REG - Tekcapital plc - Final Results year ended 31 December 2023
22/05/2024 07:00
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RNS Number : 3758P Tekcapital plc 22 May 2024
The information contained within this announcement is deemed by the Company
(Companies House registration number 08873361) to constitute inside
information as stipulated under the Market Abuse Regulations (EU) No. 596/2014
("MAR")s. With the publication of this announcement via a Regulatory
Information Service ("RIS"), this inside information is now considered to be
in the public domain.
Tekcapital PLC
("Tekcapital", "the Company" or the "Group")
Final Results for the year-ended 31 December 2023
Tekcapital plc (AIM: TEK), the UK intellectual property (IP) investment group
focused on creating valuable companies from investing in university
technologies that can improve people's lives, announces its audited results
for the year ended 31 December 2023.
Highlights
In 2023 we had a productive year for long-term value creation, setting the
foundation for meaningful growth in 2024 as evidenced by the successful
floatation of Microsalt plc post year end. Our portfolio companies achieved
significant milestones, however due to unrealized reductions in the end of
period quoted valuations of Lucyd and Belluscura, our profitability, net
assets and net assets per share were commensurately negatively impacted.
· Net Assets US$47.9m (2022: US$57.8m)
· NAV per share US$0.27 (2022: US$0.38)
· Portfolio valuation US$41.1m (2022: US$54.9m)
· Total loss after tax: US$15.7m, resulting primarily from
unrealised fair value reduction of portfolio valuation US$14.2m (2022: loss of
US$12.7m)
· Share placings totalling US$5m completed during the period (2022:
US$2.5m)
However, post end of period on 20 May 2024 our estimated portfolio valuation
was approximately US$75m, recovering the entire fair value losses of 2023 and
exceeding the $55m valuation reported in 2022 by ~36%.
The Annual General Meeting ("AGM") of Tekcapital Plc will be held at the
offices of Bird & Bird LLP, 12 New Fetter Lane, London EC4A 1JP on 21 June
2024 at 2.30 p.m. (British Summer Time). The annual report and the formal
notice of the 2023 AGM will be posted to shareholders on the 23 May 2024.
The notice of AGM will be available to review on the Company's website at:
www.tekcapital.com (http://www.tekcapital.com) .
INVESTMENT PORTFOLIO
MicroSalt plc ("Microsalt") manufactures MicroSalt®, a new, patented, all
natural, non-GMO, Kosher, low-sodium salt, that tastes great and has
approximately half of the sodium of regular table salt.
INVESTMENT RATIONALE:
The snack food industry is focused on developing and providing better-for-you
products that both taste good and help reduce sodium intake. Excess sodium
consumption contributes to cardiovascular disease, a leading cause of
premature death globally. The World Health Organization has indicated that
reducing sodium consumption to 2,300 mg/day can save upwards of 2m lives per
year. To help address this problem, MicroSalt provides a patented, low-sodium
salt has all the flavour of salt with roughly half the sodium for topical
applications such as crisps, pretzels, nuts, popcorn and other salty snacks,
bakery products and precooked meals.
2023 DEVELOPMENTS:
• Announced partnership with a Fortune 500 national retailer for the
development and execution of low-sodium solutions across the retailer's
extensive line of private branded snack offerings. This will lead to placement
of several of their snacks using MicroSalt® in lieu of traditional salt,
beginning with 800 stores in Q4 2023 and likely expanding across more than
7,000 store locations thereafter.
• Executed agreement with supermarket chain, Giant Food of Maryland
LLC, ("Giant") one of the most respected food retailers in the mid-Atlantic
United States, to carry MicroSalt's new saltshakers in its 160 stores.
• Continued its successful sales expansion of both its SaltMe!
crisps and MicroSalt saltshakers with new placements in over 400
additional U.S. retail stores.
• Executed successful launch of its new Microsalt® shakers, placing
the product in over 500 stores since Q4 2022.
• Executed an agreement with US Salt LLC ("US Salt") for the
distribution and delivery of MicroSalt's low-sodium solutions.
"OUR MICROSCOPIC SALT CRYSTAL TECHNOLOGY IS CREATING NEW OPPORTUNITIES FOR
CONSUMERS TO LOWER THEIR SODIUM INTAKE WITHOUT SACRIFICING FLAVOR."
Rick Guiney
CEO of MicroSalt Inc.
Lucyd's vision is to Upgrade your eyewear® by providing tech-enhanced eyewear
that makes it easier to stay connected to your digital life. Lucyd introduced
the world's first smart eyewear with ChatGPT.
As of 31 December 2023, Tekcapital owned 100% of Lucyd Ltd, and Lucyd Ltd
owned ~40% of NASDAQ quoted Innovative Eyewear Inc.
Lucyd® Limited ("Lucyd") is the developer of ChatGPT enabled smart eyewear
under the Lucyd®, Nautica®, Eddie Bauer® and Reebok® brands. Innovative
Eyewear, Inc ("Innovative Eyewear"), Lucyd's ~40% owned U.S. operating
subsidiary, was the first Company to deliver prescription glasses with
Bluetooth® technology in 2019. Their eyeglass frames help you stay connected
safely and conveniently, by enabling many common smartphone tasks to be
performed handsfree with Bluetooth® and voice assistants.
