623 - 7,036,593Income taxes (70,899) (12,315) - (83,214) ---------- ---------- ---------- ---------- Profit after tax 137,071 6,816,308 - 6,953,379 ---------- ---------- ---------- ---------- OTHER INFORMATIONSegment assets 517,470 35,055,555 (59,172) 35,513,853 Segment liabilities 162,161 1,243,148 (55,323) 1,349,986 Additions to fixtures,fittings, and equipment 7,082 5,817 - 12,899Depreciation 2,876 6,334 - 9,210Advisory fees settled inequity instruments - 116,115 - 116,115 5. Business and geographical segments, (continued) Geographical segments The Group's operations are located in the United States and the United Kingdom. The following table provides an analysis of the Group's advisory fees bygeographical location of the investment. Advisory fees by geographical location ----------------------- 2007 2006 ---- ---- US $ US $ United States 2,354,875 1,092,900United Kingdom 516,347 145,140 --------- --------- 2,871,222 1,238,040 ========= ========= The following is an analysis of the carrying amount of segment assets, andadditions to fixtures, fittings, and equipment, and intangible assets analysedby the geographical area in which the assets are located: Carrying amount Additions to fixtures, Additions to of segment assets fittings and equipment intangible assets -------------------------- ------------------------ ------------------ 2007 2006 2007 2006 2007 2006 ---- ---- ---- ---- ---- ---- US $ US$ US $ US$ US $ US$ United States 43,683,138 29,408,915 7,656 9,345 2,274,636 -United Kingdom 15,617,514 6,104,938 2,403 3,554 - - ---------- ---------- ------- ------- --------- ------- 59,300,652 35,513,853 10,059 12,899 2,274,636 - ========== ========== ======= ======= ========= ======= 6. Profit before tax Profit before tax has been arrived at after crediting/(charging) the followinggains and losses: Group Company Group Company Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2007 2007 2006 2006 US $ US $ US $ US $ ----------- ----------- ----------- -----------Net foreign exchange gains /(losses) (113,419) (113,419) 30,017 30,017 =========== =========== =========== ===========Change in fair value of financial assets designated as at fair value through profit or loss 13,549,980 13,459,980 9,681,104 9,515,820 =========== =========== =========== =========== Depreciation of equipment 12,052 5,655 9,210 5,664 =========== =========== =========== =========== Auditors' remuneration - audit services 135,968 81,356 164,607 150,000 =========== =========== =========== =========== Auditors' remuneration -audit services, underestimated in prior year - - 117,865 117,865 =========== =========== =========== =========== Auditors' remuneration - advisory services 26,813 26,813 - - =========== =========== =========== =========== 7. Staff costs The average monthly number of employees (including Executive Directors) was: 2007 2006 ---- ---- Number Number Amphion Innovations plc and Amphion Innovations US Inc. (employees and costs are shared) 7 6Amphion Innovations UK Ltd. 2 2 ------ ------Total for the Group 9 8 ====== ====== Group Company Group Company 2007 2007 2006 2006 ---- ---- ---- ----Their aggregate remuneration comprised: US $ US $ US $ US $ Wages and salaries 1,893,920 883,683 1,312,737 639,601Social security costs 93,705 30,912 76,281 27,647Other pension costs (see note 22) 28,826 - 26,538 - --------- --------- --------- --------- 2,016,451 914,595 1,415,556 667,248 ========= ========= ========= ========= 8. Interest income Group Company Group Company Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2007 2007 2006 2006 ----------- ----------- ----------- ----------- US $ US $ US $ US $ Interest income: Bank deposits 72,908 71,152 41,316 39,155 Investments 63,559 66,391 128,569 128,569 Other - - 605 - ----------- ----------- ----------- ----------- 136,467 137,543 170,490 167,724 =========== =========== =========== =========== 9. Income tax expense Group Group Year ended Year ended 31 December 2007 31 December 2006 ---------------- ---------------- US $ US $ Isle of Man income tax - -Tax on US subsidiary 115,548 70,899Tax on UK subsidiary 10,429 12,315 ---------------- ----------------Current tax 125,977 83,214 ================ ================ From 6 April 2006, a standard rate of corporate tax of 0% applies to Isle of Mancompanies, with exceptions taxable at the 10% rate, namely licensed banks inrespect of deposit-taking business, companies that profit from land and propertyin the Isle of Man and companies that elect to pay tax at the 10% rate. Noprovision for Isle of Man taxation is therefore required. The Company is treatedas a Partnership for U.S. federal and state income tax purposes and,accordingly, its income or loss is taxable directly to its partners. The Company has three subsidiaries, two in the USA and one in the UK. The USsubsidiaries, Amphion Innovation US Inc. and DataTern, Inc., are Corporationsand therefore taxed directly. The US subsidiaries suffer US federal tax, statetax, and New York City tax on their taxable net income. The UK subsidiary,Amphion Innovations UK Limited, is liable to UK Corporation tax at rates up to30% on its taxable profits and gains. The Group charge for the period can be reconciled to the profit per theconsolidated income statement as follows: 2007 2006 US $ US $ Profit before tax 10,565,112 7,036,593 ========== ========== Tax at the Isle of Man income tax rate of 0% - - Effect of different tax rates of subsidiariesoperating in other jurisdictions 125,977 83,214 ---------- ---------- Current tax 125,977 83,214 ========== ========== 10. Earnings per share The