Half-year Report

RNS Number : 5011A

FastForward Innovations Limited

28 December 2017

 



FASTFORWARD INNOVATIONS LIMITED

UNAUDITED CONDENSED HALF-YEARLY REPORT AND FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

INVESTING POLICY

The Company's Investing Policy is to invest in and/or acquire companies which have significant intellectual property rights which they are seeking to exploit, principally within the technology sector (including digital and content focused businesses) and the life sciences sectors (including biotech and pharmaceuticals). Initially the geographical focus will be North America and Europe but investments may also be considered in other regions to the extent that the Board considers that valuable opportunities exist and positive returns can be achieved.

In selecting investment opportunities, the Board will focus on businesses, assets and/or projects that are available at attractive valuations and hold opportunities to unlock embedded value. Where appropriate, the Board may seek to invest in businesses where it may influence the business at a board level, add its expertise to the management of the business, and utilize its industry relationships and access to finance; as such investments are likely to be actively managed.

The Company's interest in a proposed investment and/or acquisition may range from a minority position to full ownership and may comprise one investment or multiple investments. The proposed investments may be in either quoted or unquoted companies; are likely to be made by direct acquisitions or through an immediate investment; and may be in companies, partnerships, earn-in joint ventures, debt or other loan structures. The Board may focus on investments where intrinsic value can be achieved from the restructuring of investments or merger of complementary businesses.

The Board expects that investments will typically be held for the medium to long term, although short term disposal of assets cannot be ruled out if there is an opportunity to generate an attractive return for Shareholders. The Board will place no minimum or maximum limit on the length of time that any investment may be held.

There is no limit on the number of projects into which the Company may invest and the Company's financial resources may be invested in a number of propositions or in just one investment, which may be deemed to be a reverse takeover under the AIM Rules. The Directors intend to mitigate risk by appropriate due diligence and transaction analysis. Any transaction constituting a reverse takeover under the AIM Rules will also require Shareholder approval. The Board considers that as investments are made, and new promising investment opportunities arise, further funding of the Company may also be required.

Where the Company builds a portfolio of related assets it is possible that there may be cross holdings between such assets. The Company does not currently intend to fund any investments with debt or other borrowings but may do so if appropriate. Investments are expected to be mainly in the form of equity, with debt potentially being raised later to fund the development of such assets. Investments in later stage assets are more likely to include an element of debt to equity gearing. The Board may also offer new Ordinary Shares by way of consideration as well as or in lieu of cash, thereby helping to preserve the Company's cash for working capital and as a reserve against unforeseen contingencies including, for example, delays in collecting accounts receivable, unexpected changes in the economic environment and operational problems.

The Board will conduct initial due diligence appraisals of potential businesses or projects and, where it believes that further investigation is warranted, it intends to appoint appropriately qualified persons to assist. The Board believes it has a broad range of contacts through which it is likely to identify various opportunities which may prove suitable. The Board believes its expertise will enable it to determine quickly which opportunities could be viable and so progress quickly to formal due diligence. The Company will not have a separate investment manager. The Board proposes to carry out a comprehensive and thorough project review process in which all material aspects of a potential project or business will be subject to rigorous due diligence, as appropriate. Due to the nature of the sector in which the Company is focused it is unlikely that cash returns will be made in the short to medium term; rather the Company expects a focus on capital returns over the medium to long term.

CHAIRMAN'S STATEMENT

I am pleased to present the unaudited condensed half-yearly report and financial statements of Fastforward Innovations Limited (the "Company" or "FastForward") for the six-month period ended 30 September 2017.

In his report to shareholders at 31st March 2017, Lorne Abony wrote that his emphasis would be on crystallising excess value in some of the investments within our portfolio and in this we have been successful with the sale of two investments in the period and significant events occurring in two others after the period end which are detailed elsewhere.

While our continued premium to net asset value suggests that our investor base still sees our portfolio as having exciting long term potential, we are also conscious that, like many AIM companies, the liquidity of our shares can be tight. Therefore, and again as promised by your board, we have decided to instigate a buyback process which both improves liquidity and, we believe, enhances returns for longer term shareholders.

Results

The net assets of the Company at 30 September 2017 were £12,214,000 (31 March 2017: £10,101,000), equal to net assets of 9.18p per Ordinary Share (31 March 2017: 7.60p per Ordinary Share), a substantial increase over the period.

Investments

Since the approval of the 31 March 2017 audited financial statements the Company has completed two disposals.

Towards the end of the previous year the Company announced the disposal of its interest in Satoshipay for shares in Bluestar Capital plc which were subsequently sold during this period. Satoshipay was one of our earlier and smaller investments and therefore was targeted as an early disposal candidate. We more than doubled our investment on this company.

The sale of the Company's interest in Moon Active represented an increase (including exchange rate affects) of approximately 53% in value since the time of the Company's original investment in July 2016 and an IRR of 45.6% which is a significant premium to our investment cost.

Outlook

The period since the period end to the date of publication of these financial statements has been one of great activity for the Company and a number of investee companies and we go into 2018 with real optimism that our shareholders will see significant value creation through our investment strategy.

