Half-year Report

RNS Number : 6743X
Tekcapital plc
14 August 2018
 

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

 

14 August 2018

Tekcapital plc

("Tekcapital", "the Company" or "the Group")

 

Half Yearly Report

for the period ending 31 May 2018

 

Tekcapital plc (AIM: TEK) a UK intellectual property (IP) investment group focused on creating marketplace value from university technology announces its results for the six month period ended 31 May 2018.

 

Financial highlights

·     Total revenue of US$1,278,413

Revenue from services increased by c. 29% to US$639,561 (H1 2017: $495,8761) reflecting continued growth of technology transfer services

Net increase of US$638,852 in fair value of portfolio companies

·     Profit before tax of US$105,996 compared to profit of US$1,554,796 in H1 2017, with the change primarily due to first-time recognition of fair value of portfolio companies in H1 2017.

·     Cash balance of US$1,418,889 (30 November 2017:US$1,797,729) and no debt

·     Net assets up 35% at 31 May 2018: US$10,746,031 (H1 2017: 7,974,906)

·     Net asset per share at 31 May 2018: US$0.25 (H1 2017: US$0.19).

 

Operational highlights: Corporate

·     Investment in the Latin America market has resulted in the expansion of Invention Evaluator (IE) sales and business relationships with the following universities and organisations:

Universidad San Sebastian

Universidad Mayor

Fundacion COPEC

Universidad Adolfo Ibañez

Andes Pacific Technology Access Hub

Corfo (Chilean economic development agency)

Universidad Federico Santa María

INACAP

Universidad Santiago de Chile

 

·     Global expansion of our technology transfer services was aided by the addition of new lines of sales:

Invention Evaluator has developed a new report at the request of StartUp Chile, the leading startup accelerator in Latin America. Start-Up Chile supports several hundred companies a year, and these reports would assist their start-up companies on an on-going basis. Management believes this new IE report will further strengthen growth in services revenue in future periods.

 

Successfully developed and delivered an advanced technology commercialization programme in Santiago, Chile with HUB APTA and the Chilean Biotechnology Association. This programme will provide training services, Invention Evaluator reports and our software apps to our Chilean customers. The programme included participants from 13 Chilean research universities and two other research institutions. The sponsor of this unique programme was the Chilean government Agency CORFO, the main Chilean agency focused on entrepreneurship, innovation and competitiveness. University training programmes represent a new line of service business for Tekcapital, and we are optimistic about delivering more of them in future periods.

 

·    Tekcapital has recently appointed Michael S Rosen as Managing Director of Academic & Entrepreneurship Training to accelerate the growth of our Latin America business. Mr. Rosen has worked with leading research universities where he has trained university faculty on the creation of start-ups. Previously, he held senior management positions with Fortune 500 companies such as Pfizer, Bristol-Myers Squibb and Searle/Monsanto. Mr. Rosen also spent 12 years as President/CEO of European and U.S. biotech and medical device companies. He is fluent in both Spanish and Portuguese.

 

Operational highlights: Portfolio Companies

 

·     Belluscura has reported continued progress with its portable oxygen concentrator (POC) programme. The POC market is currently projected to reach US$1.7b by 2022. Belluscura plans to file a 510(K) application with the US FDA in 2018. Tekcapital's ownership interest in Belluscura is now 8,129,488 shares, representing approximately 33% of the issued share capital.

 

·     During the reporting period, Belluscura plc completed a private funding round raising gross proceeds of US$1.33 million, by way of a placing (the Belluscura Placing) of a total of 7,388,179 new ordinary shares of £0.13p each (the Belluscura Placing Shares). Tekcapital has invested US$250,000 in the private placement and converted loans to Belluscura of US$210,090 to equity. Tekcapital also received a three-year warrant to purchase 1,273,078 new shares in Belluscura at £0.13p per share.

 

·     As announced on 5 February 2018, Belluscura also added a Vice President of Operations, Dr. Paul Bray, PhD. Amongst other duties Dr. Bray is working on the FDA clearance process. To learn more, please visit www.belluscura.com.

 

·     Lucyd pte ltd ("Lucyd") completed a Token Generation event (TGE) to secure contributions of approximately $6m for the development of augmented reality (AR) smartglasses and execution of its business plan. Lucyd is seeking to introduce a prototype AR product in March 2019. The market for AR is expected to grow to US$36.4b by 2023 according to Greenlight Insights. Lucyd recently announced it has appointed Gina Avila as Global Marketing Manager.

