AMP.L Regulatory News (AMP)

23 June 2015

Amphion Innovations plc

Preliminary Results for the year to 31 December 2014

London and New York - Amphion Innovations plc (LSE: AMP) and its subsidiaries ("Amphion" or "the Group"), the developer of medical and technology businesses, today announces its Preliminary Results for the year ended 31 December 2014.

Key Points:

· Unadjusted Net Asset Value ("NAV") per Share1 at 31 December 2014 was 0.7p (1.1 US cents) compared to 6p (10 US cents) at 31 December 2013.

· Adjusted NAV per Share2 at 19 June 2015 was 10p (15.7 US cents).

· Successful AIM flotation of Motif Bio plc ("Motif") on 2 April 2015 at 20p per share.

· In April 2015, Motif obtained agreement from the U.S. Food and Drug Administration (the "FDA") to proceed with its proposed clinical development programme for iclaprim.

· Since listing, Motif's shares have risen sharply and are trading near 60p per share at which level Amphion's holding is worth approximately £25 million.

· Following the favourable December 2014 Appeals Court decision, DataTern expects to see some tangible progress during the next six to 12 months.

· Business model continues to focus on starting and building high potential companies based on innovative and proprietary, but basically proven, technology.

Richard Morgan, CEO of Amphion Innovations plc commented:

"Our ability to develop the Intellectual Property ("IP") portfolios in each of our Partner Companies is a critical success factor but our goal in every case is to build a good company that will be a commercial success. The evolution of the business plan and business model of every company needs continuous attention and Amphion is committed to providing that to each of our Partner Companies. Despite our cautious approach to valuation over the last few years, we continue to see opportunity to build and extract value from each of them, in addition to the IP licensing programme being pursued directly by DataTern.

"Following its successful IPO in April 2015, we are committed to helping Motif become a major player in the antibiotic biopharmaceutical world. In addition, we now have the opportunity to move forward one or two other Partner Companies. We look forward to the future with renewed confidence and to being able to report further progress with Motif, DataTern and other Partner Companies in due course."

For further information please contact:

Amphion Innovations plcCharlie Morgan+1 (212) 210 6224

Yellow Jersey PR LimitedDominic Barretto / Fiona Walker+44 7768 537 739Panmure Gordon (UK) Limited (Nominated Adviser and Joint Corporate Broker)Freddy Crossley / Duncan Monteith (Corporate Finance)Charles Leigh-Pemberton (Corporate Broking)+44 020 7886 2500

Northland Capital Partners Limited (Joint Corporate Broker)

Gerry Beaney / David Hignell (Corporate Finance)

John Howes / Mark Treharne (Corporate Broking)

+44 (0) 20 7382 1100

Plumtree Capital Limited (Adviser to Amphion)

Stephen Austin

+44 207 183 2493

+1 646 568 7502

Chairman and CEO's Statement

Revenue in 2014 was US $484,700 (2013: US $1,016,990) while total administrative expenses were US $3,494,351 in 2014 compared to US $3,593,735 in 2013. As a result, the operating loss for the year was US $3,009,651 compared with US $2,576,745 as reported in the same period of last year. Revenue remained below that of the prior period due partly to the absence of licensing income from DataTern and partly from the inability of our Partner Companies to contribute management fees.

Total administrative expenses have two different components: the general overheads and operating costs of the parent company and the expenses incurred within and by DataTern, our wholly-owned subsidiary. The latter are consolidated into the total but are dictated by the activity related to the IP licensing programme, which is discussed further below. General overhead and operating expense (i.e. excluding expenses related to DataTern) were again tightly controlled at US $1,754,661, a like for like reduction from the previous year (2013: US $2,303,269). DataTern expenses were higher in 2014, due mainly to expenses incurred in relation to experts hired by its legal counsel.

During the reporting period, the share price of Kromek plc dropped from £0.755 to £0.34 and, as a result, the value of the Amphion's holding of Kromek shares fell to US $6,594,390 from US $15,579,671. This fall accounted for substantially all of the decrease in the Company's Assets during the period. Combined with a rise in total liabilities of US $4,131,542, the Net Asset Value ("NAV") per ordinary share at 31 December 2014 was US $0.011 (£0.007) compared to US $0.10 (£0.06) at 2013.

Amphion's holding of IP assets is valued at amortised cost of US $430,100. In addition to the initial purchase of these IP assets from our Partner Company FireStar Software, Amphion has made additional substantial investment in these assets. That investment has been expensed as incurred and the value of those assets continues to be carried only at amortised historical cost. The Directors believe that the realisable value of the intellectual property assets held by DataTern is substantially in excess of the carrying value and the incremental investments being made in the pursuit of infringers of the IP will generate a significant profit. We believe that if we are successful in concluding licensing agreements with the various infringing parties at levels that meet our expectations, the NAV per ordinary share would be significantly higher.

Operating cash flow was again negative in 2014 at US $1,976,585 compared to negative US $1,701,969 in 2013. Some of this cash was used to support the further development of Motif in the run up to its IPO. The resulting cash requirement to fund the business was raised from an institutional investor in the form of loans, as previously reported.

