Final Results
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
06 May 2020
Tekcapital PLC
("Tekcapital", the Company" or the "Group")
Final Results for the year-ended 30 November 2019
Record Net Assets and Revenue for the Period
Tekcapital plc (AIM: TEK), the UK intellectual property (IP) investment group focused on creating marketplace value from university technology, announces its audited results for the year ended 30 November 2019.
Financial highlights
· Net Assets increased 40% to US$22.25m, a record level (2018: US$16.13m)
· NAV per share US$0.35 (2018: US$0.30)
· Portfolio valuation increased 48% to US$20.3m (2018: US$13.70m)
· Total revenue US$7.72m (2018: US$6.83m)
- Revenue from services increased 15% to US$1.20m (2018: US$1.04m)
- Net increase of US$6.52m in fair value of portfolio companies (2018: US$5.79m)
· Profit before tax: US$5.52m (2018: US$4.55m)
· Reduction of operating expenses by 7% to US$1.59m (2018: US$1.72m).
· Service revenues cover approximately 55% of cost base (cost of sales and operating expenses)
· Placing to raise US$0.9m completed in July 2019.
Operational highlights: Material Portfolio Companies
Salarius® (91.7% ownership) www.salarius.co
· Successfully launched MicroSalt® with the first three commercial accounts secured.
· Approximately 25 companies are testing MicroSalt® for inclusion in their snack food products.
· Appointed Mike Marrotte, V.P. Sales. Top performing sales leader and revenue growth strategist
· Appointed Javier Contreras as COO to further its commercialization efforts (formerly of The Clorox Company).
· Completed development and consumer packaging of its SaltMe!® line of full flavour, reduced sodium potato chips in 4 flavours.
· Engaged a leading natural food wholesaler & food broker for retail placement of SaltMe!®
· Engaged two leading food ingredient brokers, Accurate Ingredients, Inc. and Hanks Brokerage Inc., to sell MicroSalt® to snack food companies throughout the U.S.
· Filed additional patent on coverage of MicroSalt® directed to improve low-sodium salt.
Lucyd® (100% ownership) www.lucyd.co
· Launched sales of Lucyd Loud 3.0 audio glasses, proper prescription glasses that can be used to listen to music, answer your mobile phone or talk to Siri®.
·On track to launch Lucyd Loud Lyte in the H2 2020. Lucyd Lyte is the first prescription Bluetooth glasses that looks like traditional glasses in terms of style and form factor.
· Filed additional patent protection on Lucyd modular eyewear and trademark protection on Glasses as a Service (GaaS).
Guident (100% ownership) www.guident.co
· Filed a new patent application for controlling autonomous vehicles after an accident (patent was allowed by the USPTO post period end)
· Guident exclusively licensed a patent application from Michigan State University for an AV communication and safety network.
· Guident exclusively licensed patent # 9,964,948 from FIU which enables remote control of an AV by a human operator when necessary
· Begun its B2B marketing program to develop partnerships with vehicle OEM's to provide remote tele-monitoring and control centre IP & technology for autonomous vehicles and land-based delivery drones.
Belluscura® (18.9% ownership) www.belluscura.com
· Continued progress with its patented portable oxygen concentrator programme
· Belluscura raised US $2.7m in 2019 at 15p/share to continue with its FDA clearance and go to market strategy equating to a post money valuation of ~US $9m.
· Belluscura anticipates receiving 510(K) clearance from the US FDA in H1 2020
· Post end of period, Belluscura filed an additional patent application covering devices and systems for treating people suffering from acute respiratory distress caused by the Coronavirus.
Operational highlights: Corporate
· Strengthened the board of directors with the appointments of Lord David Willets and Mr. Louis Castro as independent non-executive directors
Dr. Clifford Gross, Executive Chairman said: "I'm glad to report that through the collective efforts of our dedicated and capable team we have achieved record results in 2019. The continued development of our portfolio companies combined with improved service revenues has resulted in solid financial performance, whilst we simultaneously reduced our operating expenses by 7%."
Post period end portfolio company highlights
· On December 12, 2019, Salarius Ltd secured national food ingredient broker for Microsalt®. Accurate Ingredients provides network of experienced sales representatives on east and west coast of the United States.
· On 24 January 2020, Salarius Ltd secured additional food ingredient broker partner for sales of Microsalt®. The agreement with Hanks Brokerage Inc. covers primarily snack food companies in the southwestern United States.
· On 10 February 2020, Belluscura has filed an additional patent application (17 patents filed or licensed to-date) entitled "Improved Extracorporeal Membrane Oxygenation Device, System and Related Methods," covering devices and systems for treating people suffering from acute respiratory distress caused by the Coronavirus.
· In February 2020, Salarius Ltd's executives exercised stock options resulting in Tekcapital's ownership being reduced from 97.5% to 91.7%.
· On 2 March 2020, Salarius Ltd announced North American distribution agreement for launch of SaltMe!® snacks. This agreement represents an important milestone for Salarius' new potato chip snack line, enabling unprecedented reach of SaltMe!® products into consumer outlets of every size in North America.
· On 4 March 2020, Salarius Ltd announced sales partnership agreement with iLevel Brands Inc as part of its launch of North America sales of SaltMe!®. This agreement, combined with their previously announced distribution agreement on 2 March 2020, will expand Salarius' market penetration and brand awareness for its new potato chip snack line with retail brand placements across the entire East Coast, Midwest and Southwest geographic areas of the United States.
· On 16 March 2020, Belluscura plc announced the filing of a patent application on a modular, portable oxygen enrichment ventilation system for treating patients suffering from COPD and ARDS brought on by such diseases as COVID-19.
· On 24 March 2020, Salarius Ltd announced it has received an order from its distribution partner to launch sales of its new SaltMe!® full flavor-low sodium snacks in 71 stores beginning in May 2020.
· On 26 March 2020, Lucyd Ltd announced it has filed patent and trademark on its forthcoming Vyrb(TM) app. Vyrb users will be able to active a world of smartphone actions with their voice in just moments, including social media posting. The app is designed to improve utility of Lucyd Bluetooth® glasses and wireless hearables.
· On 8 April 2020, Guident Ltd announced significant management additions including appointment of Harald Braun as Company's CEO and appointment of Daniel Grossman as the company's Chief Revenue Officer. The company also appointed Michael Trank as VP Software Development and Dr. Gabriel Castenada as Lead Architect, Artificial Intelligence Software. Guident has also announced that it has received a Notice of Allowance from the United States Patent and Trademark Office for its patent application # 16/386,530 entitled "Methods and Systems for Emergency Handoff of an Autonomous Vehicle" and has filed an additional patent entitled, "Intelligent Remote Monitoring and Control of Autonomous Vehicles".
· On 24 April 2020, Lucyd Ltd announced launch of its Bluetooth(R)-enabled glasses on the website of US superstore chain Walmart Inc.
Posting of Annual Report and Accounts
The Company's annual report and accounts for the year ended 30 November 2019 will be posted to shareholders in due course and will be available on the Company's website www.tekcapital.com shortly.
For further information, please contact:
|
|
||||||||||||||||||||||||
|
|
|
About Tekcapital plc
Tekcapital creates value from investing in new, university-developed intellectual properties and provides a range of IP investment services to make it easy for organisations to commercialise university-developed technology. Tekcapital is quoted on the AIM market of the London Stock Exchange (AIM: symbol TEK) and is headquartered in Oxford, in the UK. For more information, please visit www.tekcapital.com
LEI: 213800GOJTOV19FIFZ85
Chairman's statem ent
Tekcapital brings innovations from lab to market that enhance safety and health and improve the quality of life. In 2019, all our active portfolio companies have made significant progress and portfolio holdings value increased by 48%. We have also grown our service revenues by 15%, including portfolio company management fees and R&D related tax credits. As a result, our profits and net assets ended the year at record levels.
Key portfolio companies
Using our proprietary global university network, we provide services to universities and companies to help them commercialize their innovations. Over the past four years, using these services, we have built a compelling group of portfolio companies to commercialize high value properties we have uncovered. We believe that when you couple commercialization ready, compelling university IP with strong senior management, vibrant companies will emerge, net assets will grow, returns on invested capital will outperform the sector and exits will occur faster. When we realise exits through trade sales or IPO's, the Group's goal is to distribute a portion of the proceeds as a special dividend to our shareholders.
Salarius is a food tech business that owns a patented process to produce nanoparticle sized salt. These small crystals dissolve faster on the tongue, so you need to use less salt, while still having the same salty taste. Less salt means about 50% less sodium. Less sodium means a reduced likelihood of developing heart disease, the world's number one killer. Post-period, Salarius has added additional senior management with Fortune 500 company manufacturing experience and is expected to begin selling Salarius salt and snacks in Q4. According to Future Market Insights, the low sodium ingredient market is estimated to reach US$1.76bn by 2025. Tekcapital owns 91.7% of Salarius.
Key Investment Rationale: Whilst consumers continue to crave salted snacks, there is a significant trend for better for you, health conscious foods that taste good. As heart disease continues to rise and represents the leading cause of premature death in the world, reducing sodium in the foods we eat is of paramount and continuing importance.
Lucyd has built a new, online eyeglass business that combines technology with traditional eyewear. Recently they introduced Lucyd Loud 3.0 upgraded Bluetooth® eyewear. This product combines proper prescription glasses with Bluetooth technology that you can use to answer your phone, listen to music , and talk with Siri®. The product has been well received and the company is focused on expanding its sales with retail distribution through sporting goods and other specialty stores in 2020. Lucyd has also developed and filed approximately 20 patents on modular Bluetooth eyewear that enables the consumer to quickly and inexpensively change the look of their glasses. The company anticipates launching this new product in 2020 along with Lucy Lyte, the first Bluetooth prescription eyewear, that look like regular glasses in terms of their streamlined form factor . According to Statista, the current online market for eyewear is $3.8b per year. Tekcapital owns 100% of Lucyd.
Key Investment Rationale: Digital assistants have gained significant prominence amongst consumers of all ages. Individuals want to stay connected to their digital lives throughout the day. Lucyd's Bluetooth® enabled glasses facilitate seamless connectivity whilst providing glasses that correct vision and protect the eyes with fashion forward frames at an affordable price. Additionally, the pedestrian accidents and deaths are on the rise partially from distractions caused by mobile devices. Lucyd can help deal with this problem.
Guident owns or holds the exclusive licence to a group of patents that together we believe improve the safety of autonomous vehicles and land-based autonomous delivery drones. Guident has significantly increased its intellectual capital in 2019 with several additional patent acquisitions and one in-house developed property. Guident has begun its B2B marketing program and seeks to develop partnerships with vehicle OEM's to provide remote tele monitoring and control centres for autonomous vehicles amongst other services. Such monitoring has recently been required by law in the State of Florida and other jurisdictions. According to Statista, the US market for Autonomous vehicles is projected to reach $6 billion by 2025. Tekcapital owns 100% of Guident.
Key Investment rationale : Autonomous vehicles and ground based delivery drones are about to make their entrance on the world's roads. They hold the potential to significantly reduce accidents and transportation costs. We believe that ensuring the safety of these vehicles with software apps for primary use cases including accident remediation coupled with remote monitoring and control centres, will be required for rapid consumer adoption.
Belluscura has developed an improved portable oxygen concentrator to provide on-the-go supplemental O2, with user replaceable filter cartridges. When a patient's disease progresses, they now can upgrade the filter cartridge to provide more liters of O2 per minute, rather than having to replace an expensive medical device. This cost savings will be beneficial to patients and insurance companies and should help make healthcare more affordable as per Belluscura's mission. Belluscura raised US $2.7m in 2019 at 15p/share to continue with its FDA clearance and go to market strategy. Post money valuation ~US $9m for the entire business. Belluscura anticipates receiving 510(K) clearance from the US FDA in H1 2020. Upon receipt of clearance from the FDA, the Directors believe that Belluscura's value should significantly increase. According to Global Market Insights, the medical portable O2 market is currently $1.4bn a year and growing by more than $100m/year1. Post end of period, Belluscura has filed an additional patent application (17 patents filed or licensed to-date) entitled "Improved Extracorporeal Membrane Oxygenation Device, System and Related Methods," covering devices and systems for treating people suffering from acute respiratory distress caused by the Coronavirus. The latest patent application covers devices and systems for treating people suffering from ARDS including patients suffering from the coronavirus. Belluscura and Separation Design are designing and developing next generation, cost-effective, portable ECMO technology to treat ARDS patients. Tekcapital owns 18.9% of Belluscura.
