TIDMALM
RNS Number : 2591B
Allied Minds PLC
30 September 2022
30 September 2022
Allied Minds plc
("Allied Minds", the "Group", or the "Company")
Half-Yearly Report for the six months ended 30 June 2022
Allied Minds plc (LSE: ALM), the IP commercialisation company
focused on early-stage company development within the technology
sector, announces its unaudited interim results for the six months
ended 30 June 2022.
Investment and Financial Highlights
-- $52.8 million invested in portfolio companies, of which $52.4
million was raised from third-party investors.
-- Cash and cash equivalents at 30 June 2022: $10.2 million
(FY21: $9.7 million), of which $10.1 million is held within Allied
Minds (FY21: $9 million).
Selected Portfolio Company Highlights
-- BridgeComm ("BCI") (consolidated subsidiary at 30 June 2022,
equity accounted investment after post period end transaction):
o Post period end, closed a $2 million Series B-2 financing that
provides a new ownership structure that will enable BridgeComm
('BCI') to qualify as a US company and bid for US Space Development
Agency business as a prime contractor.
o Revised structure, post period end, reduced Allied Minds'
fully-diluted ownership to 39.77% that sets up BCI to potentially
deliver substantial upside return.
o BCI's focus is now on commercialising its technology - which
will require approximately $40m and 18 months - and it is currently
seeking to raise $10m from interested investors.
o BCI is in the later stages of bidding on two contracts, either
of which could provide further funding of up to $30m.
o Allied Minds and Aeroequity Industrial Partners ("AEI") have
each committed an additional $1m of capital to BCI to finance its
activities during the capital raise period.
-- Federated Wireless ("Federated") (equity accounted investment):
o Federated closed a $72 million in Series D financing, giving
the business an increased post-money valuation of $302 million.
o Allied Minds' bridge financing fully converted following the
completion of the Series D funding rounds. As a result, Allied
Minds' fully--diluted ownership of the issued share capital of
Federated Wireless stands at 23.96%.
o Federated delivered H1 revenue growth in line and EBITDA and
cash generation ahead of expectations.
o Federated Wireless deployed its private wireless and shared
spectrum technology to deliver industry-first solutions across new
applications:
-- Collaborated with Blue White Robotics and Intel to build an
autonomous agriculture solution connected over a private wireless
network.
-- Partnered with CalChip Connect to deliver end-to-end
solutions and services to power plug-and-play decentralized 5G
networks.
o Post period Federated entered into a partnership agreement
with US Real Estate owner, JBG SMITH, demonstrating further ongoing
progress.
-- OcuTerra (ordinary and preference share holding investment held at fair value):
o Post period, OcuTerra commenced the Phase 2 trial of its
non-invasive eyedrops (OTT166), an important milestone in its
efforts to develop the first, topical eye drop treatment for
diabetic retinopathy.
o OcuTerra continued to strengthen its managerial and clinical
team with the appointment of eye care industry veteran, Majid
Andersi, MD, as Vice President of Clinical and Medical Affairs.
-- Orbital Sidekick ("OSK") (preference share holding investment held at fair value):
o Signed a contract with one of the largest pipeline operators
in North America - Energy Transfer - to deliver recurring
monitoring services from its satellites through 2023.
o Entered an agreement with In-Q-Tel to deliver timely and
relevant insights to IQT's government partners.
o Strong interest from a number of clients wishing to
participate in its alpha/beta launch of six satellites in 2023.
o Orbital Sidekick continues to have investor support and a bank
facility to allow it to continue operating until June 2023 with the
potential for additional follow-on funding.
-- Touch Bistro (ordinary share holding investment held at fair value)
o On 28 March 2022, Allied Minds announced that it had completed
the disposal of its residual shareholding in Touch Bistro for $5.5m
CAD ($4.4m USD) in line with its strategy of monetising its
investment portfolio.
o On 23 August 2022, the remainder of the shares held in escrow
were released, resulting in cash received of $0.53m CAD.
Corporate Developments
-- Reshaped the board following the departure of Harry Rein
(Non-Executive Chairman) and Mark Lerdal (Non-Executive Director);
Bruce Failing appointed Non-executive Chairman while Sam Dobbyn and
Casey McDonald joined as Non-Executive Directors.
-- Following a formal review of the Company's strategic options,
the Board has considered that a public listing is no longer in the
best interests of the Company due to the prohibitively high costs
relative to Allied Minds' current size. The Board is now formally
consulting with shareholders regarding a possible delisting of the
Company.
Bruce Failing, Chairman of Allied Minds, commented:
"Our core focus is to maximize returns for our shareholders by
supporting our portfolio companies while maintaining disciplined
cost control. Following a formal strategic review of the business,
the Board has concluded that the costs of maintaining a public
listing are prohibitively high for a company of Allied Minds'
current size and we are now consulting with shareholders ahead of a
proposed delisting.
"The board remains positive about the prospects of our portfolio
companies and their ability to meet their planned technical and
commercial goals. We continue to see financing secured (albeit
additional financing rounds will be required for BridgeComm and
Orbital Sidekick), new contracts signed and partnerships agreed
with industry leaders. Our portfolio continues to hold substantial
value, which we believe can be realized and returned to
shareholders within a timeframe of 18-24 months."
For further information, please contact:
Allied Minds plc c/o Instinctif Partners
Bruce Failing
Instinctif Partners (Communications)
Tim Linacre / Rozi Morris / Joe Quinlan alliedminds@instinctif.com
About Allied Minds
Allied Minds plc is an IP commercialisation company focused on
early stage company development within the technology sector. With
origination relationships that span US federal laboratories,
universities, and leading US corporations, Allied Minds
historically created, and now operates and funds, a portfolio of
companies to generate long-term value for its investors and
stakeholders. Based in Boston, Allied Minds supports its businesses
with capital, management, expertise and shared services. For more
information, please visit www.alliedminds.com .
Forward looking statements
This 2022 half-yearly report may contain statements that are or
may be forward-looking statements, including statements that relate
to the Company's future prospects, developments and strategies. The
Group considers any statements that are not historical facts as
"forward-looking statements". The forward-looking statements are
based on current expectations and are subject to known and unknown
risks and uncertainties that could cause actual results,
performance and achievements to differ materially from current
expectations, including, but not limited to, those risks and
uncertainties described in the risk management section of the 2021
Annual Report. These forward-looking statements are made in good
faith based on assumptions regarding the present and future
business strategies of the Company and the environment in which it
will operate in the future and such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information. Each forward-looking statement speaks
only as at the date of this half-yearly report release. Except as
required by law, regulatory requirement, the Listing Rules and the
Disclosure Guidance and Transparency Rules, neither the Company nor
any other party intends to update or revise these forward-looking
statements, whether as a result of new information, future events
or otherwise.
INTERIM MANAGEMENT REPORT
Overview
Allied Minds is an IP commercialisation company primarily
focused on early-stage company development within the technology
sector.
We have historically invested in companies at an early stage,
including seed investments to build companies based on a technical
breakthrough or invention. As such, our investments have
significant upside potential, but also carry significant risk
inherent in the early-stage model.
There are currently five portfolio investments based upon a
broad range of underlying innovative technologies ranging from
wireless connectivity to space-based imagery and analytics.
The Group remains focused to execute its plan to maximise the
value of its portfolio company interests and deliver well-timed,
risk-adjusted returns for its shareholders.
Model
As a manager of a technology-focused portfolio in which we hold
significant ownership positions, we seek to provide hands-on
support over the life of our companies to support their growth,
focusing on enabling and driving commercialisation, supporting
follow-on investment rounds, and positioning for superior
monetisation opportunities.
We seek to play an active role in developing the strategic
direction of our portfolio companies and driving ongoing planning
and assessment. Our Non-Executive Directors serve on the boards of
directors of our portfolio companies, working with them to develop
and implement strategic, operating and funding plans. Following the
recent changes to the board of Allied Minds, Bruce Failing
currently sits on the board of Federated Wireless, BridgeComm and
Orbital Sidekick. In addition, Sam Dobbyn has now been appointed
director of Federated Wireless alongside Mr. Failing, while Casey
McDonald is due to be appointed to the board of BridgeComm and Sam
Dobbyn is due to be appointed to the board of Orbital Sidekick.
We evaluate on an on-going basis the progress and potential of
each of the portfolio company's businesses and make strategic and
funding decisions based on the regular review of operational and
financial performance and the achievement of key milestones.
Together with our management, the respective portfolio company
boards of directors define the critical milestones, or inflection
points, for each portfolio company and measure tangible progress
towards commercialisation and the key factors for a successful
monetisation event.
Where appropriate, we seek to include partners who validate the
market opportunity and can provide support and/or commercial
commitments to accelerate, expand and/or de-risk the path to
commercialisation. Co-investors in later rounds include financial,
strategic and commercial partners.
Strategy
Allied Minds is focused on supporting its existing portfolio
companies and maximising monetisation opportunities for portfolio
company interests. In March 2022, the Company announced that it was
undertaking a formal strategic review, aimed at creating and / or
realising shareholder value. As part of this strategic review, the
Board has sought to ensure that the Company is being managed in as
cost-efficient manner as possible. In conducting this review, the
Board considers that the costs of maintaining a premium listing on
the Official List and the Main Market of the London Stock Exchange
prohibitively high relative to Allied Minds' current size and deem
maintaining a public listing is no longer in the best interests of
the Company and its Shareholders as a whole.
The Allied Minds Board is now formally consulting with
shareholders regarding a possible delisting of the Company. Should
the Board decide to proceed with a delisting, the Company will
publish a shareholder circular detailing the rationale for the
decision and giving notice of a General Meeting at which
shareholders will vote on a resolution to delist and will set out
the expected timetable for the delisting to become effective if the
resolution to delist is passed.
Outlook
There was good technical and commercial progress from certain
portfolio companies during the first half of 2022, including a
successful funding round at Federated Wireless at an improved
valuation. The milestones achieved demonstrate the innovative
nature of the products and services within the portfolio, which
address a range of large potential markets and provide a strong
platform for creating shareholder value.
The Board of Allied Minds continually assesses its portfolio of
investments and takes informed decisions supported by up-to-date
information. As part of this process, a member of the Allied Minds
board sits on the boards of all our material investments, and this
remains the case following the recent departure and appointment of
certain directors at Allied Minds.
Although Allied Minds' portfolio companies are mostly at a
relatively early stage in their lifecycle, the Board remains
positive about their prospects upon exit if the portfolio companies
continue to meet their planned technical and commercial goals.
Management continuously monitors and reviews international risks
such as economic headwinds, including inflationary pressures,
interest rates and component price increases, as well as changes in
political and regulatory requirements. The Directors have also put
in measures to mitigate against the risks to the business such as
the continued impact of COVID-19. The situation in Ukraine and
wider cost of living challenges will not affect Allied Minds from a
going concern perspective.