Nuuvera, our largest investment is about to go public in Canada and the omens are good. We have several other investments that look very promising and I am confident of further progress for your company in the period ahead.

Jim Mellon

28 December 2017

REPORT OF THE CHIEF EXECUTIVE OFFICER

Introduction

It is truly a pleasure to make my report of the Chief Executive Officer to shareholders.

Strategy

I have continued our strategy to work with visionary entrepreneurs in our investee companies developing innovative technologies that solve problems in their industries or create new markets. As I have highlighted previously, this period has been characterized by efforts to crystallize value for our shareholders and where appropriate to act nimbly to generate liquidity for our company.

When I wrote in March I emphasized my excitement over our investment in Nuuvera, a Canadian company focused on the medical marijuana industry and I am pleased to say that my excitement was fully justified. Nuuvera has announced that it expects to list on the TSX-V before 29th December 2017 and I expect it to commence to trade at a significant premium to our entry price.

Performance and valuation

The Company's Net Asset Value ("NAV") per share stands at 9.18p per share compared to 7.60p at 31 March 2017. Our share price moved from 8.62p per share at 31 March 2017 to 10.25p per share at 30 September 2017, and we have consistently traded at a premium to NAV. In my view, this reflects that our shareholders understand the potential locked up in the Company.

Portfolio

The table below lists the Company's holdings as at 30 September 2017. It details the stake that those positions represent in the investee companies.

Holding	Share Class	Category	Country of incorporation	Number of shares held at 30 September 2017	Valuation at 30 September 2017	Percentage of investee equity held
					('000)
Fralis LLC (Leap Gaming)	Units	Gaming	Nevis	970	3,734	41.15%
Intensity Therapeutics, Inc.	Series A Preferred	Biotech/ Healthcare	USA	250,000	374	2.11%
Nuuvera Inc.	Common	Biotech/ Healthcare	Canada	3,000,000	4,503	4.45%
The Diabetic Boot Company Limited	Ordinary	Biotech/ Healthcare	England	25,978	347	4.86%
Factom, Inc.	Series Seed	Blockchain Tech	USA	400,000	534	3.70%
Vemo Education, Inc.	Pref Series Seed-1 Pref Series Seed-2	Edtech	USA	3,527,059	269	4.38%
Yooya Media	Series Seed Preferred	Media and Content	BVI	27,255	1,419	15.00%
Vested Finance, Inc.	Series Seed-1 Preferred	Edtech	USA	1,938,909	116	12.34%
Total investments value					11,296
Cash, prepayments and net accruals					918
Net asset value					12,214

REPORT OF THE CHIEF EXECUTIVE OFFICER (continued)

Investee companies

Intensity Therapeutics, Inc.

Intensity Therapeutics is a product development biotechnology company whose mission is to greatly extend the lives of patients with cancer. The Company is using its proprietary DfuseRxSM platform technology to create novel immune-based therapeutic products for a new and emerging field of cancer treatment known as in situ vaccination. Its lead product INT230-6 has demonstrated remarkable activity in multiple animal cancer models. During the period Intensity negotiated a new set of study inclusion criteria with both the FDA and Health Canada (HC).

During the third quarter of the year  a new patient was treated. To date, there have been no systemic side effects using INT230-6 and the drug administration was well tolerated. The small win, reported to Intensity  by the investigator, was that the squamous cell carcinoma began to shrink after just the first low dose. At 28 days post injection the patient's tumour shrank over 18%. This preliminary tumour regression finding is encouraging. The regulatory agencies mandated treatment at a low drug dose, low concentration (within the tumour) and minimal dosing frequency. To have the beginnings of a tumour response in the patient after only one low dose is positive. There is still much more that can be done to improve upon efficacy; more cycles of drug, higher intratumoral drug concentrations, more frequent treatment etc. Indeed, the patient received a second treatment per protocol and remains on study.

Intensity has told us that additional capital will be needed to continue the development of their lead drug. The Intensity board and shareholders have approved an increase in authorised capital to accommodate a future fund raise.

The Diabetic Boot Company Limited

DBC, which trades under the name "Pulseflow", has developed a new form of diabetic friendly footwear with integrated offloading capabilities and the patented Pulseflow technology which aids in the promotion of blood flow and improved circulation in one product.

It is disappointing that the acquisition of DBC, by Life Science Developments Limited ("Life"), did not proceed.

During the period, Diabetic Boot commenced commercialisation of PulseFlowDF directly in the US and through distributors in a number of other countries. The product has now proven to be reliable, well received by doctors and the clinical outcomes of the patients have been overwhelmingly positive. However, failing to attain the CMS Code in the US meant rapid market penetration has proved challenging. However, the company will continue to seek approval for the CMS Code.

DBC is currently undertaking a strategic review of the distribution channels in order to determine the most appropriate path forward to increase market penetration and sales volumes to drive the company towards profitability

SatoshiPay Limited / Blue Star Capital plc

As detailed in the accounts to 31^st March 2017, on 5^th April 2017, the Company placed its entire holding of shares in Blue Star for cash consideration of £305,763.

