AMP.L Regulatory News (AMP)

26 JUNE 2018

Amphion Innovations plc

("Amphion" or the "Company")

Final results

London and New York, 26 June 2018 - Amphion Innovations plc (AIM: AMP), the developer of medical, life science, and technology businesses, announces its audited results for the year ended 31 December 2017.

Financial Results:

· Net Asset Value ("NAV") increased when compared to the previous year, being US -$2,807,418 (2016: US -$5,886,381) due almost entirely to the movement in value of the Motif Bio plc share price

· Revenue increased to US $286,367 from US $139,633 in 2016

· Administrative expenses decreased by US $324,034 from US $3,474,045 in 2016 to US $3,150,011 in 2017

Partner Companies' Highlights:

· In October Motif Bio plc ("Motif Bio") announced positive top line results from their second global Phase III clinical trial showing iclaprim to be well tolerated and met the non-inferiority margin mandated by the FDA, the positive top line results of the first trial were announced in April

· Motif Bio's lead antibiotic, iclaprim, was granted Orphan Drug designation by the FDA for the treatment of Staphylococcus aureus lung infections in patients with cystic fibrosis

· Motif Bio raised US $20 million in debt financing, having raised US $23.7 million in an equity placing earlier in the year

Post Period Events:

· In June Motif Bio submitted its New Drug Application for its lead product iclaprim

· Amphion pre-paid three months' of loan repayments to the lender of the loan facility (originally announced on 5 June 2014 with the most recent terms announced on 22 December 2017)

· Amphion sold 8,896,034 shares of Motif Bio for total proceeds of US $3,653,712.33 bringing Amphion's holding of Motif Bio to 9.53% of the total issued share capital

· Motif Bio raised an additional £10.0 million (US $13.5 million) in May 2018

· Mr. Richard Mansell-Jones and Mr. Miroslaw Izienicki resigned as a Non-executive Directors of Amphion on 20 April 2018

· Successful IPO of Partner Company, Polarean Imaging plc ("Polarean") in March 2018, raising £3 million at 15 pence per share

· Motif Bio received an award from the Cystic Fibrosis Foundation to fund in vitro testing that will help to advance the development of iclaprim for the treatment of lung infections in patients with cystic fibrosis

Richard Morgan, CEO of Amphion Innovations plc, commented: "Amphion's immediate prospects are tied directly to the progress of its Partner Companies. We work tirelessly both on and off the Board to support and guide each company towards its own independent success. We spent 2017 focusing much of our efforts on furthering the development of Motif Bio and preparing for the IPO of Polarean. Our next priority is to put additional resources behind the further development of FireStar and we are giving increasing attention to the evolution of our business model beyond the success of these programmes. Our focus on a select few high-quality projects gives us reason to believe in the success of our Partner Companies. We remain optimistic about their prospects and look forward to building on their success with new opportunities in the financing of emerging life science companies."

The annual report is available on the Company's website and will be posted to shareholders this week. The Annual General Meeting of Amphion Innovations will be held at 11:00 am ET on 1 August 2018 at the offices of Amphion Innovations US Inc., 125 Park Avenue, 25th Floor, New York, NY 10017, USA.

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 ("MAR").

For further information please contact:

About Amphion Innovations plc - www.amphionplc.com

Amphion Innovations is a developer of medical, life science and technology businesses. We use our extensive experience in company building to invest and build shareholder value in high growth companies in the US and UK. Amphion has significant shareholding in seven partner companies developing proven technologies targeting substantial commercial marketplaces. The Amphion model has been refined to optimise the commercialisation of patents and other intellectual property within the partner companies.

