18 Aug 2008 07:00
Amphion Innovations plc
Interims Results for the 6 months to 30 June 2008
London and New York, 18 August 2008 - 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 2008.
Financial Highlights
Net Asset Value per Share increased by 37% to US $0.52 at 30 June 2008 (US $0.38 at 30 June 2007)
Earnings per share of US $0.08 for the six months to 30 June 2008 (US $0.04 for the six months to 30 June 2007)
Net Profit increased by 194% to US $10,022,764 for the six months to 30 June 2008 (US $3.4 million for the six months to 30 June 2007)
Fair value* of Amphion's investment portfolio increased 74% to US $65,961,923 million (US $37.9 million at 30 June 2007)
Revenues increased to US $5,385,966 for the six months to 30 June 2008 (US $672,656 for the six months to 30 June 2007) due to revenue received from licensing DataTern's patents
* Fair value refers to the aggregate value of Amphion's holding based on the last quoted closing price for publicly held Partner Companies and the offering price on the most recently executed financing transactions for privately held Partner Companies.
Operating Highlights
DataTern, Inc. signed its first major non-exclusive patent license agreement with RedHat, Inc.
Myconostica Ltd. raised an additional £1 million in an oversubscribed Series C financing, bringing the total raised to £5.4 million
PrivateMarkets, Inc. raised US $3.75 million in a Series A financing
Kromek Ltd. (formerly Durham Scientific Crystals Ltd.) raised £1.6 million in a Series J financing
Amphion's Chief Executive Officer, Richard C.E. Morgan, said:
"The successful completion of our first three-year plan has put us in a good position for the future. We have eight promising Partner Companies and we believe each has the potential to meet our minimum goal of a company valuation in excess of US $100 million.
During the reporting period, Amphion continued to generate strong NAV and revenue growth and to raise money for its Partner Companies, despite the current turmoil in the financial and credit markets.
We believe that all eight Partner Companies could be revenue generating by the early part of next year, which, together with the potential for further licensing income from DataTern, will mean that a larger part of the Group's future funding needs can be generated internally.
Although we anticipate, along with the wider market, a challenging business environment for the coming year, we remain focused on creating substantial value for our shareholders by a systematic application of a tried and tested methodology for building great companies from promising and proprietary intellectual property."
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 Advisor) +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
I am very pleased to report on another successful period for Amphion shown by the significant increase in Net Asset Value ("NAV") per Share and the introduction of important new revenue streams. In preparation for Amphion's IPO in August 2005, we prepared a detailed three-year plan for the Company's growth and development. In that plan we proposed to apply the Amphion model to the selection and development of up to ten Partner Companies, each with the hallmarks that we consider critical to success. With the addition of PrivateMarkets in 2007, we now have eight Partner Companies each of which are successfully developing proven technologies targeting substantial commercial marketplaces. In addition, we have created two special purpose entities that were not contemplated at the time of the IPO: MSA, our joint-venture company, and DataTern, the entity we created to focus additional resources on the development and monetisation of the Intellectual Property assets within the Amphion group of Partner Companies.
Results
Successful execution of our plan has seen our NAV per Share grow at about 35.8% per annum compound in US dollar terms during the three year period since IPO. The growth in sterling terms has been slightly lower, at 31% per annum, due to the weakness in the dollar over this period. At the time of our AGM in June we announced that our NAV per Share was expected to record an advance in excess of 15% for the half year to the end of June. We are pleased to report that our NAV per Share rose to £0.26 (US $0.52) from £0.22 (US $0.44) at the end of December, an increase of approximately 18% over the half year. The increase in the NAV per Share over the twelve month period from 30 June 2007 in pounds sterling was 37% (37% in dollar terms). While the (annualised) growth rate of approximately 40% per annum in the first six months of this year was exceptionally high, we believe that we should see further progress in the second part of the year and a good outcome for the year as a whole. An increase of US $1,988,000 in administrative expenses from 30 June 2007 to 30 June 2008 was due primarily to the consolidation of DataTern's expenses of US $1,233,000 and secondarily to the non-cash charge of US $355,000 for the vesting of previously granted stock options, coupled with a charge of $396,000 for bonuses paid in April of which US $200,000 was a non-cash charge. We expect DataTern's direct expenses in the future to be considerably lower and most of its operating costs to be reflected in cost of sales and more than offset by licensing revenue.
Funding
Our three year plan was built around a gross new capital requirement (i.e. before fees) for Amphion of up to £15 million and the variations to our plan since then have added approximately £3 million to that total. On the plus side, we made it clear at the time of the IPO that we planned to liquidate our holding in Beijing MedPharm and we managed to exit that investment at higher valuations than originally planned, giving us a positive variance in realised profit of about £1 million. We have raised most of the remaining capital required by our plan in various private placements over this period and our investment in DataTern has now started to generate a positive cash return to Amphion. We were pleased to announce the receipt in June of our first licensing fees from this programme and we expect additional licensing fees to be generated in the second half of the current year. In the years ahead, we believe the level of income we can generate from these programmes will be substantial and could be sufficient to allow Amphion to run at an operating profit and with positive cash flow (i.e. before investments in our Partner Companies). While the current climate in the capital markets clearly is uncertain due to the turbulence in the financial and credit markets, we believe we should be able to continue to make progress with the financial resources at our disposal.