 

·     Lucyd pte ltd announced on 4 July 2018 that Lucyd Pte Ltd  has appointed Dr Ira A. Clement, a licensed optometrist, as a science advisor.

 

·     Lucyd has filed a new Patent Application No. 16/022,097 to improve the utility of Augmented Reality glasses. The application is directed to smartglasses, with prescription lenses, and methods to control the presentation and display of information related to mobile device tasks that can be performed with these smartglasses.

 

·     On August 3, 2018 Lucyd launched an eShop to make it easy for anyone to acquire advanced prescription eyewear or smart glasses and to create, share and experience AR content. The eShop is the first online optics store to provide prescription filled, bone conducting, Bluetooth enabled eyeglasses that enable the wearer to answer their phone, listen to music and communicate with Siri® or other similar AI apps. To learn more, please visit www.lucyd.co.

 

·     Salarius has developed a patented process for producing nano-particle edible salt crystals. Independent tests have shown that the use of its edible salt crystals for topical food applications can deliver the same taste but half of the sodium versus traditional salt. The mission of Salarius is to commercialize low-sodium Microsalt to improve the nutritional content of food and the health of individuals worldwide. To achieve this mission, the company is exploring the launch of both a low-sodium table salt and the establishment of a reduced sodium snack brand. The low sodium ingredient market is estimated to reach US$1.76bn by 2025 according to Future Market Insights.2

 

·     Salarius announced on 22 May 2018 that it has also added Eduardo Souchon and Steve McCready to its board of directors, both with relevant Fortune 500 company experience.

 

·      Victor H. Manzanilla has been appointed as CEO of Salarius as announced on 1 August 2018. Mr Manzanilla  has previously served as founder of VHM Global Research, Marketing Director of Office Depot (office products chain with approximately 1,400 stores) and Brand Manager at Procter & Gamble (NYSE: PG) amongst other executive positions. Additionally, Mr Manzanilla has purchased 2.5% of the shares of Salarius through his consulting firm VHM Global Research for $50,000. 

 

Dr. Clifford Gross, Chairman said: 'We are pleased to report successful half-year performance for the Group, which has noted increases in service revenue while achieving important development milestones for the successful commercialization of technologies for three of its portfolio companies. We believe our unique approach of acquiring and commercialising university IP innovations, coupled with providing a range of IP value creation services to universities and corporates, has uniquely positioned us to create market value from university discoveries more efficiently than traditional IP investment companies.'

 

 

 

For further information, please contact: 

 

Tekcapital Plc 

Via Walbrook PR 

Clifford M. Gross, Ph.D. 

 

 

 

finnCap Ltd (Nominated Adviser and Joint Broker)

+44 (0) 20 7220 0500 

Geoff Nash/ Max Bullen-Smith (Corporate Finance)

 

Camille Gouchez (ECM) 

 

 

Dowgate Capital Stockbrokers (Joint Broker) 

+44 (0) 1293 517744 

David Poutney / James Serjeant 

 

 

 

Walbrook PR Ltd  

+44 (0) 20 7933 8780 

Paul Cornelius / Helen Cresswell / Sam Allen 

tekcapital@walbrookpr.com 

 

Tekcapital plc - The World's Largest University Network for Open Innovation

Tekcapital's objective is to create value from investing in new, university-developed intellectual properties. Additionally, using its proprietary discovery search engine, linked to 4,500+ universities in 160 countries, coupled with expert scientific review, Tekcapital provides a range of IP investment services to make it easy for organisations to find, evaluate and acquire university-developed technology. Tekcapital plc is quoted on the AIM market of the London Stock Exchange (AIM: symbol TEK) and is headquartered in Oxford, in the UK. For more information, please visit www.tekcapital.com.

LEI: 213800GOJTOV19FIFZ85

 

CHAIRMAN STATEMENT

 

Summary

 

Tekcapital is passionate about creating value from university intellectual property ("IP"). During the past half-year we have made good progress. 

The Group seeks to create value from its ability to identify and acquire promising new university IP, which management believes is ready to be commercialised, in addition to providing technology transfer investment services. In the first half of 2018, we continued to increase our revenues from services while undertaking significant efforts to improve the value of our portfolio companies.