Motif BioSciences

During 2014, Motif made further progress in developing its primary antibiotic programme. Early in 2015 Motif completed a transformational merger that gave Motif worldwide rights to a clinical stage antibiotic designed to be effective against MRSA and multi-drug resistant bacteria. Following the successful IPO and listing on AIM on 2 April 2015 at £0.20 per share, Motif obtained agreement from the U.S. Food and Drug Administration (the "FDA") to proceed with its proposed clinical development programme for iclaprim. Since listing, Motif's shares have risen sharply and are trading near £0.60 per share at which level Amphion's holding is worth approximately £25 million.

The decision by Motif to focus on its antibiotic programme is proving very timely given the growing recognition of the worldwide problems caused by resistance. In July 2014, Prime Minister David Cameron announced the launch of a global taskforce, under the leadership of Jim O'Neill, to coordinate an international effort to combat antibiotic resistant superbugs. Prime Minister Cameron commented, "If we fail to act, we are looking at an almost unthinkable scenario where antibiotics no longer work and we are cast back to the dark ages of medicine where treatable infections and injuries can kill once again". Motif's mission is to address this global health crisis by developing new antibiotics that work in different ways to those commonly used today.

Iclaprim was originally developed by Hoffman-La Roche Inc. and completed comprehensive development in 2008, including two Phase 3 trials with over 900 patients being treated, half of whom were treated with this antibiotic. Iclaprim has a novel mechanism of action and enjoys a number of important clinical and commercial attributes, such as a very low propensity to develop resistance, which has been demonstrated in vitro. Although the FDA declined to approve the drug at the time, despite having met the original goals agreed with the agency, the FDA confirmed that they were satisfied with the safety profile of iclaprim and this was confirmed in Motif's April meeting with the agency. Motif is now planning to begin a new Phase 3 trial by the end of the year and is confident the drug will meet the new endpoints. If all goes according to plan, Motif could have the drug on the market in 2018.

DataTern and the Intellectual Property Licensing Programme

In April 2014, DataTern received a ruling from the Federal Circuit Court of Appeal ("FCCA"), which its legal advisers considered favorable. Following that ruling, DataTern submitted a request to the FCCA for a reconsideration of certain aspects of the ruling, which were denied in July 2014 and so the ruling received in April became final. As a result the case in New York was terminated, with the result that the previously unfavorable Markman ruling of August 2012 was, in the case of Microsoft, nullified.

In late December 2014, DataTern received a ruling of its appeal in the MicroStrategy case that our legal advisers considered to be clearly favorable. There are 7 defendants in the MicroStrategy case, which is now starting to move ahead. In May 2015 there was a hearing on two summary judgment motions filed by the defendants and a ruling in that hearing has not yet been handed down.

The cases in Texas, which were on hold pending the Microsoft appeal, are expected to move ahead again in the next six months and we expect to have a Markman hearing in Texas in 2016. Following some settlements and dismissals there are now 5 defendants remaining in Texas.

Our legal team, supported by our extensive team of technical and patent experts, continues to believe in the strength of our IP. Both of the key patents have completed a comprehensive re-examination by the United States Patent and Trademark Office ("USPTO") and successfully emerged both fully validated and with additional claims added. It remains the firm and considered opinion of our team that the two patents are both valid and being infringed by a wide range of companies that are practicing this critical art. We believe that a Claim Construction ruling, which is fully reflective of our interpretation of the claims of the patents, would establish significant infringement by a large number of companies and we believe that we should be able to generate a significant amount of revenue from this asset over the next few years.

Under the revenue sharing agreement with DataTern, Amphion Partner Company, FireStar Software (where the technology and patents were originally developed) would share directly in the revenue stream.

Our goal is to arrive at fair licensing agreements with these and other users of the technology in order to give DataTern and FireStar a fair return on the substantial investment they have made. If we are successful, we believe that the value of the net income to DataTern should be substantially in excess of its carrying value.

Building Value in the Partner Companies

Since flotation, our basic business model has been to start and build high value-potential companies based on innovative and proprietary, but basically proven, technology. Our ability to select good IP and to develop the IP portfolios in each of our Partner Companies is a critical success factor and is getting steadily stronger as we deepen our knowledge and experience in this area. This knowledge underpins Amphion's investment in each Partner Company at the outset and as it develops. However, our primary goal in every company is the development of a successful business model and operating capabilities that can utilise the technology to provide innovative products, generate revenue, and make profits. Despite our cautious approach to valuation over the last few years, we continue to see a lot of opportunity to build and, in due course, extract value from each one of our Partner Companies, in addition to the IP licensing programme being pursued directly by DataTern.

Following the successful IPO for Motif on AIM in April 2015, we have the opportunity to move forward one or two other Partner Companies and to start to consider, for the first time in over five years, how best to grow the business in the future.

m2m is poised to make good progress. We anticipate being able to revive the core business and we can see a number of ways in which we can enlarge and improve the scope of the business by combining with other emerging companies. MRI is a medical imaging modality that is being increasingly widely used in pre-clinical investigations as well as for clinical diagnostics. m2m has a number of patents on the basic technology which is aimed at improving the diagnostic quality of MRI images and the company's leadership has identified a number of pathways to expand its footprint in the general area.