Portfolio Company Valuation
Of the Company's five active portfolio companies, the Company
holds a significant minority stake in three of these companies and
a small position in both OcuTerra and Concirrus. In each case,
where Allied Minds holds a significant minority stake, it is able
to exercise its influence over the portfolio company by virtue of
its large, albeit minority, ownership stake in the portfolio
company and its representation on the board of directors. The
investment in preferred stock in these portfolio companies is
accounted for under IFRS 9 and is classified by the Company as an
investment at fair value in the Company's consolidated financial
statements. Due to the equity-like characteristics of the Company's
common stockholdings in Federated Wireless, this investment is
accounted for under IAS 28 and is classified by the Company as
investments in associates. Accordingly, since Allied Minds has
significant influence over this entity through the voting rights
held, it gives access to the returns associated with an ownership
interest in this associate. For Ordinary stock holdings, where the
group does not have significant influence, these investments are
held at fair value in the Company's consolidated financial
statements.
Allied Minds provides qualitative and quantitative disclosure in
relation to the commercial and financial progress of its portfolio
companies, and directional commentary on valuation. In addition,
where commercially possible, Allied Minds provides, for each
portfolio company: (i) the date of the last equity funding round,
(ii) the post-money valuation of such round, (iii) the named key
co-investors in such round, and (iv) the Company's issued and
outstanding ownership (when provided by the portfolio company), and
fully-diluted ownership, of such portfolio company.
This information is set forth in the Portfolio Review and
Developments section below. The ownership interests are as of 9
September 2022. The fully-diluted percentages take into account
outstanding stock options granted to employees, directors and
advisors, current stock options available for grant pursuant to the
company's stock option plan, and outstanding warrants to purchase
common and preferred stock.
The post-money valuations disclosed for each entity below do not
represent IFRS 13 fair values but rather, are based on the
pre-money valuation set by the investors in the latest financing
round plus the total money raised in that round.
There can be no guarantee that the aforementioned post-money
valuations of the portfolio companies will be considered to be
correct in light of the future performance of the various
companies, or that the Company would be able to realise proceeds in
the amount of such valuations, or at all, in the event of a sale by
it of any of its portfolio companies or its ownership interest in
such portfolio companies.
Portfolio Review and Developments
----------
1) BridgeComm Inc. (BCI) (consolidated subsidiary at 30 June
2022, equity accounted investment after post period end
transaction)
BCI is developing high-speed optical wireless communications to
provide fast, secure, enterprise-grade broadband service for space,
terrestrial and 5G connectivity. It has created in the lab, and
demonstrated over 100 meters, high-capacity, secure, one-to-many
optical communications capabilities that may represent a paradigm
shift in the low earth orbiting satellite constellations
communications and battlefield communications. This technology
offers a potential low-cost alternative to laying fibre optic cable
in underserved and hard to reach cellular geographies.
As previously announced, in order to ensure BCI can bid for US
Space Development Agency business as a prime contractor, BCI could
not be majority owned by a foreign company. Allied Minds therefore
agreed to a new ownership structure with Aeroequity Industrial
Partners ("AEI"). Post the period end, in order to implement this
structure, $2 million of existing Allied Minds debt with BCI was
not converted. Allied Minds' fully diluted ownership prior to the
transaction was 62.92%.
Further, post period end, BCI closed a $2 million Series B-2
financing in which both AEI and Allied Minds invested $1 million
each (inclusive of previous bridge loans), in order for the company
to continue operations whilst it seeks to raise further funds from
interested investors. The result is Allied Minds' ownership being
39.77% on a fully diluted basis.
In addition to the restructuring enabling BCI to qualify as a US
company, BCI will also benefit from the significant US government
contacts and aerospace knowledge that AEI brings to the company.
Also, Boeing, a significant BCI customer is an investor through
Space X in AEI. Allied Minds believes that taking an economic
write-down now sets the company up for future success and the
potential for a significant total return.
BridgeComm now needs to commercialise its technology, which is
expected to cost approximately $40m and take approximately 18
months. BCI will seek to raise $10m from interested investors and
is in the later stages of bidding on two contracts. Either of those
contracts is capable of providing funding of up to $30m of the
required $40m through non-recurring engineering fees paid for by
the customer. In the meantime, Allied Minds and AEI have each
committed an additional $1m of capital to BCI to finance its
activities during the capital raise period.
While the process of going from the lab to a commercialised
product is uncertain, the economic upside for BCI and Allied Minds
could be substantial and as such we are optimistic for BCI's
success.
Holdings and valuation:
-- Date of Last Funding Round: September 2022
-- Post-Money Valuation: $11.5 million
-- Co-Investors: AE Industrial HorizonX Venture Fund I, LP
-- Allied Minds' Issued and Outstanding Ownership: 41.49%
-- Allied Minds' Fully-Diluted Ownership: 39.77%
2) Federated Wireless Inc. (Federated) ( equity accounted investment)
Founded in 2012, Federated is the market leader in Citizen Band
Radio Service (CBRS) shared spectrum. Shared spectrum, also known
as CBRS , is an innovative technology that delivers the best
attributes of traditional wireless and Wi-Fi, with lower fixed
cost, higher quality, and greater efficiency and scale.
As the first to market with a Spectrum Access System ("SAS"),
Federated Wireless is the nationwide leader in the United States in
enabling, commercialising, and driving adoption of shared spectrum.
With more than 350 customers and over 90,000 connected devices
across the United States and territories, the company serves a
customer base spanning defense, government, manufacturing,
telecommunications, utilities, real estate, and education, with a
wide range of use cases ranging from network densification and
mobile offload to private wireless and industrial IoT. Noteworthy
customers include Charter, Comcast, Verizon, the US Department of
Defense and Carnegie Mellon University.
Federated delivered an encouraging first half performance with
revenue growth in all segments. This led to revenues for the period
in line with the plan which underpinned the most recent fundraise
and valuation. Quarter on quarter growth was particularly
noteworthy with the second quarter being up 30% on the first. The
business delivered a gross margin on track for the year in first
half that was 7% ahead of plan, resulting in EBITDA and cash coming
out well ahead of expectations.
Federated Wireless entered a joint industry collaboration with
Blue White Robotics and Intel to automate agricultural solutions.
This first-of-a-kind implementation greatly reduces the barriers
for growers to adopt automation that can improve business outcomes
while addressing labour shortages. Partnering with a California
winery, the collaborators adapted existing farm equipment to
perform autonomous tasks and connected the fleet over a private
wireless network. Federated Wireless deployed a private wireless
network in less than three days which covered the vineyard's 2.1
square miles. The network leveraged Intel Smart Edge and an edge
server with a six-core Intel Xeon D-1528 processor to successfully
connect a mix of autonomous tractors, sensors and other data
points.
Federated Wireless also partnered with leading IoT distributor
CalChip Connect to deliver end-to-end solutions and services to
power plug-and-play decentralized 5G networks. The strategic
collaboration provides an end-to-end service for consumers and
small enterprises to rapidly implement a plug-and-play
decentralized 5G network solution that can be setup in as little as
20 minutes.
In H1 2022, Federated Wireless raised $72 million through a
two-stage Series D funding to fuel growth in 5G private wireless
and other strategic focuses. An affiliate of Cerberus Capital
Management, L.P. led the round, with affiliates of Fortress
Investment Group, Giantleap Capital, and LightShed Ventures added
as new investors with existing investors Allied Minds and GIC,
Singapore's sovereign wealth fund, also participating. The Series D
funding was completed at a pre-new-money valuation of $230 million,
resulting in a post-new-money valuation of $302 million, up from
the Series C post-money valuation of $215 million published in the
Allied Minds' Annual Report and Accounts for the year ended 31
December 2020. Allied Minds fully diluted ownership following this
transaction was 23.96%, reduced from 36.61%.
The Board of Federated expects continued growth over the second
half of the year. These expectations come with the usual risks
commensurate with high growth businesses of this nature.
Post period end, Federated entered into an Innovative Private
Wireless Partnership with JBG SMITH. JBG SMITH is an owner,
operator and investor in dynamic mixed-use Real Estate portfolios
in and around Washington DC. Whilst the partnership is unlikely to
contribute meaningfully to revenue, this a further endorsement of
the market opportunity for Federated and exemplifies the broad
range of possible customers for Federated.
Holdings and valuation:
-- Date of Last Funding Round: May 2022
-- Post-Money Valuation: $302 million
-- Co-Investors: Cerberus Capital Management LLP and GIC (Singapore's sovereign wealth fund)
-- Allied Minds' Issued and Outstanding Ownership: 27.04%
-- Allied Minds' Fully-Diluted Ownership: 23.96%
3) OcuTerra Therapeutics, Inc. (ordinary and preference share holding)
OcuTerra is a clinical stage ophthalmology company developing
innovative small molecule drugs for non-invasive use in treating
ophthalmologic diseases that are currently treated in the early
stages with a "watch and wait" protocol.
Following the completion of a $35 million Series B funding in
November 2021, the company commenced a Phase 2 trial in Q3 2022 of
its non-invasive eyedrops (OTT166) for use in early active
management of Diabetic Retinopathy. The trial is studying the
treatment of moderate to severe non-proliferative and mild
proliferative Diabetic Retinopathy, a disease that results in loss
of vision for diabetic patients.
Post period, in August 2022, OcuTerra announced the first
patient had been dosed in its Phase 2 DR:EAM (Diabetic Retinopathy:
Early Active Management) clinical trial. OTT166 is a novel small
molecule selective integrin inhibitor that is designed with purpose
engineering to have the required physiochemical characteristics to
be able to reach the retina from eye drop application.
OTT166 has been specifically designed to be administered as an
eye drop by the patient at home before diabetic retinopathy has
advanced to a vision-threatening complication, such as diabetic
macular edema. By potentially enabling earlier non-invasive
treatment, OcuTerra's goal is to prevent progression, thereby
delaying or completely eliminating the need for intravitreal
injections and/or destructive laser procedures.
Phase 1b clinical trials of OTT166 eye drops in patients with
diabetic retinopathy and wet AMD previously demonstrated safety,
tolerability and clear clinical evidence of biological activity. If
the Phase 2 trial is successful, the next step would be a Phase 3
trial involving more patients and if successful in meeting the
clinical end points application to the FDA for approval.
In line with the company's previously stated strategy to build
out its managerial and clinical team, OcuTerra appointed eye care
industry veteran Majid Anderesi, MD, as Vice President of Clinical
and Medical Affairs in April 2022.
Allied Minds is a minority shareholder in OcuTerra and as such
there is no current intention to invest any further capital in the
company.
Holdings and valuation:
-- Date of Last Funding Round: November 2021
-- Valuation: $51.3 million
-- Co-Investors: Various third parties
-- Allied Minds' Issued and Outstanding Ownership: 17.06%
-- Allied Minds' Fully-Diluted Ownership: 12.32%
4) Orbital Sidekick Inc. (OSK) (preference share holding)
OSK has developed a proprietary analytics platform based upon
its hyperspectral technology that allows it to take a proprietary
"chemical fingerprint" from space. Initially, OSK is addressing the
very current and large concerns about the environment by focusing
on potential energy pipeline failures. By employing its space-based
technology, it is able to detect and identify natural gas, oil
leaks and other failures much more rapidly than current monitoring
techniques in a more cost-effective way while helping to minimise
environmental damage.
In June 2022, the company signed a contract with one of the
largest pipeline operators in North America - Energy Transfer - to
deliver recurring monitoring services from its satellites through
2023. The company also signed a significant work program contract
with In-Q-Tel (IQT) to deliver timely and relevant insights to
IQT's government partners as part of a rapidly growing hybrid
architecture of technology solutions. Orbital expects to expand its
footprint within the defence & intelligence community in 2022
and beyond. In addition, the company is developing products for the
mining and agriculture industries, along with fire fuel and carbon
mapping capabilities.
