16 Mar 2009 07:00
16 March 2009
Amphion Innovations plc
Preliminary Results for the year to 31 December 2008
Amphion Innovations plc (LSE: AMP) ("Amphion" or "the Company"), which builds shareholder value in high growth companies in the medical and technology sectors, today announces its audited preliminary results for year ended 31 December 2008.
Highlights
Net Asset Value per share was £0.30 as at 31 December 2008 (2007: £0.22). In dollars, NAV per share remained flat at US $0.44 (2007: US $0.44)
Revenues increased to US $7.1 million (2007: US $2.9 million)
Partner Company, DataTern Inc., generated revenues of over US $5 million
Successfully raised over US $13 million of funding for Partner Companies in 2008
New products launched from Partner Companies; Kromek, Myconostica, and PrivateMarkets
In response to the reduction in access to capital, launched Convertible Promissory Note to support funding for Amphion and Partner Companies
Richard C.E. Morgan, Amphion's Chief Executive Officer said:
'The international financial crisis and economic downturn has thrown up a number of challenges for Amphion's Partner Companies. It seems likely that the IPO markets will remain closed for some time and the private capital markets have been severely impacted by the steep fall in worldwide equity markets. We have responded to these pressures by cutting costs wherever possible and looking at new ways of raising capital for Amphion and our Partner Companies. Most importantly, our intellectual property licensing programme continues to make good progress and promises to generate important revenue and cash streams in 2009 and the years ahead. In addition, the markets addressed by our Partner Companies are large and likely to grow in even the worst of economic conditions. In general we are well removed from the financial engineering at the heart of the credit crisis. This will be a challenging year but we believe we should be able to weather the storm and we plan to be in a good position to take advantage of the upturn when it comes along in due course.'
Enquiries
Amphion Innovations +1 212 210 6224
Charlie Morgan
Cardew Group +44 020 7930 0777
Tim Robertson/ Jamie Milton/ Matthew Law
Charles Stanley Securities, Nominated Advisor +44 020 7149 6000
Mark Taylor/ Freddy Crossley
Chairman and CEO's Statement
Results
Amphion continued to make progress in 2008, despite the rapid deterioration in the financial environment as the year went on. We are therefore pleased to show an increase in Net Asset Value per Share ('NAV') in sterling to £0.30 being US $0.44 (£0.22 and US $0.44 as at 31 December 2007). The increase in NAV per Share stems from a combination of good progress made by the Partner Companies together with exchange rate movements in the second half improving NAV per Share in sterling terms as the majority of the Partner Companies are valued in dollars.
The Company has also benefited from new licensing revenues from DataTern which led to revenues for the period increasing significantly to US $7.1 million (2007: US $2.9 million). Commencement of revenues from DataTern meant that, for the first time, the Company generated costs relating directly to sales of US $3.7 million. Administrative expenses were higher in 2008 at US $6.8 million. However, the underlying expense level for Amphion, on a cash basis, was estimated to be about US $4.5 million in 2008, in line with the previous year, on a comparable basis. The difference between this number and the reported level for 2008 is due to a variety of factors, including start up costs for DataTern, and a non cash expense of US $0.7 million relating to option charges. Before interest charges on the convertible promissory note, the underlying cost base of Amphion is expected to be lower in 2009 as a result of various streamlining measures. Due primarily to a reduction in the fair value gains on investments compared to the previous year, the Company recorded a loss before tax of US $1.2 million (2007: profit of US $10.6 million).
Funding
For our model to work, we need access to capital, and traditional routes to raise capital for early stage emerging technology companies all but disappeared in the second half of 2008. In response, each one of our Partner Companies has been reviewing and changing its operating plan, in an effort to reduce costs and conserve capital. We continue to work closely with each one of our companies to help them weather the storm. Each has made substantial progress in this regard but without any respite in the capital markets it is hard to know if the measures we have taken to date will be adequate. As a result of the current environment for capital raising, a greater burden of financial support has fallen on Amphion directly and in response to that need for additional capital we launched the Convertible Promissory Note financing in the fourth quarter of 2008.
We anticipate generating at least as much revenue from our intellectual property licensing programmes in 2009 as we did in 2008 and this would cover the majority of Amphion's operating costs. Progress during the early stages of 2009 has been promising and we look forward to updating shareholders in due course. We are reviewing and reducing costs wherever possible, without compromising the operating structure. Any additional capital that we raise through the Convertible Promissory Note, or in any other way, we will endeavor to support our Partner Companies and to maintain our ownership interest in each at the highest possible level.
Partner Companies
Early last year, we concluded that the IPO market was unlikely to support any exits in 2008 nor, probably, in 2009. At this time it is hard to see how that exit route will be viable for a realization of any of our Partner Companies via the public markets until at least 2010. Therefore, in the summer of 2008, we started to look systematically at each one of our companies to see if merger or acquisition opportunities would either allow exits through a trade sale of the business or provide opportunities to strengthen the operating profile through acquisitions of business units or entire companies. We have also stepped up our efforts to identify other sources of financial support for each one of the Partner Companies, in the form of grants or support from government entities and/or larger companies that might have an interest in making an investment. Over the course of 2008, the Partner Companies received approximately US $500,000 in grants from various government entities. As market conditions deteriorate, we continue to increase the amount of effort devoted to these alternative financing and exit options.
Despite all the negative factors at work, we draw comfort from the fact that we have never been involved in any of the speculative financial engineering that is creating so much hardship around the world today. Although we are now, for the first time, raising capital through a Convertible Note, we traditionally use little or no debt, in either Amphion or our Partner Company finances. Our companies are building real products based on innovative, usually patented technology, products which address real (usually existing) market needs that are large (usually billions of dollars in size) and growing. We have found in recent months that investors are beginning to think about how to go "back to basics" in their investment activity and we believe we could benefit from this change, as and when market conditions begin to stabilize.
A bad economic environment impacts the prospects for our Partner Companies negatively, but they are carefully selected for markets that exist, markets that are growing, and markets where their technology and products will offer an immediate and important benefit. Indeed, in some instances, bad economic conditions may actually increase the appetite of the customers for new products that promise to do things faster, better, or cheaper.
Kromek is a case in point, where there is an urgent need for products that apply innovative technology to security, industrial, and medical applications and the current technology does an inadequate job. As per our general approach, we have worked closely with the company since its beginnings in late 2004, just prior to our IPO. At that time it was just three people working in the proverbial "garage". Now it is a thriving business with one product on the market and more in development. We are excited by the company's progress and prospects, but Kromek is not unique. We believe we have 8 companies that are making progress in this way. For example, PrivateMarkets, the company we spun out of FireStar, has just started to generate revenue and has progressed to this point from a complete startup, in just three short years, partly because a lot of development work was already done, within FireStar, for several years previously. This is a case where the productivity and transparency offered by PrivateMarkets' proprietary energy trading platform is probably more valuable now than in easier financial times.
Over the last several years we have made a considerable investment in developing our capability to manage and develop the intellectual property foundation of each one of our Partner Companies. In addition, we are developing the capability to identify opportunities to license our Partner Companies' basic technology to others who might need it. In 2008, we took the step of formalizing this capability in a new company, called DataTern, which at this point is a wholly-owned subsidiary of Amphion. Although DataTern is now beginning to generate income for Amphion, we continue to approach this area very cautiously and are continually improving our approach and systems. Last year we announced our third licensee to the ORM patents we bought in to DataTern from FireStar. Like much of the IP underlying our Partner Companies, we believe these are fundamental patents and that many companies managing complex data in an IT setting should require a license to the technology to continue to "practice the art". We believe that there are many additional potential licensees and that we should be able to generate a significant amount of revenue from this asset over the next few years. In due course, once Amphion has recovered its sunk costs, we will start sharing this revenue stream back with FireStar (where the ORM technology and patents were originally developed), so FireStar should then benefit directly as well. Our longer term goal is to develop DataTern further, to support additional licensing programmes in the future.
Outlook
In summary, while we are adopting a very cautious approach in this highly challenging environment, we continue to believe in the fundamental strength of our model and the quality of our Partner Companies. Through a combination of our licensing programme and raising further new capital, through our Convertible Note offering or in other ways, we believe we will be able to continue to add value to our Partner Companies and, through our significant shareholdings in each one, build value for the Amphion shareholders.
Richard Mansell-Jones
Richard Morgan
Partner Companies' Summary
Below we provide a summary of progress made with each of our Partner Companies.
AXCESS International, Inc. (OCTBB: AXSI) provides Micro-Wireless system solutions for real-time business activity monitoring and control. Its patented Micro-Wireless technology combines RFID, RTLS and wireless sensing, and is characterised by very small, low cost wireless devices. The next horizon of wireless evolution is where all things become wireless, communicating for efficiencies, security, convenience and entertainment. This previously unavailable automated visibility into all things will generate real time operational business intelligence which should provide further productivity improvements. Analysts describe this market as the 'Internet of Things' and this market is forecast to be worth in excess of US $5 billion by 2010. Amphion's fully-diluted ownership stake in AXCESS was 7.83% as of 31 December 2008, valued at US $1.6 million (2007: US $3.1 million).
2008 Developments
AXCESS' new Micro-Wireless technology system-on-a-chip platform, DotTM operates in the combined technology and economic "sweet spot" to provide the most feature rich and cost effective wireless solutions for local area automated tracking and sensing. During 2008, AXCESS made progress in new infrastructure technologies such as AXCESSPort™, ActivatorPlus™, and Dot™ Personnel and also developed additional features, applications, and branding for Dot™. AXCESS also filed eight patents with the United States Patent and Trademark Office. Since the year end, AXCESS won a competitive procurement worth US $3.54 million to provide security infrastructure solutions for the port at Trinidad's capital, Port-of-Spain.
DataTern, Inc. aims to commercialise selected intellectual property technology opportunities which originate from Amphion's Partner Companies. DataTern initially acquired intellectual property assets from Amphion's Partner Company, FireStar Software, which included patents, trademarks, software and customers to commercial technology for object and relational database access and mapping applications under the brand, ObjectSpark®. Amphion's Partner Companies currently own or control over 150 separately identified pieces of intellectual property, a number which is growing rapidly each year. Amphion owns 100% of DataTern as of 31 December 2008 (31 December 2007: 100%), it is consolidated into Amphion's financial statements in both 2008 and 2007.
2008 Developments
During 2008, DataTern continued to expand the commercialization of the acquired ObjectSpark® technology by increasing the number of software and patent licensed customers in several enterprise applications in the US and Europe. DataTern's new customer applications are in healthcare, financial services, oil and gas services, and software services. In addition, DataTern acquired seven international patents in Cloud Computing messaging as a logical extension to the ObjectSpark® technologies. With software sales and three new non-exclusive patent licensees, DataTern's revenues for the reporting period exceeded US $5 million.
FireStar Software, Inc. is a software company providing solutions for creating and maintaining multi-enterprise, automated business transaction networks. FireStar has developed EdgeNode™, a patent-pending technology which provides secure, private, and efficient mechanisms for any set of different companies to exchange electronic business transactions. FireStar's market opportunity extends across multiple markets, from trading networks to opportunities in bank payments and healthcare networks. Amphion's fully-diluted ownership stake in FireStar was 15.3% as of 31 December 2008, valued at US $4.7 million (2007: US $4.8 million.)
2008 Developments
2008 produced the highest revenue in FireStar's history, US $2.3 million, which represented an 11% growth over its 2007 revenue of US $2.1 million. FireStar also had a positive operating income of US $196,000 (2007: US $684,000). Through our leadership position at the Object Management Group (OMG) of using electronic messages to provide automated business transaction exchange, FireStar was able develop a standard, that has been adopted by the OMG, called the Model Driven Message Interoperability (MDMI) Standard. To speed the adoption of this standard, FireStar and the OMG formed the OMG MDMI Consortium. In 2009, FireStar expects to have the first product in the market that can be used to implement the agreed OMG standard. During 2008, FireStar made significant progress in researching and developing plans for providing a Health Information Exchange service that is scalable to the national level within the United States.
Kromek is pioneering digital colour imaging for x-rays and has brought ground-breaking innovation to materials technology and advanced 3D imaging. Kromek specialises in making semiconductor materials within the Cadmium Telluride family. These materials have significant applications as detectors of x-rays and gamma rays, notably in medical imaging, security screening, industrial inspection, and space exploration, allowing for very precise identification of materials. The market place opportunities for Kromek's imaging and non-imaging technology are in the Security, Industrial Inspection, Medical, and Defence Sectors. These are high growth rate markets and provide exciting prospects for Kromek's technologies. Amphion's fully-diluted ownership stake in Kromek was 20.78% as of 31 December 2008, valued at US $14.4 million (2007: US $9.7 million).
2008 Developments
2008 proved to be a very successful year for Kromek. The Company launched its first product, the Kromek Bottle Scanner, in both Dubai and Washington DC. The Bottle Scanner is a new liquid explosive detection system, designed to help safeguard against terrorism and smuggling. In November 2008, Kromek won two Institution of Engineering and Technology's (IET) Awards for security and transport innovation for the use of its energy selective x-ray detectors which accurately identify threat materials in security applications. Also during the reporting period Kromek was awarded a £250,000 GRD grant for the development of industrial imaging applications. The Company also filed ten new patent applications as well as increased its employee headcount from 18 to 32. During 2008, Kromek manufactured the first 100mm diameter single crystal CdTe wafers. Other corporate developments during 2008 include the securing of £2.3 million in financing.
m2m Imaging Corp. specialises in developing high performance magnetic resonance imaging ("MRI") coils and accessories that allow for enhanced imaging for clinical and preclinical markets. Ultimately, enhanced images are necessary for better disease detection and faster drug discovery. This need has created a strong demand for solutions, such as the cryogenic coil. Magnetic Resonance ("MR") based applications are growing rapidly, fueled by the market's growth and insatiable demand for new therapeutic applications and solutions. The continuing growth of the global installed base of clinical and preclinical MR systems continues to provide m2m with significant opportunities for growth and it is estimated that the market is worth approximately US $12 billion. Amphion's fully-diluted ownership stake in m2m was 24.36% at 31 December 2008, valued at US $6.6 million (2007: US $4.0 million).
2008 Developments
During 2008, m2m entered into a strategic partnership with Celsense Inc., a leading developer of next generation cellular imaging technology that enables real-time detection of inflammation and transplanted cells for therapeutic and diagnostic purposes using MRI or high resolution NMR. m2m's high performance conventional and cryogenic MRI coils enable acquisition of dramatically improved image quality of fluorocarbon (19F) nanoparticles, allowing customers to achieve better results when used in conjunction with cellular solutions from Celsense.
Also during the reporting period, m2m attended an expanded trade show programme outside of North America, successfully creating new relationships in Europe and Asia. This expansion lead to a large array of new A Tier customers both end user and commercial including Varian, Mediso Medical Imaging Systems, Imperial College London, University College London and Oxford University. During 2008, m2m took initial orders for preclinical cryogenic coils as well as preclinical phased array products from both OEM's and direct users for delivery in 2009. In March 2008, m2m moved its headquarters to Cleveland, Ohio.
Motif BioSciences, Inc. works with a variety of Founder Populations to accelerate discovery of genetic variation involved in common diseases. By applying its expertise and proprietary technology to specific populations, Motif expects to make commercially-valuable discoveries on the genetic basis of diseases such as diabetes, asthma, and cancer and to develop the commercial value of these discoveries by partnering with pharmaceutical companies. Amphion's fully-diluted ownership stake in Motif was 39.11% as of 31 December 2008, valued at US $15.4 million (2007: US $12.8 million).
2008 Developments
In 2008, Motif signed a major partnership agreement with Imperial College London and Professor Philippe Froguel, a world expert in the genetics of diabetes, to study the genetics of numerous metabolic diseases including diabetes. Motif also began analysing the phenotypic and genotypic data from the genetic samples and clinical data.
During 2008, Motif finalized an agreement to partner with the Government of Barbados to study genetic causes of multiple diseases in Afro-Caribbean populations; completed the first phase of its Kuwait Post Traumatic Stress Disorder project commissioned by the Harvard School of Public Health; obtained final approvals and completed investigator training for its asthma research in the Persian Gulf; and entered into early stage discussions to partner with and initiate research projects with a variety of companies and international academic medical centres in the areas of: target gene discovery, biomarker discovery, biomarker development, and drug re-profiling.
Myconostica Ltd. is a medical diagnostics company based in Manchester UK, with operations in South Carolina, US. Myconostica develops and supplies molecular diagnostic products to aid rapid and accurate diagnosis of life threatening invasive fungal infections. Myconostica aims to establish itself as a world leader in fungal diagnostics by providing a series of high quality, effective, and fast diagnostic tests, using the latest molecular technology. This allows for fast, accurate and specific diagnosis, which in turn can reduce mortality rates and allow more cost effective treatment by reducing intensive care stays and allowing more effective and targeted use of medicines. The worldwide market for fungal tests is estimated to be in excess of US $250 million per annum with over 10 million people at risk of life threatening fungal infections each year in Europe and North America alone. Amphion's fully-diluted ownership stake in Myconostica was approximately 22.89% as of 31 December 2008, valued at US $4.2 million (2007: US $5.8 million).
2008 Developments
In late 2008, with CE marking, which enables sales in Europe and several other territories, on two platforms, Myconostica commenced sale in Europe of its first molecular assay product, FXG®: RESP (Asp+) for the diagnosis of respiratory fungal infections. In addition, at 31 December 2008, trials of FXG®: RESP (Asp+) were ongoing, successful completion of which will enable the company to apply for FDA clearance to market the product in the USA. Other developments include the securing of £5.4 million in a Series C financing. This enabled Myconostica to make good progress during the year and in October 2008, the company appointed John Garland, a diagnostics industry specialist, as Chief Executive Officer; Spencer Kerry as Chief Financial Officer; and also the company's first independent Non-executive Director.
PrivateMarkets, Inc. is the leading provider of negotiation and execution platforms for bilateral, structured trading of commodities. Its product creates a unique Virtual Private Market™ that is ideal for the special physical hedging and trading needs of non-retail consumers of energy commodities including municipal and investor-owned utilities, producers, generators, industrials, and energy marketers. PrivateMarkets currently addresses the unique trading requirements of a portion of the North American market for electricity and natural gas, valued at over US $300 billion per annum, but plans to expand its operations to other commodity markets in the US as well as globally. Amphion's fully-diluted ownership stake in PrivateMarkets was 27.75% as of 31 December 2008, valued at US $3.9 million (2007: US $1.7 million).
2008 Developments
During 2008, PrivateMarkets began live trading operations of its Virtual Private Market™ platform and generated its first revenues. There are currently 16 customers trading in the ERCOT (Texas) electricity market, representing major energy corporations, municipal utilities, and retail electric providers located in Austin, Boston, Dallas, Houston, Kansas City, Pittsburgh, and Philadelphia. Also during 2008, PrivateMarkets began efforts to expand its patent portfolio, with filings in the European Union and Canada.
In 2008, PrivateMarkets developed a new service for the trading of Ancillary Services, which was introduced late in 2008 and is expected to generate incremental revenue in 2009. The company has also developed and demonstrated a new revenue generating service for the trading of congestion rights, which is due to be launched for select North American markets in 2009. Other developments during 2008, include the securing of US $4.2 million in a Series A financing.
WellGen Inc. is a life science company positioned at the crossroads of foods and pharmaceuticals. The Company is using nutrigenomics to develop clinically-validated Medical Foods. As a spin-out of Rutgers University, WellGen has exclusive worldwide licenses to a platform technology and several patents for compositions of natural substances and their uses in a range of health states. Through its expertise in nutrigenomics and natural products chemistry, WellGen has developed proprietary, cutting edge science to create nutritional therapies based on the influence of natural products on human gene expression. The dietary supplement and functional foods opportunities fall along the continuum of the Medical Food research and development track thereby increasing value earlier in the development chain. The value of the US market alone for these three business opportunities is estimated at close to US $60 billion. Amphion's fully-diluted ownership stake in WellGen was 15.05% as of 31 December 2008, valued at US $6.6 million (2007: US $6.8 million).
2008 Developments
In 2008, WG0401, WellGen's proprietary extract from black tea, was determined by a panel of independent experts to be generally recognised as safe (commonly referred to as GRAS by the FDA). This designation is specifically related to the food regulatory pathway and is a critical requirement for Medical Food status. Also during the reporting period WellGen filed two new patents on WG0401, bringing the total number related to the enriched black tea extract to one issued and four pending. During 2008, the WellGen laboratory became fully operational with state of the art equipment and staffed by highly qualified scientists. In February, Robert Hellauer joined WellGen as Chief Financial Officer with over thirty years of broad financial leadership in the pharmaceutical, consumer, and telecommunications industries.
Amphion Innovations plc
Consolidated income statement
For the year ended 31 December 2008
| Notes | ||||||
| Year ended | Year ended | |||||
| 31 December 2008 | 31 December 2007 | |||||
| Continuing operations | US $ | US $ | ||||
| Revenue | 4 | 7,087,944 | 2,871,222 | |||
| Cost of sales | (3,676,250) | - | ||||
| Gross profit | 3,411,694 | 2,871,222 | ||||
| Other operating income | 7,000 | - | ||||
| Administrative expenses | (6,799,792) | (5,877,946) | ||||
|
|
| |||||
| Operating loss | (3,381,098) | (3,006,724) | ||||
| Fair value gains on investments | 1,967,216 | 13,549,980 | ||||
| Interest income | 8 | 274,788 | 136,467 | |||
| Other gains and losses | (22,433) | (113,419) | ||||
| Finance costs | (29,878) | (1,192) | ||||
|
|
| |||||
| (Loss) profit before tax | 6 | (1,191,405) | 10,565,112 | |||
| Tax on (loss) profit | 9 | (13,130) | (125,977) | |||
|
|
| |||||
| (Loss) profit for the year | (1,204,535) | 10,439,135 | ||||
| Earnings per share | 10 | |||||
| Basic | US | $ (0.01) | US | $ 0.10 | ||
| Diluted | US | $ (0.01) | US | $ 0.10 | ||
Amphion Innovations plc Company income statement
For the year ended 31 December 2008
| Year ended | Year ended | ||||
| Notes | 31 December 2008 | 31 December 2007 | |||
| US $ | US $ | ||||
| Continuing operations | |||||
| Administrative expenses | (2,464,160) | (2,998,360) | |||
|
|
| ||||
| Operating loss | (2,464,160) | (2,998,360) | |||
| Fair value gains on investments | 1,665,716 | 13,459,980 | |||
| Interest income | 8 | 314,445 | 137,543 | ||
| Other gains and losses | (22,433) | (113,419) | |||
| Finance costs | (26,229) | (1,192) | |||
|
|
| ||||
| (Loss) profit before tax | 6 | (532,661) | 10,484,552 | ||
| Tax on profit | 9 | - | - | ||
|
|
| ||||
| (Loss) profit for the year | (532,661) | 10,484,552 | |||
| Amphion Innovations plc | ||||||||||
| Consolidated balance sheet | ||||||||||
| At 31 December 2008 | ||||||||||
| Notes | 31 December 2008 | 31 December 2007 | ||||||||
| US $ | US $ | |||||||||
| Non-current assets | ||||||||||
| Intangible assets | 11 | 2,150,415 | 2,274,636 | |||||||
| Property, plant and equipment | 12 | 19,726 | 28,161 | |||||||
| Security deposit | 121,694 | 121,694 | ||||||||
| Investments | 14 | 59,029,932 | 51,642,725 | |||||||
| 61,321,767 | 54,067,216 | |||||||||
| Current assets | ||||||||||
| Prepaid expenses and other receivables | 15 | 1,566,911 | 639,429 | |||||||
| Cash and cash equivalents | 630,404 | 4,594,007 | ||||||||
| 2,197,315 | 5,233,436 | |||||||||
| Total assets | 63,519,082 | 59,300,652 | ||||||||
| Current liabilities | ||||||||||
| Trade and other payables | 16 | 1,952,779 | 2,469,742 | |||||||
| Non-current liabilities | ||||||||||
| Convertible promissory notes | 17 | 3,279,950 | - | |||||||
| Trade and other payables | 16 | 1,140,739 | - | |||||||
| 4,420,689 | - | |||||||||
|
| ||||||||||
| Total liabilities | 6,373,468 | 2,469,742 | ||||||||
| Net assets | 57,145,614 | 56,830,910 | ||||||||
| Equity | ||||||||||
| Share capital | 18 | 2,429,342 | 2,388,071 | |||||||
| Share premium account | 36,291,262 | 34,772,046 | ||||||||
| Translation reserve | (38,388) | 2,860 | ||||||||
| Retained earnings | 18,463,398 | 19,667,933 | ||||||||
|
| ||||||||||
| Total equity | 57,145,614 | 56,830,910 | ||||||||
| The financial statements were approved by the Board of Directors and authorised for issue on | ||||||||||
| 13 March 2009. They were signed on its behalf by: | ||||||||||
| Director | Director | |||||||||
| Richard M. Mansell-Jones | Robert J. Bertoldi | |||||||||
| Amphion Innovations plc | |||||
| Company balance sheet | |||||
| At 31 December 2008 | |||||
| Notes | 31 December 2008 | 31 December 2007 | |||
| US$ | US$ | ||||
| Non-current assets | |||||
| Property, plant and equipment | 12 | 2,397 | 6,886 | ||
| Security deposit | 121,694 | 121,694 | |||
| Investments | 14 | 58,397,156 | 51,311,449 | ||
| Investment in subsidiaries | 13 | 643,467 | 766,406 | ||
| 59,164,714 | 52,206,435 | ||||
| Current assets | |||||
| Prepaid expenses and other receivables | 15 | 1,748,986 | 379,580 | ||
| Cash and cash equivalents | 538,018 | 4,480,257 | |||
| 2,287,004 | 4,859,837 | ||||
| Total assets | 61,451,718 | 57,066,272 | |||
| Current liabilities | |||||
| Trade and other payables | 16 | 638,087 | 588,049 | ||
|
|
| ||||
| Non-current liabilities | |||||
| Convertible promissory notes | 17 | 3,279,950 | - | ||
| Trade and other payables | 16 | 27,632 | - | ||
| 3,307,582 | - | ||||
| Total liabilities | 3,945,669 | 588,049 | |||
| Net assets | 57,506,049 | 56,478,223 | |||
| Equity | |||||
| Share capital | 18 | 2,429,342 | 2,388,071 | ||
| Share premium account | 36,291,262 | 34,772,046 | |||
| Retained earnings | 18,785,445 | 19,318,106 | |||
|
|
| ||||
| Total equity | 57,506,049 | 56,478,223 | |||
| The financial statements were approved by the Board of Directors and authorised | |||||
| for issue on 13 March 2009. They were signed on its behalf by: | |||||
| Director | Director | ||||
| Richard M. Mansell-Jones | Robert J. Bertoldi | ||||
| Amphion Innovations plc | ||||||||||||
| Consolidated statement of changes in equity | ||||||||||||
| For the year ended 31 December 2008 | ||||||||||||
| Share | ||||||||||||
| Share | premium | Translation | Retained | |||||||||
| Notes | capital | account | reserve | earnings | Total | |||||||
| US $ | US $ | US $ | US $ | US $ | ||||||||
| Balance at 31 December 2006 | 1,808,983 | 23,114,093 | 11,993 | 9,228,798 | 34,163,867 | |||||||
| Issue of share capital | 18 | 579,088 | 12,179,676 | - | - | 12,758,764 | ||||||
| Incremental costs directly attributable | ||||||||||||
| to issue of shares | 19 | - | (778,379) | - | - | (778,379) | ||||||
| Recognition of share-based payments | 21 | - | 256,656 | - | - | 256,656 | ||||||
| Exchange differences arising on | ||||||||||||
| translation 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 | |||||||
| Issue of share capital | 18 | 41,271 | 859,444 | - | - | 900,715 | ||||||
| Incremental costs directly attributable | ||||||||||||
| to issue of shares | 19 | - | (41,423) | - | - | (41,423) | ||||||
| Recognition of share-based payments | 21 | - | 701,195 | - | - | 701,195 | ||||||
| Exchange differences arising on | ||||||||||||
| translation of foreign operations | - | - | (41,248) | - | (41,248) | |||||||
| Loss for the year | - | - | - | (1,204,535) | (1,204,535) | |||||||
|
|
|
|
|
| ||||||||
| Balance at 31 December 2008 | 2,429,342 | 36,291,262 | (38,388) | 18,463,398 | 57,145,614 | |||||||
| Amphion Innovations plc | |||||||||
| Company statement of changes in equity | |||||||||
| For the year ended 31 December 2008 | |||||||||
| Share | |||||||||
| Share | premium | Retained | |||||||
| Notes | capital | account | earnings | Total | |||||
| US $ | US $ | US $ | US $ | ||||||
| Balance at 31 December 2006 | 1,808,983 | 23,114,093 | 8,833,554 | 33,756,630 | |||||
| Issue of share capital | 18 | 579,088 | 12,179,676 | - | 12,758,764 | ||||
| Incremental costs directly attributable | |||||||||
| to issue of shares | 19 | - | (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 | |||||
| Issue of share capital | 18 | 41,271 | 859,444 | - | 900,715 | ||||
| Incremental costs directly attributable | |||||||||
| to issue of shares | 19 | - | (41,423) | - | (41,423) | ||||
| Recognition of share-based payments | 21 | - | 701,195 | - | 701,195 | ||||
| Loss for the year | (532,661) | (532,661) | |||||||
|
|
|
|
| ||||||
| Balance at 31 December 2008 | 2,429,342 | 36,291,262 | 18,785,445 | 57,506,049 | |||||
| Amphion Innovations plc | ||||
| Consolidated cash flow statement | ||||
| For the year ended 31 December 2008 | ||||
| Year ended | Year ended | |||
| Notes | 31 December 2008 | 31 December 2007 | ||
| US $ | US $ | |||
| Operating activities | ||||
| Operating loss | (3,381,098) | (3,006,724) | ||
| Adjustments for: | ||||
| Depreciation of property, plant and equipment | 12 | 11,836 | 12,052 | |
| Amortisation of intangible assets | 253,935 | - | ||
| Recognition of share based payments | 1,103,235 | 256,656 | ||
| (Increase) decrease in prepaid & other receivables | (927,482) | 619,512 | ||
| Increase in trade & other payables | 623,776 | 1,119,756 | ||
| Interest expense | (29,878) | (1,192) | ||
| Income tax | (13,130) | (125,977) | ||
|
|
| |||
| Net cash used in operating activities | (2,358,806) | (1,125,917) | ||
| Investing activities | ||||
| Interest received | 274,788 | 136,467 | ||
| Proceeds on disposal of investments | - | 581,353 | ||
| Proceeds from repayment of notes | 495,890 | - | ||
| Purchases of investments | (5,915,881) | (6,419,535) | ||
| Purchases of intangible assets | 11 | (129,714) | (2,274,636) | |
| Purchases of equipment | 12 | (4,173) | (10,059) | |
|
|
| |||
| Net cash used in investing activities | (5,279,090) | (7,986,410) | ||
| Financing activities | ||||
| Proceeds on issue of shares, net of share issuance costs | 457,252 | 11,980,385 | ||
| Proceeds on issue of convertible promissory notes | 3,279,950 | - | ||
|
|
| |||
| Net cash from financing activities | 3,737,202 | 11,980,385 | ||
| Net increase/(decrease) in cash and cash equivalents | (3,900,694) | 2,868,058 | ||
| Cash and cash equivalents at the beginning of the year | 4,594,007 | 1,848,539 | ||
| Effect of foreign exchange rate changes | (62,909) | (122,590) | ||
|
|
| |||
| Cash and cash equivalents at the end of the year | 630,404 | 4,594,007 | ||
| Amphion Innovations plc | |||||
| Company cash flow statement | |||||
| For the year ended 31 December 2008 | |||||
| Year ended | Year ended | ||||
| Notes | 31 December 2008 | 31 December 2007 | |||
| Operating activities | US $ | US $ | |||
| Operating loss | (2,464,160) | (2,998,360) | |||
| Adjustments for: | |||||
| Depreciation of property, plant and equipment | 12 | 4,488 | 5,655 | ||
| Recognition of share based payments | 1,103,235 | 256,656 | |||
| (Increase) decrease in prepaid & other receivables | (1,369,406) | 608,507 | |||
| Increase (decrease) in trade & other payables | 77,670 | (588,018) | |||
| Interest expense | (26,229) | (1,192) | |||
|
|
| ||||
| Net cash used in operating activities | (2,674,402) | (2,716,752) | |||
| Investing activities | |||||
| Interest received | 314,445 | 137,543 | |||
| Proceeds on disposal of investments | - | 581,353 | |||
| Purchases of investments | (6,792,941) | (7,185,938) | |||
| Proceeds from repayment of notes | 1,495,890 | - | |||
|
|
| ||||
| Net cash used in investing activities | (4,982,606) | (6,467,042) | |||
| Financing activities | |||||
| Proceeds on issue of shares, net of share issuance costs | 457,252 | 11,980,385 | |||
| Proceeds on issue of convertible promissory notes | 3,279,950 | - | |||
|
|
| ||||
| Net cash from financing activities | 3,737,202 | 11,980,385 | |||
| Net increase/(decrease) in cash and cash equivalents | (3,919,806) | 2,796,591 | |||
| Cash and cash equivalents at the beginning of the year | 4,480,257 | 1,797,085 | |||
| Effect of foreign exchange rate changes | (22,433) | (113,419) | |||
|
|
| ||||
| Cash and cash equivalents at the end of the year | 538,018 | 4,480,257 | |||
1. General information
Amphion Innovations plc (the "Company") is a public limited company incorporated in the Isle of Man under the Companies Acts 1931 to 2004 on 7 June 2005 with registered number 113646C. The address of the registered office is 15-19 Athol Street, Douglas, Isle of Man, IM1 1LB. The principal place of business is 330 Madison Avenue, New York, NY, 10017, USA. The principal activity of the Company and its subsidiaries (the "Group") is to build shareholder value 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.
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 Amphion Innovations UK Limited, which is incorporated in the United Kingdom.
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 Chairman and CEO's Statement and elsewhere within the financial statements. In addition note 15 to the financial statements include 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.
The Group has been able to meet its obligations through fund raising, providing advisory services to its partner companies and from the revenue from the licensing of intellectual property. The current economic conditions create uncertainty over the Company's ability to raise new funds for itself and its Partner Companies, the continued success of the licensing activity and the Company's ability to achieve timely exits for its investments via IPOs or trade sales.
There is a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern and therefore it may be unable to realize its assets and discharge its liabilities in the normal course of business.
The Board has considered various alternative operating and funding strategies should these be necessary and has a reasonable expectation that the Group has viable options to allow it to continue as a going concern. These options include the reduction in its fundings to Partner Companies, the reduction in its working capital requirements and an acceleration of its licensing activities.
After making due enquiries, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.
2. Significant accounting policies
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).
In the current year, the Group generated revenue from a new source, being the licensing of intellectual property and the related accounting policies are set out below.
Adoption of new and revised Standards
As of the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:
IFRS 1 (amended) / IAS27 (amended) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
IFRS 2 (amended) Share-based Payment - Vesting Conditions and Cancellations
IFRS 3 (revised 2008) Business Combinations
IFRS 8 Operating Segments
IAS 1 (revised 2007) Presentation of Financial Statements
IAS 27 (revised 2008) Consolidated and Separate Financial Statements
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
Improvements to IFRSs (May 2008)
2. Significant accounting policies, (continued)
Adoption of new and revised Standards, (continued)
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group except for additional segment disclosures when IFRS 8 comes into effect for periods commencing on or after 1 January 2009.
The financial statements have been prepared on the historical cost basis, modified by the revaluation of investments. 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 has the power to govern the financial and operating policies of any entity so as to obtain benefits from its activities.
The results of subsidiaries acquired during the year are included in the consolidated income statement from the effective date of acquisition.
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.
Cash and cash equivalents
Cash and cash equivalents include balances with banks and demand deposits, which have 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 or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as fair value through profit or loss which are initially measured at fair value.
Investments are classified as fair value through profit and loss. Investments are carried at value as determined by management using the International Private Equity and Venture Capital Valuation Guidelines. The following broad guidelines are generally used in security valuations: a) marketable securities which are freely tradable and for which quotations are readily available are valued using their last closing prices, (b) all other securities are valued at fair value as estimated by management in good faith. Factors generally considered in determining fair value are the latest offering price from recently executed financing transactions related to the investee companies and comparison to similar instruments of similar companies.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Prepaid expenses and other receivables
Prepaid expenses and other receivables are stated at their nominal value 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)
Financial instruments, (continued)
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements 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.
Convertible promissory notes
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. However, since the Company issued the convertible promissory notes 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 convertible promissory notes are classified wholly as liabilities.
Trade and other payables
Trade and other payables are not interest bearing and are stated at nominal value 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 maximizing 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 as disclosed in note 18.
Impairment of financial assets
Financial assets 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.
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.
Revenue from license agreements is recognized in accordance with the substance of the agreement and when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of the revenue can be measured reliably.
2. Significant accounting policies, (continued)
Revenue recognition, (continued)
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 recognized when it is probable that the fee will be received.
Expenses
Cost of sales
Revenue related costs include the fees paid for advisory services for licensing and enforcing various patents.
Interest income
Interest income is recognized 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.
Foreign currencies
The individual financial statements of each group company 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 group company are expressed in US dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.
Transactions in currencies other than US dollars are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance 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 period, 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 overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.
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 income statement 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 balance sheet date.
2. Significant accounting policies, (continued)
Taxation, (continued)
Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the liability is settled or the asset realised.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives of 3-5 years, using the straight-line method.
Intangible assets
Intangible assets comprise patents and other intellectual property 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 balance sheet 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 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 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 investments. By their nature, these estimates and assumptions are subject to measurement 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. Valuation techniques commonly used by market practitioners are applied. The estimation of fair value of unlisted shares includes some assumptions not supported by observable market prices or rates. The carrying amount of the unlisted shares is US $ 43.5 million (2007: US $ 39.4 million). Details of the assumptions used and of the results of sensitivity analyses regarding these assumptions are provided in notes 14 and 15.
The valuation at 31 December 2008 assumes that the Partner Companies continue to receive ongoing funding in accordance with their 2009 forecast. If this funding was not received, this would have an adverse impact on the valuation of the investments.
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 2008 | 31 December 2008 | 31 December 2007 | 31 December 2007 | |||||
| US $ | US $ | US $ | US $ | |||||
| Continuing operations | ||||||||
| Advisory fees | 1,637,694 | - | 2,871,222 | - | ||||
| License fees | 5,450,250 | - | - | - | ||||
|
|
|
|
| |||||
| Fee income | 7,087,944 | - | 2,871,222 | - |
DataTern, Inc., a wholly owned subsidiary of the Company, has entered into an agreement with IP Navigation Group, LLC which provides strategic advisory services including licensing and enforcement of various patents held by DataTern, Inc. Under this agreement, IP Navigation Group, LLC will advance up to US $2,000,000 to DataTern, Inc. under a promissory note to pay the expenses related to the licensing and enforcement of the patents. The promissory note has an 8% interest rate with repayment coming exclusively from the proceeds of the licensing and enforcement program. The note is due 18 February 2013 and is secured by the assets of DataTern, Inc. The promissory note had a balance of US $52,563 outstanding at 31 December 2008.
During 2008, IP Navigation Group, LLC assisted in obtaining non-exclusive licenses of DataTern's key database patents to various companies totaling US $5,425,000. As part of the agreement, IP Navigation Group, LLC received advisory fees ranging from fifty to eighty percent of the gross proceeds less the repayment of expenses funded by IP Navigation Group, LLC and related interest which amounted to US $500,672, and expenses of third parties. The advisory fees payable to IP Navigation Group, LLC totaled US $3,676,250.
As part of the agreement for DataTern, Inc. to purchase certain of the intangible assets in December 2007, a portion of future revenues from these patents will be retained by FireStar Software, Inc. No amounts have become payable to FireStar Software, Inc. to date.
5. Business and geographical segments
Business segments
For management purposes for 2008, 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.
| 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 | |||||||
| 2008 | 2008 | 2008 | 2008 | 2008 | |||||||
| US $ | US $ | US $ | US $ | US $ | |||||||
| REVENUE | |||||||||||
| External advisory fees | 1,637,694 | - | - | - | 1,637,694 | ||||||
| External license fees | - | - | 5,450,250 | - | 5,450,250 | ||||||
| Inter-segment fees | 240,000 | 173,027 | - | (413,027) | - | ||||||
| Total revenue | 1,877,694 | 173,027 | 5,450,250 | (413,027) | 7,087,944 | ||||||
| Cost of sales | - | - | (3,676,250) | - | (3,676,250) | ||||||
| Gross profit | 1,877,694 | 173,027 | 1,774,000 | (413,027) | 3,411,694 | ||||||
| Other operating income | - | - | 7,000 | - | 7,000 | ||||||
| Administrative expenses | (2,114,834) | (2,614,901) | (2,483,084) | 413,027 | (6,799,792) | ||||||
|
|
| ||||||||||
| Segment result | (237,140) | (2,441,874) | (702,084) | - | (3,381,098) | ||||||
| Fair value gains on investments | - | 1,967,216 | - | - | 1,967,216 | ||||||
| Interest income | 124 | 315,302 | 2,084 | (42,722) | 274,788 | ||||||
| Other gains and losses | - | (22,433) | - | - | (22,433) | ||||||
| Finance costs | - | (26,229) | (46,371) | 42,722 | (29,878) | ||||||
| Profit before tax | (237,016) | (208,018) | (746,371) | - | (1,191,405) | ||||||
| Income taxes | (3,696) | (9,434) | - | - | (13,130) | ||||||
|
|
| ||||||||||
| Profit after tax | (240,712) | (217,452) | (746,371) | - | (1,204,535) | ||||||
| OTHER INFORMATION | |||||||||||
| Segment assets | 1,437,863 | 61,587,443 | 2,209,950 | (1,716,174) | 63,519,082 | ||||||
| Segment liabilities | 813,531 | 697,803 | 2,864,817 | (1,282,633) | 3,093,518 | ||||||
| Capital additions | - | 2,487 | 131,400 | - | 133,887 | ||||||
| Depreciation | 5,856 | 5,811 | 169 | - | 11,836 | ||||||
| Amortisation | - | - | 253,935 | 253,935 | |||||||
| Recognition of share based | |||||||||||
| payments | - | 1,103,235 | - | - | 1,103,235 | ||||||
5. Business and geographical segments, (continued)
For management purposes for 2007, the Group was organised into three business segments - advisory services, investing activities, and intellectual property.
| 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 $ | |||||||
| REVENUE | |||||||||||
| External advisory fees | 2,871,222 | - | - | - | 2,871,222 | ||||||
| Inter-segment fees | - | 606,352 | - | (606,352) | - | ||||||
| Total revenue | 2,871,222 | 606,352 | - | (606,352) | 2,871,222 | ||||||
| Administrative 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 gains on investments | - | 13,549,980 | - | - | 13,549,980 | ||||||
| Interest income | 345 | 138,954 | - | (2,832) | 136,467 | ||||||
| Other 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) | - | 10,565,112 | ||||||
| Income taxes | (115,548) | (10,429) |
| - | (125,977) | ||||||
|
|
| ||||||||||
| Profit after tax | 203,029 | 10,560,117 | (324,011) | - | 10,439,135 | ||||||
| OTHER INFORMATION | |||||||||||
| Segment 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 | - | 2,284,695 | ||||||
| Depreciation | 5,068 | 6,984 | - | - | 12,052 | ||||||
| Recognition of share based | |||||||||||
| payments | - | 256,656 | - | - | 256,656 | ||||||
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 by geographical location of the investment.
| Advisory fees by | ||||
| geographical location | ||||
| 2008 | 2007 | |||
| US $ | US $ | |||
| United States | 1,104,450 | 2,354,875 | ||
| United Kingdom | 533,244 | 516,347 | ||
| 1,637,694 | 2,871,222 | |||
The following table provides an analysis of the Group's license fees by geographical location.
| License fees by | ||||
| geographical location | ||||
| 2008 | 2007 | |||
| US $ | US $ | |||
| United States | 5,425,000 | - | ||
| Europe | 25,250 | - | ||
| 5,450,250 | - | |||
The following is an analysis of the carrying amount of segment assets and capital additions analysed by the geographical area in which the assets are located:
|
| Carrying amount | Additions to fixtures, fittings and | |||||
| of segment assets | equipment and intangible assets | ||||||
| 2008 | 2007 | 2008 | 2007 | ||||
| US $ | US$ | US $ | US$ | ||||
| United States | 44,893,146 | 43,683,138 | 131,400 | 2,282,292 | |||
| United Kingdom | 18,625,936 | 15,617,514 | 2,487 | 2,403 | |||
| 63,519,082 | 59,300,652 | 133,887 | 2,284,695 | ||||
6. Profit before tax
Profit before tax has been arrived at after crediting/(charging) the following gains and losses:
| Group | Company | Group | Company | ||||
| Year ended | Year ended | Year ended | Year ended | ||||
| 31 December 2008 | 31 December 2008 | 31 December 2007 | 31 December 2007 | ||||
| US $ | US $ | US $ | US $ | ||||
| Net foreign exchange gains/(losses) | (22,433) | (22,433) | (113,419) | (113,419) | |||
| Change in fair value of financial assets designated as at fair value through profit or loss | 1,967,216 | 1,665,716 | 13,549,980 | 13,459,980 | |||
| Depreciation of equipment | 11,836 | 4,488 | 12,052 | 5,655 | |||
| Amortization of intangible assets | 253,935 | - | - | - | |||
| Auditors' remuneration - audit services | 177,903 | 117,765 | 135,968 | 81,356 | |||
| Auditors' remuneration - non-audit fee | - | 26,813 | - | 26,813 | |||
7. Staff costs
The average monthly number of employees (including Executive Directors) was:
| 2008 | 2007 | |||
| Number | Number | |||
| Amphion Innovations plc, Amphion Innovations | ||||
| US Inc. and DataTern Inc. (some employees and costs are shared) | 7 | 7 | ||
| Amphion Innovations UK Ltd. | 2 | 2 | ||
|
|
| |||
| Total for the Group | 9 | 9 |
| Group | Company | Group | Company | |||||
| 2008 | 2008 | 2007 | 2007 | |||||
| Their aggregate remuneration comprised: | US $ | US $ | US $ | US $ | ||||
| Wages and salaries | 2,457,373 | 1,084,024 | 1,893,920 | 883,683 | ||||
| Social security costs | 90,364 | 10,553 | 93,705 | 30,912 | ||||
| Other pension costs (see note 22) | 26,715 | - | 28,826 | - | ||||
|
|
| |||||||
| 2,574,452 | 1,094,577 | 2,016,451 | 914,595 |
8. Interest income
| Group | Company | Group | Company | ||||
| Year ended | Year ended | Year ended | Year ended | ||||
| 31 December | 31 December | 31 December | 31 December | ||||
| 2008 | 2008 | 2007 | 2007 | ||||
| US $ | US $ | US $ | US $ | ||||
| Interest income: | |||||||
| Bank deposits | 31,436 | 28,370 | 72,908 | 71,152 | |||
| Investments | 243,352 | 286,075 | 63,559 | 66,391 | |||
| Other | - | - | - | - | |||
|
|
| ||||||
| 274,788 | 314,445 | 136,467 | 137,543 |
9. Income tax expense
| Group | Group | ||
| Year ended | Year ended | ||
| 31 December 2008 | 31 December 2007 | ||
| US $ | US $ | ||
| Isle of Man income tax | - | - | |
| Tax on US subsidiaries | 3,696 | 115,548 | |
| Tax on UK subsidiary | 9,434 | 10,429 | |
| Current tax | 13,130 | 125,977 |
From 6 April 2006, a standard rate of corporate tax of 0% applies to Isle of Man companies, with exceptions taxable at the 10% rate, namely licensed banks in respect of deposit-taking business, companies that profit from land and property in the Isle of Man and companies that elect to pay tax at the 10% rate. No provision for Isle of Man taxation is therefore required. The Company is treated as 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 US subsidiaries, Amphion Innovations US Inc. and DataTern, Inc., are Corporations and therefore taxed directly. The US subsidiaries suffer US federal tax, state tax, 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 to 30% on its taxable profits and gains.
The Group charge for the period can be reconciled to the profit per the consolidated income statement as follows:
| 2008 | 2007 | ||
| US $ | US $ | ||
| Profit (loss) before tax | (1,191,405) | 10,565,112 | |
| Tax at the Isle of Man income tax rate of 0% | - | - | |
| Effect of different tax rates of subsidiaries | |||
| operating in other jurisdictions | 13,130 | 125,977 | |
| Current tax | 13,130 | 125,977 |
10. Earnings per share
The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the parent is based on the following data:
| Earnings | |||
| Year ended | Year ended | ||
| 31 December 2008 | 31 December 2007 | ||
| US $ | US $ | ||
| Earnings (loss) for the purposes of basic and diluted earnings per share | |||
| (profit for the year attributable to equity holders of the parent) | (1,204,535) | 10,439,135 |
| Number of shares | |||
| Year ended | Year ended | ||
| 31 December 2008 | 31 December 2007 | ||
|
| |||
| Weighted average number of ordinary shares for | |||
| the purposes of basic earnings per share | 130,183,495 | 108,073,228 | |
| Effect of dilutive potential ordinary shares: | |||
| Share options | - | 163,733 | |
| Convertible promissory notes | 12,171,667 | - | |
|
| |||
| Weighted average number of ordinary shares for | |||
| the purposes of diluted earnings per share | 142,355,162 | 108,236,961 |
11. Intangible assets
| Patents, software, | |
| trademark and copyright | |
| COST | US $ |
| At 1 January 2007 | - |
| Additions | 2,274,636 |
|
| |
| At 31 January 2008 | 2,274,636 |
| Additions | 129,714 |
|
| |
| At 31 December 2008 | 2,404,350 |
| AMORTISATION | |
| At 1 January 2007 | - |
| Charge for the period | - |
|
| |
| At 1 January 2008 | - |
| Charge for the period | 253,935 |
|
| |
| At 31 December 2008 | 253,935 |
| CARRYING AMOUNT | |
| At 31 December 2008 | 2,150,415 |
| At 31 December 2007 | 2,274,636 |
The intangible assets include certain intellectual property assets which were acquired on 20 December 2007 in a transaction between Amphion Innovations plc, DataTern, Inc. ("DataTern"), a wholly owned subsidiary of Amphion Innovations plc, and FireStar Software Inc. ("FireStar"), a company in which Amphion Innovations plc holds an investment. The assets were purchased for the following consideration: discharge of debtor of US $415,000 and assumption by Amphion of certain third party payable totaling approximately US $1.8 million. As part of the purchase, US $1,565,278 of promissory notes of FireStar, held by Amphion were converted into FireStar stock. Under the terms of the purchase, FireStar retains an interest of 48.29% of any future distributions on the 502 Patent and 24.14% of any future distributions on the 402 and 077 Patents.
12. Property, plant and equipment
| Group | Company | ||
| Property, plant | Property, plant | ||
| and equipment | and equipment | ||
| COST | US $ | US $ | |
| At 1 January 2007 | 41,659 | 19,986 | |
| Additions | 10,059 | - | |
| At 1 January 2008 | 51,718 | 19,986 | |
| Additions | 4,173 | - | |
| At 31 December 2008 | 55,891 | 19,986 | |
| ACCUMULATED DEPRECIATION | |||
| At 1 January 2007 | 11,543 | 7,445 | |
| Charge for the period | 12,052 | 5,655 | |
| Exchange difference | (38) | - | |
| At 1 January 2008 | 23,557 | 13,100 | |
| Charge for the period | 11,836 | 4,489 | |
| Exchange difference | 772 | - | |
| At 31 December 2008 | 36,165 | 17,589 | |
| CARRYING AMOUNT | |||
| At 31 December 2008 | 19,726 | 2,397 | |
| At 31 December 2007 | 28,161 | 6,886 |
13. Investments in subsidiaries
Details of the Company's subsidiaries at 31 December 2008 and 2007 are as follows:
| Place of | Proportion | Proportion | ||||||
| incorporation | of | Of | ||||||
| Name of | (or registration) | ownership | Voting | |||||
| subsidiary | and operation | interest | power held | Principal activity | ||||
| % | % | |||||||
| Consolidated | ||||||||
| Amphion Innovations US Inc. | Delaware, USA | 100 | 100 | Advisory services | ||||
| Amphion Innovations UK Limited | England & Wales | 100 | 100 | Advisory services | ||||
| DataTern, Inc. | Texas, 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 2008 | 31 December 2008 | ||||||||||||||||
| Unrealised | Unrealised | ||||||||||||||||
| Fair Value | Cost | gain/(loss) | Fair Value | Cost | gain/(loss) | ||||||||||||
| US $ | US $ | US $ | US $ | US $ | US $ | ||||||||||||
| Public companies: | |||||||||||||||||
| AXCESS International Inc. | 1,612,931 | 3,447,794 | (1,834,863) | 1,612,931 | 3,447,794 | (1,834,863) | |||||||||||
| Private companies: | |||||||||||||||||
| FireStar Software, Inc. | 4,721,447 | 4,941,783 | (220,336) | 4,721,447 | 4,941,783 | (220,336) | |||||||||||
| Kromek | 14,370,477 | 3,274,915 | 11,095,562 | 14,370,477 | 3,274,915 | 11,095,562 | |||||||||||
| Motif BioSciences, Inc. | 15,402,879 | 8,085,625 | 7,317,254 | 15,402,879 | 8,085,625 | 7,317,254 | |||||||||||
| MSA Holding B.S.C. | 1,474,905 | 1,500,000 | (25,095) | 1,474,905 | 1,500,000 | (25,095) | |||||||||||
| m2m Imaging Corp. | 6,642,861 | 2,172,453 | 4,470,408 | 6,010,085 | 2,118,685 | 3,891,400 | |||||||||||
| Myconostica Ltd. | 4,216,206 | 2,745,331 | 1,470,875 | 4,216,206 | 2,745,331 | 1,470,875 | |||||||||||
| PrivateMarkets, Inc. | 3,918,673 | 2,673,673 | 1,245,000 | 3,918,673 | 2,673,673 | 1,245,000 | |||||||||||
| WellGen, Inc. | 6,669,553 | 4,814,936 | 1,854,617 | 6,669,553 | 4,814,936 | 1,854,617 | |||||||||||
| 59,029,932 | 33,656,510 | 25,373,422 | 58,397,156 | 33,602,742 | 24,794,414 | ||||||||||||
| Group | Company | ||||||||||||||||
| 31 December 2008 | 31 December 2008 | ||||||||||||||||
| Fair Value | Cost | Unrealised | Fair Value | Cost | Unrealised | ||||||||||||
| US $ | US $ | US $ | US $ | US $ | US $ | ||||||||||||
| Shares | 43,540,862 | 22,969,181 | 20,571,681 | 43,540,862 | 22,969,181 | 20,571,681 | |||||||||||
| Promissory notes | 6,780,602 | 6,780,602 | - | 6,780,602 | 6,780,602 | - | |||||||||||
| Warrants & options | 8,708,468 | 3,906,727 | 4,801,741 | 8,075,692 | 3,852,959 | 4,222,733 | |||||||||||
| 59,029,932 | 33,656,510 | 25,373,422 | 58,397,156 | 33,602,742 | 24,794,414 | ||||||||||||
14. Investments, (continued)
| 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 | 6,805,169 | |||||||||||
| Energy 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 | 7,326,967 | |||||||||||
| MSA Holding B.S.C. | 2,929,468 | 1,500,000 | 1,429,468 | 2,929,468 | 1,500,000 | 1,429,468 | |||||||||||
| m2m Imaging Corp. | 4,015,826 | 1,636,268 | 2,379,558 | 3,684,550 | 1,582,500 | 2,102,050 | |||||||||||
| Myconostica Ltd. | 5,847,695 | 2,745,331 | 3,102,364 | 5,847,695 | 2,745,331 | 3,102,364 | |||||||||||
| WellGen, 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 | 19,428,339 | |||||||||||
| Promissory 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 | ||||||||||||
Fair value determination
At 31 December 2008 the one publicly traded company, AXCESS International Inc. ("AXCESS"), is valued based on its last quoted closing prices. In regard to the Group's valuation of AXCESS, the Directors have assumed an orderly sale of the stock over an extended period of time and have therefore chosen not to apply a discount to the quoted market price. Equity investments in Kromek (formerly Durham Scientific Crystals, Ltd.), FireStar Software, Inc., Motif BioSciences, Inc., m2m Imaging Corp., Myconostica Ltd., PrivateMarkets Inc. (formerly Energy Trading International, Inc.) and WellGen, Inc. are valued using the latest offering price from recently executed financing transactions by those companies. The prices used are as follows: for Kromek £8.00 from Dec 2008; for FireStar Software, Inc. US $7.00 from August 2006; for Motif BioSciences, Inc. $3.00 from April 2007; m2m Imaging Corp US $7.00 from May 2008; for Myconostica Ltd £40.00 from May 2008; for PrivateMarkets Inc. $1.00 from March 2008; and for WellGen, Inc. $2.50 from October 2007. Convertible promissory notes held in these companies are valued at cost. The value of MSA Holding B.S.C. is based on the value of its net assets at 31 December 2008. Warrants for all companies are valued at the valuation price less the warrant exercise price plus a factor for the time value of the warrant. The time value factor is based on the premise that an in-the-money ten year warrant is worth half the exercise price.
At 31 December 2008, MSA Holding B.S.C. owned 2,626,467 of the ordinary shares of Amphion Innovations plc.
14. Investments, (continued)
The Group's ownership percentages of the investments are as follows:
| 2008 | 2007 | |||||
| Fully-diluted | Fully-diluted | |||||
| Country of incorporation | ownership % | ownership % | ||||
| AXCESS International, Inc. | United States of America | 7.83 | 7.47 | |||
| FireStar Software, Inc. | United States of America | 15.32 | 16.21 | |||
| Kromek (formerly Durham Scientifc Crystals) | England & Wales | 20.78 | 25.32 | |||
| Motif BioSciences, Inc. | United States of America | 39.11 | 37.69 | |||
| MSA Holding B.S.C. | Kingdom of Bahrain | 50.00 | 50.00 | |||
| m2m Imaging Corporation | United States of America | 24.36 | 23.53 | |||
| Myconostica Ltd | England & Wales | 22.89 | 35.70 | |||
| PrivateMarkets, Inc. (formerly Energy Trading) | United States of America | 27.75 | 13.06 | |||
| WellGen, Inc. | United States of America | 15.05 | 15.01 |
15. Other financial assets and liabilities
The carrying amounts of the Group's financial assets and financial liabilities at the balance sheet date are as follows. The accounting policies described in note 2 explain how the various categories of financial instruments are measured.
| Group | Company | ||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||
| 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 assets | |||||||||
| Fair value through profit or loss | |||||||||
| Fixed asset investments - designated | |||||||||
| as such upon initial recognition | 59,029,932 | 59,029,932 | 51,642,725 | 51,642,725 | 58,397,156 | 58,397,156 | 51,311,449 | 51,311,449 | |
| Currents assets | |||||||||
| Loans and receivables | |||||||||
| Security deposit | 121,694 | 121,694 | 121,694 | 121,694 | 121,694 | 121,694 | 121,694 | 121,694 | |
| Prepaid expenses and other | |||||||||
| receivables | 1,566,911 | 1,566,911 | 639,429 | 639,429 | 1,748,986 | 1,748,986 | 379,580 | 379,580 | |
| Cash and cash equivalents | 630,404 | 630,404 | 4,594,007 | 4,594,007 | 538,018 | 538,018 | 4,480,257 | 4,480,257 | |
| Financial liabilities | |||||||||
| Amortised cost | |||||||||
| Trade and other payables | 3,093,518 | 3,093,518 | 2,469,742 | 2,469,742 | 665,719 | 655,719 | 588,049 | 588,049 | |
The carrying value of cash and cash equivalents, the security deposit, prepaid expenses and other receivables, and trade and other payables approximate their fair value at 31 December 2008 and 2007.
At the balance sheet date other receivables includes subscriptions receivable of US $534,036 (2007: US $234,536). The Directors consider that the carrying value of 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 its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties, as a means of mitigating the risk of financial loss from defaults.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The maximum exposure to credit risk for the financial asset investments designated at fair value through the profit and loss is represented by their carrying value.
The Group's exposure to counterparty credit risk also arises from balances from partner companie's relating to fees charged for services provided by Amphion. Amphion seeks to mitigate the risk noted above through its philosophy of working with a small number of rigorously selected Partner Companies, assisting them to grow by implementing a consistent and proven methodology developed over the management team's 20 years of company building experience. The Group's time tested model of company creation is built on a robust risk management process that relies on proven, defensible intellectual property sourced from some of the world's leading corporations and universities.
Included in the Group's other receivables are debtors which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the Group believes that the amounts are still considered recoverable. The Group does not hold any collateral over these balances.
The following table is an analysis of the age of financial assets:
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 | |
| US$ | US$ | US$ | US$ | US$ | |
| 2008 | |||||
| Fees receivable | - | 141,500 | 315,000 | 185,000 | 641,500 |
| Rebillable expenses | - | 23,141 | 20,408 | 4,135 | 47,684 |
| Subscription receivable | 499,500 | - | - | - | 499,500 |
| Other receivables | 273,304 | 19,620 | 10,000 | 34,536 | 337,460 |
| Prepaid expenses | 40,767 | - | - | - | 40,767 |
| 813,571 | 184,261 | 345,408 | 223,671 | 1,566,911 | |
| 2007 | |||||
| Fees receivable | - | 136,569 | 69,000 | - | 205,569 |
| Rebillable expenses | - | 8,550 | 21,008 | - | 29,558 |
| Other receivables | 110,479 | - | 234,536 | - | 345,015 |
| Prepaid expenses | 59,287 | - | - | - | 59,287 |
| 169,766 | 145,119 | 324,544 | - | 639,429 |
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 year | 1 year | Total | |
| US$ | US$ | US$ | US$ | US$ | |
| 2008 | |||||
| Fees receivable | - | - | - | - | - |
| Rebillable expenses | - | 9,284 | - | - | 9,284 |
| Due from subsidiaries | 883,658 | - | - | - | 883,658 |
| Other receivables | 790,563 | - | - | 34,536 | 825,099 |
| Prepaid expenses | 30,945 | - | - | - | 30,945 |
| 1,705,166 | 9,284 | - | 34,536 | 1,748,986 | |
| 2007 | |||||
| Fees receivable | - | - | - | - | - |
| Rebillable expenses | - | 4,552 | - | - | 4,552 |
| Other receivables | 89,493 | - | 234,536 | - | 324,029 |
| Prepaid expenses | 50,999 | - | - | - | 50,999 |
| 140,492 | 4,552 | 234,536 | - | 379,580 | |
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The principal risk to which the Group is exposed is liquidity risk.
Amphion's investments are in Partner Companies that are often development stage companies and will likely experience significant negative cash flow. The Partner Companies may be unable to obtain financing to fund their negative cash flows due 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 to provide additional investment to the Partner Company. Amphion may also be required to spend additional management time on these companies.
Adverse market conditions may also delay liquidity events for the Partner Companies, thereby requiring additional rounds of financing in which Amphion may feel it necessary to participate. During these adverse market conditions Amphion may also find it difficult to raise additional capital.
Amphion seeks to mitigate the risk noted above through its philosophy of working with a small number of rigorously selected Partner Companies, assisting them to grow by implementing a consistent and proven methodology developed over the management team's 20 years of company building experience. The Group's time tested model of company creation is built on a robust risk management process that relies on proven, defensible intellectual property sourced from some of the world's leading corporations and universities.
15. Other financial assets and liabilities, (continued)
The following table is a maturity analysis that shows the remaining contractual maturity for the Group's financial liabilities.
| Group | |||||
| Less than | 1-3 | 3 months | Over | ||
| 1 month | months | to 1 year | 1 year | Total | |
| 2008 | |||||
| Trade payables & other payables | 443,738 | 219,674 | 1,289,367 | 1,140,739 | 3,093,518 |
| Convertible promissory notes | 3,279,950 | - | - | - | 3,279,950 |
| 2007 | |||||
| Trade payables & other payables | 2,181,003 | 99,796 | 188,943 | - | 2,469,742 |
| Company | |||||
| Less than | 1-3 | 3 months | Over | ||
| 1 month | months | to 1 year | 1 year | Total | |
| 2008 | |||||
| Trade payables & other payables | 282,196 | 119,640 | 236,251 | 27,632 | 665,719 |
| Convertible promissory notes | 3,279,950 | - | - | - | 3,279,950 |
| 2007 | |||||
| Trade payables & other payables | 193,264 | 223,391 | 171,394 | - | 588,049 |
The 2008 payables include US $1,104,409 (2007: US $1,734,393) of payables assumed from FireStar Software, 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 other market conditions will have an adverse impact on the Group's financial position or results. Thus market risk comprises three elements - foreign currency risk, interest rate risk, and other price risk. Information to enable an evaluation of the 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 working with a small number of rigorously selected Partner Companies, assisting them to grow by implementing a consistent and proven methodology developed over the management team's 20 years of company building experience. The Group's time tested model of company creation is built on a robust risk management process that relies on proven, defensible intellectual property sourced from some of the world'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 exposures are managed by minimising the balance of foreign currencies to cover expected cash flows during periods where there is strengthening in the value of the foreign currency. The Group has two UK Partner Companies which are denominated in GBP. The valuations of these two companies fluctuate along with the US dollar/Sterling exchange rate. No Hedging of this risk is undertaken.
15. Other financial assets and liabilities, (continued)
The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:
| Group | Company | ||||||||||
| Liabilities | Assets | Liabilities | Assets | ||||||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||
| US$ | US$ | US$ | US$ | US$ | US$ | US$ | US$ | ||||
| Sterling - Cash equivalent | 32,081 | 23,700 | 502,407 | 1,175,621 | - | - | 499,264 | 1,175,621 | |||
| Sterling - Investment | - | - | 18,586,683 | 15,536,921 | - | - | 18,586,683 | 15,536,921 | |||
A 10% strengthening of the US dollar against the British pound sterling at the reporting date would have increased profit or loss by approximately US $1,906,000 (2007: US $835,000). A 10% weakening of the US dollar against the British pound sterling would have decreased profit or loss of the Group by approximately US $1,906,000 (2007: US $835,000). A 10% strengthening of the US dollar against the British pound sterling at the reporting date would have increased profit or loss of the Company by approximately US $1,909,000 (2007: US $835,000). A 10% weakening of the US dollar against the British pound sterling would have decreased profit or loss of the Company by approximately US $1,909,000 (2007: US $835,000). The GBP/USD rate used at 31 December 2008 was 1.4619 (2007: 1.9843). In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the sensitivity analysis is based on balances at the end of the year and does not reflect the exposure during the year.
Interest Rate Risk
The Group's exposure to interest rate risk is restricted to the cash and cash equivalent balance of US $630,404 (US $4,594,007 in 2007). At 31 December 2008, the Group maintains interest bearing accounts with a corporate bank at variable rates. The average monthly rate for 2008 was approximately 3% (2007: 4%). An increase of 100 basis points in interest rates would have increased profit or loss of the Group by US $10,000 (2007: US $17,000). A decrease of 100 basis points in interest rates would have decreased profit or loss of the Group by US $10,000 (2007: US $17,000). An increase of 100 basis points in interest rates would have increased profit or loss of the Company by $10,000 (2007: US $17,000). A decrease of 100 basis points in interest rates would have decreased profit or loss of the Company by US $10,000 (2007: US $17,000). The Group manages its exposure to interest rate risk by managing its cash balances and deposits to maximize its return while ensuring the Group has sufficient available cash to meet its needs. The Group does not enter into interest rate derivatives.
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. The Group does not actively trade these investments.
At the reporting date, the potential effect of using reasonably possible alternative assumptions as inputs to valuation techniques from which the fair values of the investments are determined would be an approximate decrease of US $8.8 million (2007: US $7.6 million) to profit or loss of the Group and the Company using less favorable assumptions. Due to the current economic environment, the Group and Company are not using possible favorable assumptions for 2008. The effect of using reasonably possible alternative assumptions using more favorable assumptions for 2007 results in an increase of approximately US $12 million. The more favorable assumptions used in 2007 were an increase in price of 33% to 54%. The less favorable assumptions used were a reduction in price of 10% to 15% (2007: 10% to 15%). The determination of reasonably possible alternative assumptions is subject to considerable judgment.
The amounts generated from the sensitivity analysis are estimates of the impact of market risk assuming that specified changes occur. Actual results in the future may differ materially from these results due to developments in the global financial markets which may cause exchange rates to vary from the hypothetical amounts disclosed above, which therefore should not be considered a projection of likely future events and losses.
16. Trade and other payables
Group
Trade and other payables principally comprise amounts outstanding for purchases and ongoing costs. Other payables include US $1,104,409 of debt relating to DataTern, Inc. assumed as part of the Asset Purchase Agreement with FireStar Software Inc. in 2007.
Company
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
17. Convertible promissory notes
The convertible promissory notes were issued on 30 December 2008. The notes are convertible into ordinary shares of the Company at any time prior to 31 December 2013 at a conversion price of eighteen pence per ordinary share. In the event that the closing market price of the ordinary shares is equal to or greater than 25 pence per ordinary share for 25 consecutive trading dates at any time prior to 31 December 2013, the notes will automatically be converted into fully paid ordinary shares.
Richard C.E. Morgan, Chief Executive Officer, has subscribed for £900,000 of the convertible promissory notes.
If the notes have not been converted, they will be repaid on 31 December 2013. Interest of 7 per cent will be paid quarterly until the date of repayment.
For each note issued, the Company also issued 1.11 warrants. Each warrant will entitle the holder to subscribe for one ordinary share at 20 pence per ordinary share.
The net proceeds received from the issue of the convertible promissory notes are classified as a financial liability due to the fact that the notes are denominated in a currency other than the Company's functional currency.
18. Share capital
| 2008 | 2007 | ||
| £ | £ | ||
| Authorised: | |||
| 150,000,000 ordinary shares of 1p each | 1,500,000 | 1,500,000 |
| Number | £ | US $ | |||
| 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 | 6,278 | ||
| Ordinary shares of 1p each | 9,690,000 | 96,900 | 194,411 | ||
| Ordinary 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 | ||
| Issued for cash: | |||||
| Ordinary shares of 1p each | 246,603 | 2,466 | 4,884 | ||
| Ordinary shares of 1p each | 521,897 | 5,219 | 10,320 | ||
| Ordinary shares of 1p each | 1,136,364 | 11,364 | 22,667 | ||
| Ordinary shares of 1p each | 81,780 | 818 | 1,528 | ||
| Ordinary shares of 1p each | 100,184 | 1,002 | 1,872 | ||
| Balance as at 31 December 2008 | 130,378,857 | 1,303,789 | 2,429,342 |
Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.
During the year ended 31 December 2008, the following changes occurred to the share capital of the Company:
On 2 January 2008, the Company issued 246,603 ordinary 1p shares at a premium of 20.5p per share (US $100,116) to directors in lieu of 2007 directors' fees.
On 1 April 2008, the Company issued 521,897 ordinary 1p shares at a premium of 21p per share (US $216,720) to employees as part of their incentive compensation and to directors in lieu of first quarter directors' fees.
On 4 April 2008, the Company issued 1,136,364 ordinary 1p shares at a premium of 21p per share (US $476,008) for cash.
On 16 September 2008, the Company issued 81,780 ordinary 1p shares at a premium of 20.5 per share (US $33,372) to directors in lieu of second quarter directors' fees.
On 16 September 2008, the Company issued 100,184 ordinary 1p shares at a premium of 18.75 per share (US $33,228) to directors in lieu of third quarter directors' fees.
19. Issue costs
The Company incurred costs of US $41,423 (2007: US $778,379) relating to the issue of shares. The costs were primarily for fees paid to agents. These equity transaction costs were deducted from equity in accordance with IAS 32, Financial Instruments Disclosure and Presentation.
20. Operating lease arrangements
At the balance sheet date, the Group has outstanding commitments under non-cancellable operating leases, which fall due as follows:
| 2008 | 2007 | |||
| US$ | US$ | |||
| Within one year | 327,500 | 351,654 | ||
| In the second to fifth years inclusive | 478,590 | 717,885 | ||
| After five years | - | - | ||
|
| ||||
| 806,090 | 1,069,539 |
Operating lease payments represent rentals payable by the Group for certain of its office properties. The term of the New York lease is seven years of which three years are remaining and the term of the UK lease is eight months ending on August 2009. The New York rental increases in 2009 and is fixed for an additional two years. The UK rental is fixed for 8 months. The Group recognised expenses of US $422,991 in respect of operating lease arrangements in the year ended 31 December 2008.
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 this plan, the Compensation Committee may grant share options to eligible employees, including Directors, to subscribe for ordinary shares of the Company. The number of Shares over which options may be granted under the Unapproved Plan cannot exceed ten percent of the ordinary share capital of the Company in issue on a fully diluted basis. The Plan will be administered by the Compensation Committee. The number of shares, terms, performance targets, and exercise period will be determined by the Compensation Committee.
As of 31 December 2008, a total of 10,170,536 options have been issued (2007: total of 10,136,445) of which 8,500,000 options were issued under the "2006 Unapproved Share Option Plan (2007: 8,500,000) and 625,000 options have been forfeited.
The options issued under the Plan have a four year vesting period in addition to being subject to performance criteria and at 31 December 2008, 2,690,112 of these options were vested (2007: 639,906).
As of 31 December 2008, a balance of 2,295,536 options not in the Plan have been issued (2007: 2,261,445) and at 31 December 2008, 1,612,207 of these options were vested (2007: 1,378,112). These options expire after five years from the date of grant. Of these options, 34,091 options were issued fully vested in 2008 (2007: 553,720 were fully vested when issued).
| 2008 | 2007 | ||||||
| Number of | Weighted | Number of | Weighted | ||||
| Share options | average | share options | average | ||||
| exercise | exercise | ||||||
| price (in £) | price (in £) | ||||||
| Outstanding at beginning of period | 10,136,445 | 0.23 | 1,357,725 | 0.25 | |||
| Granted during the period | 34,091 | 0.22 | 9,403,720 | 0.23 | |||
| Forfeited during the period | - | - | (625,000) | 0.25 | |||
| Outstanding at the end of the period | 10,170,536 | 0.23 | 10,136,445 | 0.23 | |||
| Exercisable at the end of the period | 4,302,317 | 0.23 | 2,018,018 | 0.23 | |||
21. Share-based payments, (continued)
The options are recorded at fair value on the date of grant using the Black-Scholes model. The inputs into the model are as follows:
| 2008 | 2007 | ||
| US$ | US$ | ||
| Weighted average share price | 0.48 | 0.46 | |
| Weighted average exercise price | 0.44 | 0.46 | |
| Expected volatility | 39% | 37% | |
| Expected life | 5 years | 5-14 years | |
| Risk free rate | 3.49% | 3.49%-5.25% | |
| Expected dividends | - | - |
Expected volatility was determined by calculating the historical volatility of the Group's share price from the date of listing to the end of the year.
In 2008, options were granted on 4 April. The aggregate of the estimated fair value of the options granted on that date was $6,965. In 2007, options were granted on 12 January, 26 March, 1 May, 29 June, 13 September, and 9 November. The aggregate of the estimated fair values of the options granted on those dates is US $2,797,289.
The Company and Group recognised total costs of US $701,195 and US $256,656 relating to equity-settled share-based payment transactions in 2008 and 2007 respectively. In 2008, US $6,965 of the total costs were charged against equity as the share-based payments were directly attributable to the issue of the equity instruments. The remaining US $694,230 was expensed in the income statement during the period.
22. Retirement benefit plans
The Company established a defined contribution plan under Section 401(k) of the Internal Revenue Code. The plan enables qualified employees to reduce their taxable income by contributing up to 15% of their salary to the plan. The Company may elect to make a matching contribution to the plan. The Company has elected not to make a contribution for the years ended 31 December 2008 or 2007.
The UK subsidiary has a defined contribution pension scheme. The total pension expense recognised in the income statement of US $26,715 (2007: US $28,826) represents contributions paid by this company to the plan.
23. Events after the balance sheet date
In January and February 2009, the Company made advances of US $199,000 under a promissory note from Motif BioSciences, Inc.
In January and February 2009, the Company made advances of US $220,000 under a promissory note from m2m Imaging Corporation.
In February 2009, the Company made advances of US $80,000 under a promissory note from AXCESS International, Inc.
In January and February 2009, the Company made advances of US $351,000 under a promissory note from PrivateMarkets Inc.
On 30 January 2009, Amphion Innovations PLC and DataTern Inc filed a lawsuit against one of DataTern Inc.'s attorneys claiming damages as a result of the mismanagement of a patent enforcement case.
In February 2009, a former employee of Suvani, Inc. filed a lawsuit against Amphion Innovations US Inc. and an Amphion Innovations PLC Director for breach of his employment contract.
In February 2009, a former employee of Amphion Innovations US Inc. filed a claim with the Central London Employment Tribunal for unfair dismissal.
24. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
During the year, the Group paid miscellaneous expenses for Motif BioSciences, Inc. ("Motif") such as office expenses. Motif paid miscellaneous expenses relating to the Kuwait activity for the Company. At 31 December 2008, the net amount owed by the Group to Motif is US $39,158. At 31 December 2007, the amount owed by Motif to the Group was US $19,956.
Amphion Innovations US Inc., a subsidiary of the Company, has entered into an agreement with AXCESS International Inc. ("AXCESS") to provide advisory services. Richard Morgan and Robert Bertoldi, Directors of the Company, are also Directors of AXCESS. Amphion Innovations US Inc. will receive a monthly fee of US $10,000 pursuant to this agreement. The agreement is effective until 1 March 2009 and will renew on an annual basis until terminated by one of the parties. The monthly fee is suspended for any month in which AXCESS' cash balance falls below US $500,000. Amphion Innovations US Inc. received US $20,000 for the year ended 31 December 2008 (2007: US $100,000).
Amphion Innovations US Inc. has entered into an agreement with Kromek (formerly Durham Scientific Crystals Ltd) to provide advisory and consulting services. Richard Morgan, a Director of the Company, is also a Director of Kromek. The monthly fee under this agreement is the lesser of US $10,000 and 50% of the gross compensation paid to Directors and management of Kromek in that month. The agreement renews annually unless terminted by one of the parties. The subsidiary's fee for the year ended 31 December 2008 was US $120,000 (2007: US $120,000). Amphion Innovations US Inc. also received US $113,876 as a fund raising fee for the year ended 31 December 2008 (2007: US $225,688).
Amphion Innovations US Inc. has entered into an agreement with FireStar Software Inc. ("FireStar") to provide advisory and consulting services. Richard Morgan, a Director of the Company, is also a Director of FireStar. The annual fee under this agreement is US $120,000 and expires 1 January 2010 unless renewed by the mutual consent of both parties. The fee for the year ended 31 December 2008 and 2007 was suspended and not recognised.
Amphion Innovations US Inc. has entered into an agreement with Motif BioSciences, Inc. ("Motif") to provide advisory and consulting services. Richard Morgan, a Director of the Company, is also a Director of Motif. The annual fee for the services is US $240,000. The agreement is effective until 1 April 2009 and shall automatically renew for successive one year periods. Amphion Innovations US Inc.'s fee for the period ended 31 December 2008 was US $240,000 (2007: US $282,000). At 31 December 2008, US $360,000 of the advisory fee is due from Motif (2007: US $120,000).
Amphion Innovations US Inc. has entered into an agreement with Myconostica Limited ("Myconostica") to provide advisory and consulting services. Richard Morgan, a Director of the Company, is also a Director of Myconostica. The monthly fee for the services is £4,500 and renews annually unless terminated by one of the parties. An additional £2,250 per month was charged starting 1 November 2007 until November 2008 while Jerel Whittingham was acting CEO of Myconostica. The subsidiary's fee for the year ended 31 December 2008 is £77,063 or US $141,030 (2007: £58,500 or US $114,715) of which US $6,500 (2007: US $44,894) was still due at 31 December 2008. Amphion Innovations US Inc. also received US $158,637 as a fund raising fee for the year ended 31 December 2008 (2007: nil).
Amphion Innovations US Inc. has entered into an agreement with m2m Imaging Corp. ("m2m") to provide advisory and consulting services. Robert Bertoldi, a Director of the Company, is also a Director of m2m. The monthly fee under this agreement is US $15,000. This agreement renews on an annual basis until terminated by either party. Amphion Innovations US Inc.'s fee for the period ended 31 December 2008 was US $180,000 (2007: US $180,000) of which US $90,000 is due at 31 December 2008 (2007: nil). Amphion Innovations US Inc. also received US $130,000 as a fund raising fee for the year ended 31 December 2008 (2007: nil).
Amphion Innovations US Inc. has entered into an agreement with WellGen Inc. ("WellGen") to provide advisory and consulting services. Richard Morgan and Robert Bertoldi, Directors of the Company, are also Directors of WellGen. The fee is under this agreement is US $60,000 per quarter. The agreement renews annually until terminated by either party. The subsidiary's fee for the year ended 31 December 2008 was US $240,000 (2007: US $210,000).
Amphion Innovations US Inc. has entered into an agreement with PrivateMarkets Inc. ("PMI") (formerly Energy Trading Inc.) to provide advisory services. Richard Morgan, a Director of the Company, is also a Director of PMI. The fee under this agreement is 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 least US $3,000,000 and thereafter, US $45,000 per quarter. This agreement is effective will renew annually unless terminated by either party. The subsidiary's fee for the year ended 31 December 2008 was US $185,000 which is due at 31 December 2008. Amphion Innovations US Inc. also received US $109,450 as a fund
24. Related party transactions, (continued)
raising fee for the year ended 31 December 2008. The fee for 2007 was deferred and not recognised until PMI had a successful financing.
Amphion Innovations US Inc. has entered into an agreement with DataTern Inc. ("DataTern") (a wholly owned subsidiary of the Company) to provide advisory and consulting services. Richard C.E. Morgan and Robert J. Bertoldi, Directors of the Company, are also Directors of DataTern. The quarterly fee under this agreement is US $60,000 and renews annually unless terminated by either party. The subsidiary's fee for the year ended 31 December 2008 is US $240,000.
Directors' interests
The Directors' direct ownership in the Partner Companies is as follows:
| Fully diluted % | ||||
| Investment company | owned by Directors | |||
| 2008 | 2007 | |||
| AXCESS International Inc. | 7.24% | 5.45% | ||
| FireStar Software, Inc. | 1.62% | 1.48% | ||
| Kromek | 1.66% | 1.20% | ||
| Motif BioSciences, Inc. | 3.81% | 3.91% | ||
| Myconostica Limited | 0.34% | 0.26% | ||
| PrivateMarkets Inc. | 3.01% | - | ||
| WellGen, Inc. | 4.59% | 4.57% | ||
The Directors who held office at 31 December 2008 had the following interests in the Company's ordinary share capital:
| 2008 | 2007 | |||
| Ordinary | Ordinary | |||
| Shares | Shares | |||
| Richard M. Mansell-Jones | 2,693,774 | 2,398,163 | ||
| Richard C.E. Morgan | 21,698,211 | 20,734,155 | ||
| Robert J. Bertoldi | 5,674,844 | 5,643,237 | ||
| R. James Macaleer | 19,917,054 | 19,769,248 | ||
| Anthony W. Henfrey | 904,352 | 858,861 |
Aggregate Directors' remuneration
The total amounts for Directors' remuneration was as follows:
| Year ended | Year ended | ||
| 31 December 2008 | 31 December 2007 | ||
| US$ | US$ | ||
| Emoluments | 1,093,775 | 988,163 |
24. Related party transactions, (continued)
Directors' emoluments and compensation
| Group | Group | Group | Year ended | Year ended | |||||
| Fees/Basic | Benefits in | Annual | 31 December | 31 December | |||||
| salary | kind | bonuses | 2008 total | 2007 total | |||||
| US$ | US$ | US$ | US$ | US$ | |||||
| Name of Director | |||||||||
| Executive - salary | |||||||||
| Richard C.E. Morgan | 350,000 | 14,343 | 164,900 | 529,243 | 474,034 | ||||
| Robert J. Bertoldi | 300,000 | 19,322 | 85,210 | 404,532 | 354,129 | ||||
| Non-executive - fees | |||||||||
| Richard M. Mansell-Jones | 70,000 | - | - | 70,000 | 70,000 | ||||
| R. James Macaleer | 35,000 | - | - | 35,000 | 35,000 | ||||
| Anthony W. Henfrey | 35,000 | - | - | 35,000 | 35,000 | ||||
| Ronald E. Thomas | 20,000 | - | - | 20,000 | 20,000 | ||||
| Aggregate emoluments | 810,000 | 33,665 | 250,110 | 1,093,775 | 988,163 |
The annual bonuses were issued in cash and shares of the Company.
Directors' share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the company granted to or held by the Directors. Details of options for Directors who served during the year are as follows:
| Date from | |||||||||||||||
| Name of | 1 January | 31 December | Exercise | which | Expiry | ||||||||||
| Director | Scheme | 2008 | Granted | 2008 | price | exercisable | date | ||||||||
| Richard Morgan | 2006 Unapproved Share Option Plan | 2,000,000 | - | 2,000,000 | £0.23 | 1 July 2011 | 30 June 2021 | ||||||||
| Robert Bertoldi | 2006 Unapproved Share Option Plan | 1,250,000 | - | 1,250,000 | £0.23 | 1 July 2011 | 30 June 2021 | ||||||||
| 3,250,000 | 3,250,000 | ||||||||||||||
Notice
The financial information set out above does not constitute the group's statutory accounts for the year ended 31 December 2008, but is derived from those accounts. Statutory accounts for the year ended 31 December 2008 will be delivered to the Registrar of Companies following the Company's annual general meeting. The auditors have reported on those accounts and their report was unqualified, but did draw attention to matters by way of emphasis relating to significant uncertainty in respect of going concern and valuation of investments without qualifying their report and did not contain statements under s. 15(4) or (6) Companies Act 1982 of the Isle of Man.
Approval
This statement was approved by the Board of Directors on 13 March 2009.
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: Amphion Innovations plc, Attn: Investor Relations, 330 Madison Avenue, New York, NY 10017, USA.