During the first six months of this year we completed important financing rounds for Myconostica and Kromek (formerly Durham Scientific Crystals Ltd.). The pace of completion of these and other rounds of financing for our Partner Companies has slowed markedly since the first half of last year, but we continue to believe we should be able to get access to the capital we need to build our companies, even if at a lower level and slower pace than hitherto. Several of our Partner Companies are making the critical transition from a development stage company to a revenue generating business during the course of this year. In fact we believe that all eight companies could be revenue generating by the early part of next year. This is an important rite of passage for any business and it is gratifying to see our Partner Companies moving to the next level of performance in this way.
Outlook
While the current uncertainty in the financial and credit markets has made it impossible to list any of our companies for the time being, we do not expect that to impact our longer term value creation opportunity in any one of them. At some point the public markets will make a recovery and the IPO market will reopen. There are a number of companies within our portfolio that we believe will be well placed for IPO at that time.
While we are very gratified by the progress in the last six months and indeed since the IPO, we must caution again that it is not likely that the rates of growth in our NAV per Share will continue at the exceedingly high levels of the first three years. That said, we continue to believe that the underlying strength of our model will produce very good growth rates over time and in addition we have a number of new initiatives that should contribute to good results over that period. Moreover, we believe that we are now in an important transition as a management company, from dependence on outside capital to the generation of our own capital by a combination of positive operating cash flow from the licensing programmes and the prospect of some realisations of our current group of Partner Companies in the next year or two.
In the meantime, the growing commercial value of each one will present increasingly valid acquisition opportunities to industry participants. Experience has shown us that great companies only emerge from an unrelenting focus on execution, with a firm eye on the longer term goals of the business. That means that it is not possible to "plan" on trade sales, any more than it is possible to plan on an IPO, given the need for a receptive stock market for the latter to be possible. The best we can do is to build solid companies with a valuable business franchise. Experience suggests that the capital markets and potential acquirers will play their part in due course.
| Company | Amphion Holding | Company Description | Company Valuation |
| AXCESS | 7.96% | RFID Systems | $29 Million |
| DataTern | 100% | Intellectual Property Development | N/A |
| FireStar | 16.21% | Software platform for inter-enterprise integration | $40 Million |
| Kromek | 21.13% | Digital x-ray systems for medical and security applications | $93 Million |
| m2m | 23.6% | MRI coils & tools for clinical and research use | $30 Million |
| Motif | 38.43% | Population genetics for pharmaceuticals & diagnostics | $32 Million |
| MSA | 50% | Middle East Joint Venture | $6 Million |
| Myconostica | 22.96% | Molecular diagnostics for fungal diseases | $24 Million |
| PrivateMarkets | 27.84% | Online energy trading marketplace | $15 Million |
| WellGen | 14.94% | Nutrigenomics for health and wellness | $61 Million |
Partner Company Highlights
·; AXCESS International, Inc. (OTCBB: AXSI) is a leading provider of security and transportation logistics solutions that utilise radio frequency identification (“RFID”) technology.
During the reporting period, AXCESS announced that its new Dot™ micro-wireless technology received the Federal Communications Commission (FCC) approval, making it the world’s only approved hybrid passive and active micro-wireless solution. Also during the period, AXCESS announced relationships with Interface Security Systems, LLC, Vector Networks, Inc., Management Controls, Inc., as well as the implementation of its Micro-Wireless RFID system by the U.S. military to enable automatic inventory accounting and perimeter security for ordnance assets.
Amphion currently owns approximately 7.96% of AXCESS, valued at US $3.2 million.
·; FireStar Software, Inc. develops software that assists institutions in automating business transactions between multiple companies.
During the reporting period, FireStar completed a Convertible Note Offering of over US $900,000 and provided crucial support to its strategic partners, PrivateMarkets and DataTern. PrivateMarkets (which is 45% owned by FireStar) was spun out of FireStar in 2007 to develop a unique energy trading platform. PrivateMarkets has licensed the FireStar EdgeNode™ technology as a basis for its trading platform and is also exploring the potential to deploy the EdgeNode™ technology into other markets such as the secure electronic distribution of medical records. DataTern has begun to generate revenues from patent license agreements. FireStar has a 50:50 revenue sharing agreement once DataTern’s upfront costs have been recovered.
Amphion currently owns approximately 16.21% of FireStar, valued at US $4.7 million.
·; DataTern, Inc. is wholly owned by Amphion and was established in order to commercialise selected intellectual property assets from Amphion’s Partner Companies.
In June 2008, DataTern signed its first major non-exclusive patent license agreement with RedHat, Inc. As a result, revenues directly attributable to Amphion from the license fee, after costs, were approximately US $800,000. Currently, DataTern is entering into non-exclusive patent negotiations with several other major US corporations.
DataTern owns three fundamental U.S. Patents for Database Access Mapping and Unique Identifiers as a part of its ObjectSpark® technologies. These technologies are employed by both FireStar and PrivateMarkets products and following the agreement with RedHat the value of these patents has increased and will continue to increase as further license agreements are secured.