Despite repeated profit warnings since Kromek's IPO, and the disappointing performance of the share price, we continue to believe that the company's technology platform holds great promise. With the acquisition of eV Products, Kromek gained one of the leading cadmium zinc telluride ("CZT") production capabilities in the world. As the cost of producing this material becomes competitive with scintillator technology, the opportunity exists for a lasting shift to CZT-based detector systems, bringing the benefits of multispectral imaging to CT systems and nuclear medicine where SPECT is used.

In April, the case Axcess brought against Baker & Botts LLP, the law firm, went to the jury which returned a verdict in favour of Axcess of US $40.5 million. The judge then overruled this verdict. Axcess is in the process of pursuing an appeal to the Texas Court of Appeals, which should be heard in the next six months. In parallel, we have worked closely with Axcess' legal advisers to evaluate the extent to which all 13 patents in its portfolio are being infringed. It is clear that many companies are now offering products or services that incorporate some of the basic wireless technology developed by Axcess over the last 15 years. A number of companies in the transportation, security and other sectors appear to be infringing one or more of these patents and the company has recently initiated a claim for a licence from one of the Fortune 500 companies where the analysis shows this to be the case.

During 2014, FireStar was notified by the USPTO of the grant of an additional patent relating to its innovative messaging technology. FireStar's technology is incorporated in its EdgeNode™ product and enables companies to facilitate low-cost, secure, machine-to-machine messaging, in a novel architecture, which is well suited to the needs of the healthcare and financial industries.

WellGen has made further progress in the development of a novel functional beverage based on its patented anti-inflammatory ingredient. It has reached an agreement in principle to move forward with a US-based beverage company that has established distribution channels in the Mid-West of the US, with an opportunity to expand to other US markets and beyond.

Further developments within each of the Partner Companies can be found in the Partner Company Summaries section.

Financing

Financial support for Amphion over the last few years has come, for the most part, from the Directors and the management team. The team provided additional support in 2014 and Amphion was able, for the first time, to access a loan facility granted by an institutional lender. At the time we entered into this arrangement we saw it as an opportunity to use the value of our publicly traded assets as security for a loan to bridge the company to the IPO of Motif. That approach has served the Company well. The amount outstanding under this facility at the end of the financial year was US $2,575,000.

Since the end of the reporting period Amphion was able to access the capital markets again on two occasions in April and June of the current year, raising a total of £2,119,683.

We have made a substantial investment in the pursuit of good outcomes for DataTern in the form of settlements with the many companies that we believe have infringed and who continue to infringe this important technology. If we are successful in achieving these goals, then cash flow from DataTern should allow us to pay down the loans on our balance sheet and support our other Partner Companies.

Prospects for 2015 and Beyond

The successful IPO of Motif has transformed Amphion's financial condition and prospects. Motif listed on AIM in early April at £0.20 per share and has recently been trading near £0.60 per share. As indicated above, on a pro-forma basis this would result in a massive improvement in the Company's balance sheet and Net Asset Value.

We believe Motif has a very bright future and we are committed to helping the company to become a major player in the antibiotic biopharmaceutical world.

We remain steadfast in our belief in the strength and validity of the DataTern patents. With the Appeals Court decision in hand we expect to see some tangible progress in these programmes during the next six to 12 months.

The Company's consolidated balance sheet includes all the liabilities of its subsidiary DataTern but very little value for the assets of that company. If both assets and liabilities of DataTern were completely excluded from the calculation, or a Fair Value estimate of the DataTern assets included on the balance sheet and the current market value was used for Motif, we believe the pro-forma Net Asset Value at the present time would be over £0.10 per share based on the current issued and outstanding shares.

As expected, the recovery in the stock market and the IPO market in particular has led to an improvement in the overall climate for our business. With the transformation in Motif's business, we have been able to take advantage of these improved market conditions and with the sharp rise in the valuation of Motif since the IPO we have been able to approach the equity capital markets again for the first time in over seven years. We are pleased to be able to focus on the future once again and look forward to reporting further progress with Motif, DataTern and the other Partner Companies.