Key Investment rationale : Chronic obstructive pulmonary disease ("COPD") afflicts more than 250 million individuals worldwide and is growing due to the aging population, smoking and air pollution. Further, as a result of the COVID-19 pandemic, individuals who recover may have residual lung damage. Many of these individuals could benefit from the supplemental oxygen provided by portable oxygen concentrators. Belluscura's patented approach to enable users to upgrade their portable oxygen concentrators as their disease progresses rather than purchase a new unit will make healthcare more affordable for these patients and their insurance providers.
Corporate
Tekcapital has strengthened the board of directors with the appointments of Lord David Willetts and Mr. Louis Castro.
Rt Hon Lord Willetts FRS is President of the Resolution Foundation and former U.K. Minister for Universities and Science. He served as the Member of Parliament for Havant (1992-2015), and previously worked at HM Treasury and the No. 10 Policy Unit. Lord Willetts is a visiting Professor at King's College London, former Chair of the British Science Association and a member of the Council of the Institute for Fiscal Studies.
Louis Castro is a highly experienced and well qualified Director and Chartered Accountant with some thirty years spent in industry and in financial services, including positions as Chief Executive, Finance Director and Non-Executive Director of several AIM listed companies. He was previously the CFO at Eland Oil & Gas plc where he had full executive responsibility for finance, legal, corporate finance and a budget of over US$150m. Louis is a Fellow of the Institute of Chartered Accountants of England & Wales.
We are seeing continued growth of technology transfer services and have released a new version of the Invention Evaluator tri-lingual website for expansion of its service offerings throughout Latin America. Consulting sales are up approximately 15% Y-O-Y and currently cover approximately 55% of our administrative costs. One of our goals is to have all of our administrative costs covered by our service revenue in future periods.
Principal Risks and Uncertainties
The specific financial risks are discussed in the notes to the financial statements. Other risks are as follows:
- the principal financial risks of the business relate to the value of the Group's portfolio companies. We believe that the fair value of each portfolio company is a time dependent valuation that may be impaired if the business does not achieve it milestones, growth trajectory, product development, capital raises or other key performance metrics. Individually and as a group our portfolio companies have a material impact on our financial performance. This risk of individual portfolio company negative performance may be ameliorated as our portfolio becomes more diverse and increases in value.
- the principal operational risk of the business is management's ability to assist our portfolio companies in achieving their goals and ultimate exits whilst increasing our service revenues.
- the Group is dependent on its executive team and directors for its operations and ultimate success and there can be no assurance that it will be able to retain the services of these key personnel in the future.
- the COVID-19 epidemic may produce negative economic activities which could reduce the Group's economic performance Further, until the Group covers all of its operating costs from service revenue and or exits it will seek to raise additional capital to fund operations and follow-on investments in portfolio companies.
Post Period End Fundraisings
Post end of period, the Company announced that it had completed a fundraising of $0.96 million gross through the placing of 14,800,000 new ordinary shares with new and existing investors at a price of 5 pence per share. The issue of the new shares and receipt of the proceeds from the fundraising were received during February 2020.
Post end of period, the Company announced that it had raised US$1.15 million (before expenses) by means of a conditional fundraise through the issue of, in aggregate 9,250,000 placing shares at 10 pence per share. The placing will be subject to Tekcapital's shareholders approval at a general meeting on 19 May 2020.
Current Trading and Outlook
Having continued to develop and expand Tekcapital's existing business, the Board is confident that continued investment in our portfolio companies remains the right approach for long-term value creation. Additionally, we are currently exploring early stage venture funding for a number of our portfolio companies. Further, we believe that we are executing on our strategy and this should result in further increases in returns on invested capital as our portfolio companies continue to mature towards exits.
Whilst it is clear that the Company is progressing very well, net asset values will fluctuate from period to period due to individual portfolio company performance, valuations and changes in market conditions and macro-economic financial conditions including the recent Coronavirus epidemic. We are grateful for the patience and support of our shareholders. We are also sincerely appreciative of our dedicated, creative and incredibly hardworking team without which, none of the results reported herein would be possible.
Dr Clifford M Gross
Chairman and CEO
05 May 2020
Tekcapital Plc
Consolidated Statement of comprehensive income
For the year ended 30 November 2019
|
Group |
Note |
|
Year ended 30 November 2019 |
Year ended 30 November 2018 |
|
|
|
|
US $ |
US $ |
|
|
|
|
|
|
|
Continuing Operations |
|
|
|
|
|
Revenue from services |
6 |
|
1,200,551 |
1,040,830 |
|
Unrealised profit on the revaluation of investments |
12 |
|
6,516,813 |
5,792,264 |
|
Total Revenue |
|
|
7,717,364 |
6,833,094 |
|
Cost of sales |
|
|
(606,166) |
(559,630) |
|
Gross Profit |
|
|
7,111,198 |
6,273,464 |
|
|
|
|
|
|
|
Administrative expenses |
7 |
|
(1,590,563) |
(1,717,570) |
|
|
|
|
|
|
|
Operating Profit |
|
|
5,520,635 |
4,555,894 |
|
|
|
|
|
|
|
Profit on ordinary activities before income tax |
|
|
5,520,635 |
4,555,894 |
|
Income tax expense |
9 |
|
(2,345) |
(1,269) |
|
|
|
|
|
|
|
Profit after tax for the year |
|
|
5,518,290 |
4,554,625 |
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
Foreign exchange (loss)/profit |
|
|
31,855 |
(135,342) |
|
Total other comprehensive (loss)/income |
|
|
31,855 |
(135,342) |
|
|
|
|
|
|
|
Total comprehensive profit for the year |
|
|
5,550,145 |
4,419,283 |
|
Profit per share |
|
|
|
|
|
Basic earnings per share |
10 |
|
0.095 |
0.103 |
|
Diluted earnings per share |
10 |
|
0.095 |
0.103 |
|
|
|
|
- |
- |
The Group has used the exemption under S408 CA 2006 not to disclose the Company income statement.
Items in the statement above are disclosed net of tax.
Tekcapital Plc
Consolidated Statement of financial position
At 30 November 2019
|
Group |
Note |
|
As at 30 November 2019 |
As at 30 November 2018 |
|
|
|
|
US $ |
US $ |
|
Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Intangible assets Financial assets at fair value through profit and loss |
13 12 |
|
838,770 20,335,925 |
838,769 13,704,354 |
|
Convertible loan notes |
15 |
|
476,122 |
250,000 |
|
Property, plant and equipment |
14 |
|
17,353 |
33,489 |
|
|
|
|
21,668,170 |
14,826,612 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Trade and other receivables |
15 |
|
815,866 |
429,373 |
|
Cash and cash equivalents |
16 |
|
472,899 |
1,165,442 |
|
|
|
|
1,288,765 |
1,594,815 |
|
|
|
|
|
|
|
Total assets |
|
|
22,956,935 |
16,421,427 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
20 |
|
310,160 |
285,957 |
|
Current income tax liabilities Deferred Revenue |
|
|
500 118,595 |
500 - |
|
|
|
|
429,255 |
286,457 |
|
|
|
|
|
|
|
Total liabilities |
|
|
429,255 |
286,457 |
|
|
|
|
|
|
|
Net assets |
|
|
22,527,680 |
16,134,970 |
|
|
|
|
|
|
|
Equity attributable to the owners of the Parent |
|
|
|
|
|
Ordinary shares |
18 |
|
372,984 |
326,036 |
|
Share premium |
18 |
|
10,993,546 |
10,218,805 |
|
Retained earnings |
19 |
|
11,055,821 |
5,516,655 |
|
Translation Reserve |
19 |
|
177,498 |
145,643 |
|
Merger Reserve |
19 |
|
(72,169) |
(72,169) |
|
|
|
|
|
|
|
Total Equity |
|
|
22,527,680 |
16,134,970 |
|
|
|
|
|
|
|
|
|
|
|
|
Tekcapital Plc
Company Statement of financial position
At 30 November 2019
|
Company |
Note |
|
As at 30 November 2019 |
As at 30 November 2018 |
|
|
|
|
US $ |
US $ |
|
Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Intangible assets |
13 |
|
- |
- |
|
Investment in subsidiaries |
11 |
|
1,959,003 |
1,955,013 |
|
Financial assets at fair value through profit and loss |
12 |
|
1,804,120 |
1,126,315 |
|
Convertible Loan Notes |
15 |
|
476,122 |
250,000 |
|
|
|
|
4,239,245 |
3,331,328 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Trade and other receivables |
15 |
|
2,321,731 |
1,752,385 |
|
Cash and cash equivalents |
16 |
|
112,114 |
698,694 |
|
|
|
|
2,433,845 |
2,451,079 |
|
|
|
|
|
|
|
Total assets |
|
|
6,673,090 |
5,782,407 |
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
Trade and other payables |
20 |
|
484,375 |
470,808 |
|
|
|
|
|
|
|
|
|
|
484,375 |
470,808 |
|
|
|
|
|
|
|
Total liabilities |
|
|
484,375 |
470,808 |
|
|
|
|
|
|
|
Net assets |
|
|
6,188,715 |
5,311,599 |
|
|
|
|
|
|
|
Equity attributable to the owners of the parent |
|
|
|
|
|
Ordinary shares |
18 |
|
372,984 |
326,036 |
|
Share Premium |
18 |
|
10,993,546 |
10,218,805 |
|
Retained Earnings |
19 |
|
(5,079,729) |
(5,131,273) |
|
Translation Reserve |
19 |
|
(98,086) |
(101,969) |
|
|
|
|
|
|
|
Total Equity |
|
|
6,188,715 |
5,311,599 |
|
|
|
|
|
|
The Company's profit before tax for the year ended 30 November 2019 was $30,688.
Tekcapital Plc
Consolidated Statement of changes in equity
For the year ended 30 November 2019
|
|
|
Attributable to equity holders of the parent company |
|
|||||
|
Group |
Note |
Ordinary Shares US $ |
Share Premium US $ |
Translation Reserve US $ |
Merger reserve US $ |
Profit and loss account US $ |
Total Equity US $ |
|
|
Balance at 30 November 2017 |
|
264,221 |
9,271,098 |
280,985 |
(72,169) |
931,826 |
10,675,961 |
|
|
Share issue |
18 |
61,815 |
1,097,216 |
|
|
|
1,159,031 |
|
|
Cost of share issue |
18 |
- |
(149,509) |
- |
- |
- |
(149,509) |
|
|
Profit for the year |
19 |
- |
- |
- |
- |
4,554,625 |
4,554,625 |
|
|
Other comprehensive income |
19 |
- |
- |
(135,342) |
- |
- |
(135,342) |
|
|
Share based payments |
26 |
- |
- |
- |
- |
30,204 |
30,204 |
|
|
Balance at 30 November 2018 |
|
326,036 |
10,218,805 |
145,643 |
(72,169) |
5,516,655 |
16,134,970 |
|
|
Share issue |
18 |
46,948 |
892,018 |
|
|
|
938,966 |
|
|
Cost of share issue |
18 |
- |
(117,277) |
- |
- |
- |
(117,277) |
|
|
Profit for the year |
19 |
- |
- |
- |
- |
5,518,290 |
5,518,290 |
|
|
Other comprehensive income |
19 |
- |
- |
31,855 |
- |
- |
31,855 |
|
|
Share based payments |
26 |
- |
- |
- |
- |
20,876 |
20,876 |
|
|
Balance at 30 November 2019 |
|
372,984 |
10,993,546 |
177,498 |
(72,169) |
11,055,821 |
22,527,680 |
|
|
|
|
|
|
|
|
|
|
|
Share premium - amount subscribed for share capital in excess of nominal value, net of directly attributable costs.
Translation reserve - amount subscribed for foreign exchange differences recognised in Other Comprehensive Income.
Merger reserve - amount subscribed for share capital in excess of nominal value in relation to the qualifying acquisition of subsidiary undertakings .
Profit and loss account - cumulative net gains and losses recognised in the consolidated statement of comprehensive income.
Tekcapital PLC
Company Statement of changes in equity
For the year ended 30 November 2019
Attributable to owners of the parent company
|
Company |
Note |
Ordinary Shares US $ |
Share Premium US $ |
Translation Reserve US $ |
Retained earnings US $ |
Total Equity US $ |
|
Balance at 30 November 2017 |
|
264,221 |
9,271,098 |
77,277 |
(4,241,264) |
5,371,332 |
|
|
|
|
|
|
|
|
|
Share issue |
18 |
61,815 |
1,097,216 |
- |
- |
1,159,031 |
|
Cost of share issue |
18 |
- |
(149,509) |
- |
- |
(149,509) |
|
Profit for the year |
19 |
- |
- |
- |
(920,213) |
(920,213) |
|
Other comprehensive income |
19 |
- |
- |
(179,246) |
- |
(179,246) |
|
Share based payments |
26 |
- |
- |
- |
30,204 |
30,204 |
|
|
|
|
|
|
|
|
|
Balance at 30 November 2018 |
|
326,036 |
10,218,805 |
(101,969) |
(5,131,273) |
5,311,599 |
|
|
|
|
|
|
|
|
|
Share issue |
18 |
46,948 |
892,018 |
- |
- |
938,966 |
|
Cost of share issue |
18 |
- |
(117,277) |
- |
- |
(117,277) |
|
Profit for the year |
19 |
- |
- |
- |
30,668 |
30,668 |
|
Other comprehensive loss |
19 |
- |
- |
3,883 |
- |
3,883 |
|
Share based payments |
26 |
- |
- |
- |
20,876 |
20,876 |
|
Balance at 30 November 2019 |
|
372,984 |
10,993,546 |
(98,086) |
(5,079,729) |
6,188,715 |
Share premium - amount subscribed for share capital in excess of nominal value, net of directly attributable issue costs.
Translation reserve - amount subscribed for foreign exchange differences recognized in Other Comprehensive Income.
Profit and loss account - cumulative net gains and losses recognised in the consolidated financial statements of comprehensive income.
Tekcapital Plc
Consolidated Statement of cash flows
For the year ended 30 November 2019
|
Group |
Note |
|
For the year ended 30 November 2019 |
For the year ended 30 November 2018 |
|
|
|
|
US $ |
US $ |
|
Cash flows from operating activities |
|
|
|
|
|
Cash outflows from operations |
24 |
|
(1,397,294) |
(866,377) |
|
Tax paid |
|
|
(2,345) |
(1,269) |
|
|
|
|
|
|
|
Net cash outflows from operating activities |
|
|
(1,399,639) |
(867,646) |
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
Purchase of financial assets at fair value through profit and loss* |
12 |
|
(111,810) |
(693,413) |
|
Purchases of property, plant and equipment |
14 |
|
(862) |
(45,841) |
|
Proceeds from sale of property, plant and equipment |
|
|
- |
80 |
|
Net cash outflows from investing activities |
|
|
(112,672) |
(739,174) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from issuance of ordinary shares |
18 |
|
938,966 |
1,159,031 |
|
Costs of raising finance |
18 |
|
(117,277) |
(149,508) |
|
Net cash outflows from financing activities |
|
|
821,689 |
1,009,523 |
|
|
|
|
|
|
|
Net (decrease) in cash and cash equivalents |
|
|
(690,622) |
(597,297) |
|
Cash and cash equivalents at beginning of year |
15 |
|
1,165,442 |
1,797,729 |
|
Exchange (losses)/gains on cash and cash equivalents |
|
|
(1,921) |
(34,990) |
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
15 |
|
472,899 |
1,165,442 |
|
|
|
|
|
|
* No significant non-cash transaction occurred during the period.
Notes
1. General Information
Tekcapital PLC is a company incorporated in England and Wales and domiciled in the UK. The address of the registered office is detailed on page 1 of these financial statements. The Company is a public limited company, which listed on the AIM market of the London Stock Exchange in 2014. The principal activity of the parent company is that of an investment entity and that of the Group is to provide universities and corporate clients with a wide range of technology transfer services. The Group and the parent company also acquire exclusive licences for disruptive technologies it has acquired for its own portfolio, for subsequent commercialisation.
The principal accounting policies applied in the preparation of these consolidated and parent company financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Amounts presented in this report are rounded to nearest US$1.
2. Accounting policies
2.1 Statement of compliance
The consolidated financial statements of Tekcapital PLC Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention. The consolidated financial statements comprise the financial statements of Tekcapital plc and its subsidiaries, Tekcapital Europe Ltd and Tekcapital LLC.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.
The consolidated financial statements of the parent company have been prepared in accordance with Financial Reporting Standard 101 "Reduced disclosure framework" ('FRS 101'). The company will continue to prepare its financial statements in accordance with FRS101 on an ongoing basis until such time as it notifies shareholders of any change to its chosen accounting framework.
The Company financial statements have been prepared using the historical cost convention except where other measurement basis are required to be applied and in accordance with IFRS under FRS 101. In accordance with FRS101, the company has taken advantage of the following exemptions:
· IAS 7, 'Statement of Cash Flows'
· Requirements of IAS 24, 'Related Party Disclosures' to disclose related party transactions entered into between two or more members of a group.
2.1.1 Going concern
The Group and the Company meets its day to day working capital requirements through its service offerings and monies raised through the issues of equity. The Group's forecasts and projections indicate that the Group and the Company have sufficient cash reserves to operate within the level of its current facilities. Whilst it is the Group's and the Company's intention to rely on the available cash reserves, future income generated from its growing service offerings and reductions in its cost base, a negative variance in the forecasts and projections would make the Group's ability to continue as a going concern dependent on an additional fund raise. If the Group's forecasts are not achieved, the Directors would seek to raise the additional funds through equity issues. Whilst the COVID-19 epidemic is contributing to uncertainty in the markets and the full impact is difficult to measure, at the time of approving the accounts after making enquiries, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. The Group and the Company therefore continue to adopt the going concern basis in preparing both its consolidated financial statements and for its own financial statements.
2.1.2 Changes in accounting policy and disclosures
New standards and interpretations not yet adopted by the Group
IFRS 16 Leases
IFRS 16 was issued in January 2016 and is effective for accounting periods beginning on or after 1 January 2019. The Group has not chosen to early adopt this standard and will adopt it for the accounting period beginning 1 December 2019. Directors do not expect any material impact on the consolidated financial statements, as most of its operating lease commitment disclosed in Note 25 (US$61,925) will be satisfied by 1 December 2019.
No other issued but not endorsed amendments to IFRS will have a material impact on the Group's financial statements once they become endorsed and effective.
New standards and interpretations adopted by the Group:
IFRS 9
IFRS 9 was issued in July 2014 and is effective for accounting periods on or after 1 January 2018. The Group has adopted the full retrospective method of adoption; however, the adoption of this standard has not had an impact on the financial performance or position of the Group for the year or comparative period.
IFRS 15 Revenue from contracts with customers
IFRS 15 was issued in September 2015 and is effective for accounting periods beginning on or after 1 January 2018.
The Group has adopted IFRS 15 on 1 December 2018, effectively replacing IAS 18 used by the Group previously. The Group has adopted the full retrospective method of adoption; however, the adoption of this standard has not had an impact on the financial performance or position of the Group for the year or comparative period.
Additional disclosures were included in Note 6 to satisfy the IFRS disclosure requirements.
2.2 Business combinations
Tekcapital PLC was incorporated on 3 February 2014 and on 18 February 2014 entered into an agreement to acquire the issued share capital of Tekcapital Europe Limited by way of share issue. On 19 February 2014 it acquired the issued share capital of Tekcapital LLC also by share issue. This has been accounted for as a common control transaction under IFRS 3 using the pooling of interest method by using the nominal value of shares exchanged in the business combination and no fair value adjustment. The consolidated financial statements comprise the financial statements of Tekcapital PLC and all subsidiaries controlled by it. Subsidiaries are entities that are controlled by the Group. Control is achieved when the Group has the power to govern the financial and operating policies of an entity so as to obtain economic benefit from its activities. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated when necessary amounts reported by subsidiaries have been adjusted to conform to the Group's accounting policies.
2.3 Foreign currencies
(a) Functional and presentation currency
These consolidated financial statements are presented in US Dollars which is the presentation currency of the Group. This is because the majority of the Group's transactions are undertaken in US Dollars. Each subsidiary within the Group has its own functional currency which is dependent on the primary economic environment in which that subsidiary operates. Effective 1 December 2014 Tekcapital PLC and Tekcapital Europe Limited changed their functional currency to UK Sterling. This is because, the primary economic activity of these entities is undertaken in the UK.
(b) Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within 'finance income or costs'.
(c) Group companies
The results and financial position of all Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are translated at the closing exchange rates at the date of that balance sheet.
(ii) income and expense for each income statement are translated at the average rates of exchange during the period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions)
(iii) all resulting exchange differences are recognised in other comprehensive income.
2.4 Investment in subsidiaries
Investments in subsidiaries including Tekcapital Europe Ltd and Tekcapital LLC are recognised initially at cost. The cost of the investment includes transactions costs. The carrying amounts are reviewed at each reporting dated to determine whether there is any indication of impairment.
Investments in portfolio companies are held at fair value through the profit and loss. Directors' judgment was exercised in determination that the Group meets the following criteria and should be recognized as an investment entity under IFRS 10 par. 27. Directors re-evaluated the below criteria and concluded they were met as at 30 November 2019:
Obtains funds from one or more investors for the purpose of providing clients with investment management services
• Commits to its investors that its business purpose is to invest funds solely for return from capital appreciation, investment income or both
• Measures and evaluate the performance of substantially all of its investments on a fair value basis.
Tekcapital's IP search and technology transfer investment services represent investment advisory services, and therefore Tekcapital Europe Limited and Tekcapital LLC continue to be treated as subsidiaries and are consolidated in the Group financial statements. These services may be provided to investors, clients and third parties. The Board considers that the criteria are met in the group's current circumstances.
The Board envisages that Tekcapital's shareholder returns will derive primarily from mid to long-term capital appreciation of a portion of its intellectual property investments, as well as from providing IP investment services to clients. Consequently, the Group's portfolio companies are measured at fair value in accordance with IFRS 9 as disclosed in Note 2.9.
2.5 Non-controlling interests
Losses applicable to non-controlling interests in a subsidiary are allocated to the non-controlling interests, even if doing so causes the non-controlling interests to have a deficit balance. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary. Upon the loss of control the assets and liabilities of the subsidiary, any non-controlling interests and other components of equity related to the subsidiary are derecognised. Any resulting gain or loss is recognised in the profit and loss.
2.6 Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation of assets are calculated to write off the cost less the estimated residual value of tangible fixed assets by equal instalments over the estimated useful economic lives as follows:
Furniture - 3 years
Computer equipment - 3 years
Leasehold improvements - 5 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the assets carrying value is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are recognised within 'Other gains / (losses) - net' in the income statement. When re-valued assets are sold, the amounts are included in other reserves are transferred to retained earnings.
2.7 Intangible assets
(a) Invention Evaluator
This is an intangible asset and a piece of computer software acquired for use by one of the subsidiaries of the Group and is shown at original cost of purchase less impairment losses.
Under IAS38, this asset is regarded by the Directors as being an intangible asset with an indefinite useful life. The Directors believe that the asset is unique in that no competitor offering currently exists, the service appeals globally to many types of clients including Fortune 100 companies, there is no expectation of obsolescence in the foreseeable future, and the service provided by the asset generates sufficient ongoing revenue streams.
Consequently, no write down in the value of this asset either by way of amortisation or impairment has occurred in this financial year. In the Directors' opinion this asset has an indefinite useful life.
(b) Computer software and website development
Costs associated with maintaining computer software programmes and the Company website are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:
(i) it is technically feasible to complete the software product so that it will be available for use;
(ii) management intends to complete the software product and use or sell it;
(iii) there is an ability to use or sell the software product;
(iv) it can be demonstrated how the software product will generate probable future economic benefits;
(v) adequate technical, financial and other resources to complete the development and to use or sell the
software product are available; and
(vi) the expenditure attributable to the software product during its development can be reliably
measured.
Computer software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed four years.
(c) Licences
Costs associated with the acquisition of Licences for technologies with the express purpose of developing them further for a commercial market are recognised as an intangible asset when they meet the criteria for capitalisation. That is, they are separately identifiable and measurable and it is probable that economic benefit will flow to the entity.
Further development costs attributable to the Licenced technology and recognised as an intangible asset when the following criteria are met:
(i) it is technically feasible to complete the technology for commercialisation so that it will be available for use;
(ii) management intends to complete the technology and use or sell it;
(iii) there is an ability to use or sell the technology;
(iv) it can be demonstrated how the technology will generate probable future economic benefits;
(v) adequate technical, financial and other resources to complete the development and to use or sell the technology are available; and
(vi) the expenditure attributable to the technology during its development can be reliably measured.
Licences and their associated development costs are amortised over the life of the licence or the underlying patents, whichever is shorter.
(d) Vortechs Group
This is an intangible asset acquired for use by one of the subsidiaries of the Group and is valued at original cost of purchase.
Under IAS38, the Group's Vortechs Group asset is regarded by the Directors as being an intangible asset with an indefinite useful life. The Directors believe that this asset is unique as it operates in a niche market, it generates an ongoing revenue stream, and there is no expectation of obsolescence. This asset meets the requirements of IAS38 as it is separately identifiable, controlled by the Group, the cost can be measured reliably, and as a result of owning this asset future economic benefits in the form of service revenue are generated for the Group.
In the opinion of the Directors this asset as an indefinite useful life and there has been no amortisation or impairment provided in the current year.
2.8 Impairment of non-financial assets
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows, (CGUs). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.
2.9 Financial assets
2.9.1 Classification
The Group and the Company classify their financial assets depending on the purpose for which the asset was acquired. Management determines the classification of its financial assets at initial recognition.
During the financial year the Group and the Company held investments into portfolio companies classified as equity investments. They are included in current assets and are measured at fair value through profit and loss in accordance with IFRS 9.
The Company also has loans, convertible loan notes and receivables that are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities that are greater than 12 months after the end of the reporting year. These are classified as non-current assets. The Group's loans and receivables comprise 'trade and other receivables' in the balance sheet. The Group also has cash and cash equivalents.
All short-term liabilities are measured at cost, the Group does not hold any long-term financial liabilities.
2.9.2 Recognition and measurement
The Company's investments into the portfolio companies are recognised on the acquisition or formation date and measured at fair value through profit or loss in accordance with IFRS 9.
Loans and receivables are recognised on the trade date in which the transaction took place and are recognised at their fair value (which equates to cost) with transaction costs expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the loans or receivables have been collected, expired or transferred and the Group has subsequently transferred substantially all risks and rewards of ownership. Short term financial liabilities are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method.
2.9.3 Fair value
Financial instruments are measured at fair value including investments in portfolio companies, cash and cash equivalents, trade and other receivables, trade and other payables, and borrowings. This measurement policy does not apply to subsequent measurement at amortised cost of short-term financial liabilities and trade receivables.
The Group measures portfolio companies using valuation techniques appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Our fair value valuation policy is as follows:
· The fair value of new portfolio companies is estimated at the cost of the acquired IP or equity plus associated expenses to facilitate the acquisition.
· Existing portfolio companies are valued as follows:
Ø If a market transaction such as third-party funding has occurred during the past 18 months we will value our ownership in the portfolio company at this observed valuation, taking account of any observed material changes during the period.
Ø In the absence of a recent market transaction, fair value will be estimated by alternative methods and where appropriate by an external, qualified valuation expert. The valuation technique used fall under Level 2 - Observable techniques other than quoted prices and Level 3 - other techniques as defined by IFRS 13.
Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, and trade and other payables approximate their fair value. The fair value of borrowings equals their carrying amounts, as the impact of discounts is not significant.
2.10 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is the intention to settle on a net basis or realise the asset and settle the liability simultaneously.
2.11 Impairment of financial assets
The Group assesses at the end of each reporting year whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (a 'loss event') and the loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
For the loans and receivables category, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument's fair value using an observable market price.
If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as the improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.
2.12 Trade receivables
Trade receivables are amounts due from customers for the provision of services performed in the ordinary course of business. Collection is normally expected within three months or less (in the normal operating cycle of the business) and is classified as current assets. In the rare circumstances that they exceed a period of greater than one year they are presented as non-current assets. In some instances, the Group accepts convertible loan notes for trade debts these are held separately on the statement of financial position until maturity or disposal on the open market. Any value received which is greater or less than the value of the original debt is taken to the consolidated statement of comprehensive income.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.
2.13 Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with other banks, other short term highly liquid investments with maturities of three months or less and bank overdrafts. In the consolidated statement of financial position, bank overdrafts are shown within borrowings in current liabilities.
2.14 Share capital
Ordinary Shares
Ordinary shares are classified as equity.
Share premium
The share premium account has been established to represent the excess of proceeds over the nominal value for all share issues, including the excess of the exercise share price over the nominal value of the shares on the exercise of share options as and when they occur. Incremental costs directly attributable to the issue of new ordinary shares and new shares options are shown in equity as a deduction, net of tax, from the proceeds.
Merger Reserve
The consolidated financial statements are accounted for using the 'pooling of interests' method', which treats the Group as if it had been combined throughout the current and comparative accounting periods. Pooling of interests principles for this combination gave rise to a merger reserve in the consolidated statement of financial position, being the difference between the nominal value of new shares issued by the Company for the acquisition of the shares of the subsidiary and the subsidiary's own share capital.
Non-controlling interest
Non-controlling interest is the portion of equity ownership in a subsidiary not attributable to the parent company.
2.15 Trade payables
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.
2.16 Share based payments
The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of options is recognised as an expense. 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 (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and
· excluding the impact of any non-vesting conditions (for example the requirement of the employees to save).
Assumptions about the number of options that are expected to vest include consideration of non-market 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 reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to the originally estimates, if any, in the income statement, with a corresponding adjustment to equity.
When the options are exercised, the Group issues new shares. The proceeds received net of any directly attributable transactions costs are credited to share capital (nominal value) and share premium when the options are exercised.
2.17 Current and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is recognised in the consolidated income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised on temporary timing differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to the extent that it is probable the temporary difference will reverse in full in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle balances on a net basis.
2.18 Provisions
Provisions and any other anticipated foreseen liabilities are recognised: when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties, and employee termination payments. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering a class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.
2.19 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rentals payable under the operating leases are charged to income on a straight-line basis over the term of the relevant lease.
2.20 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for the services supplied, stated net of discounts, and value added taxes. The Group recognises revenue when the contract is identified, performance obligation is determined, transaction price is determined and allocated to performance obligation in accordance with IFRS 15.
The Group also recognises an unrealised profit/loss on the revaluation of investments in share of portfolio companies in accordance with the fair value policy outlined in Note 2.9.
Provision of services
The Group provides following lines of services:
- Invention Evaluator services: provision of reports assessing potential of any new technology. Revenue is recognized upon delivery of a complete report
- IP Acquisition Opportunities services: provision of reports identifying attractive university developed IP. Revenue is recognised upon delivery of a complete report
- Tech transfer recruitment services: recruitment services specialising in technology transfer executives. Revenue is recognised when the placement is successfully completed
- Training services: custom solutions for new tech transfer offices, spin out companies and accelerators delivered via in person trainings. Revenue is recognised over time based on completion stage of each session.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
3. Financial Risk Management
3.1 Financial risk factors
(a) Portfolio Risk/Investments Risk Management
Investment into portfolio companies held by the Group requires long-term commitment with no certainty of return.
The fair value of each portfolio company represents the best estimate at a point in time and may be impaired if the business does not perform as well as expected, directly impacting the Group's value and profitability. This risk is mitigated as the size of the portfolio increases. The Group performed sensitivity analysis with regards to assumptions used in determination of fair value of the portfolio in Note 12.
The Group also regularly monitors portfolio companies' liquidity required for returns to occur.
(b) Credit Risk
Credit risk is managed on a Group basis. In order to minimise this risk, the Group endeavours to only deal with companies that are demonstrable creditworthy, and the Directors continuously monitor the exposure. The Group's maximum exposure to credit risk for the components of financial position at 30 November 2019 and 2018 is the carrying amount of its current trade and other receivables as illustrated in Note 15.
The Group monitors credit risk related to performance of portfolio companies, including considerations related to recoverability of convertible loan notes issued. Progress is monitored and regular discussions are held with management of portfolio companies to assess commercial progress and financial information provided. The Group also monitors credit risk related to creditor amounts due from portfolio companies.
(c) Liquidity Risk Management
Cash flow forecasting is performed on a Group basis. The Directors monitor rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs. At the reporting date the Group held bank balances of US $472,899. Post period end, the Group completed a post period end placement for US$0.9m and a conditional placing for US$1.15m. All amounts shown in the consolidated statement of financial position under current assets and current liabilities mature for payment within one year, with Trade and Other Receivables exceeding Trade and Other Payables by US$ 505,706.
(d) Financial Risk Management
The Company's Directors review the financial risk of the Group. Due to the early stage of its operations the Group has not entered into any form of financial instruments to assist in the management of risk during the period under review.
(e) Market Risk Management
Due to low value and number of financial transactions that involve foreign currency and the fact that the Group has no borrowings to manage, the Directors have not entered into any arrangements, adopted or approved the use of derivative financial instruments to assist in the management of the exposure of these risks. It is their view that any exchange risks on such transactions are negligible.
The Group also regularly monitors risk related to fair value of financial instruments held such as convertible loan notes held.
(f) Foreign exchange risk
Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency, with the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group.
A sensitivity analysis has been performed to assess the exposure of the Group to foreign exchange movements. If the exchange rate weakened by 10 percent then the effect on the gain before tax would decrease by US$33,177 and equity would decrease by US$37,788.
(g) Impact of the COVID-19 pandemic
The current Coronavirus epidemic may produce negative economic activities which could reduce the company's economic performance and the performance of its portfolio companies in ways that are difficult to quantify at this juncture. It may cause a recession in the markets in which the Group operates, reduce the Group's net asset values, revenue, cash flow, access to investment capital and other factors which could negatively impact the Group.
3.2 Capital management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to adjust or maintain the capital structure, the Group may adjust the level of dividends paid to its shareholders, return capital to shareholders, issue new shares or sell assets to reduce borrowings. The Group has no external borrowings. This policy is periodically reviewed by the Directors, and the Group's strategy remains unchanged for the foreseeable future.
The capital structure of the Group consists of cash and bank balances and equity consisting of issued share capital, reserves and retained losses of the Group. The Directors regularly review the capital structure of the Company and consider the cost of capital and the associated risks with each class of capital. The Company has no external borrowings and this has no impact on the gearing levels of the Group as at 30 November 2019.
The Company's historic cost of capital has been the cost of securing equity financings, which have averaged around 10%. The company's long-term financial goal is to optimise its returns on invested capital (ROIC) in excess of our weighted average cost of capital (WACC) and as such create value for our shareholders. The method the Company seeks to employ for achieving this is to utilise its structural intellectual capital developed through its Discovery Search Network, its Invention Evaluator service and its Vortechs Group Service to mitigate selection bias and improve returns on invested capital. Ultimately, management will seek to monetize these returns with exits from its investments in portfolio companies.
4. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Directors made the following judgements:
- determination as to the classification of the Group as an investment entity as discussed in Note 2.4
- determination of operating segments as disclosed in Note 5
- determination of reliance of the Group's portfolio companies on funding to achieve their fair values discussed in Note 12.
The Directors also make estimates and assumptions concerning the future. The resulting accounting estimates will by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of the assets and liabilities within the next financial year are detailed below.
|
Key estimate/judgment area |
Key assumption |
Potential impact within the next financial year |
Potential impact in the longer term |
Note reference for sensitivity analysis |
|
Valuation of unquoted equity investments |
In applying valuation techniques to determine the fair value of unquoted equity investments the Group and the Company make estimates and assumptions regarding the future potential of the investments. The policy of the Group and the Company is to value new portfolio companies at cost of the acquired IP or equity plus associated expenses to facilitate the acquisition. Existing portfolio companies are valued using either a market transaction such as third-party funding or, in the absence of a recent market transaction, by alternative methods and where appropriate by an external, qualified valuation expert. The fair value of Guident Limited reflects the fair value of the Guident's net assets. This value is primarily based on its IP portfolio detailed in Note 12, valued using the royalty relief method. The estimates used in this valuation include market size market penetration used to determine projected sales, the royalty relief rate and the discount factor. These estimates are key to calculation of the net present value of future cashflows associated with the patent. The fair value calculation assumes Guident Limited obtains sufficient funding to execute their strategy. The fair value of Salarius Limited reflects the fair value of the Salarius' net assets. This value is primarily based on the US patent 8,900,650 valued using the royalty relief method. The estimates used in this valuation include market size market penetration used to determine projected sales, the royalty relief rate and the discount factor. These estimates are key to calculation of the net present value of future cashflows associated with the patent. The fair value calculation assumes Salarius Limited obtains sufficient funding to execute their strategy. The fair value of Lucyd Limited reflects: - Lucyd's ecommerce platform valued by estimating the net present value of future cashflows associated with the e-shop. Key assumptions used in estimating future cash flows are projected profits including market size and market penetration used to determine projected sales, and a discount factor applied for the net present value of future cashflows from the platform. - Lucyd's trademark value based on the Net book value stated at cost. |
ü |
ü |
Note 12 |
|
Useful life of Invention Evaluator website |
The Directors have considered the useful life of the Invention Evaluator website to be indefinite because of the uniqueness of the service it provides and that there is no competitor in the market in which the Group operates who is able to provide a similar service. The Directors undertake an annual review that considers an appropriateness of the use of an indefinite useful life in addition to impairment review and if required make a provision in the financial statements. |
ü |
ü |
Note 13 |
|
Useful life of Vortechs Group
|
The Directors have considered the useful life of Vortechs Group to be indefinite because of the ongoing service revenue that is being generated. The business operates in a specialised market, with few competitors. The Directors undertake an annual review that considers an appropriateness of the use of an indefinite useful life in addition to impairment review and if required make a provision in the financial statements. |
ü |
ü |
Note 13 |
|
Deferred Taxes
|
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. The Group did not recognize deferred tax liability on fair value gains associated with the revaluation of shares in its portfolio companies due to availability of the substantial shareholdings exemption. This is considered a permanent difference and not a temporary difference.
|
ü |
ü |
Note 22 |
5. Segmental reporting
The Directors consider the business to have three segments for reporting purposes under IFRS 8 which are:
· professional services, including the provision of recruitment services via Vortechs Group, provision of reports and services provided to locate and transfer technologies to customers, as well as R&D tax relief credits and provision of management services to its portfolio companies. The activities grouped under this segment share similar economic characteristics of provision of intellectual property services to third party services;
· licensing and investment activities, including acquiring licences for technologies, portfolio company investment, development and commercialisation. The activities share the goal of increasing the fair value of investments made into portfolio companies by the Group.
Segmental revenues and results
|
2019 Consolidated income statement |
Professional Services US $ |
Licensing & Investment US $ |
TOTAL
US $ |
|
Net Revenue |
1,170,733 |
6,516,813 |
7,687,546 |
|
Interest Income Cost of Sales |
(606,166) |
29,818 |
29,818 (606,166) |
|
Administrative Expenses |
(503,840) |
(1,069,725) |
(1,573,565) |
|
Depreciation and Amortisation |
(4,249) |
(12,749) |
(16,998) |
|
Group operating profit |
56,478 |
5,464,157 |
5,520,635 |
|
Profit on ordinary activities before income tax |
56,478 |
5,464,157 |
5,520,635 |
|
Profit tax expense |
(586) |
(1,759) |
(2,345) |
|
Profit after tax |
55,892 |
5,462,398 |
5,518,290 |
|
2018 Consolidated income statement |
Professional Services US $ |
Licensing & Investment US $ |
TOTAL
US $ |
|
Net revenue |
1,040,830 |
5,792,264 |
6,833,094 |
|
Cost of sales |
(559,630) |
- |
(559,630) |
|
Administrative expenses |
(629,483) |
(1,070,017) |
(1,699,500) |
|
Depreciation and amortisation |
(4,517) |
(13,553) |
(18,070) |
|
Group operating profit/(loss) |
(152,800) |
4,708,694 |
4,555,894 |
|
Profit/(Loss) on ordinary activities before income tax |
(152,800) |
4,708,694 |
4,555,894 |
|
Income tax expense |
(317) |
(952) |
(1,269) |
|
Profit/(Loss) after tax |
(153,117) |
4,707,742 |
4,554,625 |
Segment assets and liabilities
|
2019 Consolidated statement of financial position |
Professional Services US $ |
Licensing and Investment US $ |
TOTAL
US $ |
|
Assets |
1,614,014 |
21,342,921 |
22,956,935 |
|
Liabilities |
(429,255) |
|
(429,255) |
|
Net assets |
1,184,759 |
21,342,921 |
22,527,680 |
|
2018 Consolidated statement of financial position |
Professional Services US $ |
Licensing Activities US $ |
Other
US $ |
TOTAL
US $ |
|
|
Assets |
1,901,195 |
14,386,512 |
133,720 |
16,421,427 |
|
|
Liabilities |
(214,842) |
(42,969) |
(28,646) |
(286,457) |
|
|
Net assets |
1,686,353 |
14,343,543 |
(105,074) |
16,134,970 |
|
|
|
|
|
|
|
|
Geographical information
|
|
2019 US $ |
2018 US $ |
|
United Kingdom |
6,516,813 |
6,068,109 |
|
United States |
1,200,551 |
764,985 |
|
Total revenue |
7,717,364 |
6,833,094 |
Geographical information
|
|
2019 US $ |
2018 US $ |
|
United Kingdom Assets |
21,342,921 |
14,386,512 |
|
Liabilities United States Assets Liabilities |
-
1,614,014 (429,255) |
(42,969)
2,034,915 (243,488)
|
|
Total Net Assets |
22,527,680 |
16,134,970 |
The Group's operations are now strictly divided between those of professional services or licensing and investment, therefore no amounts are presented under "Other" compared to previous years.
6. Revenue from Services
The below table discloses disaggregated Revenue from "Services by their nature/categories as well as timing of the revenue. Please refer to Note 12 for disaggregation of Group's Unrealized profit on the revaluation of investments.
|
Group |
Transferred at a point in time |
Transferred over time |
Total 2019 US$ |
Transferred at a point in time |
Transferred over time |
Total 2018 US$ |
|
Major service lines: Sales of Invention Evaluator Tech transfer recruitment services Technology reports Training services Management services R & D relief income* Loan convertible interest income Other |
199,184
454,452
45,800 -
- -
- - |
-
-
- -
413,278 58,019
29,818 - |
199,184
454,452
45,800 - - 413,278 58,019
29,818 -
|
247,593
381,380
44,000 - - - -
- - |
-
-
- 90,000
181,474 94,371
- 2,012 |
247,593
381,380
44,000 90,000
181,474 94,371
- 2,012 |
Total Revenue
from Services 699,436 501,115 1,200,551 672,973 367,857 1,040,830
* The Group received an R&D tax relief, the directors consider this to be income.
All of the Group's major service lines are sold directly to consumers and not through intermediaries. All revenue recognised in the reporting period represent performance obligations satisfied in the current period.
7. Expenses
7.1 Expenses by nature
|
Group |
|
2019 US $ |
2018 US $ |
|
|
|
Depreciation of property plant and equipment |
|
16,998 |
18,070 |
|
|
|
Research and development expenses |
|
173,947 |
204,968 |
|
|
|
Other administration expenses |
|
1,463,289 |
1,564,320 |
|
|
|
Foreign exchange movements |
|
(63,671) |
(69,788) |
|
|
|
Total expenses |
|
1,590,563 |
1,717,570 |
||
Included in the Other administration expenses is the amount of US$ 65,848 related to payments under operating lease for the office rental agreement also referenced in Note 25.
7.2 Auditor remuneration
|
Group |
|
2019 US $ |
2018 US $ |
|||||
|
Fees payable to the Group's auditor and its associated for the audit of the Group and Company financial statements |
|
95,313 |
77,912 |
|||||
|
Fees payable to the Company's auditor and its associates for other |
|
|
|
|||||
|
· The audit of company's subsidiaries |
|
15,920 |
16,277 |
|||||
|
|
|
111,233 |
94,189 |
|
||||
|
|
|
|
|
|
||||
8. Employees
8.1 Directors' emoluments
|
Group |
|
2019 US $ |
2018 US $ |
|
Directors emoluments |
|
264,799 |
264,938 |
|
|
|
|
|
|
Total |
|
264,799 |
264,938 |
The highest paid Director received a salary of $187,760 (2018: $191,865) and benefits of $21,050 (2018: $15,253). The highest paid Director received a bonus of $0 (2018: $0). The highest paid Director did not exercise any share options or receive any shares from the Company during the current year. No termination benefits, post-employment benefits were provided to Directors. Total of short-term benefits in kind of US$21,050 were provided during the year. The amounts in the table above do not include Employers NI in the amount of US$14,447.
Key management personnel (including Directors and Group Financial Controller) received salary of US$368,042, excluding Stock Base Compensation disclosed in Directors Remuneration Report. Please also refer to Director's Report.
8.2 Employee benefit expense
|
Group |
|
2019 US $ |
2018 US $ |
|
Wages and salaries including restructuring costs and other termination benefits |
|
275,765 |
296,751 |
|
Social security costs |
|
40,644 |
43,453 |
|
Share options granted to directors and employees |
|
20,876 |
32,775 |
|
Total |
|
337,285 |
372,979 |
8.3 Average number of people employed
|
Group |
|
2019
|
2018
|
|
Average number of people (including executive directors) employed |
|
|
|
|
Operations |
|
4 |
4 |
|
Management |
|
2 |
2 |
|
Total average headcount |
|
6 |
6 |
Average number of employees with the Company in 2019 and 2019 was two (Management).
To enhance flexibility and improve cost control, the Group utilizes consultants for scientific review, administrative and operations support, software development and other knowledge-intensive services.
9. Income tax expense
|
Group |
|
2019 US $ |
2018 US $ |
|
Current tax |
|
|
|
|
Current tax on profits for the year |
|
2,345 |
1,269 |
|
Total current tax |
|
2,345 |
1,269 |
|
|
|
|
|
|
Income tax expense |
|
2,345 |
1,269 |
|
|
|
|
|
|
Group |
|
2019 US $ |
2018 US $ |
|
Profit before tax |
|
5,520,635 |
4,555,894 |
|
Tax calculated at domestic tax rates applicable to profits |
|
1,048,921 |
774,502 |
|
Tax effects of: |
|
|
|
|
· Expenses not deductible for tax purposes |
|
19,155 |
15,444 |
|
· Income not taxable |
|
(1,238,195) |
(1,057,017) |
|
· Capital allowances in excess of depreciation |
|
3,230 |
2,150 |
|
· Unrelieved tax losses and other deductions |
|
169,235 |
266,190 |
|
Total corporation tax |
|
2,345 |
1,269 |
|
|
|
|
|
The weighted average applicable tax rate was 19% (2018: 17%). The Group applied 17% tax rate in FY 2018 based on expectation of corporation tax rate adjustment that did not materialise.
Unused tax losses for which no deferred tax assets have been recognised is attributable to the uncertainty over the recoverability of those losses through future profits.
10. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of Ordinary Shares outstanding during the period.
Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the sum of weighted average number of (1) Ordinary Shares outstanding during the period and (2) any dilutive potential Ordinary Shares outstanding at 30 November 2019.
|
|
2019 |
2018 |
|||
|
|
|
|
|
||
|
Earnings attributable to equity holders of the Group (US$) |
5,518,290 |
4,554,625 |
|
||
|
|
|
|
|
||
|
Weighted average number of Ordinary Shares in issue:
|
|
|
|
||
|
|
|
|
|
||
|
Basic |
58,010,322 |
44,100,930 |
|
||
|
Diluted |
58,918,289 |
44,120,817 |
|
||
|
|
|
|
|
||
|
Basic earning per share |
0.095 |
0.103 |
|
||
|
Diluted earning per share |
0.095 |
0.103 |
|
||
|
|
|
|
|
||
The effect of 2.9m share options granted in August 2019 contributed to the difference between basic weighted average number of shares and diluted weighted average number of shares.
Post period end, the Group completed a placement of 14,800,000 new ordinary shares and a conditional placement of 9,250,00 new ordinary shares.
11. Investments in subsidiaries
|
Company |
Shares in subsidiaries US$ |
Loans to subsidiaries US$ |
Total
US $ |
|
Cost and net book value |
|
|
|
|
As at 1 December 2018 |
79,265 |
1,875,748 |
1,955,013 |
|
Additions during the year |
- |
- |
- |
|
Disposal during the year |
- |
- |
- |
|
Foreign currency translation differences |
161 |
3,829 |
3,990 |
|
Balance at 30 November 2019 |
79,426 |
1,879,577 |
1,959,003 |
|
|
|
|
|
|
Subsidiaries name (consolidated) |
Proportion of ordinary shares directly held |
Nature of business |
Capital Net Profit/ and reserves (Loss) |
|
|
|
Direct |
|
|
|
||
|
Tekcapital Europe Limited England and Wales
|
100% |
Provision of Intellectual property research services |
16,835,932 5,949,752 |
||
|
|
|
|
|
||
|
Tekcapital LLC USA |
100% |
Provision of Intellectual property research services
|
(3,167,902) (373,561) |
||
Indirect
The following are directly owed by Tekcapital Europe Limited
|
Lucyd Limited |
England and Wales |
100.00% |
Provider of high-tech eyewear
|
(4,329,230) |
(258,466) |
|
Salarius Limited |
England and Wales |
91.7% |
Developer of low sodium salt and snack foods
|
(545,780) |
(453,039) |
|
Guident Limited |
England and Wales |
100.00% |
Developer of autonomous vehicle valet system
|
(276,465) |
(192,687) |
|
Smart Food Tek Limited |
England and Wales |
100.00% |
Developer for baked food coating to reduce fat
|
35,589 |
(3,271) |
* As at the year end, the Company has no interest in the ownership of any other entities or exerts any significant influence over or provides funding which constitutes an "unconsolidated structured entity".
All UK subsidiaries are exempt from the requirement to file audited accounts by virtue of section 479A of the Companies Act 2006.
Tekcapital Europe Ltd (registered address 12 New Fetter Lane, London, United Kingdom, EC4A 1JP) and Tekcapital LLC (registered address 12000 Biscayne Boulevard, Suite 222, Miami, Florida, 33133, United States) are consolidated by Tekcapital plc because they continue to provide advisory services in IP search and technology transfer.
All other entities are measured at fair value through profit and loss based in IFRS 10 as referenced in Note 2.4. The Group provides management service support to Lucyd Limited, Salarius Limited and Guident Limited, as well as has provided working capital assistance to Salarius Limited through convertible loan note financing (see also Note 15). The Group also assists the entities with their fundraising activities.
Registered office of all four subsidiaries owned by Tekcapital Europe Limited: Acre House, 11-15 William Road, London, England, NW1 3ER
12. Financial Assets at Fair Value through Profit and Loss
Group's investments in portfolio companies in the years ended 30 November 2019 and 30 November 2018 are listed below and classified as equity instruments. The principal place of business for portfolio companies listed below is England and Wales.
|
|
|
|
|
|
|
|
|
||||
|
Group |
Proportion of ordinary shares held |
1 Dec 2018 |
Additions |
Disposal |
FX reval |
Fair Value change |
30 Nov 2019 |
||||
|
|
|
US $ |
US $ |
US $ |
US $ |
US $ |
US $ |
||||
|
Guident Limited |
100.00% |
8,545,103 |
- |
- |
- |
6,981,092 |
15,526,195 |
|
|||
|
Lucyd Limited |
100.00% |
3,040,616 |
- |
- |
500 |
(1,912,094) |
1,129,022 |
||||
|
Salarius Limited |
97.50% |
923,830 |
633 |
- |
22 |
908,941 |
1,833,426 |
||||
|
Belluscura Limited |
18.90% |
1,126,315 |
111,177 |
- |
2,338 |
564,291 |
1,804,121 |
||||
|
Smart Food Tek Limited |
100.00% |
43,073 |
- |
- |
89 |
- |
43,162 |
||||
|
eSoma Limited |
100.00% |
24,750 |
- |
- |
- |
(24,750) |
- |
||||
|
Non Invasive Glucose Tek Limited |
100.00% |
667 |
- |
- |
- |
(667) |
- |
||||
|
Total Balance |
|
13,704,354 |
111,810 |
- |
2,949 |
6,516,813 |
20,335,925 |
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Company |
Proportion of ordinary shares held |
1 Dec 2018 |
Additions |
Disposal |
FX reval |
Fair Value change |
30 Nov 2019 |
||||||||
|
|
|
US $ |
US $ |
|
US $ |
US $ |
US $ |
||||||||
|
Belluscura Limited |
18.90% |
1,126,315 |
111,177 |
- |
2,338 |
564,291 |
1,804,121 |
||||||||
|
Total Balance |
|
1,126,315 |
111,177 |
- |
2,338 |
564,291 |
1,804,121 |
||||||||
|
30 November 2018:
|
|
|
|
|
|
|
|
|
|||||||
|
Group |
Proportion of ordinary shares held |
1 Dec 2017 |
Additions |
Disposal |
FX reval |
Fair Value change |
30 Nov 2018 |
|
|||||||
|
|
|
US $ |
US $ |
US $ |
|
US $ |
US $ |
|
|||||||
|
Guident Limited |
100.00% |
- |
23,494 |
- |
(7) |
8,521,616 |
8,545,103 |
|
|||||||
|
Lucyd Limited |
100.00% |
6,023,954 |
15,760 |
|
(16,757) |
(2,982,341) |
3,040,616 |
|
|||||||
|
Salarius Limited |
100.00% |
15,128 |
27,466 |
- |
(708) |
881,944 |
923,830 |
|
|||||||
|
Belluscura Limited |
29.22% |
981,762 |
560,090 |
- |
(60,839) |
(354,698) |
1,126,315 |
|
|||||||
|
Smart Food Tek Limited |
100.00% |
44,167 |
972 |
- |
(2,066) |
- |
43,073 |
|
|||||||
|
eSoma Limited |
100.00% |
10,983 |
13,768 |
- |
(1) |
- |
24,750 |
|
|||||||
|
Non Invasive GlucoseTek Limited |
100.00% |
24,199 |
425 |
- |
(981) |
(22,976) |
667 |
|
|||||||
|
eGravitas Limited |
100.00% |
154,535 |
43,955 |
- |
(5,807) |
(192,683) |
- |
|
|||||||
|
Frigidus Limited |
100.00% |
52,968 |
7,483 |
- |
(1,853) |
(58,598) |
- |
|
|||||||
|
Total Balance |
|
7,307,696 |
693,413 |
- |
(89,019) |
5,792,264 |
13,704,354 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
Company |
Proportion of ordinary shares held |
1 Dec 2017 |
Additions |
Disposal |
FX reval |
Fair Value change |
30 Nov 2018 |
|
|
|
US $ |
US $ |
US $ |
|
US $ |
US $ |
|
Belluscura Limited |
29.22% |
981,762 |
560,090 |
|
(60,839) |
354,698 |
1,126,315 |
|
Total Balance |
|
981,762 |
560,090 |
- |
(60,839) |
354,698 |
1,126,315 |
Total fair value gain of $6.5m for the year reflects uplift in value of shares of Guident and Salarius, offset mostly by reduction in valuation of Lucyd Limited. Considering early stage of commercialisation, fair value of remaining portfolio companies was recorded based on the cost of acquired IP, as their carrying amounts represent a reasonable approximation of fair value.
The valuation techniques used fall under, Level 2 - Observable techniques, other than quoted prices, and Level 3- Other techniques as defined by IFRS 13. These techniques were deemed to be the best evidence of fair values considering early stage of portfolio companies. There has been no transfer between levels during the period. Fair value measurement hierarchy for financial assets as at 30 November 2019 with comparative amounts as of 30 November 2018:
|
|
|
|
|
|
|
|
Date of Valuation |
Total |
Significant observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
|
|
|
US $ |
US $ |
US $ |
|
Guident and others |
30 November 2019 |
18,531,804 |
|
18,531,804 |
|
Belluscura Limited |
30 November 2019 |
1,804,121 |
1,804,121 |
|
|
Total Balance |
30 November 2019 |
20,335,925 |
1,804,121 |
18,531,804 |
|
|
|
|
|
|
|
Guident and others |
30 November 2018 |
12,578,039 |
|
12,578,039 |
|
Belluscura Limited |
30 November 2018 |
1,126,315 |
1,126,315 |
|
|
Total Balance |
|
13,704,354 |
1,126,315 |
12,578,039 |
Guident ($7.0m gain)
An external valuation by an independent patent valuation expert was prepared for Guident' s IP portfolio including:
1. US patent 9,429, 943 ("FAMU 943")
2. International Patent Filing WO2019/147569: Visual Sensor Fusion and Data Sharing Across Connected Vehicles (MSU 569) -added this period
3. US Patent No. 9,964,948 (FIU 948) - added this reporting period
The total fair value of $15.5m reflects the fair value of Guident' s net assets as determined by:
· Valuation of FAMU 943 of US$16.2m (2018:US$10.3m) conducted by an external, qualified valuation expert using the Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:
- Total US market size of US$35b for autonomous vehicles and drones (as the patent applies to both) for the 11 years period ended 30 December 2033. 1% market penetration of Guident' s patent starting in 2022 with annual increase of 1% leading to a 12% market penetration by 2033, resulting in projected US$3b in sales of drones/vehicles underlying licensing revenue between 2022 and 2033. This market penetration assumption is based on a number of factors:
o Broad protection and claims included in the IP
o The protection given to the product by its US patent, which effectively gives Guident a barrier to entry in the US through 2033
o The strength and experience of the management team, whose proven expertise is in the exact areas required to bring the product to market and build the brand;
o There are no foreseeable software development barriers in the commercialisation process o Other foreseeable challenges for directors to deliver successful commercialisation appear to be well within the abilities of directors to handle.
o Innovative nature of Guident's IP and the fact that the AV market is dependent on innovators.
o Improving regulatory environment with more states in the United States legalizing autonomous vehicles operation in 2019 including large states such as Florida and California.
The increase in FV of FAMU 943 compared to 2018 was driven by reduction in discount factor from 18% to 17% and increase in in the royalty rate from 5.375% to 6%.
· Valuation of MSU 569 of US$2.8m conducted by an external, qualified valuation expert using the Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:
- In January 2024, Guident also expects to introduce an additional, complementary component featuring the MSU 569 technology (Sensory Fusion Component). This component would enable sensory data sharing between the vehicles, providing for new safety standard. Guident expects the Sensor Fusion Component to be sold to customers of the Standard Initial Component when 5G is available so as to further generate an additional $500 of revenue for each sale of the Sensor Fusion.
For the estimate of the US market derived revenue, using the units of underlying Autonomous Vehicles from FAMU 943, the management assumed 10% of FAMU customers would choose to pay for this additional safety improving capability, starting with 10% of them in 2024 with the share growing to 40% in 2027.
For the estimate of the international market derived revenue, the management applied comparative share of countries included in the international filing based on authoritative literature from the Allied Market Research report.
These market penetration assumptions are based on assumptions similar to those considered for the patent FAMU 943.
· Valuation of FIU 948 of US$0.3m conducted by an external, qualified valuation expert using the Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:
- US sidewalk delivery drone market size of US$1.27b between 2022 and 2036. 1% market penetration starting in2022 with annual increase leading to 25% in 2027. This market penetration rate assumptions is based on factors analogous to those listed for FAMU 943, with additional legislative/regulatory requirements included as well. Recent regulatory developments in United States make it mandatory to have back-up human control operators taking control of an AV in the event of an accident or mishap,
· Assumptions applied to valuations of all three patents above:
- Total 6% license royalty rate, with 3% royalty attributable to the university and 3% comprising Guident's licencing revenue based on comparable market transactions, with the exception of 30% for FIU 48 (whereby 2.5% is due to the university)
- Corporate income tax rate of 19% applied to projected licensing costs saved 17% discount rate used to discount proceeds as determined by opportunity cost (10%), inflation rate (2%) and technology risk (5%)
- The deferred tax liability of (US$ 3.6m) recorded by Guident based on UK corporate tax rate of 19% applied to the fair value gain associated with the patent
- Net book value of other assets and liabilities of <(US$0.2m).
- Guident Ltd obtains sufficient funding to execute their strategy.
Salarius (US$ 0.9m gain)
An external valuation by an independent patent valuation expert was prepared for US patent 8,900,650.
The fair value of US$ 1.8m recorded by the Group reflects the fair value of Group's 97.5% stake in Salarius' net assets valued at US$ 1.9m as determined by:
• Valuation of US patent 8,900,650 of US$ 3m (2018: US$ 1.1m) conducted by an external, qualified valuation expert using the Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:
- Sales of low sodium salt to snack food manufacturers ("B2B") of US$ 44m for the 10-year period ended 2030. Market penetration of 0.5% in 2020 growing to 10% in 2030. These market penetration assumptions are based on a number of factors. This market penetration assumption is based on a number of factors:
o Microsalt is a unique product substantially in advance of alternative, developed, and tested in terms of market acceptability and ready to market;
o The protection given to the product by its US patent, which effectively gives Salarius a barrier to entry in the US for 11 more years;
o The strength and experience of the management team, whose proven expertise is in the exact areas required to bring the product to market and build the brand;
o There are no foreseeable manufacturing barriers in the commercialisation process. Manufacturing has been established and outsourced in 2019;
o Post period end, the company secured two food ingredient brokerage agreements for sales of Microsalt covering multiple geographical areas of the United States; First customers were secured
o Other foreseeable challenges for management to deliver successful commercialisation appear to be well within the abilities of management to handle.
- Sales of salty snacks ("B2C") estimated at $106m for the 10 year period ended in 2030. The projections assume Salarius chips being sold in 300 individual stores by the end of 2020 growing annually to the total of 16,400. This assumption is based on factors analogous to the B2B segment, with the addition of following factors:
o Post year-end, the company secured distribution agreement with one of North America's largest natural food distributors for the launch of SaltMe snacks in all 4 flavors; the distributor supplies thousands of stores on a daily basis
o Post year-end, the company secured sales contract brokerage agreement for sales of SaltMe snacks in all 4 flavors;
- Licence royalty rate of 8.2% with 3% royalty attributable to the university and 5.2% comprising Salarius' licencing revenue based on comparable market transactions
- 12% discount rate used to discount proceeds as determined by opportunity cost (10%) and inflation rate (2%). Technology risk was determined at 0%, as the patent describes easily manufactured salt compositions, maybe manufactured in many production facilities without extensive modifications. The end product has already been manufactured and used to conduct consumer acceptance tests. Sales and distribution channels have been established.
The increase in the fair value of US patent 8,900,650 was driven by addition of B2C sales projections in the forecast used in the valuation, increase in license royalty rate from 7.8% to 8.2% as well as reduction in discount rate used from 13% to 12%.
• The deferred tax liability of US$ 0.5m recorded by Salarius based on UK corporate tax rate of 19% applied to the fair value gain associated with the patent
• Net book value of liquid assets, creditors and debtors of < $0.6m.
The value of the IP is dependent on Salarius Ltd obtaining sufficient funding to execute their strategy.
Lucyd Ltd (US $1.9m loss)
The fair value of US$ 1.1m reflects the fair value of Lucyd's net asset as determined by:
• Valuation of Lucyd's significant assets performed by an external, qualified valuation expert:
• The deferred tax liability of US$ 0.3m recorded by Lucyd based on UK corporate tax rate of 19% applied to the fair value gain associated with the ecommerce platform.
Lucyd will be re-valuated in subsequent reporting periods. The future value of Lucyd could fluctuate significantly, either up or down, based on the performance of the business and the achievement of product development milestones.
Belluscura (US $0.6m gain)
The fair value of the holding increased by US$ 0.6m due to the most recent private placement held at 15 pence per share in April 2019, compared to preceding placement at 10 pence per share in December 2018 used by the Group to value its holding in Belluscura as of 30 November 2018. The Group contributed US$ 110,000 during this placement.
eSoma (US$ 0.02m loss)
The Group closed eSoma Limited resulting in recognition of a US$ 0.02m fair value loss.
Smart Food Tek (Nil Gain / Nil loss)
The Group exercised judgment in determination of sufficiency of portfolio companies' cash reserves, forecasts and ability to raise money to achieve their fair values. Directors reviewed and questioned the forecasts used, standing liquidity and working capital balances, as well as discussed capability and plans to raise money in the future with directors or management of portfolio companies. Based on the review, the Group made a positive determination as to portfolio companies' likely ability to achieve fair values considering liquidity factors.
Description of significant unobservable inputs to valuation:
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy, together with a quantitative sensitivity analysis as at 30 November 2019 are shown as below. No sensitivities have been included on the other investments not listed in the table below as their fair value equates to cost.
|
Investment
|
Valuation Technique |
Significant unobservable input |
Estimate applied |
Sensitivity of the input to fair value |
|
Lucyd |
Income Approach |
Discount to Future Cash Flows from Eshop Sales
|
17% |
5% increase in the discount factor would decrease the Lucyd valuation by $123,000, a 5% decrease in the discount factor would increase the Lucyd valuation by $149,000 |
|
|
|
Eshop adjusted net profit through December |
$1.9m |
A 20% increase in net profit would increase the Lucyd valuation by $239,000. A 20% decrease in gross profit would decrease the Lucyd valuation by 239,000. |
|
Guident |
Income Approach Royalty Relief Method |
Discount to Future Cash Flows from licensing |
17% |
2% increase in the discount factor would decrease the Guident valuation by $2,300,000, a 2% decrease in the discount factor would increase the value by $3,000,000 |
|
|
|
Royalty Relief Rate |
6%(FAMU, MSU US, MSU OUS) and 30% (FIU 948) |
A 1% increase in the royalty relief rate would increase the Guident valuation by $5,300,000, a 1% decrease in the royalty relief rate would decrease the valuation by $4,700,000 |
|
|
|
Gross licensing proceeds & gross revenue |
$3.0b (FAMU), $286m (MSU US), $189m (MSU OUS), $8.8m (FIU948) |
A 20% increase in the gross licensing proceeds and gross revenue would increase the Guident valuation by $3,500,000. A 20% decrease would decrease the Guident valuation by $2,800,000. |
|
Salarius |
Income Approach Royalty Relief Method |
Discount to Future Cash Flows from licensing |
12% |
5% increase in the discount factor would decrease the Salarius valuation by $644,000, a 5% decrease in the discount factor would increase the value by $1,004,000 |
|
|
|
Licence Royalty Rate |
8.2% |
A 2% increase in the royalty rate would increase the Salarius valuation by $918,000 a 2% decrease in the royalty rate would decrease the Salarius valuation by $918,000. |
|
|
|
Projected sales |
$150m |
A 20% increase in the projected sales would increase the Salarius valuation by $477,000. A 20% decrease in the projected sales would decrease the Salarius valuation by $477,000. |
13. Intangible assets
|
|
|
|||
|
Group |
Vortechs Group US $ |
Website development US $ |
Invention Evaluator US $ |
Total US $ |
|
At 30 November 2018 |
500,000 |
28,121 |
338,769 |
866,890 |
|
At 30 November 2019 |
500,000 |
28,121 |
338,770 |
866,891 |
|
|
|
|
|
|
|
Accumulated amortisation and impairment |
|
|
|
|
|
At 30 November 2018 |
- |
(28,121) |
- |
(28,121) |
|
At 30 November 2019 |
- |
(28,121) |
- |
(28,121) |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
At 30 November 2019 |
500,000 |
- |
338,770 |
338,770 |
|
At 30 November 2018 |
500,000 |
- |
338,769 |
338,769 |
The intangible assets presented above are included within Professional Services segment under Note 5 disclosure. Costs of the Group's website development have been fully amortized as of 30 November 2018.
Under IAS38, the Group's Invention Evaluator is regarded by the Directors as being an intangible asset with an indefinite useful life. The Directors believe that the asset is unique in that no competitor offering currently exists, the service is already proven to have appealed globally to many types of clients including Fortune 100 companies, there is no expectation of obsolescence in the foreseeable future, and the service from the use of the asset generates sufficient ongoing revenue streams. The Directors have carried out an impairment review and believe that the value in use is significantly greater than book value.
The Directors have considered the recoverable amount by assessing the value in use by considering the future cash flow projections of the revenue generated by the Invention Evaluator intangible, cash flows were based on the past revenue generation. The projections were assessed for a three year period in order to determine no impairment. The projections are based off revenue generation at US$300k less cost of sales at the 2018 gross profit margin, no growth has been applied forecasts. A discount factor at 10% (consistent with Group's cost of capital) was used to determine no impairment. The revenue projections are based on company's historical performance and existing pipeline of sales orders. The Invention Evaluator intangible's recoverable amount exceeds its carrying amount by US$ 34,257.
Under IAS38, the Group's Vortechs asset is regarded by the Directors as being an intangible asset with an indefinite useful life. The Directors believe that this asset is unique as it operates in a niche market, it generates an ongoing revenue stream, and there is no expectation of obsolescence. This asset meets the requirements of IAS38 as it is:
- Separately identifiable
- The Group controls this asset
- Future economic benefits flow to the Group in the form of service revenues from this asset
- The cost of this asset can be measured reliably
The Directors have carried out an impairment review and consider the value in use to be greater than the book value.
The Directors have considered the recoverable amount by assessing the value in use by considering the future cash flow projections of the revenue generated by the Vortechs intangible, cash flows were based on the past revenue generation plus expected growth. The projections were assessed over a period in excess of 5 years on the basis the directors consider the projections can be reasonably forecast. The projections are based off revenue generation at US$400,000 per annum for 2020 and 2021 (approximating actual revenue from 2018), reducing to US$ 300,000 for 2022, US$ 350,000 for 2023 and back to US$ 400,000 until 2028. The cost of sales element for 2020 and 2021 was determined at 90% in line with the agreement, thereafter it drops to US$ 120,000 p.a. plus inflation at 5%. The reduction in cost of sale is due to the end of a term in the purchase agreement. A discount factor at 10% (consistent with Group's cost of capital) was used to determine no impairment. Vortech's intangible's recoverable amount exceeds its carrying amount by US$ 518,258.
The tech-transfer recruiting is viewed by directors as permanent part of the Group's business and its offering. This together with the high turnover in this industry leading to continuous hiring needs leads Directors to apply projections of over 5 years in the impairment determination.
14. Fixed Assets
|
Group |
Leasehold Improvements US$ |
Office Equipment US $ |
Computer Equipment US $ |
Total US $ |
|
Closing cost 30 November 2017 |
- |
2,042 |
17,306 |
19,348 |
|
Exchange differences |
- |
3 |
34 |
37 |
|
Additions |
13,775 |
22,241 |
9,825 |
45,841 |
|
Disposals |
- |
|
(309) |
(309) |
|
Closing cost 30 November 2018 |
13,775 |
24,286 |
26,856 |
64,917 |
|
Exchange differences |
|
|
14 |
14 |
|
Additions |
- |
- |
862 |
862 |
|
Closing cost 30 November 2019 |
13,775 |
24,286 |
27,732 |
65,793 |
|
|
|
|
|
|
|
Accumulated depreciation and impairment |
|
|
|
|
|
At 30 November 2017 |
- |
(1,284) |
(12,059) |
(13,344) |
|
Depreciation charge |
(6,888) |
(4,860) |
(6,631) |
(18,379) |
|
Disposals |
- |
- |
308 |
308 |
|
Exchange differences |
- |
2 |
(16) |
(14) |
|
At 30 November 2018 |
(6,888) |
(6,142) |
(18,398) |
(31,428) |
|
Depreciation charge |
(6,888) |
(4,839) |
(5,271) |
(16,998) |
|
Exchange differences |
- |
|
(14) |
(14) |
|
At 30 November 2019 |
(13,775) |
(10,981) |
(23,683) |
(48,440) |
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
At 30 November 2018 |
6,888 |
18,143 |
8,458 |
33,489 |
|
At 30 November 2019 |
- |
13,304 |
4,049 |
17,353 |
15. Trade and other receivables
|
Group |
|
2019 US $ |
2018 US $ |
|
Trade receivables |
|
144,944 |
59,655 |
|
Less provision for impairment of trade receivables |
|
- |
- |
|
Trade receivables - net |
|
144,944 |
59,655 |
|
VAT recoverable |
|
14,333 |
40,329 |
|
Prepayments and debtors Receivables from related parties |
|
125,715 530,874 |
97,769 231,620 |
|
Total trade and other receivables |
|
815,866 |
429,373 |
|
Non-current: convertible loan notes* |
|
476,122 |
250,000 |
|
Company |
|
2019 US $ |
201 US $ |
|
Receivables from Group companies |
|
2,277,783 |
1,697,545 |
|
VAT |
|
9,025 |
30,057 |
|
Prepayments |
|
34,923 |
24,783 |
|
Total trade and other receivables |
|
2,321,731 |
1,752,385 |
|
Non-current: convertible loans notes |
|
476,122 |
250,000 |
The fair value of trade and other receivables are not materially different to those disclosed above. The Group's exposure to credit risk related to trade receivables is detailed in Note 3 to the consolidated financial statements.
*The Group and the Company hold three convertible loans issued by its portfolio company, Salarius Ltd for the total of US$ 600,000, of which US$440,000 was drawn. The notes were issued at 10% coupon rate and included option to convert the debt into shares at market price (no discount against future equity placements offered). Market rate of 10% was applied in determination of the present value of cash flows related to both notes. The US$ 50,000 note originated in September 2018 is payable on demand, however Directors do not anticipate the repayment before or after November 2020. The US$ 300,000 note originated in October 2018 is payable by Salarius on 29 October 2021 (term extended during the period) or can be converted into Salarius' equity upon occurrence of certain conversion events. The US$ 250,000 note originated in August 2019 is payable on 01 August 2021 or can be converted into Salarius' equity upon occurrence of certain conversion events.
The Group also held a convertible loan issued by Guident Ltd in December 2018 for the total of US$300,000, issued at 10% coupon rate including option to convert the debt into shares at market price (no discount against future equity placements offered). The note can be converted into Guident's equity upon occurrence of certain conversion events.
The Group had outstanding receivables from its portfolio companies as at 30 November 2019 in the amount of: - US$130,912 due from Lucyd Ltd
- US$141,849 due from Salarius Ltd
- US$254,667 due from Guident Ltd
The Company recorded a historical US$2,500,000 provision against its receivable from one its subsidiaries, Tekcapital LLC.
16. Cash and cash equivalents
|
Group |
|
2019 US $ |
2018 US $ |
|
|
|
|
|
|
Cash at bank and in hand |
|
472,899 |
1,165,442 |
|
|
|
|
|
|
Total cash and cash equivalents |
|
472,899 |
1,165,442 |
|
Company |
|
2019 US $ |
2018 US $ |
|
|
|
|
|
|
Cash at bank and in hand |
|
112,114 |
698,694 |
|
|
|
|
|
|
Total cash and cash equivalents |
|
112,114 |
698,694 |
17. Categories of financial assets and financial liabilities
|
Group |
|
2019 US $ |
2018 US $ |
|
Financial assets |
|
|
|
|
Financial assets at fair value through profit and loss |
|
20,335,925 |
13,704,354 |
|
Loans and receivables at amortised cost |
|
1,291,988 |
679,389 |
|
Cash and equivalents |
|
472,899 |
1,165,442 |
|
|
|
22,100,812 |
15,549,185 |
|
Financial Liabilities |
|
|
|
|
Trade and other payables at amortised cost |
|
303,847 |
275,601 |
|
|
|
|
|
|
Company |
|
2019 US $ |
2018 US $ |
|
Financial assets |
|
|
|
|
Financial assets at fair value through profit and loss |
|
1,804,120 |
1,126,315 |
|
Loans and receivables at amortised cost |
|
2,797,853 |
1,997,602 |
|
Cash and equivalents |
|
112,114 |
698,694 |
|
Available for sale |
|
1,959,003 |
1,955,013 |
|
|
|
6,673,090 |
5,777,624 |
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
Trade and other payables at amortised cost |
|
484,375 |
470,809 |
18. Share capital and premium
Share capital
|
Group and Company |
Number of shares |
Ordinary Shares US $ |
Total US $ |
|
|
|
|
|
|
Issued and fully paid up |
|
|
|
|
At 30 November 2017 |
42,654,707 |
264,221 |
264,221 |
|
Shares issued in further public offering |
11,698,335 |
61,815 |
61,815 |
|
At 30 November 2018 |
54,353,042 |
326,036 |
326,036 |
|
Shares issued in further public offering |
9,375,000 |
46,948 |
46,948 |
|
At 30 November 2019 |
63,728,04 |
372,984 |
372,984 |
The shares have full voting, dividend and capital distribution (including on winding up) rights; they do not confer any rights of redemption. The following shares were issued during the year: July 2019 - 9,375,000 shares were issued in the placing of new ordinary shares at £0.08p. Total proceeds of US$938,966 were netted against cost of raising finance in the amount of US$117,277.
The Company has authorised share capital of 81,529,563, with a nominal value of £0.004. Of these shares, 63,728,042 were issued and fully paid up.
Share premium
|
Group and Company
|
|
Share premium US $ |
Total US $ |
|
At 30 November 2017 |
|
9,271,098 |
9,271,098 |
|
Shares issued in further public offering
|
|
1,097,216
|
1,097,216
|
|
Cost of shares issued |
|
(149,509) |
(149,509) |
|
As at 30 November 2018 |
|
10,218,805 |
10,218,805 |
|
Shares issued in further public offering |
|
892,018 |
892,018 |
|
Cost of shares issued |
|
(117,277) |
(117,277) |
|
As at 30 November 2019 |
|
10,993,546 |
10,993,546 |
19. Reserves
Profit and Loss Account
|
|
|
Group Profit and Loss Account US $ |
Company Profit and Loss Account US $ |
|
At 30 November 2017 |
|
931,826 |
(4,241,264) |
|
Profit/(loss) for the year |
|
4,554,625 |
(920,213) |
|
Share based payments |
|
30,204 |
30,204 |
|
At 30 November 2018 |
|
5,516,655 |
(5,131,273) |
|
Profit/(loss) for the year |
|
5,518,290 |
30,668 |
|
Share based payments |
|
20,876 |
20,876 |
|
At 30 November 2019 |
|
11,055,821 |
(5,079,729) |
Merger reserve
|
Group |
|
|
Merger reserve US $ |
|
At 30 November 2018 |
|
|
(72,169) |
|
|
|
|
|
|
At 30 November 2019 |
|
|
(72,169) |
|
|
|
|
|
Translation reserve
|
|
|
Group Translation reserve US $ |
Company Translation reserve US $ |
|
At 30 November 2017 |
|
280,985 |
77,277 |
|
Foreign exchange loss |
|
(135,342) |
(179,246) |
|
At 30 November 2018 |
|
145,643 |
(101,969) |
|
Foreign exchange gain |
|
31,855 |
3,883 |
|
At 30 November 2019 |
|
177,498 |
(98,086) |
|
|
|
|
|
20. Trade and other payables
|
Group |
|
2019 US $ |
2018 US $ |
|
Trade creditors |
|
116,936 |
91,303 |
|
Social security and other taxes |
|
6,089 |
10,357 |
|
Accruals and other creditors |
|
187,135 |
184,297 |
|
|
|
310,160 |
285,957 |
|
Company |
|
2019 US $ |
2018 US $ |
|
Accruals and other creditors |
|
362,863 |
357,529 |
|
Accruals, deferred income and other creditors |
|
121,512 |
113,279 |
|
|
|
484,375 |
470,808 |
The fair values of trade and other payables are not materially different to those disclosed above.
The Group's exposure to currency and liquidity risk related to trade and other payables is detailed in note 3 to the accounts.
21. Deferred Revenue
The Group received a payment in the amount of US$118,595 for Invention Evaluator reports to be delivered after 30 November 2019, therefore the amount was recognized as deferred revenue.
22. Deferred income tax
Unused tax losses for which no deferred tax assets have been recognised is attributable to the uncertainty over the recoverability of those losses through future profits. A tax rate of 19% has been used to calculate the potential deferred tax.
|
Deferred tax |
Group 2019 US $ |
Group 2018 US $ |
Company 2019 US $ |
Company 2018 US $ |
|
Accelerated capital allowances |
(3,230) |
(3,072) |
- |
- |
|
Short term timing difference |
- |
- |
- |
- |
|
Tax losses |
(1,791,410) |
(1,127,294) |
(435,092) |
(435,092) |
|
Unprovided deferred tax asset |
1,794,639 |
1,130,366 |
435,092 |
435,092 |
|
|
- |
- |
- |
- |
23. Dividends
No dividend has been recommended for the year ended 30 November 2019 (2018: Nil) and no dividend was paid during the year (2018: Nil).
24. Cash used from operations
|
Group |
|
2019 US $ |
2018 US $ |
|
Profit before income tax |
|
5,520,635 |
4,555,894 |
|
Adjustments for |
|
|
|
|
- Depreciation |
|
16,998 |
18,070 |
|
- Share based payment expense |
|
20,876 |
30,204 |
|
- Movement in foreign exchange |
|
33,776 |
(11,127) |
|
- Movement in trade and other receivables - Financial assets at fair value through the profit or loss - Deferred revenue movement |
|
(612,615) (6,519,761) 118,595 |
284,536 (5,792,264) - |
|
- Trade and other payables |
|
24,202 |
48,310 |
|
Cash used |
|
(1,397,294) |
(866,377) |
|
|
|
|
|
25. Commitments
Capital commitments
The Group entered into convertible loan note agreement in September and October 2018 with Salarius Ltd for the total amount of US $ 350,000 (US$ 300,000 drawn by November 2019). Third convertible loan note agreement was signed in August 2019 for the total amount of US$250,000. US$140,000 was provided as part of that agreement by the Group by November 2019.
Operating lease commitments
The Group's subsidiaries have various office rental agreements.
The total un-provided minimum lease commitment under non-cancellable operating lease are:
|
Group |
|
2019 US $ |
2018 US $ |
|
Arising: |
|
|
|
|
No later than 1 year |
|
61,925 |
59,847 |
|
Later than 1 year and no later than 5 years |
|
|
61,925 |
|
Total |
|
61,925 |
121,772 |
|
|
|
|
|
26. Share based payments
The Group operates an approved Enterprise management scheme and an unapproved share option scheme.
The fair value of the options granted is expensed over the vesting period and is arrived at using the Black-Scholes model. The assumptions inherent in the use of this model are as follows:
|
Attribute |
Input |
|
No. of options granted |
5,785,000 |
|
Share price at date of grant |
£0.08-£0.46 |
|
Exercise price |
£0.08-£0.46 |
|
Options life in years |
5 |
|
Risk free rate |
1.50% |
|
Expected volatility |
41%-60% |
|
Expected dividend yield |
0 |
|
Fair value of options |
£0.03-£0.09 |
The weighted average fair value of options outstanding was £0.05p. Volatility was calculated using Group's historical share price performance since 2015. The share-based payment expense for the year was $20,876 (2018: $30,204). Details of the number of share options and the weighted average exercise price outstanding during the year as follows:
|
|
|
2019 |
|
2018 |
|
Group and Company |
Av. Exercise price per share £ |
Options (Number) |
Av. Exercise price per share £ |
Options (Number) |
|
As at 1 December |
0.3164 |
3,585,000 |
0.3379 |
3,285,000 |
|
Granted |
0.0781 |
2,900,00 |
0.0810 |
300,000 |
|
Exercised |
- |
- |
- |
- |
|
Forfeited |
0.2500 |
700,000 |
- |
- |
|
As at 30 November |
0.2110 |
5,785,000 |
0.3164 |
3,585,000 |
|
Exercisable as at 30 November |
|
2,610,000* |
|
2,951,667 |
*The weighted average exercise price for the options exercisable as at 30 November 2019 and 30 November 2018 was £0.34p and £0.33p respectively
The weighted average remaining contractual life is 2.65 years (2018: 1.82 years). The weighted average fair value of options granted during the year was £0.05p (2017: £0.07p).The range of exercise prices for options outstanding at the end of the year was £0.065p - £0.46p (2018: £0.081p - £0.46p).
27. Related party transactions
Details of Directors' remuneration and grant of options are given in the Directors' report. The Group had an outstanding payable balance in the amount of $7,379 payable to Dr Clifford Gross as at 30 November 2019. The Group has taken advantage of the exemption in IAS 24 "related parties" not to disclose transactions with other Group companies.
525,000 options were held by Harrison Gross, family member of Dr. Clifford Gross.
28. Events after the reporting period
Tekcapital Group strengthened the board of directors with post period end appointments of Lord David Willetts (7 January 2020) and Mr. Louis Castro (2 December 2019). The Rt Hon Lord Willetts FRS is President of the Resolution Foundation and former U.K. Minister for Universities and Science. He served as the Member of Parliament for Havant (1992-2015), and previously worked at HM Treasury and the No. 10 Policy Unit. Louis Castro is a highly experienced and well qualified Director and Chartered Accountant with some thirty years spent in industry and in financial services, including positions as Chief Executive, Finance Director and Non-Executive Director of several AIM listed companies. He was previously the CFO at Eland Oil & Gas plc where he had full executive responsibility for finance, legal, corporate finance and a budget of over $150m.
On 6 February 2020, Tekcapital Group completed a placing of 14,800,000 new ordinary shares at 5 pence each to raise US$962,000 before expenses.
On 18 March 2020, the Company signed an extension to Convertible Loan agreement with Salarius Ltd dated 29 October 2018. The extension revised the maturity date to be three years from 29 October 2018.
On 1 May 2020, Tekcapital Group completed a conditional placing of 9,250,000 ordinary shares at 10 pence each to raise US$1,150,000 before expenses. The existing authorities to allot shares and disapply pre-emption rights under section 551 and section 570 of the Companies Act 2006, were insufficient to enable the Company to allot and issue the full amount of the Placing Shares pursuant to the Placing. Accordingly, the Placing will be conditional upon, amongst other things, the passing of certain resolutions at a General Meeting of the Company to allot the Placing Shares and to disapply statutory pre-emption rights which would otherwise apply to such allotment.
Post period end, the coronavirus pandemic emerged that may produce negative economic activities which could reduce Group's economic performance and the performance of its portfolio companies in ways that are difficult to quantify at this juncture. It may cause a recession in the markets in which the Company operates, reduce the Company's net asset values, revenue, cash flow, access to investment capital and other factors which could negatively impact the Company.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
Latest directors dealings
- 2 hours ago Urban Logistics Reit
- 2 hours ago Ocado Group
- 2 hours ago AJ Bell
- 2 hours ago Foresight Enterprise VCT
- 2 hours ago Mitie Group