We delivered the following technology transfer investment services for our corporate and university clients which provided revenue from services of US$639,561 in the period, excluding our portfolio companies and product sales:

 

Invention Discovery         Identify university IP available for license. Our bespoke reports create a pipeline of compelling university IP for potential acquisition or licensing candidates

 

Invention Evaluator          Assess the market potential of new technology. An on-line service providing objective analysis for new IP

 

Vortechs Group                Technology transfer experts for hire. More than a decade of experience in finding the right technology transfer professionals for universities and others, worldwide

 

IP Search App                   Global university IP search app. Instantly search worldwide university PCT (Patent Corporate Treaty) applications and patents on your smartphone.

 

TEK Training Services       Foundational training to individuals, professional teams, new tech transfer offices and government agencies to enhance their ability to commercialize university innovations.

 

These services provide the dual benefit of strengthening our IP supplier network, which we view as a competitive advantage, while generating service revenues to reduce our operating expenses. These services include our original Invention Discovery service, strengthened by two business and product acquisitions and the development of a new search App.

 

In 2018, the Group has continued systematic offering and geographical expansion, resulting in the increase in service revenue. The Group's investment in new markets, such as Latin American, as well as new offerings including university trainings and IE startup reports provides further growth opportunities. Tekcapital also recently added Michael S Rosen, an executive with relevant experience gathered in Fortune 500 companies, as Managing Director of Academic & Entrepreneurship Training to accelerate growth of our Latin America business. The Group's goal is to continue to expand its current services in Latin America and Europe. 

 

In addition to the above, the Group seeks to create value from its ability to identify and acquire promising new university IP, which management believes is ready to be commercialised. This is achieved through the establishment of portfolio companies coupled with the acquisition of the proprietary IP rights. Our goal as a business is to use our global university network, combined with our science advisory board, to acquire the rights to additional high value intellectual properties. Utilising these properties, we then seek to produce meaningful returns on invested capital that exceed our cost of capital.

 

Consistent with these objectives, our portfolio companies have developed materially during the reporting period.

We are sincerely appreciative of our dedicated, creative and hardworking team that is continuously striving to enhance the value of Tekcapital and thankful to our shareholders for their interest, patience and support.

Current Trading and Outlook

Having continued to develop and expand Tekcapital's existing business, the Board is confident that continued investment in growth and our portfolio companies remains the right strategy. Further, we believe that we are executing on our strategy and this is likely to result in further increases in returns on invested capital, and profitability in the future. Whilst it is clear that the Company is progressing well we anticipate fluctuations in our net asset values from period to period due to individual portfolio company performance, valuations and changes in market conditions and macro-economic financial conditions.

 

Because of the quickening pace of innovation, an increasing number of companies are making ever faster and more disruptive use of innovative ideas sourced exogenously. We believe this should result in increased service revenues in the future and enhancement of the combined value of our portfolio companies.

 

Dr Clifford M Gross 

 

 

Chairman and CEO

13 August 2018

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

For the six months ended 31 May 2018

 

 

Notes

Six months ended 31 May 2018

Six months ended 31 May 2017

Year ended 30 November

 2017

 

 

Unaudited

Unaudited

Audited

 

 

US$

US$

US$

 

Continuing Operations

 

 

 

 

Revenue from services

 

639,561

495,876

813,714

Revenue from products

 

-

139,453

139,453

Net unrealised profit on the revaluation of investments

8

638,852

2,944,193

6,083,225

Profit on derecognition of subsidiaries

 

-

226,656

226,656

Total Revenue

 

1,278,413

3,806,178

7,263,048

Cost of sales

 

(371,774)

(502,618)

(692,610)

Gross Profit

 

906,639

3,303,560

6,570,438

Administrative expenses

 

(800,643)

(1,748,764)

(2,417,284)

Operating Profit/(Loss)

 

105,996

1,554,796

4,153,154

Finance income

 

-

-

-

Gain/(Loss) before taxation

 

105,996

1,554,796

4,153,154

Income tax expense

5

(1,194)

(1,406)

(1,406)

Gain/(Loss) after taxation

 

104,802

1,553,390

4,151,748

 

 

 

 

 

Other comprehensive income/(loss)

 

 

 

 

Foreign exchange gain/(loss)

 

(51,796)

359,983

424,230

Total comprehensive income/(loss)

 

53,006

          1,913,373

4,575,978

 

Gain/(Loss) attributable to:

 

 

 

 

  Equity holders of the parent

 