As previously announced, OSK was seeking to raise $40m which it
had hoped to close in mid-2022. Although this was not achieved due
to extraneous market events, OSK continues to have investor support
and a bank facility to allow it to continue operating. The business
has strong interest from a number of clients wishing to participate
in its alpha/beta launch of six satellites in 2023. The current
third party investor group plans to invest an additional $4-$5
million in OSK. That coupled with a $5 million banking facility
will extend OSK's cash runway until June 2023. It is expected that
the launch of two additional satellites in the first half of 2023
will demonstrate OSK's hyperspectral data capability and position
the business for additional follow-on funding.
Holdings and valuation:
-- Date of Last Funding Round: April 2021
-- Post-Money Valuation: $46 million
-- Co-Investors: Temasek, Energy Innovation Capital and 11.2 Capital
-- Allied Minds' Issued and Outstanding Ownership in respect of preference shares: 26.29%
-- Allied Minds' Fully-Diluted Ownership: 23.84%
5) TouchBistro, Inc. (acquirer of TableUp, Inc.) (common shares in TouchBistro)
On 28 March 2022, Allied Minds announced that it had completed
the disposal of its residual shareholding in Touch Bistro for $5.5m
CAD ($4.4m USD) in line with its strategy of monetising its
investment portfolio. All of the sale proceeds had been received as
of 23 August 2022 when the remaining shares held in escrow were
released.
6) Concirrus Limited (acquirer of Spark Insights, Inc) (preferred share investment)
On 29 October 2021, Allied Minds Plc has disposed of its
portfolio company, Spark Insights, Inc. to Concirrus, a private
UK-based insurance technology company in which Concirrus acquired
100% of the shares of Spark in exchange for the issuance of
Concirrus' Series A1 preferred shares. Allied Minds' ownership
percentage in Concirrus is 0.98% at 30 June 2022.
Risk Management
The principal risks and uncertainties surrounding Allied Minds
and its portfolio companies are set out in detail on pages 19 to 25
in the Risk Management section of the Strategic Report included in
the 2021 Annual Report and Accounts. Such risks and uncertainties
include those in connection with science and technology development
or commercialisation failures; lack of profitability; inherent
limitations on exclusive licenses with US universities and other
federally-funded research institutions; regulatory restrictions and
limitations; loss of key senior management risk; termination of
critical IP licenses; the Company being deemed to be an investment
company; inability to generate sufficient revenue, attract
investment or generate liquidity events; lack of capital; Ukraine
conflict; and COVID-19, all as further described in the 2021 Annual
Report and Accounts.
There have not been any significant changes in the nature of the
risks set forth therein that will affect the next six months of the
financial year, therefore, such risks are applicable to the
remaining six months of the financial year. A copy of the 2021
Annual Report and Accounts is available on the Company's website at
http://www.alliedminds.com/investor/.
Financial Review
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited
For the six months ended: 30 June 2022 30 June 2021
$'000 $'000
----------------------------------------------------------------------- -------------- --------------
Revenue 1,531 219
Cost of revenue (513) (119)
Selling, general and administrative expenses (3,889) (6,344)
Research and development expenses (1,038) (1,514)
Finance cost, net (3,088) (3,733)
Loss on investments held at fair value (101) (1,887)
Gain on deconsolidation of subsidiary - 14,209
Share of net loss of associates accounted for using the equity method - (2,362)
Loss for the period (7,098) (1,531)
Other comprehensive loss, net of tax (162) (206)
-------------- --------------
Total comprehensive loss (7,260) (1,737)
============== ==============
Revenue increased by $1.3 million, to $1.5 million for the six
months ended 30 June 2022 (HY21: $0.2 million), when compared to
the same period in the prior year. This increase is primarily
attributable to revenue from existing and new contracts entered in
2022 at BridgeComm of $1.5 million. Cost of revenue at $0.5 million
for the six months ended 30 June 2022 (HY21: $0.1 million) was
lower as a percentage of revenue, when compared to the same period
in the prior year, mainly due to the nature of the revenue being
delivered.
Selling, general and administrative (SG&A) expenses
decreased by $2.4 million, to $3.9 million for the six months ended
30 June 2022 (HY21: $6.3 million). This reduction was mainly due to
the deconsolidation of a subsidiary, OcuTerra, resulting in $1.6
million change in SG&A expenses in the first half of 2021. The
remainder of the decrease reflects a reduction in SG&A expenses
at corporate level of $0.6 million when compared to same period
last year. Out of the $3.9 million in total SG&A expenses, $2.8
million represent the Company's corporate expenses as of 30 June
2022.
Research and development (R&D) expenses decreased by $0.5
million, to $1.0 million for the six months ended 30 June 2022
(HY21: $1.5 million). The decrease was primarily due to the
deconsolidation of a subsidiary, OcuTerra, in the first half of
2021. The remainder of the decrease reflects the net effect from
R&D spend at the other subsidiaries.
Net finance cost decreased to $3.1 million (HY21: finance cost
of $3.7 million ). The net cost reflects the impact from the fair
value adjustment of $3.2 million of a convertible note payable at
30 June 2022 as well as interest expense, net of interest income,
of $0.2 million. This was offset by the $0.3 million decrease of
the subsidiary preferred shares liability balance at BridgeComm as
a result of IFRS 9 fair value accounting.
Loss on investments decreased to $0.1 million (HY21: gain of
$10.0 million) reflecting $0.1 million in loss on investments held
at fair value.
As a result of the above discussed factors, total comprehensive
loss for the year increased by $5.6 million to $7.3 million for the
six months ended 30 June 2022 (HY21: comprehensive income of $1.7
million).
Condensed Consolidated Statement of Financial Position
Unaudited Audited
As of the period ended: 30 June 2022 31 December 2021
$'000 $'000
------------------------------------ -------------- ------------------
Non-current assets 34,958 35,229
Current assets 17,294 20,672
-------------- ------------------
Total assets 52,252 55,901
============== ==================
Non-current liabilities - 213
Current liabilities 14,902 11,033
Equity 37,350 44,655
Total liabilities and equity 52,252 55,901
============== ==================
Significant performance-impacting events and business
developments reflected in the Group's financial position at the
half year end include:
Non-current assets decreased by $0.2 million, to $35.0 million
at 30 June 2022 (FY21: $35.2 million), due $0.2 million reduction
in property and equipment.
o Investments at fair value represent $34.0 million as of 30
June 2022 (FY21: 34.0 million). Movements in the period reflects
the income of $0.1 million of the fair value accounting for other
investments held at fair value and recognition of $4.2 million in
investment as a result of the latest financing round at Federated
Wireless. This was offset by $4.3 million reduction in investments
as a result of the disposal of TouchBistro with the remaining
shares held in an escrow worth $0.4 million being reclassed to
current assets due to the nature of this balance.
Current assets decreased by $3.4 million, to $17.3 million as of
30 June 2022 (FY21: $20.7 million), mainly due to a reduction in
other financial assets of $4.5 million.
o Cash and cash equivalents increased by $0.5 million to $10.2
million at 30 June 2022 from $9.7 million at 31 December 2021. The
increase is mainly attributed to $2.9 million of net cash used in
operations, $3.9 million cash from in investing activities and $0.5
million cash used in financing activities.
o Trade and other receivables increased by $0.6 million due to
an increase in trade receivables of $0.2 million and an increase in
prepaid expenses of $0.4 million mainly from advanced payments for
unfinished inventory units at BridgeComm.
o Other financial assets have decreased by $4.5 million to $0.6
million (FY21: $5.1 million) primarily due to the conversion of
Federated Wireless's SAFE of $4.3 million into preferred shares
upon the closing of the Series D funding and a loss of $0.2 million
of the fair value accounting for the note recorded prior to
conversion.
Non-current liabilities decreased by $0.2 million, to $nil as of
30 June 2022 (FY21: $0.2 million) mainly reflecting a decrease of
$0.2 million in lease liability at 30 June 2022.
Current liabilities increased by $3.9 million, to $14.9 million
at 30 June 2022 (FY21: $11.0 million). The increase mainly reflects
an increase in loans of $3.7 million, $0.4 million increase in
trade and other payables and deferred revenue of $0.3 million. The
increase in loans primarily reflects the issuance of $0.4 million
in additional convertible notes to BridgeComm. The increase was
offset by the combination of a fair value adjustment of $0.3
million in the subsidiary preferred shares liability and a $0.2
million reduction in current lease liability.
Net equity decreased by $7.3 million to $37.4 million at 30 June
2022 (FY21: $44.7 million) mainly reflecting the combination of
comprehensive loss for the period of $7.2 million and $0.1 million
charge due to equity-settled share based payments.
Condensed Consolidated Statement of Cash Flows
Unaudited Unaudited
For the six months ended: 30 June 2022 30 June 2021
$'000 $'000
--------------------------------------------------------- -------------- --------------
Net cash outflow from operating activities (3,267) (6,286)
Net cash inflow/(outflow) from investing activities 3,864 (14,265)
Net cash (outflow)/inflow from financing activities (99) 14,120
Net increase/(decrease) in cash and cash equivalents 498 (6,431)
Cash and cash equivalents at beginning of period 9,710 24,489
-------------- --------------
Cash and cash equivalents at end of the period 10,208 18,058
============== ==============
The Group's net cash outflow from operating activities of $3.3
million in the six months ended 30 June 2022 (HY21: $6.3 million)
was primarily due to the net operating losses for the period of
$7.1 million (HY21: loss of $1.5 million). The operating cash
outflow was offset by an increase in working capital of $0.6
million (HY21: $1.1 million), other finance costs of $2.8 million
(HY21: $3.4 million) and the combination of adjustments for
non-cash accounting entries such as depreciation, amortisation,
loss on investments held at fair value and share-based expenses of
$0.4 million (HY21: $9.2 million).
The Group had a net cash inflow from investing activities of
$3.9 million in the six months ended 30 June 2022 (HY21: net cash
outflow of $14.3 million). This inflow was predominately related to
the $3.9 million proceeds from sale of TouchBistro's
investment.
The Group's net cash outflow provided by financing activities of
$0.1 million in the six months ended 30 June 2022 (HY21: net cash
inflow $ 14.1 million) reflects $0.5 million in lease payments
offset by $0.4 million in proceeds from issuance of convertible
notes at BridgeComm.
The Group's strategy is to manage its cash balance to focus
exclusively on supporting its existing portfolio companies, noting
any commitments are determined based on current facts and
commitments on a case by case basis and maximising monetisation
opportunities for such companies. To further minimise its exposure
to risks the Group does not maintain any material borrowings or
cash balances in foreign currency .
