Achieves Record Results for the Period
LONDON, April 30, 2021 (GLOBE NEWSWIRE) — Tekcapital Plc (AIM: TEK),(OTCQB: TEKCF), the UK intellectual property (IP) investment group focused on creating valuable products from investing in university technologies that can improve the quality of life, announces its audited results for the year ended 30 November 2020.
Financial highlights
Operational highlights: Material Portfolio Companies
Salarius� Limited (Salarius) (97.2% ownership) www.salarius.co
Salarius Ltd manufactures MicroSalt®, a new, patented, all natural, non-GMO, Kosher, low-sodium salt that tastes great and has half of the sodium of regular table salt.
Investment Rationale:
The snack food industry is focused on developing and providing better for you products that both taste good and help reduce sodium intake. The reason for this is that excess sodium consumption contributes to cardiovascular disease, a leading cause of premature death globally. To help address this problem, Salarius has developed a patented process for producing micron sized salt crystals. MicroSalt® has all the flavour of salt with roughly half the sodium for topical applications such as crisps, pretzels, nuts, popcorn and other salty snacks.
Recent developments:
Lucyd® Limited (Lucyd) (100% ownership) www.lucyd.co
Lucyd is seeking to Upgrade Your Eyewear® by developing and selling designer prescription eyewear with smart features at affordable prices. Lucyd was the first company to deliver prescription glasses with Bluetooth® technology in 2019. Their frames help you stay connected safely and conveniently, by enabling many common smartphone tasks to be performed handsfree via voice assistants.
Investment Rationale:
In the U.S. pedestrian fatalities have increased more than 50% from 2009 to 2018. This is primarily because drivers and pedestrians alike are distracted with their smartphones. Approximately 2/3rds of the population wear corrective lenses, and the advancements in Bluetooth technology have enabled it to be incorporated into traditional eyeglass form factors. This combination created a new type of glasses with built-in speakers, microphone and touch controls, Lucyd e-glasses, which allow the wearer to forego headphones and headsets and use their glasses to listen to audio content and talk to others. Since the speakers are open-ear, Lucyd e-glasses enable the wearer to stay connected to their digital life while maintaining situational and social awareness.
Recent Developments:
Guident Limited (Guident) (100% ownership) www.guident.co
Guident is developing remote monitoring and control software to improve the safety of autonomous vehicles and land-based delivery devices. Guidents software will incorporate artificial intelligence and advanced network technologies to minimize signal latency and improve reliability.
Investment Rationale:
Vehicles of all types are rapidly becoming electric and autonomous. While Autonomous Vehicles (AVs) are projected to be significantly safer than traditional vehicles, there will still be mishaps and in many instances there will be no vehicle operator present to help resolve these problems. We believe remote human interaction will be needed to address these mishaps. Guident is seeking to build a remote monitoring and control centre that will monitor vehicles and if necessary provide additional support such as calling first responders, taking over control of the vehicle to move it out of harms way and providing real-time communication with passengers or pedestrians. Over time we believe remote monitoring centres will be required in many jurisdictions.
Recent Developments:
Belluscura® Plc (17.8% ownership) www.belluscura.com
Respiratory medical device company that has developed an improved portable oxygen concentrator (POC) to provide on-the-go supplemental O2. The company believes its product is the first FDA cleared, modular POC with a user-replaceable filter cartridge. Belluscura aims to make POCs more affordable to those who need them.
Investment Rationale:
Worldwide, approximately 250m individuals suffer from Chronic Obstructive Pulmonary Disease (COPD). Many of these patients require supplemental oxygen. As there is no cure for COPD, over time patients require greater amounts of oxygen, and if they use a portable oxygen concentrator, this means they must replace their devices with greater capacity models as their disease progresses. With Belluscuras new patented device, recently cleared by the FDA, users can swap out the filter cartridges to enable higher capacity oxygen flow without having to buy a new device; like upgrading memory on a laptop. The result is significantly more affordable oxygen therapy for the life of the patient.
Recent Developments:
Operational highlights: Corporate
As part of our continuing efforts to develop our team and expand our services:
Dr. Clifford Gross, Executive Chairman said: Through the collective efforts of our dedicated and capable team we have achieved record results in 2020. Our portfolio companies have demonstrated significant growth and we believe they are well positioned to further expand and achieve meaningful milestones in 2021.
Post period end portfolio company highlights
Posting of Annual Report and Accounts
The Company’s annual report and accounts for the year ended 30 November 2020 will be available on the Company’s website www.tekcapital.com shortly and will be posted to shareholder on 04 May 2021.
For further information, please contact:
| Tekcapital Plc | Via Flagstaff | |
| Clifford M. Gross, Ph.D. | ||
| SP Angel Corporate Finance LLP (Nominated Adviser and Broker) | +44 (0) 20 3470 0470 | |
| Richard Morrison/Charlie Bouverat (Corporate Finance) Abigail Wayne / Rob Rees (Corporate Broking) | ||
| Flagstaff Strategic and Investor Communications Tim Thompson/Andrea Seymour/Fergus Mellon | +44 (0) 20 7129 1474 | |
| Skyline Corporate Communications Group, LLC (U.S.) Matthew Abenante/Scott Powell | +1 646 893 5835 |
About Tekcapital plc
Tekcapital creates value from investing in new, university-developed discoveries that can enhance peoples lives and provides a range of technology transfer services to help organisations evaluate and commercialise new technologies. Tekcapital is quoted on the AIM market of the London Stock Exchange (AIM: symbol TEK) and is headquartered in the UK. For more information, please visit www.tekcapital.com
This press release is for informational purposes only. The information herein does not constitute investment advice nor an offer to invest and may contain statements related to our future business and financial performance and future events or developments involving Tekcapital that may constitute forward-looking statements. These statements may be identified by words such as “expect,” “look forward to,” “anticipate” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “project” or words of similar meaning. We may also make forward-looking statements in other reports, in presentations, on social media, in material delivered to customers, stakeholders and in press releases. In addition, our representatives may from time to time make oral forward-looking statements. Such statements may be based on the current expectations and certain assumptions of Tekcapitals management. Please note that these are subject to a number of risks, uncertainties and factors, including, but not limited to those described in various disclosures. Should one or more of these risks or uncertainties materialize, or should underlying expectations not occur or assumptions prove incorrect, actual results, performance or achievements of Tekcapital may vary materially from those described explicitly or implicitly in the relevant forward-looking statement. Forward-looking statements express, as at the date of this release, the Companys plans, estimates, valuations, forecasts, projections, opinions, expectations or beliefs as to future events, results or performance. Forward-looking statements involve a number of risks and uncertainties, many of which are beyond the Companys control, including those associated with COVID-19, and there can be no assurance that such statements will prove to be accurate. No assurance is given that such forward looking statements or views are correct or that the objectives of the Company will be achieved. Further, valuations of Companys portfolio investments and net asset value can and will fluctuate over time due to a variety of factors and this could have a material impact on the Companys financial performance. Tekcapital neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which may differ from those anticipated.
General Risk Factors and Forward-Looking Statements
The information contained in this document has been prepared and distributed by the Company and is subject to material updating, completion, revision, verification and further amendment. This Report is directed only at Relevant Persons and must not be acted on or relied upon by persons who are not Relevant Persons. Any other person who receives this Report should not rely or act upon it. By accepting this Report the recipient is deemed to represent and warrant that: (i) they are a person who falls within the above description of persons entitled to receive the Report; (ii) they have read, agree and will comply with the contents of this notice. The securities mentioned herein have not been and will not be, registered under the U.S. Securities Act of 1933, as amended (the Securities Act), or under any U.S. State securities laws, and may not be offered or sold in the United States of America or its territories or possessions (the United States) unless they are registered under the Securities Act or pursuant to an exemption from or in a transaction not subject to the registration requirements of the Securities Act. This Report is not being made available to persons in Australia, Canada, Japan, the Republic of Ireland, the Republic of South Africa or any other jurisdiction in which it may be unlawful to do so and it should not be delivered or distributed, directly or indirectly, into or within any such jurisdictions.
Investors must rely on their own examination of the legal, taxation, financial and other consequences of an investment in the Company, including the merits of investing and the risks involved. Prospective investors should not treat the contents of this Report as advice relating to legal, taxation or investment matters and are advised to consult their own professional advisers concerning any acquisition of shares in the Company. Certain of the information contained in this Report has been obtained from published sources prepared by other parties. Certain other information has been extracted from unpublished sources prepared by other parties which have been made available to the Company. The Company has not carried out an independent investigation to verify the accuracy and completeness of such third party information. No responsibility is accepted by the Company or any of its directors, officers, employees or agents for the accuracy or completeness of such information.