104,802

1,785,585

4,487,533

  Non-controlling interests

 

-

(232,195)

(335,785)

 

 

104,802

1,553,390

4,151,748

Total comprehensive income/(loss) attributable to:

 

 

 

 

  Equity holders of the parent

 

53,006

2,041,863

4,808,059

  Non-controlling interests

 

-

(128,490)

(232,081)

 

 

53,006

1,913,373

4,575,978

 

 

 

 

 

Gain/(Loss) per share

6

 

 

 

Basic earnings per share

 

0.002

0.044

0.108

Diluted earnings per share

 

0.002

0.043

0.108

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

At 31 May 2018

 

 

Notes

As at 31

May 2018

As at 31

 May 2017

As at 30 November 2017

 

 

Unaudited

Unaudited

Audited

 

 

US$

US$

US$

 

 

 

 

 

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

7

838,769

841,727

838,769

Financial assets at fair value through profit and loss

8

8,411,856

4,148,349

7,307,696

Property, plant and equipment

 

41,435

4,624

6,005

 

 

9,292,060

4,994,700

8,152,470

Current Assets

 

 

 

 

Trade and other receivables

 

345,157

440,711

963,911

Inventory

 

-

-

-

Cash and cash equivalents

 

1,418,889

3,135,803

1,797,729

 

 

1,764,046

       3,576,514

2,761,640

 

 

 

 

 

Total Assets

 

11,056,106

8,571,214

10,914,110

 

 

 

 

 

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

309,575

595,808

237,649

Current income tax liabilities

 

500

500

500

Loans and borrowings

 

-

-

-

Total liabilities

 

310,075

596,308

238,149

 

Net Assets

 

 

10,746,031  

 

7,974,906  

 

10,675,961

Equity

 

 

 

 

Share capital

9

264,221

264,221

264,221

Share premium

9

9,271,098

9,271,098

9,271,098

Retained earnings

 

1,053,692

(1,704,982)

931,826

Translation reserve

 

229,189

216,738

280,985

Merger reserve

 

(72,169)

(72,169)

(72,169)

Total equity attributable to equity holders of the parent

 

10,746,031

7,974,906

10,675,961

Non-controlling interests

 

-

-

-

 

 

 

 

 

Total Equity and Liabilities

 

11,056,106

8,571,214

10,914,110

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

For the six months ended 31 May 2018

 

 

 

Attributable to equity holders of the parent

 

 

 

 

 

Share capital

Share Premium

Translation Reserve

Merger Reserve

Retained Earnings

Total

Non-controlling interest

Total Equity

 

 

US$

US$

US$

US$

US$

US$

US$

US$

Unaudited

 

 

 

 

 

 

 

 

 

Balance at 1 December 2017

 

264,221

9,271,098

280,985

(72,169)

931,826

10,675,961

-

10,675,961

Comprehensive income

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

-

-

-

104,802

104,802

-

104,802

Other comprehensive income

 

-

-

(51,796)

-

-

(51,796)

-

(51,796)

Share based payments

 

-

-

 -

-

17,064

17,064

-

17,064

Issue of ordinary shares

 

-

-

-

-

-

-

-

-

Warrants exercised

 

-

-

-

-

-

-

-

-

Balance at 31 May 2018

 

264,221

9,271,098

229,189

(72,169)

1,053,692

10,746,031

-

10,746,031

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 

 

 

 

 

 

 

Balance at 1 December 2016

 

228,052

6,377,383

(39,540)

(72,169)

(3,778,052)

2,715,674

421,400

3,137,074

Comprehensive income

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

-

-

-

1,785,585

1,785,585

(232,195)

1,553,390

Other comprehensive income

 

-

-

256,278

-

-

256,278

103,705

359,983

Share based payments

 

-

-

-

-

31,868

31,868

-

31,868

Issue of ordinary shares

 

34,879

2,814,385

-

-

-

2,849,264

-

2,849,264

Warrants exercised

 

1,290

79,330

-

-

-

80,620

-

80,620

New funds into non-controlling interest

 

-

-

-

-

-

-

323,300

323,300

(Loss)/Gain arising from change in non-controlling interest

 

-

-

-

-

255,617

255,617

(255,617)

-

Elimination of NCI as a result of change in the accounting policy

 

-

-

-

-

-

-

(360,593)

(360,593)

Balance at 31 May 2017

 

264,221

9,271,098

216,738

(72,169)

(1,704,982)

7,974,906

-

7,974,906

 

 

 

 

 

Share capital

Share Premium

Translation Reserve

Merger Reserve

Retained Earnings

Total

Non-controlling interest

Total Equity

 

Audited

 

US$

US$

US$

US$

US$

US$

US$

US$

Balance at 30 November 2016

 

228,052

6,377,383

(39,540)

(72,169)

(3,778,052)

2,715,674

421,400

3,137,074

Share issue

 

34,879

3,017,010

 

 

 

3,051,889

 

3,051,889

Cost of share issue

 

-

(202,625)

-

-

-

(202,625)

-

(202,625)

Gain/(loss) for the year

 

-

-

-

-

4,487,533

4,487,533

(335,785)

4,151,748

Other comprehensive income

 

-

-

320,525

-

-

320,525

103,705

424,230

Share based payments

 

-

-

-

-

70,318

70,318

-

70,318

Warrants exercised

 

1,290

79,330

-

-

-

80,620

-

80,620

New funds into non-controlling interest

 

-

-

-

-

-

-

323,300

323,300

Gain/(loss) arising from change in NCI

 

-

-

-

-

      152,026

152,026

(152,026)

-

Derecognition of NCI as a result of change in the accounting policy

 

-

-

-

                  -

-

(360,593)

(360,593)

Balance at 30 November 2017

 

9,271,098

280,985

(72,169)

931,826

10,675,961

-

10,675,961

 

 

Share capital represents the amount subscribed for share capital at nominal value.

 

Share premium represents the amount subscribed for share capital in excess of nominal value and net of any directly attributable issue costs.

 

The merger reserve arose on the share for share exchange undertaken by the Company with Tekcapital Europe Limited on 18 February 2014.

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

For the six months ended 31 May 2018

 

 

 

Group

 

 

Note

Six months

 ended

 31 May 2018

Six months ended

 31 May 2017

For the year ended

 30 Nov 2017

 

 

US $

US $

US $

Cash flows from operating activities

 

 

 

 

Cash used in operations

 

(345,397)

(1,363,134)

(2,739,179)

Taxation paid

 

(1,994)

(1,406)

(2,206)

 

 

 

 

 

Net cash used in operating activities

 

(347,391)

(1,364,540)

(2,741,385)

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Deemed disposal of subsidiary, net of cash acquired

 

-

(596,176)

(596,176)

Purchases of property, plant and equipment

 

(44,558)

(3,733)

(15,755)

Purchases of intangible assets

 

-

(43,132)

(43,277)

Interest received

 

-

-

-

 

 

 

 

 

Net cash used in investing activities

 

(44,558)

(643,041)

(655,208)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Proceeds from issuance of ordinary shares

 

-

3,051,889

3,051,889

Costs of raising finance

 

-

(202,625)

(202,625)

Proceeds from the exercise of warrants

 

-

80,620

80,620

Cash from non-controlling interest

 

-

323,300

323,300

 

 

 

 

 

Net cash from financing activities

 

-

3,253,184

3,253,184

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(391,950)

1,245,603

(143,410)

Cash and cash equivalents at beginning of year

 

    1,797,729

    1,839,603

1,839,603

Exchange gain/(loss) on cash and cash equivalents

 

                 13,110

50,597

(101,536)

 

 

 

 

 

Cash and cash equivalents at end of year

 

1,418,889

3,135,803

1,797,729

 

 

 

 

 

 

 

 

Notes to the financial information

 

1.    General information

Tekcapital PLC is a company incorporated in England and Wales and domiciled in the UK. The address of the registered office is 12 New Fetter Lane, London, United Kingdom, EC4A 1JP. The Company is a public limited company, which is listed on the AIM market of the London Stock Exchange in 2014.

 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

 

2.    Basis of preparation

The financial information for the six months ended 31 May 2018 set out in this interim financial information is unaudited and does not constitute statutory financial statements.

The interim condensed financial information has been presented in US Dollars ("$").

 

3.    Accounting policies

3.1 Statement of compliance

The accounting policies applied by the Group in these unaudited half year results are consistent with those applied in the annual financial statements for the year ended 30 November 2017.  

 

The 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 financial statements have been prepared under the historical cost convention.

 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4 of the FY 2017 accounts. The estimates have not changed since then other than addition of the new estimates related to valuation of Salarius Ltd as disclosed in Note 8, including relevant sensitivity analysis.