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited
For the six months ended: Note 30 June 2022 30 June 2021
$'000 $'000
------------------------------------------------------------------------- ----- -------------- --------------
Revenue 2 1,531 219
Operating expenses:
Cost of revenue (513) (119)
Selling, general and administrative expenses (3,889) (6,344)
Research and development expenses (1,038) (1,514)
Operating loss (3,909) (7,758)
Other (loss)/income:
Loss on investments held at fair value 4,11 (101) (1,887)
Gain on deconsolidation of subsidiary - 14,209
-------------- --------------
Other (loss)/income (101) 12,322
Finance income 13 27
Finance cost (158) (153)
Finance cost from IFRS 9 fair value accounting 9,11 (2,943) (3,607)
Finance cost, net (3,088) (3,733)
Share of net loss of associates accounted for using the equity method 4 - (2,362)
Loss before tax (7,098) (1,531)
Taxation - -
Loss for the period 3 (7,098) (1,531)
Other comprehensive loss:
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences (162) (206)
Other comprehensive loss, net of taxation (162) (206)
-------------- --------------
Total comprehensive loss (7,260) (1,737)
-------------- --------------
(Loss)/ Income attributable to:
Equity holders of the parent (7,096) 1,957
Non-controlling interests 7 (2) (3,488)
(7,098) (1,531)
-------------- --------------
Total comprehensive (loss)/ income attributable to:
Equity holders of the parent (7,258) 1,751
Non-controlling interests 7 (2) (3,488)
(7,260) (1,737)
============== ==============
(Loss)/ Income per share $ $
Basic 5 (0.03) 0.01
-------------- --------------
Diluted 5 (0.03) 0.01
-------------- --------------
Condensed Consolidated Statement of Financial Position
Unaudited Audited
As of the period ended: Note 30 June 2022 31 December 2021
$'000 $'000
---------------------------------------------- ----- -------------- ------------------
Non-current assets
Property and equipment 623 787
Investments at fair value 4 33,990 33,984
Right-of-use assets 8 302 414
Other financial assets 11 43 44
Total non-current assets 34,958 35,229
-------------- ------------------
Current assets
Cash and cash equivalents 11 10,208 9,710
Trade and other receivables 11 6,488 5,912
Other financial assets 11 598 5,050
-------------- ------------------
Total current assets 17,294 20,672
-------------- ------------------
Total assets 52,252 55,901
============== ==================
Equity
Share capital 6 3,767 3,767
Treasury shares 6 (738) (738)
Translation reserve 6 1,140 1,302
Accumulated earnings 6 33,043 40,156
-------------- ------------------
Equity attributable to owners of the Company 6 37,212 44,487
Non-controlling interests 7 138 168
-------------- ------------------
Total equity 37,350 44,655
-------------- ------------------
Non-current liabilities
Lease liability 8 - 213
Total non-current liabilities - 213
-------------- ------------------
Current liabilities
Trade and other payables 11 1,443 1,061
Deferred revenue 5,293 4,948
Loans 11 6,824 3,109
Preferred shares 9 951 1,255
Lease liability 8 391 660
-------------- ------------------
Total current liabilities 14,902 11,033
-------------- ------------------
Total liabilities 14,902 11,246
Total equity and liabilities 52,252 55,901
============== ==================
Condensed Consolidated Statement of Changes in Equity
Note Share capital Treasury shares Translation Accumulated Total Non-controlling Total
reserve (Deficit)/ parent interests equity
$' 000 Earnings equity $' 000 $' 000
$' 000 $' 000
----------------------- --------------------- ------------ ------------ --------- ---------------- ---------
Shares Amount Shares Amount
$' 000 $' 000
-------- ------- ------- ------------ ------------ --------- ---------------- ---------
Audited Balance at
31 December 2020 242,187,985 3,767 - - 1,343 55,440 60,550 (2,264) 58,286
Total comprehensive -
income/(loss) for
the period
Loss from continuing
operations - - - - - 1,957 1,957 (3,488) (1,531)
Foreign currency
translation - - - - (206) - (206) - (206)
------------ ------------ --------- ---------------- -----------
Total comprehensive
income/(loss) for
the period - - - - (206) 1,957 1,751 (3,488) (1,737)
Loss arising from
change in
non-controlling
interest 7 - - - - - - - (38) (38)
Repurchase of ordinary
shares 6 - - (730) (181) - - (181) - (181)
Deconsolidation of
subsidiary 4 - - - - - - - 2,421 2,421
Equity-settled share
based payments 10 - - - - - 203 203 18 221
------------ -------- ----------- ----------- ------------ ------------ --------- ---------------- -----------
Unaudited Balance
at 30 June 2021 242,187,985 3,767 (730) (181) 1,137 57,600 62,323 (3,351) 58,972
------------ -------- ----------- ----------- ------------ ------------ --------- ---------------- -----------
Total comprehensive
loss for the year
Loss from continuing
operations - - - - - (15,534) (15,534) (710) (16,244)
Foreign currency
translation - - - - (41) - (41) - (41)
------------ ------------ --------- ---------------- -----------
Total comprehensive
loss for the year - - - - (41) (15,534) (15,575) (710) (16,285)
Issuance of ordinary
shares 5 - - - - - - - (96) (96)
Loss arising from
change in
non-controlling
interest 7 - - (2,538) (738) - - (738) - (738)
Deconsolidation of
subsidiary 4 - - - - - - - 3,207 3,207
Equity-settled share
based payments 10 - - - - - 250 250 31 281
------------ -------- ----------- ----------- ------------ ------------ --------- ---------------- -----------
Audited Balance at
31 December 2021 242,187,985 3,767 (2,538) (738) 1,302 40,156 44,487 168 44,655
------------ -------- ----------- ----------- ------------ ------------ --------- ---------------- -----------
Total comprehensive
loss for the period
Loss from continuing
operations - - - - - (7,096) (7,096) (2) (7,098)
Foreign currency
translation - - - - (162) - (162) - (162)
------------ ------------ --------- ---------------- -----------
Total comprehensive
loss for the period - - - - (162) (7,096) (7,258) (2) (7,260)
Equity-settled share
based payments 10 - - - - - (17) (17) (28) (45)
------------ -------- ----------- ----------- ------------ ------------ --------- ---------------- -----------
Unaudited Balance
at 30 June 2022 242,187,985 3,767 (2,538) (738) 1,140 33,043 37,212 138 37,350
============ ======== =========== =========== ============ ============ ========= ================ ===========
Condensed Consolidated Statement of Cash Flows
Unaudited Unaudited
For the six months ended: Note 30 June 2022 30 June 2021
$'000 $'000
---------------------------------------------------------------------------- ------ -------------- --------------
Cash flows from operating activities:
Loss for the period (7,098) (1,531)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 324 495
Share-based compensation (reversal)/ expense 10 (45) 221
Loss on investments held at fair value 4,11 101 1,887
Gain on deconsolidation of subsidiary 4 _ (14,209)
Share of net loss of associate 4 _ 2,362
Changes in working capital:
(Increase)/ decrease in trade and other receivables (576) 727
Decrease in other assets 435 347
Increase in accrued expenses 49 148
Increase/(decrease) in accounts payables 334 (831)
Increase in deferred revenue 345 455
Increase in other liabilities 83 242
Unrealised gain on foreign currency transactions (162) (206)
Other finance cost 9,11 2,943 3,607
Net cash used in operating activities (3,267) (6,286)
-------------- --------------
Cash flows from investing activities:
Purchases of property and equipment, net of disposals (48) (27)
Receipt of payment for finance sub-lease 8 8 78
Proceeds from sale of investments at fair value 4 3,904 _
Purchases of investments at fair value 4 _ (1,000)
Cash derecognised upon loss of control over subsidiary 4 _ (13,316)
Net cash provided by/ (used in) investing activities 3,864 (14,265)
-------------- --------------
Cash flows from financing activities:
Proceeds from issuance of convertible notes 400 _
Receipt of PPP loan _ 257
Payment of lease liability 8 (499) (565)
Payments to repurchase ordinary shares 9 _ (181)
Proceeds from issuance of preferred shares in subsidiaries _ 14,609
-------------- --------------
Net cash (used in)/ provided by financing activities (99) 14,120
-------------- --------------
Net increase/ (decrease) in cash and cash equivalents 498 (6,431)
Cash and cash equivalents at beginning of period 9,710 24,489
-------------- --------------
Cash and cash equivalents at end of period 10,208 18,058
============== ==============
Notes to the Condensed Consolidated Interim Financial
Statements
1. General information
a) Reporting entity
Allied Minds Group comprises of Allied Minds plc and its
subsidiaries ("Allied Minds", the "Group" or the "Company"). The
Company is publicly listed on the Main Market of the London Stock
Exchange ("LSE"). Allied Minds plc is engaged in the development of
various technologies for commercial applications. As of 30 June
2022, Allied Minds Group comprised of three legal subsidiaries,
which included one active portfolio company that is currently
majority owned and controlled, and therefore fully consolidated in
the Company's consolidated financial statements prepared in
accordance with UK adopted international accounting standards
("IFRS"). Additionally, the Company holds a minority stake in four
other portfolio companies. For the majority of the portfolio
companies, Allied Minds is able to exercise influence by virtue of
its large, albeit minority, ownership stake in the portfolio
company and its representation on the board of directors.
Certain portfolio companies have entered into agreements with
universities, scientists, and US federal research institutions to
develop and commercialise products. In exchange for licenses, time,
and expertise already provided, certain universities and/or
scientists received an equity ownership in such companies. The cash
contributed by Allied Minds is used to fund additional research and
to create a management structure and operations.
b) Basis of preparation
This condensed consolidated unaudited interim financial report
for the half-year reporting period ended 30 June 2022 has been
prepared in accordance with the UK-adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
The interim report does not include all of the notes of the type
normally included in an annual financial report. Accordingly, this
report is to be read in conjunction with the annual report for the
year ended 31 December 2021, which has been prepared in accordance
with UK Adopted International accounting standards.
These condensed unaudited interim financial statements do not
comprise statutory accounts within the meaning of section 434 (3)
of the Companies Act 2006. Statutory accounts for the year ended 31
December 2021 were approved by the board of directors and delivered
to the Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498 (2) -
(3) of the Companies Act 2006.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control and
continue to be consolidated until the date when such control
ceases. The financial information of the subsidiaries is prepared
for the same reporting period as the parent Company, using
consistent accounting policies. All intra-group balances,
transactions, unrealised gains and losses resulting from
intra-group transactions and dividends are eliminated in full.
Investments in associates where it is demonstrated that the
Group exercises significant influence over the entity are equity
accounted in line with IAS 28.
Non-controlling interests ("NCI") are measured at their
proportionate share of the acquiree's identifiable net assets at
the acquisition date. Changes in the Group's interest in a
subsidiary that do not result in a loss of control are accounted
for as equity transactions.
When the Group loses control over a subsidiary, it derecognises
the assets and liabilities of the subsidiary, and any related NCI
and other components of equity. Any resulting gain or loss is
recognised in profit or loss. Any interest retained in the former
subsidiary is measured at fair value when control is lost.
The financial information presented in these half-yearly results
has been prepared under the historical cost convention. The
presentational currency adopted by Allied Minds is US Dollar ('$')
as this is the functional currency all of the entities in the Group
except for the parent company, Allied Minds Plc, which has a
Sterling ('GBP') functional currency. In preparing these interim
financial statements, management has made judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
The significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the consolidated
financial information included in the Group annual report and
accounts as at and for the year ended 31 December 2021.