All statements of opinion and/or belief contained in this Report and all views expressed represent the directors own current assessment and interpretation of information available to them as at the date of this Report. In addition, this Report contains certain forward-looking statements, including but not limited to, the statements regarding the Companys overall objectives and strategic plans, timetables and capital expenditures. Forward-looking statements express, as at the date of this Report, the Companys plans, estimates, valuations, forecasts, projections, opinions, expectations or beliefs as to future events, results or performance. Forward-looking statements involve a number of risks and uncertainties, many of which are beyond the Companys control, and there can be no assurance that such statements will prove to be accurate. No assurance is given that such forward looking statements or views are correct or that the objectives of the Company will be achieved. Further, valuations of Companys portfolio investments and net asset value can and will fluctuate over time due to a wide variety of factors both company specific and macro-economic. Changes in net asset values can have a significant impact on revenue and earnings of the Company and its future prospects. Additionally, the current Coronavirus pandemic may produce negative economic activities which could reduce the companys economic performance and the performance of its portfolio companies in ways that are difficult to quantify at this juncture. It may cause a downturn in the markets in which the Company operates, reduce the Companys net asset values, revenue, cash flow, access to investment capital and other factors which could negatively impact the Company. As a result, the reader is cautioned not to place reliance on these statements or views and no responsibility is accepted by the Company or any of its directors, officers, employees or agents in respect thereof. The Company does not undertake to update any forward-looking statement or other information that is contained in this Report. Neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers take any responsibility for, or will accept any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness of the information contained in this Report or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this Report. Neither the issue of this Report nor any part of its contents is to be taken as any form of contract, commitment or recommendation on the part of the Company or the directors of the Company. In no circumstances will the Company be responsible for any costs, losses or expenses incurred in connection with any appraisal, analysis or investigation of the Company. This Report should not be considered a recommendation by the Company or any of its affiliates in relation to any prospective acquisition or disposition of shares in the Company. No undertaking, Report, warranty or other assurance, express or implied, is made or given by or on behalf of the Company or any of its affiliates, any of its directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this Report and no responsibility or liability is accepted for any such information or opinions or for any errors or omissions.
Intellectual Property Risk Factors
Tekcapital mission is to create valuable products from university intellectual property that can improve peoples lives. Therefore, our ability to compete in the market may negatively affected if our portfolio companies lose some or all of their intellectual property rights. If patent rights that they rely on are invalidated, or if they are unable to obtain other intellectual property rights. Our success will depend on the ability of our portfolio companies to obtain and protect patents on their technology and products, to protect their trade secrets, and for them to maintain their rights to licensed intellectual property or technologies. Their patent applications or those of our licensors may not result in the issue of patents in the United States or other countries. Their patents or those of their licensors may not afford meaningful protection for our technology and products. Others may challenge their patents or those of their licensors by proceedings such as interference, oppositions and re-examinations or in litigation seeking to establish the invalidity of their patents. In the event that one or more of their patents are challenged, a court may invalidate the patent(s) or determine that the patent(s) is not enforceable, which could harm their competitive position and ours. If one or more of our portfolio company patents are invalidated or found to be unenforceable, or if the scope of the claims in any of these patents is limited by a court decision, our portfolio companies could lose certain market exclusivity afforded by patents owned or in-licensed by us and potential competitors could more easily bring products to the market that directly compete with our own. The uncertainties and costs surrounding the prosecution of their patent applications and the cost of enforcement or defense of their issued patents could have a material adverse effect on our business and financial condition.
To protect or enforce their patent rights, our portfolio companies may initiate interference proceedings, oppositions, re-examinations or litigation against others. However, these activities are expensive, take significant time and divert managements attention from other business concerns. They may not prevail in these activities. If they are not successful in these activities, the prevailing party may obtain superior rights to our claimed inventions and technology, which could adversely affect their ability of our portfolio companies to successfully market and commercialize their products and services. Claims by other companies may infringe the intellectual property rights on which our portfolio companies rely, and if such rights are deemed to be invalid it could adversely affect our portfolio companies and ourselves as investors in these companies.
From time to time, companies may assert, patent, copyright and other intellectual proprietary rights against our portfolio companys products or technologies. These claims can result in the future in lawsuits being brought against our portfolio companies or their holding company. They and we may not prevail in any lawsuits alleging patent infringement given the complex technical issues and inherent uncertainties in intellectual property litigation. If any of our portfolio company products, technologies or activities, from which our portfolio companies derive or expect to derive a substantial portion of their revenues and were found to infringe on another companys intellectual property rights, they could be subject to an injunction that would force the removal of such product from the market or they could be required to redesign such product, which could be costly. They could also be ordered to pay damages or other compensation, including punitive damages and attorneys fees to such other company. A negative outcome in any such litigation could also severely disrupt the sales of their marketed products to their customers which in turn could harm their relationships with their customers, their market share and their product revenues. Even if they are ultimately successful in defending any intellectual property litigation, such litigation is expensive and time consuming to address, will divert our managements attention from their business and may harm their reputation and ours.
Several of our portfolio companies may be subject to complex and costly regulation and if government regulations are interpreted or enforced in a manner adverse to them, they may be subject to enforcement actions, penalties, exclusion, and other material limitations on their operations and have a negative impact on their financial performance. All of the above listed risks can have a material, negative affect on our net asset value, revenue, performance and the success of our business and the portfolio companies we invested in.
STRATEGIC REPORT
Chairman’s statement
Tekcapital brings new scientific innovations from lab to market to enhance safety and health and improve the quality of life of the customers we serve. Achieving our mission has never been more important than right now, as the COVID-19 pandemic has resulted in significant and unprecedented global health and financial distress.
In 2020, despite these events, all of our active portfolio companies made significant progress and the value of our portfolio holdings increased by 50%. As a result, for the year, our net assets increased by approximately 45% to US$32.7m, a record level for our Company. Total revenues increased 28% to US$9.9m while our after-tax profit increased by 39% to US$7.7m.
Key portfolio companies
Using our proprietary global university network, we provide services to universities and companies to help them commercialize their innovations. Additionally, over the past four years, using these services, we have built a valuable group of portfolio companies to commercialize select intellectual properties we or our portfolio companies have uncovered. We believe that when you couple commercialization ready, compelling university IP with visionary management, vibrant companies will likely emerge, net assets are likely to grow, returns on invested capital will outperform the sector and exits, if they occur, will occur faster. When we realise exits through trade sales or IPOs, the Groups goal is to distribute a portion of the proceeds as a special dividend to our shareholders.
Our current portfolio companies were all started by Tekcapital from a clean sheet of paper. Whilst few in number, they are diverse and span multiple sectors including food tech, autonomous vehicles, smart eyewear and respiratory medical devices. In our view, all of our portfolio companies have compelling intellectual properties, capable and inspired management and address US$B+, fast growing markets. The entire team at Tekcapital is committed to helping these companies grow to achieve their full potential and value, which we view as significant.
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, whilst still having the same salty taste. Less salt means about 50% less sodium for most applications. Less sodium means a reduced likelihood of developing high blood pressure and heart disease, the worlds leading cause of death. In addition to its focus on B2B sales of MicroSalt® to snack food companies, as proof of concept, Salarius has launched its own snack food brand called SaltMe!TM. Beginning in August 2020 they started shipping their first product, SaltMe! potato chips, to stores throughout the U.S. According to Future Market Insights, the low sodium ingredient market is estimated to reach US$1.76bn1 by 2025. Tekcapital owns 97.15% of Salarius and 87.1% of its U.S. subsidiary MicroSalt Inc. as of the date of this report.
Lucyd has built a new, online eyeglass business that combines technology with traditional eyewear. Recently they launched Lucyd LyteTM, their most advanced and compelling Bluetooth® eyewear. This product combines proper prescription, designer glasses with Bluetooth technology that you can use to answer your phone, listen to music, and talk with Siri® or Alexa®. The product has initially been very well received. Lucyd is focused on expanding its sales online and leveraging retail distribution after the pandemic subsides, through existing specialty and large format stores in late 2021. Lucyd has developed and filed 24 U.S. utility and design patents covering its products. According to Statista2, the current U.S. online market for eyewear is $3.8b per year. Tekcapital owned 100% of Lucyd and 90% of its U.S. subsidiary Innovative Eyewear Inc as of 30 November 2020.
Guident owns or holds the exclusive licence to a group of patents that we believe can improve the safety of autonomous vehicles and land-based autonomous delivery devices once brought to market. Guident has significantly progressed its R&D efforts, increased its intellectual capital in 2020 with several additional patent acquisitions and in-house developed properties and software, along with key team additions. Guident has begun its B2B marketing program for its Remote Control and Monitoring Center and is seeking to consummate strategic alliances and partnerships in the last mile delivery, smart city and AV sectors. Such monitoring has recently been required by law in the State of Florida and is being reviewed in other jurisdictions. According to Allied Market Research3, the global market for autonomous last mile delivery is projected to reach US$11.9 billion in 2021. Additionally, Guident has acquired an exciting, new regenerative shock absorber technology, to help extend the range of electric vehicles. Guident has executed NDAs with two listed OEMs to test these new shocks for potential use in their electric vehicles and is currently fabricating prototypes for testing. Tekcapital owned 100% of Guident and approximately 96% of its U.S. subsidiary Guident Corporation as of 30 November 2020.
Belluscura has developed an improved portable oxygen concentrator to provide on-the-go supplemental O2, with user replaceable filter cartridges. When a patients respiratory disease progresses, they now can upgrade the filter cartridge to provide more liters of O2 per minute, similar to upgrading memory on a laptop, rather than having to replace an expensive medical device. We believe the cost-savings will be beneficial to patients and insurance companies, and should help make respiratory healthcare more affordable which is core to Belluscuras mission. Belluscura filed for 510(K) clearance from the US FDA in December 2020 and received clearance in March 2021.
Belluscura have announced that they may plan to float on AIM or conduct an alternative financing, in the near-term, to finance and accelerate the manufacture and distribution of their portable oxygen concentrators. According to Global Market Insights, the medical portable O2 market is currently US$1.4bn4 a year and growing by more than US$100m/year4. Belluscura has 18 patents filed or licensed to-date covering devices and systems for treating people suffering from acute respiratory distress caused by COPD or the Coronavirus pandemic. Tekcapital owned 17.8% of Belluscura as of 30 November 2020 and ~23% as of the date of this report.