 

4.    Going concern

The Group meets its day to day working capital requirements through its service offerings, bank facilities and monies raised in follow-on offerings. The Group's forecasts and projections indicate that the Group has sufficient cash reserves to operate within the level of its current facilities, if the group forecasts are not achieved the Directors are confident that additional funds could be raised through equity issues if required. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.

 

The Company therefore continues to adopt the going concern basis in preparing both its consolidated financial statements and for its own financial statements.

 

5.    Taxation

Immaterial charge of $1,194 has arisen in the six-month period ended 31 May 2018 (31 May 2017: $1,406).

 

 

6.    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) Ordinary Shares to be issued assuming exercise of outstanding stock options with intrinsic value above $0 at 31 May 2018.

 

 

         Six months

   ended 31 May                                              2018

 Six months

ended 31 May 2017

Year ended 30 November 2017

 

US$

US$

US$

 

 

 

 

Profits/(Losses) attributable to equity holders of the Company

104,802

1,785,585

4,487,533

 

 

 

 

Weighted average number of Ordinary Shares in issue:

 

 

 

 

 

 

 

 

Basic

42,654,707

41,001,118

41,512,012

Diluted

42,654,707

41,264,580

41,718,262

 

 

 

 

Basic profit (loss) per share ($)

0.002

0.044

0.108

Diluted profit (loss) per share ($)

0.002

0.043

0.108

             

 

 

7.    Intangible Assets

 

               

 

Purchased intangible assets

 

 

Licenses

US $

Website development

US $

Vortechs

US $

Invention Evaluator

US $

 

Total

US $

Costs

 

 

 

 

 

At 1 December 2016

621,871

26,002

500,000

333,815

1,481,688

Additions

35,973

-

-

7,159

43,132

Disposals

(657,989)

 

 

 

(657,989)

At 31 May 2017                              

-

26,002

500,000

340,974

866,976

 

 

 

 

 

 

At 1 December 2016

621,871

26,002

500,000

333,815

1,481,688

Additions

36,118

-

-

7,159

43,277

Disposals

(657,989)

 

 

(2,205)

(660,194)

Exchange difference

-

2,119

-

-

2,119

 

 

 

 

 

 

At 30 November 2017

-

28,121

500,000

338,769

866,890

 

Additions

-

 

-

 

-

 

-

 

-

 

 

 

 

 

 

At 31 May 2018

-

28,121

500,000

338,769

866,890

 

 

 

 

 

 

Accumulated amortisation and impairment

 

 

 

 

 

At 1 December 2016

(51,781)

(20,149)

-

-

(71,930)

Amortisation for the period

(20,955)

(4,370)

-

-

(25,325)

De-recognition due to the change in the accounting policy 

72,736

 

-

 

-

 

-

 

72,736

Exchange difference

-

(730)

-

-

(730)

 

 

 

 

 

 

At 31 May 2017

-

(25,249)

-

-

(25,249)

 

 

 

 

 

 

As 1 December 2016

(51,781)

(20,149)

-

-

(71,930)

Amortisation for the period

(20,955)

(5,994)

-

-

(26,949)

Disposals

72,736

 

 

 

72,736

Foreign currency translation

-

(1,978)

-

-

(1,978)

 

 

 

 

 

 

At 30 November 2017

-

(28,121)

-

-

(28,121)

 

 

 

 

 

 

Amortisation for the period

-

-

-

-

-

De-recognition due to the change in the accounting policy 

-

-

-

-

-

Foreign currency translation

-

-

-

-

-

 

 

 

 

 

 

At 31 May 2018

-

(28,121)

-

-

(28,121)

 

 

 

 

 

 

Net book value

 

 

 

 

 

At 31 May 2017

-

753

500,000

340,974

841,727

 

 

 

 

 

 

At 30 November 2017

-

-

500,000

338,769

838,769

 

 

 

 

 

 

At 31 May 2018

-

-

500,000

338,769

838,769

 

 

 

 

 

 

8.    Financial Assets at Fair Value through Profit or Loss

 

Group's investments in portfolio companies are listed below and classified as equity instruments. The principal place of business for portfolio companies listed below is England and Wales.