calculation of the basic and diluted earnings per share attributable to theordinary equity holders of the parent is based on the following data: Earnings Year ended Year ended 31 December 2007 31 December 2006 ---------------- ---------------- US $ US $Earnings for the purposes of basic and diluted earnings per share(profit for the year attributable to equity holders of the parent) 10,439,135 6,953,379 ================ ================ Number of shares Year ended Year ended 31 December 2007 31 December 2006 ---------------- ----------------Weighted average number of ordinary shares for the purposes of basic earnings per share 108,073,228 95,175,992 Effect of dilutive potential ordinary shares: Share options 163,733 110,211 ---------------- ----------------Weighted average number of ordinary shares for the purposes of diluted earnings per share 108,236,961 95,286,203 ================ ================ 11. Intangible assets Patents, software, trademark and copyright ----------------------- US $COST At 1 January 2006 -Additions - ----------------------- At 1 January 2007 - Additions 2,274,636 ----------------------- At 31 December 2007 2,274,636 ======================= The intangible assets relate to certain intellectual property assets which wereacquired on 20 December 2007 in a transaction between Amphion Innovations plc,DataTern, Inc. ("DataTern"), a wholly owned subsidiary of Amphion Innovationsplc, and FireStar Software Inc. ("FireStar"), a company in which AmphionInnovations plc holds an investment. The assets were purchased for the followingconsideration: discharge of debtor of US $415,000 and assumption by Amphion ofcertain third party payable totaling approximately US $1.8 million. As part ofthe purchase, US $1,565,278.05 of promissory notes of FireStar, held by Amphionwere converted into FireStar stock. Under the terms of the purchase, FireStarretains an interest of 48.29% of any future distributions on the 502 Patent and24.14% of any future distributions on the 402 and 077 Patents. 12. Fixtures, fittings, and equipment Group Company Fixtures, fittings, Fixtures, fittings, and equipment and equipment ------------------- -------------------COST US $ US $ At 1 January 2006 28,760 17,723Additions 12,899 2,263 ------------------- ------------------- At 1 January 2007 41,659 19,986Additions 10,059 - ------------------- ------------------- At 31 December 2007 51,718 19,986 ------------------- ------------------- ACCUMULATED DEPRECIATION At 1 January 2006 2,333 1,781Charge for the period 9,210 5,664 ------------------- ------------------- At 1 January 2007 11,543 7,445Charge for the period 12,052 5,655Exchange difference (38) - ------------------- ------------------- At 31 December 2007 23,557 13,100 ------------------- ------------------- CARRYING AMOUNT At 31 December 2007 28,161 6,886 =================== ===================At 31 December 2006 30,116 12,541 =================== =================== 13. Subsidiaries Details of the Company's subsidiaries at 31 December 2007 are as follows: Place of Proportion Proportion incorporation of ofName of (or registration) ownership votingsubsidiary and operation interest power held Principal activity % %------------------------------- ----------------- ---------- ----------- ---------------------Consolidated------------Amphion Innovations US Inc. Delaware, USA 100 100 Advisory servicesAmphion Innovations UK Limited England & Wales 100 100 Advisory servicesDataTern, Inc. Delaware, USA 100 100 Intellectual property The investments in subsidiaries are all stated at cost. 14. Investments At fair value through profit and loss Group Company 31 December 2007 31 December 2007 Unrealised Unrealised Fair Value Cost gain/(loss) Fair Value Cost gain/(loss) US $ US $ US $ US $ US $ US $Public companies:AXCESS International Inc. 3,088,760 2,559,521 529,239 3,088,760 2,559,521 529,239 Private companies:Durham Scientific Crystals, Ltd. 9,689,225 2,884,056 6,805,169 9,689,225 2,884,056 6,805,169Energy Trading International,Inc. 1,690,000 1,690,000 - 1,690,000 1,690,000 -FireStar Software, Inc. 4,783,933 4,941,783 (157,850) 4,783,933 4,941,783 (157,850)Motif BioSciences, Inc. 12,791,591 5,464,624 7,326,967 12,791,591 5,464,624 7,326,967MSA Holding B.S.C. 2,929,468 1,500,000 1,429,468 2,929,468 1,500,000 1,429,468m2m Imaging Corp. 4,015,826 1,636,268 2,379,558 3,684,550 1,582,500 2,102,050Myconostica Ltd. 5,847,695 2,745,331 3,102,364 5,847,695 2,745,331 3,102,364WellGen, Inc. 6,806,227 4,814,936 1,991,291 6,806,227 4,814,936 1,991,291 ---------- ---------- ---------- ---------- ---------- ---------- 51,642,725 28,236,519 23,406,206 51,311,449 28,182,751 23,128,698 ========== ========== ========== ========== ========== ========== Group Company 31 December 2007 31 December 2007 Fair Value Cost Unrealised Fair Value Cost Unrealised US $ US $ US $ US $ US $ US $ Shares 39,482,486 20,054,147 19,428,339 39,482,486 20,054,147 19,428,339Promissory notes 4,275,645 4,275,645 - 4,275,645 4,275,645 -Warrants & options 7,884,594 3,906,727 3,977,867 7,553,318 3,852,959 3,700,359 ---------- ---------- ---------- ---------- ---------- ---------- 51,642,725 28,236,519 23,406,206 51,311,449 28,182,751 23,128,698 ========== ========== ========== ========== ========== ========== 14. Investments, (continued) Group Company 31 December 2006 31 December 2006 Unrealised Unrealised Fair Value Cost gain/(loss) Fair Value Cost gain/(loss) US $ US $ US $ US $ US $ US $Public companies:AXCESS International Inc. 2,686,210 2,409,521 276,689 2,686,210 2,409,521 276,689Beijing Med-Pharm Corporation 446,388 113,314 333,074 446,388 113,314 333,074 Private companies:Durham Scientific Crystals, Ltd. 4,110,000 2,134,673 1,975,327 4,110,000 2,134,673 1,975,327FireStar Software, Inc. 4,060,284 4,155,784 (95,500) 4,060,284 4,155,784 (95,500)Motif BioSciences, Inc. 10,346,655 4,252,279 6,094,376 10,346,655 4,252,279 6,094,376m2m Imaging Corp. 3,736,026 1,386,268 2,349,758 3,494,750 1,332,500 2,162,250Myconostica Ltd. 1,929,000 1,929,000 - 1,929,000 1,929,000 -WellGen, Inc. 4,940,000 4,549,458 390,542 4,940,000 4,549,458 390,542 ---------- ---------- ---------- ---------- ---------- ---------- 32,254,563 20,930,297 11,324,266 32,013,287 20,876,529 11,136,758 ========== ========== ========== ========== ========== ========== Group Company 31 December 2006 31 December 2006 Fair Value Cost Unrealised Fair Value Cost Unrealised US $ US $ US $ US $ US $ US $ Shares 25,065,759 15,683,292 9,382,467 25,065,759 15,683,292 9,382,467Promissory notes 1,340,278 1,340,278 - 1,340,278 1,340,278 -Warrants & options 5,848,526 3,906,727 1,941,799 5,607,250 3,852,959 1,754,291 ---------- ---------- ---------- ---------- ---------- ---------- 32,254,563 20,930,297 11,324,266 32,013,287 20,876,529 11,136,758 ========== ========== ========== ========== ========== ========== Fair value determination At 31 December 2007 the one publicly traded company, AXCESS International Inc.("AXCESS"), is valued based on its last quoted closing prices. In regard to theGroup's valuation of AXCESS, the Directors have assumed an orderly sale of thestock over an extended period of time and have therefore chosen not to apply adiscount to the quoted market price. Promissory notes held in Energy TradingInternational, Inc. are valued at cost. Equity investments in Durham ScientificCrystals, Ltd., FireStar Software, Inc., Motif BioSciences, Inc., m2m ImagingCorp. (formerly Supertron Technologies Inc.), Myconostica Ltd. and WellGen, Inc.are valued using the latest offering price from recently executed financingtransactions by those companies. Convertible promissory notes held in thesecompanies are valued at cost. The value of MSA Holding B.S.C. is based on thevalue of its net assets at 31 December 2007. Warrants for all companies arevalued at the valuation price less the warrant exercise price plus a factor forthe time value of the warrant. The time value factor is based on the premisethat an in-the-money ten year warrant is worth half the exercise price. During the year ended 31 December 2007, the Company sold 68,675 shares ofBeijing Med-Pharm Corporation for total proceeds of US $581,353. In December2007, the Company contributed 500,000 shares of Motif BioSciences, Inc. to MSAHolding B.S.C. valued at US $1.5 million, realising a non-cash gain of US $1million. At 31 December 2007, MSA Holding B.S.C. owned 2,626,467 of the ordinary sharesof Amphion Innovations plc. 14. Investments, (continued) Subsequent to the year end Energy Trading International, Inc. changed its nameto PrivateMarkets, Inc. The Group's ownership percentages of the investments are as follows: 2007 2006 Fully-diluted Fully-diluted Country of incorporation ownership % ownership % AXCESS International, Inc. United States of America 7.47 8.55Beijing Med-Pharm Corporation United States of America - .23Durham Scientific Crystals, Ltd England & Wales 25.32 26.24Energy Trading International, Inc. United States of America 13.06 -FireStar Software, Inc. United States of America 16.21 10.75Motif BioSciences, Inc. United States of America 37.69 41.17MSA Holding B.S.C. Kingdom of Bahrain 50.00 -m2m Imaging Corporation United States of America 23.53 22.81Myconostica Ltd England & Wales 35.70 32.46WellGen, Inc. United States of America 15.01 17.39 15. Other financial assets and liabilities The carrying amounts of the Group's financial assets and financial liabilitiesat the balance sheet date are as follows. The accounting policies described innote 2 explain how the various categories of financial instruments are measured. Group Company 2007 2006 2007 2006 Carrying Fair Carrying Fair Carrying Fair Carrying Fair amount value amount value amount value amount value US $ US $ US $ US $ US $ US $ US $ US $Financial assetsFair value through profit or lossFixed asset investments - designated as such upon initial recognition 51,642,725 51,642,725 32,254,563 32,254,563 51,311,449 51,311,449 32,013,287 32,013,287 Currents assetsSecurity deposit 121,694 121,694 121,694 121,694 121,694 121,694 121,694 121,694Prepaid expenses and otherreceivables 639,429 639,429 1,258,941 1,258,941 379,580 379,580 988,087 988,087Cash and cash equivalents 4,594,007 4,594,007 1,848,539 1,848,539 4,480,257 4,480,257 1,797,085 1,797,085 Financial liabilitiesTrade and other payables 2,469,742 2,469,742 1,349,986 1,349,986 588,049 588,049 1,176,067 1,176,067 The carrying value of cash and cash equivalents, the security deposit, prepaidexpenses and other receivables, and trade and other payables approximate theirfair value at 31 December 2007 and 2006. At the balance sheet date other receivables includes subscriptions receivable ofUS $234,536 (2006: US $702,660). The Directors consider that the carrying valueof other receivables approximates to their fair value. 