Financial Performance
In 2020, despite the global COVID-19 pandemic and the related social and economic hardship, we are fortunate that our team is healthy, all of our active portfolio companies made significant progress and the value of our portfolio holdings increased by 50%. This increase was driven primarily by:
As a result, for the year, our net assets increased by approximately 45% to US$32.7m, a record level for our Company. Total revenues increased 28% to US$9.9m with unrealised profit on the revaluation of investments driving that increase by US$8.7m. Our after-tax profit increased by 39% to US$7.7m.
Principal Risks and Uncertainties
The specific financial risks are discussed in the notes to the financial statements. Other risks are as follows:
Fundraisings during the period
Early-stage businesses facing large market opportunities need talent, technology and capital to succeed. To help address this we completed the following fundraises in 2020:
On 6 February 2020, the Group announced it had completed a fundraising of US$0.96m (before expenses) through the placing of 14,800,000 new Ordinary Shares with new and existing investors at a price of 5 pence per new Ordinary Share.
On 1 May 2020, the Group announced it had completed a fundraising of US$1.15m through placing of 9,250,000 new Ordinary Shares with new and existing investors at a price of 10 pence per new Ordinary Share.
On 17 September 2020, the Group announced it completed a fundraise US$0.5m (before expenses) through placing of 4,750,000 new ordinary shares with existing investors at a price of 8 pence per new Ordinary Share.
Post end of period fundraising:
On March 18, 2021, the Company announced that it had raised US$5.28m (before expenses) through placing of 38,000,000 new Ordinary Shares with existing and new investors at a price of 10 pence per new Ordinary Share.
Current Trading and Outlook
We are enthusiastic about the development of Tekcapitals portfolio companies, their performance to-date and their prospects to significantly expand in 2021. The Board is confident that continued investment in our portfolio companies remains the right approach for potential long-term value creation. Additionally, we are currently exploring early-stage venture funding and conducting equity crowdfunding for a number of our portfolio companies, to accelerate growth and brand awareness for these companies.
Whilst the Company is progressing very well, investors should note that 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 current COVID-19 pandemic, and that changes in the value of our portfolio companies can have a significant impact on our NAV, revenue, income and future prospects.
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 whom, none of the results reported herein would be possible.
Section 172 (1) statement
Our Board ensures that all decisions are taken for the long term, and collectively and individually aims to always uphold the highest standard of conduct. Similarly, our Board acknowledges that the business can only grow and prosper over the long-term if it understands and respects the views and needs of the Companys investors, customers, employees, suppliers and other stakeholders to whom we are accountable, as well as the environment we operate within.
When making decisions, each director ensures that they act in the way that would most likely promote the Companys success for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to the following matters:
(a) The likely consequences of any decision in the long term
In line with our strategy, Tekcapitals purpose is to find and invest in exciting new discoveries from our global university network that can enhance peoples lives. We believe that when you couple commercialization ready, compelling university IP with strong senior management, vibrant companies will likely emerge. When we realise exits the Groups goal is to distribute a portion of the proceeds as a special dividend to our shareholders.
With this in mind, we apply the same high standards of responsible stewardship to our businesses as if we were to own them forever, and it is this approach to decision making that requires the Directors to have regard to the likely consequences of decisions in the long-term.
(b) The interests of the Companys employees
The Board strives to maintain and develop a culture where everyone feels valued and included. The Board also considers the health, safety and wellbeing of all Tekcapital employees in everyday decisions. Feedback from employees is actively encouraged and is considered a key driver in developing our business activities, processes and workplace environment. Initiatives to encourage wellbeing are well established and continue to evolve and are strongly influenced by the workforce. Professional and personal development of employees is viewed as fundamental to the continued success of the Company.
(c) The need to foster the Company’s business relationships with suppliers, customers and others
The Board ensures that the Companys mission is focused on improving the world with university discoveries, and focuses on innovations that, if successful, can improve the quality of life of customers we serve.
The Board recognises that it is crucial that we deliver a reliable service to our customers and maintain excellent relationships with suppliers. The Board also considered near-term demand and how customers priorities might change over a longer period of time, including effect of the COVID-19 pandemic.
(d) The impact of the companys operations on the community and the environment
In their decision making, the Directors need to have regard to the impact of the Companys operations on the community and environment. The Board plays a constructive role in tackling issues through engagement and making sure the Companys investments focus on improving quality of life and attempt to solve significant health and safety problems facing communities.
(e) The desirability of the Company maintaining a reputation for high standards of business conduct
The Board recognises that culture, values and standards are key contributors to how a company creates and sustains value over the longer term, and to enable it to maintain a reputation for high standards of business conduct. High standards of business conduct guide and assist in the Boards decision making, and in doing so, help promote the Companys success, recognising, amongst other things, the likely consequences of any decision in the long-term and wider stakeholder considerations. The standards set by the Board mandate certain requirements and behaviours with regards to the activities of the Directors, the Groups employees and others associated with the Group.
(f) The need to act fairly as between members of the Company
The Company has one class of ordinary shares, which have the same rights as regards voting, distributions and on a liquidation. Management are also significant shareholders in the Company, holding approximately 9.3% of the register, together putting them in the top 3 shareholders of the Company. On this basis the Board feels that the executive Directors are fully aligned with shareholders.
On the basis of the above, the members of the Board consider, both individually and together, that they have acted in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172(1)(a-f) of the Companies Act 2006) in the decisions taken during the year ended 30 November 2020.
Dr Clifford M Gross
Chairman and CEO
29 April 2021
Directors Report
Directors
The following Directors held office during the period, or as of the date of this report.
Clifford M Gross, Ph. D.
Robert Miller, M. D.
Louis Castro (appointed on 2 December 2019)
The RT Hon Lord David Willets FRS (appointed on 6 January 2020)
The following officers no longer hold office with the Company:
M J Malcolm Groat (held office from April 2014 through completion of term in July 2020)
Robert Payne (resigned 31 December 2019)
The Group has chosen to set out in the groups strategic report information required to be contained in the directors report. It has done so in respect of future developments. The principal activity of the parent company is that of an investment entity.
Statement of Directors responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and parent company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Groups transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Each of the current Directors, whose names are listed in the Directors report on page 30 of the financial statements confirm that, to the best of each persons knowledge and belief:
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Groups website www.tekcapital.com. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Going Concern
The Group meets its day to day working capital requirements through its service offerings and monies raised through the issuances of equity. The Groups forecasts and projections indicate that the Group has sufficient cash reserves to operate within the level of its current facilities. Whilst it is the Groups intention to rely on the available cash reserves, future income generated from its service offerings and reductions in its cost base, a negative variance in the forecasts and projections would make the Groups ability to continue as going concern dependent on an additional fund raise. If the Groups 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 has adequate resources to continue in operational existence for the foreseeable future.
Information has been included in the strategic report in relation to disclosures under S414C(11) of the Companies Act 2006.
Dividends
No dividend was paid or was proposed during the year ended 30 November 2020.
Audit Committee
The Board operates an Audit Committee, chaired by Louis Castro. This Committee carries out duties as set out in the AIM Admission Document, supervising the financial and reporting arrangements of the Group. During the period, no issues arose that the Directors consider appropriate to disclose in their Report.
Research and Development
The Group incurred expenses related to research and development activities. The activities were limited to improvement of the Innovation Discovery Network solution, developed to facilitate an improved technology search engine.
Remuneration Committee
The Board has delegated to its Remuneration Committee, chaired by Dr Robert Miller, certain responsibilities in respect of the remuneration of senior executives. During the period, no issues arose that the Directors consider appropriate to disclose in their Report.
Directors Emoluments
| Salary & | Benefits | Bonus | 2020 | 2019 | |
| fees | in kind | Total | Total | ||
| US $ | US $ | US $ | US $ | US $ | |
| Clifford M Gross | 191,865 | 22,745 | 154,375 | 368,985 | 208,810 |
| M J Malcolm Groat | 10,247 | – | – | 10,247 | 15,284 |
| R W Bill Payne | 3,802 | – | – | 3,802 | 19,105 |
| Robert Miller | 21,600 | – | – | 21,600 | 21,600 |
| Louis Castro | 37,146 | – | – | 37,146 | – |
| Lord David Willets | 28,218 | – | – | 28,218 | – |
| 292,879 | 22,745 | 154,375 | 469,998 | 264,799 |
Directors proportion of the stock option expense is below US$20,000.
The Group did not make any contributions to a pension scheme in the year ended 30 November 2020 (2019: Nil).
Directors beneficial interests in shares:
| 2020 | 2019 | 2020 | 2019 | |
| No of Shares | No of Shares | No of Options | No of Options | |
| Clifford M Gross | 8,657,500 | 8,657,500 | 3,000,000 | 450,000 |
| Lord David Willets | – | – | 100,000 | – |
| Robert Miller | 2,664 | 2,664 | 200,000 | 320,000 |
Please note the above figure for Clifford M Gross does not include 100,000 shares held by both of Dr. Grosss adult children, who are not considered a PCA as defined in the Article 3(1)(26) of the UK Market Abuse Regulation.
| No of Options | Exercise Price | Grant Date | Date from which exercisable | Life | |
| Clifford M Gross | 3,000,000 | £0.12 | 28-Aug-20 | Special Conditions* | 5 Years |
| Robert Miller | 100,000 | £0.375 | 29-Jun-16 | Special Conditions* | 5 Years |
| 100,000 | £0.0783 | 30-Aug-19 | Special Conditions** | 5 Years | |
| Lord David Willets | 100,000 | £0.0525 | 6-Jan-20 | Special Conditions** | 5 Years |
The details of the options held by each director as of 30 November 2020 are as follows:
* The options vest in three equal annual instalments from the date of grant and there is a special condition which means the options will vest when the closing price for a share has been traded at more than 50 pence (sterling) for ten consecutive trading days.