 

 

 

 

 

 

 

 

31 May

2017

1 December 2017

Additions

Exchange difference

Fair value gain/(loss)

31 May 2018

 

                                                               

US $

US $

US $

US $

US $

US $

 

Lucyd Ltd

183,030

6,023,955

3,766

(11,617)

(1,339,359)

4,676,745

 

Belluscura Limited

3,676,123

981,762

460,090

(29,351)

(6,913)

1,405,588

 

Salarius Ltd

14,650

15,128

-

(253)

1,985,125

2,000,000

 

Non Invasive Glucose Tek Limited

24,657

24,199

-

(402)

-

23,797

 

Smart Food Tek Limited

47,365

44,167

320

(738)

-

43,749

 

eGravitas Limited

150,024

154,535

12,873

(2,390)

-

165,018

 

Frigidus Ltd

52,500

52,968

-

(766)

-

52,202

 

eSoma Limited

-

10,983

11,914

-

-

22,897

 

Guidant Limited

-

-

21,860

-

-

21,860

 

Total Balance                       

4,148,349

7,307,696

510,823

(45,517)

638,853

8,411,856

 

                         

 

The valuation techniques used fall under, Level 2 - Observable techniques, other than quoted prices, and Level 3- Other techniques as defined by IFRS 13. There has been no transfer between levels during the period. Fair value measurement hierarchy for financial assets as at 31 May 2018:

 

 

 

 

 

 

 

Date of Valuation

Total

Significant observable inputs (Level 2)

Significant unobservable inputs (Level 3)

 

 

US $

US $

US $

Salarius Ltd

31 May 2018

2,000,000

-

2,000,000

Belluscura Limited

31 May 2018

1,405,588

1,405,588

-

Lucyd and others

31 May 2018

5,006,268

-

5,006,268

Total Balance                                

 

8,411,856

1,405,588

7,006,268

 

 

Lucyd Ltd

In accordance with the Group's policy, fair value of Lucyd Limited as of 31 May 2018 was determined by an external, qualified valuation expert. The fair value of Lucyd Limited of $4.7m was determined based on valuation methodology used in the 30 November 2017 valuation and resulted in fair value loss of (US$1,339,359). This movement is attributed primarily due to volatility of crypto-currencies (Ethereum and Bitcoin) in which the Lucyd Pte is holding the majority of funds held.

 

Belluscura Ltd

During the reporting period, Belluscura plc completed a private funding round raising gross proceeds of US$1.33 million, by way of a placing (the Belluscura Placing) of a total of 7,388,179 new ordinary shares of £0.13p each (the Belluscura Placing Shares). Tekcapital has invested US$250,000 in the private placement and converted loans to Belluscura of US$210,090 to equity. Tekcapital also received a three- year warrant to purchase 1,273,078 new shares in Belluscura at £0.13p per share.

 

Considering Belluscura's valuation as of 30 November 2017 was based on the most recent funding round share price of £0.13p, no material adjustments to the fair value as of 31 May 2018 were made. Similarly, given the warrant was granted at £0.13p, the most recent placement price, the management considered the fair value of the warrant to be immaterial.

 

Salarius Ltd

Based on commercialisation advancements as of 31 May 2018, an external valuation of Salarius Ltd was prepared valuing Group's stake at US$2,000,000. The valuation was based on the IP and supported with  following assumptions:

 

·     The projected size of the sodium-reduction ingredient market in 2025. Future Market Insights, a substantial and respected market research firm, projects the global market for such ingredients to have revenue of US$1.8bn at that time. The US market is projected to be 32% of the global market, being US$562m. The snack food sector is projected to be 26.9% of the US market, being $151m.

·     The Salarius board's forecast assuming penetration of between 1% and 5% of that market by 2025, based on a number of factors:

o Microsalt is a unique product substantially in advance of alternative, developed, and tested in terms of market acceptability and ready to market;

o The protection given to the product by its US patent, which effectively gives Salarius a barrier to entry in the US for 11 more years;

o The strength and experience of the management team, whose proven expertise is in the exact areas required to bring the product to market and build the brand;

o There are no foreseeable manufacturing barriers in the commercialisation process. Manufacturing will be outsourced, and it can be clearly foreseen that this is deliverable;

o Other foreseeable challenges for management to deliver successful commercialisation appear to be well within the abilities of management to handle.

·     Salarius's forecast of its turnover in 2025 is US$1.51m. This is equivalent to the lowest end of the market penetration range quoted above, i.e. 1%.