R. James Macaleer Richard C.E. Morgan

Chairman Chief Executive Officer

Partner Company Summaries

Axcess International provides intelligent wireless ID systems under the ActiveTracTM brand for improving security, safety, and productivity in business. Its patented MicroWireless™ technology platform delivers local location identification, tracking, and control solutions for enterprise personnel and assets. Axcess has a portfolio of important patents on many different aspects of RFID technology and is seeking licensing agreements with companies that are using its proprietary technology. Over 500 prospective entities have been identified to date and are sized at over US $250 million of potential royalty value. In January 2014, Axcess was awarded a novel new patent related to the use of RFID via cellular networks. Part of the patent programme is a suit against Savi Technologies ("Savi") for patent infringement. That case is on hold as the patent that is the basis of the suit is being re-examined by the US Patent and Trademark Office. Another part of the programme is a suit against the former patent counsel Baker & Botts LLP for negligence, breach of fiduciary duty, and fraud for acting for both Savi and Axcess on patent matters without Axcess's consent. On 15 May 2014 the jury in the Baker & Botts case returned a verdict that found that Baker & Botts had acted with negligence and was liable to Axcess for damages of US $40.5 million. That verdict followed a direction by the judge to restrict Axcess's claim to an issue of negligence which is subject to a two year statute of limitations, which prevented Axcess from collecting the damages. In March 2015, Axcess filed an appeal with the Texas Appeals Court seeking a new trial.

FireStar Software, Inc. is a leader in application-to-application electronic message exchange between independent entities. FireStar's EdgeNode® messaging and data translation platform empowers companies to exchange information securely without the need to replace existing software systems or to implement expensive custom coding. It accesses, moves, and transforms data from its source to a required destination format. EdgeNode® brings the total solution cost-point low enough to open a broader range of businesses in many industries to innovative new ways to share and leverage information. FireStar was instrumental in the development of the Model Driven Message Interoperability (MDMI) industry standard for data transformation. In 2014, the standard continued to gain acceptance by healthcare industry groups and saw its first practical implementation. The company continues to believe the standard will gain broad acceptance within U.S. healthcare and that its EdgeNode® platform will benefit. Spending on information solutions for healthcare in the US is in excess of US $40 billion annually. FireStar is working with fellow Amphion Partner Company, PrivateMarkets, Inc., to identify applications within healthcare that will demonstrate the high value of the FireStar platform. In late 2014, FireStar announced that it had recruited Dr. John Amatruda to the Company's Advisory Board. Dr. Amatruda brings significant expertise in the area of new drug development and clinical trials at Bayer and Merck. FireStar currently holds four granted U.S. patents in the area of information message exchange with another two patent applications pending. FireStar also has a participation in the revenue stream from DataTern's IP licensing programme and has an equity holding in PrivateMarkets.

Kromek Group plc (LSE: KMK) is an Anglo-American platform technology company that provides digital colour x-ray and gamma ray detection and imaging solutions. Its products enable direct materials identification in the security, nuclear, and medical markets. The company has operations in the United Kingdom as well as Pennsylvania and California in the United States. Selling internationally, with partnerships or distribution channels in Asia, Europe, and North America, Kromek's global customer base includes national governments and regulatory bodies, international airports, research institutes, major energy providers, and some of the world's largest technology and medical equipment groups. Kromek announced for the year ending 30 April 2014 revenues of £6 million and pre-tax losses of £4.3 million. For the year ending 30 April 2015 Kromek issued a trading update that stated that revenues would be £8.1 million and that during the second six months of the year earnings before interest, taxes, depreciation and amortization would be positive. Kromek also reaffirmed the underlying growth dynamic including the signing of multiple contracts in all three of their target segments.

m2m Imaging has specialised capabilities in a range of technologies that allow novel materials and design of the coils that act as receivers in MRI systems. The company's focus to date has been on preclinical applications of imaging system accessories (coils and related products). m2m's products are being developed to serve systems that range from 0.2T to 21T in field strength. m2m specialises in custom developments to specific research requirements. The company's business plan envisages a family of surface coils, volume coils, arrays, and multi element Hi B1 field uniformity BioSAW coils, some of which are available as stand-alone coils or integrated into more complete systems. m2m builds coils and coil systems for a wide range of manufacturers and has over 4000 products in use in major university and pharmaceutical labs around the world. The company plans to build on its existing presence in the preclinical market and, in due course, to develop novel coil components for the clinical imaging systems market based on the same materials science and RF technologies.

Motif Bio plc (LSE: MTFB) is developing novel antibiotics designed to be effective against serious and life-threatening infections caused by multi-drug resistant bacteria. Motif has a lead antibiotic candidate, iclaprim, and MTF-001, a preclinical programme to design a best-in-class dihydrofolate reductase inhibitor ("DHFRi"). Discussions and negotiations with academic institutes are underway to build a portfolio of antibiotic candidates through licensing. It is anticipated that Motif's lead antibiotic candidate could be ready for commercialisation as early as 2018. Motif became a public company on the London Stock Exchange and admission and trading of its Ordinary Shares commenced on 2 April 2015 on AIM. On 28 May 2015, Motif announced receipt of the official meeting minutes from the U.S. Food and Drug Administration ("FDA") guidance meeting which was held on 14 April 2015. The minutes confirm the FDA's agreement with Motif's Phase 3 clinical development programme for iclaprim, a broad-spectrum antibiotic designed to be effective against multi-drug resistant bacteria. Iclaprim is being developed as an intravenous ("IV") formulation to treat acute bacterial skin and skin structure infections ("ABSSSI") and hospital acquired bacterial pneumonia ("HABP") caused by Gram positive pathogens, including resistant strains such as methicillin-resistant Staphylococcus aureus ("MRSA") and multi-drug resistant Streptococcus pneumoniae ("MDRSP"). The FDA has confirmed that two successful Phase III trials are required for the approval of iclaprim. In June 2015, Motif announced it had signed Letters of Intent and interim agreements with a leading global Clinical Research Organization ("CRO"). Under the terms of these interim agreements, the CRO will undertake preparations for two Phase 3 trials. Motif expects to begin the Phase III trials in the second half of 2015.