Amphion currently owns 100% of DataTern. As DataTern is 100% owned by Amphion, it is consolidated into Amphion’s financial statements.
·; Kromek Ltd. (formerly Durham Scientific Crystals Ltd.), a Durham University spin-out, produces semiconductor materials based upon Cadmium Telluride (“CdTe”) and Cadmium Zinc Telluride (“CZT”), the x-ray detector material of choice. Kromek uses a vapour phase growth method to produce crystals instead of a liquid phase method used by crystal manufacturers worldwide.
Notably the company has made progress in its strategy of selective forward integration to produce the detectors and systems designs capable of extracting the maximum informational and thus economic, value from its unique semiconductors. The company’s electronics and production capabilities have grown greatly over the period. In particular, the company has now developed expertise in the various interlinked areas required to allow direct materials identification, including data treatment algorithms. The company shortly expects to commence sales of its first Security Market product, an innovative liquid threat detection system addressing an urgent unmet need, which is being offered to airports worldwide. This system will enable the identification of the materials within an unopened bottle, within a few seconds. Distributors in a number of key Middle East markets have already been signed. This represents the first in a family of systems under active development which will address the problem of threat identification in hand and checked baggage.
The rebranding, and website launch which occurred in June 2008, represents one of various steps the company is making in developing its marketing and sales assets. The company has also recently appointed a highly experienced sales manager with over 20 year experience in the international aviation security market.
Amphion currently owns approximately 21.13% of Kromek, valued at US $19.6 million.
·; m2m Imaging Corp. is a spin-out from Columbia University and the University of Queensland, Australia. m2m specialises in developing high performance magnetic resonance imaging (“MRI”) coils and accessories, including cryogenic coils that allow for enhanced imaging, at significantly lower cost.
During the reporting period, m2m began taking orders for their Preclinical High Definition cryogenic coils. The company also moved its headquarters to Cleveland, Ohio and started operations there from 1 March 2008.
Amphion currently owns approximately 23.6% of m2m, valued at US $6 million.
·; Motif BioSciences, Inc. is a population genetics company focused on discovering genes associated with various diseases by utilising human genetics data from the Persian Gulf region and other selected population groups.
During the reporting period, Motif signed and announced three important partnerships: a) an agreement with Imperial College London to partner with Professor Philippe Froguel to study genetics, b) a partnership agreement with the Diabetes Foundation of Barbados to study the genetic causes of the renal and ophthalmic complications of Type II Diabetes, and c) a research agreement with the Dasman Centre for the Treatment of Diabetes in Kuwait.
Motif continues to conduct the most comprehensive study of the genetic causes of adult asthma worldwide in several countries in the Persian Gulf. The company’s scientists have made several new findings in our first project as a genetics partner with the Harvard School of Public Health on Post Traumatic Stress Disorder in Kuwait. Motif is in active discussions with academic and other partners to study specialised populations worldwide (USA, Sweden, Bermuda, India, South Africa, Nigeria) across a variety of common and rare diseases. The company is also actively pursuing projects on pharmacogenomics and drug re-profiling with selected pharmaceutical companies.
Amphion currently owns approximately 38.43% of Motif, valued at US $14 million.
·; MSA Holding B.S.C. is a Bahrain based investment company formed in 2007 by Amphion and its Kuwaiti partners.
During the reporting period, Amphion continued to work on the development of the two companies which are being incubated to be part of MSA in due course (Saydanah and Suvani).
Amphion currently owns 50% of MSA, valued at US $2.8 million.
·; Myconostica Ltd. is a Manchester University spin-out that specialises in a new type of ‘molecular’ diagnostic test for infectious diseases, particularly life-threatening respiratory fungal infections.
During the reporting period, the company closed a £5.4 million Series C Preferred financing from US, Middle Eastern, and European investors. The capital raised will support the launch and marketing of Myconostica’s first products, the MycXtra™ fungal DNA extraction system and Resp ASP+™ a real-time molecular test for Aspergillus and Pneumocystis, which will commence sales in Q3 2008.
Over the course of the reporting period, the management team has been further developed. Myconostica appointed Mr. Spencer Kerry, formerly of Ardana PLC, as Chief Financial Officer, and Dr. John Thornback became the full time COO. A search is well advanced for a CEO to replace Amphion’s Jerel Whittingham who is currently serving as interim CEO. The Board was also considerably strengthened with the addition of Dr. Ed Snape (Nexus), Mr. John Jeans (GE Healthcare), and Dr. David Holbrook (MTI Partners) as Non-executive Directors.
Amphion now owns approximately 22.96% of Myconostica, valued at US $5.8 million.
·; PrivateMarkets, Inc. is introducing the first automatic energy negotiation and execution system for bilateral, structured trading of energy products. PrivateMarkets’ product is an online service, available over the Internet, which creates a marketplace for the negotiation of contracts between anonymous, but prescreened, counterparties.
PrivateMarkets’ product is built on the (patented) EdgeNode™ platform technology licensed from FireStar and is initially being marketed to the electricity and gas markets in the US. PrivateMarkets plans to expand its operations to other commodity markets in the US, as well as globally, in due course. In the US alone, the total addressable market for the company is well in excess of US $1 billion per year.
