Ampeak Energy Regulatory News (AMP)

20 Aug 2009 07:00



Amphion Innovations plc

Interims Results for the 6 months to 30 June 2009

London and New York, 20 August 2009 - Amphion Innovations plc (LSE: AMP) ("Amphion" or the "Company"), the developer of medical and technology businesses, today announces its unaudited interim results for the six months to 30 June 2009.

Highlights

Net Asset Value per Share was approximately unchanged versus December 2008 at US $0.44, but down 15.38% since June 2008 (US $0.52). In sterling terms, the NAV per Share increased by 3.85% to £0.27 over the levels of June 2008 (£0.26), a 10% decrease since December 2008 (£0.30)

Operating results improved sharply from a loss of over US $1.73 million in the first half of 2008, to very close to breakeven for the first half of 2009 

DataTern, Inc. signed 7 non-exclusive patent license agreements during the first half of 2009, with an additional license agreement concluded in July. In August, the United States Patent and Trademark Office found DataTern's '502 patent valid for all 18 original claims and 26 new claims after re-examination.  DataTern has now signed a total of 11 license agreements, bringing its total revenues since inception to approximately US $9.4 million

Received a further subscription of £716,900 bringing the total to £3.5 million for Amphion's Convertible Promissory Note, launched to support funding for Amphion and the Partner Companies

Amphion's Chief Executive Officer, Richard Morgan, said:

"I am pleased to announce that Amphion has managed to weather the economic and financial storm of the last six months relatively well, with a near breakeven versus the US $1.73 million operating loss for the first half of 2008.  We have also made good progress in the development of our IP licensing programme through DataTern, which has established itself as a significant source of revenue for Amphion. I am excited by the value that is being created in each of our Partner Companies and remain confident in the strength of the Amphion model." 

Amphion Innovations plc +1 212 210 6224

Charlie Morgan

Cardew Group +44 20 7930 0777

Tim Robertson

James Milton

Matthew Law

Charles Stanley Securities (Nominated Adviser) +44 20 7149 6000

Mark Taylor

Freddy Crossley

Notes to editors

About Amphion Innovations plc

Amphion Innovations plc (LSE: AMP) builds 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. 

Amphion has significant shareholding in 8 Partner Companies and two specialised entities, developing proven technologies targeting substantial commercial marketplaces, each in excess of US $1 billion. Each Partner Company is chosen with the goal of achieving an exit valuation in excess of US $100 million.

On the web: www.amphionplc.com

CEO's Statement

Amphion has managed to weather the economic and financial turbulence of the last six months relatively well. Our Net Asset Value per Share has remained largely unchanged in this period and was US $0.44 at the end of June, a similar position to the end of December 2008. This is the result of the majority of our assets being unchanged in value as expressed in US dollars, with the reduction in the valuation of Myconostica being offset by increases in the dollar value of Kromek and some of our other assets. In sterling terms, the NAV per Share fell slightly over the period as sterling recovered by 12.5% over the six months.

As we observed in the AGM statement, it is possible that the valuation of one or more of our individual assets will be reduced, given the significant fall in the broader capital markets in the last year or so, but we believe the significance of the effect on our NAV will be muted. This is due in part to our confidence in the valuation of our holding of Kromek, which continues to make progress and which has successfully raised additional capital in recent months at the same valuation of £8 per share. At the end of June, Kromek accounted for 24.8% of the total value of Amphion's assets. In addition, our holdings of convertible debt in our eight Partner Companies reached US $8.1 million at 30 June 2009 and thus constituted 12.4% of the total value of our assets. Lastly, it is important to keep in mind that the intrinsic nature of the Partner Companies we help start and build is one of rapid and dynamic growth. In normal economic and financial conditions the inherent value of any one of these companies has gone up by a significant percentage each year for many years, usually a multiple of the capital we invest in them. To us, therefore, standing still is an unnatural act, even if it is considered to be an accomplishment in difficult conditions like these.

When Amphion starts or supports the start of a new company, we only commit after we are satisfied that the foundation of the company, particularly its intellectual property, is sound. We look for large unmet market needs and strong, proven technology that will bring innovative solutions to fill a substantial and well-defined need. However,  without capital to grow, our model cannot be successful and it is particularly  significant that we are now able to generate a proportion of this through  DataTern's  growing IP licensing programme. In the first half of the year, we concluded an additional seven license agreements to the ORM technology, bringing the total number of licensees at mid-year to eleven. We continue to make progress in this area, with one more license concluded in July and with several others in active negotiation. In August, the United States Patent and Trademark Office found DataTern's '502 patent valid for all 18 original claims and 26 new claims after re-examination. DataTern's gross licensing income in the first half of 2009 was US $3.4 million, and we are confident the outcome for the second half of 2009 should be at least equal to that of the first six months.  