Factom Inc.

Factom is at the forefront of pushing the blockchain revolution towards solving real-world business problems. Factom's unique back-end infrastructure allows corporations, governments, and organizations to securely integrate, manage, and secure data -- any type, any source, and at a massive scale. The result is a new generation of audit and accountability tools for a safer, more affordable way to handle secure and tamper-proof transactions.

Factom believes the core of what drives its success is the quality of the team members that join the company. With that in mind Factom continues to add top level subject matter experts in banking and blockchain technology.

Factom is in a position where it is one of the very few blockchain software platforms being used in live production systems today at scale. To date the Factom network has secured more than 138 Million records for users around the world.  This year Factom's big focus has been deploying its Harmony software to large enterprises and serving their record keeping, documentation, auditing and decision preservation needs.

Financially Factom is in a healthy position with plenty of cash in the bank, paying customers and a strategy for growth in 2018 that will include both traditional financial industry customers as well as serve the burgeoning and well-funded blockchain technology companies that have emerged in the past 12 months.

REPORT OF THE CHIEF EXECUTIVE OFFICER (continued)

Investee companies (continued)

Vemo Education, Inc.

Vemo continued to make progress on all fronts in 2017.  Sales of unique income share agreements (ISAs) surged over 300% from 354 to over 1,300 outstanding contracts at December 1.  Growth was driven by the addition of 14 new schools in 2017 bringing Vemo's total client roster to over 20 programs.  Notably, student demand continues to outstrip ISA supply at each portfolio school.

On the back of a successful $7.4 million seed round completed in August, Vemo's ranks swelled in 2017 with the addition of 10 key hires in Operations, IT and Finance.  Total headcount stood at just over 30 full and part-time employees at December 1.  The company continues to aggressively recruit talent to facilitate accelerating growth.

Vemo also made progress on its market-leading ISA servicing platform with the rollout of several new modules designed to improve school and student workflows.  The company also began producing periodic investor reports detailing historical ISA performance across a number of different dimensions.

Vemo's success did not go unnoticed by the media in 2017.  Numerous pieces from the Wall Street Journal, The Atlantic, MarketWatch, TechCrunch among others highlighted Vemo's role in making ISAs real for a growing number of students.  In addition, think-tanks across the spectrum including The Urban and Aspen Institutes published notes extolling the virtues of ISAs in improving student outcomes.

Yooya Media (formerly Entertainment Direct Asia)

Yooya develops and delivers end-to-end online video solutions for content producers, rights owners, brands and advertisers, and ecommerce providers in China.  The company now distributes, manages, or tracks video content on forty-five platforms in China, including new unicorn-class entrants Toutaio, Miaopai, and Meipai. 

With China already the world's largest market for online video by a wide margin and continuing to explode, demand for expertise and solutions such as Yooya provides continues to grow attractively.  Leading traditional social media channels in China such as Weibo and Wechat, for example, are turning increasingly to video, and this year on China's equivalent of Black Friday, held on November 11th of each year, Alibaba exceeded last year's ecommerce sales tally by more than 35% and sold more than USD 25 billion worth of goods in a 24 hour period-with ecommerce vendors increasingly choosing to advertise using video-based marketing and live video streaming in lieu of traditional display advertising.

Yooya set a new sales record in October 2017, and anticipates that it will likewise set a new quarterly sales record in Q4.  Management remains bullish on mid-term revenue prospects for the company and its ability to execute on its ambitious growth and development targets, the early stage of the company and highly competitive nature of its chosen market notwithstanding.

Fralis LLC (trading as Leap Gaming)

Leap Gaming, which was acquired in April 2016, is a developer and provider of 3D gaming technology and products with a focus on virtual sports and casino. Leap Gaming partners with online and land-based gaming companies to provide advanced gaming products for end-users. On the 20^th November we announced that we were in formal negotiations with a well-known gaming industry operator to sell  our interest in Leap. The Company has received an offer of US$4.9 million for its entire interest in Leap. The purchaser is completing his due diligence are on-going and I am optimistic this deal will close soon.

Moon Active Limited

We completed the sale of our entire holding of shares in investee company Moon Active for cash consideration of US$750,000 on 18^th September 2017. The sale of Moon Active represents an increase (including exchange rate affects) of approximately 53% in value since the time of the Company's original investment in July 2016.

Vested Finance, Inc. ("Kickwheel" formerly known as "Schoold")

Kickwheel is the leading data-driven mobile app for college counselling, financial aid advising and recruitment. Operating as a marketplace for post-secondary education the company offers "messaging mentorship" for prospective students, while equipping partner universities with its proprietary technology to reach and recruit the digital native generation. It was clearly disappointing that the proposed merger with Lingo Media did not proceed and, in the light of this setback, Kickwheel has announced a further fund raise which they expect to close in early 2018.

REPORT OF THE CHIEF EXECUTIVE OFFICER (continued)

Investee companies (continued)

Nuuvera Inc.