SOURCE: ¹
(https://www.ghsa.org/resources/news-releases/GHSA/Ped-Spotlight-Full-Report22)
https://www.ghsa.org/resources/news-releases/GHSA/Ped-Spotlight-Full-Report22#:~:text=WASHINGTON%2C%20D.C.%20%E2%80%93%20Drivers%20struck%20and,Highway%20Safety%20Association%20(GHSA)
(https://www.ghsa.org/resources/news-releases/GHSA/Ped-Spotlight-Full-Report22)
.
²https://www.essilorusa.com/newsroom/vision-impact-institute-releases-study-on-corrective-lens-wearers-in-the-u-s
INVESTMENT RATIONALE:
In 2022, the National Highway Traffic Safety Administration (NHTSA) estimates
that 7,522 pedestrians died in traffic crashes on public roads, which is a
historic high. Open ear audio found in Lucyd smart glasses can help
pedestrians maintain situational awareness whilst walking running and cycling.
According to the Vision Institute², approximately 75% of the adult population
need corrective lenses, and advancements in Bluetooth technology have enabled
it to be incorporated into traditional eyeglass form factors. This combination
created a new type of eyewear with built-in speakers, microphones and touch
controls. Lucyd smart eyewear allows the wearer to forego headphones and use
their glasses to listen to audio content and talk to others and digital
assistant. Since the speakers are open-ear, Lucyd smart glasses enables the
wearer to stay connected to their digital life whilst maintaining situational
and social awareness.
2023 DEVELOPMENTS:
· Licensed sports culture brand, Reebok® for smart eyewear through
an agreement with Authentic Brands Group.
· Launched Nautica Smart Eyewear Powered by Lucyd® and commenced
go to market efforts with assistance from ABG's extensive distribution
network.
· Released Lucyd App, an iOS/Android app that enables voice
interface for ChatGPT on their smart eyewear.
· Launched Lucyd Lyte 2.0, a major upgrade to its flagship Lucyd
Lyte audio eyewear platform that brings several advances to the company's core
product, including:
- Four speaker array
- Improved audio input
- Improved battery life with 12 hours of playback
- The introduction of Bluetooth 5.2 amongst other innovations
introduced by the company.
· Continued preparation for launches of its licensed brand
products: Eddie Bauer and Reebok.
· Filed a patent application for a software system that focuses on
one or more smart devices, which may include smart glasses that operate with
chatbots such as ChatGPT. The invention accomplishes this by using an
innovative technique for choosing from and prioritizing data that may be drawn
simultaneously from several different chatbots or AI language models.
· Innovative Eyewear has filed a patent on a key product
innovation, flexible spring hinges for smart eyewear, with the Company's
belief that it will enable each style to be worn by a wider array of users and
will also increase the durability of the frames by reducing stress points on
the temples caused by extended wear.
· Continued its sales growth as exhibited by 77% increase in
revenue in 2023 compared to 2022.
Guident Limited ("Guident") has developed and deployed remote monitoring and
control software to improve safety of autonomous vehicles and land-based
delivery devices. Guident's software will incorporate artificial intelligence
and advanced network technologies to minimize signal latency and improve the
safety of autonomous vehicles.
Guident developed state of the art, first fully functional remote monitoring
and control software to improve the safety of autonomous vehicles and
land-based delivery devices.
As at 31 December 2023, Tekcapital owned 100% of Guident Ltd, ~and 91% of
Guident Corp, its US operating subsidiary.
INVESTMENT RATIONALE:
Vehicles of all types are rapidly becoming electric and autonomous. Whilst
Autonomous Vehicles ("AVs") are projected to be significantly safer than
traditional vehicles, there will still be mishaps and in many instances there
will be no vehicle operator present to help resolve these problems. Guident
believes remote human interaction will be needed to address these mishaps.
Guident's remote monitoring and control centre monitors vehicles and when
necessary provide additional support such as calling first responders, taking
over control of the vehicle to move it out of harm's way and can provide
real-time communication with passengers and pedestrians. Over time, Guident
believes remote monitoring centres will be required in most jurisdictions
where AV's operate.
In addition to safety, a key variable in affecting the adoption of electric
vehicles is the travel range between charges.
All commercial electric cars utilise regenerative braking to help extend the
range by capturing the heat energy from braking and utilising it to power the
vehicle or help charge the battery. Regenerative brakes work by reversing the
electric motors that propel the vehicle. This works like a generator and
directs energy back into the electric system to help extend the range and over
time improve efficiency. Guident believes that in the next few years all
electric vehicles will also have regenerative shock absorbers as these are
also "green" and will extend the range the vehicle can be driven between
charges. Guident's regenerative shock absorbers have the potential to assist
electric vehicle manufacturers to improve the efficiency and range of their
vehicles.
2023 DEVELOPMENTS:
· Secured and fulfilled its first purchase order from Jacksonville
Transportation Authority (JTA) for JTA project to provide remote monitoring
and control services.
· Received Space Florida grant for a groundbreaking project under
the Florida-Israel Innovation Partnership program, together with its valued
Israeli partner, NOVELSAT. This integration of NOVELSAT's satellite-based
space connectivity technologies and Guident's human-in-the-loop AI
technologies will provide the first LEO satellite back-up monitoring and
control of an autonomous vehicle with reliable and high-speed bi-directional
connectivity.