As we have said previously, we believe it should be possible to reduce administrative expenses and increase revenue to the point where we are able to cover most, if not all, of our operating costs at the Amphion level. The revenue level was down slightly compared with the first six months of last year, but the gross profit on this revenue was higher.  Administrative expenses were lower and as a result operating results improved sharply from an operating loss of over US $1.73 million in the first half of 2008, to a very near operating breakeven. 

Despite the progress we have made with our licensing programme, we have not yet reached the point where our financial resources are sufficient to finance the growth of our Partner Companies. Since Amphion's IPO in 2005 we have advised that we would only reach that point when we are able to generate liquidity from the sale or flotation of at least one of our companies (beyond Beijing MedPharm). This has been put on hold following the events of last year and our plans to list two of our companies  were postponed. However, given the improvement in the broader capital markets in recent months, we are now once again working on possible IPO's for two or three of the Partner Companies.  At this point, the IPO markets remain subdued but our aim is to be prepared for when conditions are more favorable which means that our Partner Companies remain well placed for either a trade sale or an IPO.

We have, therefore, decided to raise additional capital through the further issuance of Convertible Promissory Notes in order to support our Partner Companies and maintain our ownership position in each one. We raised £2.8 million through these notes by the mid-year point and an additional £716,900 since then, bringing the current total to £3.5 million. Our goal is to cap the issuance of convertible notes at £7 million, which would represent a modest level of debt to total assets of about 18%. We will use proceeds from this convertible note issuance primarily for investment in our Partner Companies. Although raising capital in this way imposes additional dilution on our shareholders, the effect is largely offset by our being able to manage and maintain the level of ownership of each individual company. As a result, we continue to believe the net effect of this programme will be positive for our shareholders.

In previous economic downturns, the recovery in the private capital markets has lagged the recovery in the broader stock market by six to twelve months and we do not believe recovery in this cycle will be quicker. As a result, we remain cautious in the management of our business. However, we have eight promising Partner Companies and each has made progress in the last six months, despite the difficult environment. Seven of the eight companies are now generating revenue, albeit still at rather modest levels, but for a startup company to ship products and make the transition to a revenue generating business is a significant achievement. The next challenge is to increase sales to the point where we show first an accounting profit and then positive cash flow. We remain committed to helping our Partner Companies meet these challenges and make the transition to profitable businesses. We try to minimise the amount of time and effort spent on trying to "engineer" outcomes or "exits", in the belief that if we build good, well-run companies, the opportunity to complete an IPO will present itself in due course. 

We are excited by the value that is being created in our Partner Companies and believe that our shareholders should benefit when this value creation is released in due course. Despite the events of the last year, I am pleased to report that we have weathered the storm well so far and remain confident in our approach. We believe that we should be able to get back on a growth track by the end of the year and do well once capital markets recover. 

  

Partner Companies

 

Amphion's Partner Companies continue to make progress.

Axcess (OTCBB: AXSI), announced in February that it won a competitive procurement worth US $3.54 million to provide security infrastructure solutions for the port at Trinidad's capital, Port-of-Spain. With the security successfully implemented, in April Trinidad hosted the Fifth Summit of the Americas Conference attended by over 30 heads of state of countries from North, Central and South America, and the Caribbean. Axcess has also recently reported record revenues for the first half of 2009. Amphion's fully-diluted ownership stake in Axcess was 8.50% as of 30 June 2009, valued at US $2.0 million (June 2008: US $3.2 million).

DataTern signed seven additional license agreements in the six months to June, with one more license concluded in July and with several others in active negotiation. To date, DataTern has signed 11 license agreements for total revenues of US $9.4 million since June 2008.  The gross licensing income in the first half of 2009 was US $3.4 million, slightly ahead of plan, and we are confident the outcome for the second half of 2009 should be at least equal to that of the first six months.  In August, the United States Patent and Trademark Office found DataTern's '502 patent valid for all 18 original claims and 26 new claims after re-examination. Amphion's fully-diluted ownership stake in DataTern was 100% as of 30 June 2009. As DataTern is 100% owned by Amphion, it is consolidated into Amphion's financial statements.

FireStar is making progress working with several leading organisations on establishing the new payments standard for messaging in the financial sector. EdgeNode™ (the proprietary engine supporting the PrivateMarkets platform) offers unique functionality for messaging in both the financial payments sector and in healthcare. FireStar developed new revenue streams for services and EdgeNode™ technologies in the Financial Services market during the first half of 2009.  The company anticipates growing this revenue stream in the second half of 2009 as well as beginning a new revenue stream based on EdgeNode™ in the secure electronic distribution of medical records. Amphion's fully-diluted ownership stake in FireStar was 15.32% as of 30 June 2009, valued at US $4.5 million (June 2008: US $4.7 million).