Chief Executive Officer's Statement

Overview

For the last few years our primary goal has been to further the development of our primary assets and our efforts have been focused on Motif Bio plc ("Motif Bio") and Polarean Imaging plc ("Polarean"). The IPO for Motif Bio, which we helped facilitate in April 2015, put Motif Bio into a trajectory that has encompassed a number of critical milestones, most particularly the completion of the two Phase III clinical trials for iclaprim, the asset Amphion managed to bring into Motif Bio in late 2014. 2017 turned out to be the year we focused in earnest on completing the preparations for the IPO of Polarean and that programme ran through the end of the year and into the first quarter of 2018. The IPO for Polarean was successfully completed in March 2018 and we are starting to focus our attention on moving FireStar Software Inc. ("Firestar") forward. We are also now beginning to look beyond the horizon of these three primary assets to an extension of our business model, which I will return to below.

Motif Bio

Motif Bio reported good progress in 2017 with successful results announced for the Revive 1 and Revive 2 Phase III studies evaluating Motif Bio's lead investigational drug candidate, iclaprim, in patients with acute bacterial skin and skin structure infections. It is worth reminding ourselves of the lengthy development programme undertaken by Arpida prior to the acquisition of the iclaprim assets ahead of Motif Bio's AIM IPO and the intense efforts which have been applied to the further development of the company since then. We are pleased to note that this culminated in Motif Bio making a New Drug Application ("NDA") FDA submission for iclaprim on 14 June 2018. The success of Motif Bio's clinical programme has been matched by a major increase in the capital funding needs of the company and we have been very active in assisting Motif in every possible way to get access to the capital required to keep the programmes on track. The need to return to the capital markets in 2017 and again in 2018, following the successful listing on NASDAQ in late 2016, has placed a lot of pressure on the valuation of Motif Bio, which in turn has imposed pressures on Amphion. We have believed strongly in the value of the iclaprim programme since we were first instrumental in acquiring the assets and we continue to believe the intrinsic value of this antibiotic are not fully understood by the market or reflected in the Motif Bio share price. Given the nature of our business model, we needed access to additional capital to further the development of Polarean and the undervaluation of the Motif Bio shares created circumstances where we needed to restructure our secured loans and sell some of our holding in the market. However, our intentions toward Motif Bio should not be misconstrued. We were important in supporting the business as it exists today and our faith in the value of the assets we acquired in 2014 has been validated by the additional clinical trials completed since then and the recent NDA. For many years, through good times and bad, the value of a novel, safe, and effective antibiotic has typically been substantially higher than the market capitalisation of Motif Bio and we believe that value will be recognised in due course as the company makes progress with its NDA and, assuming approval is granted, the commercial launch of the drug. We own 28,254,611 ordinary shares of Motif Bio, 27,475,951 of which are pledged as security in respect of our loan facility.

Polarean

Polarean is a medical drug-device combination company operating in the high resolution medical imaging market. The preparations we completed in the early part of 2017 managed to progress Polarean to the point where we could consummate the merger of m2m and Polarean and allow Polarean to complete a US $2 million pre-IPO financing in May 2017. Amphion helped close this financing through its US $400,000 participation which in turn allowed Polarean to continue preparations for its AIM IPO as well as the continued commercial and clinical progress of the business. Unfortunately, the work required to complete the accounting records of the newly combined business proved to be challenging and took longer than originally expected. In July 2017, we completed a non-deal roadshow prior to the anticipated IPO and received positive feedback which encouraged us to push ahead with preparations for an IPO in the fourth quarter of 2017. However, by the time we were ready to launch the IPO roadshow in November, it was not clear that the listing could be completed by the end of 2017, running the risk that it might become stalled over the holiday period. That delay led to the need to complete a second pre-IPO financing, which we managed to complete in December 2017, providing an important additional infusion into Polarean of close to US $1 million, which in turn allowed the company to continue to make progress for the next three to four months while the IPO roadshow got under way in January and completed in March. The Polarean IPO is the only life-science listing on AIM so far this year. We raised a total of US $7.1 million through the two pre-IPO financings and the £3 million (US $4.2 million) raised in the IPO. Amphion also supported the IPO financing with an additional investment of US $600,000 and, as a result currently has a 23.2% holding in Polarean. In aggregate, the funding activities provided sufficient capital to prepare Polarean for a public listing while allowing the programmes to make sustained progress. Over the better part of two years we have worked closely with the Polarean team and our confidence in the opportunity has grown steadily stronger. Polarean's original intellectual property and clinical achievements have been joined by new inventions that move the state of the art technology forward significantly, beyond ventilation into the realm of opportunities made possible by the quantitative measure of gas exchange. Work is already under way in some of the preclinical research sites where Polarean's polarizers are being used by prestigious researchers for use in neurological and other applications. The immediate task is the initiation of the clinical trials required by the FDA which, if successful, should lead to a broad marketing label for use of Polarean's systems in pulmonary medicine. We are very excited by the promise of this technology to address a huge unmet medical need and we believe the value of our investment should in due course be substantially higher than it is today. We currently own 17,034,853 ordinary shares of Polarean.