15. Other financial assets and liabilities, (continued) Credit risk Credit risk refers to the risk that a counterparty will default on itscontractual obligations resulting in financial loss to the Group. The Group hasadopted a policy of only dealing with creditworthy counterparties, as a means ofmitigating the risk of financial loss from defaults. The credit risk on liquid funds is limited because the counterparties are bankswith high credit-ratings assigned by international credit-rating agencies. Themaximum exposure to credit risk for the financial asset investments designatedat fair value through the profit and loss is represented by their carryingvalue. The Group's exposure to counterparty credit risk also arises from balances frompartner companie's relating to fees charged for services provided by Amphion.Amphion seeks to mitigate the risk noted above through its philosophy of workingwith a small number of rigorously selected Partner Companies, assisting them togrow by implementing a consistent and proven methodology developed over themanagement team's 20 years of company building experience. The Group's timetested model of company creation is built on a robust risk management processthat relies on proven, defensible intellectual property sourced from some of theworld's leading corporations and universities. Included in the Group's other receivables are debtors which are past due at thereporting date for which the Group has not provided as there has not been asignificant change in credit quality and the Group believes that the amounts arestill considered recoverable. The Group does not hold any collateral over thesebalances. The US $415,000 that was due from FireStar Software, Inc. at 31December 2006 was forgiven as part of the 20 December 2007 Asset PurchaseAgreement between FireStar, the Company, and DataTern, Inc. The following table is an analysis of the age of financial assets that are pastdue but not impaired: Group More than 3 Not past due Not more than months and not More than or impaired 3 months more than 1 year 1 year Total 2007Fees receivable - 136,569 69,000 - 205,569Rebilliableexpenses - 8,550 21,008 - 29,558Other receivables 110,479 - 234,536 - 345,015Prepaid expenses* 59,287 - - - 59,287 ------------------------------------------------------------------ 169,766 145,119 324,544 - 639,429 ------------------------------------------------------------------2006Fees receivable - 25,849 - 376,500 402,349Rebillableexpenses 21,777 - 11,274 44,421 77,472Other receivables 19,100 - - - 19,100Subscriptionsreceivable 702,660 - - - 702,660Prepaid expenses* 57,360 - - - 57,360 ------------------------------------------------------------------ 800,897 25,849 11,274 420,921 1,258,941 ------------------------------------------------------------------ 15. Other financial assets and liabilities, (continued) Company More than 3 Not past due Not more than months and not More than or impaired 3 months more than 1 1 year Total year 2007Fees receivable - - - - -Rebilliable expenses - 4,552 - - 4,552Other receivables 89,493 - 234,536 - 324,029Prepaid expenses 50,999 - - - 50,999 --------------------------------------------------------------- 140,492 4,552 234,536 - 379,580 --------------------------------------------------------------- 2006Fees receivable - - 184,952 184,952Rebillable expenses - - - 44,241 44,241Other receivables 5,556 - - - 5,556Prepaid expenses 50,678 - - - 50,678Subscriptions receivable 702,660 - - - 702,660 --------------------------------------------------------------- 758,894 - - 229,193 988,087 --------------------------------------------------------------- Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financialobligations as they fall due. The principal risk to which the Group is exposedis liquidity risk. Amphion's investments are in Partner Companies that are often development stagecompanies and will likely experience significant negative cash flow. The PartnerCompanies may be unable to obtain financing to fund their negative cash flowsdue to market conditions or lack of operational progress. In these instances,though Amphion is not obligated to do so, the Group may feel it necessary toprovide additional investment to the Partner Company. Amphion may also berequired to spend additional management time on these companies. Adverse market conditions may also delay liquidity events for the PartnerCompanies, thereby requiring additional rounds of financing in which Amphion mayfeel it necessary to participate. During these adverse market conditions Amphionmay also find it difficult to raise additional capital. Amphion seeks to mitigate the risk noted above through its philosophy of workingwith a small number of rigorously selected Partner Companies, assisting them togrow by implementing a consistent and proven methodology developed over themanagement team's 20 years of company building experience. The Group's timetested model of company creation is built on a robust risk management processthat relies on proven, defensible intellectual property sourced from some of theworld's leading corporations and universities. 15. Other financial assets and liabilities, (continued) The following table is a maturity analysis that shows the remaining contractualmaturity for the Group's financial liabilities. Group Company Less than 1-3 3 months Less than 1-3 3 months 1 month months to 1 year Total 1 month months to 1 year Total 2007Trade payables & other payables 2,181,003 99,796 188,943 2,469,742 193,264 223,391 171,394 588,049 2006Trade payables & other payables 548,124 582,494 219,368 1,349,986 496,764 480,330 198,973 1,176,067 The 2007 payables include US $1,734,393 of payables assumed from FireStarSoftware, Inc. as part of the Asset Purchase Agreement dated 20 December 2007. Market risk Market risk is the risk that changes in interest rates, foreign exchange rates,equity prices, and other rates, prices, volatilities, correlations, or othermarket conditions will have an adverse