** The options shall vest when the net asset value, as stated in the annual consolidated accounts, meets, or exceeds USD$20.53m during the 36 months after the grant date. The threshold shall be re-tested when each set of accounts published during the 36 months are finalised.
525,000 options were held by Harrison Gross, received as part of his employment compensation with the Company. Harrison is an adult family member of Dr. Clifford Gross and Dr. Gross disclaims any ownership or control of these options.
Principal Risks and Uncertainties
Please refer to Strategic Report.
Post Balance Sheet Events
For further details, please refer to note 28 in the notes to the financial statements.
Independent auditors
HW Fisher LLP were appointed as auditor to the Company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting. Statement of disclosure of information to auditors
Each of the persons who was a Director at the date of approval of this report confirms that:
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
By order of the Board of Directors and signed on behalf of the Board
Louis Castro
Director
29 April 2021
Tekcapital Plc
Consolidated Statement of comprehensive income
For the year ended 30 November 2020
| Group | Note | Year ended 30 November 2020 | Year ended 30 November 2019 | ||
| US $ | US $ | ||||
| Continuing Operations | |||||
| Revenue from services | 6 | 1,195,252 | 1,200,551 | ||
| Unrealised profit on the revaluation of investments | 12 | 8,688,111 | 6,516,813 | ||
| Total Revenue | 9,883,363 | 7,717,364 | |||
| Cost of sales | (458,728 | ) | (606,166 | ) | |
| Gross Profit | 9,424,635 | 7,111,198 | |||
| Administrative expenses | 7 | (1,742,641 | ) | (1,590,563 | ) |
| Operating Profit | 7,681,994 | 5,520,635 | |||
| Profit on ordinary activities before income tax | 7,681,994 | 5,520,635 | |||
| Income tax expense | 9 | (2,076 | ) | (2,345 | ) |
| Profit after tax for the year | 7,679,918 | 5,518,290 | |||
| Other comprehensive income | |||||
| Foreign exchange profit | 92,949 | 31,855 | |||
| Total other comprehensive income | 92,949 | 31,855 | |||
| Total comprehensive profit for the year | 7,772,867 | 5,550,145 | |||
| Profit per share | |||||
| Basic earnings per share | 10 | 0.095 | 0.095 | ||
| Diluted earnings per share | 10 | 0.094 | 0.095 | ||
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.
The notes on pages 23 to 60 are an integral part of these consolidated financial statements.
Tekcapital Plc
Consolidated Statement of financial position
At 30 November 2020
| Group | Note | As at 30 November 2020 | As at 30 November 2019 | |||
| US $ | US $ | |||||
| Assets | ||||||
| Non-current assets | ||||||
| Intangible assets Financial assets at fair value through profit and loss | 13 12 | 838,770 30,491,657 | 838,770 20,335,925 | |||
| Convertible loan notes | 15 | 588,169 | 476,122 | |||
| Property, plant and equipment | 14 | 9,622 | 17,353 | |||
| 31,928,218 | 21,668,170 | |||||
| Current assets | ||||||
| Trade and other receivables | 15 | 647,436 | 815,866 | |||
| Cash and cash equivalents | 16 | 538,473 | 472,899 | |||
| 1,185,909 | 1,288,765 | |||||
| Total assets | 33,114,127 | 22,956,935 | ||||
| Current liabilities | ||||||
| Trade and other payables | 20 | 247,442 | 310,160 | |||
| Current income tax liabilities Deferred Revenue | 21 | 500 154,721 | 500 118,595 | |||
| 402,663 | 429,255 | |||||
| Total liabilities | 402,663 | 429,255 | ||||
| Net assets | 32,711,464 | 22,527,680 | ||||
| Equity attributable to the owners of the Parent | ||||||
| Ordinary shares | 18 | 521,830 | 372,984 | |||
| Share premium | 18 | 13,211,344 | 10,993,546 | |||
| Retained earnings | 19 | 18,780,012 | 11,055,821 | |||
| Translation Reserve | 19 | 270,447 | 177,498 | |||
| Merger Reserve | 19 | (72,169 | ) | (72,169 | ) | |
| Total Equity | 32,711,464 | 22,527,680 | ||||
The notes on pages 23 to 60 are an integral part of these financial statements.
The financial statements on pages 17 to 60 were authorised for issue by the Board of Directors on 29 April 2021 and were signed on its behalf.
| Louis Castro | Dr Clifford Gross |
| Director | Chairman and CEO |
Tekcapital Plc
Company Statement of financial position
At 30 November 2020
| Company | Note | As at 30 November 2020 | As at 30 November 2019 | |||
| US $ | US $ | |||||
| Assets | ||||||
| Non-current assets | ||||||
| Investment in subsidiaries | 11 | 1,955,215 | 1,959,003 | |||
| Financial assets at fair value through profit and loss | 12 | 2,081,027 | 1,804,120 | |||
| Convertible Loan Notes | 15 | 588,169 | 476,122 | |||
| 4,624,411 | 4,239,245 | |||||
| Current assets | ||||||
| Trade and other receivables | 15 | 3,560,188 | 2,321,731 | |||
| Cash and cash equivalents | 16 | 239,991 | 112,114 | |||
| 3,800,179 | 2,433,845 | |||||
| Total assets | 8,424,590 | 6,673,090 | ||||
| Current Liabilities | ||||||
| Trade and other payables | 20 | 79,249 | 484,375 | |||
| 79,249 | 484,375 | |||||
| Total liabilities | 79,249 | 484,375 | ||||
| Net assets | 8,345,341 | 6,188,715 | ||||
| Equity attributable to the owners of the parent | ||||||
| Ordinary shares | 18 | 521,830 | 372,984 | |||
| Share Premium | 18 | 13,211,344 | 10,993,546 | |||
| Retained Earnings | 19 | (5,351,695 | ) | (5,079,729 | ) | |
| Translation Reserve | 19 | (36,138 | ) | (98,086 | ) | |
| Total Equity | 8,345,341 | 6,188,715 | ||||
The Companys loss before tax for the year ended 30 November 2020 was $316,239.
The notes on pages 23 to 60 are an integral part of these financial statements.
The financial statements on pages 17 to 60 were authorised for issue by the Board of Directors on 28 April 2021 and were signed on its behalf.
| Louis Castro | Dr Clifford Gross |
| Director | Chairman and CEO |
Tekcapital Plc
Consolidated Statement of changes in equity
For the year ended 30 November 2020
| 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 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 issue | 18 | 147,298 | 2,450,245 | – | – | – | 2,597,543 | ||||
| Share options exercised | 18 | 1,548 | 29,805 | – | – | – | 31,353 | ||||
| Cost of share issue | 18 | – | (262,252 | ) | – | – | – | (262,252 | ) | ||
| Profit for the year | 19 | – | – | – | – | 7,679,918 | 7,679,918 | ||||
| Other comprehensive income | 19 | – | – | 92,949 | – | – | 92,949 | ||||
| Share based payments | 26 | – | – | – | – | 44,273 | 44,273 | ||||
| Balance at 30 November 2020 | 521,830 | 13,211,344 | 270,447 | (72,169 | ) | 18,780,012 | 32,711,464 | ||||
Share premium amount subscribed for share capital in excess of nominal value, net of directly attributable costs.
Translation reserve amount recognised 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.
The notes on pages 23 to 60 are an integral part of these financial statements.
Tekcapital PLC
Company Statement of changes in equity
For the year ended 30 November 2020
| Attributable to owners of the parent company | ||||||||||
| Company | Note | Ordinary Shares US $ | Share Premium US $ | Translation Reserve US $ | Profit and loss account US $ | Total Equity US $ | ||||
| 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 income | 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 issue | 18 | 147,298 | 2,450,245 | – | – | 2,597,543 | ||||
| Share options exercised | 18 | 1,548 | 29,805 | 31,353 | ||||||
| Cost of share issue | 18 | – | (262,252 | ) | – | – | (262,252 | ) | ||
| Profit for the year | 19 | – | – | – | (316,239 | ) | (316,239 | ) | ||
| Other comprehensive loss | 19 | – | – | 61,948 | – | 61,948 | ||||
| Share based payments | 26 | – | – | – | 44,273 | 44,273 | ||||
| Balance at 30 November 2020 | 521,830 | 13,211,344 | (36,138 | ) | (5,351,695 | ) | 8,345,341 | |||
Share premium amount subscribed for share capital in excess of nominal value, net of directly attributable issue costs.
Translation reserve amount recognised for foreign exchange differences recognised in Other Comprehensive Income.
Profit and loss account cumulative net gains and losses recognised in the consolidated financial statements of comprehensive income.
The notes on pages 23 to 60 are an integral part of these financial statements.