During the reporting period, PrivateMarkets completed pilot tests with 13 consumers and generators in the Texas/ERCOT market and signed contracts with a number of major public utilities, retail electric providers, and power generators. Initial trading started on the PrivateMarkets system and this is expected to grow substantially in the next six months.
In April, PrivateMarkets successfully raised US $3.75 million in a Series A financing.
Amphion currently owns approximately 27.84% of PrivateMarkets, valued at US $3.2 million.
WellGen continues to build its intellectual property portfolio with the award in April of US Patent Number 7,351,739 for rabdosia compounds discovered at Rutgers and the uses for these compounds. WellGen is the exclusive licensee of this patent and is focused on augmenting the number of composition of matter patents in its portfolio.
Additional patent applications have been published and filed during the reporting period. Of note are the patent applications for an approach for managing the stresses of Type II Diabetes and a patent related to the human study completed at the Rutgers Human Performance Laboratory.
To supplement its internal lead generation activities, WellGen formalised several relationships with public and private research entities during the first half of 2008. These relationships have been established to generate opportunities for WellGen to in-license qualified leads. Among the agreements is one with the University of Mississippi’s National Center for Natural Products Research and another with a private natural product researcher and grower in North Carolina. A Joint Development Agreement to create a new bioactive food ingredient was entered into with a global manufacturer of specialty and intermediate ingredients for consumer products. This collaboration will complement the WellGen expertise in discovery and development with the manufacturing capabilities of the partner.
As contemplated when Dr. Kathleen Mullinix joined WellGen as CEO following the untimely death of Dr. David Evans in 2006, Dr. Mullinix will be stepping down as CEO effective 22 August 2008. Robert Bertoldi, Amphion President and CFO, will assume the position of interim CEO while a search is conducted. Dr. Mullinix has played a key role in stabilising the company and strengthening its management team.
During the reporting period, WellGen hired Robert Hellauer as Chief Financial Officer, who comes to WellGen with over thirty years of broad financial leadership in the pharmaceutical, consumer, and telecommunications industries.
Amphion currently owns approximately 14.94% of WellGen, valued at US $6.7 million.
| Amphion Innovations plc | |||||||||
| Condensed consolidated income statement | |||||||||
| For the six months ended 30 June 2008 | |||||||||
| Unaudited | |||||||||
| Notes | Six months | Six months | |||||||
| ended | ended | Year ended | |||||||
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |||||||
| Continuing operations | US$ | US$ | US$ | ||||||
| Revenue | 3 | 5,385,966 | 672,656 | 2,871,222 | |||||
| Cost of sales | 3 | (3,237,562) | - | - | |||||
| Gross profit | 2,148,404 | 672,656 | 2,871,222 | ||||||
| Administrative expenses | (3,882,771) | (1,894,214) | (5,877,946) | ||||||
|
|
|
| |||||||
| Operating loss | (1,734,367) | (1,221,558) | (3,006,724) | ||||||
| Fair value gains on investments | 7 | 11,800,211 | 4,671,461 | 13,549,980 | |||||
| Interest income | 135,457 | 31,057 | 136,467 | ||||||
| Other gains and losses | (10,958) | 4,140 | (113,419) | ||||||
| Finance costs | (1,787) | - | (1,192) | ||||||
|
|
|
| |||||||
| Profit before tax | 10,188,556 | 3,485,100 | 10,565,112 | ||||||
| Tax on profit | 5 | (165,792) | (76,000) | (125,977) | |||||
|
|
|
| |||||||
| Profit for the period | 10,022,764 | 3,409,100 | 10,439,135 | ||||||
| Earnings per share | 6 | ||||||||
| Basic | US | $ 0.08 | US | $ 0.04 | US | $ 0.10 | |||
| Diluted | US | $ 0.08 | US | $ 0.04 | US | $ 0.10 | |||
| Amphion Innovations plc | |||||
| Condensed consolidated balance sheet | |||||
| At 30 June 2008 | |||||
| Unaudited | Audited | ||||
| Notes | 30 June 2008 | 31 December 2007 | |||
| US$ | US$ | ||||
| Non-current assets | |||||
| Intangible assets | 2,269,208 | 2,274,636 | |||
| Fixtures, fittings and equipment | 26,825 | 28,161 | |||
| Security deposit | 121,694 | 121,694 | |||
| Investments | 7 | 65,961,923 | 51,642,725 | ||
| 68,379,650 | 54,067,216 | ||||
| Current assets | |||||
| Prepaid expenses and other receivables | 617,676 | 639,429 | |||
| Cash and cash equivalents | 1,871,888 | 4,594,007 | |||
| 2,489,564 | 5,233,436 | ||||
| Total assets | 70,869,214 | 59,300,652 | |||
| Current liabilities | |||||
| Trade and other payables | 2,865,367 | 2,469,742 | |||
|
|
| ||||
| Total liabilities | 2,865,367 | 2,469,742 | |||
| Net assets | 68,003,847 | 56,830,910 | |||
| Equity | |||||
| Share capital | 8 | 2,425,942 | 2,388,071 | ||