The Directors have taken proactive cost management measures that
include reduction in expenses of the management function of the
head office at the parent level. They have also decided to focus
exclusively on supporting the five existing portfolio companies,
albeit do not make or have and enforceable financial or working
capital commitments, and maximising monetisation opportunities for
portfolio company interests, and not to deploy any capital into any
new portfolio companies. In the event of successful monetisation
events from the sale of portfolio companies or portfolio company
interests, the Directors anticipate distributing the net proceeds
to shareholders, after due consideration of potential follow-on
investment opportunities within the existing portfolio and working
capital requirements. The Directors expect this strategy to take at
least two years to be fully implemented, and as a matter of good
governance, will continue to keep this strategy under review at
appropriate intervals. They have prepared trading and cash flow
forecasts for the parent through 2025. Reflecting this revised
strategy, although the Group is currently loss making and is likely
to continue to be so, at least in the short term, after making
enquiries and considering the impact of risks and opportunities on
expected cash flows, and given the fact that the Group has $10.2
million of available funds in the form of cash and cash equivalents
as at 30 June 2022, that any commitments to subsidiary and investee
companies are determined based on real time facts and circumstances
and on a case by case basis, the Directors have a reasonable
expectation that the Group has adequate cash to continue in
operational existence for a period of not less than 12 months from
the date of approval of the interim financial statements.
Furthermore, the directors have considered the timeline of when it
plans to dispose of, divest or reinvest in its portfolio companies
and there is no intention to cease trading or liquidate the
business for the period under the going concern review. For this
reason, they have adopted the going concern basis in preparing
these half-yearly results.
Though the majority of the Company's operations are in the
United States and the functional currency of the group's
investments are U.S. dollar, whilst the parent company has a
functional currency of GBP. Allied Minds is based in the United
Kingdom and therefore susceptible to various international risks
such as economic headwinds, including inflationary pressure,
interest rates and component price increases, as well as changes in
political and regulatory requirements. These risks are continuously
monitored and reviewed by management. The Group cannot predict all
future events or conditions, however, the directors have concluded
that there are no material uncertainties that could cast
significant doubt over the ability of the Group to continue as a
going concern for at least the going concern period as assessed
above and the Company's existing measures are sufficient to
mitigate the inherent risks to its business model.
The Directors have also put in measures to mitigate against the
risks to the business such as the continued impact of COVID-19. The
situation in Ukraine and wider cost of living challenges will not
affect Allied Minds from a going concern perspective.
The condensed consolidated financial statements are not audited
and the results for the six months ended 30 June 2022 are not
necessarily indicative of results for future operating periods.
Certain financial information has been extracted from the annual
report and accounts as at and for the period ended 31 December 2021
and has been included for comparative purposes in this half-yearly
report.
These interim financial statements are unaudited and were
approved by the Board of Directors and authorised for issue on 29
September 2022 and are available on the Company's website at
www.alliedminds.com under "Investors - Reports and
Presentations".
c) Accounting policies
Except as described below, the accounting policies applied by
the Group in these half-yearly results are the same as those which
formed the basis of the 2021 Annual Report and Accounts, with the
exception of the new standards the Group adopted as of 1 January
2022, included below.
The changes in accounting policies are also expected to be
reflected in the Group's consolidated financial statements as of
and for the year ending 31 December 2022.
Newly adopted standards
The following are amended or new standards and interpretations
that may impact the Group. The Group is finalising the required
disclosures, which includes an assessment of the impact of the new
guidance on our financial position and results of operations. The
adoption of the proposed changes is not expected to have a material
effect on the financial statements unless otherwise indicated:
Effective date New standards or amendments
1 January 2022 Onerous contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
-------------------------------------------------------------------------------------------
References to Conceptual Framework (Amendments to IFRS 3)
-------------------------------------------------------------------------------------------
Property, Plant and Equipment: Proceeds before Intended Use (amendments to IAS16
-------------------------------------------------------------------------------------------
Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and
IAS 41)
-------------------------------------------------------------------------------------------
Standards issued not yet effective
Other new standards and interpretations yet to be adopted, for
which the Company does not expect to have a material impact on its
financial statements include:
1 January 2023 IFRS 17 Insurance Contracts
1 January 2023 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
---------------------------------------------------------------------------------------------
1 January 2023 Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
---------------------------------------------------------------------------------------------
1 January 2023 Definition of Accounting Estimates (Amendments to IAS 8)
---------------------------------------------------------------------------------------------
1 January 2023 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments
to IAS 12)
---------------------------------------------------------------------------------------------
2. Revenue
Revenue recorded in the statement of comprehensive loss consists
of the following:
Unaudited
30 June Unaudited
For the period ended: 2022 30 June 2021
$'000 $'000
---------- --------------
Service revenue 1,531 219
Total revenue in consolidated statement
of income/(loss) 1,531 219
========== ==============
Revenue is measured based on the consideration specified in a
contract with a customer. The Group recognises revenue when it
transfers control over a good or service to a customer. The Group
disaggregates contract revenue based on the transfer of control of
the underlying performance obligations and for both accounting
period the performance obligation has been satisfied over time for
all revenue.
3. Operating segments
a) Basis for segmentation
For management purposes, the Group's principal operations are
organised in three reportable segments:
(i) Early stage companies - subsidiary businesses that are in
the early stage of their lifecycle characterised by incubation,
research and development activities; and
(ii) Later stage companies - subsidiary businesses that have
substantially advanced with or completed their research and
development activities, are closer in their lifecycle to
commercialisation, and/or have a potential of realising material
return on investment through a future liquidity event;
(iii) Minority holdings companies reflect the activity related
to portfolio companies other than consolidated subsidiary
businesses where the Group has made a minority investment and does
not control or exercise joint control over the financial and
operating policies of those entities. This segment will only
include the results of entities which were deconsolidated during
the accounting period. No subsidiaries were deconsolidated in the
first half of 2022. As of 30 June 2021, this operating segment
included OcuTerra Therapeutics, Inc. profit and loss for the period
up to deconsolidation on 27 April 2021.
The Group's chief operating decision maker ("CODM") reviews
internal management reports on these operating segments at least
quarterly in order to make decisions about resources to be
allocated to the segment and to assess its performance.
Other operations include the management function of the head
office at the parent level of Allied Minds.
b) Information about reportable segments
The following provides detailed information of the Group's
reportable segments:
For the six months ended 30 June
2022:
$'000
-------------------------------------------------
Later Other Consolidated
Stage Operations
------- --------- -----------
Statement of Comprehensive Loss
Revenue 1,531 1,531 1,531 _ 1,531
Cost of revenue (513) (513) _ (513)
Selling, general and administrative
expenses (1,058) (2,831) (3,889)
Research and development expenses (1,038) _ (1,038)
Other income 298 (399) (101)
Finance income/(cost), net 866 (3,954) (3,088)
Income/(Loss) for the period 86 (7,184) (7,098)
Other comprehensive income/(loss) _ (162) (162)
Total comprehensive income/((loss) 86 (7,346) (7,260)
========= =============== =============
Total comprehensive income
attributable to:
Equity holders of the parent 88 (7,346) (7,258)
Non-controlling interests (2) _ (2)
Total comprehensive income/ (loss) 86 (7,346) (7,260)
========= =============== =============
For the six months ended 30 $'000
June 2021 :
------------------------------------------------------------------------------------
Early Later Minority
stage stage Other Consolidated
Stage Stage Holdings operations
------ ---------- --------- ------------------------- ----------------
Statement of Comprehensive
Loss
Revenue 250 _ 219 _ _ 219
Cost of
revenue _ (119) _ _ (119)
Selling, general and
administrative expenses (43) (1,337) (1,524) (3,440) (6,344)
Research and development
expenses (428) (966) (120) _ (1,514)
Other income _ _ _ 12,322 12,322
Finance income/(cost), net (6) 12,985 (11,060) (5,652) (3,733)
Share of net loss of
associates accounted for
using the equity method _ _ _ (2,362) (2,362)
--------- --------
(Loss) for the period (477) 10,782 (12,704) 868 (1,531)
Other comprehensive
income/(loss) _ _ _ (206) (206)
Total comprehensive
income/((loss) (477) 10,782 (12,704) 662 (1,737)
====== ========== ========= ======== ==================
Total comprehensive income
attributable to:
Equity holders of the
parent 30 10,619 (9,560) 868 1,957
Non-controlling interests (507) 163 (3,144) _ (3,488)
Total comprehensive income (477) 10,782 (12,704) 867 (1,531)
====== ========== ========= ======== ==================
As of the period ended
30 June 2022:
Later Other Consolidated
stage operations
---------- ------------ -------------
Statement of Financial
Position
Non-current assets 695 34,263 34,958
Current assets 6,363 10,931 17,924
---------- ------------ -------------
Total assets 7,058 45,194 52,252
Non-current liabilities _ _ _
Current liabilities (16,014) 1,112 (14,902)
---------- ------------ -------------
Total liabilities (16,014) 1,112 (14,902)
---------- ------------ -------------
Net assets/(liabilities) (8,956) 46,306 37,350
---------- ------------ -------------
As of the period ended
30 June 2021:
Later Other Consolidated
stage operations
--------- ------------ -------------
Statement of Financial
Position
Non-current assets 820 34,409 35,229
Current assets 6,262 14,410 20,672
--------- ------------ -------------
Total assets 7,082 48,819 55,901
Non-current liabilities (75) (138) (213)
Current liabilities (12,820) 1,787 (11,033)
--------- ------------ -------------
Total liabilities (12,895) 1,649 (11,246)
--------- ------------ -------------
Net assets/(liabilities) (5,813) 50,468 44,655
--------- ------------ -------------
4. Investment in Associate
Group Subsidiaries, associates and investments
As of 30 June 2022, Allied Minds has five portfolio companies,
including subsidiaries, associates and investments, and two holding
companies. As at the 30 June 2022 the investments in each of the
companies and the accounting treatment is summarized below:
Company name Financial instruments Accounting treatment
held of financial instruments
Allied Minds LLC Ordinary shares Consolidated by the group
in line with IFRS 10
and following management
assessment of significant
control.
Allied Minds Securities Ordinary shares Consolidated by the group
Corp. in line with IFRS 10
and following management
assessment of significant
control.
BridgeComm, Inc. Ordinary share capital Consolidated by the group
and preferred shares in line with IFRS 10
and following management
assessment of significant
control.
Preferred shares are
eliminated on consolidation
between group companies,
preferred shares held
by third parties are
fair valued through profit
and loss under IFRS 9.
Concirrus, LTD Preferred shares The Group has a minority
stake in the investment
and does not have significant
influence over the company.
The investment in preferred
shares is accounted for
at fair value through
the profit and loss under
IFRS 9.
OcuTerra Therapeutics, Ordinary share capital The Group does not have
Inc. and preferred shares significant influence
over the company. The
investment in ordinary
shares is accounted for
at fair value through
the profit and loss under
IFRS 9. Preferred share
holdings are accounted
for at fair value through
profit and loss as investments
held by the Group under
IFRS 9.
Federated Wireless, Ordinary share capital The ordinary share capital
Inc. and preferred shares ownership means that
the group has significant
influence but not control
over the entity. Therefore,
the investment in ordinary
shares is accounted for
by the equity method
of accounting under IAS
28. Preferred share holdings
are accounted for at
fair value through profit
and loss as investments
held by the Group under
IFRS 9.
Orbital sidekick, Preferred shares No ordinary shares are
Inc. owned by Allied Minds
and the directors have
judged, at the year end,
that the group does not
have significant influence
over the entity through
its preferred share holding.
Preferred share holdings
are accounted for at
fair value through profit
and loss as investments
held by the Group under
IFRS 9.
At 30 June 2022, the Group has one associate, Federated
Wireless, which is material to the Group and is equity
accounted.
Federated Wireless : As of 31 December 2021, Allied Minds'
ownership percentage went from 43.11% to 42.72% and the investment
in Federated Wireless continued to be subject to the equity method
accounting. In accordance with IAS 28, the Company's investment was
adjusted by the share of losses generated by Federated Wireless
subsequent to the date of deconsolidation up to the point where the
investment in Federated was reduced to a zero balance.
As of 30 June 2022, Allied Minds' ownership percentage went from
42.72% to 27.04% and continues to be subject to the equity method
accounting and no further adjustments were made to the investment
balance at 30 June 2022. If Federated Wireless subsequently reports
profits, Allied Minds will resume recognising its share of those
profits only after its share of the profits equals the share of
losses not recognised.
Ownership percentage
Location 30 June 2022 31 December 2021
--------------- ------------- -----------------
Federated Wireless, Inc. Arlington, VA 27.04% 42.72%
30 June 2022 31 December 2021
$'000 $'000
------------- -----------------
Group's interest in net assets of
investee, beginning of period _ _
Share of loss from continuing
operations _ _
------------- -----------------
Carrying amount for equity accounted investees _ _
----------------- -----------------
Unrecognised share of losses in associate (66,005) (53,169)
----------------- -----------------
Total outstanding (66,005) (53,169)
================= =================
Investments at fair value
The Group's investments at fair value represent securities of
portfolio companies where Allied Minds holds preferred shares or a
minority stake in those companies. These investments are initially
measured at fair value through profit or loss and are subsequently
re-measured at fair value at each reporting date and on
derecognition.
Federated Wireless : The Company's investment at fair value in
Federated Wireless has changed from $14.2 million, as reported at
31 December 2021, to $18.6 million at 30 June 2022. The increase in
investment balance primarily relates to the conversion of Federated
Wireless's SAFE of $4.3 million into preferred shares upon the
closing of the Series D funding and $0.1 million in the IFRS 9 fair
value accounting during the period. Series A and Series C preferred
shares were also adjusted following the anti-dilution protection
option in the event of a down round financing. As such, this
resulted in 258,839 more shares, Series A and C combined, issued to
Allied Minds.
Orbital Sidekick : On 6 April 2018, Allied Minds made an
investment in Orbital Sidekick, a company developing capabilities
in aerial and space-based hyperspectral imaging and analytics,
initially for the oil and gas industry. Allied Minds has
significant influence over financial and operating policies of the
investee by virtue of its large, albeit minority, stake in the
company and its representation on the entity's board of directors.
Allied Minds only held shares of preferred stock in Orbital
Sidekick. The preferred shares held by Allied Minds are not
equity-like and therefore these fall under the guidance of IFRS 9
and will be treated as a financial asset held at fair value where
all movements to the value of Allied Minds' share in the preferred
stock will be recorded through the Consolidated Statements of
Comprehensive Loss.
On 13 April 2021, Orbital Sidekick, Inc. ("OSK") completed the
closing of its $16 million Series A funding round led by Temasek,
an investment company headquartered in Singapore, with
participation from Energy Innovation Capital, Syndicate 708, and
existing investors Allied Minds and 11.2 Capital. Out of the total
financing capital raised, Allied Minds invested $2.5 million
(including the conversion of its SAFE of $1.5 million). As of 30
June 2022, Allied Minds' ownership of Orbital Sidekick's issued
share capital is 26.29% (31 December 2021: 26.29%). As of 30 June
2022, Allied Minds investment held at fair value related to its
Preferred Shares in Orbital Sidekick was valued at $9.8 million (31
December 2021: $8.5 million).
TouchBistro : On 6 April 2018, Allied Minds made an investment
in TableUp, a software provider enabling end-to-end transparency
through the restaurant supply chain to enable more effective
inventory and operations management. On 5 August 2020, TableUp was
acquired by TouchBistro, Inc. ("TouchBistro") in which TouchBistro
acquired 100% of the shares of TableUp in exchange for the issuance
of TouchBistro common shares to the shareholders of TableUp. As
such, Allied Minds's investment in preferred stock, along with the
convertible note, was fully converted into common shares in
TouchBistro. Allied Minds' ownership percentage was 1.40% at 31
December 2020.
On 28 March 2022, Allied Minds has completed the disposal of its
residual shareholding in TouchBistro for $5.5 million CAD ($4.3
million USD) in line with its strategy of monetising its investment
portfolio. Of the sale proceeds, $3.9 million has been received at
the time of the sale. On 23 August 2022 the remaining TouchBistro
shares were released from the escrow account and as a result Allied
Minds received $0.4 million in proceeds from the pre-arranged sale
of these shares.
OcuTerra Therapeutics : As of April 2021, OcuTerra Therapeutics
was deconsolidated from the Group's financial statements as a
result of the first closing of its Series B Preferred Stock
financing round. On that date Allied Minds' issued and outstanding
ownership percentage dropped from 62.67% to 27.58%.
Consequently, since the Company no longer held a majority of the
voting rights in OcuTerra Therapeutics and did not hold a majority
on its board of directors, Allied Minds did not exercise effective
control over OcuTerra Therapeutics. However, even after the
transaction, Allied Minds was able to exercise significant
influence over the entity by virtue of its large, albeit minority,
stake in the company and its representation on the OcuTerra
Therapeutics's board of directors. As such, only the profits and
losses generated by OcuTerra Therapeutics through April 2021 were
included in the Group's Consolidated Statements of Comprehensive
Loss. Upon the date of deconsolidation, Allied Minds recognised an
investment in OcuTerra Therapeutics related to its common shares of
$2.4 million. Series A Preferred Stock and Series B Preferred Stock
(collectively the "OcuTerra Therapeutics Preferred Stock") held by
Allied Minds are not equity-like and therefore these fall under the
guidance of IFRS 9 and will be treated as a financial asset held at
fair value where all movements to the value of Allied Minds' share
in the preferred stock will be recorded through the Consolidated
Statements of Comprehensive Loss. At the date of deconsolidation
these were classified as an investment at fair value of $3.3
million. The fair value of the investment in associate at the date
of deconsolidation was based on the value implied from the third
party funding round which lead to the loss of control. This is a
market based valuation approach. As a result of the
deconsolidation, Allied Minds recorded an unrealised gain of $14.2
million in the Consolidated Statements of Comprehensive Loss. The
gain was calculated by taking the difference between the fair value
of the interest retained in the former subsidiary at the date
control is lost less the carrying amount of net assets adjusted for
the non-controlling interests of the former subsidiary.
On 21 June 2021, OcuTerra completed the third closing of the
same Series B financing and as a result, Allied Minds' ownership
dropped to 18.98% of the issued and outstanding shares. In
addition, Allied Minds does not have Board of Directors
representation and therefore it is limited in its participation in
operating and capital. Based on these factors management have
judged that Allied Minds cannot alone impact the policy making
processes of the company and there are no other material
transaction between the investor and investee. It has therefore
been determined, Allied Minds no longer has significant influence
over the investee and the investment does not meet the definition
of an associate under IAS 28 at this date. As such, Allied Minds'
share of common stock is accounted as an investment at fair value
in accordance with IFRS 9 for the period beyond 21 June 2021.
Allied Minds' investment in common shares was adjusted by the
share of loss of $2.4 million generated by OcuTerra Therapeutics
for the period 27 April through 21 June 2021. This reduced the
investment in OcuTerra to a zero balance. At 21 June 2021, the
investment in OcuTerra's common shares was accounted as an
investment at fair value in accordance with IFRS 9. The investment
in OcuTerra's common shares was subsequently measured at $2.6
million from $nil at 21 June 2021. This resulted in a gain through
profit and loss in relation to the fair value of this amount.
As of 30 June 2022, Allied Minds investment held at fair value
related to its Preferred Shares and Common Shares in OcuTerra was
valued at $5.0 million (31 December 2021: $6.3 million).
Ownership percentage
31 December
Location 30 June 2022 2021
--------------- ---------------------------- -------------
OcuTerra
Therapeutics, Inc. Cambridge, MA 17.06% 17.06%
31 December
30 June 2022 2021
$'000 $'000
------------------------------- -------------
Group's interest in
net assets of
investee, beginning
of period _ _
Addition in the
year _ 2,362
Share of loss from
continuing
operations _ (2,362)
---------------------------- -------------
Carrying amount for equity accounted
investees _ _
--------------- -----------------
Unrecognised share of losses in
associate _ (1,406)
--------------- -----------------
Total outstanding _ (1,406)
=============== =================
Concirrus : On 29 October 2021, Allied Minds Plc has disposed of
its portfolio company, Spark Insights, Inc. to Concirrus, a private
UK-based insurance technology company in which Concirrus acquired
100% of the shares of Spark in exchange for the issuance of
Concirrus' Series A1 preferred shares. Allied Minds' ownership
percentage in Concirrus is 0.98% at 30 June 2022.
Those investments are presented in the below table:
(Loss)/gain
from IFRS
30 June 9 fair value 31 December
2022 Disposals accounting Additions 2021
$'000 $'000 $'000 $'000 $'000
------------------------ -------- ---------- -------------- ---------- ------------
Federated Wireless,
Inc. 18,603 _ 166 4,283 14,154
Orbital Sidekick,
Inc. 9,761 _ 1,233 _ 8,528
TouchBistro,
Inc.(2) _ (4,321) (9) _ 4,330
OcuTerra Therapeutics,
Inc. 5,003 _ (1,273) _ 6,276
Concirrus, LTD(1) 623 _ _ _ 696
======== ========== ============== ========== ============
Total investments
at fair value 33,990 (4,321) 117 4,283 33,984
======== ========== ============== ========== ============
(1) Concirrus balance is adjusted by foreign currency changes
for the period. No fair market value changes were noted as of 30
June 2022.
(2) On 28 March 2022, Allied Minds has completed the disposal of
its residual shareholding in TouchBistro for $4.3 million USD. Of
the sale proceeds, $3.9 million had been received at the time of
the sale and $0.4 million was received subsequent to period end
when shares held in escrow were released. This account was
reclassified to current assets in line with the nature of this
balance.
Allocation Model Inputs
The following presents the quantitative information about the
significant unobservable inputs used in the fair value measurement
of the Group's financial assets:
As of the period ended: 30 June
2022 31 December 2021
-------------------------- -------------- -----------------
Volatility 50.4%-70.9% 51.8%-81.2%
Time to liquidity (years) 1.0 - 3.0 0.75 - 2.75
Risk-free rate 2.80% - 2.99% 0.29% - 0.89%
IPO/M&A/Sale Probability 0%/ 100%/ 0%/ 100%/ n/a
n/a
Sensitivity Analysis
The following summarises the sensitivity from the assumptions
made by the Company in respect to the unobservable inputs used in
the fair value measurement of the Group's financial assets:
As of the period ended: 30 June 2022 31 December 2021
$'000 $'000
----------------- --------------------
Input Sensitivity range Financial assets increase/(decrease)
------------------------- ------------------ ---------------------------------------
Enterprise Value -2% (710) (780)
+2% 887 677
Volatility -10% 446 171
+10% (85) (79)
Time to Liquidity -6 months 409 534
+6 months (212) (1,756)
Risk-Free Rate (1) -0.28%/-0.23% 409 809
0.06% /0.18% (212) (465)
(1) Risk-free rate is a function of the time to liquidity input assumption.
Valuation methodology
The fair value is derived using the option pricing model
("OPM"), the Probability-Weighted Expected Return Method ("PWERM")
or a hybrid of the two.
The key inputs into these valuation models include the equity
value of the portfolio company , the term of the instrument, risk
free rate and volatility.
The valuation methodologies utilised for determining the equity
value include market approach, income approach or cost approach or
hybrid of these approaches. Other methodologies such as asset based
and cash in are also utilised where deemed appropriate. It is noted
that in the current year none of the equity values were determined
using the income approach.
Other valuation approaches
In certain cases, the value of a portfolio company is determined
using a market instead of income- based approach.
Where there has been a third party funding round in the year
this has been used as the implied value of the portfolio company or
comparable guideline public companies or comparable transactions ,
adjusted for indexation where this is deemed to be appropriate.
Whilst the Board considers the methodologies and assumptions
adopted in the valuation are supportable, reasonable and robust,
because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have
been used had a ready market for the investment existed and the
differences could be significant.
PWERM and OPM
The principal methods the Group applies for allocation of value
are the PWERM, the OPM as well as a hybrid of the two. These models
take assumptions such as the equity values, term of the
instruments, risk free rate and volatility to determine the fair
value of each share class.
The PWERM estimates the value of equity securities based on an
analysis of various discrete future outcomes, such as an IPO,
merger or sale, dissolution, or continued operation as a private
enterprise until a later exit date. The equity value today is based
on the probability-weighted present values of expected future
investment returns, considering each of the possible outcomes
available to the enterprise, as well as the rights of each security
class. The key judgement relates to probability weighting of the
scenarios.
The OPM treats common stock or derivatives thereof as call
options on the enterprise's value or overall equity value. The
value of a security is based on the optionality over and above the
value securities that are senior in the capital structure (e.g.
preferred stock), considering the dilutive effects of subordinate
securities. In the OPM, the exercise price is based on a comparison
with the overall equity value rather than per-share value.
5. Earnings per share
The calculation of basic and diluted earnings per share has been
calculated by dividing the loss for the period attributable to
ordinary shareholders of $7.1 million (HY21: income of $2.0
million), by the weighted average number of ordinary shares
outstanding of 239,650,273 (HY21: 242,163,396 ) during the
six-month period ended 30 June 2022:
(Loss)/Income attributable to ordinary shareholders:
Unaudited Unaudited
For the six months ended: 30 June 2022 30 June 2021
Basic Diluted Basic Diluted
$'000 $'000 $'000 $'000
--------- --------- ------ --------
(Loss)/ Income for the year
attributed to the ordinary shareholders (7,096) (7,096) 1,957 1,957
(Loss)/ Income for the year
attributed to the ordinary shareholders (7,096) (7,096) 1,957 1,957
========= ========= ====== ========
Weighted average number of ordinary shares:
For the six months
ended: 30 June 2022 30 June 2021
-------------------------- -------------------------------------------------------
Basic Diluted Basic Diluted
------------ ------------ --------------------------- --------------------------
Issued ordinary
shares 239,650,273 239,650,273 242,163,396 242,163,396
Weighted average
ordinary shares 239,650,273 239,650,273 242,163,396 242,163,396
============ ============ =========================== ==========================
(Loss)/ income per share :
Unaudited Unaudited
For the six months ended: 30 June 2022 30 June 2021
Basic Diluted Basic Diluted
$ $ $ $
------- -------- ------ --------
(Loss)/ income per share (0.03) (0.03) 0.01 0.01
------- -------- ------ --------
Awards granted under the LTIP (as defined below) are subject to
vesting requirements that are either based on performance
conditions and continued services or time conditions only. Per IAS
33, only awards that are subject to performance criteria are
considered contingently issuable and therefore represent the only
class of potentially dilutive ordinary shares. Based upon
information available at the end of the reporting period, no
portion of these performance-based awards under the LTIP has
vested. Consequently, there are no potentially dilutive shares
outstanding at the period end.
6. Share capital, share premium and reserves
The table below explains the composition of share capital:
As of the period ended: 30 June 2022 31 December 2021
$'000 $'000
--------------------------------------------------------- ------------- -----------------
Equity
Share capital, GBP0.01 par value, issued and fully paid
242,187,985 and 242,187,985 , respectively 3,767 3,767
Treasury shares (738) (738)
Translation reserve 1,140 1,302
Accumulated earnings 33,043 40,156
Equity attributable to owners of the Company 37,212 44,487
Non-controlling interests 138 168
------------- -----------------
Total equity 37,350 44,655
============= =================
In 2021 ALM's Board of Directors (the "Board") approved a
programme to buy back up to $3.0 million of the Group's shares
("Buyback Programme"). The Buyback Programme ran from the date of
the announcement to 6 October 2021. In 2021, the company
repurchased 2,537,712 of its own shares for a total value of
$737,678.
7. Non-controlling interests
The following summarises the changes in the non-controlling
ownership interest in subsidiaries by reportable segment,
calculated on the basis of percentage ownership of non-controlling
interest in voting stock on an as converted basis, excluding
liability classified preferred shares:
Later stage Consolidated
$'000 $'000
------------ -------------
Non-controlling interest as of 31 December 2021 168 168
Share of comprehensive income (2) (2)
Equity-settled share based payments (28) (28)
Non-controlling interest as of 30 June 2022 138 138
============ =============
8. Leases
Right of use asset
Right of use assets
$000s
--------------------
Balance at 1 January 2021 414
Depreciation (112)
--------------------
Balance at 30 June 2022 302
--------------------
Lease liability
Total lease
liability
$000s
------------
Balance at 1 January
2021 873
Cash paid (499)
Interest expense 17
Balance at 30 June
2022 391
------------
Amounts were arrived at using the contractual minimal lease
payments, present valued using the applicable incremental borrowing
rate of 5.50%.
During 2019, the Group relocated its corporate headquarters and
as a result it sub-leased the office space that has been presented
as part of a right-of-use asset. As the sub-lease is for all of the
remaining useful economic life of the right-of-use asset, the
sub-lease is classified as a finance lease.
9. Preferred shares
At 30 June 2022, BridgeComm Inc. had outstanding preferred
shares which were classified as subsidiary preferred shares in
current liabilities in accordance with IFRS 9 as BridgeComm has a
contractual obligation to deliver cash or other assets to the
holders under certain future liquidity events, and/or a requirement
to deliver an uncertain number of common shares upon conversion.
The preferred shares do not contain mandatory dividend rights. The
preferred shares are convertible into common stock of the
subsidiary at the option of the holder and are mandatorily
convertible into common stock of the subsidiary upon a qualified
public offering at or above certain value and gross proceeds
specified in the agreements or upon the vote of the holders of a
majority of the subsidiary preferred shares. Under certain
scenarios the number of common stock shares receivable on
conversion will change. The Group has elected not to bifurcate the
variable conversion feature as a derivative liability, but account
for the entire instrument at fair value through the income
statement.
The preferred shares are entitled to a vote with holders of
common stock on an as converted basis. The holders of the preferred
shares are entitled to a liquidation preference amount in the event
of a liquidation or a deemed liquidation event of the respective
subsidiary. The Group recognises the subsidiary preferred shares
balance upon the receipt of cash financing, and records the change
in its fair value for the respective reporting period through
profit and loss. Preferred shares are not allocated shares of the
subsidiary losses.
The following summarises the subsidiary preferred shares
balance:
Finance
(income)/cost
from IFRS
As of the period 30 June 9 fair 31 December
ended: 2022 value accounting 2021
$'000 Disposals $'000 Additions $'000
BridgeComm 951 _ (304) _ 1,255
Total subsidiary
preferred shares 951 _ (304) _ 1,255
======== ========== =================== ========== ============
The redemption is conditional on occurrence of uncertain future
events beyond the control of the Group. The amount that would be
payable in case of such events is as follows:
As of the period ended: 30 June 2022 31 December 2021
$'000 $'000
------------------------------ ------------- -----------------
BridgeComm 950 1,260
Total liquidation preference 950 1,260
============= =================
Valuation methodology
The fair value is derived using the option pricing model
("OPM"), the Probability-Weighted Expected Return Method ("PWERM")
or a hybrid of the two.
The key inputs into these valuation models include the equity
value of the subsidiary, the term of the instrument, risk free rate
and volatility.
The valuation methodologies utilised for determining the equity
value include the market approach, income approach or cost approach
or hybrid of these approaches. Other methodologies such as asset
based are also utilised where deemed appropriate. It is noted that
in the current year none of the equity values were determined using
the income approach.
Where there has been a third party funding round in the year
this has been used as the implied value of the portfolio company or
comparable guideline public companies or comparable transactions,
adjusted for indexation where this is deemed to be appropriate.
Whilst the Board considers the methodologies and assumptions
adopted in the valuation are supportable, reasonable and robust,
because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have
been used had a ready market for the investment existed and the
differences could be significant.
PWERM and OPM
The principal methods the Group applies for allocation of value
are the PWERM, the OPM as well as a hybrid of the two. These models
take assumptions such as the equity values, term of the
instruments, risk free rate and volatility to determine the fair
value of each share class.
The PWERM estimates the value of equity securities based on an
analysis of various discrete future outcomes, such as an IPO,
merger or sale, dissolution, or continued operation as a private
enterprise until a later exit date. The equity value today is based
on the probability-weighted present values of expected future
investment returns, considering each of the possible outcomes
available to the enterprise, as well as the rights of each security
class. The key judgement relates to probability weighting of the
scenarios.
The OPM treats common stock or derivatives thereof as call
options on the enterprise's value or overall equity value. The
value of a security is based on the optionality over and above the
value securities that are senior in the capital structure (e.g.
preferred stock), considering the dilutive effects of subordinate
securities. In the OPM, the exercise price is based on a comparison
with the overall equity value rather than per-share value.
Allocation model inputs
The following presents the quantitative information about the
significant unobservable inputs used in the fair value measurement
of the Group's subsidiary preferred shares liability:
As of : 31 December
30 June 2022 2021
Volatility 75.0% 77.7%
Time to Liquidity (years) 1.50 2.00
Risk-Free Rate 2.86% 0.73%
The change in fair value of the subsidiary preferred shares is
recorded in Finance cost from IFRS 9 fair value accounting in the
consolidated statement of comprehensive loss.
Sensitivity Analysis
The following summarises the sensitivity from the assumptions
made by the Company in respect to the unobservable inputs used in
the fair value measurement of the Group's financial
liabilities:
As of: 30 June 2022 31 December
2021
------------- -------------
$'000 $'000
------------------- ----------------- ------------- -------------
Input Sensitivity
range
Enterprise
Value -2% (80) (3)
+2% 35 35
Volatility -10% (124) 35
+10% 35 (3)
Time to Liquidity -6 months 80 35
+6 months 195 (3)
Risk-Free
Rate -0.09% / -0.17% 80 35
0.03%/ 0.12% 195 (3)
The change in fair value of the subsidiary preferred shares is
recorded in Finance cost, net in the consolidated statement of
comprehensive loss.
10. Share-based payments
The share-based payments for the period were $0.1 million (HY21:
$ 0.2 million) comprising of charges related to the LTIP and the
other subsidiary plans. The primary changes affecting the half year
period were related to the following:
a) UK Long Term Incentive Plan
Under the UK Long Term Incentive Plan ("LTIP"), awards of
Ordinary Shares may be made to employees, officers and directors,
and other individuals providing services to the Company and its
subsidiaries. Awards may be granted in the form of share options,
share appreciation rights, restricted or unrestricted share awards,
performance share awards, restricted share units, phantom-share
awards and other share-based awards. Vesting is subject to the
achievement of certain performance conditions and continued
services of the participant.
Awards have been granted under the LTIP based on the following
vesting criteria:
-- awards subject to performance conditions based on the
Company's total shareholder return ("TSR") performance or relative
total shareholder return (rTSR) performance over a defined of
time;
-- awards subject to performance conditions based on a basket of
shareholder value metrics ("SVM"). Performance is assessed on these
measures on a scorecard basis over a defined period of time;
-- awards that vest 100 per cent after a period of time subject
to continued service condition only.
On 10 June 2019, the Board determined to retire the long term
incentive plan (LTIP) scheme and therefore no future awards will be
made to executive directors, management and other employees.
Historic awards remained outstanding and eligible to vest in
accordance with their terms. A significant majority of the
outstanding awards are subject to relative total shareholder return
(TSR) performance; however, at the current share price, the
performance criteria of these awards will not be met and therefore,
no shares are expected to be issued under such awards.
No shares were issued in respect of historic awards under the
LTIP and no stock option activity was noted during the six months
ended 30 June 2022 (HY21 nil).
The share grants that vest upon the occurrence of a market
condition (i.e. the TSR performance) and service condition were
adjusted to current market price at the date of the grant to
reflect the effect of the market condition on the non-vested
shares' value. The Company used a Monte Carlo simulation analysis
utilising a Geometric Brownian Motion process with 50,000
simulations to value those shares. The model takes into account
share price volatilities, risk-free rate and other covariance of
comparable UK public companies and other market data to predict
distribution of relative share performance. This is applied to the
reward criteria to arrive at expected value of the TSR awards.
The share grants that vest only upon the occurrence of a
non-market performance condition (i.e. the SVM grants) and service
condition or upon passage of time were valued at the fair value of
the shares on the date of the grants. The number of instruments
included in the measurement of the transaction amount is
subsequently adjusted so that, ultimately, the amount of recognised
share-based expense is based on the number of instruments that
eventually vest. None of the outstanding awards under the LTIP as
of 30 June 2022 are subject to SVM vesting.
The accounting charge does not necessarily represent the
intended value of share-based payments made to recipients, which
are determined by the Remuneration Committee according to
established criteria. The share-based payment charge for the period
related to the UK LTIP was $17.4 thousand (HY21: $0.2 million).
During the six-month period ended 30 June 2022, no units have
vested under the LTIP and respectively no equivalent number of
common stock shares were issued to current and former employees and
directors of the Group in exchange for a settlement price of
GBP0.01 per share.
b) U.S. Stock Option/Stock Issuance Plan
The US Stock Option/Stock Issuance Plan (the "US Stock Plan")
was originally adopted by Allied Minds, Inc. (now Allied Minds,
LLC) in 2008. The US Stock Plan provides for the grant of share
option awards, restricted share awards, and other awards to acquire
common stock of Allied Minds, Inc. (now Allied Minds, LLC). All
stock options granted to employees under this plan are equity
settled, for a ten-year term. Pursuant to the Company's IPO in
2014, Allied Minds plc adopted and assumed the rights and
obligations of Allied Minds, Inc. under this plan except that the
obligation to issue Common Stock is replaced with an obligation to
issue ordinary shares to satisfy awards granted under the US Stock
Plan. As of 19 June 2014, the maximum number of options reserved
under the plan were issued and outstanding and as a result of the
Company's IPO in 2014, all issued and outstanding options vested on
19 June 2014. The Company does not intend to make any further
grants under the US Stock Plan.
No new stock option grants were awarded in the half-year 2022
and 2021 under the Allied Minds 2008 Plan.
For the six months ended 30 June 2022, no options were exercised
(HY21: nil ) resulting in $ nil (HY21: $ nil ) additional share
premium for the period.
11. Financial Instruments and Related Disclosures
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy:
As of 30 June 2022
(Unaudited):
$'000
--------------------------- --------- --------------------------------
Carrying Fair value
--------------------------------
Level Level Level
Amount 1 2 3 Total
--------- ------ ------ ------- -------
Financial assets
designated as fair
value through profit
or loss
Investments at fair
value 33,990 _ _ 33,990 33,990
Loans and receivables
Cash and cash equivalents 10,208
Trade and other
receivables 6,488
Security and other
deposits 641
--------- ------ ------ ------- -------
Total 51,327 _ _ 33,990 33,990
========= ====== ====== ======= =======
Financial liabilities
designated as fair
value through profit
or loss
Subsidiary preferred
shares 951 _ _ 951 951
Convertible notes 6,824 _ _ 6,824 6,824
Financial liabilities
measured at amortised
cost
Trade and other
payables 1,443
Lease liability 391
Total 9,609 _ _ 7,775 7,775
========= ====== ====== ======= =======
As of 31 December 2021
(Audited):
$'000
Carrying Fair value
Level Level Level
Amount 1 2 3 Total
Financial assets designated
as fair value through
profit or loss
Investments at fair
value 33,984 - - 33,984 33,984
Convertible note receivable 4,500 - - 4,500 4,500
Loans and receivables
Cash and cash equivalents 9,710
Trade and other receivables 5,912
Security and other
deposits 594
Total 54,700 - - 38,484 38,484
Financial liabilities
designated as fair value
through profit or loss
Convertible notes 3,109 - - 3,109 3,109
Subsidiary preferred
shares 1,255 - - 1,255 1,255
Financial liabilities
measured at amortised
cost
Trade and other payables 1,061
Lease liability 873
Total 6,298 - - 4,364 4,364
The fair value of financial instruments that are not traded is
determined by using valuation techniques that maximise the use of
observable market data where it is available and rely as little as
possible on entity specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument
is included in Level 2. Where the inputs for determining the fair
value of financial instruments are not based on observable market
data, the instrument is included in Level 3.
Cash and cash equivalents, trade receivables, and trade payables
are carried at cost, which approximates fair value because of their
short-term nature.
For assumptions used in the fair value measurement of the
Group's convertible notes designated as Level 3.
12. Related party transactions
a) Key management personnel compensation
For the six months ended: Unaudited Unaudited
30 June 2022 30 June 2021
$'000 $'000
--------------
Short-term employee benefits 151 837
Share-based payments - -
Total 151 837
Compensation of the Group's key management personnel includes
salaries, health care and other non-cash benefits. Share-based
payments are subject to vesting terms over future periods.
b) Key management personnel transactions
For the six months ended: 30 June 2022 30 June 2021
$'000 $'000
Non-executive Directors' fees 151 173
Non-executive Directors' share-based payments - -
Total 151 173
Executive management and Directors of the Company control 0.6 %
(HY21: 0.6 %) of the voting shares of the Company as of 30 June
2022.
13. Taxation
No current income tax expense was recorded for the period ended
30 June 2022 and 2021 due to continuing operating losses.
Furthermore, deferred tax assets have not been recognised in
respect of tax losses carried forward, research and development
credits and other timing differences, due to history of operating
losses and no convincing evidence that future taxable profit will
be available against which the Group can use the benefits
therefrom, as well as due to potential permanent restrictions under
Internal Revenue Code Section 382 rules. No deferred tax liability
is recognised in respect of fair value gains as at 30 June 2022
given the current availability of tax losses within the group,
which would be sufficient to extinguish any capital gain
assessed.
14. Subsequent events
The Company has evaluated subsequent events through 29 September
2022, which is the date the Condensed Consolidated Interim
Financial Statements are available to be issued.
On 23 August 2022, the remaining TouchBistro shares were
released from the escrow account and as a result, Allied Minds
received $0.4 million in proceeds from the pre-arranged sale of
these shares. There were no claims against the escrowed shares by
TouchBistro and this now fully liquidates Allied Minds' investment
in Touch Bistro.
On 9 September 2022, in order to ensure BridgeComm can bid for
US Space Development Agency business as a prime contractor, Allied
Minds agreed to a new ownership structure with Aeroequity
Industrial Partners ("AEI"). Post the period end, in order to
implement this structure, $2.0 million of existing Allied Minds
debt with BridgeComm was not converted. Allied Minds' fully diluted
ownership prior to the transaction was 62.92%.
Also on 9 September 2022, BridgeComm closed a $2.0 million
Series B-2 financing in which both AEI and Allied Minds invested $1
million each (inclusive of previous bridge loans), in order for the
company to continue operations whilst it seeks to raise further
funds from interested investors. This reduced Allied Minds' issued
and outstanding ownership to 41.49% (39.77% fully diluted). As a
result of this change in ownership holding Allied Minds no longer
controls BridgeComm and at the date of the transaction it has been
deconsolidated from the Group. Going forward Allied Minds has
significant influence and will equity account for the investment
held under IAS 28.
Statement of Directors' Responsibilities
The Directors confirm to the best of their knowledge that:
a) the Condensed Consolidated Interim Financial Statements have
been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting"and give a
true and fair view of the assets, liabilities, financial position
and profit or loss of the Group as required by the FCA's Disclosure
Guidance and Transparency Rules (4.2.4R); and
b) the Interim Management Report includes a fair review of the
information required by the FCA's Disclosure Guidance and
Transparency Rules (4.2.7R and 4.2.8R).
The Directors of Allied Minds plc and their functions are listed
below.
By order of the Board
Bruce Failing ,
Non-Executive Chairman
30 September 2022
COMPANY information
Company Registration Number
08998697
Registered Office
Beaufort House
51 New North Road
Exeter EX4 4EP
United Kingdom
Website
www.alliedminds.com
Board of Directors
Bruce Failing (Non-Executive Chairman)
Sam Dobbyn (Independent Non-Executive Director)
Casey McDonald (Independent Non-Executive Director)
INDEPENT REVIEW REPORT TO ALLIED MINDS PLC
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the Condensed
Consolidated Statement of Comprehensive Income, Condensed
Consolidated Statement of Financial Position, Condensed
Consolidated Statement of Changes in Equity and Condensed
Consolidated Statement of Cash Flows; and associated notes.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of
Allied Minds plc (the 'company') and its subsidiaries (the 'Group')
are prepared in accordance with UK adopted international accounting
standards. The condensed set of financial statements included in
this half-yearly financial report has been prepared in accordance
with UK adopted International Accounting Standard 34, "Interim
Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the [group/company] to cease to continue as a going
concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority and prepared in a form consistent with that which will be
adopted in the Group's annual accounts having regard to the
accounting standards applicable to such annual accounts.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, UK
Date: 29 September 2022
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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END
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