Tekcapital Plc
Consolidated Statement of cash flows
For the year ended 30 November 2020
| Group | Note | For the year ended 30 November 2020 | For the year ended 30 November 2019 | |||
| US $ | US $ | |||||
| Cash flows from operating activities | ||||||
| Cash outflows from operations | 24 | (948,166 | ) | (1,397,294 | ) | |
| Tax paid | (2,076 | ) | (2,345 | ) | ||
| Net cash outflows from operating activities | (950,242 | ) | (1,399,639 | ) | ||
| Cash flows from investing activities | ||||||
| Purchase of financial assets at fair value through profit and loss | 12 | (1,345,679 | ) | (111,810 | ) | |
| Purchases of property, plant and equipment | 14 | (950 | ) | (862 | ) | |
| Net cash outflows from investing activities | (1,346,629 | ) | (112,672 | ) | ||
| Cash flows from financing activities | ||||||
| Proceeds from issuance of ordinary shares | 18 | 2,628,896 | 938,966 | |||
| Costs of raising finance | 18 | (262,252 | ) | (117,277 | ) | |
| Net cash inflows from financing activities | 2,366,644 | 821,689 | ||||
| Net increase/(decrease) in cash and cash equivalents | 69,773 | (690,622 | ) | |||
| Cash and cash equivalents at beginning of year | 16 | 472,899 | 1,165,442 | |||
| Exchange (losses)/gains on cash and cash equivalents | (4,199 | ) | (1,921 | ) | ||
| Cash and cash equivalents at end of year | 16 | 538,473 | 472,899 | |||
Notes
| 1. | General Information |
| Tekcapital PLC (Companies House registration number: 08873361) 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 limited by shares, which listed on the AIM market of the London Stock Exchange Group Plc 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 valuable technology transfer services. The Group and the parent company also acquire exclusive licences to university technologies that it believes can positively impact peoples lives, 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 Groups 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:
| |
| 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 Groups 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 Groups and the Companys intention to rely on the available cash reserves, future income generated from its growing service offerings and continued reductions in its cost base, a negative variance in the forecasts and projections would make the Groups ability to continue as a going concern dependent on an additional fund raise. If the Groups forecasts are not achieved, the Directors would seek to raise the additional funds through equity issues. Whilst the COVID-19 pandemic 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 17 Insurance Contracts | |
| IFRS 17 was issued in May 2017 and is effective for accounting periods beginning on or after 1 January 2023. The Group has not chosen to early adopt this standard and will adopt it for the accounting period beginning 1 December 2023. Directors do not expect any material impact on the consolidated financial statements. No other issued but not endorsed amendments to IFRS will have a material impact on the Groups financial statements once they become endorsed and effective. New standards and interpretations adopted by the Group: IFRS 16 Leases The Group adopted this standard for the accounting period beginning 1 December 2019. 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 | |
| 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 Groups 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 Groups 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. | |
| 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 2020:
Tekcapitals 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 Groups current circumstances. The Board envisages that Tekcapitals 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 Groups 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 assets 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 assets 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 Groups 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 assets carrying value exceeds its recoverable amount. The recoverable amount is the higher of an assets 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 instruments | ||
| 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 Groups 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 Companys 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: | |||
| |||
| 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 assets 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 instruments 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 debtors 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 subsidiarys 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 Company 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 Company. 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:
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 Company 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 | ||
| At inception, the Company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the Company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the Company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the Company’s estimate of the amount expected to be payable under a residual value guarantee; or the Company’s assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. | |||
| 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: Interest income | |||
| 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 Groups 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 Management 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 Groups maximum exposure to credit risk for the components of financial position at 30 November 2020 and 2019 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 Groups liquidity requirements to ensure it has sufficient cash to meet operational needs. At the reporting date the Group held bank balances of US$538,473. Post period end, the Group completed a post period end placement for gross US$5.28m. 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$399,994. (d) Financial Risk Management The Companys 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 Groups 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 increase by US$46,198 and equity would decrease by US$38,608. (g) Impact of the COVID-19 pandemic The current Coronavirus epidemic may produce negative economic activities which could reduce the Groups 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 Groups net asset values, revenue, cash flow, access to investment capital and other factors which could negatively impact the Group. | |||
| 3.2 | Capital management | ||
| The Groups objectives when managing capital are to safeguard the Groups 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 Groups 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 2020. The Companys historic cost of capital has been the cost of securing equity financings, which have averaged around 10%. The companys 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 Groups 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 Guidents 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 Salarius Limited net assets. This value is primarily based on the independent patent valuation of US patent 8,900,650 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 Salarius Limited obtains sufficient funding to execute their strategy. The fair value of Lucyd Limited reflects: – Lucyds 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 eyewear unit sales for companys e-commerce channels as well as number of retail stores to determine projected sales , and a discount factor applied for the net present value of future cashflows from the platform. – Lucyds trademark value based on the Net book value stated at cost. The Group corroborated this valuation with secondary observable input in the form of value of Lucyd Ltds shares in its US subsidiary (Innovative Eyewear Inc) as determined by recent market transactions of these shares. | ? | ? | 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. | ? | ? | 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. | ? | ? | 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. | ? | ? | Note 22 |
| Share based payment | The estimate of share based payment requires the Director to select an appropriate valuation model and make decisions about various inputs into the model including the volatility of its own share price, the probable life of options and the risk free interest rate | ? | ? | Note 26 |
| 5. | Segmental reporting |
| The Directors consider the business to have two segments for reporting purposes under IFRS 8 which are: | |
| |
Segmental revenues and results
| 2020 Consolidated income statement | Professional Services US $ | Licensing & Investment US $ | TOTAL US $ | |||
| Net Revenue | 1,099,305 | 8,688,111 | 9,787,416 | |||
| Interest Income | 95,947 | 95,947 | ||||
| Cost of Sales | (458,728 | ) | (458,728 | ) | ||
| Administrative Expenses | (528,722 | ) | (1,204,482 | ) | (1,733,204 | ) |
| Depreciation and Amortisation | (2,359 | ) | (7,078 | ) | (9,437 | ) |
| Group operating profit | 109,496 | 7,572,498 | 7,681,994 | |||
| Profit tax expense | (519 | ) | (1,557 | ) | (2,076 | ) |
| Profit after tax | 108,977 | 7,570,941 | 7,679,918 | |||
| 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 | 29,818 | 29,818 | ||||
| Cost of sales | (606,166 | ) | – | (606,166 | ) | |
| Administrative Expenses | (503,840 | ) | (1,069,725 | ) | (1,573,656 | ) |
| Depreciation and amortisation | (4,249 | ) | (12,749 | ) | (16,998 | ) |
| Group operating profit | 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 | |||
Segment assets and liabilities
| 2020 Consolidated statement of financial position | Professional Services US $ | Licensing and Investment US $ | TOTAL US $ | ||
| Assets | 2,034,302 | 31,079,825 | 33,114,127 | ||
| Liabilities | (402,663) | (402,663) | |||
| Net assets | 1,631,639 | 31,079,825 | 32,711,464 | ||
| 2019 Consolidated statement of financial position | Professional Services US $ | Licensing Activities 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 | |||
Geographical information
| 2020 US $ | 2019 US $ | |
| United Kingdom | 8,688,111 | 6,516,813 |
| United States | 1,195,252 | 1,200,551 |
| Total revenue | 9,883,363 | 7,717,364 |
Geographical information
| 2020 US $ | 2019 US $ | |
| United Kingdom Assets | 31,079,825 | 21,342,921 |
| Liabilities United States Assets iabilities | – 2,034,302 | – 1,614,014 |
| Total Net Assets | 32,711,464 | 22,527,680 |
| 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 Groups Unrealized profit on the revaluation of investments. |
| Group | Transferred at a point in time | Transferred over time | Total 2020 US$ | Transferred at a point in time | Transferred over time | Total 2019 US$ |
| Major service lines: | ||||||
| Sales of Invention Evaluator | 174,905 | – | 174,905 | 199,184 | – | 199,184 |
| Tech transfer recruitment services | 261,311 | – | 261,311 | 454,452 | – | 454,452 |
| Technology reports | – | – | – | 45,800 | – | 45,800 |
| Training services | – | – | – | – | – | – |
| Management | – | – | – | |||
| services | – | 506,351 | 506,351 | – | 413,278 | 413,278 |
| R & D relief income* | – | 67,688 | 67,688 | – | 58,019 | 58,019 |
| Loan convertible interest income | – | 95,947 | 95,947 | – | 29,818 | 29,818 |
| Other** | – | 89,050 | 89,050 | – | – | – |
| Total Revenue from Services | 436,216 | 759,036 | 1,195,252 | 699,436 | 501,115 | 1,200,551 |
* The Group received an R&D tax relief, the directors consider this to be income.
** Includes PPP grant totalling US$77,837 received by Tekcapital LLC which has been forgiven in full.
All of the Groups 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 | 2020 US $ | 2019 US $ | |||
| Depreciation of property plant and equipment | 9,437 | 16,998 | |||
| Research and development expenses | 417,569 | 173,947 | |||
| Other administration expenses | 1,316,002 | 1,463,289 | |||
| Foreign exchange movements | (367 | ) | (63,671 | ) | |
| Total expenses | 1,742,641 | 1,590,563 |
Included in the Other administration expenses in the amount of US$70,766 related to payments under operating lease for the office rental agreement.