FireStar Software Inc.

During 2017 we also actively assisted FireStar in the further development of its new business plan. The technology platform on which the product offering is being built is robust and protected by six issued patents. The product is being designed to give the sponsors of out-sourced clinical trials an efficient and economical window in real time into the key performance indicators that all sponsors need to see at the earliest possible moment. The costs of drug development are very large and significant opportunity exists to save money and save time in trials by getting better data in front of the key decision makers at the sponsor at the earliest possible moment. Clinical data in trials is gathered in countless different formats and FireStar's proprietary technology can play an important role in synthesising and translating those data flows into comprehensible and actionable signals, more or less in real time. The need is large and the value to the sponsor is very high. We have at least another six months to a year of further development of the system before it can begin to be beta tested by the customers but early interaction with industry players encourages us to believe this programme should be successful. Currently, Amphion's holding in FireStar is in the form of loans (advances, and amounts owed for advisory fees) as well as equity that reflect the continued financial support we have given to the company over the last few years. Ahead of any IPO or trade sale, Amphion's ownership is typically in the 30% - 50% range and we are confident that our FireStar holding will reflect that by the time we complete the expected equity financing rounds.

DataTern Inc.

DataTern's efforts to progress its claims in the Massachusetts courts came to an end in November 2017, when the law firm that had been leading the programme, with contingency funding, decided not to proceed. The efforts made to find an alternative firm to take up the programme were unsuccessful and the interactions with various litigation financing sources also failed to produce the necessary funding. This result is very disappointing, given the considerable body of evidence that these patents, originally developed within FireStar and subsequently licensed to DataTern, have considerable merit. These programmes are now on hold and will only move forward if suitable funding sources and litigation partners can be identified.

Axcess International

Axcess has had some success in pursuing its claims of infringement against certain parties but the settlements achieved to date have not been large or numerous enough to allow the programme to be expanded. We remain confident in the strength of the patent portfolio and continue to explore the opportunity to help the company move forward with its claims against infringing parties.

WellGen Inc.

Through its joint venture with a US-based sports drink company, WellGen began marketing Workout Tea, a novel functional beverage based on a patented anti-inflammatory ingredient. The market for such products has been expanding rapidly in recent years and WellGen believes there is a place for a tea-based sports drink whose anti-inflammatory properties have been clinically proven. WellGen has determined that its interest in the marketing of Workout Tea will be through a profit participation in the activities of its joint venture partner. The profit participation agreement is currently being negotiated.

Financial Results and Financing

Revenue in 2017 increased to US $286,367 from US $139,633 in 2016 while administrative expenses decreased by US $324,034 from US $3,474,045 in 2016 to US $3,150,011 in 2017. The Net Asset Value ("NAV") as at 31 December 2017 increased when compared to 2016, being US -$2,807,418 (2016: US -$5,886,381). This was due primarily to the increase in the value of our holding in Motif Bio. At 31 December 2016, Motif Bio's share price was 24.7 pence and rose to 41 pence at 31 December 2017. We continue to hope that the market will realise the value that we see in Motif Bio and now Polarean as the outlook for Amphion increasingly depends on the success of our Partner Companies.