impact on the Group's financial positionor results. Thus market risk comprises three elements - foreign currency risk,interest rate risk, and other price risk. Information to enable an evaluation ofthe nature and extent of these three elements of market risk are shown below. Amphion seeks to mitigate the risk noted above through its philosophy of workingwith a small number of rigorously selected Partner Companies, assisting them togrow by implementing a consistent and proven methodology developed over themanagement team's 20 years of company building experience. The Group's timetested model of company creation is built on a robust risk management processthat relies on proven, defensible intellectual property sourced from some of theworld's leading corporations and universities. Foreign currency risk The Group undertakes certain transactions denominated in foreign currencies.Hence, exposures to exchange rate fluctuations arise. Exchange rate exposuresare managed by minimising the balance of foreign currencies to cover expectedcash flows during periods where there is strengthening in the value of theforeign currency. The carrying amounts of the Group's foreign currency denominated monetary assetsand monetary liabilities at the reporting date are as follows: Group Company Liabilities Assets Liabilities Assets 2007 2006 2007 2006 2007 2006 2007 2006 US$ US$ US$ US$ US$ US$ US$ US$ Sterling - Cash equivalent 23,700 67,081 1,175,621 630,734 - - 1,175,621 604,596Sterling - Investment - - 15,536,921 6,039,000 - - 15,536,921 6,039,000 A 5% strengthening of the US dollar against the British pound sterling at thereporting date would have increased profit or loss by approximately US $835,000(2006: US $333,000). A 5% weakening of the US dollar against the British poundsterling would have decreased profit or loss of the Group by approximately US$835,000 (2006: US $333,000). A 5% strengthening of the US dollar against theBritish pound sterling at the reporting date would have increased profit or lossof the Company by approximately US $835,000 (2006: US $332,000). A 5% weakeningof the US dollar against the British pound sterling would have decreased profitor loss of the Company by approximately US $835,000 (2006: US $332,000). The GBP/USD rate used at 31 December 2007 was 1.9843 (2006: 1.9586). In management'sopinion, the sensitivity analysis is unrepresentative of the inherent foreignexchange risk as the sensitivity analysis is based on balances at the end of theyear and does not reflect the exposure during the year. 15. Other financial assets and liabilities, (continued) Interest Rate Risk The Group's exposure to interest rate risk is restricted to the cash and cashequivalent balance of US $4,594,007 (US $1,848,539 in 2006). At 31 December2007, the Group maintains interest bearing accounts with a corporate bank atvariable rates. The average monthly rate for 2007 was approximately 4%. Anincrease of 100 basis points in interest rates would have increased profit orloss of the Group by US $17,000. A decrease of 100 basis points in interestrates would have decreased profit or loss of the Group by US $17,000. Anincrease of 100 basis points in interest rates would have increased profit orloss of the Company by $17,000. A decrease of 100 basis points in interest rateswould have decreased profit or loss of the Company by US $17,000. The Groupmanages its exposure to interest rate risk by managing its cash balances anddeposits to maximize its return while ensuring the Group has sufficientavailable cash to meet its needs. The Group does note enter into interest ratederivatives. Other price risks The Group is exposed to equity price risks arising from equity investments.Equity investments are held for strategic rather than trading purposes. TheGroup does not actively trade these investments. At the reporting date, the potential effect of using reasonably possiblealternative assumptions as inputs to valuation techniques from which the fairvalues of the investments are determined would be an increase of approximatelyUS $12 million (2006: US $4.4 million) to profit or loss of the Group and theCompany using more favorable assumptions and an approximate decrease of US $7.6million (2006: US $4.6 million) to profit or loss of the Group and the Companyusing less favorable assumptions. The more favorable assumptions used were anincrease in price of 33% to 54% (2006: 12% to 20%). The less favorableassumptions used were a reduction in price of 10% to 15% (2006: 5% to 15%). Thedetermination of reasonably possible alternative assumptions is subject toconsiderable judgment. The amounts generated from the sensitivity analysis are estimates of the impactof market risk assuming that specified changes occur. Actual results in thefuture may differ materially from these results due to developments in theglobal financial markets which may cause exchange rates to vary from thehypothetical amounts disclosed above, which therefore should not be considered aprojection of likely future events and losses. 16. Trade and other payables Group Trade and other payables principally comprise amounts outstanding for purchasesand ongoing costs. Other payables include US $1,734,393 of debt relating toDataTern, Inc. assumed as part of the Asset Purchase Agreement with FireStarSoftware Inc. in 2007. Company Trade and other payables principally comprise amounts outstanding for tradepurchases and ongoing costs. The Directors consider that the carrying amount of trade and other payablesapproximates to their fair value. 17. Share capital 2007 2006 ---- ---- £ £ Authorised:150,000,000 ordinary shares of 1p each 1,500,000 1,500,000 ========== ========== Number £ US $ Balance as at 31 December 2005 93,639,455 936,395 1,685,160 Issued for cash:Ordinary shares of 1p each 4,010,769 40,108 75,844Ordinary shares of 1p each 2,450,000 24,500 47,979 ----------- --------- ---------Balance as at 31 December 2006 100,100,224 1,001,003 1,808,983 Issued for cash:Ordinary shares of 1p each 320,000 3,200 6,278Ordinary shares of 1p each 9,690,000 96,900 194,411Ordinary shares of 1p each 18,181,805 181,817 378,399 ----------- ---------- ---------- Balance as at 31 December 2007 128,292,029 1,282,920 2,388,071 =========== ========== ========== Holders of the ordinary shares are entitled to receive dividends and otherdistributions and to attend and vote at any general meeting. In August 2007, a Lock-In Agreement, dated 16 August 2005, between the Company,the Company's broker and nominated advisor, Amphion Capital Partners LLC, theDirectors and certain applicable employees holding ordinary shares expired. TheLock-In Agreement stated that for a period of 24 months immediately followingthe admission to AIM, they would not make a sale or disposal except through thebroker of the Company to maintain an orderly market in the ordinary shares. During the year ended 31 December 2007, the following changes occurred to theshare capital of the Company: On 22 January 2007, the Company issued 320,000 ordinary 1p shares at a premiumof 24p per share (US $150,662). On 29 June 2007, the Company issued 9,690,000 ordinary 1p shares at a premium of21p per share (US $4,082,620). On 6 November 2007, the Company issued 15,909,077 ordinary 1p shares at apremium of 21p per share (US $6,968,796). On 15 November 2007, the Company issued 2,272,728 ordinary 1p shares at apremium of 21p per share (US $977,598). 18. Issue costs The Company incurred costs of US $778,379 (2006: US $150,950) relating to theissue of shares. The costs were primarily for fees paid to agents. These equitytransaction costs were deducted from equity in accordance with IAS 32, FinancialInstruments Disclosure and Presentation. 19. Contingent liabilities The Compensation Committee has recommended that bonuses be issued for the year2007. If the total amount of the bonuses were paid out in cash, the cash chargewould amount to US $421,000. The Compensation Committee is requiring that 50% ofthe bonus be paid in shares. No provision has been made in these financialstatements for the bonuses as the payment of the bonuses is dependent upon therecipient being employed by the Company on 31 March 2008. 20. Operating lease arrangements At the balance sheet date, the Group has outstanding commitments undernon-cancellable operating leases, which fall due as follows: 2007 2006 ---- ---- US$ US$ Within one year 351,654 385,821In the second to fifth years inclusive 717,885 989,452After five years - - --------- --------- 1,069,539 1,375,273 ========= ========= Operating lease payments represent rentals payable by the Group for certain ofits office properties. The term of the New York lease is seven years of whichfour years are remaining and the term of the UK lease is six months beginningApril 2008. The New York rental increases in 2009 and is fixed for an additionaltwo years. The UK rental is fixed for 6 months. The Group recognised expenses ofUS $403,007 in respect of operating lease arrangements in the year ended 31December 2007. 21. Share-based payments In 2006 the Group established the 2006 Unapproved Share Option Plan ("the Plan")and it was adopted pursuant to a resolution passed on 8 June 2006. Under thisplan, the Compensation Committee may grant share options to eligible employees,including Directors, to subscribe for ordinary shares of the Company. The numberof Shares over which options may be granted under the Unapproved Plan cannotexceed ten percent of the ordinary share capital of the Company in issue on afully diluted basis. The Plan will be administered by the CompensationCommittee. The number of shares, terms, performance targets, and exercise periodwill be determined by the Compensation Committee. As of 31 December 2007, a total of 10,136,445 options have been issued (2006:total of 1,357,725) of which 8,500,000 options were issued under the "2006Unapproved Share Option Plan (2006: 650,000) and 625,000 options have beenforfeited. The options issued under the Plan have a four year vesting period in addition tobeing subject to performance criteria and at 31 December 2007, 639,906 of theseoptions were vested (2006: 25,000). As of 31 December 2007, a balance of 2,261,445 options not in the Plan have beenissued (2006: 707,725). These options expire after five years from the date ofgrant. Of these options, 553,720 options were issued fully vested in 2007 (2006:107,725 were fully vested when issued). 21. Share-based payments, (continued) 2007 2006 Number of Weighted Number of Weighted share options average share options average exercise exercise price (in £) price (in £) Outstanding at beginning of period 1,357,725 .25 600,000 0.25Granted during the period 9,403,720 .23 757,725 0.25Forfeited during the period (625,000) .25 - 0.25 ---------- ----------Outstanding at the end of the period 10,136,445 .23 1,357,725 0.25 ========== ==========Exercisable at the end of the period 2,018,018 .23 732,725 0.25 The options are recorded at fair value on the date of grant using theBlack-Scholes model. The inputs into the model are as follows: 2007 2006 US$ US$ Weighted average share price .46 0.50Weighted average exercise price .46 0.49Expected volatility 37% 37%Expected life 5-14 years 5 yearsRisk free rate 3.49%-5.25% 4.56%Expected dividends - - Expected volatility was determined by calculating the historical volatility ofthe Group's share price from the date of listing to the end of the year. In 2007, options were granted on 12 January, 26 March, 1 May, 29 June, 13September, and 9 November. The aggregate of the estimated fair values of theoptions granted on those dates is US $2,797,289. In 2006, options were grantedon 17 February, 15 August, and 29 December. The aggregate of the estimated fairvalues of the options granted on those dates is US $153,206. The Company and Group recognised total costs of US $256,656 and US $116,115relating to equity-settled share-based payment transactions in 2007 and 2006respectively. In 2007, US $82,574 of the total costs were charged against equityas the share-based payments were directly attributable to the issue of theequity instruments. The remaining US $174,082 was expensed in the incomestatement during the period. 22. Retirement benefit plans The Company established a defined contribution plan under Section 401(k) of theInternal Revenue Code. The plan enables qualified employees to reduce theirtaxable income by contributing up to 15% of their salary to the plan. TheCompany may elect to make a matching contribution to the plan. The Company haselected not to make a contribution for the years ended 31 December 2007 or 2006. The UK subsidiary has a defined contribution pension scheme. The total pensionexpense recognised in the income statement of US $28,826 (2006: US $26,538)represents contributions paid by this company to the plan. 23. Events after the balance sheet date In January and March 2008, the Company made advances of £150,000 under apromissory note from Myconostica Ltd. In January and February 2008, the Company made advances of US $505,000 under apromissory note from Motif BioSciences, Inc. In January and February 2008, the Company made advances of US $220,000 under apromissory note from Energy Trading International, Inc. In January and February 2008, the Company made advances of US $360,000 under apromissory note from AXCESS International, Inc. 24. Related party transactions Transactions between the Company and its subsidiaries, which are related partiesof the Company, have been eliminated on consolidation and are not disclosed inthis note. Details of transactions between the Group and other related partiesare disclosed below. During the year, the Group paid miscellaneous expenses for Motif BioSciences,Inc. ("Motif") such as office expenses. At 31 December 2007, the amount owed byMotif to the Group is US $19,956 (2006: US $14,140). A subsidiary of the Company has entered into an agreement with AXCESSInternational Inc. ("AXCESS") to provide advisory services. Richard Morgan andRobert Bertoldi, Directors of the Company, are also Directors of AXCESS. AmphionInnovations US Inc. will receive a monthly fee of US $10,000 pursuant to thisagreement. The agreement is effective until 1 March 2008 and will renew on anannual basis until terminated by one of the parties. The monthly fee issuspended for any month in which AXCESS' cash balance falls below US $500,000.Amphion Innovations US Inc. received US $100,000 for the year ended 31 December2007 (2006: US $70,000). A subsidiary of the Company has entered into an agreement with Durham ScientificCrystals Inc. ("DSC") to provide advisory and consulting services. RichardMorgan, a Director of the Company, is also a Director of DSC. The monthly feeunder this agreement is the lesser of US $10,000 and 50% of the grosscompensation paid to Directors and management of DSC in that month and expireson 21 September 2008. The subsidiary's fee for the year ended 31 December 2007was US $120,000 (2006: 78,167) of which US $10,000 was due at 31 December 2007(2006: US $10,000). Amphion Innovations US Inc. also received US $225,688 as afund raising fee for the year ended 31 December 2007 (2006: US$56,266). A subsidiary of the Company has entered into an agreement with FireStar SoftwareInc. ("FireStar") to provide advisory and consulting services. Richard Morgan, aDirector of the Company, is also a Director of FireStar. The annual fee underthis agreement is US $240,000 and expires 1 January 2008. The fee for the yearended 31 December 2007 was suspended and not recognised. The outstanding feesdue at 31 December 2006 have been discharged as part of the Asset PurchaseAgreement between Amphion Innovations PLC, DataTern, Inc. and FireStar Software,Inc. dated 20 December 2007. A subsidiary of the Company has entered into an agreement with MotifBioSciences, Inc. ("Motif") to provide advisory and consulting services. RichardMorgan, a Director of the Company, is also a Director of Motif. The annual feefor the services is US $240,000. The agreement is effective until 1 April 2008and shall automatically renew for successive one year periods. AmphionInnovations US Inc.'s fee for the period ended 31 December 2007 was US $282,000(2006: US $249,000) which includes a US $42,000 fund raising fee. At 31 December2007, US $120,000 of the advisory fee is due from Motif (2006: nil). A subsidiary of the Company has entered into an agreement with MyconosticaLimited ("Myconostica") to provide advisory and consulting services. RichardMorgan, a Director of the Company, is also a Director of Myconostica. Themonthly fee for the services is £4,500 and expires 1 December 2008. Anadditional £2,250 per month will be charged starting 1 November 2007 while JerelWhittingham is acting CEO of Myconostica. The subsidiary's fee for the yearended 31 December 2007 is £58,500 or US $114,715 (2006: £4,500 or US $8,293) ofwhich US $44,894 (2006: US $8,293) was still due at 31 December 2007. A subsidiary of the Company has entered into an agreement with m2m Imaging Corp.("m2m") to provide advisory and consulting services. Robert Bertoldi, a Directorof the Company, is also a Director of m2m. The monthly fee under this agreementis US $15,000. This agreement is effective until 1 November 2008 and will renewon an annual basis until terminated by either party. Amphion Innovations USInc.'s fee for the period ended 31 December 2007 was US $180,000 (2006: US$482,500 of which $337,500 was a success fee). 24. Related party transactions, (continued) A subsidiary of the Company has entered into an agreement with WellGen Inc.("WellGen") to provide advisory and consulting services. Richard Morgan, aDirector of the Company, is also a Director of WellGen. The fee for the firstand second quarters of 2007 under this agreement is US $45,000 and US $60,000for each subsequent quarter. The agreement is effective until 20 June 2008 andwill renew annually for subsequent 12-month periods until terminated by eitherparty. The subsidiary's fee for the year ended 31 December 2007 was US $210,000.Amphion Innovations US Inc. also received US $1,492,875 as a fund raising feefor the year ended 31 December 2007. A subsidiary of the Company has entered into an agreement with Energy TradingInternational, Inc. ("ETI") to provide advisory services. Richard Morgan, aDirector of the Company, is also a Director of ETI. The fee under this agreementis US $15,000 per quarter beginning 7 February 2007 until 31 October 2007, US$30,000 per quarter from 1 November 2007 until the successful sale of at leastUS $3,000,000 and thereafter, US $45,000 per quarter. This agreement iseffective until 7 February 2008 and will renew annually for subsequent 12-monthperiods unless terminated by either party. The fee for 2007 has been deferredand not recognised until ETI has a successful financing. On 20 December 2007, Amphion Innovations plc, DataTern, Inc., a wholly ownedsubsidiary of Amphion Innovations plc, and FireStar Inc. entered into an AssetPurchase Agreement described in note 11. Directors' interests The Directors' direct ownership in the Partner Companies is as follows: Fully diluted % Investment company owned by Directors------------------------------- ------------------- 2007 2006 ---- ---- AXCESS International Inc. 5.45% 5.37%Beijing Med-Pharm Corporation - 0.21%Durham Scientific Crystals Ltd. 1.20% 1.08%FireStar Software, Inc. 1.48% 1.50%Motif BioSciences, Inc. 3.91% 4.12%Myconostica Limited .26% -WellGen, Inc. 4.57% 5.37% The Directors who held office at 31 December 2007 had the following interests inthe Company's ordinary share capital: 2007 2006 Ordinary Ordinary Shares Shares Richard M. Mansell-Jones 2,398,163 2,398,163Richard C.E. Morgan 20,734,155 16,141,531Robert J. Bertoldi 5,643,237 5,643,237R. James Macaleer 19,769,248 19,769,248Anthony W. Henfrey 858,861 858,861 24. Related party transactions, (continued) Aggregate Directors' remuneration The total amounts for Directors' remuneration was as follows: Year ended Year ended 31 December 2007 31 December 2006 US$ US$ Emoluments 988,163 835,411 Directors' emoluments and compensation Group Group Group Year ended Year ended Fees/Basic Benefits in Annual 31 December 31 December salary kind bonuses 2007 total 2006 total US$ US$ US$ US$ US$Name of DirectorExecutive - salaryRichard C.E. Morgan 350,000 14,034 110,000 474,034 362,851Robert J. Bertoldi 275,000 19,129 60,000 354,129 312,602Non-executive - feesRichard M. Mansell-Jones 70,000 - - 70,000 70,000R. James Macaleer 35,000 - - 35,000 35,000Anthony W. Henfrey 35,000 - - 35,000 34,974Ronald E. Thomas 20,000 - - 20,000 19,984 ------- ------- ------- ------- ------- Aggregate emoluments 785,000 33,163 170,000 988,163 835,411 ======= ======= ======= ======= ======= Directors' share options Aggregate emoluments disclosed above do not include any amounts for the value ofoptions to acquire ordinary shares in the company granted to or held by theDirectors. Details of options for Directors who served during the year are asfollows: Date from 1 January 31 December Exercise which ExpiryName of Director Scheme 2007 Granted 2007 price exercisable date Richard Morgan 2006 Unapproved Share - 2,000,000 2,000,000 £0.23 1 July 2011 30 June 2021 Option PlanRobert Bertoldi 2006 Unapproved Share - 1,250,000 1,250,000 £0.23 1 July 2011 30 June 2021 Option Plan --- ---------- --------- - 3,250,000 3,250,000 === ========== ========= Notice The financial information set out above does not constitute the company'sstatutory accounts for the year ended 31 December 2007, but is derived fromthose accounts. Statutory accounts for the year ended 31 December 2007 will bedelivered to the Registrar of Companies following the Company's annual generalmeeting. The auditors have reported on those accounts; their reports werequalified and did not contain statements under s. 15(4) or (6) Companies Act1982 of the Isle of Man. Approval This statement was approved by the Board of Directors on 12 March 2008. Copies of the Annual Report and Accounts Copies of the Annual Report and Accounts will be sent to all shareholders. Further copies will be obtainable from the Company's primary office: AmphionInnovations plc, Attn: Investor Relations, 330 Madison Avenue, New York, NY10017, USA. This information is provided by RNS The company news service from the London Stock Exchange
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