Nuuvera is engaged in the testing, formulation, production, extraction and sale of medicinal cannabis products in Canada and is pursuing opportunities in various other legal international jurisdictions (excluding the United States). In particular:

Nuuvera holds an indirect 51% interest in ARA-Avanti Rx Analytics Inc. ("Avanti"). Avanti is a Health Canada Good Manufacturing Practices ("GMP"), Office of Controlled Substances and Natural Health Products approved organization, which offers a comprehensive array of services in the field of controlled drugs and substances. Avanti holds a Dealer Licence for the entire spectrum of cannabis and cannabinoid controlled substances.  Permitted activities under this licence include possession, production, packaging, sale and delivery of these controlled substances.  Avanti also possesses a drug establishment licence under the Food and Drug Regulations (Canada), which evidences its GMP status.

Avalon Pharmaceuticals Inc. ("Avalon"), an indirect, wholly-owned subsidiary of Nuuvera, is a late stage Licensed Producer applicant under the Access to Cannabis for Medical Purposes Regulations. Health Canada has granted Avalon permission to proceed with the construction of its cultivation facility located in Brampton, Ontario and Avalon anticipates completion and full production in Q2 2018.

Nuuvera has also entered into a strategic partnership with Aphria Inc. ("Aphria") which includes a cannabis supply agreement for Nuuvera to purchase up to 1,500 kg of cannabis, growing to 5,000 kg when Aphria completes its phase III expansion, then to 17,000 kg when Aphria completes its phase IV expansion in 2018, until Nuuvera's own greenhouse facility is complete, as well as an outsourced 1 million square foot "contract grow" facility to be built and operated by Aphria in Leamington, Ontario.

After the period end Mira IX Acquisition Corp. ("Mira") (TSXV:MIA.P) confirming that it has entered into a definitive agreement with Nuuvera Corp. ("Nuuvera") and Mira's wholly-owned subsidiary, Mira IX Subco Inc. ("Mira Subco"), pursuant to which Mira Subco will amalgamate with Nuuvera (the "Amalgamation") to complete Mira's qualifying transaction (the "Transaction") in accordance with the policies of the TSX Venture Exchange (the "TSXV"). The Amalgamation is structured as a three-cornered amalgamation and as a result the amalgamated corporation ("Amalco") will become a wholly-owned subsidiary of Mira at the time of the completion of the Amalgamation. Upon completion of the Amalgamation, it is intended that Mira will be known as "Nuuvera Corp." (the "Resulting Issuer") and Amalco will be known as "Nuuvera Holdings Ltd.". The Amalgamation Agreement is available on SEDAR at www.sedar.com. Nuuvera and Mira anticipate closing the Transaction in late December, 2017. The Transaction is subject to the receipt of all necessary regulatory and shareholder approvals as well as the satisfaction of conditions to closing as set out in the Amalgamation Agreement.

After the period end Nuuvera completed a private placement of 8,000,000 subscription receipts (the "Subscription Receipts") at a price of C$2.50 per Subscription Receipt for aggregate gross proceeds of C$20,000,000 (the "Offering"). Each Subscription Receipt is exchangeable for one common share of Nuuvera (a "Nuuvera Common Share"), without any additional payment or any further action on the part of the holder, and will ultimately entitle the holder thereof to one Resulting Issuer Common Share, upon completion of the Amalgamation. Following this fundraise, and subject to completion of the Amalgamation, Nuuvera will have approximately C$45,000,000 of funds available to it.

Fund raising and changes to share capital

There was no changes to share capital in the period.

Conclusion

At the year-end I wrote that much of our work with investee companies is to assist them in leveraging opportunities to build their businesses away from the glare of public scrutiny and it can be frustrating that confidentiality and regulation does not enable me always to share the incredible progress made by the dedicated teams at our investee companies.  I am pleased to be able to report on some, but not all the projects we have been working on for considerable time showing that our business model is beginning to create significant value uplift for our shareholders. 

Lorne Abony                                                          

28 December 2017

DIRECTORS' RESPONSIBILITIES STATEMENT

The Directors are responsible for preparing these unaudited condensed half-yearly financial statements, which have not been reviewed or audited by the Company's independent auditors, and are required to:

• prepare the unaudited half-yearly financial statements in accordance with International Accounting Standard 34: Interim Financial Reporting;

• include a fair review of important events that have occurred during the period, and their impact on the unaudited half-yearly financial statements, together with a description of the principal risks and uncertainties of the Company for the remaining six months of the financial year as detailed in the Chairman's Statement; and

• include a fair review of related party transactions that have taken place during the six month period which have had a material effect on the financial position or performance of the Company, together with disclosure of any changes in related party transactions from the last annual financial statements which have had a material effect on the financial position of the Company in the current period.

The Directors confirm that the unaudited condensed half-yearly financial statements comply with the above requirements and are signed on behalf of the Board of Directors by:

   Jim Mellon

Director

Date: 28 December 2017

CONDENSED HALF-YEARLY STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 September 2017

		1 April 2017 to		1 April 2016 to
		30 September 2017		30 September 2016
		(unaudited)		(unaudited)
	Note	£'000		£'000
Investment gains and losses
Income from derivative financial instruments designated at fair value through profit and loss
	5	356		-
Unrealised gain on investment at fair value through profit and loss	5	1,840		508
Total investment gains		2,196		508
Income
Bank interest income		1		1
Total income		1		1
Expenses
Legal and professional fees		(7)		(94)
Nominated Adviser and broker's fees		(29)		(76)
Administration fees		(23)		(43)
Other expenses		(22)		(195)
Fair value movement of Special Adviser share options		(32)
Fair value movement of Directors' share options	12	65		-
Directors' remuneration	12	-		(271)
Total expenses		(48)		(679)
Net profit / (loss) from operating activities before gains and losses on foreign currency exchange
		2,149		(170)
Net foreign currency exchange (loss)/gain		(3)		241
Total comprehensive profit for the period		2,146		71
Profit per Ordinary Share - basic and diluted	7	1.61p		0.05p

All the items in the above statement are derived from continuing operations.

The accompanying notes on pages 12 to 17 form an integral part of these unaudited condensed half-yearly financial statements.

CONDENSED STATEMENT OF FINANCIAL POSITION

as at 30 September 2017

		30 September 2017		31 March 2017
		(unaudited)		(audited)
	Note	£'000		£'000
Non-current assets
Investments designated at fair value through profit or loss	5	11,296		9,955
Current assets
Other receivables		37		35
Cash and cash equivalents		925		164
		962		199
Total assets		12,258		10,154
Current liabilities
Payables and accruals		(44)		(53)
Total liabilities		(44)		(53)
Net assets		12,214		10,101
Capital and reserves attributable to equity holders of the Company
Share capital	11	1,329		1,329
Deferred share reserve	11	630		630
Other reserve		2,293		2,293
Employee stock option reserve		464		497
Distributable reserves		7,498		5,352
Total equity shareholders' funds		12,214		10,101
Net assets per Ordinary Share - basic
and diluted	10	9.18p		7.60p

The accompanying notes on pages 12 to 17 form an integral part of these unaudited condensed half-yearly financial statements.

CONDENSED HALF-YEARLY STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 September 2017 (unaudited)

	Share capital	Deferred shares reserve	Other reserve	Employee stock option reserve	Distributable reserves	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2017	1,329	630	2,293	497	5,352	10,101
Total comprehensive profit for the period	-	-	-	-	2,146	2,146
Employee share scheme - value of
employee services	-	-	-	(33)	-	(33)
Balance at 30 September 2017	1,329	630	2,293	464	7,498	12,214
for the six months ended 30 September 2016 (unaudited)
	Share capital	Deferred shares reserve	Other reserve	Employee stock option reserve	Distributable reserves	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2016	1,309	630	2,293	895	5,150	10,277
Total comprehensive profit for the period	-	-	-	-	71	71
Transactions with shareholders
Issue of Ordinary Shares	30	-	-	-	183	213
Employee share scheme - value of
employee services	-	-	-	53	-	53
Balance at 30 September 2016	1,339	630	2,293	948	5,404	10,614

The accompanying notes on pages 12 to 17 form an integral part of these unaudited condensed half-yearly financial statements.

CONDENSED HALF-YEARLY STATEMENT OF CASH FLOWS

for the six months ended 30 September 2017

	1 April 2017 to		1 April 2016 to
	30 September 2017		30 September 2016
	(unaudited)		(unaudited)
	£'000		£'000
Cash flows from operating activities
Bank interest received	1		1
Nominated Adviser and broker's fees paid	(29)		(87)
Legal and professional fees paid	(14)		(8)
Administration fees paid	(36)		(51)
Other expenses paid	(13)		(289)
Directors' remuneration paid	-		(237)
Net cash outflow from operating activities	(91)		(671)
Cash flows from investing activities
Purchase of investments	-		(2,968)
Sale of investments	855		-
Transferred from broker	-		4,732
Net cash inflow from investing activities	855		1,764
Cash flows from financing activities
Proceeds from issue of Ordinary Shares	-		28
Net cash inflow from financing activities	-		28
Increase in cash and cash equivalents	764		1,121
Cash and cash equivalents brought forward	164		164
Increase in cash and cash equivalents	764		1,121
Foreign exchange movement	(3)		3
Cash and cash equivalents carried forward	925		2,539

The accompanying notes on pages 12 to 17 form an integral part of these unaudited condensed half-yearly financial statements.

 

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL STATEMENTS

for the six months ended 30 September 2017

1.         General Information

The Company is a closed-ended investment company. The Company is domiciled and incorporated as a limited liability company in Guernsey. The registered office of the Company is 11 New Street, St Peter Port, Guernsey, GY1 2PF.                                                                                                                                                                                                         

The Company's Ordinary Shares are traded on AIM, a market operated by the London Stock Exchange.

2.         Statement of Compliance

These condensed half-yearly financial statements, which have not been independently reviewed or audited by the Company auditors, have been prepared in accordance with International Accounting Standard 34: Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the audited financial statements for the year ended 31 March 2017.

 The unaudited condensed half-yearly financial statements were approved by the Board of Directors on 28 December 2017.             

3.         Significant Accounting Policies

These unaudited condensed half-yearly financial statements have adopted the same accounting policies  as  the  last  audited financial statements, which were prepared in accordance with International Financial Reporting Standards ("IFRS"), issued by the International Accounting Standards Board, interpretations issued by the IFRS Interpretations Committee and applicable legal and regulatory requirements of Guernsey Law and reflect the accounting policies as disclosed in the Company's last audited financial statements, which have been adopted and applied consistently.

4.         Critical Accounting Estimates and Judgments

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

Management makes estimates and assumptions concerning the future of the Company. The resulting accounting estimates will, by definition, seldom equal the related actual results. Management believe that the underlying assumptions are appropriate and that the financial statements are fairly presented. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:

Judgments

Going concern

After making reasonable enquiries, and assessing all data relating to the Company's liquidity, Management have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the Company. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

 

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL STATEMENTS (continued)

for the six months ended 30 September 2017

4.  Critical Accounting Estimates and Judgments (continued)

Estimates and assumptions

Fair Value of  financial instruments

The fair values of securities that are not quoted in an active market are determined by using valuation techniques as explained in the International Private Equity and Venture Capital Valuation Guidelines ("IPEV Guidelines"), primarily earnings multiples, discounted cash flows and recent comparable transactions. The models used to determine fair values are validated and periodically reviewed by the Company. The inputs in the earnings multiples models include observable data, such as earnings multiples of comparable companies to the relevant portfolio company, and unobservable data, such as forecast earnings for the portfolio company. In discounted cash flow models, unobservable inputs are the projected cash flows of the relevant portfolio company and the risk premium for liquidity and credit risk that are incorporated into the discount rate. However, the discount rates used for valuing equity securities are determined based on historic equity returns for other entities operating in the same industry for which market returns are observable. Management uses models to adjust the observed equity returns to reflect the actual equity financing structure of the valued equity investment. Models are calibrated by back-testing to actual results/exit prices achieved to ensure that outputs are reliable.

Valuation of Options

The fair values of the options are measured using the Black-Scholes model. The Black-Scholes model is considered an acceptable model where options are subject to market conditions as defined within IFRS 2.

The Black-Scholes model takes into account the following factors when calculating the fair value of the share options at grant date:

·         any market vesting conditions;

·         the expected term of the options (see below);

·         the expected volatility of the Company's share price as at grant date;

·         the risk-free rate of return available at grant date;

·         the Company's share price at grant date;

·         the expected dividends on the Company's shares over the expected term of the options; and

·         the exercise (strike) price of the options.

The expected term of the options is assumed to be 5 years from the grant date.  However, the options can be exercised at any point after vesting and within a 10 year period from the grant date.  As the management of the Company are unsure as to when the options will be exercised, it is assumed they will be exercised half way through the 10 year period from grant date to lapse date which is 5 years. 5. Investments designated at fair value through profit or loss

 

	30 September 2017	30 September 2016
	£'000	£'000
Opening valuation	9,955	4,238
Purchases	-	3,349
Disposal proceeds	(855)	-
Realised gains	356	-
Net unrealised change in fair value of financial assets	1,840	508
	11,296	8,095

 

All of the financial assets held at fair value as at 30 September 2017 and 30 September 2016 are classified as Level 3 in the fair value hierarchy. There were no transfers between fair value hierarchy levels during the period (2016: None).

 

 

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL STATEMENTS (continued)

for the six months ended 30 September 2017

5. Investments designated at fair value through profit or loss (continued)

The valuations used to determine fair values are validated and periodically reviewed by experienced personnel and are in accordance with the International Private Equity and Venture Capital Valuation Guidelines. The valuations, when relevant, are based on a mixture of:

·      third party financing (if available);

·      cost, where the investment has been made during the year and no further information has been available to indicate that cost is not an appropriate valuation;

·      proposed sale price;

·      discount to NAV calculations;

·      discount to last traded price;

·      discounted cash flow; and

·      discount to bid prices of PLUS quoted investments.

 

6.  Segmental Information

In accordance with International Financial Reporting Standard 8: Operating Segments, it is mandatory for the Company to present and disclose segmental information based on the internal reports that are regularly reviewed by the Board in order to assess each segment's performance and to allocate resources to them.

Management information for the Company as a whole is provided internally to the management for decision-making purposes. The management's asset allocation decisions are based on an, integrated investment strategy and the Company's performance is evaluated on an overall basis. The single segment is investments in companies which have significant intellectual property rights which they are seeking to exploit, principally within the technology sector (including digital technology, gaming and content focused businesses) and the life sciences sectors (including biotech and pharmaceuticals). Initially the geographical focus will be North America and Europe but investments may also be considered in other regions to the extent that the Board considers that valuable opportunities exist and positive returns can be achieved.