In prior years, the Group has been able to meet its working capital and investment obligations through fund raising including the issue of shares, convertible promissory notes ("CPNs") and promissory notes, from revenue generated through the provision of advisory services to its Partner Companies, from the revenue generated from the licensing of intellectual property, and through a secured loan facility. During 2017 and 2016, as a result of a lack of cash being generated from these activities, the Group has had to reduce its financial support to its Partner Companies and extend the payment dates for its trade payables and its convertible and non-convertible promissory notes. The Group has also reduced its operating costs where possible, including salary and fee reductions for employees and directors, and has obtained financial support from various related parties, through the issue of promissory notes, short-term loans (see note 23 for further detail), and through a secured loan facility. The Group will need to continue to implement these measures and seek further financing as required. The Group's primary method of financing during 2017 and 2016 was through a second loan facility, using its holdings in Kromek Group plc and Motif Bio plc as security. Further access to additional funds under the secured loan facility will be dependent on a number of factors including the appreciation in value of the ordinary shares of Motif Bio and Polarean. At 31 December 2017 the Group had US $20,630,496 (2016: US $20,186,729) in notes payable including US $8,108,264 (2016: US $7,226,059) of CPNs that were due to mature on 31 December 2018 and US $5,839,409 from a loan facility payable in monthly installments from 15 June 2018 to 15 December 2018 and US $6,308,600 payable to the Estate of R. James Macaleer, the Company's former Chairman, which has a payment date of 31 December 2018. In May 2018 Amphion pre-paid three months' repayment of the secured loan facility, bringing the current loan balance of the facility to US $3,685,183. The repayment of the amounts is subject to uncertainty due to the factors noted above and below. The Group's ability to extend repayment, if required, is also uncertain.

The timing and ability of the Group to realise its investments in Partner Companies is subject to inherent uncertainty due to numerous factors including, but not limited to: the liquidity of the investment; market conditions being favourable for realisation whether through a listing or otherwise; potential for restrictions being imposed that may limit full realisation of investments sold; such as lock-in periods; and other factors that are outside the control of the Group. The Group will realise investments where the terms of any potential arrangement are favourable to the Group and is confident of its ability to fund near term cash requirements through this process if required.

In May 2017, Richard Morgan and Robert Bertoldi, Directors of the Company, entered into a deed of postponement where they have agreed to postpone the repayment of the amounts owed to them, which total US $4,300,000, until all other debts of the Company are repaid.

Outlook

We have recently had occasion to begin to look beyond the horizon defined by the projects already underway, as described above. We remain very actively supportive of each of them but recognise the need to identify extensions to our business model that can provide the next wave of opportunity for our shareholders. We see that most likely being in the space between the private financing activities that support emerging life science and med-tech companies and the public markets where they can access a deeper pool of capital. Up to now we have only supported companies that have emerged from our own incubation activities but that model has proven hard to sustain with limited capital resources and has proven difficult to scale and hard to manage from a risk perspective. Going forward we hope to be able to identify a broader spectrum of opportunities where late stage, pre-IPO capital is being required in anticipation of a listing or, in some cases, a trade sale. We have found from our own experience in tapping those financing sources that there is an unmet need at that stage of development and we believe we can operate profitably as a financial supporter of companies tackling that very difficult transition. We have more work to do to refine this business model, and in due course, to identify investors who would be interested in supporting us to be active in that niche. We look forward to reporting further on this topic in coming months. Meanwhile our efforts remain focused on doing everything we can to support Motif Bio and Polarean on the public markets and to help FireStar progress to the point where it can graduate to the next level both commercially and financially.