Kromek's first product, the Bottle Scanner, was shipped to Newcastle Airport and began trials in June, when they also launched their second product, the 3-1-1 Scanner, at the Transec World Expo in Amsterdam. Also in June, Dr. Arnab Basu, Kromek's CEO, was awarded Ernst & Young Entrepreneur of the Year 2009 for the North and Midlands region. Kromek recently announced the award of a US $4 million contract from the US Defense Threat Reduction Agency (DTRA) for the development of Detectors from Vapour Grown Cadmium Zinc Telluride material. Amphion's fully-diluted ownership stake in Kromek was 19.99% as of 30 June 2009, valued at US $16.2 million (June 2008: US $19.6 million).

m2m has continued to see good demand for its current product range of preclinical coils. m2m is a key supplier to Bruker Biospin, Siemens, Varian, GE, and other major imaging system manufacturers, and also provides solutions to GSK, Merck, BMS, Astra Zeneca, Roche, and most university research organisations in the US and Europe. The company continues development work on its first cryogenic coil, for the preclinical market. Amphion's fully-diluted ownership stake in m2m was 24.40% as of 30 June 2009, valued at US $6.9 million (June 2008: US $6.0 million).

Motif has made good progress mining the very rich dataset in a Moroccan cohort in partnership with Imperial College London and Professor Philippe Froguel.  The company believes it has already made several important discoveries in diabetes and hypertension and believes that these, along with additional discoveries from our ongoing research, will result in important Intellectual Property. Amphion's fully-diluted ownership stake in Motif was 38.55% as of 30 June 2009, valued at US $15.7 million (June 2008: US $14 million).

Myconostica currently has two products on the market; the MycXtra™ fungal DNA extraction system and MycAssayTM Pneumocystis, a real-time PCR test for  Pneumocystis jirovecii, one of the most common causes of fungal pneumonia. Myconostica has a pipeline of products in development including a test for the detection of Aspergillus and a microarray-based assay for the identification of yeast species. Amphion's fully-diluted ownership stake in Myconostica was 22.14% as of 30 June 2009, valued at US $2.3 million (June 2008: US $5.8 million).

PrivateMarkets began commercial operations in the ERCOT/Texas region of the U.S. wholesale electricity market, achieving first revenues and early growth of trading volumes that, while still small, is ahead of plan. The company anticipates continuing to expand its presence in the Texas market and plans to launch an expansion into other parts of the U.S. market in the second half of 2009. Amphion's fully-diluted ownership stake in PrivateMarkets was 25.34% as of 30 June 2009, valued at US $4.6 million (June 2008: US $3.2 million).

WellGen announced the appointment of Dr. Roddy Carter as President and CEO in April 2009. In May, the company launched its first four consumer products into the nutritional supplement market under the brand name Te Amé. Preclinical testing of WellGen's first candidate product for the medical foods market continues with encouraging results thus far. Development work on the next two proprietary products is also making good progress.  Amphion's fully-diluted ownership stake in WellGen was 14.56% as of 30 June 2009, valued at US $6.6 million (June 2008: US $6.7 million).

Amphion Innovations plc
Condensed consolidated income statement
For the six months ended 30 June 2009
Unaudited
		Notes		Six months		Six months
				ended		ended		Year ended
				30 June 2009		30 June 2008		31 December 2008
Continuing operations				US$		US$		US$
Revenue		3		4,010,503		5,385,966		7,087,944
Cost of sales		3		(1,398,420)		(3,237,562)		(3,676,250)
Gross profit				2,612,083		2,148,404		3,411,694
Other operating income				-		-		7,000
Administrative expenses				(2,634,387)		(3,882,771)		(6,799,792)
Operating loss				(22,304)		(1,734,367)		(3,381,098)
Fair value gains (losses) on investments		7		(146,832)		11,800,211		1,967,216
Interest income				188,959		135,457		274,788
Other gains and losses				21,043		(10,958)		(22,433)
Finance costs				(148,198)		(1,787)		(29,878)
Profit (loss) before tax				(107,332)		10,188,556		(1,191,405)
Tax on profit		5		(87,000)		(165,792)		(13,130)
Profit (loss) for the period				(194,332)		10,022,764		(1,204,535)
Earnings per share		6
Basic			US	$ (0.00)	US	$ 0.08	US	$ (0.01)
Diluted			US	$ (0.00)	US	$ 0.08	US	$ (0.01)

Amphion Innovations plc
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2009
		Six months		Six months
		ended		ended		Year ended
		30 June 2009		30 June 2008		31 December 2008
		US$		US$		US$
Profit (loss) for the period		(194,332)		10,022,764		(1,204,535)
Other comprehensive income
Exchange differences arising on translation
of foreign operations		39,955		(953)		(41,248)
Other comprehensive income for the period		39,955		(953)		(41,248)
Total comprehensive income for the period		(154,377)		10,021,811		(1,245,783)

Amphion Innovations plc
Condensed consolidated statement of financial position
At 30 June 2009
			Unaudited			Audited
	Notes		30 June 2009			31 December 2008
			US$			US$
Non-current assets
Intangible assets			2,020,501			2,150,415
Property, plant and equipment			19,952			19,726
Security deposit			121,694			121,694
Investments	7		60,202,949			59,029,932
			62,365,096			61,321,767
Current assets
Prepaid expenses and other receivables			2,349,968			1,566,911
Cash and cash equivalents			365,134			630,404
			2,715,102			2,197,315
Total assets			65,080,198			63,519,082
Current liabilities
Trade and other payables			2,297,755			1,952,779
Non-current liabilities
Convertible promissory notes	8		4,182,274			3,279,950
Trade and other payables			1,077,546			1,140,739
			5,259,820			4,420,689
Total liabilities			7,557,575			6,373,468
Net assets			57,522,623			57,145,614
Equity
Share capital	9		2,448,303			2,429,342
Share premium account			36,803,687			36,291,262
Translation reserve			1,567			(38,388)
Retained earnings			18,269,066			18,463,398
Total equity			57,522,623			57,145,614

Amphion Innovations plc
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2009
Unaudited
						Foreign
				Share		currency
		Share		premium		translation		Retained
	Notes	capital		account		reserve		earnings		Total
		US$		US$		US$		US$		US$
Balance at 31 December 2007		2,388,071		34,772,046		2,860		19,667,933		56,830,910
Profit for the period		-		-		-		10,022,764		10,022,764
Exchange differences arising on
translation of foreign operations		-		-		(953)		-		(953)
Total comprehensive income for the period		-		-		(953)		10,022,764		10,021,811
Issue of share capital		37,871		792,844		-		-		830,715
Incremental costs directly attributable
to issue of shares		-		(34,458)		-		-		(34,458)
Recognition of share-based payments		-		354,869		-		-		354,869
Balance at 30 June 2008		2,425,942		35,885,301		1,907		29,690,697		68,003,847
Loss for the period		-		-		-		(11,227,299)		(11,227,299)
Exchange differences arising on
translation of foreign operations		-		-		(40,295)		-		(40,295)
Total comprehensive income for the period		-		-		(40,295)		(11,227,299)		(11,267,594)
Issue of share capital		3,400		66,600		-		-		70,000
Incremental costs directly attributable
to issue of shares		-		(6,965)		-		-		(6,965)
Recognition of share-based payments		-		346,326		-		-		346,326
Balance at 31 December 2008		2,429,342		36,291,262		(38,388)		18,463,398		57,145,614
Loss for the period		-		-		-		(194,332)		(194,332)
Exchange differences arising on
translation of foreign operations		-		-		39,955		-		39,955
Total comprehensive income for the period		-		-		39,955		(194,332)		(154,377)
Issue of share capital	9	18,961		185,361		-		-		204,322
Recognition of share-based payments	11	-		327,064		-		-		327,064
Balance at 30 June 2009		2,448,303		36,803,687		1,567		18,269,066		57,522,623

	Six months ended 30 June 2009		Six months ended 30 June 2008		Year ended 31 December 2008
	US$		US $		US $
Operating activities
Operating loss	(22,304)		(1,734,367)		(3,381,098)
Adjustments for:
Depreciation of property, plant and equipment	5,288		6,408		11,836
Amortisation of intangible assets	129,914		123,428		253,935
Recognition of share based payments	531,386		354,869		1,103,235
Decrease (increase) in prepaid & other receivables	(783,057)		21,753		(927,482)
Increase in trade & other payables	281,783		395,625		623,776
Interest expense	(148,198)		(1,787)		(29,878)
Income tax	(87,000)		(165,792)		(13,130)
Net cash used in operating activities	(92,188)		(999,863)		(2,358,806)
Investing activities
Interest received	188,959		135,457		274,788
Proceeds from repayment of notes receivable	160,000		495,890		495,890
Purchases of investments	(1,479,849)		(3,014,877)		(5,915,881)
Purchases of intangible assets	-		(118,000)		(129,714)
Purchases of equipment	(4,967)		(5,072)		(4,173)
Net cash used in investing activities	(1,135,857)		(2,506,602)		(5,279,090)
Financing activities
Proceeds on issue of shares, net of share issuance costs	-		796,257		457,252
Proceeds on issue of promissory notes	902,324		-		3,279,950
Net cash from financing activities	902,324		796,257		3,737,202
Net decrease in cash and cash equivalents	(325,721)		(2,710,208)		(3,900,694)
Cash and cash equivalents at the beginning of the period	630,404		4,594,007		4,594,007
Effect of foreign exchange rate changes	60,451		(11,911)		(62,909)
Cash and cash equivalents at the end of the period	365,134		1,871,888		630,404

1. General information

The condensed consolidated interim financial statements for the six months ended 30 June 2009 are unaudited and do not constitute statutory accounts within the meaning of the Isle of Man Companies Acts 1931 to 2004. The statutory accounts of Amphion Innovations plc for the year ended 31 December 2008 have been filed with the Registrar of Companies and contain an unqualified audit report which includes an emphasis of matter reference for going concern and valuation of 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 (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 2008 except for the impact of the adoption of the Standards and Interpretations described below.

IFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January 2009)

IFRS 8 is a disclosure Standard that has had no impact on the Group's reportable segments or on the reported results or financial position of the Group.

IAS 1 (revised 2007) Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009)

The revised Standard has introduced a number of terminology changes (including revised titles for the condensed financial statements) and has resulted in a number of changes in presentation and disclosure. However, the revised Standard has had no impact on the reported results or financial position of the Group.

3. Revenue

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

	Six months ended		Six months ended		Year ended
	30 June 2009		30 June 2008		31 December 2008
	US $		US$		US$
Continuing operations
Advisory fees	553,453		1,135,966		1,637,694
License fees	3,457,050		4,250,000		5,450,250
	4,010,503		5,385,966		7,087,944

 

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 $86,109 outstanding at 30 June 2009.

During 2009, IP Navigation Group, LLC assisted in obtaining non-exclusive licenses of DataTern's key database patents to various companies totaling US $3,450,000. As part of the agreement, IP Navigation Group, LLC received advisory fees of fifty percent of the gross proceeds less the repayment of expenses funded by IP

3. Revenue, (continued)

Navigation Group, LLC and related interest which amounted to US $617,159, and expenses of third parties. The advisory fees payable to IP Navigation Group, LLC totaled US $1,398,420.

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.

 

4. Segment information

The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks and rewards approach, with the entity's system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. There has been no change to the identification of the Group's reportable segments as a result of the adoption of IFRS 8.

For management purposes, the Group is currently organised into three business segments - advisory services, investing, 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.

			Advisory		Investing		Intellectual
			services		activities		property		Eliminations		Consolidated
			Six months		Six months		Six months		Six months		Six months
			ended		ended		ended		ended		ended
			30 June 2009		30 June 2009		30 June 2009		30 June 2009		30 June 2009
			US $		US $		US $		US $		US $
REVENUE
External advisory fees			553,453		-		-		-		553,453
External license fees			-		-		3,457,050		-		3,457,050
Inter-segment fees			120,000		-		-		(120,000)		-
Total revenue			673,453		-		3,457,050		(120,000)		4,010,503
Cost of sales			-		-		(1,398,420)		-		(1,398,420)
Gross profit			673,453		-		2,058,630		(120,000)		2,612,083
Administrative expenses			(505,542)		(1,433,756)		(815,089)		120,000		(2,634,387)
Segment result			167,911		(1,433,756)		1,243,541		-		(22,304)
Fair value losses on
investments			-		(146,832)		-		-		(146,832)
Interest income			1		192,700		27		(3,769)		188,959
Other gains and losses			-		21,043		-		-		21,043
Finance costs			-		(137,769)		(14,198)		3,769		(148,198)
Profit (loss) before tax			167,912		(1,504,614)		1,229,370		-		(107,332)
Income taxes			-		-		(87,000)		-		(87,000)
Profit (loss) after tax			167,912		(1,504,614)		1,142,370		-		(194,332)

 

  

4. Segment information, (continued) 

			Advisory		Investing		Intellectual
			services		activities		property		Eliminations		Consolidated
			Six months		Six months		Six months		Six months		Six months
			ended		ended		ended		ended		ended
			30 June 2009		30 June 2009		30 June 2009		30 June 2009		30 June 2009
			US $		US $		US $		US $		US $
OTHER INFORMATION
Segment assets			1,490,762		61,953,337		2,884,973		(1,248,874)		65,080,198
Segment liabilities			931,814		889,635		2,397,470		(843,618)		3,375,301
Capital additions			3,081		-		1,886		-		4,967
Depreciation			2,928		2,003		357		-		5,288
Amortisation			-		-		129,914		-		129,914
Recognition of share based
payments			-		531,386		-		-		531,386

 

  4. Segment information, (continued)

For management purposes for 30 June 2008, the Group was organised into three business segments - advisory services, investing activities, and intellectual property.