Segment assets                                                                                                                                                                  

The internal reporting provided to the Board for the Company's assets, liabilities and performance is prepared on a consistent basis with the measurement and recognition principles of IFRS. Segment assets are measured in the same way as in the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. At 30 September 2017 the cross section of segment assets between geographical focus and economic sectors were as follows:

		Period ended 30 September 2017
Geographical Focus		Technology sector		Life sciences sector		Total
Private equity investments		£'000		£'000		£'000
- North America		5,421		374		5,795
- Europe		-		347		347
- Middle East		-		-		-
- Other		5,154		-		5,154
Total segment assets		10,575		721		11,296

Segment liabilities

Segment liabilities are measured in the same way as in the financial statements. These liabilities are allocated based on the operations of the segment. At 30 September 2017 there were no segmented liabilities.

Other profit and loss disclosures

At 30 September 2017 the cross section of the realised and unrealised gain on private equity investments between geographical focus and economic sectors were as follows:

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL STATEMENTS (continued)

for the six months ended 30 September 2017

6.  Segmental Information (continued)

		Period ended 30 September 2017
Geographical Focus		Technology sector		Life sciences sector		Total
Private equity investments		£'000		£'000		£'000
- North America		1,412		(26)		1,386
- Europe		(3)		-		(3)
- Middle East		(32)		-		(32)
- Other		845		-		845
Total gains on investments		2,222		(26)		2,196

All of the Company's investment portfolio income was derived from its investments whose business focus is in the sectors as described above. The only other revenue generated by the Company during the period was interest of £1,000 (30 September 2016: £1,000),  arising  from  cash  and  cash  equivalents,  which  was  generated  in  Guernsey. The Company is domiciled in Guernsey.

7. Gain per Ordinary Share - basic and diluted

The gain per Ordinary Share of 1.61p (30 September 2016: 0.05p) is based on the profit for the period of £2,146,000 (30 September 2016: £71,000) and on a weighted average number of 132,985,875 Ordinary Shares in issue during the period (30 September 2016: 133,154,382 Ordinary Shares).

The share price of the Ordinary Shares throughout the period, and as at 30 September 2017, was below the exercise price of the Options (exercise price of 20.00 pence). Therefore, at no point during the period, or as at 30 September 2017, did the Options have any dilutive effect.

8.  Dividends
The Directors do not propose an interim dividend for the period ended 30 September 2017 (30 September 2016: £Nil).
9. Tax Effects of Other Comprehensive Income
During the period ended 30 September 2017 there was no other comprehensive income disclosed in the Statement of Comprehensive Income and, as a result, there were no tax effects arising thereon (30 September 2016: Nil).
10. Net Assets per Ordinary Share
Basic and diluted
The basic net assets value per Ordinary Share is based on the net assets attributable to equity shareholders of £12,214,000 (31 March 2017: £10,101,000) and on 132,985,875 Ordinary Shares in issue at the end of the period (31 March 2017: 132,985,875 Ordinary Shares).
The share price of the Ordinary Shares throughout the period and as at 30 September 2017 was below the exercise price of the Options (exercise price of 20.00 pence). Therefore, at no point during the period, or as at 30 September 2017, did the Options have any dilutive effect.

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL STATEMENTS (continued)

for the six months ended 30 September 2017

11. Share Capital and Options
	30 September 2017			31 March 2017
	£'000			£'000
Authorised:
1,910,000,000 Ordinary Shares of 1p	19,100			19,100
100,000,000 Deferred Shares of 0.9p	900			900
	20,000			20,000
Allotted, called up and fully paid:
132,985,875 Ordinary Shares of 1p	1,329			1,329
70,700,709 Deferred Shares of 0.9p	630			630
	30 September 2017			31 March 2017
Options:
Share options	14,647,992			17,680,879

Deferred Shares

In aggregate (not per share), the holders of Deferred Shares shall be entitled to receive up to £1 only as a preferred dividend or distribution. The Deferred Shares have zero economic value. The holders of Deferred Shares, in respect of their holdings of Deferred Shares, shall not have the right to received notice of any general meeting of the Company, nor the right to attend, speak or vote at any such general meeting. The Company has the right to transfer the Deferred Shares to such persons as it wishes, without the consent of the holders of the Deferred Shares, and to cancel Deferred Shares with the consent of such transferee. No movement in deferred shares has occurred in the period.

Options

No issue of Options has occurred during the current period. The options previously allotted to Stephen Dattels expired on 30 September 2017.

Directors' Authority to Allot Shares

The Directors are generally and unconditionally authorised to exercise all the powers of the Company to allot relevant securities and subject to the terms the Directors may determine up to a maximum aggregate nominal amount of £5,000,000 (representing 5,000,000,000 Sub-Ordinary Shares of £0.001 each, or 500,000,000 New Ordinary Shares of £0.01 each). Authority under this resolution will expire on the date falling five years after the date of the Annual General Meeting. The Guernsey Companies Law does not limit the power of Directors to issue shares or impose any pre-emption rights on the issue of new shares. Accordingly, the Directors are generally and unconditionally authorised to allot securities in the Company up to the authorised but unissued share capital of the Company, any such power not to be limited in duration.

12. Related Parties

Mr Mellon, a director of the company, is a life tenant of a trust which owns Galloway Limited ("Galloway"), which held 10,425,991 (31 March 2017: 10,425,991) Ordinary Shares in the Company at 30 September 2017 and at the date of signing this report.