| Share premium account | 35,885,301 | 34,772,046 | |||
| Translation reserve | 1,907 | 2,860 | |||
| Retained earnings | 29,690,697 | 19,667,933 | |||
|
|
| ||||
| Total equity | 68,003,847 | 56,830,910 | |||
| Amphion Innovations plc | |||||||||||
| Condensed consolidated statement of changes in equity | |||||||||||
| For the six months ended 30 June 2008 | |||||||||||
| Unaudited | |||||||||||
| 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 | 200,688 | 4,233,282 | - | - | 4,433,970 | ||||||
| Incremental costs directly attributable | |||||||||||
| to issue of shares | - | (195,245) | - | - | (195,245) | ||||||
| Recognition of share-based payments | - | 32,572 | - | - | 32,572 | ||||||
| Exchange differences arising on | |||||||||||
| translation of foreign operations | - | - | 852 | - | 852 | ||||||
| Profit for the period | - | - | - | 3,409,100 | 3,409,100 | ||||||
|
|
|
|
|
| |||||||
| Balance at 30 June 2007 | 2,009,671 | 27,184,702 | 12,845 | 12,637,898 | 41,845,116 | ||||||
| Issue of share capital | 378,400 | 7,946,394 | - | - | 8,324,794 | ||||||
| Incremental costs directly attributable | |||||||||||
| to issue of shares | - | (583,134) | - | - | (583,134) | ||||||
| Recognition of share-based payments | - | 224,084 | - | - | 224,084 | ||||||
| Exchange differences arising on | |||||||||||
| translation of foreign operations | - | - | (9,985) | - | (9,985) | ||||||
| Profit for the period | - | - | - | 7,030,035 | 7,030,035 | ||||||
|
|
|
|
|
| |||||||
| Balance at 31 December 2007 | 2,388,071 | 34,772,046 | 2,860 | 19,667,933 | 56,830,910 | ||||||
| Issue of share capital | 8 | 37,871 | 792,844 | - | - | 830,715 | |||||
| Incremental costs directly attributable | |||||||||||
| to issue of shares | - | (34,458) | - | - | (34,458) | ||||||
| Recognition of share-based payments | 9 | - | 354,869 | - | - | 354,869 | |||||
| Exchange differences arising on | |||||||||||
| translation of foreign operations | - | - | (953) | - | (953) | ||||||
| Profit for the period | - | - | - | 10,022,764 | 10,022,764 | ||||||
|
|
|
|
|
| |||||||
| Balance at 30 June 2008 | 2,425,942 | 35,885,301 | 1,907 | 29,690,697 | 68,003,847 | ||||||
| Amphion Innovations plc | |||||
| Condensed consolidated cash flow statement | |||||
| For the six months ended 30 June 2008 | |||||
| Unaudited | |||||
| Six months | Six months | ||||
| ended | ended | Year ended | |||
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |||
| US$ | US $ | US $ | |||
| Operating activities | |||||
| Operating loss | (1,734,367) | (1,221,558) | (3,006,724) | ||
| Adjustments for: | |||||
| Depreciation of fixtures, fittings and equipment | 6,408 | 5,657 | 12,052 | ||
| Amortisation of intangible assets | 123,428 | - | - | ||
| Recognition of share based payments | 354,869 | 32,572 | 256,656 | ||
| Decrease (increase) in prepaid & other receivables | 21,753 | (1,885,942) | 619,512 | ||
| Increase (decrease) in trade & other payables | 395,625 | (475,281) | 1,119,756 | ||
| Interest expense | (1,787) | - | (1,192) | ||
| Income tax | (165,792) | (76,000) | (125,977) | ||
|
|
|
| |||
| Net cash used in operating activities | (999,863) | (3,620,552) | (1,125,917) | ||
| Investing activities | |||||
| Interest received | 135,457 | 31,057 | 136,467 | ||
| Proceeds on disposal of investments | - | 360,240 | 581,353 | ||
| Proceeds from repayment of note | 495,890 | - | - | ||
| Purchases of investments | (3,014,877) | (1,362,277) | (6,419,535) | ||
| Purchases of intangible assets | (118,000) | - | (2,274,636) | ||
| Purchases of equipment | (5,072) | (4,859) | (10,059) | ||
|
|
|
| |||
| Net cash used in investing activities | (2,506,602) | (975,839) | (7,986,410) | ||
| Financing activities | |||||
| Proceeds on issue of shares, net of share issuance costs | 796,257 | 4,238,725 | 11,980,385 | ||
| Proceeds on issue of promissory notes | 201,260 | - | - | ||
| Repayment of promissory notes | (201,260) | - | - | ||
|
|
|
| |||
| Net cash from financing activities | 796,257 | 4,238,725 | 11,980,385 | ||
| Net increase (decrease) in cash and cash equivalents | (2,710,208) | (357,666) | 2,868,058 | ||
| Cash and cash equivalents at the beginning of the period | 4,594,007 | 1,848,539 | 1,848,539 | ||
| Effect of foreign exchange rate changes | (11,911) | 4,922 | (122,590) | ||
|
|
|
| |||
| Cash and cash equivalents at the end of the period | 1,871,888 | 1,495,795 | 4,594,007 |
1. General information
The condensed consolidated interim financial statements for the six months ended 30 June 2008 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 2007 have been filed with the Registrar of Companies and contain a qualified audit report. 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 2007. During the period, the Group generated revenue from a new source, being the licensing of intellectual property and the related accounting policies are set out below.