7.2 Auditor remuneration
| Group | 2020 US $ | 2019 US $ | |||
| Fees payable to the Groups auditor and its associated for the audit of the Group and Company financial statements | 90,919 | 95,313 | |||
| Fees payable to the Companys auditor and its associates for other | |||||
| 10,247 | 15,920 | |||
| 101,166 | 111,233 | ||||
8. Employees
8.1 Directors emoluments
| Group | 2020 US $ | 2019 US $ | |
| Directors emoluments | 469,998 | 264,799 | |
| Directors portion of Share Based Payments | 10,465 | 486 | |
| Total | 480,463 | 265,285 |
The highest paid Director received a salary of US$191,865 (2019: $187,760) and benefits of US$22,745 (2019: US$21,050). The highest paid Director received a bonus of US$154,375 (2019: US$0). The highest paid Director did not exercise any share options; he received 3,000,000 share options in August 2020. The share-based payments associated with the highest paid Director amounted to US$9,275. No termination benefits, post-employment benefits were provided to Directors. Total of short-term benefits in kind of US$22,745 were provided during the year. The amounts in the table above do not include Employers NI in the amount of US$22,500.
Key management personnel (including Directors and Group Financial Controller) received salary of US$574,995, excluding Stock Base Compensation disclosed in Directors Remuneration Report. Please also refer to Directors Report.
8.2 Employee benefit expense
| Group | 2020 US $ | 2019 US $ | |
| Wages and salaries including restructuring costs and other termination benefits | 281,248 | 275,765 | |
| Social security costs | 48,032 | 40,644 | |
| Share options granted to directors and employees | 44,273 | 20,876 | |
| Total | 373,553 | 337,285 |
8.3 Average number of people employed
| Group | 2020 | 2019 | |
| 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 2020 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 | 2020 US $ | 2019 US $ | |||
| Current tax | |||||
| Current tax on profits for the year | 2,076 | 2,345 | |||
| Total current tax | 2,076 | 2,345 | |||
| Income tax expense | 2,076 | 2,345 | |||
| Group | 2020 US$ | 2019 US $ | |||
| Profit before tax | 7,681,994 | 5,520,635 | |||
| Tax calculated at domestic tax rates applicable to profits | 1,459,579 | 1,048,921 | |||
| Tax effects of: | |||||
| 22,712 | 19,154 | |||
| (1,650,744 | ) | (1,238,195 | ) | |
| 1,793 | 3,230 | |||
| 168,736 | 169,235 | |||
| Total corporation tax | 2,076 | 2,345 | |||
The weighted average applicable tax rate was 19% (2019: 19%).
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 2020. |
| 2020 | 2019 | ||
| Earnings attributable to equity holders of the Company (US$) | 7,679,918 | 5,518,290 | |
| Weighted average number of Ordinary Shares in issue: | |||
| Basic | 80,713,247 | 58,010,322 | |
| Diluted | 81,335,979 | 58,918,289 | |
| Basic earning per share | 0.095 | 0.095 | |
| Diluted earning per share | 0.094 | 0.095 | |
The Company completed placements of total of 28,800,000 new ordinary shares during the financial year and issued 300,000 shares due to share option exercise by an employee.
11. Investments in subsidiaries
| Company | Shares in subsidiaries US$ | Loans to subsidiaries US$ | Total US $ | ||
| Cost and net book value | |||||
| As at 1 December 2019 | 79,426 | 1,879,577 | 1,959,003 | ||
| Additions during the year | – | – | – | ||
| Disposal during the year | – | – | – | ||
| Foreign currency translation differences | (3,788 | ) | – | (3,788 | ) |
| Balance at 30 November 2020 | 75,638 | 1,879,577 | 1,955,215 | ||
| Subsidiaries name (consolidated) | Proportion of ordinary shares directly held | Nature of business | Capital and reserves | Net Profit/(Loss) | ||
| Direct | ||||||
| Tekcapital Europe Limited England and Wales | 100% | Provision of Intellectual property research services | 26,267,890 | 8,424,175 | ||
| Tekcapital LLC USA | 100% | Provision of Intellectual property research services | (2,422,933) | (382,023) | ||
Indirect (not consolidated)
The following are directly owed by Tekcapital Europe Limited
| Lucyd Limited | England and Wales | 100.00 | % | Provider of high-tech eyewear | (971,831 | ) | (3,360,135 | ) |
| Innovative Eyewear Inc | United States | 90.00 | % | Provider of high-tech eyewear | 107,793 | (434,620 | ) | |
| Salarius Limited | England and Wales | 97.13 | % | Developer of low sodium salt and snack foods | 4,356,486 | 4,356,486 | ||
| MicroSalt Inc | United States | 87.13 | % | Developer of low sodium salt and snack foods | 58,088 | (520,603 | ) | |
| Guident Limited | England and Wales | 100.00 | % | Developer of autonomous vehicle software | (435,336 | ) | (252,587 | ) |
| Guident Corp | United States | 100.00 | % | Developer of autonomous vehicle software | (435,336 | ) | (252,587 | ) |
| Smart Food Tek Limited | England and Wales | 100.00 | % | Developer for baked food coating to reduce fat | (116,114 | ) | (103,312 | ) |
* 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 66 West Flagler Street, Suite 900, Miami, Florida, 33130, 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 under 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 providing working capital assistance to Salarius Limited through convertible loan note financing (see also Note 15). The Group also assists the entities, and their subsidiaries, with their fundraising activities.
Registered office of all subsidiaries owned by Tekcapital Europe Limited: Acre House, 11-15 William Road, London, England, NW1 3ER.
During the year Salarius Limited incorporated MicroSalt Inc, a U.S subsidiary to advance sales of its product in the United States. Salarius Limited owns 87.13% of MicroSalt Inc.
During the year Lucyd Limited incorporated Innovative Eyewear Inc, a U.S. subsidiary to advance sales of its product in the United States. Lucyd Limited owns 90% shares of Innovative Eyewear Inc.
During the year Guident Limited incorporated Guident CORP, a U.S. subsidiary to advance sales of its product in the United States. Guident Limited owns 100% of Guident CORP.
| 12. | Financial Assets at Fair Value through Profit and Loss |
| Groups investments in portfolio companies in the years ended 30 November 2020 and 30 November 2019 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 2019 | Additions | Disposal | FX reval | Fair Value change | 30 Nov 2020 | |
| US $ | US $ | US $ | US $ | US $ | US $ | |||
| Guident Limited | 100.00 | % | 15,526,195 | 46,294 | 6,457,345 | 22,029,834 | ||
| Lucyd Limited | 100.00 | % | 1,129,022 | 1,570,309 | 2,699,331 | |||
| Salarius Limited | 97.15 | % | 1,833,426 | 1,121,516 | 22,905 | 660,457 | 3,638,304 | |
| Belluscura Limited | 17.82 | % | 1,804,121 | 224,163 | 52,743 | 2,081,027 | ||
| Smart Food Tek Limited | 100.00 | % | 43,161 | – | 43,161 | |||
| Total Balance | 20,335,925 | 1,345,679 | – | 121,942 | 8,688,111 | 30,491,657 | ||
| Company | Proportion of ordinary shares held | 1 Dec 2019 | Additions | Disposal | FX reval | Fair Value change | 30 Nov 2020 | |
| US $ | US $ | US $ | US $ | US $ | US $ | |||
| Belluscura Limited | 17.82 | % | 1,804,121 | 224,163 | – | 52,743 | – | 2,081,027 |
| Total Balance | 1,804,121 | 224,163 | – | 52,743 | – | 2,081,027 | ||
| 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 | 97.15 | % | 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 | % | 24,750 | – | – | – | (24,750 | ) | – |
| Non Invasive Glucose Tek Limited | 100 | % | 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 $ | 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 | ||
Total fair value gain of $8.7m for the year reflects uplift in value of shares of Guident, Lucyd and Salarius, with no changes for Belluscura. Considering early stage of commercialisation, fair value of Smart Food Tek 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.
Fair value measurement hierarchy for financial assets as at 30 November 2020 with comparative amounts as of 30 November 2019:
| Date of Valuation | Total | Significant observable inputs (Level 2) | Significant unobservable inputs Level 3) | |
| US $ | US $ | US $ | ||
| Guident and others | 30 November 2020 | 28,410,630 | 28,410,630 | |
| Belluscura Limited | 30 November 2020 | 2,081,027 | 2,081,027 | |
| Total Balance | 30 November 2020 | 30,491,657 | 2,081,027 | 28,410,630 |
| 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 (US$6.5m 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)
3. US Patent No. 9,964,948 (FIU 948)
4. US Patent No. 8,941,251 (SUNY 251) new intellectual property licensed during the period
The total fair value of $22m reflects the fair value of Guident s net assets as determined by:
– Total market of electronic vehicles (EVs) sold of 21,952,420 sold in the U.S. between 2023 (start of projections) and 2031 (patent life end). 1% market penetration of Guidents patent starting in 2023 leading to 6% market penetration by 2028 through 2031, resulting in projected 1,137,000 vehicles subject to the licensing revenue. 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 2031
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 Well documented range anxiety issue within the EV market as one of the largest barriers for new EV purchasers. The EV manufacturers are aggressively competing for the increase in their vehicles operational range and the technology described by SUNY 251 provides the competitive advantage sought.
o Ongoing discussions with major auto makers regarding this technology.
While managements projection remained unchanged compared to 30 November 2019 valuation, the valuation increased due to discounting of underlying cash flows to 30 November 2020.
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.
In their review of assumptions used in the 30 November 2019 valuation, the management noted only positive developments related to commercialisation of this IP. While managements projection remained unchanged compared to 30 November 2019 valuation, the valuation increased due to discounting of underlying cash flows to 30 November 2020.
In their review of assumptions used in the 30 November 2019 valuation, the management noted only positive developments related to commercialisation of this IP. While managements projection remained unchanged compared to 30 November 2019 valuation, the valuation increased due to discounting of underlying cash flows to 30 November 2020.
– 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$5.3m) 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$0.45m).
– Guident Ltd obtains sufficient funding to execute their strategy.
Salarius (US$ 0.7m gain)
The fair value of US$3.6m was recorded by the Group based on following considerations:
Salarius 87.13% ownership of MicroSalt Inc was applied to resulting US$4.3m valuation, resulting in US$3.7m valuation of shares held by Salarius Ltd in its US subsidiary. Subsequently, Groups 97.15% ownership in Salarius Ltd was applied resulting in fair value of US$3.6m.
During the period, the Group converted US$1,121,516 in convertible note receivable into shares of Salarius Ltd resulting in classification of the amount as addition to the Financial Assets Held at Fair Value.
Lucyd Ltd (US$1.6m gain)
The fair value of US$2.7m was recorded by the Group based on following considerations:
– Lucyds e-commerce platform selling advanced and fashionable eyewear valued at US$3.8m as determined by applying an 15% discount rate on US$10.3m of adjusted net profit projected through 2025. The 15% discount rate was calculated as a total of 10% opportunity cost, 2% inflation rate and 3% technology risk. The projections of profit were increased compared to 30 November 2019 valuation considering:
º The company achieved significant R&D improvement related to its new product, making it easier to market and advertise in managements opinion, also expanding potential e-commerce channels from electronic to also optical thanks to its better look and less weight compared to previous version of the product;
º The company solidifying its plans to hybrid, having expanded from an online-only company to include brick-and-mortar store sales. While the forecast used by management in the 30 November 2019 valuation assumed some level of in store sales, the improved quality of its new product better fitting optical sections of retail stores, together with creating a plan of target retailers and distributors justified, in managements opinion, increasing the focus on these channels it its projections.
º Extending projection period to 5 years due to developments in the product, Vyrb app development and matching industry standards of forecast timelines.
– Lucyds trademarks valued at US$0.2m, assessed using Cost Approach Reproduction Method. Through cost analysis, the fair value approximates cost recognized in Lucyds balance sheet.
– The deferred tax liability of (US$0.68m) recorded by Lucyd based on UK corporate tax rate of 19% applied to the fair value gain associated with the patent.
– Other assets and liabilities of (US0.45m).
Belluscura (US $0.0m gain)
The fair value of the holding increased by US$0.6m due to the cost basis addition as the Company participated in the most recent private placement held at 15 pence per share in May 2020. This price per share remained unchanged from preceding placement at 15 pence per share in April 2019 used by the Company and the Group to value its holding in Belluscura as of 30 November 2019. The Group contributed US$224,000 during this placement.
Smart Food Tek (Nil Gain / Nil loss)
Considering early commercialisation stage, the Group records its investment in Smart Food Tek at cost. The directors do not consider that any other available information would materially change or give a more reliable representation of the value.
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 2020 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 | 15% | 2% increase in the discount factor would decrease the Lucyd valuation by US$0.2m a 2% decrease in the discount factor would increase the Lucyd valuation by US$0.2m | |
| Eshop adjusted net profit through December | US$6.5m | A 20% increase in net profit would increase the Lucyd valuation by US$0.6m. A 20% decrease in gross profit would decrease the Lucyd valuation by US$0.6m. | |||
| 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 US$3.1m, a 2% decrease in the discount factor would increase the value by US$3.9m | |
| Royalty Relief Rate | 6%(FAMU, MSU US, MSU OUS) 27.5% (FIU 948), 4.66% (SUNY 251) | A 1% increase in the royalty relief rate would increase the Guident valuation by US$7.0m, a 1% decrease in the royalty relief rate would decrease the valuation by US$7.0m | |||
| Gross licensing proceeds & gross revenue | US$3.0b (FAMU), US$286m (MSU US), US$189m (MSU OUS), US$8.7m (FIU948), US$42m (SUNY 251) | A 20% increase in the gross licensing proceeds and gross revenue would increase the Guident valuation by US$4.7m. A 20% decrease would decrease the Guident valuation by US$4.7m. | |||
| Salarius | Income Approach Royalty Relief Method | Discount to Future Cash Flows from licensing | 12% | 2% increase in the discount factor would decrease the Salarius valuation by US$0.4m, a 2% decrease in the discount factor would increase the value by US$0.4m | |
| Licence Royalty Rate | 8% | A 1% increase in the royalty rate would increase the Salarius valuation by US$0.7m a 1% decrease in the royalty rate would decrease the Salarius valuation by US$0.7m. | |||
| Projected sales | US$179m | A 20% increase in the projected sales would increase the Salarius valuation by US$0.7m. A 20% decrease in the projected sales would decrease the Salarius valuation by US$0.7m. | |||
13. Intangible assets
| Group | Vortechs Group US $ | Website development US $ | Invention Evaluator US $ | Total US $ | ||
| At 30 November 2019 | 500,000 | 28,121 | 338,770 | 866,891 | ||
| At 30 November 2020 | 500,000 | 28,121 | 338,770 | 866,891 | ||
| Accumulated amortisation and impairment | ||||||
| At 30 November 2019 | – | (28,121 | ) | – | (28,121 | ) |
| At 30 November 2020 | – | (28,121 | ) | – | (28,121 | ) |
| Net book value | ||||||
| At 30 November 2020 | 500,000 | – | 338,770 | 838,770 | ||
| At 30 November 2019 | 500,000 | – | 338,770 | 838,770 | ||
The intangible assets presented above are included within Professional Services segment under Note 5 disclosure. Costs of the Groups website development have been fully amortized as of 30 November 2018.
Under IAS38, the Groups 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 five year period in order to determine no impairment. The projections are based off revenue generation at US$300k less cost of sales at 50% gross profit margin, no growth has been applied forecasts. A discount factor at 10% (consistent with Groups cost of capital) was used to determine no impairment. The revenue projections are based on companys historical performance and existing pipeline of sales orders. The Invention Evaluator intangibles recoverable amount exceeds its carrying amount by US$229,848.
Under IAS38, the Groups 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 2021 (approximating actual revenue from 2019), 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 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 Groups cost of capital) was used to determine no impairment. Vortechs intangibles recoverable amount exceeds its carrying amount by US$678,113.
The tech-transfer recruiting is viewed by directors as permanent part of the Groups business and its offering. This together with the high turnover in this industry leading to continuous hiring needs leads Directors to apply projections of over 5 years in the impairment determination.
14. Fixed Assets
| Group | Leasehold Improvements US$ | Office Equipment US $ | Computer Equipment US $ | Total US $ | ||||
| Closing cost 30 November 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 | ||||
| Exchange differences | ||||||||
| Additions | – | – | 950 | 950 | ||||
| Closing cost 30 November 2020 | 13,775 | 24,286 | 28,682 | 66,743 | ||||
| Accumulated depreciation and impairment | ||||||||
| 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 | ) |
| Depreciation charge | (4,526 | ) | (4,232 | ) | (8,758 | ) | ||
| Exchange differences | 76 | 76 | ||||||
| At 30 November 2020 | (13,775 | ) | (15,431 | ) | (27,914 | ) | (57,121 | ) |
| Closing net book value | ||||||||
| At 30 November 2019 | – | 13,304 | 4,049 | 17,353 | ||||
| At 30 November 2020 | – | 8,854 | 767 | 9,622 | ||||
15. Trade and other receivables
| Group | 2020 US $ | 2019 US $ | ||
| Trade receivables | 54,014 | 144,944 | ||
| Less provision for impairment of trade receivables | – | – | ||
| Trade receivables net | 54,014 | 144,944 | ||
| VAT recoverable | (934 | ) | 14,333 | |
| Receivables from related parties | 579,089 | 530,874 | ||
| Prepayments and debtors | 15,267 | 125,715 | ||
| Total trade and other receivables | 647,436 | 815,866 | ||
| Non-current: convertible loan notes* | 588,169 | 476,122 | ||
| Company | 2020 US $ | 2019 US $ | |
| Receivables from Group companies | 3,544,286 | 2,277,783 | |
| VAT | 2,300 | 9,025 | |
| Prepayments | 13,602 | 34,923 | |
| Total trade and other receivables | 3,560,188 | 2,321,731 | |
| Non-current: convertible loans notes | 588,169 | 476,122 |
The fair value of trade and other receivables are not materially different to those disclosed above. The Groups exposure to credit risk related to trade receivables is detailed in Note 3 to the consolidated financial statements.
The Company held multiple convertible loans issued by its portfolio company, Salarius Ltd for the total US$1,100,000, which was fully drawn by September 2020. In September 2020, at mutual agreement between the Company and Salarius Ltd, the full amount of outstanding receivable was converted into 718 shares of Salarius Ltd issued to Tekcapital Europe at $1,562 per share. Consequently, the Group presented the amount of US$1,121,025 under additions to Financial Assets Held at Fair Value as of 30 November 2020 (see Note 12).