PrivateMarkets, Inc. has continued working closely with fellow Amphion Partner Company, FireStar Software, on applications of its software and the FireStar EdgeNode® platform within the healthcare industry. During 2014, PrivateMarkets decided to focus on applications within the new drug and medical device development segments of U.S. healthcare. This segment has many of the same information sharing issues present in healthcare delivery with an opportunity for a superior solution value proposition. The U.S. spends over US $25 billion annually to conduct clinical trials on new drugs. More effective use of software for data collection and analysis is a key to controlling or reducing these costs. The U.S. currently spends over US $3 billion annually on software to support clinical trials. PrivateMarkets has one granted U.S. patent with a second application pending.

WellGen, Inc. is at the crossroads of food and pharmaceuticals, developing natural products with medicinal properties, backed by rigorous scientific research. WellGen's products have applications in the management of chronic inflammation-based disease, consumer products, and pet products. In 2014, WellGen completed experiments that were funded by an award from the National Institute of Health. The experiments entitled "Controlling Type 2 Diabetes with Proprietary Natural Extracts in Medicinal Foods" are now complete and proved to be inconclusive. Additional work will be required. WellGen signed a joint venture and supply agreement with a US-based sports drink company in order to create a new functional beverage based on WellGen's proprietary Black Tea Extract ("BTE") product. Formulation of the functional beverage is due to begin in 2015. WellGen is also in discussions with Rutgers University relating to the continuation of its license to BTE. WellGen's work in testing BTE in dogs by a major pet care company stalled in 2014.

The notes are an integral part of these financial statements.

The notes are an integral part of these financial statements.

1. General information

Amphion Innovations plc (the "Company") is a public limited company incorporated in the Isle of Man under the Companies Act 2006 with registered number 011472V on 29 August 2014 (formerly registered under the Companies Acts 1931 to 2004 on 7 June 2005 with registered number 113646C). The address of the registered office is Fort Anne, Douglas, Isle of Man, IM1 5PD. The principal place of business is 330 Madison Avenue, 6th Floor, New York, NY, 10017, USA. The principal activity of the Company and its subsidiaries (the "Group") is to build shareholder value in high growth companies in the medical and technology sectors, by using a focused, hands-on company building approach, based on decades of experience in both the US and UK.

The consolidated financial statements include the accounts of Amphion Innovations plc and its four wholly owned subsidiaries, Amphion Innovations US Inc. and DataTern, Inc., which are incorporated in the United States, Amphion Innovations UK Ltd., which was incorporated in the United Kingdom (Amphion Innovations UK Ltd. was dissolved on 8 July 2014), and MSA Holding Company which is incorporated in the Kingdom of Bahrain.

These financial statements are presented in US dollars because that is the currency of the primary economic environment in which the Company operates.

Going concern

The Group's business activities, together with factors likely to affect its future development, performance, and financial position and commentary on the Group's financial results, its cash flows and liquidity requirements are set out in the Chairman and CEO's Statement on pages 1-4 and elsewhere within the financial statements. In addition, note 16 to the financial statements includes the Group's objectives, policies, and processes for managing its capital, its financial risk management objectives, details of its financial instruments, and its exposures to liquidity risk and credit risk.

These financial statements have been prepared on the basis that the Group is a going concern. Although the Group is loss making and in a net current liabilities position, it is forecasting future positive cash flows.

The Directors have prepared cash flow forecasts extending at least 12 months from the date of approval of these financial statements, which include certain key assumptions about the ability of the Group to continue to generate revenue from the licensing of intellectual property, the realization of the Group's investment in Partner Companies, and the ability to raise external financing.

The Directors are also of the view that other viable options to allow the Group to continue as a going concern include the reduction in its financial support to Partner Companies in the short-term, although this may have an impact on the ability of the Partner Companies to develop their businesses and raise additional finance, the reduction in its working capital requirements; or from the sale of its intellectual property.

However, certain conditions exist which indicate the existence of a material uncertainty. These conditions and the Directors' considerations in respect of these matters are discussed below:

• In prior years, the Group has been able to meet its obligations through fund raising [issue of shares and convertible promissory notes ("CPNs")] from revenue generated through the provision of advisory services to its Partner Companies, and from the revenue generated from the licensing of intellectual property. During 2014 and 2013 as a result of a lack of cash being generated from these activities the Group has had to reduce its financial support to its Partner Companies and extend the payment dates for its trade payables and its convertible promissory notes. The Group has also reduced its operating costs where possible, including salary and fee reductions for employees and directors, and has obtained financial support from various related parties, through the issue of promissory notes and short-term loans (see note 23 for further detail). The Group will continue to implement these measures and seek further financing as required. In that regard in June 2014, the Group entered into a US loan facility which is secured by the holdings in Kromek Group plc (see note 18 for further details). The progress of many of the Partner Companies has, as a result of reduced financial support from the Group and current economic conditions, been adversely impacted, resulting in a reduction in their valuations (see note 15 for further detail). Relations with significant trade suppliers have also been strained during the year. Should the Group fail to generate sufficient cash to support its Partner Companies and to pay trade payables on a timely basis, the Group may see additional adverse effects on its Partner Companies and their valuations and in its relationship with its vendors.

• As at 31 December 2014 the Group has US $20,136,792 (2013: US $16,864,271) in notes payable including US $10,189,891 (2013: US $9,543,671) of convertible promissory notes ("CPNs") that are due to mature on 31 December 2015 and US $2,575,000 from a loan facility payable in monthly installments to June 2015. In February 2015 the repayment date of US $6,308,600 of related party notes payable was extended from 31 December 2014 to 31 December 2015 (see note 23 for further details). However, the Directors of the Company agreed to a Deed of Postponement, as part of a loan facility, that defers the repayment of any debt to Directors until the loan facility has been paid in full (see note 18).

1. General information, (continued)

• The timing and ability of the Group to realise its investments in Partner Companies is subject to inherent uncertainty due to numerous factors including, but not limited to: the liquidity of the investment; market conditions being favourable for realisation whether through a listing or otherwise; potential for restrictions being imposed that may limit full realisation of investments sold; such as lock-in periods; and other factors that are outside the control of the Group. The Group will realise investments where the terms of any potential arrangement are favourable to the Group.

• One of the Group's wholly owned subsidiary companies, DataTern Inc., ("DataTern") was subject to lawsuits which were brought by Microsoft Corporation ("Microsoft") and SAP AG, and SAP America, Inc. ("SAP") in April 2011. In December 2012, a summary judgment was entered in the lawsuits under which it was ruled that Microsoft and SAP do not infringe on the DataTern patents. DataTern and its legal team, supported by their extensive team of technical and patent experts, strongly refuted the basis for the summary judgment and filed an appeal. In April 2014, DataTern received a broadly favourable decision on the appeal ending the cases brought by Microsoft and SAP. The Group believes that the appeal ruling will allow DataTern to continue to try to reach equitable licensing agreements with the many companies that are infringing its patents. The Group is looking for litigation financing to continue to pursue the cases.

These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business. These financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

However, after making enquiries, and considering the uncertainties described above, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons they continue to adopt the going concern basis in preparing the annual report and financial statements.

2. Significant accounting policies

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRSs") as issued by the International Accounting Standards Board ("IASB"), interpretations issued by the International Financial Reporting Committee of the IASB and applicable legal and regulating requirements of Isle of Man law and the AIM rules of the London Stock Exchange.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.

Adoption of new and revised Standards

The Group has adopted the following new standards and amendments to standards with a date of initial application of 1 January 2014.

· Amendments to IAS 27, Separate Financial Statements

· Amendments to IFRS 10, Consolidated Financial Statements

· Amendments to IAS 32, Financial Instruments: Presentation

· Amendments to IAS 36, Recoverable Amount Disclosures for Non-Financial Assets

The financial statements have been prepared on the historical cost basis, except for financial instruments classified as fair value through profit and loss. The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The results of subsidiaries acquired during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income, and expenses are eliminated on consolidation.

2. Significant accounting policies, (continued)

Cash and cash equivalents

Cash and cash equivalents include balances with banks and demand deposits, which have maturities of less than three months.

Investments in subsidiaries

Investments in subsidiaries are stated at cost less provisions for impairment where appropriate.

Financial instruments

The Group designates its assets and liabilities into the categories below.

(i) Financial assets and liabilities designated at fair value through profit or loss at inception: These include equity, warrants, options, and convertible promissory notes held in Partner Companies. These are financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Group's documented investment strategy. These investments have been designated at fair value through profit or loss and accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement, therefore IAS 28, Investments in Associates and Joint Ventures, has not been applied by the Group to the investments that it holds in associates.

· Recognition

All regular way purchases and sales of financial instruments are recognised on the trade date, which is the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial instruments that require delivery of assets within the period generally established by regulation or convention in the market place. Realised gains and losses on disposals of financial instruments are calculated using the first-in-first-out ("FIFO") method.

· Initial measurement

Financial instruments categorised at fair value through profit or loss, are recognised initially at fair value, with transaction costs for such instruments being recognised directly in the Statement of Comprehensive Income.

· Subsequent measurement

"Fair value" is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as "active" if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The Group measures instruments quoted in an active market at a mid price.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred.

The fair value of unlisted securities is established using valuation techniques. Whenever possible the Group uses valuation techniques which make maximum use of market-based inputs. Accordingly, the valuation methodologies and principals used most commonly by the Group are those contained in the International Private Equity and Venture Capital Valuation Guidelines (the "IPEVCV Guidelines") endorsed by the British & European Venture Capital Associations.

Assets and long positions are measured at a bid price; liabilities and securities sold short are measured at an asking price.

2. Significant accounting policies, (continued)

Financial instruments, (continued)

Given the nature of the Group's investments in seed, start-up, and early-stage companies where there are often no current and no short-term future earnings or positive cash flows it can be difficult to gauge the probability and financial impact of the success or failure of development or research activities and to make reliable cash flow forecasts. Consequently, the most appropriate approach to determine fair value is a methodology that is based on market data, that being the price of a recent investment. Where the Group considers that the price of recent investment, unadjusted, is no longer relevant, and there are limited or no comparable companies or transactions from which to infer value, the Group carries out an enhanced assessment taking into consideration the key market drivers of the investee company and the overall economic environment.

Where the Group considers that there is an indication that the fair value has changed, an estimation is made of the required amount of any adjustment from the last price of recent investment. Wherever possible, this adjustment is based on objective data from the investee company and the experience and judgment of the Group; however, any adjustment is, by its very nature, subjective. Where a deterioration in value has occurred, the Group reduces the carrying value of the investment; however, in the absence of additional financing rounds or profit generation it can be difficult to determine the value that a purchaser may place on positive developments given the potential outcome and the costs and risks to achieving that outcome and accordingly caution is applied.

Factors that the Group considers include, inter alia, technical measures such as product development phases and patent approvals, financial measures such as cash burn rate and profitability expectations, and market and sales measures such as testing phases, product launches and, market introduction.

· De-recognition

The Group de-recognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for de-recognition in accordance with IAS 39. The Group de-recognises a financial liability when the obligation specified in the contract is discharged, cancelled, or expired.

Impairment of financial assets

Financial assets, other than those classified as at fair value through profit and loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangement entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Convertible promissory notes

Compound financial instruments are required by IAS 32 Financial Instruments: Presentation, to be separated into their liability and equity components upon initial recognition. To meet the definition of equity, the contract must be settled by a fixed amount of cash in exchange for a fixed amount of equity instruments. However, since the Company issued the convertible promissory notes ("CPNs") in a currency other than its functional currency, a fixed number of shares will be delivered in exchange for a variable amount of cash, therefore the definition of equity is not met. Consequently, the CPNs are classified wholly as liabilities at fair value through the statement of comprehensive income. The warrants that were issued with the CPNs have been accounted for as part of the same financial instrument as the CPNs in accordance with IAS 39: Financial instruments - Recognition and Measurement, since they were entered into at the same time and in contemplation of each other, they have the same counterparty, they relate to the same risk and are non-transferable.

Prepaid expenses and other receivables

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

Trade and other payables

Trade and other payables are not interest bearing and are stated at amortised cost which approximates their fair value.

2. Significant accounting policies, (continued)

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Share-based payments

The Group has applied the requirements of IFRS 2 Share-based payments.

The Group issues equity-settled share-based payments to certain employees and consultants. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest. The fair value of equity-settled share-based payments attributable to the issue of equity instruments is charged against equity.

Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted based on management's best estimate for effects of non-transferability, exercise restrictions, and behavioral considerations.

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves, and retained earnings.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for, and services provided, in the normal course of business, net of VAT and other sales related taxes.

Revenue from license agreements is recognised 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 recognised at the time of sale.

Where a license fee is contingent on the occurrence of a future event, the revenue is only recognised when it is probable that the fee will be received.

Cost of sales

Revenue related costs only include the direct fees paid for strategic advisory services for licensing and enforcing various patents.

Interest income

Interest income is recognised on an accruals basis.

Dividend income

Dividend income from investments is recognised when the shareholders' right to receive payment has been established.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

2. Significant accounting policies, (continued)

Foreign currencies

The individual financial statements of each company in the Group are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each company in the Group company are expressed in US dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

Transactions in currencies other than US dollars are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.

Gains and losses arising on retranslation are included in net profit or loss for the year, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity.

On consolidation, the assets and liabilities of the Group's overseas operations are translated at exchange rates prevailing on the statement of financial position date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly in which case they are translated at the rate on the date of the transaction. Exchange differences arising, if any, are recognised in the statement of comprehensive income and are transferred to the Group's translation reserve.

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expenditure that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the liability is settled or the asset realised.

Property, plant, and equipment

Property, plant, and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives of 3-5 years, using the straight-line method.

Intangible assets

Intangible assets comprise patents and other intellectual property with finite useful lives and are measured initially at purchase cost and are amortised on a straight-line basis over their estimated useful lives of 5-10 years.

Impairment of tangible and intangible assets

At each statement of financial position date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and an intangible asset which is amortised is tested for impairment only when there is an indication that the asset may be impaired.

3. Key sources of estimation uncertainty

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

Investments that are fair valued through profit or loss, as detailed in note 15, are all considered to be 'Partner Companies'. Those 'Partner Companies' categorised as Level 3 are defined as investments in 'Private Companies'.

Fair value of financial instruments

As described in note 2, the Directors use their judgment in selecting an appropriate valuation technique for financial instruments not quoted in an active market ("Private Investments"). The estimation of fair value of these Private Investments includes a number of assumptions which are not supported by observable market inputs. The carrying amount of the Private Investments is US $22.1 million (2013: US $20.2 million) in the Group and US $19.4 million (2013: US $18.6 million) in the Company.

Fair value of other receivables

As described in note 2, other receivables are stated at their amortised cost which approximates their fair value and are reduced by appropriate allowances for estimated irrecoverable amounts and do not carry any interest. Note 16 describes how the Group mitigates the counterparty credit risk associated with advisory fees due from Partner Companies including those that are past due at 31 December 2014. The recovery of the advisory fees due at 31 December 2014 of US $0.9 million (2013: US $1.4 million) is dependent on a number of uncertain factors including the ability of the Partner Companies to raise finances (through current investors and new financing rounds) in order to support their future growth plans and therefore generate enough cash to be able to settle any outstanding debts.

The valuation of the Private Investments and other receivables from Partner Companies at 31 December 2014 assumes that the Partner Companies continue to receive ongoing funding in accordance with their 2015/2016 forecasts. If this funding is not received, this would have an adverse impact on the valuation of the investments and the ability of the Partner Companies to settle their debts, which in turn would impact the valuation of other receivables.

4. Revenue

An analysis of the Group's and Company's revenue for the period is as follows:

A provision for doubtful accounts has been set up for US $240,000 for the advisory fees accrued from Partner Companies in 2014 and US $240,000 of bad debt expense was recognized in the statement of comprehensive income.

In July 2011, DataTern, Inc. entered into a fee agreement with McCarter & English LLP ("ME"). Under this agreement, ME will represent DataTern in the assertion of all patent infringement claims, except for claims in Texas and conflicts with existing ME clients. There were no license settlements in 2014 and 2013 relating to the ME fee agreement and as a result no fees were paid to ME. In addition, ME was engaged to represent DataTern, Inc. in connection with the lawsuit filed by Microsoft Corporation and SAP AG and SAP America, Inc. in April 2011. In April 2015, ME issued a default notice seeking repayment of US $500,178 in expenses giving Amphion and DataTern sixty days to make payment or the fee agreement would be terminated. Amphion and DataTern are currently in discussion with ME regarding payment of the US $500,178 and ME's continuing representation.

In September 2011, The Davis Firm, PC was engaged to represent DataTern, Inc. in the patent infringement cases in Texas. DataTern paid the Davis Firm, PC approximately US $234,000 during the course of the engagement. At the time DataTern terminated the Davis Firm, PC, they believed US $133,000 was owed to the Davis Firm, PC. The Davis Firm, PC claimed that US $280,000 was owed and in January 2013, they commenced a legal action to collect their fees. In February 2014, the parties negotiated a settlement where DataTern has to pay The Davis Firm, PC US $150,000 over 12 months starting 15 March 2014. The balance remaining at 31 December 2014 is US $50,000.

In September 2012, Braden, Varner & Aldous, P.C., was engaged to represent DataTern, Inc. in the patent infringement cases in Texas. In September 2013, Braden, Varner & Aldous, P.C. reduced their hourly rate in consideration for a partial contingency on the Texas cases and the Microsoft matters. Under the contingent fee agreement, Braden, Varner & Aldous, P.C. will receive 15% of any individual settlement up to US $500,000 and 25% on settlements above US $500,000 on the Texas cases. If the contingent fee from Texas does not equal 4x return on their total fee, Braden, Varner & Aldous, P.C. will make up the difference on a contingent fee with 5% from any settlements or recoveries on the Microsoft matters up to 4x return on their hourly fee. Prior to the later of 31 December 2013, or 14 days after the ruling on the NY appeal, but no later than 30 June 2014, DataTern Inc. can cancel the contingent fee portion of this agreement if it pays all time accrued at the standard hourly rates and by paying a bonus of 20% of the total time billed. The contingent fee agreement termination date of 30 June 2014 has been extended indefinitely by mutual agreement. In February 2014, the engagement was moved to Forshey Prostok, LLP along with the move of one of the partners.

In December 2012, Berkeley Research Group, LLC ("Berkeley"), an expert consultant engaged by DataTern filed for arbitration claiming US $1,142,478 was owed to them. DataTern opposed the arbitration and vigorously contested the amount owed. In January 2015, the arbitrator found in favor of Berkeley and awarded them a amount totaling US $2,090,865 for the balance due and legal costs. DataTern is contesting the award and has filed a lawsuit seeking to overturn the award.

As part of the December 2007 agreement for DataTern, Inc. to purchase certain of the intangible assets from FireStar Software, Inc. ("FireStar'), a portion of future revenues from these patents will be retained by FireStar. No amounts have become payable to FireStar to date.

5. Business and geographical segments

Business segments

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.

For management purposes for 2014, the Group is organised into three business segments - advisory services, investing activities, and intellectual property. These business segments are the basis on which the Group reports its primary segment information.

Segment information about these businesses is presented below: