24 May 2016 14:34
24 May 2016 | ||
FASTFORWARD INNOVATIONS LIMITED (formerly Kuala Innovations Limited and Kuala Limited)
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RESULTS FOR THE YEAR ENDED 31 MARCH 2016 | ||
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KEY POINTS
· £10,739,000 was raised from the issue of Ordinary Shares during the year. · The Company changed its name from Kuala Limited to Kuala Innovations Limited, with effect from 28 July 2015, and then to FastForward Innovations Limited, with effect from 24 November 2015. · A new Investing Policy was adopted which is available on the Company's website. · On 29 October 2015, the Company announced that it had substantially implemented its new investing policy in accordance with Rule 15 of the AIM Rules. · Net assets at 31 March 2016 of £10,277,000 (2015: net assets of £463,000). · Appointments of Jim Mellon as Co-Chairman and Lorne Abony as Chief Executive Officer of the Company. · The Company acquired seven investments in the year with an additional investment acquired post year end. Further details of these eight investments are set out at in the Report of the Chief Executive Officer and note 12 .
The 2016 Annual Financial Report & Accounts will be available shortly on the Company's website: www.fstfwd.co. Copies can be obtained in hard copy form free of charge, from Legis House, 11 New Street, St Peter Port, Guernsey, GY1 2PF.
Lorne Abony will host a results conference call at 4:30 p.m. British Summer Time on Wednesday, 1st June, 2016. Details of how to register for and join this call will be published shortly. | ||
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For further information please visit www.fstfwd.co or contact:
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James Biddle (Nomad) Beaumont Cornish LimitedTel: +44 207 628 3396 | Guy Miller and Lucy Williams (Broker) Peterhouse Corporate Finance limited Tel: +44 207 220 9795
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CO-CHAIRMAN'S STATEMENT
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We are pleased to present the results of FastForward Innovations Limited (the "Company") for the year ended 31 March 2016.
Last year Stephen Dattels wrote that 2015 had been a year of change for the Company and the same can be said for this year.
Structural and board changes Jim Mellon joined Stephen Dattels as Co- Chairman of the Company on 13 July 2015. On 28 July 2015, shareholders approved a change in investment policy, and the name of the Company was changed from Kuala Limited to Kuala Innovations Limited. Subsequently, on 24 November 2015, the name was changed again to FastForward Innovations Limited which reinforced the Company's new core investing philosophy. To reflect our new approach to investment, the Company launched a new brand image and new website.
However, the most significant event during the year was the appointment of Lorne Abony, firstly as a director on 6 January 2016 and then his later appointment as Chief Executive Officer on the 27 January 2016. Lorne brings energy and a unique style to the Company, and the significant progress made by the Company since the start of the year is largely as a result of his hard work.
Share Capital This has been an active year for raising capital into the Company. Full details of the raises are given in Note 17 of these results and we do appreciate the support of shareholders which has enabled us to raise £10,739,000 through five placing events during the year. This has not only enabled us to invest funds in the projects which are detailed below, but has also broadened our shareholder base, introducing a number of key industry players onto our register which we see as beneficial to the Company as a whole. We also hold a substantial cash balance which can be deployed quickly to secure future investments which complement our portfolio.
Investments The Company has moved from holding no strategic investments at the start of the year to a position of holding seven strategic and exciting investments at this year end which have the potential to deliver substantial returns to shareholders. Full details of these investments are set out in the Report of the Chief Executive Officer and our view is that these investments have the potential for short and medium term liquidity events, which will both create value enhancing opportunities and realisation windows. These investments are all characterised by their ability to disrupt markets through the innovative use of technology whether in the Educational Technology space (Vemo Education, Inc ("Vemo") and Vested Finance, Inc ("Schoold")), blockchain technology (SatoshiPay Limited ("Satoshipay") and Factom, Inc ("Factom")), biotech/healthcare (Intensity Therapeutics, Inc ("Intensity Therapeutics") and The Diabetic Boot Company Limited ("DBC")) or media and content (Yooya Media (formerly, Entertainment Direct Asia Limited) ("Yooya")). We will continue to search for technological sectors where smaller companies can make a significant impact on their market and generate outsized returns for our Company and its shareholders. Finally we would like to thank our fellow directors and our shareholders for their support throughout the year.
Results and Share Price The share price increased during the period by 137% from the 31 March 2015 price of 6.5p to 15.375p per Ordinary Share at 31 March 2016.
The net assets of the Company at 31 March 2016 were £10,277,000 (2015: £463,000), equal to 7.85p net assets per Ordinary Share (2015: 1.69p net assets per Ordinary Share).
Outlook The decision to move the Company's investment strategy away from natural resources and energy into investing into disruptive technology is an exciting one for this Company. We expect the year ahead to be at least as busy for the Company as the year under review as Lorne Abony drives the growth and development of our portfolio, supported by the rest of the Board and management team. We believe that his approach will continue to add value to our shareholders and so we look forward to 2016 with enthusiasm. |
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Stephen Dattels Jim Mellon
23 May 2016 |
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REPORT OF THE CHIEF EXECUTIVE OFFICER
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Introduction It is truly a pleasure to make my first Report of the Chief Executive Officer to shareholders. I was first introduced to the Company by my good friend, Stephen Dattels, and was intrigued by the concept he and Jim Mellon had created. I took the opportunity to invest into the Company before enthusiastically accepting the chance to firstly join the Board of Directors and then be asked to accept the position as Chief Executive Officer.
This has been a year of hugely positive change for the Company as it moved its focus and investment policy from targeting the resources and energy sector to creating a portfolio of exciting start-up companies in the high tech space, as will be detailed later in my report. The change of focus is reflected in the decision to change the name of the Company, firstly to Kuala Innovations Limited, and subsequently to FastForward Innovations Limited.
I believe that attractive investment returns can be generated from investing in emerging technologies that will shape the future. Again, what attracted me to the Company was the practical demonstration of Jim Mellon's philosophy in his book Fast Forward: The Technologies and Companies Shaping Our Future.
Strategy Our strategy is to invest in visionary entrepreneurs developing innovative technologies that solve problems in their industries. It is my view the investments made to date have enormous potential for significant shareholder value creation. Beyond this, preliminary analysis indicates that each company is delivering results ahead of their respective business plans and budgets. As previously announced, I will provide a comprehensive market update with greater detail around our strategy, specific investment criteria and about our investments and their respective prospects in due course.
During the first half of 2016, I plan to make further investments into businesses which complement our existing portfolio. The second half of 2016 will likely see a heavy emphasis on seeking to crystallize the value of those businesses at valuations well in excess of the value that we acquired our interests; those events could take the form of investments by third parties at higher valuations, IPOs or sales.
Performance and valuation The Company's Net Asset Value ("NAV") per share stands at 7.85p per share compared to 1.69p at 31 March 2015. More importantly, our share price moved from 6.5p per share at 31 March 2015 to 15.375p per share at 31 March 2016, and we have consistently traded at a premium to NAV. In my view, this reflects that our shareholders understand the potential locked up in the Company.
The portfolio of investments is entirely comprised of unquoted start-up companies, all of which have been acquired during the year. Initially we have deemed the fair value of the investments to be the cost of acquisition unless there is an event or factor, as defined under accounting standards, which causes the Directors to consider that another measure of fair value should be used. No such events occurred before the year end, so, although I see potential in many of our investments, no uplift in value has been recorded at this time.
Portfolio The table below lists the Company's holdings at the end of March 2016. It details the stake that those positions represent in the investee companies.
Investee Companies
Intensity Therapeutics, Inc Intensity Therapeutics is a product development biotechnology company whose mission is to greatly extend the lives of patients with cancer. The Company is using its proprietary DfuseRxSM platform technology to create novel immune-based therapeutic products for a new and emerging field of cancer treatment known as in situ vaccination. Its lead product INT230-6 has demonstrated remarkable activity in multiple animal cancer models. The drug must be made meticulously, analyzed properly, released appropriately and documented correctly to assure acceptability to the US Food and Drugs Administration (the "FDA"). A potent drug is critical to treating patients successfully. I have spent time with the Intensity team and know they are proceeding expeditiously, but it would be unwise to hurry the manufacturing development or take shortcuts so I expect that the first clinical trial of the product will commence in early 2017.
The Diabetic Boot Company Limited DBC, which trades under the name "Pulseflow", has developed a new form of diabetic friendly footwear with integrated offloading capabilities and the patented Pulseflow technology which aids in the promotion of blood flow and improved circulation in one product.
DBC received clearance from the US FDA in December 2015, and since then has been putting into place the systems needed to operate there and obtaining the Centers for Medicare & Medicaid Service ("CMS") and state-by-state approvals needed to begin selling the product under the name of their US subsidiary. A new US sales office and storage facility in Cleveland, Ohio is fully operational with all the quality, inventory control and billing systems that are needed for the Company to trade as a Durable Medical Equipment ("DME") supplier. Approval to sell has been achieved for the majority of US States already. The result of the audit by CMS is expected shortly and a favourable outcome will allow sales to commence in the second quarter of 2016 to Medicare and Medicaid patients in the US.
DBC has full contracted distribution partners in the following countries: Austria, Australia, Canada, Germany, Mexico & South America, Saudi Arabia, Switzerland, and New Zealand. The countries in bold type have already placed orders, and the others will order as soon as regulatory affairs clearance is in place.
SatoshiPay Limited The emergence of Machine-to-Machine and the Internet-of-Things, as well as the rising demand for audio and video streaming services, all create a need for near-instant, micro-amount settlement mechanisms. The growing adoption of ad-blocking on both the consumer and ISP level is forcing online publishers to move away from ad-based business models. SatoshiPay offers the solution to these needs. With its first-mover advantage, SatoshiPay is in a strong position to capture and defend a substantial market share.
While there are competitors in the market, none provide the same disrupting technological approach to the monetisation method as SatoshiPay, which is based on cutting-edge blockchain technology, allowing for cheaper, faster, and more secure payment services.
SatoshiPay launched the beta version of its product in the first quarter of 2016 and is now working to validate and scale the business model. They are working to successfully complete a joint venture project with Visa Inc, through its innovation department Visa Europe Collab, which will further the mainstream adoption of its product. Key objectives for Satoshipay in the next 12 months are to identify and exploit the market opportunities for the nanopayment technology and gain substantial traction in the developer communities with the open API platform.
Factom Inc Factom's Blockchain technology secures data for large private and public organizations by publishing encrypted data or a cryptographically unique fingerprint of the data to Factom's immutable, distributed ledger. This immutable data serves as a "proof of existence" and source of truth for all future business processes. Factom is an irreversible publishing engine (write once, never erase). Factom removes the need for blind trust by providing precise, verifiable, and immutable audit trail.
Factom reached more than 150,000 entries in the Factom network by the end of 2015 and continues to show the product to large enterprise potential clients. In February, Factom announced it had entered into a Memorandum of Understanding Agreement ("MOU") with a Chinese partner iSoftstone to provide business advice and technical knowledge to help shape a smart city solution and to provide data storage, auditing and verification for several regions in China. I have spent time with the Factom team in Dallas and know that they are market leaders in their niche field.
Vemo Education, Inc Vemo works with higher education institutions and their affiliates in the USA to effectively design and implement unique alternatives to traditional debt-dependent education finance options. During the year Vemo announced that it was providing technical advice to Purdue University to research ISAs - agreements in which investors front a student's money for college in exchange for a percentage of the student's post-graduation income.
Just after the year end, Vemo announced that it had entered into a contract with Holberton School to oversee its tuition pricing and payment processes.
Yooya Media (formerly Entertainment Direct Asia) Yooya is one of the first digital networks of its kind in China built specifically to connect and unify the three linchpins of the online video market in China: rights owners, distribution platforms, and brand constituents. Yooya has been instrumental in helping content producers monetize China's fragmented online video market by providing a single platform for content distribution, rights management, and advertising solutions. Yooya brings together many key components essential to the equation, including licensing at scale, automated ad sales, consolidated data & analytics, and dramatically simplified content distribution. To do this, they have assembled a one-of-a-kind team that combines unique China-centric technology expertise, a strong solutions-oriented focus, and decades of experience in licensing, rights, and content management in both Asian and Western contexts.
At the year end, Yooya announced that it has now achieved over four billion lifetime views, with more than 2.75 billion added in the last seven months of the year. The combination of an increasing number of distribution partners and a growing stream of compelling new content on the platform drove this astounding 25% month-over-month growth. This growth reflect the exploding popularity and enormous power of online video in China, but more importantly for rights owners and advertisers, it means that finally there is a viable managed platform on which to build better monetization and more effective video-based advertising.
One of the conditions of our acquisition was that we were entitled to appoint a director to the board of Yooya and this enables me not only to maintain a complete understanding of the business progress but also to leverage the skills and knowledge available to Yooya's benefit.
Vested Finance, Inc ("Schoold") Schoold transforms college and career planning by using technology to educate, inform and inspire users about their prospects for a successful future. Schoold is a big-data driven college and career counsellor mobile app with proprietary technologies that exploit leading data science. As a mobile app, Schoold owns and maintains all aspects of content and user experience while benefitting from increased utility among its target student demographic. Schoold features the tools and resources that it believes are most important to users including college, major and career discovery, individualised matching, predictive admissions chances, and financial aid support. Schoold's customised interface narrows the universe of college and career data to a manageable, relevant amount of information that can be easily navigated, explored, and outcomes assessed.
Schoold's app was launched towards the end of the year and by year end the Company had surpassed 500,000 downloads.
Fund raising and changes to share capital During the period the Company has placed shares as follows:
Note 1 Shares issued as consideration for services provided (see note 19). Note 2 Shares issued in consideration for the acquisition of 25,978 shares of The Diabetic Boot Company Limited Note 3 Shares issued in consideration for the acquisition of 527,059 shares of Vemo Education Inc
As at the start of the year, 44,674,283 warrants granted under the warrant instrument dated 3 May 2015 were outstanding. Exercise notices in respect of a total of 1,055,466 ordinary shares at an exercise price of 5 pence per Ordinary Share were received generating aggregate gross exercise proceeds of £52,773.30. The remaining 43,618,817 warrants lapsed on 28 May 2015.
In February 2016 the Company completed a buyback of 3,158,623 shares at a total cost of £347,448. The Redeemed Shares were acquired from certain shareholders of the Company who had invested in the Company when it was focused on natural resources (pre-13 July 2015) and who had approached the Company setting out their intention to sell the shares in the market. Given that the Company had recently completed a placing to raise funds at 15 pence per share, the Directors determined that it would be inappropriate to actively place out such shares, and agreed a price of 11 pence per share for the entire block.
I would like to thank all our shareholders for your support during the year. I am especially pleased to welcome a number of key and substantial shareholders who not only bring capital into the company but a willingness to engage with and assist the Board in searching out new and exciting potential investments.
Management team I am very comfortable saying that I am truly excited by the Board of Directors and management team we have put together and I thank each and every one for their hard work so far. Our shareholders benefit from the years of experience and expertise of the Company's management team to identify opportunities in emerging technologies which are never seen outside of a small group of private equity funds. All Directors have shown their commitment by personally investing in the Company.
On 17 February 2016, we announced the creation of Options over the Company shares to Stephen Dattels, Jim Mellon and myself. The option scheme, which may be extended to other Directors and senior managers as we build a world class management team, has been designed to align any benefit to the Company's share price.
Outlook I believe that attractive investment returns can be generated from investing in emerging technologies that will shape the future. We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before [1]. Your Company is ideally placed to benefit from this revolution.
Lorne Abony 23 May 2016
[1] Source: World Economic Forum: The Fourth Industrial Revolution |
STATEMENT OF COMPREHENSIVE INCOME | |||||
for the year ended 31 March 2016 | |||||
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| Note | Year ended 31 March 2016 | Year ended 31 March 2015 |
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| £'000 | £'000 |
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Investment gains and losses |
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Income from derivative financial instruments designated at fair value through profit and loss |
14 |
149 |
79 |
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Loss on derivative financial instruments designated at fair value through profit and loss |
14 |
(163) |
(68) |
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Unrealised gain on investments at fair value through profit and loss | 12 | 159 | - |
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| ------------ | ------------ |
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Total investment gains and losses |
| 145 | 11 |
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Income |
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Bank interest income |
| 1 | 1 |
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| ------------ | ------------ |
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Total income |
| 1 | 1 |
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Expenses |
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Directors' remuneration | 7 | (1,228) | (17) |
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Legal and professional fees |
| (173) | (67) |
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Nominated Adviser and Broker fees |
| (157) | (28) |
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Other expenses | 8 | (187) | (91) |
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| ------------ | ------------- |
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Total expenses |
| (1,745) | (203) |
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| ------------ | ------------ |
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Net loss from operating activities before gains and losses on foreign exchange |
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(1,599) |
(191) |
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Net foreign exchange gains |
| 126 | 4 |
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| ------------ | ------------ |
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Total comprehensive loss for the year attributable to the shareholders |
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(1,473) |
(187) |
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| ------------ | ------------ |
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Loss per Ordinary Share: | - basic and diluted | 10 | (2.69)p | (1.28)p |
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STATEMENT OF FINANCIAL POSITION | ||||
as at 31 March 2016
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| Note | 31 March 2016 | 31 March 2015 |
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| £'000 | £'000 |
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Non-current assets |
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Financial assets designated at fair value through profit or loss | 12 | 4,238 | - |
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Total non-current assets |
| 4,238 | - |
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Current assets |
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Financial instruments within the margin account | 14 | - | 294 |
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Other receivables and prepayments | 15 | 4,714 | 7 |
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Cash and cash equivalents |
| 1,415 | 237 |
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| ---------- | ---------- |
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Total current assets |
| 6,129 | 538 |
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| ---------- | ---------- |
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Total assets |
| 10,367 | 538 |
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| ---------- | ---------- |
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Current liabilities |
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Other payables and accrued expenses | 16 | (90) | (46) |
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Financial liabilities designated at fair value through profit or loss: |
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- Derivative financial instruments | 12 | - | (29) |
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| ---------- | ---------- |
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Total liabilities |
| (90) | (75) |
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| ---------- | ---------- |
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Net assets |
| 10,277 | 463 |
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| ---------- | ---------- |
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Equity |
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Share capital | 17 | 1,309 | 274 |
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Deferred share reserve | 17 | 630 | 630 |
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Employee stock option reserve |
| 895 | - |
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Other reserve |
| 2,293 | 2,293 |
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Distributable reserve |
| 5,150 | (2,734) |
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| ---------- | ---------- |
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Total equity |
| 10,277 | 463 |
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| ---------- | ---------- |
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Net assets per Ordinary Share - basic | 18 | 7.85p | 1.69p |
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Net assets per Ordinary Share - diluted | 18 | 7.82p | 1.69p |
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STATEMENT OF CHANGES IN EQUITY | |||||||
for the year ended 31 March 2016 | |||||||
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Note | Share capital | Deferred Shares reserve | Other reserve | Employee stock option reserves | Distributable reserves |
Total |
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| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
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Balance at 31 March 2014 |
| 700 | - | 2,293 | - | (3,027) | (34) |
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Total comprehensive loss for the year |
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Loss for the year |
| - | - | - | - | (187) | (187) |
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Transactions with shareholders |
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Subdivision of Ordinary Shares prior to subscription |
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(630) |
630 |
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Issue of Ordinary Shares | 17 | 204 | - | - | - | 480 | 684 |
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| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- |
Balance at 31 March 2015 |
| 274 | 630 | 2,293 | - | (2,734) | 463 |
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Total comprehensive loss for the year |
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Loss for the year |
| - | - | - | - | (1,473) | (1,473) |
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Transactions with shareholders |
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Issue of Ordinary Shares | 17 | 1,067 | - | - | - | 9,672 | 10,739 |
Acquisition of Treasury Shares | 17 | (32) | - |
| - | (315) | (347) |
Employee share scheme - value of employee services | 17 | - | - | - | 895 | - | 895 |
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| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- |
Balance at 31 March 2016 |
| 1,309 | 630 | 2,293 | 895 | 5,150 | 10,277 |
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| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- |
STATEMENT OF CASH FLOWS for the year ended 31 March 2016 |
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| Year ended 31 March 2016 | Year ended 31 March 2015 |
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| £'000 | £'000 |
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Cash flows from operating activities |
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Bank interest received |
| 1 | 1 |
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Legal and professional fees paid |
| (108) | (67) |
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Nominated Adviser and Broker fees paid |
| (166) | (28) |
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Directors' remuneration paid |
| (329) | (17) |
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Other expenses paid |
| (145) | (134) |
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| ---------- | ---------- |
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Net cash outflow from operating activities |
| (747) | (245) |
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Cash flows from investing activities |
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Purchases of investments at fair value through profit or loss |
| (3,385) | - |
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Transferred from/(to) broker |
| 240 | (246) |
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| ---------- | ---------- |
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Net cash outflow from investing activities |
| (3,145) | (246) |
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Cash flows from financing activities |
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Proceeds from issue of Ordinary Shares |
| 5,423 | 684 |
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Payments for Ordinary Shares brought back |
| (347) | - |
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| ---------- | ---------- |
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Net cash inflow from financing activities |
| 5,076 | 684 |
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| ---------- | ---------- |
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| ---------- | ---------- |
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Increase in cash and cash equivalents |
| 1,184 | 193 |
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| ---------- | ---------- |
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Cash and cash equivalents at beginning of the year |
| 237 | 44 |
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Increase in cash and cash equivalents |
| 1,184 | 193 |
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Foreign exchange movement |
| (6) | - |
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| ---------- | ---------- |
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Cash and cash equivalents at the end of the year |
| 1,415 | 237 |
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| ---------- | ---------- |
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Significant non-cash transactions |
note | Year ended 31 March 2016 | Year ended 31 March 2015 |
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| £'000 | £'000 |
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Issue of Ordinary Shares for investment | 12 | 693 | - |
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| ---------- | ---------- |
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Issue of Ordinary Shares for consultancy services | 19 | 65 | - |
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| ---------- | ---------- |
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The financial information set out in this announcement does not constitute the Company's statutory financial statements for the year ended 31 March 2016. | ||||||
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NOTES TO THE RESULTS for the year ended 31 March 2016
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1. General Information | ||||||
The Company is a closed-ended investment company.
The Company is domiciled and incorporated as a limited liability company in Guernsey.
The registered office of the Company is 1st Floor, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey, GY1 3JX.
The Company's Ordinary Shares are traded on AIM, a market operated by the London Stock Exchange.
The Company held an Extra-Ordinary General Meeting ("EGM") on 28 July 2015, where the shareholders voted in favour of the following resolution: · A new Investing Policy was adopted which is detailed on Company's website. · The Company changed its name from Kuala Limited to Kuala Innovations Limited.
Following the change in Investing Policy, the Company acquired seven new investments, with a further investment acquired after the year end. Details of these investments are disclosed in the Report of the Chief Executive Officer and in note 12.
Subsequently, the Company held an EGM on 23 November 2015, where the shareholders voted in favour of changing the Company name from Kuala Innovations Limited to FastForward Innovations Limited. | ||||||
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2. Basis of Preparation | ||||||
The results have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), interpretations issued by the IFRS Interpretations Committee ("IFRSIC") applicable to companies reporting under IFRS and applicable legal and regulatory requirements of Guernsey Law and reflect the following policies, which have been adopted and applied consistently.
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The results have been prepared on a historic cost basis, as modified by the revaluation to fair value of certain financial assets and financial liabilities (including derivative instruments).
The results were authorised for issuance by the Board of Directors on 23 May 2016. | ||||||
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Changes and amendments to existing standards effective in the year commencing 1 April 2015 | ||||||
The Company has adopted the following revisions and amendments to IFRS issued by the IASB, which may be relevant to and effective for the Company's results for the annual period beginning 1 April 2015:
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IFRS 7 | Financial Instruments: Disclosures - Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures | |||||
IFRS 13 | Fair Value Measurement - Scope of the portfolio exception | |||||
During the year, the Company did not adopt any standards or interpretations that had an impact on the reported financial position or performance of the Company. | ||||||
Standards, amendments and interpretations issued but not yet effective | ||||||
The IASB has issued/revised the following relevant standards with an effective date after the date of these results:
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International Accounting Standards (IAS/IFRS) | Effective date | |||||
IFRS 7 | Financial Instruments: Disclosures - Additional guidance regarding servicing contracts | 1 January 2016 | ||||
IFRS 9 | Financial Instruments | 1 January 2018 | ||||
IFRS 15 | Revenue from Contracts with Customers | 1 January 2018 | ||||
IAS 1 | Presentation of Financial Statements - Amendments resulting from the disclosure initiative | 1 January 2016 | ||||
No other relevant standards, interpretations or amendments have been issued by the IASB with an effective date after the date of these results. The Directors have chosen not to early adopt the above standards and amendments to standards and they do not anticipate that they, with the exception of IFRS 9, would have a material impact on the Company's results in the period of initial application. A full assessment of the impact of IFRS 9 has not yet been performed. |
3. Significant Accounting Policies |
a) Income recognition |
Interest income is recognised on an accruals basis using the effective interest method and includes bank interest and interest from debt securities.
Dividend income is recognised when the right to receive payment is established.
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b) Expenses |
All expenses are accounted for on an accruals basis and, with the exception of share issue costs, are charged through the Statement of Comprehensive Income in the period in which they are incurred. |
c) Taxation |
The Company is exempt from taxation in Guernsey. However, in some jurisdictions, investment income and capital gains are subject to withholding tax deducted at the source of the income. The Company presents the withholding tax separately from the gross investment income, if any, in the Statement of Comprehensive Income. For the purpose of the Statement of Cash Flows, cash inflows from financial assets are presented net of withholding taxes when applicable. |
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d) Share based payments |
Share-based compensation benefits are provided to key employees via the Employees Option Plan, i.e. an equity-settled share-based payment plan. Information relating to this plan is set out in note 7 to the Results. The fair value of options granted under the Employee Option Plan is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted: · including any market performance conditions; · excluding the impact of any service and non-market performance vesting conditions; and · including the impact of any non-vesting conditions. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the Company revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in the Statement of Comprehensive Income, with a corresponding adjustment to equity. When the options are exercised, the Company transfers the appropriate amount of shares to eligible employee with no cash settlement involved. |
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e) Investments designated at fair value through profit or loss |
Classification The Company classifies its investments in debt and equity securities, and related derivatives, as financial assets at fair value through profit or loss. These financial assets are designated by the management of the Company at fair value through profit or loss on acquisition.
Financial assets designated at fair value through profit or loss at inception are those that are not classified as held for trading but are managed and their performance evaluated on a fair value basis in accordance with the Company's documented Investing Policy. It is the Company's policy for the management to evaluate the information about these financial assets on a fair value basis together with other related financial information.
Assets in this category are classified as current assets if they are expected to be realised within 12 months of the year end date. Those not expected to be realised within 12 months of the year end date will be classified as non-current.
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Recognition/derecognition Regular-way purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investment.
Financial assets are derecognised when the Company loses control over the contractual rights that comprise that asset. This occurs when rights are realised, expire or are surrendered and the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Realised gains and losses on fair value through profit or loss assets sold are calculated as the difference between the sales proceeds and cost. Financial assets that are derecognised and corresponding receivables from the buyer for the payment are recognised as of the date the Company has transacted an unconditional disposal of the assets. |
Measurement Financial assets and liabilities designated at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed through the Statement of Comprehensive Income. Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the financial assets and liabilities at fair value through profit or loss are presented through the Statement of Comprehensive Income within `investment gains and losses' in the period in which they arise.
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Interest income from financial assets designated at fair value through profit or loss is recognised through the Statement of Comprehensive Income within other income using the effective interest rate method. Dividend income from investments designated at fair value through profit or loss is recognised through the Statement of Comprehensive Income within dividend income when the Company's right to receive payments is established.
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Fair value estimation 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.
The fair value of financial instruments traded in active markets (such as publicly traded securities) is based on quoted market prices at the financial reporting date. The quoted market price used for these financial assets held by the Company is the current bid price.
The Company monitors trade prices and volumes taking place a few days before and after the year-end date, in order to assess whether the trade prices used at each valuation date are representative of fair value. If a significant movement in fair value occurs subsequent to the close of trading up to midnight in a particular stock exchange on the year end date, valuation techniques will be applied to determine the fair value.
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The fair value of financial instruments that are not traded in an active market (for example unquoted private companies) is determined by using valuation techniques in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEV Guidelines). The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each financial reporting date. Valuation techniques used include the use of comparable recent arm's length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.
The valuation techniques also consider the original transaction price and take into account the relevant developments since the acquisition of the investments and other factors pertinent to the valuation of the investments, with reference to such rights in connection with realisation, recent third-party transactions of comparable types of instruments, and reliable indicative offers from potential buyers. In determining fair value, the Company may rely on the financial data of investee portfolio companies and on estimates by the management of the investee portfolio companies as to the effect of future developments. |
Notwithstanding the above, the variety of valuation bases adopted and the quality of management information provided by the underlying investments, means that there are inherent limitations in determining the value of the investments. The amount realised on the sale of those investments may differ from the values reflected in these results and the difference may be significant. |
f) Offsetting of Financial Instruments |
Financial assets and financial liabilities are offset and reported net by counterparty in the Statement of Financial Position, when there is currently a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. A current legally and contractually enforceable right to offset must not be contingent on a future event. Furthermore, it must be legally and contractually enforceable in (i) the normal course of business; (ii) the event of default; and (iii) the event of insolvency or bankruptcy of the Company and all of the counterparties. The Company's agreement with LOM Stockbrokers Limited does not provide for a master netting arrangement and therefore, the amounts due to/from LOM Stockbrokers Limited are shown gross in the Statement of Financial Position.
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g) Financial instruments within the margin account |
The financial instruments within the margin account comprises cash balances held at the Company's clearing brokers and cash collateral pledged to counterparties related to derivative contracts. Cash that is related to securities sold, not yet purchased, is restricted until the securities are purchased. Financial instruments held within the margin account consist of cash received from brokers to collateralize the Company's derivative contracts and amounts transferred from the Company's bank account. |
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h) Cash and cash equivalents |
Cash and cash equivalents, comprising cash balances and call deposits which are held to maturity, are carried at cost. Cash and cash equivalents are defined as cash in hand, demand deposits, bank overdrafts and short-term highly liquid investments with original maturities of three months or less and subject to insignificant risk of changes in value.
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i) Other receivables |
Other receivables are carried at the original invoice amount, less allowance for doubtful receivables and include receivables against issuance of Ordinary Shares. Provision is made when there is objective evidence that the Company will be unable to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote. |
j) Other payables and accrued expenses |
Payables and accrued expenses are recognised initially at fair value and subsequently stated at amortised cost. The difference between the proceeds and the amount payable is recognised over the period of the payable using the effective interest method. As at the year ended, the carrying amount of other payables and accrued expenses approximate their fair value.
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k) Foreign currency translation |
Functional and presentation currency The Company's Ordinary Shares are denominated in Sterling and are traded on AIM in Sterling. The primary activity of the Company is detailed in the Investing Policy. The performance of the Company is measured and reported to the investors in Sterling and the majority of the expenses incurred by the Company are in Sterling. Consequently, the Board of Directors considers that Sterling is the currency that most faithfully represents the effects of the underlying transactions, events and conditions. The results are presented in Sterling, which is the Company's functional and presentation currency. All amounts are rounded to the nearest thousand. |
Transactions and balances Foreign currency transactions are translated into the functional currency using rates approximating to the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised through the Statement of Comprehensive Income. Translation differences on non-monetary financial assets and liabilities, such as financial assets designated at fair value through profit or loss, are recognised through the Statement of Comprehensive Income within the net unrealised change in fair value of investments. |
l) Net assets per share |
The net assets per Ordinary Share disclosed on the face of the Statement of Financial Position is calculated by dividing the net assets of the Company as at the year end by the number of Ordinary Shares in issue at the year end.
Loss per Ordinary Share is calculated by dividing the net loss for the year by the weighted average number of Ordinary Shares in issue during the year.
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m) Loss per share |
Basic loss per share:
Basic loss per share is calculated by dividing:
· the loss attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares; and · by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements, if any, in ordinary shares issued during the year and excluding treasury shares.
Diluted loss per share:
Diluted loss per share adjusts the figures used in the determination of basic loss per share to take into account:
· the after tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and · the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. |
n) Transaction costs |
Transaction costs are legal and professional fees incurred to structure a deal to acquire the investments designated as financial assets at FVTPL. They include the upfront fees and commissions paid to agents, advisers, brokers and dealers and due diligence fees. Transaction costs, when incurred, are immediately recognised in statement of comprehensive income as an expense. |
o) Contributed equity |
Ordinary shares are classified as equity. Where the Company purchases its own equity share (e.g. as the result of a share buy-back), the consideration paid, including any directly attributable incremental costs, is deducted from equity attributable to the owners of the Company as treasury shares until the shares are cancelled or reissued. The Company has held all treasury shares purchased in the year and has presented them in the Statement of Changes in Equity as a deduction from contributed equity. |
p) Assessment as an investment entity |
Entities that meet the definition of an investment entity within IFRS 10 are required to measure their investee companies at fair value through profit or loss. The criteria (per IFRS 10) which define an investment entity are, as follows: · An entity that obtains funds from one or more investors for the purpose of providing those investors with investment services; · An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and · An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.
The Company meets the above criteria and is therefore categorised as an investment entity within IFRS 10.
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4. Critical Accounting Estimates and Judgements |
The preparation of results in conformity with IFRS requires the management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
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The management make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The management believes that the underlying assumptions are appropriate and that the results are fairly presented. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:
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Judgements |
Going Concern |
After making reasonable enquiries, and assessing all data relating to the Company's liquidity, the management have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the Company. For this reason, they continue to adopt the going concern basis in preparing the results. |
Assessment as an investment entity In determining the Company's meeting the definition of an investment entity in accordance with IFRS 10, the Company considered the following:
· the Company has raised the commitments from a number of investors in order to raise capital to invest and to provide the investors management services with respect to these private equity investments; · the Company intends to generate capital and income returns from its investments which will, in turn, be distributed to the investors; and · the Company evaluates its investments' performance on a fair value basis, in accordance with the policies set out in these results. Although, the Company met all three defining criteria, the management has also assessed the business purpose of the Company, the investment strategies for the private equity investments, the nature of any earnings from the private equity investments and the fair value model. The management made this assessment in order to determine whether any additional areas of judgement exist with respect to the typical characteristics of an investment entity versus those of the Company. The management concludes that from the assessments made the Company meets the criteria of an investment Company within IFRS 10.
Part of the assessment in relation to meeting the business purpose aspects of the IFRS 10 criteria also requires consideration of exit strategies. Given that the Company does not intend to hold investments indefinitely, the management have determined that the Company's investment plans support its business purpose as an investment entity.
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The Board has also concluded that the Company meets the additional characteristics of an investment entity, in that: it is intended that in future it will have more than one investment; the investments will predominantly be in the form of equities, derivatives and similar securities; it has more than one investor and the majority of its investors are not related parties. | |||||||||||||
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Estimates and assumptions | |||||||||||||
Fair Value of financial instruments | |||||||||||||
The fair values of securities that are not quoted in an active market are determined by using valuation techniques as explained in the IPEV Guidelines, primarily earnings multiples, discounted cash flows and recent comparable transactions. The models used to determine fair values are validated and periodically reviewed by the Company. The inputs in the earnings multiples models include observable data, such as earnings multiples of comparable companies to the relevant portfolio company, and unobservable data, such as forecast earnings for the portfolio company. In discounted cash flow models, unobservable inputs are the projected cash flows of the relevant portfolio company and the risk premium for liquidity and credit risk that are incorporated into the discount rate. However, the discount rates used for valuing equity securities are determined based on historic equity returns for other entities operating in the same industry for which market returns are observable. Management uses models to adjust the observed equity returns to reflect the actual equity financing structure of the valued equity investment. Models are calibrated by back-testing to actual results/exit prices achieved to ensure that outputs are reliable. | |||||||||||||
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Valuation of Options | |||||||||||||
The fair values of the Options are measured using the Black-Scholes model. The Black-Scholes model is considered an acceptable model where options are subject to market conditions as defined within IFRS 2.
The Black-Scholes model takes into account the following factors when calculating the fair value of the share options at grant date: · any market vesting conditions; · the expected term of the options (see below); · the expected volatility of the company's share price as at grant date; · the risk-free rate of return available at grant date; · the company's share price at grant date; · the expected dividends on the company's shares over the expected term of the options; and · the exercise (strike) price of the options.
The expected term of the options is assumed to be 5 years from the grant date. However, the options can be exercised at any point after vesting and within a 10 year period from the grant date. As the management of the Company are unsure as to when the options will be exercised, it is assumed they will be exercised half way through the 10 year period from grant date to lapse date which is 5 years.
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5. Segmental Information In accordance with International Financial Reporting Standard 8: Operating Segments, it is mandatory for the Company to present and disclose segmental information based on the internal reports that are regularly reviewed by the Board in order to assess each segment's performance and to allocate resources to them. | |||||||||||||
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Management information for the Company as a whole is provided internally to the management for decision-making purposes. The management's asset allocation decisions are based on an, integrated investment strategy and the Company's performance is evaluated on an overall basis. Prior to the change in Investing Policy on 28 July 2015, the single segment was deemed to be the natural resources and/or energy sector, primarily in Africa. Following the change in Investing Policy, the segments is investments in companies which have significant intellectual property rights which they are seeking to exploit, principally within the technology sector (including digital technology, and content focused businesses) and the life sciences sectors (including biotech and pharmaceuticals). Initially the geographical focus will be North America and Europe but investments may also be considered in other regions to the extent that the Board considers that valuable opportunities exist and positive returns can be achieved. | |||||||||||||
Segment assets The internal reporting provided to the Board for the Company's assets, liabilities and performance is prepared on a consistent basis with the measurement and recognition principles of IFRS.
Segment assets are measured in the same way as in the results. These assets are allocated based on the operations of the segment and the physical location of the asset. At 31 March 2016 the cross section of segment assets between geographical focus and economic sectors were as follows:
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| Year ended 31 March 2016 | ||||||||||||
Geographical Focus | Technology sector | Life sciences sector |
Total | ||||||||||
Private equity investments | £'000 | £'000 | £'000 | ||||||||||
- North America | 2,093 | 348 | 2,441 | ||||||||||
- Europe | 127 | 347 | 474 | ||||||||||
- Southeast Asia | 1,323 | - | 1,323 | ||||||||||
| ------------ | ------------ | --------- | ||||||||||
Total segment assets | 3,543 | 695 | 4,238 | ||||||||||
| ------------ | ------------ | --------- | ||||||||||
Segment liabilities Segment liabilities are measured in the same way as in the results. These liabilities are allocated based on the operations of the segment. At the 31 March 2016 there were no segmented liabilities.
Other profit and loss disclosures The Company's derivative financial instrument income and losses was derived from investments whose business focus is in the energy sector. Following the change of investing policy on 28 July 2015, the Company ceased trading in energy sector focused investments. The other revenue generated by the Company during the year was interest of £1,000 (2015: £1,000), arising from cash and cash equivalents, which was generated in Guernsey, and an unrealised gain on private equity investments. At 31 March 2016 the cross section of the unrealised gain on private equity investments between geographical focus and economic sectors were as follows: | |||||||||||||
| Year ended 31 March 2016 | ||||||||||||
Geographical Focus | Technology sector | Life sciences sector |
Total | ||||||||||
Private equity investments | £'000 | £'000 | £'000 | ||||||||||
- North America | 121 | 18 | 139 | ||||||||||
- Europe | 9 | - | 9 | ||||||||||
- Southeast Asia | 11 | - | 11 | ||||||||||
| ------------ | ------------ | ------------ | ||||||||||
Total unrealised gain on private equity investments | 141 | 18 | 159 | ||||||||||
| ------------ | ------------ | ------------ | ||||||||||
In the year ended 31 March 2016 there were no segmented expenses.
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6. Administration Fees | |||||||||||||
Elysium Fund Management Limited ("Elysium") was entitled to an administration fee from the Company at a rate of 0.1% per annum (subject to a minimum of £100,000 per annum) of the Net Asset Value of the Company together with an amount equal to the long term borrowings invested by the Company calculated at the close of business on each calculation day, payable quarterly in arrears. However, it was agreed during the prior year that the administration fee would be reduced to £24,000 per annum, with effect from 1 October 2014, until any further recapitalisations occurred in the Company. With effect from 1 January 2016, the administration fee was increased to £48,000 per annum.
In the year ended 31 March 2016, a total of £46,000 (2015: £46,000) was incurred in respect of administration fees, of which, £28,000 was payable at the financial reporting date (2015: £6,000).
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7. Directors' Remuneration | |||||||||||||
On 1 February 2016, the Board agreed the following compensation packages for the Directors of the Company, with effect from 1 January 2016, except for share options which are applicable from 17 February 2016: · Lorne Abony is entitled to an annual salary of £250,000, payable monthly in arrears, and a discretionary bonus; under this he was awarded a bonus of £100,000. In addition, the Company will pay Mr Abony's rental expense for an office amounting to up to US$30,000 per annum, a personal assistant amounting to up to US$60,000 per annum and health insurance. The Company has also granted Mr Abony Options over 8% of the issued shares (on a fully diluted basis) at 20 pence per share. The terms of the Options are explained below. | |||||||||||||
· Stephen Dattels is entitled to an annual salary of £50,000, payable quarterly in arrears. In addition, the Company has granted Mr Dattels Options over 2% of the issued shares (on fully diluted basis) at 20 pence per share. The terms of the Options are explained below. · Jim Mellon is entitled to an annual salary of £30,000, payable quarterly in arrears. In addition, the Company has granted Mr Mellon Options over 1% of the issued shares (on fully diluted basis) at 20 pence per share. The terms of the Options are explained below. · Ian Burns is entitled to an annual salary of £25,000, payable quarterly in arrears, plus a one-off Director's bonus of £25,000 for work carried out since joining the Board in November 2014. · Bryan Smith is entitled to an annual salary of £15,000, payable quarterly in arrears, plus a one-off Director's bonus of US$15,000 for work carried out since joining the Board in March 2015. | |||||||||||||
Following the approval to grant Options, the number of share options held by each Directors is as follows:
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| Date Granted | Options issued | % of issued shares on fully diluted basis | Exercise price | |||||||||
Lorne Abony | 17 February 2016 | 12,131,548 | 8% | 20 pence | |||||||||
Stephen Dattels | 17 February 2016 | 3,032,887 | 2% | 20 pence | |||||||||
Jim Mellon | 17 February 2016 | 1,516,444 | 1% | 20 pence | |||||||||
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| ---------------- | ------- |
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| 16,680,879 | 11% |
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| ---------------- | ------- |
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The Options entitles the holder upon exercise to one Ordinary Share of 1 pence in the Issued Share Capital of the Company. Following the grant of the Options, 50% of the Options vested immediately, 25% of the Options shall vest after 12 months (subject to the weighted average price of the Company's ordinary shares rising above 25 pence for ten consecutive trading days), and the balance of 25% shall vest after 24 months (subject to the weighted average price of the Company's Ordinary Shares rising above 35 pence for ten consecutive trading days). Subject to vesting (which is accelerated in the event of a change of control), the Options may only be exercised while the party remains, or in the six month period after they cease to be, an "eligible employee" of the Company (as such term is defined in the Option Agreements) and within a five year term from the date of grant. The Options may be exercised on a cash-less basis subject to agreement of the Board at such time. | |||||||||||||
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Share Option measurement of fair value The fair value of the Options has been measured using the Black-Scholes model. Services and non-market performance conditions attached to the arrangements were not taken into account in measuring fair value as explained in note 3(d) and 4.
The following market the following market conditions have been incorporated into the fair value calculation of the Options at the grant date and year ended 31 March 2016: · 25% of the share awards vest from year 1 onwards subject to the weighted average price of the share price exceeding 25 pence for a minimum of 10 trading days; and · 25% of the share awards vest from year 2 onwards subject to the weighted average price of the share price exceeding 35 pence for a minimum of 10 trading days.
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In addition, the model inputs used in the measurement of the fair values at grant date and the year ended 31 March 2016 were as follows: | |||||||||||||
| Year ended 31 March 2016 | Grant date 17 February 2016 | |||||||||||
Fair value | 5.3364 pence | 9.2281 pence | |||||||||||
Share price | 15.375 pence | 18.00 pence | |||||||||||
Exercise price | 20 pence | 20 pence | |||||||||||
Annualised expected volatility | 70.09% | 70.09% | |||||||||||
Expected life | 5 years | 5 years | |||||||||||
Expected dividends | nil | nil | |||||||||||
Annual risk free interest rate | 0.86% | 0.86% | |||||||||||
Expected volatility has been based on an evaluation of the historical volatility of the Company's share price.
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Reconciliation of outstanding Options |
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| Year ended 31 March 2016 | Year ended 31 March 2015 | |||||||||||
| Number of options | Number of options | |||||||||||
Granted 17 February 2016 and closing balance at 31 March 2016 | 16,680,879 | - | |||||||||||
| ---------------- | ------------ | |||||||||||
Exercisable at 31 March 2016 | 8,340,439 | - | |||||||||||
| ---------------- | ------------ | |||||||||||
The Options outstanding at 31 March 2015 had an exercise price of 20 pence per share and a contractual life of 5 years.
The total fair value of the share Options is estimated to be £1,539,000, of which, £895,000 is the estimated liability at 31 March 2016. | |||||||||||||
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Directors' remuneration | |||||||||||||
| Year ended 31 March 2016 | Year ended 31 March 2015 | |||||||||||
| Directors' Remuneration | Value of Options issued | Total | Total | |||||||||
| £'000 | £'000 | £'000 | £'000 | |||||||||
Stephen Dattels (appointed on 12 November 2014) | 63 | 163 | 226 | - | |||||||||
Ian Burns (appointed on 12 November 2014) | 31 | - | 31 | - | |||||||||
Bryan Smith (appointed on 20 March 2015) | 19 | - | 19 | - | |||||||||
Jim Mellon (appointed on 13 July 2015) | 8 | 81 | 89 | - | |||||||||
Lorne Abony (appointed on 6 January 2016) | 212 | 651 | 863 | - | |||||||||
Nicholas Brook (resigned on 12 November 2014) | - | - | - | 8.4 | |||||||||
Kevin McCabe (resigned on 12 November 2014) | - | - | - | 8.4 | |||||||||
| ------------ | ------------ | --------- | ------------ | |||||||||
| 333 | 895 | 1,228 | 17 | |||||||||
| ------------ | ------------ | --------- | ------------ | |||||||||
No bonuses other than as detailed above or pension contributions were paid or were payable on behalf of the Directors.
Details of the Directors' interests in the share capital are set out in note 19.
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8. Other Expenses | |||||||||||||
| Year ended 31 March 2016 | Year ended 31 March 2015 | |||||||||||
| £'000 | £'000 | |||||||||||
Administration fees (note 6) | 46 | 46 | |||||||||||
Marketing expenses | 44 | - | |||||||||||
Directors' expenses | 25 | - | |||||||||||
Regulatory and listing fees | 22 | 12 | |||||||||||
Registrar fees | 19 | 13 | |||||||||||
Audit fees | 18 | 10 | |||||||||||
Directors' and Officers' liability insurance | 5 | 5 | |||||||||||
Other expenses | 8 | 5 | |||||||||||
| ------------ | ------------ | |||||||||||
| 187 | 91 | |||||||||||
| ------------ | ------------ | |||||||||||
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9. Tax effects of other comprehensive income |
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The Income Tax Authority of Guernsey has granted the Company exemption from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and the income of the Company may be distributed or accumulated without deduction of Guernsey income tax. Exemption under the above mentioned Ordinance entails payment by the Company of an annual fee of £1,200 for each year in which the exemption is claimed. It should be noted, however, that interest and dividend income accruing from the Company's investments may be subject to withholding tax in the country of origin.
There were no tax effects arising from the other comprehensive income disclosed in the Statement of Comprehensive Income (31 March 2015: nil). |
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10. Loss per Ordinary Share |
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The loss per Ordinary Share of 2.69p (2015: 1.28p) is based on the loss for the year of £1,473,000 (2015: loss of £187,000) and on a weighted average number of 54,750,152 Ordinary Shares in issue during the year (2015: 14,617,541 Ordinary Shares).
Although the average price of the Ordinary Shares during the year was above the exercise price of the Broker Warrants, there was no dilutive effect, as the Company made a loss in the year. Therefore, the basic and diluted loss per Ordinary Share were the same.
The average share price of the Ordinary Shares during the year was below the exercise price of the Options (exercise price of 20.00 pence). Therefore, as at 31 March 2016 the Options had no dilutive effect. |
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11. Dividends |
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During the year ended 31 March 2016, no dividend was paid to shareholders (2015: nil). The Directors do not propose a final dividend for the year ended 31 March 2016 (2015: nil). |
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12. Financial Assets and Liabilities Designated at Fair Value Through Profit or Loss | ||
| 31 March 2016 | 31 March 2015 |
| £'000 | £'000 |
Financial assets designated at fair value through profit or loss |
|
|
Opening valuation | - | - |
Purchases | 4,079 | - |
Net unrealised change in fair value of financial assets | 159 | - |
| --------------- | --------------- |
Closing valuation | 4,238 | - |
| --------------- | --------------- |
|
|
|
Closing book cost | 4,079 | - |
Closing unrealised gain | 159 | - |
| --------------- | --------------- |
Closing valuation | 4,238 | - |
| --------------- | --------------- |
| 31 March 2016 | 31 March 2015 |
| £'000 | £'000 |
Financial liabilities designated at fair value through profit or loss |
|
|
Derivative financial instruments | - | (29) |
| --------------- | --------------- |
Net (expense)/income from financial assets and financial liabilities through profit or loss | |||||||
| Year ended 31 March 2016 |
| Year ended 31 March 2015 |
| |||
| Premium received | Realised loss | Unrealised gain | Total investment losses |
| Total | |
| £'000 | £'000 | £'000 | £'000 |
| £'000 | |
Derivative financial instruments | 149 | (192) | 29 | (14) |
| 11 | |
| --------------- | --------------- | --------------- | --------------- |
| --------------- | |
See note 3e, note 4, note 13 and note 14 regarding the classification, recognition, derecognition, measurement and fair value estimation of financial assets designated at fair value through profit or loss.
Since shareholders approved a change in the Company's Investing Policy, the Company has acquired seven investments with a further investment acquired post year end. Further details of these investments are set out below, in the Report of the Chief Executive Officer and at the Company's website.
The Diabetic Boot Company Limited In September 2015, the Company acquired 25,978 (4.86%) ordinary shares of The Diabetic Boot Company Limited ("DBC") from Regent Mercantile Holdings Limited ("Regent") and Galloway, for £347,000. The consideration paid was the issue of 6,946,480 new Ordinary Shares in the Company of 5 pence per share, allocated equally between Regent and Galloway.
SatoshiPay Limited In September 2015, the Company acquired 1,471 (10%) ordinary shares of SatoshiPay at a price of £108.76 per share, for total cash consideration of US$160,000, equivalent to £127,000 as at the year end date.
Intensity Therapeutics, Inc In October 2015, the Company acquired 250,000 (3.5%) preferred series A shares of Intensity Therapeutics, at a price of US$2.00 per share, for total cash consideration of US$500,000, equivalent to £348,000 as at the year end date. | |||||||
Factom, Inc In October 2015, the Company acquired 400,000 (3.64%) seed series shares in Factom at a price of US$1.00 per share, for total cash consideration of US$400,000, equivalent to £279,000 as at the year end date.
Vemo Education, Inc In November 2015, the Company acquired 1,000,000 (8.28%) non-assessable shares of series-2 preferred stock in Vemo at a price of US$1.00 per share, for total cash consideration of US$1,000,000, the equivalent of £696,000 as at the year end date.
In December 2015, the Company purchased a further 527,059 (4.37%) non-assessable shares of series-1 preferred stock in Vemo from Mr Abony at a price of US$1.00 per share, for US$527,059, equivalent to £367,000 as at the year end date. The consideration paid was the issue of 4,328,425 new Ordinary Shares in the Company of 8 pence per share.
Yooya Media (formerly, Entertainment Direct Asia Limited) In January 2016, the Company acquired 12,910 (7.49%) series seed preferred shares in Yooya at a price of US$69.71 per share, for total cash consideration of US$900,000.
In February 2016, the Company purchased a further 14,345 (7.51%) series seed preferred shares in Yooya at a price of US$69.71 per share, for total cash consideration of US$1,000,000.
At 31 March 2015, the Company held a total of 27,255 (15%) series seed preferred shares in Yooya with a total purchase cost amounting to US$1,900,000, equivalent to £1,323,000 as at the year end date. | |||||||
Vested Finance, Inc In January 2016, the Company acquired 1,078,035 (9.1%) seed series shares in Schoold at a price of US$0.9376 per share, for total cash consideration of US$1,000,000, equivalent to £751,000 as at the year end date.
Fralis LLC In April 2016, the Company acquired 693 (29.4%) preferred units in Fralis LLC ("Fralis") at a price of US$3,605.77 per share, for total cash consideration of US$2,500,000, equivalent to £1,711,000.
Energy Select Sector SPDR Fund During the year ended 31 March 2016 and prior to the EGM held on 28 July 2015 to change the Company's Investing Policy, the Company incurred a net loss of £14,000 (31 March 2015: net income of £11,000) from selling short-term put options on the Energy Select Sector SPDR Fund ("ESSSF"), which is an Exchange Traded Fund that tracks the performance of the Energy Select Sector Index. At the time the Company's Investing Policy was changed all the open positions were closed. |
13. Fair value of financial instruments |
IFRS 13 requires the Company to classify financial instruments at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the measurement. The fair value hierarchy has the following levels: · Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the year-end date (Level 1); · Those involving inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and · Those with inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). |
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
| |||||
The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
| |||||
Financial assets/(liabilities) designated at fair value through profit or loss | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 |
|
|
|
|
|
|
|
31 March 2016 investee funds - private equity | - | - | 4,238 | 4,238 |
|
| ---------- | ---------- | ---------- | ---------- |
|
|
|
|
|
|
|
31 March 2015 derivative financial instruments | (29) | - | - | (29) |
|
| ---------- | ---------- | ---------- | ---------- |
|
Transfers between levels There were no transfers between levels during the year (2015: none). | |||||
| |||||
Fair value of unquoted securities | |||||
The valuations used to determine fair values are validated and periodically reviewed by experienced personnel and are in accordance with the International Private Equity and Venture Capital Valuation Guidelines. The valuations, when relevant, are based on a mixture of: - third party financing (if available); - cost, where the investment has been made during the year and no further information has been available to indicate that cost is not an appropriate valuation; - proposed sale price; - discount to NAV calculations; - discount to last traded price; - discounted cash flow; and - discount to bid prices of PLUS quoted investments. | |||||
A reconciliation of the opening and closing balances of assets/(liabilities) designated at fair value through profit or loss classified as Level 3 is shown below: | ||
| 31 March 2016 | 31 March 2015 |
| £'000 | £'000 |
Fair value of Level 3 financial instruments at 1 April | - | - |
Acquisition of Level 3 financial instruments | 4,079 | - |
Net unrealised change in fair value of Level 3 financial instruments | 159 | - |
| ---------- | ---------- |
Fair value of Level 3 financial instruments at 31 March | 4,238 | - |
| ---------- | ---------- |
14. Derivative Contracts | ||
In the normal course of business, the Company enters into derivative contracts for investment purposes. Typically, derivative contracts serve as components of the Company's investing policy and are utilised primarily to structure the portfolio to economically match the investment objectives of the Company. These instruments are subject to various risks, similar to non-derivative instruments, including market, credit and liquidity risk (see Note 21). The Company manages these risks on an aggregate basis along with the risks associated with its investing activities as part of its overall risk management policy.
The Company's derivative trading activities are primarily the purchase and sale of listed options. These derivatives are reported at fair value in the Statement of Financial Position. Changes in fair value are reflected in the statement of comprehensive income.
| ||
15. Other receivables and prepayments | ||
| 31 March 2016 | 31 March 2015 |
| £'000 | £'000 |
Issued Ordinary Shares | 4,700 | - |
Prepayments | 14 | 7 |
| --------------- | --------------- |
| 4,714 | 7 |
| --------------- | --------------- |
The Issued Ordinary Shares receivable of £4,700,000 relates to amounts held by the Company's legal adviser from equity raising activities pending completion of the required anti money laundering due diligence. Post year end, £4,200,000 of the Issued Ordinary Shares receivable was transferred to the Company's bank account, with £500,000 being retained in a client account on behalf of the Company by the Company's legal adviser.
| ||
16. Other payables and accruals | ||
The carrying value of other payables and accruals equate to their fair value. | ||
17. Share Capital, Warrants and Options | ||
| 31 March 2016 | 31 March 2015 |
| £'000 | £'000 |
Authorised: |
|
|
1,910,000,000 Ordinary Shares of 1p (2015: 1,910,000,000 Ordinary Shares) | 19,100 | 19,100 |
100,000,000 Deferred Shares of 0.9p (2015: 100,000,000 Deferred Shares) | 900 | 900 |
| --------------- | --------------- |
| 20,000 | 20,000 |
| --------------- | --------------- |
Allotted, called up and fully paid: |
|
|
130,949,822 Ordinary Shares of 1p (2015: 27,445,552 Ordinary Shares) | 1,309 | 274 |
70,700,709 Deferred Shares of 0.9p (2015: 70,700,709) | 630 | 630 |
| --------------- | --------------- |
|
|
|
Warrants: | 31 March 2016 | 31 March 2015 |
Existing Warrants | - | 44,674,283 |
Subscription Anti-Dilution Warrants | - | 158,400,000 |
Broker Warrants | - | 823,366 |
|
|
|
Options: | 31 March 2016 | 31 March 2015 |
Share options | 16,680,879 | - |
|
|
|
| ||
Warrants Each Existing Warrant and Subscription Anti-Dilution Warrant entitled the warrant-holder to subscribe for one Ordinary Share in cash at any time from 29 May 2012 to 29 May 2015 at a price of 5.0 pence per Ordinary Share. Neither of the Warrants was admitted to listing or trading on any stock exchange.
In May 2015, the Company received notice to exercise 1,055,466 Warrants at an exercise price of 5.0 pence each. As a result of the Warrant exercise, 31,664 Broker Warrants were issued to Peterhouse Corporate Finance Limited ("Peterhouse"). All of the remaining Existing Warrants and Subscription Anti-Dilution Warrants expired on 29 May 2015.
As part of the restructuring, 855,031 Broker Warrants were issued to Peterhouse to subscribe for Ordinary Shares equating to up to 3% of the share capital by 12 November 2016 at 3.32p per Ordinary Share. Post year end, on 9 May 2016, the Broker Warrants were assigned over to Stifel Nicolaus Europe Limited ("Stifel") on the same terms as set out in the initial Warrant Deed dated 13 November 2014. On 23 May 2016, the 855,031 Broker Warrants were exercised for a price of 3.32p per Ordinary Share and for total consideration of £28,387.
| ||
Deferred Shares In aggregate (not per share), the holders of Deferred Shares shall be entitled to receive up to £1 only as a preferred dividend or distribution. The Deferred Shares have zero economic value. The holders of Deferred Shares, in respect of their holdings of Deferred Shares, shall not have the right to received notice of any general meeting of the Company, nor the right to attend, speak or vote at any such general meeting. The Company has the right to transfer the Deferred Shares to such persons as it wishes, without the consent of the holders of the Deferred Shares, and to cancel Deferred Shares with the consent of such transferee.
Options See note 7 for information on Options issued during the year.
Directors' Authority to Allot Shares The Directors are generally and unconditionally authorised to exercise all the powers of the Company to allot relevant securities and, subject to the terms the Directors may determine, up to a maximum aggregate nominal amount of £5,000,000 (representing 5,000,000,000 Sub-Ordinary Shares of £0.001 each, or 500,000,000 New Ordinary Shares of £0.01 each). Authority under this resolution will expire on the date falling five years after the date of the Annual General Meeting. Guernsey Companies Law does not limit the power of Directors to issue shares or impose any pre-emption rights on the issue of new shares. Accordingly, the Directors are generally and unconditionally authorised to allot securities in the Company up to the authorised but unissued share capital of the Company, any such power not to be limited in duration.
Changes in share capital during the period As mentioned above, in May 2015, the Company received notice to exercise 1,055,466 Warrants at an exercise price of 5.0 pence each, for a total of £52,773.
On 2 June 2015, Galloway was appointed as a business development consultant, for a six month period and was payable a fixed fee of £65,278. The Company and Galloway Limited agreed that these fees would be satisfied by the issue of 1,110,170 new Subscription Shares of the Company to Galloway, at a price of 5.88 pence per share.
On 2 June 2015, Galloway subscribed for 1,439,751 new Ordinary Shares in the Company at a subscription price of 5.88 pence per share, raising total proceeds of £84,657. The Ordinary Shares rank pari passu with the Ordinary Shares already in issue.
On 4 September 2015, the Company issued 2,000,000 new Ordinary Shares at a price of 5 pence per share, raising total proceeds of £100,000. The Ordinary Shares rank pari passu with the Ordinary Shares already in issue.
On 10 September 2015, the Company issued 6,946,480 new Ordinary Shares in the Company at a price of 5 pence per share, as consideration for a £347,000 acquisition of 25,978 (4.9%) ordinary shares in DBC, split equally to Regent and Galloway. | ||
| ||
On 11 September 2015, the Company issued 2,000,000 new Ordinary Shares at a price of 5 pence per share, raising total proceeds of £100,000. The Ordinary Shares rank pari passu with the Ordinary Shares already in issue.
On 10 November 2015, the Company issued 8,187,500 new Ordinary Shares of 1 pence each at a price of 8 pence per ordinary share with a number of new investors thereby raising £655,000 before expenses of approximately £43,000. In addition to its fee, Beaumont Cornish was granted 500,000 Warrants with an exercise price of 8 pence and an expiry date of 10 November 2020.
On 26 November 2015, the Company issued 2,500,000 new Ordinary Shares at a price of 8 pence per share, raising total proceeds of £200,000. The Ordinary Shares rank pari passu with the Ordinary Shares already in issue.
On 8 January 2016, the Company issued 4,328,425 new Ordinary Shares in the Company at 8 pence per share, as consideration for £346,274 (US$527,059) acquisition of 527,059 (4.37%) ordinary shares in Vemo.
On 11 January 2016, the Company issued 39,668,200 new Ordinary Shares at a price of 8 pence per share, raising total proceeds of £3,173,456. The Ordinary Shares rank pari passu with the Ordinary Shares already in issue.
On 12 February 2016, the Company issued 37,426,901 new Ordinary Shares at a price of 8 pence per share, raising total proceeds of £5,614,035. The Ordinary Shares rank pari passu with the Ordinary Shares already in issue.
On 15 February 2016, the Company brought back 3,158,623 Ordinary Shares at a price of 11 pence per share, for a total cost of £347,449. The Ordinary Shares redeemed are held in treasury and had a fair value of £486,000 at 31 March 2016. | ||
| ||
18. Net Assets per Ordinary Share | ||
Basic The basic net asset value per Ordinary Share is based on the net assets attributable to equity shareholders of £10,277,000 (2015: £463,000) and on 130,949,822 Ordinary Shares (2015: 27,445,552 Ordinary Shares) in issue at the end of the year.
Diluted The diluted net asset value per Ordinary Share is based on the net assets attributable to equity shareholders of £10,277,000 and the exercise value of the Broker Warrants of £28,387, over 130,949,822 Ordinary Shares and 855,030 Broker Warrants in issue at the end of the year
The share price of the Ordinary Shares at 31 March 2016 of 15.375 pence (2015: 6.50 pence) was below the exercise price of the Options (exercise price of 20.00 pence). Therefore, as at 31 March 2016 the Options had no dilutive effect.
Although the 31 March 2015 share price of 6.50 pence per Ordinary Shares was above the exercise price of the Warrants (exercise price of 3.32 pence), there was no dilutive effect, as the exercise price was above the NAV per share.
| ||
19. Related Parties | ||
Mr Dattels is a discretionary beneficiary of a trust which owns Regent, which held 15,209,248 (11.61%) Ordinary Shares in the Company at 31 March 2016 and the date of signing this report.
Mr Mellon (who was appointed as a Director on 13 July 2015) is a life tenant of a trust which owns Galloway, which held 10,425,991 (7.96%) Ordinary Shares in the Company at 31 March 2016 and at the date of signing this report.
On 2 June 2015, Galloway was appointed as a business development consultant, for a six month period and was payable a fixed fee of £65,278. The Company and Galloway Limited agreed that these fees will be satisfied by the issue of 1,110,170 new Ordinary Shares of the Company to Galloway, at a subscription price of 5.88 pence per share.
On 2 June 2015, Galloway subscribed for 1,439,751 new Ordinary Shares in the Company at a subscription price of 5.88 pence per share, raising total proceeds of £84,657. The Ordinary Shares rank pari passu with the Ordinary Shares already in issue.
On 10 September, the Company purchased a total of 25,978 (4.9%) ordinary shares in DBC, equally from Regent and Galloway. The consideration paid was the issue of 6,946,480 new Ordinary Shares in the Company of 5 pence per share, allocated equally between Regent and Galloway.
Following the Company's acquisition in DBC, Regent held 76,764 (14.7%) ordinary shares in DBC and Galloway held 6,657 (1.3%) ordinary shares. Regent and Galloway shareholding in DBC remained unchanged at 31 March 2016 and at the date of signing this report.
In addition, Regent Pacific Group Limited ("Regent Pacific") is interested in 89,753 shares of DBC, representing 17.0% of the issued shares of DBC. Mr Mellon and Mr Dattels are both interested in the shares of Regent Pacific, and Mr Mellon and Mr Dattels are together Co-Chairmen of Regent Pacific.
Mr Burns is the legal and beneficial owner of Smoke Rise Holdings Limited ("Smoke"), which held 1,374,024 Ordinary Shares in the Company.
Mr Burns is also the Managing Director of Regent.
Mr Smith held 687,832 (0.53%) Ordinary Shares in the Company at 31 March 2016 and at the date of signing this report.
Following a Warrant exercise on 29 May 2015, Peterhouse, the Company's broker, was issued with a further 31,664 Broker Warrants. Peterhouse hold a total of 855,030 Broker Warrants in the Company.
In November 2015, the Company purchased 1,000,000 (8.28%) non-assessable shares of series-2 preferred stock in Vemo at a price of US$1.00 per share, for total cash consideration of US$1,000,000. Mr Abony (who was appointed as a Director on 6 January 2016) is a substantial shareholder and the non-executive chairman of Vemo.
| ||
In December 2015, the Company purchased a further 527,059 (4.37%) non-assessable shares of series-2 preferred stock in Vemo from Mr Abony at a price of US$1.00 per share, for US$527,059. The consideration paid was the issue of 4,328,425 new Subscription Shares in the Company of 8 pence per share.
In January 2016, the Company purchased a total of 1,078,035 (9.1%) seed series shares in Schoold at a price of US$0.9376 per share, for total cash consideration of US$1,000,000. Mr Abony is a substantial shareholder and the non-executive chairman of Schoold.
Mr Abony held 26,438,391 (20.19%) Ordinary Shares in the Company at 31 March 2016 and at the date of signing this report.
The Directors' remuneration is disclosed in note 7.
Details of the amounts paid to Elysium, the Company's Administrator and Company Secretary, are disclosed in note 6.
The Directors consider that there is no immediate or ultimate controlling party.
Beaumont Cornish Limited, which was appointed as Nominated Adviser of the Company on 16 June 2016, incurred fees during the year amounting to £101,000.
Capita Registrars (Guernsey) Limited, which acts as registrar for the Company, incurred fees during the year amounting to £19,000, of which £4,000 was payable at the financial reporting date. | ||
| ||
Peterhouse, which acts as Broker for the Company, incurred fees during the year amounting to £51,000. Details of Broker Warrants issued to Peterhouse are disclosed in note 17 and 23.
| ||
20. Commitments and Contingencies | ||
There were no capital commitments as at 31 March 2016. | ||
21. Financial Instruments |
Treasury policies The objective of the Company's treasury policies is to manage the Company's financial risk, secure cost effective funding for the Company's operations and to minimise the adverse effects of fluctuations in the financial markets on the value of the Company's financial assets and liabilities on reported profitability and on cash flows of the Company.
The Company finances its activities with cash and short-term deposits, with maturities of three months or less. Other financial assets and liabilities, such as receivables and payables, arise directly from the Company's operating activities. Derivative instruments may be used to change the economic characteristics of financial instruments in accordance with the Company's treasury policies. |
The financial assets and liabilities of the Company were: | |||||||||
| 31 March 2016 | 31 March 2015 | |||||||
| Total | Assets at fair value through profit or loss | Loans and receivables | Other financial liabilities | Total | Assets at fair value through profit or loss | Loans and receivables | Other financial liabilities | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Financial assets |
|
|
|
|
|
|
|
| |
Financial assets designated at fair value through profit or loss | 4,238 |
4,238 | - | - | - | - | - | - | |
Financial instrument within the brokerage account | - |
- | - | - | 294 |
- | 294 | - | |
Other receivables | 4,700 | - | 4,700 | - | - | - | - | - | |
Cash and cash equivalents | 1,415 | - | 1,415 | - | 237 | - | 237 | - | |
| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
Total financial assets | 10,353 | 4,238 | 6,115 | - | 531 | - | 531 | - | |
|
|
|
|
|
|
|
|
| |
Financial liabilities |
|
|
|
|
|
|
|
| |
Other payables and accruals | (90) | - | - | (90) | (46) | - | - | (46) | |
Derivative financial instrument | - | - | - | - | (29) | (29) | - | - | |
| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
Total financial liabilities | (90) | - | - | (90) | (75) | (29) | - | (46) | |
|
|
|
|
|
|
|
|
| |
| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
Total financial assets/(liabilities) | 10,263 | 4,238 | 6,115 | (90) | 456 | (29) | 531 | (46) | |
| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
The main risks arising from the Company's financial assets and liabilities are credit risk, liquidity risk and market risk, and are set out below, together with the policies currently applied by the Board for their management. Market risk comprises three types of financial risk, being interest rate risk, currency risk and other price risk, being the risk that the fair value or future cash flows will fluctuate because of changes in market prices other than from interest rate and currency risks.
|
Credit risk The Company takes on exposure to credit risk, which is the risk that one party will cause a financial loss for the other party by failing to discharge an obligation.
The Company's credit risk is primarily attributable to its private equity investments, other receivables and cash and cash equivalents. In order to mitigate credit risk, the Company seeks to trade only with reputable counterparties that the management believe to be creditworthy.
The credit risk on cash and cash equivalents is limited by using banks with high credit ratings assigned by international credit-rating agencies.
At the year end, the entire amount of cash and cash equivalents of £1,415,000 (100.00%) was placed with HSBC Bank plc (2015: the highest concentration of credit risk was £234,000 (98.73%) placed with HSBC Bank plc). The Moody's credit rating for HSBC Bank plc was Aa3 as at 31 March 2016.
The Company's investment policy is to invest in start up or early stage investments. These companies carry a higher risk of credit failure through their inability to raise sufficient funds to bring their technology to a successful and profitable conclusion. The credit risk on private equity investments is monitored by the management who review the business plans, budgets, market updates and management accounts of the private equity investments on a regular basis. |
|
Other receivables of £4,700,000 relates to amounts held by the Company's legal adviser on behalf of the Company from equity raising activities. The management consider the credit risk to be low as the Company received £4,200,000 of this amount post year end and the remaining £500,000 is held by the legal adviser in a client account on behalf of the Company.
|
Liquidity risk |
Liquidity risk is the risk that the Company may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can only do so on terms that are materially disadvantageous. The Company invests in private equities, which, by their very nature, are illiquid. During the year, the Company raised £10,739,000 (2015: £684,000) via an issue of Ordinary shares to enable the Company to acquire investments and maintain a sufficient cash balance to meet its working capital requirements. |
The contractual undiscounted cash flows of the Company's financial liabilities, which are equal to the fair value of the Company's financial liabilities, are all payable within three months to the sum of £90,000 (2015: £46,000).
The Board monitors the Company's liquidity position on a regular basis. In addition, the Company's Administrator continually monitors the Company's liquidity position and reports to the Board when appropriate. | |||
Market risk (i) Price risk The Company's private equity investments and derivative financial instruments are susceptible to price risk arising from uncertainties about future values of the private equity investments or derivatives financial instruments. This price risk is the risk that the fair value or future cash flows will fluctuate because of changes in market prices, whether those changes are caused by factors specific to the individual investment or financial instrument or its holder or factors affecting all similar financial instruments or investments traded in the market, if any.
During the year, the Company did not hedge against movements in the value of its private equity investments. A 10% increase/decrease in the fair value of private equity investments would result in a £424,000 (4.13%) (2015: nil) increase/decrease in the net asset value.
The Company did not hold any derivative financial instrument at 31 March 2016.
| |||
ii) Currency risk The Company regularly holds assets (both monetary and non-monetary) denominated in currencies other than the functional currency (Sterling). It is therefore exposed to currency risk, as the value of the financial instruments denominated in other currencies will fluctuate due to changes in exchange rates.
| |||
Foreign currency risk, as defined in IFRS 7, arises as the values of recognised monetary assets and monetary liabilities denominated in other currencies fluctuate due to changes in foreign exchange rates. IFRS 7 considers the foreign exchange exposure relating to non-monetary assets and liabilities to be a component of market price risk, not foreign currency risk. The Company monitors the exposure on all foreign-currency-denominated assets and liabilities.
The Company monitors its exposure to foreign exchange rates and, where exposure is considered significant, appropriate measures would be adopted to minimise these exposures. As at 31 March 2016, a proportion of the net financial assets of the Company were denominated in currencies other than Sterling as follows: | |||
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|
|
|
| 31 March 2016 | 31 March 2015 |
|
US Dollar | £'000 | £'000 |
|
Financial assets designated at fair value through profit or loss | 3,764 | - |
|
Cash and cash equivalents | 1,178 | - |
|
Financial instrument within the brokerage account | - | 294 |
|
Derivative financial liabilities | - | (29) |
|
| --------------- | --------------- |
|
Net US Dollar assets | 4,942 | 265 |
|
|
|
|
|
Euro |
|
|
|
Financial assets designated at fair value through profit or loss | 127 | - |
|
| --------------- | --------------- |
|
Net Euro assets | 127 | - |
|
|
|
|
|
| --------------- | --------------- |
|
Net exposure to US Dollar and Euro | 5,069 | 265 |
|
| --------------- | --------------- |
|
| |||
At 31 March 2016, if the exchange rate of the US Dollar and Euro had strengthened/weakened by 10% against the Sterling, with all other variables remaining constant, the increase/(decrease) in the profit for the year would amount to +/- £507,000 (2015: +/- £27,000). | |||
iii) Interest rate risk The Company currently funds its operations through the use of equity. Cash at bank, the majority of which was in US Dollars at the year end, is held at variable rates. At the year end, the Company's financial liabilities did not suffer interest and thus were not subject to any interest rate risk. It is unlikely that interest rates would decrease by as much as 1% as they are currently less than 1%. Any decrease in the interest rate to a minimum of 0% would have an insignificant impact on the interest income received by the Company.
The interest rate risk profile of the Company's financial assets and financial liabilities at the year end was:
| ||||||
| Total | Fixed rate | Floating rate | Assets on which no interest is received | Weighted average interest rate | Weighted average period until maturity |
31 March 2016 | £'000 | £'000 | £'000 | £'000 | % | years |
Financial assets |
|
|
|
|
|
|
Financial assets designated at fair value through profit or loss | 4,238 | - | - | 4,238 | - | n/a |
Other receivables | 4,700 |
|
| 4,700 |
|
|
Cash and cash equivalents | 1,415 | - | 1,415 |
| - | n/a |
| ---------- | ---------- | ---------- | ---------- |
|
|
Total financial assets | 10,353 | - | 1,415 | 8,938 |
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
Other payables and accruals | (90) | - | - | (90) | - | n/a |
| ---------- | ---------- | ---------- | ---------- |
|
|
Total financial liabilities | (90) | - | - | (90) |
|
|
|
|
|
|
|
|
|
| ---------- | ---------- | ---------- | ---------- |
|
|
Net financial Assets | 10,263 | - | 1,415 | 8,864 |
|
|
| ---------- | ---------- | ---------- | ---------- |
|
|
| Total | Fixed rate | Floating rate | Assets on which no interest is received | Weighted average interest rate | Weighted average period until maturity |
| £'000 | £'000 | £'000 | £'000 | % | years |
31 March 2015 |
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
Financial instrument within the brokerage account | 294 | - | - | 294 | - | n/a |
Cash and cash equivalents | 237 | - | 231 | 6 | - | n/a |
| ---------- | ---------- | ---------- | ---------- |
|
|
Total financial assets | 531 | - | 231 | 300 |
|
|
Other payables and accruals | (46) | - | - | (46) | - | n/a |
Derivative financial instrument | (29) | - | - | (29) | - | n/a |
| ---------- | ---------- | ---------- | ---------- |
|
|
Total financial liabilities | (75) | - | - | (75) |
|
|
| ---------- | ---------- | ---------- | ---------- |
|
|
|
|
|
|
|
|
|
| ---------- | ---------- | ---------- | ---------- |
|
|
Net financial Assets | 456 | - | 231 | 225 |
|
|
| ---------- | ---------- | ---------- | ---------- |
|
|
| ||||||
As the Company's interest rate risk exposure is minimal, it has not entered into any derivative transactions to further reduce the interest rate risk. | ||||||
22. Capital Management Policy and Procedures |
The Company's capital structure is derived solely from the issue of Ordinary and Deferred Shares.
The Company does not currently intend to fund any investments through debt or other borrowings but may do so if appropriate. Investments in early stage assets are expected to be mainly in the form of equity, with debt potentially being raised later to fund the development of such assets. Investments in later stage assets are more likely to include an element of debt to equity gearing. The Company may also offer new Ordinary Shares by way of consideration as well as cash, thereby helping to preserve the Company's cash for working capital and as a reserve against unforeseen contingencies including, for example, delays in collecting accounts receivable, unexpected changes in the economic environment and operational problems. |
|
The Board monitors and reviews the structure of the Company's capital on an ad hoc basis. This review includes: · The need to obtain funds for new investments, as and when they arise. · The current and future levels of gearing. · The need to buy back Ordinary Shares for cancellation or to be held in treasury, which takes account of the difference between the net asset value per Ordinary Share and the Ordinary Share price. · The current and future dividend policy; and · The current and future return of capital policy.
The Company is not subject to any externally imposed capital requirements. |
23. Events After the Financial Reporting Date |
On 10 April 2016, the Company purchased a total of 693 (29.4%) preferred units in Fralis at a price of US$3,605.77 per share, for total cash consideration of US$2,500,000.
On 14 April 2016, the Company appointed Norbert Teufelberger as a Special Adviser. Mr Teufelberger will support the Company's initiatives in identifying early stage investment opportunities in the technology and gaming industry, given his extensive experience across these sectors. The Company has agreed to grant 1,000,000 Options over Ordinary Shares in the Company on the same terms as the Options granted to the Directors, on 17 February 2016 (see note 7).
On 9 May 2016, Peterhouse assigned their 855,031 Broker Warrants over to Stifel on the same terms as set out in the initial Warrant Deed dated 13 November 2014. On 23 May 2016, the 855,031 Broker Warrants were exercised for a price of 3.32p per Ordinary Share and for total consideration of £28,387.
There were no other significant events after the financial reporting date. |
-- ENDS --