AMP.L Regulatory News (AMP)

29 September 2017

AMPHION INNOVATIONS PLC

("Amphion" or the "Company")

Interim results for the six months to 30 June 2017

London and New York, 29 September 2017 - Amphion Innovations plc (AIM: AMP), the developer of medical, life science, and technology businesses, announces its audited results for the six months to 30 June 2017.

Financial Results

· Net Asset Value ("NAV") per share was -1p (US -$0.02 cents)* at Period-end from -2.4p (US -$0.03 cents) as at year end. This increase was due almost entirely to the movement in value of the Motif Bio plc share price

Highlights

Amphion

· Sold the Company's remaining holding of Kromek Group plc

· Richard Morgan and Robert Bertoldi, Directors of the Company, entered into a Deed of Postponement where they agreed to postpone the repayment of the amounts owed to them, which total US $4.3 million, until all other debts of the Company are repaid

Motif Bio

· In January, Motif Bio completed treatment of patients in its Phase III trial (REVIVE-1) for its product candidate iclaprim

· In April, Motif Bio released data readout from REVIVE-1, showing iclaprim to be well tolerated and met the non-inferiority margin mandated by the FDA

Polarean

· In May, m2m Imaging Corp. and Polarean Inc. merged to create Polarean Imaging Limited, a clinical-stage, revenue generating, medical imaging product company, in a cash and share merger

· Also in May, Polarean Imaging Limited announces the closing of its Pre-IPO financing of US $2.0 million

Post Period Events

· Sold a total of 6,090,000 shares of Motif Bio in repayment of the Loan Facility previously announced

on 5 June 2014, reducing the loan balance from US $6,149,013 at 30 June to US $4,289,407

· Finalised an agreement with the Loan Facility provider that no more shares of Motif Bio will be sold

until 15 January 2018

· Motif Bio announced that the FDA granted iclaprim Orphan Drug Designation for the treatment of Staphylococcus aureus lung infections in patients with cystic fibrosis

· Motif Bio completed treatment of patients in its REVIVE-2 Phase III trial for its product candidate, iclaprim

· The net improvement in our NAV as the result of the appreciation in the Motif Bio shares and exchange rate, net of the last three months operations is US $1.2 million

*Exchange rate at 30 June 2017 - US $1.2995 per GBP

Richard Morgan, CEO of Amphion Innovations plc, commented:  "We were very pleased to see the announcement of the Orphan Designation for Cystic Fibrosis for Motif Bio's iclaprim as well as the recent recovery in the Motif Bio share price. The value of Motif has a significant and proportional effect on the Net Asset Value of Amphion. We are focused on retaining as much of our Motif Bio shares as possible other than what is absolutely necessary to meet the required repayments on Amphion's Loan Facility. Following the long overdue improvement in the Motif Bio share price and the repayments on the Loan Facility, we were quickly able to conclude an agreement with the Lender to postpone further repayments on the loan until January 2018, thus giving us more time to replace the current loan with one that has a longer repayment terms.

We have also made good progress in the preparations to take Polarean through an IPO on AIM. Our confidence in the future prospects for Polarean has only increased as we have engaged in the due diligence required to complete the IPO process. We believe hyperpolarised Xenon could become an accepted and well regarded diagnostic and monitoring tool for clinicians treating pulmonary conditions and for companies developing drugs to treat these conditions, which are widespread and growing around the world. Progress has also been made in moving most of our other assets forward and we believe that in due course they will also do well, given our continued support."

This announcement contains insider information for the purposes of Article 7 of Regulatory (EU) No596/2014.

  For further information please contact:

About Amphion Innovations plc - www.amphionplc.com

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

Chief Executive Officer's Statement

Partner Company Summaries

Motif Bio

The data from Motif's Phase III REVIVE-1 clinical trial support our belief that its lead antibiotic, iclaprim, is safe and effective. In August, Motif announced that the last patient completed the treatment phase in REVIVE-2, the second Phase III clinical trial investigating the safety and efficacy of iclaprim in patients with Acute Bacterial Skin and Skin Structure Infections (ABSSSI). Data from REVIVE-2, which uses an identical protocol to REVIVE-1 but has different trial centres, are expected in the fourth quarter of 2017. We believe that the successful completion of these two pivotal Phase III trials satisfy both FDA and EMA requirements for regulatory submission for an IV formulation of iclaprim in the treatment of ABSSSI. The company remains on track to submit a New Drug Application in the first quarter of 2018 in the United States and a Marketing Authorisation Application in the first half of 2018 in Europe for iclaprim for the treatment of ABSSSI. Iclaprim has recently been granted Orphan Drug Designation by the FDA for the treatment of Staphylococcus aureus lung infections in patients with Cystic Fibrosis. This designation grants special status to a drug or biologic under development to treat a rare disease or condition and qualifies Motif for various development incentives including tax credits for qualified clinical testing, waiver of user fees, and potentially up to seven years of market exclusivity for the given indication.

Polarean Imaging

In May, m2m Imaging Corp. completed a merger with Polarean Inc. to form a new UK company, Polarean Imaging Limited. In addition to the merger, we successfully completed the pre-IPO placing which raised a total of US $2 million, giving the new company a fully diluted company valuation slightly over US $20 million. Amphion invested an additional US $400,000 in the pre-IPO, thereby maintaining our ownership position. We continue to work diligently on preparations for Polarean's IPO on AIM, which we are looking to close before the end of 2017. Polarean's technology enables the visualisation of hyperpolarised 129Xenon via magnetic resonance imaging technology. Polarean is a clinical stage, revenue generating medical imaging product company that expects to gain clinical approval for its drug/device combination product within three years. The protocol for the Phase III clinical trial has been agreed with the FDA and, if successful, should garner a broad clearance to market "for use in pulmonary medicine". Polarean is planning to hold the trial at two sites, each of which already has at least one polariser, namely Duke University and the University of Virginia. The company expects to start the clinical trial at the beginning of 2018. Polarean continues to sell its polariser units and consumables to leading research institutions and plans to continue do so while the Phase III clinical trial is underway.

WellGen

Since year end, WellGen has signed a license agreement with Rutgers University and is currently working on a sub-licensing agreement with its joint venture partner, a US-based sports beverage company. The joint venture has developed WorkOut TeaTM, the first true performance tea on the market. The functional beverage market has been expanding rapidly in recent years and we believe that WorkOut Tea's clinically tested and proven benefits should help it stand out from the crowd. WellGen is focused on the success of this functional beverage as we continue to explore distribution channels in the mid-west of the United States, with the possibility of expanding to other US markets and beyond. WellGen's proprietary Black Tea Extract is scientifically derived and the clinical trial demonstrated improved performance and recovery benefits such as a reduction in muscle soreness and reduced recovery time.

FireStar Software

The EdgeNodeTM platform on which FireStar's new product is based is a novel architecture that is protected by six patents. FireStar has spent the last several years developing a product which is aimed at the sponsors of outsourced clinical trials (such as Motif Bio). The product, called Clinicon©, uses EdgeNode's patented messaging capability to allow sponsors to monitor the huge amount of diverse data flows generated in clinical trials and facilitate early and decisive intervention if key performance indicators (such as enrollment or dosing) are drifting off track. At present, the sponsor is very much at the mercy of the Contract Research Organisation's ("CRO's") ability to collect and analyse the data from many different sources in many different locations and is usually only aware there may be a problem after a considerable delay, if at all while the trial is ongoing. Clinicon automates all those activities and puts the control back into the sponsor's hands, with little imposition on the CRO's existing data processing systems. We have been able to get valuable input and guidance from the Motif Bio team about their needs and concerns and this has helped to guide the design of the product to date. The next step is to demonstrate this capability with a prototype and then sign up with one or two beta sites to stress test the product.

Axcess continues to discuss litigation strategies and financing opportunities with several legal and litigation financing firms. Axcess has a rich portfolio of over a dozen patents in Micro-Wireless systems solutions for real time business activity monitoring and control. It is clear that many companies are now offering products or services that incorporate some of the basic wireless technology developed by Axcess over the last 15 years and a number of companies in the transportation, security, and other sectors appear to be infringing one or more of Axcess's patents. A lot of work has been done on the patent portfolio by us and our legal experts. This work has confirmed that we should be able to get companies using the technology to sign up for equitable licensing agreements.

DataTern's two patents (the '502 and '402 patents) are directed to how object-oriented software applications access data stored in relational databases. Such applications are widely used and most current databases are relational databases. We continue to believe that companies that are using or want to use DataTern's patented technology should enter into equitable licensing agreements. Both patents have successfully completed re-examinations by the United States Patent and Trademark Office with new claims added. Ultimately our confidence in the strength of the patents will be tested in the courts and in order to pursue these claims DataTern has been exploring alternative legal and financing opportunities.

Financial review

Revenue for the six-month period ended 30 June 2017 was US $153,000 compared with US $60,000 recorded in the first half of 2016. We have continued to control costs and the Board has continued to work with reduced levels of current cash compensation. Total administrative expenses were only slightly higher than last year and, as a result, the operating loss for the Period was US $1,599,817 compared with US $1,505,488 as reported in the same period of last year.

At 30 June 2017 the Company's unrealized gains on investments was US $4,277,373, mostly due to the increase in share price of Motif Bio. Total assets were US $27,260,681 and Net Asset Value per Share was US -$0.02 (up 33%) versus US -$0.03 at the end of last year. In pounds Sterling, NAV per Share was -1p at the end of the Period, up approximately 58% versus the year end figure of -2.4p.

On 15 May 2017 the Company entered into a Deed of Postponement with both Richard Morgan and Robert Bertoldi, Directors of the Company, where they agreed to postpone the repayment of the amounts owed to them, which total US $4.3 million, until all other debts of the Company are repaid.

Financial support for Amphion over the last few years has come, for the most part, from access to the Loan Facility first announced in June 2014. The Facility was granted by an institutional Lender, using the value of our publicly traded assets as security. As at 30 June 2017, the amount payable owed to the Lender was US $6,149,013. In the months following the reporting period the Company sold 6,090,000 shares of Motif Bio in repayment of the Facility, bringing the amount owed to US $4,289,407. The Company now has an agreement in place with the Lender that no additional shares of Motif Bio will be sold until January 2018. The Company is currently in negotiation with a number of finance providers to seek alternative longer term financing strategies. Support for Amphion has also come from the Management team, but with reduced prominence as prior years as the Company has managed to access the Loan Facility.

Outlook

We continue to believe that the successful completion of Motif's ABSSSI Phase III trials will satisfy both FDA and EMA requirements for regulatory submission for an IV formulation of iclaprim. With data from the REVIVE-2 trial expected in the fourth quarter of 2017, we look forward to Motif moving forward it its drug development of iclaprim as it prepares and submits the New Drug Application to the FDA. Our confidence in the future prospects for Polarean has only increased as we have engaged in the due diligence required to complete the IPO process. We believe their use of hyperpolarized Xenon gas in diagnostic and monitoring medical imaging will become a fundamental tool in the treatment of pulmonary conditions, which are widespread and growing around the world.

The outlook for Amphion depends increasingly on the value we can capture from our holdings in Motif and now Polarean as it proceeds down the path towards an IPO. We continue to support our other Partner Companies FireStar, Axcess, and WellGen and are excited about the prospects for each of them. As the other Partner Companies further develop, they will each become more important contributors to Amphion. We remain committed to seeing each of their programmes develop and succeed.

We continue to look for a replacement to our loan facility that extends the maturity and allows for the Company to hold on to its holding in Motif. We expect our ability to replace the loan facility and to access the equity markets will improve as Motif and Polarean continue to progress.

Richard Morgan

Chief Executive Officer

The notes are an integral part of these financial statements.

The notes are an integral part of these financial statements.

1. General information

The condensed consolidated interim financial statements for the six months ended 30 June 2017 are unaudited and do not constitute statutory accounts within the meaning of the Isle of Man Companies Act 2006. The statutory accounts of Amphion Innovations plc for the year ended 31 December 2016 have been filed with the Registrar of Companies and contain an unqualified audit report which includes an emphasis of matter relating to significant uncertainty in respect of going concern and valuation of Partner Company investments. Copies are available on the Company's website at www.amphionplc.com/reports.php.

2. Accounting policies

These condensed consolidated interim financial statements have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted by the EU (IFRS).

The accounting policies applied by the Group are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2016. No new standards that have become effective in the period have had a material effect on the Group's financial statements.

Going concern

After making inquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

3. Use of judgements and estimates

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

Investments that are fair valued through profit or loss, as detailed in note 8, are all considered to be "Partner Companies". Those "Partner Companies" categorised as Level 3 are defined as investment in "Private Companies".

Fair value of financial instruments

The Directors use their judgement in selecting an appropriate valuation technique for financial instruments not quoted in an active market ("Private Investments"). The estimation of fair value of these Private Investments includes a number of assumptions which are not supported by observable market inputs. The carrying amount of the Private Investments is US $8 million.

Fair value of other receivables

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

4. Revenue

An analysis of the Group's revenue is as follows:

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. Segment information

For management purposes, the Group is currently 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.

Information regarding these segments is presented below.

5. Segment information, (continued)

For management purposes for 30 June 2016, the Group was organised into three business segments - advisory services, investing activities, and intellectual property.

5. Segment information, (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.

The following table provides an analysis of the Group's license fees by geographical location.

The following is an analysis of the carrying amount of segment assets, and additions to fixtures, fittings, and equipment, analysed by the geographical area in which the assets are located:

6. Income tax expense

From 6 April 2006, a standard rate of corporate income 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 Kingdom of Bahrain. 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 Group charge for the period can be reconciled to the profit per the consolidated income statement as follows:

7. 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:

Share options that could potentially dilute basic earnings per share in the future have not been included in the calculation of diluted earnings per share because they are antidilutive.8. Investments

At fair value through profit or loss