At 30 September 2017 the Company held 25,978 (31 March 2017: 25,978) Ordinary Shares in The Diabetic Boot Company Ltd ("DBC"). Galloway and Regent Pacific Group Limited also hold shares in DBC. The combined shareholding in DBC is in excess of 30%. Regent Pacific Group is deemed to be a related party as Mr Mellon is Chairman of Regent Pacific Group Limited.

Mr Burns, a director of the company, is the legal and beneficial owner of Smoke Rise Holdings Limited ("Smoke"), which held 1,374,024 (31 March 2017: 1,374,024) Ordinary Shares in the Company at 30 September 2017 and at the date of signing this report.

Mr Abony, a director of the company, held 24,496,871 (31 March 2017: 24,496,871) Ordinary Shares in the Company at 30 September 2017 and at the date of signing this report.

As at 30 September 2017 the Company held 3,527,059 (31 March 2017: 3,527,059) non-assessable series-2 preferred stocks in Vemo Education. Inc. ("Vemo"), a company related by virtue of common shareholdings with Mr Abony. Mr Abony is also the non-executive Chairman of Vemo.

NOTES TO THE CONDENSED HALF-YEARLY FINANCIAL STATEMENTS (continued)

for the six months ended 30 September 2017

12. Related Parties (continued)

As at 30 September 2017 the Company holds a total of 1,938,909 (31 March 2017: 1,938,909) shares in Schoold. Mr Abony is a substantial shareholder and the non-executive chairman of Schoold.

All Directors' remuneration for the period ended 30 September 2017 has been waived (30 September 2016: £207,000). Remuneration of Directors has commenced again with effect from 1 October 2017 on the same terms as those disclosed in the last audited financial statements. Share options in the Company, held by the Directors, increased in their estimated fair value by £25,000 (30 September 2016: £53,000).

Share options held by Stephen Dattels, who resigned as a Director of the Company on 31 March 2017 and valued at £90,000 at that date, expired on 30 September 2017.

The Directors consider that there is no immediate or ultimate controlling party.

13. Events after the financial reporting date

On 20 November 2017 the Company announced that it intends to commence a share repurchase programme of Ordinary shares, up to a maximum of 5.9 million shares, approximately £680,000. This programme is designed to return capital to shareholders arising from the successful sale of assets during the period, provide liquidity in the stock for smaller shareholders who wish to exit and enhance shareholder returns for shareholders who chose to remain invested in the Company.

Subsequent to this announcement the Company has purchased 295,000 of its Ordinary shares at a cost of £38,350.

The programme will be funded from existing cash resources.  All shares purchased by the Company will be held in Treasury pending cancellation. 

On 8 December 2017, Mr Joshua Epstein resigned as Company Secretary of the Company. Vistra Fund Services (Guernsey) Limited have been appointed as his replacement.

14. Capital management policy and procedures

The Company does not currently intend to fund any investments through debt or other borrowings but may do so if appropriate. Investments in early stage assets are expected to be mainly in the form of equity, with debt potentially being raised later to fund the development of such assets. Investments in later stage assets are more likely to include an element of debt to equity gearing. The Company may also offer new Ordinary Shares by way of consideration as well as cash, thereby helping to preserve the Company's cash for working capital and as a reserve against unforeseen contingencies including, for example, delays in collecting accounts receivable, unexpected changes in the economic environment and operational problems.

The Board monitors and reviews the structure of the Company's capital on an ad hoc basis. This review includes:

• The need to obtain funds for new investments, as and when they arise.

• The current and future levels of gearing.

• The need to buy back Ordinary Shares for cancellation or to be held in treasury, which takes account of the difference between the net asset value per Ordinary Share and the Ordinary Share price.

• The current and future dividend policy; and

• The current and future return of capital policy.

The Company is not subject to any externally imposed capital requirements.

DIRECTORS
Jim Mellon (Chairman)
Ian Burns (Chief Operating Officer)
Lorne Abony (Chief Executive Officer)
ADVISERS
Administrator and Registered Office	Nominated Adviser
Vistra Fund Services (Guernsey) Limited	Beaumont Cornish Limited
11 New Street	2nd Floor
St Peter Port	Bowman House
Guernsey	29 Wilson Street
GY1 2PF	London
Registrar	Independent Auditor
Link Market Services Limited	PricewaterhouseCoopers CI LLP
PO Box 627	Royal Bank Place
Bulwer Avenue	1 Glategny Esplanade
St Sampsons	St Peter Port
Guernsey	Guernsey
GY2 4LH	GY1 4ND
Brokers	Guernsey Legal Adviser to the Company
Optiva Securities Limited	Collas Crill
2 Mill Street	Glategny Esplanade
London	St Peter Port
W1S 2AT	Guernsey
Secretary	English Legal Adviser to the Company
Joshua Epstein	Hill Dickinson LLP
11 New Street	The Broadgate Tower
St Peter Port	20 Primrose Street London EC2A 2EW
Guernsey, GY1 2PF                                                                                       London, EC2A 2EW

 

END

 

 

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