Revenue recognition
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.
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 recognized 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.
3. Revenue
An analysis of the Group's revenue is as follows:
| Six months ended | Six months ended | Year ended | |||
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |||
| US $ | US$ | US$ | |||
| Continuing operations | |||||
| Advisory fees | 1,135,966 | 672,656 | 2,871,222 | ||
| License fees | 4,250,000 | - | - | ||
|
|
|
| |||
| 5,385,966 | 672,656 | 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 $8,000,000 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
3. Revenue, (continued)
enforcement program. The note is due 18 February 2013 and is secured by the assets of DataTern, Inc. There was no outstanding amount of promissory note payable as at 30 June 2008.
In June 2008, IP Navigation Group, LLC assisted in obtaining a non-exclusive license of DataTern's key database patents to RedHat, Inc. of US $4,250,000. As part of the agreement, IP Navigation Group, LLC received an advisory fee of eighty percent of the gross proceeds less the repayment of expenses funded by IP Navigation Group, LLC and related interest which amounted to US $203,047, and expenses of third parties. The advisory fee totaled US $3,237,562. The advisory fee will be reduced on a sliding scale.
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
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.
Segment information about these businesses 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 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 | ||||||
| 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 | ||||||
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 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)
For management purposes for 30 June 2007, the Group was organised into two business segments - advisory services and investing services.
| Advisory | Investing | ||||||||||||||||||
| services | activities | Eliminations | Consolidated | ||||||||||||||||
| Six months | Six months | Six months | Six months | ||||||||||||||||
| ended | ended | ended | ended | ||||||||||||||||
| 30 June 2007 | 30 June 2007 | 30 June 2007 | 30 June 2007 | ||||||||||||||||
| US $ | US $ | US $ | US $ | ||||||||||||||||
| REVENUE | |||||||||||||||||||
| External advisory fees | 672,656 | - | - | 672,656 | |||||||||||||||
| Inter-segment fees | - | 327,056 | (327,056) | - | |||||||||||||||
| Total revenue | 672,656 | 327,056 | (327,056) | 672,656 | |||||||||||||||
| Administrative expenses | (446,956) | (1,774,314) | 327,056 | (1,894,214) | |||||||||||||||
|
|
| ||||||||||||||||||
| Segment result | 225,700 | (1,447,258) | - | (1,221,558) | |||||||||||||||
| Fair value gains on investments | - | 4,671,461 | - | 4,671,461 | |||||||||||||||
| Interest income | 222 | 30,835 | - | 31,057 | |||||||||||||||
| Other gains and losses | - | 4,140 | 4,140 | ||||||||||||||||
| Profit before tax | 225,922 | 3,259,178 | - | 3,485,100 | |||||||||||||||
| Income taxes | (76,000) | - | - | (76,000) | |||||||||||||||
|
|
| ||||||||||||||||||
| Profit after tax | 149,922 | 3,259,178 | - | 3,409,100 | |||||||||||||||
| Advisory | Investing | ||||||||||||||||||
| services | activities | Eliminations | Consolidated | ||||||||||||||||
| Six months | Six months | Six months | Six months | ||||||||||||||||
| ended | ended | ended | ended | ||||||||||||||||
| 30 June 2007 | 30 June 2007 | 30 June 2007 | 30 June 2007 | ||||||||||||||||
| US $ | US $ | US $ | US $ | ||||||||||||||||
| OTHER INFORMATION | |||||||||||||||||||
| Segment assets | 762,482 | 42,271,781 | (314,442) | 42,719,821 | |||||||||||||||
| Segment liabilities | 222,326 | 961,567 | (309,188) | 874,705 | |||||||||||||||
| Additions to fixtures, fittings & equipment | 3,864 | 995 | - | 4,859 | |||||||||||||||
| Depreciation | 2,336 | 3,321 | - | 5,657 | |||||||||||||||
| Advisory fees settled in equity instruments | - | 32,572 | - | 32,572 | |||||||||||||||
There were not costs related to the intellectual property segment for the period ended 30 June 2007.
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 2008 | 30 June 2007 | |||
| US $ | US $ | |||
| United States | 714,450 | 528,875 | ||
| United Kingdom | 421,516 | 143,781 | ||
| 1,135,966 | 672,656 | |||
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 2007 | |
| US$ | US$ | |
| United States | 4,250,000 | - |
| United Kingdom | - | - |
| 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 2008 | 30 June 2007 | 30 June 2008 | 30 June 2007 | ||||
| US $ | US $ | US $ | US $ | ||||
| United States | 45,464,104 | 36,278,063 | 119,686 | 3,864 | |||
| United Kingdom | 25,405,110 | 6,441,758 | 3,386 | 995 | |||
| 70,869,214 | 42,719,821 | 123,072 | 4,859 | ||||
5. 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 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 $ | |||
| Profit before tax | 10,188,556 | ||
| Tax at the Isle of Man income tax rate of 0% | - | ||
| Effect of different tax rates of subsidiaries | |||
| operating in other jurisdictions | 165,792 | ||
|
| |||
| Current tax | 165,792 |
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 2008 | 30 June 2007 | 31 December 2007 | |||||||||||
| 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) | 10,022,764 | 3,409,100 | 10,439,135 | ||||||||||
| Number of shares | |||||||||||||
| Six months | Six months | ||||||||||||
| ended | ended | Year ended | |||||||||||
| 30 June 2008 | 30 June 2007 | 31 December 2007 | |||||||||||
| Weighted average number of ordinary shares for | |||||||||||||
| the purposes of basic earnings per share | 129,349,031 | 100,490,169 | 108,073,228 | ||||||||||
| Effect of dilutive potential ordinary shares: | |||||||||||||
| Share options | 61,312 | 98,747 | 163,733 | ||||||||||
|
|
| ||||||||||||
| Weighted average number of ordinary shares for | |||||||||||||
| the purposes of diluted earnings per share | 129,410,343 | 100,588,916 | 108,236,961 |
7. Investments
At fair value through profit or loss
| 30 June 2008 | 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. | 3,160,046 | 3,154,794 | 5,252 | 3,088,760 | 2,559,521 | 529,239 | |||||||||||||||||||
| Private companies: | |||||||||||||||||||||||||
| FireStar Software, Inc. | 4,748,682 | 4,941,783 | (193,101) | 4,783,933 | 4,941,783 | (157,850) | |||||||||||||||||||
| Kromek Limited (Durham Scientific) | 19,567,598 | 3,274,915 | 16,292,683 | 9,689,225 | 2,884,056 | 6,805,169 | |||||||||||||||||||
| Motif BioSciences, Inc. | 14,047,681 | 6,725,624 | 7,322,057 | 12,791,591 | 5,464,624 | 7,326,967 | |||||||||||||||||||
| MSA Holding B.S.C. | 2,781,743 | 1,500,000 | 1,281,743 | 2,929,468 | 1,500,000 | 1,429,468 | |||||||||||||||||||
| m2m Imaging Corp. | 5,966,391 | 1,642,454 | 4,323,937 | 4,015,826 | 1,636,268 | 2,379,558 | |||||||||||||||||||
| Myconostica Ltd. | 5,751,635 | 2,745,331 | 3,006,304 | 5,847,695 | 2,745,331 | 3,102,364 | |||||||||||||||||||
| PrivateMarkets, Inc. (Energy Trading) | 3,200,669 | 1,955,669 | 1,245,000 | 1,690,000 | 1,690,000 | - | |||||||||||||||||||
| WellGen, Inc. | 6,737,478 | 4,814,936 | 1,922,542 | 6,806,227 | 4,814,936 | 1,991,291 | |||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||
| 65,961,923 | 30,755,506 | 35,206,417 | 51,642,725 | 28,236,519 | 23,406,206 | ||||||||||||||||||||
| 30 June 2008 | 31 December 2007 | ||||||||||||||||||||||||
| Unrealised | Unrealised | ||||||||||||||||||||||||
| Fair Value | Cost | gain/(loss) | Fair Value | Cost | gain/(loss) | ||||||||||||||||||||
| US $ | US $ | US $ | US $ | US $ | US $ | ||||||||||||||||||||
| Stocks | 53,246,544 | 22,969,181 | 30,277,363 | 39,482,486 | 20,054,147 | 19,428,339 | |||||||||||||||||||
| Promissory notes | 3,879,598 | 3,879,598 | - | 4,275,645 | 4,275,645 | - | |||||||||||||||||||
| Warrants & options | 8,835,781 | 3,906,727 | 4,929,054 | 7,884,594 | 3,906,727 | 3,977,867 | |||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||
| 65,961,923 | 30,755,506 | 35,206,417 | 51,642,725 | 28,236,519 | 23,406,206 | ||||||||||||||||||||
7. Investments, (continued)
At 30 June 2008 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 Limited (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. 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 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 30 June 2008, 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 | 7.96 | |||||||
| FireStar Software, Inc. | United States of America | 16.21 | |||||||
| Kromek Limited | England & Wales | 21.13 | |||||||
| Motif BioSciences, Inc. | United States of America | 38.43 | |||||||
| MSA Holding B.S.C. | Kingdom of Bahrain | 50.00 | |||||||
| m2m Imaging Corp. | United States of America | 23.60 | |||||||
| Myconostica Ltd. | England & Wales | 22.96 | |||||||
| PrivateMarkets, Inc. | United States of America | 27.84 | |||||||
| WellGen, Inc. | United States of America | 14.94 | |||||||
8. Share capital
| 30 June 2008 | |||||
| £ | |||||
| Authorised: | |||||
| 150,000,000 ordinary shares of 1p each | 1,500,000 | ||||
| Number | £ | US$ | |||
| Balance as at 31 December 2007 | 128,292,029 | 1,282,920 | 2,388,071 | ||
| Issued in lieu of directors fees and employee bonuses: | |||||
| Ordinary shares of 1 p each | 246,603 | 2,466 | 4,884 | ||
| Ordinary shares of 1p each | 521,897 | 5,219 | 10,320 | ||
| Issued for cash: | |||||
| Ordinary shares of 1p each | 1,136,364 | 11,364 | 22,667 | ||
|
|
|
|
|
| |
| Balance as at 30 June 2008 | 130,196,893 |
| 1,301,969 |
| 2,425,942 |
During the six months ended 30 June 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 21p per share (US $105,000).
On 1 April 2008, the Company issued 521,897 ordinary 1p shares at a premium of 21p per share (US $227,040).
On 4 April 2008, the Company issued 1,136,364 ordinary 1p shares at a premium of 21p per share (US $498,675).
9. Share based payments
In 2006 the Group established the 2006 Unapproved Share Option Plan and it was adopted pursuant to a resolution passed on 8 June 2006. Under this plan, the Compensation Committee may grant share options to eligible employees, including Directors, to subscribe for ordinary shares of the Company. The number of Shares over which options may be granted under the Unapproved Plan cannot exceed ten percent of the ordinary share capital of the Company in issue on a fully diluted basis. The Plan will be administered by the Compensation Committee. The number of shares, terms, performance targets and exercise period will be determined by the Compensation Committee.
During 2008, 34,091 options have been issued. These options expire after five years from the date of grant and were issued fully vested.
| 2008 | |||
| Weighted | |||
| average | |||
| Number of | exercise | ||
| share options | price (in £) | ||
| Outstanding at beginning of period | 10,136,445 | 0.23 | |
| Granted during the period | 34,091 | 0.22 | |
| Outstanding at the end of the period | 10,170,536 | 0.23 | |
| Exercisable at the end of the period | 1,562,205 | 0.23 | |
The options are recorded at fair value on the date of grant using the Black-Scholes model. The inputs into the model are as follows:
| 2008 | |
| US$ | |
| Weighted average share price | 0.48 |
| Weighted average exercise price | 0.44 |
| Expected volatility | 39% |
| Expected life | 5 years |
| Risk free rate | 3.49% |
| 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 2008, options were granted on 4 April. The aggregate of the estimated fair values of the options is US $6,965. The Group recognized total costs of US $354,869 relating to equity-settled share based payment transactions in 2008 which were expensed in the income statements during the period.
10. Events after the balance sheet date
In July 2008, the Company made advances of US $150,000 under a promissory note from m2m Imaging Corp.
In July and August 2008, the Company made advances of US $136,000 under a promissory note from Motif BioSciences Inc.
In July 2008, the Company made advances of US $150,000 under a promissory note from PrivateMarkets Inc.
In August 2008, the Company made advances of US $50,000 under a promissory note from AXCESS International Inc.
11. 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. At 30 June 2008, the amount owed by Motif to the Group is US $36,800.
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 during the period ended 30 June 2008.
A subsidiary of the Company has entered into an agreement with Kromek Limited ("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 expires on 21 September 2008. The subsidiary's fee for the period ended 30 June 2008 was US $60,000. Amphion Innovations US Inc. also received US $113,876 as a fund raising fee for the period ended 30 June 2008.
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 2008 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 2009 and shall automatically renew for successive one year periods. Amphion Innovations US Inc.'s fee for the period ended 30 June 2008 was US $120,000 which was due at 30 June 2008.
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 is £4,500 and expires 1 December 2008. An additional £2,250 per month is charged while Jerel Whittingham is acting CEO of Myconostica. The subsidiary's fee for the period ended 30 June 2008 is £43,750 or US $78,950. Amphion Innovations US Inc. also received US $158,637 as a fund raising fee for the period ended 30 June 2008.
11. Related party transactions, (continued)
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 2008 and will renew on an annual basis until terminated by either party. Amphion Innovations US Inc.'s fee for the period ended 30 June
2008 was US $90,000. Amphion Innovations US Inc. also received US $130,000 as a fund raising fee for the period ended 30 June 2008.
A subsidiary of the Company has entered into an agreement with WellGen, Inc. ("WellGen") to provide advisory and consulting services. Richard Morgan, a Director of the Company, is also a Director of WellGen. The fee under this agreement is US $60,000 per quarter. The agreement is effective until 20 June 2009 and will renew annually for subsequent 12-month periods until terminated by either party. The subsidiary's fee for the year ended 30 June 2008 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 2009 and will renew annually for subsequent 12-month periods unless terminated by either party. The subsidiary's fee for the year ended 30 June 2008 was US $60,000. The 2007 and 2008 fee totaling US $125,000 are due at 30 June 2008. Amphion Innovations US Inc. also received US $109,450 as a fund raising fee for the period ended 30 June 2008.
The Directors' direct ownership in the Partner Companies is as follows:
| Fully diluted | |||||
| % owned by | |||||
| Investment company | directors | ||||
| AXCESS International, Inc. | 5.40% | ||||
| FireStar Software, Inc. | 1.48% | ||||
| Kromek Limited | 1.69% | ||||
| Motif BioSciences, Inc. | 3.87% | ||||
| Myconostica Ltd. | 0.35% | ||||
| PrivateMarkets, Inc. | 1.03% | ||||
| WellGen, Inc. | 4.55% |