Richard C.E. Morgan

25 June 2018

Amphion Innovations plc

Notes to the consolidated financial statements, (continued)

For the year ended 31 December 2017

1. General information

Amphion Innovations plc (the "Company") is a public limited company incorporated in the Isle of Man under the Companies Act 2006 with registered number 011472V on 29 August 2014 (formerly registered under the Companies Acts 1931 to 2004 on 7 June 2005 with registered number 113646C). The address of the registered office is First Names House, Victoria Road, Douglas, Isle of Man, IM1 5PD. The principal place of business is 125 Park Avenue, 25th Floor, New York, NY, 10017, USA. The principal activity of the Company and its subsidiaries is to build shareholder value as a venture capital organization in high growth companies in the medical and technology sectors, by using a focused, hands-on company building approach, based on decades of experience in both the US and UK and provides advisory and consulting services to its Partner Companies. Investments that are fair valued through profit or loss, as detailed in note 15, are all considered to be 'Partner Companies'. Those 'Partner Companies' categorized as Level 3 are defined as investments in 'Private Companies'.

The consolidated financial statements include the accounts of Amphion Innovations plc and its three wholly owned subsidiaries, Amphion Innovations US Inc. and DataTern, Inc., which are incorporated in the United States, and MSA Holding Company which is incorporated in the Kingdom of Bahrain.

These financial statements are presented in US dollars because that is the currency of the primary economic environment in which the Company operates.

Going concern

The Group's business activities, together with factors likely to affect its future development, performance, and financial position and commentary on the Group's financial results, its cash flows, and liquidity requirements are set out in the CEO's Statement on pages 2 - 5 and elsewhere within the financial statements. In addition, note 16 to the financial statements includes the Group's objectives, policies, and processes for managing its capital, its financial risk management objectives, details of its financial instruments, and its exposures to liquidity risk and credit risk.

These financial statements have been prepared on the basis that the Group is a going concern. Although the Group made an operating loss and is in a net current liability position with a negative net asset position, it is forecasting future positive cash flows.

The Directors have prepared cash flow forecasts extending at least 12 months from the date of approval of these financial statements, which include certain key assumptions about the ability of the Group to continue to generate cash inflows from the realisation of the Group's investment in Partner Companies.

The Directors are also of the view that other viable options to allow the Group to continue as a going concern include the reduction in its financial support to Partner Companies in the short-term, although this may have an impact on the ability of the Partner Companies to develop their businesses and raise additional financing, the reduction in its working capital requirements and the more aggressive realisation of the Group's investments in Partner Companies. The Company recognizes the need to identify extensions to the business model and believes that most likely to be in the space between the private financing activities that support emerging life science and med-tech companies and the public markets where they can access a deeper pool of capital. Going forward we the Company hopes to be able to identify a broader spectrum of opportunities where late stage, pre-IPO capital is being required in anticipation of a listing or, in some cases, a trade sale.

However, certain conditions exist which indicate the existence of a material uncertainty. These conditions and the Directors' considerations in respect of these matters are discussed below:

• In prior years, the Group has been able to meet its obligations through fund raising (including the issue of shares, convertible promissory notes ("CPNs") and promissory notes), from revenue generated through the provision of advisory services to its Partner Companies, and from the revenue generated from the licensing of intellectual property. During 2017 and 2016 as a result of a lack of cash being generated from these activities, the Group has had to reduce its financial support to its Partner Companies and extend the payment dates for its trade payables and its convertible and non-convertible promissory notes. The Group has also reduced its operating costs where possible, including salary and fee reductions for employees and directors, and has obtained financial support from various related parties, through the issue of promissory notes and short-term loans (see note 23 for further detail). The Group will need to continue to implement these measures and seek further financing as required. The Group's primary method of financing during 2017 and 2016 was through a second loan facility, using its holdings in Kromek Group plc and Motif Bio plc as security. Further access to additional funds under the second loan facility will be dependent on a number of factors including the appreciation in value of the ordinary shares of Motif Bio plc. In that regard in June 2014, the Group entered into a US loan facility which was secured by 7,774,678 ordinary shares of Kromek Group plc. The securities would be released upon repayment of the loan (see note 18 for further

1. General information, (continued)

Going concern, (continued)

details). This facility was further extended in April 2016 to include Motif Bio plc shares as security. As of the current date, 27,475,591 shares of Motif Bio plc are pledged as security. No Kromek Group plc shares are pledged as they have been disposed of. Relations

with significant trade suppliers have also been strained during the year. Should the Group fail to generate sufficient cash to support its Partner Companies and to pay trade payables on a timely basis, the Group may see additional adverse effects on its Partner Companies and their valuations and in its relationship with its vendors.

• As at 31 December 2017 the Group has US $20,630,496 (2016: US $20,186,729) in notes payable including US $8,108,264 (2016: US $7,226,059) of convertible promissory notes ("CPNs") that were due to mature on 31 December 2017 and US $5,839,409 from a loan facility payable in monthly installments from 15 June 2018 to 15 December 2018. In 26 February 2018, the CPN holders agreed to amend the notes and to extend the due date to 31 December 2018 (note 18). The repayment of the amounts is subject to uncertainty due to the factors noted above and below. The Group may need to extend the term of some or all of its CPNs and it should be noted that the Group's ability to extend repayment, if required, is also uncertain.

• The timing and ability of the Group to realise its investments in Partner Companies is subject to inherent uncertainty due to numerous factors including, but not limited to: the liquidity of the investment; market conditions being favourable for realisation whether through a listing or otherwise; potential for restrictions being imposed that may limit full realisation of investments sold; such as lock-in periods; and other factors that are outside the control of the Group. The Group will realise investments where the terms of any potential arrangement are favourable to the Group and is confident of its ability to fund near term cash requirements through this process if required.

· In May 2017, Richard Morgan and Robert Bertoldi, Directors of the Company, entered into a deed of postponement where they have agreed to postpone the repayment of the amounts owed to them, which total US $4,300,000, until all other debts of the company are repaid.

These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business. These financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

However, after making enquiries, and considering the uncertainties described above, the Directors have a reasonable expectation that the Group has adequate resources, as discussed above, to continue in operational existence for the foreseeable future. For these reasons they continue to adopt the going concern basis in preparing the annual report and financial statements.

2. Significant accounting policies

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRSs"), interpretations issued by the International Financial Reporting Committee of the IASB and applicable legal and regulating requirements of Isle of Man law and the AIM rules of the London Stock Exchange.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.

Adoption of new and revised standards

The Group has adopted the following new standards and amendments to standards with a date of initial application of 1 January 2017:

· Amendments to IAS 7, Disclosure Initiative

The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes from cash flow and non-cash changes. The Group believes that the disclosure contained herein adequately satisfy this requirement.

2. Significant accounting policies, (continued)

Standards and interpretations issued but not yet effective

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2017 and earlier application is permitted; however, the Group and Parent Company has not early applied the following new or amended standards in preparing these financial statements. The new standards potentially relevant to the Group and Parent Company are discussed below. The Group and Parent Company do not plan to adopt these standards early.

The financial statements have been prepared on the historical cost basis, except for financial instruments classified as fair value through profit and loss. The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The results of subsidiaries acquired during the year are included in the consolidated Statement of Comprehensive Income from the effective date when control was acquired or up to the effective date of disposal.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income, and expenses are eliminated on consolidation.

2. Significant accounting policies, (continued)

Cash and cash equivalents

Cash and cash equivalents include balances with banks and demand deposits, which have maturities of less than three months.

Investments in subsidiaries

Investments in subsidiaries are stated at cost less provisions for impairment where appropriate.

Financial instruments

The Group designates its assets and liabilities into the categories below.

(i) Financial assets and liabilities designated at fair value through profit or loss at inception: These include equity, warrants, options, and convertible promissory notes held in Partner Companies. These are financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Group's documented investment strategy. These investments have been designated at fair value through profit or loss and accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement, therefore IAS 28, Investments in Associates and Joint Ventures, has not been applied by the Group to the investments that it holds in associates.

· Recognition

All regular way purchases and sales of financial instruments are recognised on the trade date, which is the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial instruments that require delivery of assets within the period generally established by regulation or convention in the market place. Realised gains and losses on disposals of financial instruments are calculated using the first-in-first-out ("FIFO") method or the average cost per share when a capital change has occurred.

· Initial measurement

Financial instruments categorised at fair value through profit or loss, are recognised initially at fair value, with transaction costs for such instruments being recognised directly in the Statement of Comprehensive Income.

· Subsequent measurement

"Fair value" is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as "active" if transactions for the asset or liability take place with sufficient frequency and

volume to provide pricing information on an ongoing basis. The Group measures instruments quoted in an active market at a mid-price.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred.

The fair value of unlisted securities is established using valuation techniques. Whenever possible the Group uses valuation techniques which make maximum use of market-based inputs. Accordingly, the valuation methodologies and principals used most commonly by the Group are those contained in the International Private Equity and Venture Capital Valuation Guidelines (the "IPEVCV Guidelines") endorsed by the British & European Venture Capital Associations.

Assets and long positions are measured at a bid price; liabilities and securities sold short are measured at an asking price.

2. Significant accounting policies, (continued)

Financial instruments, (continued)

Given the nature of the Group's investments in seed, start-up, and early-stage companies where there are often no current and no short-term future earnings or positive cash flows it can be difficult to gauge the probability and financial impact of the success or failure of development or research activities and to make reliable cash flow forecasts. Consequently, the most appropriate approach to determine fair value is a methodology that is based on market data, that being the price of a recent investment. Where the Group considers that the price of recent investment, unadjusted, is no longer relevant, and there are limited or no comparable companies or transactions from which to infer value, the Group carries out an enhanced assessment taking into consideration the key market drivers of the investee company and the overall economic environment.

Where the Group considers that there is an indication that the fair value has changed, an estimation is made of the required amount of any adjustment from the last price of recent investment. Wherever possible, this adjustment is based on objective data from the investee company and the experience and judgment of the Group; however, any adjustment is, by its very nature, subjective. Where a deterioration in value has occurred, the Group reduces the carrying value of the investment; however, in the absence of additional financing rounds or profit generation it can be difficult to determine the value that a purchaser may place on positive developments given the potential outcome and the costs and risks to achieving that outcome and accordingly caution is applied.

Factors that the Group considers include, inter alia, technical measures such as product development phases and patent approvals, financial measures such as cash burn rate and profitability expectations, and market and sales measures such as testing phases, product launches and, market introduction.

· De-recognition

The Group de-recognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for de-recognition in accordance with IAS 39.

Impairment of financial assets

Financial assets, other than those classified as at fair value through profit and loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangement entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Financial liabilities are de-recognised when its contractual obligations are discharged, or cancelled, or expire. Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method. The Group de-recognises a financial liability when the obligation specified in the contract is discharged, cancelled, or expired.

Compound financial instruments are required by IAS 32 Financial Instruments: Presentation, to be separated into their liability and equity components upon initial recognition. To meet the definition of equity, the contract must be settled by a fixed amount of cash in exchange for a fixed amount of equity instruments. Where the Company issues convertible promissory notes ("CPNs") in a currency other than its functional currency, a fixed number of shares will be delivered in exchange for a variable amount of cash, therefore the definition of equity is not met. Consequently, the CPNs are classified wholly as liabilities held at amortised cost.

Prepaid expenses and other receivables

Prepaid expenses and other receivables are stated at their amortised cost which approximates their fair value. Other receivables are reduced by appropriate allowances for estimated irrecoverable amounts and do not carry any interest.

2. Significant accounting policies, (continued)

Trade and other payables

Trade and other payables are not interest bearing and are stated at amortised cost which approximates their fair value.

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Share-based payments

The Group has applied the requirements of IFRS 2 Share-based payments.

The Group issues equity-settled share-based payments to certain employees and consultants. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest. The fair value of equity-settled share-based payments attributable to the issue of equity instruments is charged against equity.

Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted based on management's best estimate for effects of non-transferability, exercise restrictions, and behavioral considerations.

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves, and retained earnings.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for, and services provided, in the normal course of business, net of VAT and other sales related taxes.

Where assignment of rights for a fixed fee under a non-cancellable contract permits the licensee to exploit those rights freely and the licensor has no remaining obligations to perform, the revenue is recognised at the time of sale.

Where a license fee is contingent on the occurrence of a future event, the revenue is only recognised when it is probable that the fee will be received.

Cost of sales

Revenue related costs only include the direct fees paid for strategic advisory services for licensing and enforcing various patents.

Interest income

Interest income is recognised on an accruals basis.

Dividend income

Dividend income from investments is recognised when the shareholders' right to receive payment has been established.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

2. Significant accounting policies, (continued)

Foreign currencies

The individual financial statements of each company in the Group are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each company in the Group are expressed in US dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. In concluding that US dollars is the functional currency of the Group, consideration has been given to the British Pound Sterling denominated convertible promissory notes and investments held during the year. As the majority of the Group's economic activities are carried out in US dollars, however, this was determined to be the Group's functional currency.

Transactions in currencies other than US dollars are recorded at the rates of exchange prevailing on the dates of the transactions. At each Statement of Financial Position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the Statement of Financial Position sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.

Gains and losses arising on retranslation are included in net profit or loss for the year, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity.

On consolidation, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the Statement of Financial Position date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly in which case they are translated at the rate on the date of the transaction. Exchange differences arising, if any, are recognised in the Statement of Comprehensive Income and are transferred to the Group's translation reserve.

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expenditure that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the Statement of Financial Position date.

Intangible assets

Intangible assets comprise patents and other intellectual property with finite useful lives and are measured initially at purchase cost and are amortised on a straight-line basis over their estimated useful lives of 5-10 years.

Impairment of tangible and intangible assets

At each Statement of Financial Position date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and an intangible asset which is amortised is tested for impairment only when there is an indication that the asset may be impaired.

3. Key sources of estimation uncertainty

The preparation of the Group's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and contingencies at the date of the Group's financial statements, and revenue and expenses during the reporting period. Actual results could differ from those estimated. Significant estimates in the Group's financial statements include the amounts recorded for the fair value of the financial instruments and other receivables. By their nature, these estimates and assumptions are subject to an inherent measurement of uncertainty and the effect on the Group's financial statements of changes in estimates in future periods could be significant.

Fair value of financial instruments

As described in note 2, the Directors use their judgment in selecting an appropriate valuation technique for financial instruments not quoted in an active market ("Private Investments"). The estimation of fair value of these Private Investments includes a number of assumptions which are not supported by observable market inputs. The carrying amount of the Private Investments is US $5.5 million (2016: US $7.9 million) in the Group and US $5.5 million (2016: US $7.9 million) in the Company.

Fair value of other receivables

The valuation of the Private Investments and other receivables from Partner Companies at 31 December 2017 assumes that the Partner Companies continue to receive ongoing funding in accordance with their 2018/2019 forecasts. If this funding is not received, this would have an adverse impact on the valuation of the investments and the ability of the Partner Companies to settle their debts, which in turn would impact the valuation of other receivables.

4. Revenue

An analysis of the Group's and Company's revenue for the period is as follows:

As part of the December 2007 agreement for DataTern, Inc. to purchase certain of the intangible assets from FireStar Software, Inc. ("FireStar"), a portion of future revenues from these patents will be retained by FireStar. No amounts have become payable to FireStar to date.

5. Business and geographical segments

Business segments

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

For management purposes for 2017, the Group is organised into three business segments - advisory services, investing activities, and intellectual property. These business segments are the basis on which the Group reports its primary segment information.

Segment information about these businesses is presented below: