AMP.L Regulatory News (AMP)

Amphion Innovations plc

Preliminary Results for the year to 31 December 2012

London and New York - Amphion Innovations plc (LSE: AMP) and its subsidiaries ("Amphion" or "the Group"), the developer of medical and technology businesses, today announces its preliminary results for the year ended 31 December 2012.

Chairman and CEO's Statement

As expected, 2012 proved to be another challenging year for Amphion and our Partner Companies. Revenue for 2012 as a whole fell from US $3,463,527 to $1,395,806 and total administrative expenses were higher during the year. The fall in revenue and the increase in expenses reflected our investment in the IP licensing programme (DataTern). The investment has been expensed as incurred and the value of the assets continues to be carried at amortized historical cost. The Company has also elected to take a provision against receivables due from several Partner Companies. As a result, the net operating loss for the year was $6,433,912 versus an operating profit of $584,455 in 2011. Operating cash flow was negative in 2012 and the business was financed by additional loans contributed by Board members during the year in the amount of US $2.7 million.

Including contributions from Amphion, a total of US $4.5 million was raised directly by the seven companies, with most of this (US $3.1 million) being raised by Kromek. During the course of 2012, Amphion contributed US $574,445 to the Partner Companies mainly in the form of various convertible loans.

Our reported Net Asset Value ("NAV") per Share was £0.09 (US $0.14) as at 31 December 2012 compared to £0.13 (US $0.20) at 31 December 2011. Many of the Partner Companies have been unable to raise new capital in an outside financing event for the better part of three years. As a result, the Board has again taken a cautious approach to the valuation of the investments, reducing most of them further and taking a provision against receivables as precautionary moves. Despite the shortage of capital and the poor economic and financial environment, most of our Partner Companies have seen some progress in the period under review.

Amphion's holding of intellectual property assets continue to be valued at amortised cost, or US $748,048. The directors believe that the realizable value of the intellectual property assets held by DataTern is substantially in excess of the carrying value and the incremental investments being made in the pursuit of infringers of the IP will generate a substantial profit. We believe that if we are successful in concluding licensing agreements with the various infringing parties at levels that meet our expectations, the NAV per Share would be significantly higher.

Intellectual Property Licensing Programme

As we reported in September 2012, the Claim Construction Order known as a Markman ruling has delayed progress with DataTern and slowed the pace of settlements. Our legal team, supported by our extensive team of technical and patent experts, continues to believe that the ruling is not fully reflective of the claims of the two key patents, both of which have completed a comprehensive re-examination by the United States Patent and Trademark Office and successfully emerged both fully validated and with additional claims added. The appeal of the ruling to the United States Court of Appeals for the Federal Circuit is under way. Our main brief has been filed and we are advised that we may see a ruling on the appeal by the end of 2013. The suits we filed in Massachusetts against MicroStrategy and several of their customers who we believe infringe our IP are also subject to the Appeals Court process. However, we are continuing to prosecute the remaining cases against users of the technology in Texas. The court schedule for one of those cases currently includes a separate Markman hearing on 9 July 2013.

We believe that a Claim Construction ruling which is fully reflective of our interpretation of the claims of the patents will establish significant infringement and it remains the very firm and considered opinion of our team that the two patents are both valid and being infringed by a wide range of companies that are practicing this critical art. There remain a large number of additional potential licensees and we believe that we should be able to generate a significant amount of revenue from this asset over the next few years. FireStar Software, where the technology and patents were originally developed, shares directly in this revenue stream.

Building Value in Our Partner Companies

Since flotation, our basic business model has been to start and build high potential companies based on innovative and proprietary, but basically proven, technology. Our ability to select good IP and to develop the IP portfolios in each of our Partner Companies is a critical success factor and is getting steadily stronger as we deepen our knowledge and experience in this area. This underpins Amphion's investment in each Partner Company at the outset and as it develops. However, our primary goal in every company is the development of successful business models and operating capabilities that can utilise the technology to provide innovative products and generate revenue and make profits. The bad economic climate demands continued attention to the evolution of these business models so they can be adapted to a different and generally harsher market environment.

We have adjusted our model and our span of activities to the extent possible to continue to move forward in this difficult environment. Although the pace of advance remains frustratingly slow, most of our Partner Companies are making progress. Credit for their ability to adjust and advance must go to each of the teams who have dealt with such difficult circumstances with fortitude and adaptability.

Kromek has continued to make progress on many fronts. The nuclear contamination disaster in Japan generated a need for new and more versatile gamma ray monitoring devices and Kromek has been able to address this need with its current range of products and is currently developing others. In addition, important and exciting progress is now being seen in other areas, such as in medicine, where the use of high-quality CZT detector materials can have a significant impact on the use of x-rays. We have recently seen important advances in programmes that have been under way for some time with leading medical technology companies in the CT, SPECT, and BMD areas, each of which uses x-rays in various ways for medical imaging. Kromek managed to conclude the acquisition of eV Products in the early part of this year. This is the second critical acquisition we have managed to conclude in the US and it is an important strategic addition to Kromek's growing portfolio of technology, patents, customers, and human resources and underpins the company's pivotal position in the emerging market for CZT based imaging systems. Kromek now has leading edge capabilities in CZT materials using the current (liquid-phase) process and has continued to make progress in developing the next generation (vapour-phase) technology which was the foundation of the company when it was first spun out of Durham University. Orders and revenues are now increasing nicely and this year is progressing well. Kromek successfully raised additional equity financing at £8.40 per share (up from £7.20 per share previously) and this increase was reflected in our half-year results.

Motif has recently recruited a new CEO and a new head of Business Development to work with our two leading Indian drug discovery and development partners. Both Graham Lumsden and Dr. Carolyn Kong have a wealth of experience in the pharmaceutical industry. We would like to recognize the good work that Zaki Hosny has done in leading Motif over the past few years and look forward to continuing to work with him as a member of the board of Motif. Two of the leading programmes developed by Motif have garnered a lot of attention in the last twelve months. The need for new and innovative anti-infectives is acute and is being recognized by authorities in many countries and we remain optimistic about Motif's programme to develop a new and best-in-class pharmaceutical to treat MRSA. In addition, interest in the role of the Janus Kinase pathway in arthritis and other therapeutic areas has increased substantially in the last twelve months and we are excited about the opportunity to develop a new best-in-class JAK3 compound.

FireStar has made significant progress in gaining recognition for its innovative messaging platform and for the adoption of MDMI as a standard. MDMI was developed by FireStar for the Object Management Group and its corporate members, as an important component of interoperability in the exchange of electronic health records. As use of MDMI, which is a message transformation (mapping) utility, becomes widely adopted, the company expects to see increased demand for EdgeNode™, its proprietary message generation platform. The combination of MDMI and EdgeNode offers the healthcare community a robust and low cost pathway to interoperability which is being supported by the US Federal Government with over US $27 billion of funding.

WellGen has made further progress in the development of its innovative beverage product, incorporating the leading proprietary ingredient which has shown in human clinical trials to reduce inflammation with no observed side-effects. WellGen has also seen good progress in potential use of its products in the veterinary area and is making progress in identifying funding sources for the further clinical development of the lead material in the treatment of chronic disease.

Axcess continues to pursue its litigation against Savi (now spun off from Lockheed Martin) for infringement of Axcess' intellectual property. Axcess' portfolio of patents covers key functionality and applications in tagging and tracking people and other assets. These features are believed to be widely used by other companies who might require a license to continue to practice the art. In addition, the management has done a very good job in keeping the operations of the company intact in very difficult conditions. While Axcess' financial condition has made it impossible to expand marketing programmes, many existing customers are continuing to place repeat orders and several new revenue opportunities are being pursued.

PrivateMarkets and m2m have been in a holding pattern pending the evolution of new business plans and fresh financing.

In summary, despite our cautious approach to valuation, we continue to see a lot of opportunity to build and, in due course, extract value from each one of our Partner Companies, in addition to the IP licensing programme being pursued directly by DataTern.

Financing

Financial support for Amphion in 2012 and so far in the current year has been provided, for the most part, by loans from the directors and additional contributions from the management team, supplemented by a Placing to investors in December 2012. We have continued to cut costs wherever possible and the leadership team has been working with much reduced levels of current cash compensation, this will be continued in the near future until the Company becomes profitable again. Our goal is to help the Company get through this challenging period in the market to the point where we can begin to realize the fruits of our investment in DataTern and our Partner Companies.

Prospects for 2012 and Beyond

While we remain cautious, we have seen some increase in investment interest in early stage technology companies in the public markets. The return of a viable IPO market would be a welcome development and would, over time, have a positive effect on the availability of capital for all our Partner Companies. We believe there is significant inherent value to be developed and extracted from DataTern and our Partner Companies and we have a clear focus on generating and returning value to our shareholders from our current assets. However we refer to note 1 of the financial statements regarding further discussion of the Company as a going concern.

R. James Macaleer Richard C.E. Morgan

Chairman Chief Executive Officer

For further information please contact:

Amphion InnovationsCharlie Morgan+1 212 210 6224

Novella CommunicationsTim Robertson+44 (0)7900 927 650

Panmure Gordon LimitedFreddy Crossley/ Fred Walsh/ Grishma Patel (Corporate Finance)

Adam Pollock/ Victoria Boxall (Corporate Broking)+44 (0)20 7866 2500

Partner Company Summaries

Axcess International (OTCBB: AXSI) provides intelligent wireless ID systems globally under the ActiveTracTM brand for improving security, safety, and productivity in business. Its patented MicroWireless™ technology platform delivers local location identification, tracking, and control solutions for enterprise personnel and assets. Based on active RFID principles, its technology is at the epicenter of automated, autonomously-powered, low cost miniature wireless devices. Axcess has a portfolio of patents, of which 13 have issued to date with two applications in process. In May 2010, Axcess initiated its first IP monetization effort and filed a lawsuit in Dallas, Texas against Savi Technology, Inc., a wholly-owned subsidiary of Lockheed Martin Corporation, alleging infringement of U.S. Patent No. 6,294,953 entitled "High Sensitivity Demodulator For A Radio Tag And Method". A trial date is expected for the second half of 2013.

FireStar Softwarebuilds software that empowers application-to-application electronic message exchange between corporate and other entities. FireStar's EdgeNode messaging platform and MDMI data translation technologies empower companies to exchange electronic messages without detailed technical knowledge of other exchange members. They are the only solutions that provide a cost-point that is low enough to bring Small and Medium Businesses into comprehensive data exchanges. FireStar's products constitute the ability to bring comprehensive B2B capacity to industries that are currently dependent on fax, telephone, and paper mail. While these technologies can be applied to any vertical industry, FireStar is concentrating on the US Healthcare market where there are over 1 million unaffiliated providers who require such comprehensive data exchange abilities. FireStar also has a net profit interest in the results of DataTern's IP licensing programme. In addition, FireStar has an equity holding of 36% in PrivateMarkets.

Kromek is an Anglo-American platform technology company that provides digital colour x-ray and gamma ray detection and imaging. Its products enable direct materials identification in the security, civil nuclear, and medical markets. The company has won numerous national and international awards for technology and innovation and has operations in the United Kingdom as well as Pennsylvania and California in the United States. Selling internationally, with partnerships or distribution channels in Asia, Europe, and North America, Kromek's global customer base ranges from national governments and regulatory bodies to international airports and research institutes and from major energy providers to some of the world's largest technology and medical equipment groups. In addition to continuing growth in sales, a major development during the year was the successful acquisition of eV Products Inc. which brought complementary and additional capabilities in several areas, including technology, manufacturing, and established channels to market - especially in medical imaging. 2012 saw new product developments and several new patents filed/granted, increasing the company's IP portfolio. Kromek has also entered into a number of new technology partnerships/distributor agreements.

m2m Imaging is a leading developer of preclinical and clinical imaging system accessories. With a product portfolio that spans from 0.2T to 21T, and from 2mm to 30cm, m2m specialises in custom developments to specific research requirements. The company's surface coils, volume coils, arrays, and multi element Hi B1 field uniformity BioSAW coils are all available either as standalone coils or integrated into a hi throughput "AHS" platforms with anesthesia, nosecones, and stereotactic fixation. m2m builds coil and coil systems for all manufacturers' platforms, horizontal and vertical bore, all nuclei, all applications, and has over 4000 products in use in major University and Pharmaceutical labs around the world.

Motif BioSciences has identified three compounds with clear safety and/or efficacy deficits that can be fixed by applying proprietary medicinal chemistry expertise. The world class team of experienced drug discovery scientists, together with contracted development partners, is able to generate Pre-Clinical Candidates within 18 months that can be partnered out to pharmaceutical companies for clinical development. Motif's first three projects are in therapeutic areas of major unmet medical need - rheumatoid arthritis, MRSA, and over active bladder. In each case Motif is building on first-in-class lead compounds and mechanisms which have already established proof of concept in man, significantly increasing the probability of success of the company's proprietary best-in-class compounds. Motif is currently seeking investors and strategic partners to execute the plan.

PrivateMarkets is at the leading edge of emerging demand for new financial marketplaces that address unique transaction requirements by using social networking approaches to create trading solutions that are compatible with the new regulatory environment. The company's focus is on the growing need for solutions in the energy markets, post-reform financial derivatives, and in many physical commodity markets. Each of these is a growing multi-billion dollar market that represents significant opportunity. Transactions in these markets need the efficient access to liquidity that PrivateMarkets will provide. PrivateMarkets provides innovative Internet-based marketplaces that link together networks of potential buyers and sellers who need to conduct customized transactions. The technology enables customers to create their own private "mini-markets" where others they invite can vie competitively for their business. PrivateMarkets replaces individual, undocumented, one-on-one voice or IM communications between trading counterparties with a hosted, easy-to-use service that facilitates closing a transaction and is accessible from any user's desktop or mobile device. 

WellGen is at the crossroads of food and pharmaceuticals, developing natural products with medicinal properties, backed by rigorous scientific research. WellGen's products are in development for applications in the management of chronic inflammation-based disease, consumer products, and pet products. Each of these opportunities represents a multi-billion dollar market. Building on the extensive foundation of R&D on the company's lead products, discussions are in progress with potential partners in the areas of pet care, dietary supplements, and consumer beverages. Pets suffer from many of the same inflammation-based conditions that affect their owners. WellGen products have passed initial screening by a major pet care company which found they demonstrated efficacy for pet care applications. The next step in the company's product development is animal trials. In addition, WellGen's clinical trial results demonstrate that WG0401 enhances muscle recovery after exercise. Dietary supplements and sports beverages are a natural fit for this product. WellGen is in discussion with an on-line dietary supplements company to introduce several products using WellGen's anti-inflammatory ingredient, in a co-owned and developed product line. WellGen is also in conversations with new investors to brand, market, and distribute a sports beverage developed by WellGen which is based on WG0401. Additional clinical trials are planned in the area of inflammation-based disease management. In May 2012, after serving on the Board of Directors for over 3 years, Dr. Laura Philips joined WellGen as CEO. She brings a breadth of experience in biotech, strategy, management, and technology to the role.