·     A multiple of 2.8 has been applied to forecast 2025 turnover to give a valuation at that point of US$4.2m

·     The 2025 valuation of Salarius has then been discounted back to a present value using a conservative cost of capital of 10%. That discounted value is US$2.1m, which has been rounded down to US$2.0m.

·     The valuation of US$2.0m has been further validated by the share acquisition in July 2018, where as a result of conditions existing as of 31 May 2018, price of US$50,000 was agreed upon for the sale of 2.5% stake in Salarius, albeit a related party.

 

Given early stage of commercialisation, fair value of remaining portfolio companies was recorded based on the cost of acquired IP, as their carrying amounts represent a reasonable approximation of fair value.

 

Other investments (Nil Gain / Nil loss)

Under level 3 unobservable inputs. In the absence of observable inputs the directors have considered the entities own data to determine the fair value, which equates to the original funds invested. They do not consider that any other available information would materially change or give a more reliable representation of the value. 

 

This is the only category of financial instruments measured and re-measured at fair value.

 

Description of significant unobservable inputs to valuation:

 

The significant unobservable input used in the fair value measurements categorised within Level 3 of the fair value hierarchy, together with a quantitative sensitivity analysis as at 31 May 2018 are shown as below:

 

 

 

 

 

 

 

Valuation Technique

Significant unobservable input

Estimate applied

Sensitivity of the input to fair value

Lucyd

Net Asset

Discount to Treasury tokens

66%

10% increase to the discount factor would decrease the Lucyd valuation by $850,000, a 10% reduction in the discount factor would increase the Lucyd valuation by $850,000

 

 

Bonus Share

15%

A 10% increase to the bonus shares would decrease the Lucyd value by $340,000, a 10% decrease would increase the Lucyd value by $340,000.

Salarius

Market approach, revenue multiple

Revenue multiple

2.8

A 10% increase in the multiple would increase the Salarius value by $217,000, a decrease in the multiple by 10% would decreased the Salarius value by $217,000

 

 

Discount factor

10%

A 5% increase in the discount factor would decrease the Salarius value by $580,000, a 5% decrease in the discount factor would increase the value by $850,000

 

 

Market penetration %

1%

A 1% increase in the market penetration estimate would increase the Salarius valuation by $2,000,000, a 1% decrease in the market penetration estimate would decrease the value by $2,000,000.

 

No sensitivities have been included on the other investments as their fair value equate to cost.

 

9.    Share Capital

 

The Company's ordinary shares are of £0.004 par value.

 

All of the Company's issued ordinary shares have full voting, dividend and capital distribution (including winding up) rights; they do not confer any rights of redemption. The Company does not hold any ordinary shares in treasury. 

 

 

 

 

Issued and fully paid

 

Shares

Share capital

Share premium

 

 

 

Number

US$

US$

 

Ordinary shares of £0.004 each

 

 

 

 

 

 

 

 

 

 

 

At 1 December 2016

 

35,421,207

228,052

6,377,383

 

Shares issued in further public offering

 

6,968,500

34,879

2,814,385

 

Shares issued on exercise of warrants

 

265,000

1,290

79,330

 

 

 

 

 

 

 

As at 31 May 2017

 

42,654,707

264,221

9,271,098

 

 

 

 

 

 

 

At 1 December 2016

 

35,421,207

228,052

6,377,383

 

Shares issued in further public offering

 

6,968,500

34,879

2,814,385

 

Shares issued on exercise of warrants

 

265,000

1,290

79,330

 

 

 

 

 

 

 

As at 30 November 2017

 

42,654,707

264,221

9,271,098

 

 

 

 

 

 

 

Shares issued in further public offering

 

-

-

-

 

Shares issued on exercise of warrants

 

-

-

-

 

 

 

 

 

 

 

As at 31 May 2018

 

42,654,707

264,221

9,271,098

 

 

 

10.  Related party transactions

The Group has taken advantage of the exemption in IAS 24 "related parties" not to disclose transactions with other Group companies. During the period the Group did not employ any services of non-Group companies meeting the definition of related parties.

 

 

 

 

11.  Interim results

The interim results for the six months ended 31 May 2018 will not be sent to shareholders but will be available from the Company's website at http://tekcapital.com/investors/.

 

- Ends -

 

 

1 Excluding Belluscura's sales from products deconsolidated as of May 1, 2017 as a result of the recognition of Group's portfolio companies at fair value. 


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