			Advisory		Investing		Intellectual
			services		activities		property		Eliminations		Consolidated
			Six months		Six months		Six months		Six months		Six months
			ended		ended		ended		ended		ended
			30 June 2008		30 June 2008		30 June 2008		30 June 2008		30 June 2008
			US $		US $		US $		US $		US $
REVENUE
External advisory fees			1,255,966		-		-		(120,000)		1,135,966
External license fees			-		-		4,250,000		-		4,250,000
Inter-segment fees			-		393,432		-		(393,432)		-
Total revenue			1,255,966		393,432		4,250,000		(513,432)		5,385,966
Cost of sales			-		-		(3,237,562)		-		(3,237,562)
Gross profit			1,255,966		393,432		1,012,438		(513,432)		2,148,404
Administrative expenses			(896,386)		(2,147,241)		(1,352,576)		513,432		(3,882,771)
Segment result			359,580		(1,753,809)		(340,138)		-		(1,734,367)
Fair value and gains on
investments			-		11,800,211		-		-		11,800,211
Interest income			80		158,421		321		(23,365)		135,457
Other gains and losses			-		(10,958)		-		-		(10,958)
Finance costs			-		-		(25,152)		23,365		(1,787)
Profit before tax			359,660		10,193,865		(364,969)		-		10,188,556
Income taxes			(146,000)		(19,792)		-		-		(165,792)
Profit after tax			213,660		10,174,073		(364,969)		-		10,022,764

 

			Advisory		Investing		Intellectual
			services		activities		property		Eliminations		Consolidated
			Six months		Six months		Six months		Six months		Six months
			ended		ended		ended		ended		ended
			30 June 2008		30 June 2008		30 June 2008		30 June 2008		30 June 2008
			US $		US $		US $		US $		US $
OTHER INFORMATION
Segment assets			1,443,505		68,425,848		3,157,841		(2,157,980)		70,869,214
Segment liabilities			522,653		640,413		3,431,306		(1,729,005)		2,865,367
Capital additions			-		3,386		119,686		-		123,072
Depreciation			2,928		3,480		-		-		6,408
Amortisation			-		-		123,428		-		123,428
Recognition of share based
payments			-		354,869		-		-		354,869

  

4. 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.

		Advisory fees by
		geographical location
		Six months ended		Six months ended
		30 June 2009		30 June 2008
		US $		US $
United States		390,000		714,450
United Kingdom		163,453		421,516
		553,453		1,135,966

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

	License fees by
	geographical location
	Six months ended	Six months ended
	30 June 2008	30 June 2008
	US$	US$
United States	3,457,050	4,250,000
United Kingdom	-	-
	3,457,050	4,250,000

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:

	Carrying amount				Additions to fixtures, fittings and
	of segment assets				equipment and intangible assets
	Six months ended		Six months ended		Six months ended		Six months ended
	30 June 2009		30 June 2008		30 June 2009		30 June 2008
	US $		US $		US $		US $
United States	46,624,077		45,464,104		4,967		119,686
United Kingdom	18,456,121		25,405,110		-		3,386
	65,080,198		70,869,214		4,967		123,072

5. Income tax expense

Six months ended Six months ended Year ended 30 June 2009 30 June 2008 31 December 2008 US $ US $ US $ Isle of Man income tax - - - Tax on US subsidiary 87,000 146,000  3,696 Tax on UK subsidiary -    19,792 9,434       Current tax 87,000 165,792  13,130

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 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:

	US $
Loss before tax	(107,332)
Tax at the Isle of Man income tax rate of 0%	-
Effect of different tax rates of subsidiaries
operating in other jurisdictions	87,000
Current tax	87,000

6. 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		Six months ended		Six months ended		Year ended
		30 June 2009		30 June 2008		31 December 2008
		US $		US $		US $
Earnings for the purposes of basic and diluted earnings per share
(profit for the year attributable to equity holders of the parent)		(194,332)		10,022,764		(1,204,535)
Number of shares
		Six months		Six months
		ended		ended		Year ended
		30 June 2009		30 June 2008		31 December 2008
Weighted average number of ordinary shares for
the purposes of basic earnings per share		130,963,672		129,349,031		130,183,495
Effect of dilutive potential ordinary shares:
Share options		236,895		61,312		-
Convertible promissory notes		15,598,744		-		12,171,667
Weighted average number of ordinary shares for
the purposes of diluted earnings per share		146,799,311		129,410,343		142,355,162

 

  

7. Investments

At fair value through profit or loss

		30 June 2009						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.		2,010,460		3,447,794		(1,437,334)		1,612,931		3,447,794		(1,834,863)
Private companies:
FireStar Software, Inc.		4,543,533		4,751,783		(208,250)		4,721,447		4,941,783		(220,336)
Kromek Ltd.		16,172,316		3,274,915		12,897,401		14,370,477		3,274,915		11,095,562
Motif BioSciences, Inc.		15,729,930		8,417,625		7,312,305		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.		6,860,550		2,468,685		4,391,865		6,642,861		2,172,453		4,470,408
Myconostica Ltd.		2,253,930		2,745,331		(491,401)		4,216,206		2,745,331		1,470,875
PrivateMarkets, Inc.		4,556,522		3,311,522		1,245,000		3,918,673		2,673,673		1,245,000
WellGen, Inc.		6,600,803		4,814,936		1,785,867		6,669,553		4,814,936		1,854,617
		60,202,949		34,732,591		25,470,358		59,029,932		33,656,510		25,373,422
		30 June 2009						31 December 2008
						Unrealised						Unrealised
		Fair Value		Cost		gain/(loss)		Fair Value		Cost		gain/(loss)
		US $		US $		US $		US $		US $		US $
Stocks		44,036,543		22,969,181		21,067,362		43,540,862		22,969,181		20,571,681
Promissory notes		8,100,451		8,100,451		-		6,780,602		6,780,602		-
Warrants & options		8,065,955		3,662,959		4,402,996		8,708,468		3,906,727		4,801,741
		60,202,949		34,732,591		25,470,358		59,029,932		33,656,510		25,373,422

  7. Investments, (continued)

At 30 June 2009 the one publicly traded company, Axcess International, Inc. ("Axcess") is valued based on its last quoted closing price. 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, FireStar Software, Inc., Motif BioSciences Inc., m2m Imaging Corp, PrivateMarkets, Inc. and WellGen, Inc. are valued using the latest offering price from recently executed financing transactions by those companies. Equity investments in Myconostica Ltd. are valued using the proposed offering price for a financing transaction that is expected to close later in 2009. 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 30 June 2009. 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.

The 30 June 2009 fair value losses on investments include an unrealized gain of US $96,936 and a realized loss of US $243,768.

At 30 June 2009, MSA Holding B.S.C. owned 2,626,467 of the ordinary shares of Amphion Innovations plc.

The Group's ownership percentages of the investments are as follows:

				Fully-diluted
				ownership
		Country of incorporation		%
Axcess International, Inc.		United States of America		8.50
FireStar Software, Inc.		United States of America		15.32
Kromek		England & Wales		19.99
Motif BioSciences, Inc.		United States of America		38.55
MSA Holding B.S.C.		Kingdom of Bahrain		50.00
m2m Imaging Corp.		United States of America		24.40
Myconostica Ltd.		England & Wales		22.14
PrivateMarkets, Inc.		United States of America		25.34
WellGen, Inc.		United States of America		14.56

8. Convertible promissory notes

During 2009, £616,874 of convertible promissory notes were issued of which £24,624 were subscribed for by three Directors of the Company. 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.

If the notes have not been converted, they will be repaid on 31 December 2013. Interest of 7% 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.

9. Share capital

	30 June 2009
	£
Authorised:
250,000,000 ordinary shares of 1p each	2,500,000
	Number		£		US$
Balance as at 31 December 2008	130,378,857		1,303,789		2,429,342
Issued and fully paid:
Ordinary shares of 1 p each	874,977		8,750		12,874
Ordinary shares of 1p each	221,037		2,210		3,142
Ordinary shares of 1p each	207,189		2,072		2,945
Balance as at 30 June 2009	131,682,060		1,316,821		2,448,303

During the six months ended 30 June 2009, the following changes occurred to the share capital of the Company:

On 30 March 2009, the Company issued 874,977 ordinary 1p shares at a premium of 9.75p per share (US $125,526) to employees as part of their incentive compensation.

On 15 April 2009, the Company issued 221,037 ordinary 1p shares at a premium of 10.14p per share (US $31,858) to Directors in lieu of first quarter Directors' fees.

On 26 May 2009, the Company issued 207,189 ordinary 1p shares at a premium of 9.5p per share (US $27,977) to certain holders of the Convertible Promissory Notes in respect of accrued interest on the Notes.

10. Contingent liabilities

The Compensation Committee has determined the bonuses for the year 2008 and required that 50% of the bonuses be paid in shares. The cash portion totaling US $153,600 is only to be paid at the discretion of the Compensation Committee therefore no provision has been made in these financial statements for the cash portion.

The Company is subject to two lawsuits brought by former employees. The Company believes the lawsuits are without merit and that any settlements will not exceed US $200,000 in total plus legal costs. No provision has been made in these financial statements for the settlements.

11. 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.

During 2009, 1,925,000 options have been issued under the Plan and 525,000 options were forfeited.

The options issued expire after ten years from the date of grant and have a one year vesting period.

	2009
			Weighted
			average
	Number of		exercise
	share options		price (in £)
Outstanding at beginning of period	10,170,536		0.2300
Granted during the period	1,925,000		0.1075
Forfeited during the period	(525,000)		0.2310
Outstanding at the end of the period	11,570,536		0.2082
Exercisable at the end of the period	5,669,283		0.2190

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:

	2009
	US$
Weighted average share price	0.16
Weighted average exercise price	0.16
Expected volatility	57.68%
Expected life	10 years
Risk free rate	3.47%
Expected dividends	-

Expected volatility was determined by calculating the historical volatility of the Group's share price from the date of the listing to the end of the period.

In 2009, options were granted on 24 March. The aggregate of the estimated fair values of the options is US $212,905. The Group recognized total costs of US $327,064 relating to equity-settled share based payment transactions in 2009 which were expensed in the income statements during the period.

12. Events after the balance sheet date

In July and August 2009, the Company made advances of US $40,000 under a promissory note from m2m Imaging Corp.

In July and August 2009, the Company made advances of US $40,000 under a promissory note from Motif BioSciences Inc.

In July 2009 and August, the Company made advances of US $160,000 under a promissory note from PrivateMarkets Inc.

In July 2009, the Company settled one of the two lawsuits brought by a former employee referred to in Note 10. Under the terms of the settlement agreement, the Company agreed to pay the former employee US $120,000. 

In August 2009, the Company purchased 94,123 D Preference Shares and 60,000 B Preference Shares of Myconostica Limited for £155,000.

In August 2009, the Company issued convertible promissory notes and 240,759 warrants for cash of £216,900.

13. 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 partners are disclosed below.

During the period, 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 30 June 2009, the net amount owed by the Group to Motif is US $27,795.

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 2010 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 no fee during the period ended 30 June 2009.

A subsidiary of the Company has entered into an agreement with Kromek 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 and can be terminated by one of the parties. The subsidiary's fee for the period ended 30 June 2009 was US $60,000. Amphion Innovations US Inc. also received US $69,368 as a fund raising fee for the period ended 30 June 2009.

A subsidiary of the Company 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 31 December 2009. The fee for the period ended 30 June 2009 was suspended and not recognised.

A subsidiary of the Company 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 2010 and shall automatically renew for successive one year periods. Amphion Innovations US Inc.'s fee for the period ended 30 June 2009 was US $120,000 which was due at 30 June 2009.

A subsidiary of the Company has entered into an agreement with Myconostica Ltd. ("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 was £4,500 through 20 April and £3,000 thereafter and expires 31 December 2009. The subsidiary's fee for the period ended 30 June 2009 is £23,500 or US $34,084 of which US $4,701 was due at 30 June 2009.

A subsidiary of the Company 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 quarterly fee under this agreement is US $45,000. This agreement is effective until 1 November 2009 and will renew on an annual basis until terminated by either party. Amphion Innovations US Inc.'s fee for the period ended 30 June 

2009 was US $90,000 which was due at 30 June 2009.

A subsidiary of the Company 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 under this agreement is US $60,000 per quarter. The agreement is effective until 20 June 2010 and will renew annually for subsequent 12-month periods until terminated by either party. The subsidiary's fee for the year ended 30 June 2009 was US $120,000.

A subsidiary of the Company has entered into an agreement with PrivateMarkets, Inc. ("PMI") 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 until 7 February 2010 and will renew annually for subsequent 12-month periods unless terminated by either party. The subsidiary's fee for the year ended 30 June 2009 was US $60,000. The 2007, 2008 and 2009 fees totaling US $245,000 are due at 30 June 2009.

The Directors' direct ownership in the Partner Companies is as follows:

		Fully diluted
		% owned by
Investment company		directors
Axcess International, Inc.		7.37
FireStar Software, Inc.		1.62
Kromek Ltd.		1.59
Motif BioSciences, Inc.		3.73
Myconostica Ltd.		.33
PrivateMarkets, Inc.		2.75
WellGen, Inc.		4.63

ENDIR GGGMRVLDGLZM