The Group and the Company also held:
The Group had outstanding receivables from its portfolio companies as at 30 November 2020 in the amount of:
– US$288,165 due from Lucyd Ltd
– US$103,092 due from Smart Food Tek
– US$184,376 due from Innovative Eyewear Inc
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 | 2020 US $ | 2019 US $ | |
| Cash at bank and in hand | 538,473 | 472,899 | |
| Total cash and cash equivalents | 538,473 | 472,899 |
| Company | 2020 US $ | 2019 US $ | |
| Cash at bank and in hand | 239,991 | 112,114 | |
| Total cash and cash equivalents | 239,991 | 112,114 |
17. Categories of financial assets and financial liabilities
| Group | 2020 US $ | 2019 US $ | |
| Financial assets | |||
| Financial assets at fair value through profit and loss | 30,491,657 | 20,335,925 | |
| Loans and receivables at amortised cost | 1,235,605 | 1,291,988 | |
| Cash and cash equivalents | 538,473 | 472,899 | |
| 32,265,735 | 22,100,812 | ||
| Financial Liabilities | |||
| Trade and other payables at amortised cost | 239,228 | 303,847 | |
| Company | 2020 US $ | 2019 US $ | |
| Financial assets | |||
| Financial assets at fair value through profit and loss | 2,081,027 | 1,804,120 | |
| Loans and receivables at amortised cost | 4,148,357 | 2,797,853 | |
| Cash and cash equivalents | 239,991 | 112,114 | |
| Available for sale | 1,955,214 | 1,959,003 | |
| 8,424,589 | 6,673,090 | ||
| Financial liabilities | |||
| Trade and other payables at amortised cost | 79,249 | 484,375 |
18. Share capital and premium
Share capital
| Group and Company | Number of shares | Ordinary SharesUS $ | Total US $ |
| Issued and fully paid up | |||
| 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 | 63,728,042 | 372,984 | 372,984 |
| Shares issued in further public offering | 28,800,000 | 147,298 | 147,298 |
| Shares issued through share option exercise | 300,000 | 1,548 | 1,548 |
| At 30 November 2020 | 92,828,042 | 521,830 | 521,830 |
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:
– February 2020: 14,800,000 shares were issued in the placing of new ordinary shares at £0.05p. Total proceeds of US$881,174 were netted against cost of raising finance in the amount of US$105,228
– May 2020: 9,250,000 shares were issued in the placing of new ordinary shares at £0.10p. Total proceeds of US$1,086,060 were netted against cost of raising finance in the amount of US$117,889
– September 2020: 300,000 shares were issued in exercise of share options held by Amy Shim at £0.085p. Total proceeds of US$29,805 were received.
– November 2020: 4,750,000 shares were issued in the placing of new ordinary shares at £0.08p. Total proceeds of US$483,011 were netted against cost of raising finance in the amount of US$39,136.
The Company has authorised share capital of 131,667,063, with a nominal value of £0.004. Of these shares, 92,828,042 were issued and fully paid up as at 30 November 2020.
Share premium
| Group and Company | Share premium US $ | Total US $ | |||
| 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 | |||
| Shares issued in further public offering | 2,450,245 | 2,450,245 | |||
| Cost of shares issued | (262,352 | ) | (262,352 | ) | |
| Shares issued in share option exercise | 29,805 | 29,805 | |||
| As at 30 November 2020 | 13,211,244 | 13,211,244 | |||
19. Reserves
Profit and Loss Account
| Group Profit and Loss Account US $ | Company Profit and Loss Account US $ | |||
| 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 | ) | |
| Profit/(loss) for the year | 7,679,918 | (316,239 | ) | |
| Share based payments | 44,273 | 44,273 | ||
| At 30 November 2020 | 18,780,012 | (5,351,695 | ) | |
Merger reserve
| Group | Merger reserve US $ | |||
| At 30 November 2019 | (72,169 | ) | ||
| At 30 November 2020 | (72,169 | ) | ||
Translation reserve
| Group Translation reserve US $ | Company Translation reserve US $ | |||
| At 30 November 2018 | 145,643 | (101,969 | ) | |
| Foreign exchange loss | 31,855 | 3,883 | ||
| At 30 November 2019 | 177,498 | (98,086 | ) | |
| Foreign exchange gain | 92,949 | 61,948 | ||
| At 30 November 2020 | 270,447 | (36,138 | ) | |
20. Trade and other payables
| Group | 2020 US $ | 2019 US $ |
| Trade creditors | 103,882 | 116,936 |
| Social security and other taxes | 8,215 | 6,089 |
| Accruals and other creditors | 135,345 | 187,135 |
| 247,442 | 310,160 |
| Company | 2020 US $ | 2019 US $ |
| Amounts due to group companies | 362,863 | |
| Accruals, deferred income and other creditors | 79,249 | 121,512 |
| 79,249 | 484,375 |
The fair values of trade and other payables are not materially different to those disclosed above.
The Groups exposure to currency and liquidity risk related to trade and other payables is detailed in note 3 to the accounts.
| 21. | Deferred Revenue |
The Groups deferred revenue balance of US$118,595 as of 30 November 2019 was adjusted for:
| |
| 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 2020 US $ | Group 2019 US $ | Company 2020 US $ | Company 2019 US $ | ||||
| Accelerated capital allowances | (1,793 | ) | (3,230 | ) | – | – | ||
| Short term timing difference | – | – | – | – | ||||
| Tax losses | (1,958,070 | ) | (1,791,410 | ) | (563,069 | ) | (525,230 | ) |
| Unprovided deferred tax asset | 1,959,863 | 1,794,639 | 563,069 | 525,230 | ||||
| – | – | – | – | |||||
| 23. | Dividends |
| No dividend has been recommended for the year ended 30 November 2020 (2019: Nil) and no dividend was paid during the year (2019: Nil). | |
| 24. | Cash used from operations? |
| Group | 2020 US $ | 2019 US $ | |||
| Profit before income tax | 7,681,994 | 5,520,635 | |||
| Adjustments for | |||||
| – Depreciation | 9,437 | 16,998 | |||
| - Share based payment expense | 44,273 | 20,876 | |||
| - Movement in foreign exchange | 96,392 | 33,776 | |||
| - Movement in trade and other receivables - Financial assets at fair value through the profit or loss | 56,383 (8,810,053 | ) | (612,615 (6,519,761 | ) ) | |
| - Deferred revenue movement | 36,126 | 118,595 | |||
| - Trade and other payables | (62,718 | ) | 24,202 | ||
| Cash used | (948,166 | ) | (1,397,294 | ) | |
| 25. | Commitments |
| Capital commitments The Group entered into multiple convertible loan note agreements with its portfolio companies. Please see note 15 for details regarding outstanding commitments. | |
| Operating lease commitments The Group did have any material contracts within the scope of IFRS 16. Consequently, the Group did not recognise any right-of-use assets and lease liabilities during the period. | |
| 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 | 7,450,000 | |
| Share price at date of grant | £0.05-£0.46 | |
| Exercise price | £0.05-£0.46 | |
| Options life in years | 5 | |
| Risk free rate | 0.10% | |
| Expected volatility | 41%-86% | |
| Expected dividend yield | 0 | |
| Fair value of options | £0.03-£0.09 | |
The weighted average fair value of options outstanding was £0.03p. Volatility was calculated using Groups historical share price performance since 2017. The share-based payment expense for the year was US$44,273 (2019: US$20,876). Details of the number of share options and the weighted average exercise price outstanding during the year as follows:
| 2020 | 2019 | |||
| Group and Company | Av. Exercise price per share £ | Options (Number) | Av. Exercise price per share £ | Options (Number) |
| As at 1 December | 0.2110 | 5,785,000 | 0.3164 | 3,585,000 |
| Granted | 0.1193 | 4,450,000 | 0.0781 | 2,900,000 |
| Exercised | 0.0810 | 300,000 | – | – |
| Forfeited | 0.3551 | 2,485,000 | 0.2500 | 700,000 |
| As at 30 November | 0.2351 | 7,450,000 | 0.2110 | 5,785,000 |
| Exercisable as at 30 November | 1,575,000* | 2,610,000* |
*The weighted average exercise price for the options exercisable as at 30 November 2020 and 30 November 2019 was £0.19p and £0.34p respectively.
The weighted average remaining contractual life is 4.2 years (2019: 2.7 years). The weighted average fair value of options granted during the year was £0.03p (2019: £0.05p). The range of exercise prices for options outstanding at the end of the year was £0.052p – £0.46p (2019: £0.065p – £0.46p).
| 27. | Related party transactions |
| Details of Directors remuneration and grant of options are given in the Directors report. Please also refer to Note 15 for detail of transactions with portfolio companies. 525,000 options were held by Harrison Gross, family member of Dr. Clifford Gross.
| |
| 28. | Events after the reporting period |
| On 1 February 2021, Tekcapital Group announced that the Company’s shares will cross trade publicly on the US OTCQB Venture Market (“OTCQB”), under the ticker TEKCF, commencing 1st February 2021. On 18 March 2021, Tekcapital Group completed a placing of 38,000,000 ordinary shares at 10 pence each to raise US$5.28m before expenses. In April 2021, Tekcapital Group exercised following warrants and options into following shares of Belluscura:
Post period end, following amounts were drawn for existing convertible notes:
|
_______________________
1 https://www.futuremarketinsights.com/reports/sodium-reduction-ingredient-market
2 https://www.statista.com/outlook/12000000/109/eyewear/united-states#market-onlineRevenueShare
3 https://www.alliedmarketresearch.com/autonomous-last-mile-delivery-market
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