· Executed letter of intent with Auve Tech OÜ ("Auve Tech") to
provide remote monitoring and control services for Auve Tech's autonomous
vehicles. By combining Auve Tech's advanced Level 4 autonomous vehicles with
Guident's RMCC software, the two companies will bring an enhanced level of
safety to self-driving technology. Guident's patented software provides
human-in-the-loop supervision, adding an extra layer of security to Auve
Tech's new autonomous shuttle..
· Received Notice of Allowance from USPTO for
patent for "Systems and Methods for Remote Monitoring of a Vehicle, Robot or
Drone", which reinforces its DNA of innovation, it also significantly expands
its patent portfolio in the secure and safe operation of autonomous vehicles
with the human-in-the-loop concept.
· Additionally, Guident has announced progress with
their regenerative shock absorbers (RSA). Guident has produced its first
generation or prototype regenerative shock absorbers
(https://guident.co/videos-regenerative-shiock-absorbers/) and is currently
testing these new shocks with Tier-1 automotive companies. This technology
will enable EVs to increase their range and have more available power for
telemetric connection with the RMCC. The goal of this technology is to
manufacture electromagnetic regenerative shock absorbers with energy densities
that can recover a vehicle's vibration energy which is otherwise lost as heat,
and in doing so extend their range between charges. In addition, this unique
design utilising rotary mechanical motion rectifiers can be tuned to achieve
better damping characteristics than existing shock absorbers. In a significant
step forward, Guident secured a paid proof of concept agreement with a tier-1
tyre manufacturer for their regenerative shock absorber. This collaboration
resulted in successful tests and detailed reports regarding the performance of
the regenerative shock absorber. Subsequently, Guident incorporated a new
subsidiary, Revive Energy Solutions Ltd, to commercialise its regenerative
shock absorber technology. Guident believes that in the next few years all
electric vehicles will have both regenerative braking and regenerative shock
absorbers to enhance range and comfort.
Belluscura plc ("Belluscura") is a respiratory medical Device company that
has developed and launched an improvedportable oxygen concentrator (POC) to
provide on-the-go supplemental O(2). Belluscura believes
its product is the first FDA cleared, modular POC with a user-replaceable
filter cartridge. Belluscura aims to
make POC's more affordable to those who need them.
INVESTMENT RATIONALE:
Worldwide, approximately 300m individuals suffer from COPD (chronic
obstructive pulmonary disease). COPD is a progressive lung disease that
includes emphysema and chronic bronchitis. POC's are also used to treat:
Interstitial lung disease (ILD): This is a group of lung diseases that cause
scarring of the lungs.
Cystic fibrosis: This is a genetic disease that causes thick, sticky mucus to
build up in the lungs, making it hard to breathe.
Sleep Apnea: This is a sleep disorder that causes breathing to repeatedly stop
and start.
Pulmonary hypertension: This is high blood pressure in the lungs.
Heart failure: This is a condition that makes it hard for the heart to pump
blood effectively.
Many patients suffering from the above disorders require supplemental oxygen.
As there is no cure for COPD, over time patients require greater amounts of
oxygen, and if they use a portable oxygen concentrator, they must often
replace their devices with greater capacity models as their disease
progresses. With Belluscura's new patented device, users can swap out the
filter cartridges to enable higher capacity oxygen flow without having to buy
a new device, like upgrading memory on a laptop. The result is more affordable
oxygen therapy which increases the number of people who can avail themselves
of these life-extending and life saving devices.
2023 DEVELOPMENTS:
· Belluscura announced it received orders for 6,500 of its
next-generation DISCOV-R portable oxygen concentrator. This represents
approximately US$15 million of potential revenue to the Company, with
initial production of the DISCOV-R expected to begin by the end of this
year.
· Belluscura announced it has entered into an Exclusive License,
Marketing and Distribution Agreement ("Agreement") with its global
manufacturing partner InnoMax Medical Technology Ltd. Minimum cumulative
royalties over the term of the Agreement will therefore range
from US$27.5m if the license is converted to non-exclusive from year 6 and
up to US$55m in cumulative royalties if the license remains exclusive for
the entire term.
· Signed a distribution agreement with McKesson Medical-Surgical, a
division of McKesson. McKesson delivers a third of all pharmaceuticals used in
North America and operates the fourth-largest pharmacy chain in North America.
· Announced that Robert ("Bob") Fary has joined the Company as
Senior Vice President of Global Sales. Bob has thirty years of experience in
the respiratory industry where he has held leadership roles at major oxygen
concentrator manufacturers and durable medical equipment companies. During the
past two decades, Bob's industry leading team was directly responsible for or
contributed to the sale of over one million portable oxygen concentrators
("POCs"), generating revenues in excess of US$1 billion.
· Announced its X-PLOR portable oxygen concentrator ("POC") is now
marketed in the US through GoodRx, Inc. www.goodrx.com
(http://www.goodrx.com/)
· Raised total of GBP 7.1m through combination of convertible loan
notes and new placings
CORPORATE FINANCIAL PERFORMANCE
Our investment objective is to achieve long-term growth of net assets and
deliver returns on invested capital through the commercialisation of
university and other new discoveries that can make a positive impact on
people's lives. In 2023 we had a productive year for long-term value creation,
setting the foundation for meaningful growth in 2024 as evidenced by the
successful floatation of Microsalt plc post year end. Our portfolio companies
achieved significant milestones, however due to unrealized reductions in the
end of period quoted valuations of Lucyd and Belluscura, our profitability,
net assets and net assets per share were commensurately negatively impacted.
• Net Assets US$47.9m (2022: US$57.8m)
• NAV per share US$0.27 (2022: US$0.38)
• Portfolio valuation US$41.1m (2022: US$54.9m)
• Total loss after tax: US$15.7m, resulting primarily from unrealised fair
value reduction of portfolio valuation US$14.2m (2022: loss of US$12.7m)
• Share placings totalling US$5m completed during the period (2022:
US$2.5m)
However, post end of period, using 20 May 2024 closing market prices, our
estimated portfolio valuation was approximately US$75m (appx. US$0.37 per
share), recovering the entire fair value losses of 2023 and exceeding the $55m
valuation reported in 2022 by ~36%.
CORPORATE SERVICES ACTIVITY
· In 2023 our corporate services revenue from Invention Evaluator
and Vortechs Group increased ~43%.
· Tekcapital delivered over 290 Invention Evaluator (IE) reports, a
significant increase from the previous year. These reports help organizations
worldwide evaluate the market potential of their technologies, indicating the
company's growing influence and expertise in this field.
· Notably, Tekcapital expanded its client base to include industry
giants such as Vale S.A., the world's largest producer of iron ore and nickel.
Tekcapital also added well known academic clients such as the University of
Johannesburg, one of the largest, multi-campus, residential universities in
South Africa.
· Vortechs, Tekcapital's executive search firm, secured more than
12 executive search assignments in 2023, demonstrating substantial growth
compared to the previous year. Additionally, it expanded its list of academic
clients to include prestigious institutions such as the Massachusetts
Institute of Technology (MIT), indicating the firm's increasing reputation in
talent acquisition within academia and beyond.
· Tekcapital played a significant role in sponsoring the
'Innovation for Sustainable Water USA-MEX' open innovation hub in
collaboration with Grupo Rotoplas, the Tijuana Development Council, and the
United States-Mexico Foundation for Science. This initiative aimed to promote
sustainable water solutions, showcasing Tekcapital's commitment to societal
and environmental impact through innovation.
DR. CLIFFORD GROSS, EXECUTIVE CHAIRMAN SAID:
"The Group has made good progress during 2023. Our portfolio companies have
demonstrated solid business growth, and we believe they should achieve
additional significant milestones by the end of 2024.
Notably during the year, Innovative Eyewear Inc. launched the world's first
ChatGPT enabled eyewear.
Key 2023 milestones included:
Guident signed re-seller agreements with both Auvetech a leading Estonia
autonomous minibus manufacturer and Adastec a leading AV software provider.
Guident's RMCC software will be included in all Auvetech MiCa vehicles and as
part of Adastec's autonomous software stack for future deployments.
Additionally, Guident has continued to improve and rigorously test its
regenerative shock absorbers. Numerous Tier-1 companies are evaluating the
shocks for potential inclusion in their electric vehicles.
We are also pleased to highlight Microsalt's strong progress ending the year
by growing its revenues, signing up additional customers and launching its low
sodium saltshakers in approximately 400 supermarkets and engaging its advisory
team for their AIM IPO which was completed on 1 Feb 2024.
Our financial results were negatively impacted by the reduction in the
observable, closing share prices of both innovative Eyewear and Belluscura at
the end of the period, which we believe were in large measure the result of
exogenous macro-economic and capital market factors.
We remain steadfast and excited about the commercial progress of our portfolio
companies in 2023 and for their future prospects for the remainder of 2024. As
per our mission and investment objective, we believe that all of our key
portfolio companies have the potential to make a positive impact on the lives
of the customers they serve, as well as produce meaningful returns on invested
capital for our shareholders over the long term."
POST PERIOD END HIGHLIGHTS
Following Microsalt plc's introduction of its low-sodium saltshakers in the
United Kingdom, the Company successfully completed its Initial Public Offering
and commenced trading on the AIM market of the London Stock Exchange on
February 1st, 2024. Tekcapital holds a 77.24% interest in MicroSalt after the
IPO (at 1 February 2024), which at the listing price of 43p per ordinary
share, was valued at approximately £14.3m on Admission.
Also following our year end, Guident announced that it will integrate
its industry-leading AV remote monitoring, control, assistance, and passenger
support services with the world's most compact and flexible level 4 autonomous
shuttle, MiCa from Auve Tech. By working together, the groundbreaking MiCa
shuttle will now incorporate Guident's teleoperation solution, further
enhancing its safety and Auve Tech's leading, self-driving technology. For
each vehicle outfitted with Guident's technology there will be a hardware fee
and a recurring license fee.
On 15 May 2024 Microsalt has announced it has been granted an important patent
protecting the IP of its micron-sized salt. This particular patent, entitled
Low Sodium Salt Composition, is focused on how Microsalt's low-sodium salt
adheres to food particles in a different way than traditional table salt. "We
believe the grant of patent 11,992,034 is an important milestone for the
Company as it further strengthens our IP position in the global low sodium
market," said Rick Guiney, CEO of Microsalt.
On 19 Feb 2024 Guident hosted a grand opening for the first U.S. commercial
Remote Monitor and Control Centre (depicted below) for enhancing AV safety.
Innovative Eyewear Inc announced a new partnership with Windsor Eyes, a
leading eyewear manufacturing and distribution firm. Over the last 50 years,
Windsor has become a leading manufacturer and supplier of fashion eyewear
under the Bruno Magli, Sanctuary, Pier Martino, Adolfo, Eyecroxx, as well as
private label options. Windsor Eyes products are distributed nationwide in
leading optical chains and prominent optical shops. The partnership aims to
forge a robust collaboration between Innovative Eyewear's unique, cutting-edge
smart eyewear products and Windsor Eyes' well-established distribution network
within the optical retail sector. Together, Innovative and Windsor intend to
work closely to ensure extensive distribution of smart eyewear across the
United States, targeting key large optical retail outlets.
Image courtesy of Innovative Eyewear, Inc.
Innovative Eyewear also announced a partnership with New Look Vision Group to
distribute its smart eyewear in Canada. New Look Vision Group is the largest
optical group in the eye care industry in Canada and has been rapidly
expanding in the United States since its acquisition of Edward Beiner in March
2020, its partnership with Black Optical in 2021, and the acquisition of LOH
in December 2021. New Look Vision Group has a network of 489 locations
operating mainly under the Iris, New Look Eyewear, Vogue Optical, Greiche
& Scaff and Edward Beiner banners and a laboratory facility using
state-of-the-art technologies.
Innovative Eyewear Inc. also appointed Micah Richards as a brand ambassador.
Micah is a former England International footballer, turned successful
broadcaster, currently working for Sky Sports, CBS Sports and BBC Sport whilst
he is also a co-host of "The Rest is Football" - a top ten UK podcast.
For further information, please contact:
Tekcapital Plc Via Flagstaff
Clifford M. Gross, Ph.D.
SP Angel Corporate Finance LLP +44 (0) 20 3470 0470
(Nominated Adviser and Broker)
Richard Morrison/Charlie Bouverat (Corporate Finance)
Abigail Wayne / Rob Rees (Corporate Broking)
Flagstaff Strategic and Investor Communications +44 (0) 20 7129 1474
Tim Thompson/Andrea Seymour/Fergus Mellon
About Tekcapital plc
Tekcapital creates value from investing in new, university-developed
discoveries that can enhance people's lives and provides a range of technology
transfer services to help organisations evaluate and commercialise new
technologies. Tekcapital is quoted on the AIM market of the London Stock
Exchange (AIM: symbol TEK) and is headquartered in the UK. For more
information, please visit www.tekcapital.com (http://www.tekcapital.com)
General Risk Factors and Forward-Looking Statements
The information contained in this document has been prepared and distributed
by the Company and is subject to material updating, completion, revision,
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Securities Act of 1933, as amended (the "Securities Act"), or under any U.S.
State securities laws, and may not be offered or sold in the United States of
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Investors must rely on their own examination of the legal, taxation, financial
and other consequences of an investment in the Com-pany, including the merits
of investing and the risks involved. Prospective investors should not treat
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responsibility is accepted by the Company or any of its directors, officers,
em-ployees or agents for the accuracy or completeness of such information.
All statements of opinion and/or belief contained in this Report and all views
expressed represent the directors' own current as-sessment and interpretation
of information available to them as at the date of this Report. In addition,
this Report contains certain "forward-looking statements", including but not
limited to, the statements regarding the Company's overall objectives and
strategic plans, timetables and capital expenditures. Forward-looking
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looking statements or views are correct or that the objectives of the Company
will be achieved. Further, valuations of the Company's portfolio investments
and net asset value can and will fluctuate over time due to a wide variety of
factors both company specific and macro-economic. Changes in net asset values
can have a significant impact on revenue and earnings of the Company and its
future prospects. As a result, the reader is cautioned not to place reliance
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Company does not undertake to update any forward-looking statement or other
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Intellectual Property Risk Factors
Tekcapital mission is to create valuable products from university intellectual
property that can improve people's lives. Therefore, our ability to compete
in the market may negatively affected if our portfolio companies lose some or
all of their intellectual property rights. If patent rights that they rely on
are invalidated, or if they are unable to obtain other intellectual property
rights. Our success will depend on the ability of our portfolio companies to
obtain and protect patents on their technology and products, to protect their
trade secrets, and for them to maintain their rights to licensed intellectual
property or technologies. Their patent applications or those of our licensors
may not result in the issue of patents in the United States or other
countries. Their patents or those of their licensors may not afford meaningful
protection for our technology and products. Others may challenge their patents
or those of their licensors by proceedings such as interference, oppositions
and re-examinations or in litigation seeking to establish the invalidity of
their patents. In the event that one or more of their patents are challenged,
a court may invalidate the patent(s) or determine that the patent(s) is not
enforceable, which could harm their competitive position and ours. If one or
more of our portfolio company patents are invalidated or found to be
unenforceable, or if the scope of the claims in any of these patents is
limited by a court decision, our portfolio companies could lose certain market
exclusivity afforded by patents owned or in-licensed by us and potential
competitors could more easily bring products to the market that directly
compete with our own. The uncertainties and costs surrounding the prosecution
of their patent applications and the cost of enforcement or defence of their
issued patents could have a material adverse effect on our business and
financial condition.
To protect or enforce their patent rights, our portfolio companies may
initiate interference proceedings, oppositions, re-examinations or litigation
against others. However, these activities are expensive, take significant time
and divert management's attention from other business concerns. They may not
prevail in these activities. If they are not successful in these activities,
the prevailing party may obtain superior rights to our claimed inventions and
technology, which could adversely affect their ability of our portfolio
companies to successfully market and commercialize their products and
services. Claims by other companies may infringe the intellectual property
rights on which our portfolio companies rely, and if such rights are deemed to
be invalid it could adversely affect our portfolio companies and ourselves as
investors in these companies.
From time to time, companies may assert, patent, copyright and other
intellectual proprietary rights against our portfolio company's products or
technologies. These claims can result in the future in lawsuits being brought
against our portfolio companies or their holding company. They and we may not
prevail in any lawsuits alleging patent infringement given the complex
technical issues and inherent uncertainties in intellectual property
litigation. If any of our portfolio company products, technologies or
activities, from which our portfolio companies derive or expect to derive a
substantial portion of their revenues and were found to infringe on another
company's intellectual property rights, they could be subject to an injunction
that would force the removal of such product from the market or they could be
required to redesign such product, which could be costly. They could also be
ordered to pay damages or other compensation, including punitive damages and
attorneys' fees to such other company. A negative outcome in any such
litigation could also severely disrupt the sales of their marketed products to
their customers which in turn could harm their relationships with their
customers, their market share and their product revenues. Even if they are
ultimately successful in defending any intellectual property litigation, such
litigation is expensive and time consuming to address, will divert our
management's attention from their business and may harm their reputation and
ours.
Several of our portfolio companies may be subject to complex and costly
regulation and if government regulations are interpreted or enforced in a
manner adverse to them, they may be subject to enforcement actions, penalties,
exclusion, and other material limitations on their operations and have a
negative impact on their financial performance. All of the above listed risks
can have a material, negative affect on our net asset value, revenue,
performance and the success of our business and the portfolio companies we
invested in.
STRATEGIC REPORT
CHAIRMAN'S SUMMARY
Tekcapital plc and subsidiaries ('Tekcapital') brings new scientific
innovations from lab to market to enhance safety and health and improve the
quality of life of the customers we serve. In the past year, thankfully, all
of our portfolio companies have made significant advancements. Belluscura
expanded production, distribution and sales of its portable O(2) concentrator,
Innovative Eyewear launched the first ChatGPT enabled smart eyewear, and had
record annual sales growth MicroSalt on-boarded two Fortune 500 B2B clients to
use MicroSalt in their products and have expanded sales of their saltshakers
to >400 retail locations throughout the US. Additionally, Guident has
begun providing RMCC services to its first customer, the Jacksonville
Transportation Authority, for its remote monitoring and control service and
has built and continues to test their regenerative shock absorbers with Tier 1
companies for use with electric vehicles.
As a result, consistent with our mission, Tekcapital's portfolio companies are
making a positive impact on the lives of the customers they serve.
CURRENT TRADING AND OUTLOOK
We are enthusiastic about the development of Tekcapital's portfolio companies,
their performance to-date and their prospects to significantly expand in 2024.
The Board is confident that continued investment in our non-quoted portfolio
companies remains the right approach for potential long-term value creation.
Additionally, we are currently exploring adding a fifth portfolio company
focused on the commercialisation of generative artificial intelligence.
Whilst Tekcapital Group is progressing well, investors should note that net
asset values will fluctuate from period to period due to individual portfolio
company performance, valuations and changes in market conditions and
macro-economic financial conditions, and that material changes in the value of
our portfolio companies can have a significant impact on our NAV, operating
result and future prospects.
KEY PORTFOLIO COMPANIES
Leveraging our proprietary global university network, we provide services to
universities and companies to help them assess and commercialise their
innovations. Utilising these services, we have built a valuable group of
portfolio companies to commercialise select intellectual properties that if
successfully commercialised could make a positive impact on people's lives.
Our model is simple, we seek to couple commercialisation ready, compelling
university IP with visionary management. We then invest our own capital and
introduce exogenous sources of capital to help these companies grow. When we
realise exits through trade sales or IPOs, the Group's goal is to distribute a
portion of the proceeds as a special dividend to our shareholders.
Our current portfolio companies were all started by Tekcapital. Whilst few in
number, they are diverse and span multiple sectors including food tech,
autonomous vehicles, smart eyewear and respiratory medical devices. All of our
portfolio companies have in our view, compelling intellectual properties,
capable and inspired management and address $Billion+, fast growing markets.
The entire team at Tekcapital is committed to helping these companies grow to
achieve their full potential and value.
Microsalt is a food tech business that owns a patented process to produce
micron sized salt.
Microsalt has made significant progress in 2023, including receipt of purchase
orders from two Fortune 500 customers for Mirosalt as an ingredient. In
addition to its focus on B2B sales of MicroSalt® to snack food companies
where the Company has made substantial progress, Microsalt has launched its
own snack food brand called SaltMe!™. Additionally, MicroSalt has launched
its low sodium salt in saltshakers during 2023. Approximately 400 supermarkets
now carry theses better-for-you saltshakers.
Tekcapital owned approximately 87% of MicroSalt Ltd as of 31 December 2023.
Guident Ltd seeks to improve the safety and efficiency of autonomous vehicles
and land-based delivery drones with a SaaS software platform that enables the
remote monitoring and control of these vehicles to serve rapidly resolve the
situation.
In 2023, Guident Secured and fulfilled its first purchase order from
Jacksonville Transportation Authority (JTA) for JTA a project to provide
remote monitoring and control services. The company also received Space
Florida grant for a groundbreaking project under the Florida-Israel
Innovation Partnership program, together with its valued Israeli partner,
NOVELSAT. This integration of NOVELSAT's satellite-based space connectivity
technologies and Guident's human-in-the-loop AI technologies will provide the
first satellite back-up monitoring and control of an autonomous vehicle with
reliable and high-speed bi-directional connectivity.
In a significant step forward, Guident secured a paid proof of concept
agreement with a tier-1 tyre manufacturer for their regenerative shock
absorber. This collaboration resulted in successful tests and detailed reports
regarding the performance of the regenerative shock absorber. Subsequently,
Guident incorporated a new subsidiary, Revive Energy Solutions Ltd, to
commercialise its regenerative shock absorber technology. Guident believes
that in the next few years all electric vehicles will have both regenerative
braking and regenerative shock absorbers to enhance range and comfort.
Tekcapital owned 100% of Guident Ltd and 90% of its U.S. subsidiary Guident
Corporation as of 31 December 2023.
Lucyd has built a smart eyewear business that combines technology with
traditional eyewear.
In 2023, the Company licensed sports culture brand, Reebok® for smart eyewear
through an agreement with Authentic Brands Group. The Company demonstrated
quarterly sales growth in 2023 while also continuing preparation for launch of
its remaining branded products including Nautica and Eddie Bauer. In another
milestone achievement, the Company released Lucyd App, an iOS/Android app that
enables voice interface for ChatGPT on their smart eyewear.
As at 31 December 2023, Tekcapital owns, via it's 100% interest in Lucyd
Limited, 40% of the share capital of Innovative Eyewear, Inc. Innovative
Eyewear shares are listed on the NASDAQ under ticker: LUCY.
Belluscura has developed and sells an improved portable oxygen concentrator to
provide on-the-go supplemental O(2) (oxygen), with user replaceable filter
cartridges.
When a patient's disease progresses, they now can upgrade the filter cartridge
to provide more liters of O(2) per minute, like adding memory on a laptop,
rather than having to replace an expensive medical device. These cost savings
will be beneficial to patients and insurance companies and should help make
portable respiratory devices more affordable which is core to Belluscura's
mission. Belluscura filed for and received clearance from the Hong Kong
Department of Health has received approval for the distribution of the
X-PLOR® portable oxygen concentrators. China has almost 100 million people
living with chronic obstructive pulmonary disease (COPD) and accounts for
almost 25% of all COPD cases globally 1 .
Financial performance
• Net Assets US$47.89m (2022: US$57.8m)
• NAV per share US$0.27 (2022: US$0.38)
• Portfolio valuation US$41.1m (2022: US$54.9m)
• Total loss after tax: US$15.7m, resulting primarily from net unrealised
fair value reduction of US$14.23m (2022: loss of US$12.7m).
Fundraisings during the period
In 2023 we closed share placements totaling US$ 5.2m. (2022: US$ 2.5m),
excluding expenses. Proceeds were used primarily to accelerate the commercial
progress and IPO readiness of Microsalt and fuel the further fabrication and
testing of Guident's regenerative shock absorbers coupled with building
Guident's new remote monitoring and control centre in Boca Raton, Florida.
PRINCIPAL RISKS AND UNCERTAINTIES
The specific financial risks are discussed in the notes to the financial
statements. Other risks are as follows:
We believe the principal financial risks and benefits of the business relate
to the value and performance of the Group's portfolio companies. We believe
that the fair value of each portfolio Company is a time dependent valuation
that may become impaired if the business does not achieve it milestones,
growth trajectory, product development goals, market acceptance, capital
raises or other key performance metrics. Individually and as a group our
portfolio companies have a material impact on our financial performance.
• The risk of individual portfolio company negative performance, in
the future, may be ameliorated, as our portfolio becomes more mature, and when
our portfolio companies develop significant capital reserves, predictable
revenues and have demonstrated significant increases in value. Management's
strategy of early detection and remediation includes continuous monitoring of
sales performance, expenses and capital requirements as well as ongoing
assistance in strategic planning and fundraising activities, amongst others.
• The principal operational risk of the business is management's
ability to assist our portfolio companies in achieving their goals and
ultimate exits whilst having a small team and an additional goal of increasing
our service revenues. Management's strategy of early detection and remediation
includes continuous monitoring of sales performance and expenses, intellectual
property position and strategic direction, as well as ongoing assistance in
executive and board recruitment, IP acquisition and fundraising activities,
amongst others.
• The current barbaric and senseless Russian invasion of Ukraine, as
well as Israel/Gaza conflict over time may contribute to inflation of energy
costs and supply chain disruption which could increase the cost and complexity
of sourcing components for some of our portfolio companies. Additionally, due
to the conflict and the uncertainty it has introduced to the capital markets,
whilst large cap stocks have progressed well, small cap stocks worldwide are
still feeling the pinch, and this can be seen in Belluscura's and Innovative
Eyewear's share prices at the end of the period.
We are grateful for the patience and support of our shareholders. We are also
sincerely appreciative of our dedicated, creative and incredibly hardworking
teams at portfolio companies and our corporate team, without whom, none of the
results reported herein would be possible.
SECTION 172 (1) STATEMENT
Our Board (please also see Board of Directors page for information on
Directors) ensures that all decisions are taken for the long term, and
collectively and individually aims to always uphold the highest standard of
conduct. Similarly, our Board acknowledges that the business can only grow and
prosper over the long-term if it understands and respects the views and needs
of the Company's investors, customers, employees, suppliers and other
stakeholders to whom we are accountable, as well as the environment we operate
within. When making decisions, each director ensures that they act in the way
that would most likely promote the Company's success for the benefit of its
members as a whole, and in doing so have regard (amongst other matters) to the
following matters:
a) The likely consequences of any decision in the long term
In line with our strategy, Tekcapital plc's purpose is to find and invest in
exciting new discoveries from our global university network that can enhance
people's lives. We believe that when you couple commercialisation ready,
compelling university IP with strong senior management, vibrant companies will
likely emerge. When we realise exits the Group's goal is to distribute a
portion of the proceeds as a special dividend to our shareholders.
With this in mind, we apply the same high standards of responsible stewardship
to our businesses as if we were to own them forever, and it is this approach
to decision making that requires the Directors to have regard to the likely
consequences of decisions in the long-term.
The long term decision making and strategy also considers consequences of
climate change, such as changes in extreme and unpredictable weather. The
Board considers the potential impacts of the climate change related
disruptions on business operations of Tekcapital Group and its portfolio
companies as they relate to supply chain, customer demand and business
operations as these risks may affect future investment decisions.
b) The interests of the Group's employees
The Board strives to maintain and develop a culture where everyone feels
valued and included. The Board also considers the health, safety and wellbeing
of all Tekcapital employees in every day decisions. Feedback from employees
is actively encouraged and is considered a key driver in developing our
business activities, processes and workplace environment. Initiatives to
encourage wellbeing are well established and continue to evolve and are
strongly influenced by the workforce. Professional and personal development of
employees is viewed as fundamental to the continued success of the Company.
c) The need to foster the Group's business relationships with
suppliers, customers and others
The Board ensures that the Group's mission is focused on improving the world
with university discoveries, and focuses on innovations that, if successful,
can improve the quality of life of customers we serve. The Board recognises
that it is crucial that we deliver a reliable service to our customers and
maintain excellent relationships with suppliers.
d) The impact of the Group's operations on the community and the
environment
In their decision making, the Directors need to have regard the impact of the
Company's operations on the community and environment. The Board plays a
constructive role in tackling issues through engagement and making sure the
Group's investments focus on improving quality of life and attempt to solve
significant health and safety problems facing communities. The Board also
considers impact of Group's investment decisions on the environment as part of
screening process.
e) The desirability of the Group maintaining a reputation for high
standards of business conduct
The Board recognises that culture, values, and standards are key contributors
to how the Group creates and sustains value over the longer term, and to
enable it to maintain a reputation for high standards of business conduct.
High standards of business conduct guide and assist in the Board's decision
making, and in doing so, help promote the Group's success, recognising,
amongst other things, the likely consequences of any decision in the long-term
and wider stakeholder considerations. The standards set by the Board mandate
certain requirements and behaviour with regards to the activities of the
Directors, the Group's employees and others associated with the Group.
f) The need to act fairly as between members of the Group
The Company has one class of ordinary shares, which have the same rights as
regards voting, distributions and on a liquidation. Management are also
significant shareholders in the Group, holding approximately 6% of the
register, together putting them in the top 3 shareholders of the Group. On
this basis the Board feels that the executive Directors are fully aligned with
shareholders.
g) MicroSalt Ltd ('Microsalt') listing
As at 31 December 2023, we had initiated the process for listing of Microsalt
Ltd's shares to enhance its ability to raise capital and compete effectively
in the sodium reduction market. The listing, if successful, will enhance the
Microsalt's ability to recruit experienced managers by being able to offer
associates stock options grants with a near-term path towards monetisation.
h) Fundraising activities
During the course of the year, Tekcapital plc consummated two fundraises for
dual reason of continued investment in our portfolio companies and to increase
our available working capital. The former reason is consistent with board
policies mentioned in our current report.
We are enthusiastic about the development of Tekcapital's portfolio companies,
their performance to-date and their prospects to significantly expand in 2024.
The Board is confident that continued investment in our portfolio companies
remains the right approach for potential long-term value creation.
Additionally, we are currently exploring early-stage venture funding for
Guident to accelerate growth further.
Clifford M. Gross, Ph.D.
Chairman and CEO
21 May 2024
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2023
PRINCIPAL ACTIVITIES
The principal activity of the Group and the parent Company is that of an
investment entity.
RESULTS AND DIVIDENDS
The results for the period are set out in the consolidated statement of
comprehensive income on page 29. No dividend was declared or paid during the
period ended 31 December 2023 (2022: $nil).
DIRECTORS
The following Directors held office during the period:
Clifford M Gross, Ph.D.
Robert Miller, M.D.
Louis Castro, FCA
The RT Hon Lord David Willetts FRS
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the financial statements in
accordance with applicable laws and regulations.
Under that law the Directors are required to prepare the Group financial
statements in accordance with International Financial Reporting Standards as
adopted in the United Kingdom ("UK adopted IFRS") and have also chosen to
prepare the Company financial statements in accordance with the United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 Reduced Disclosure Framework, and applicable law). Under
company law, the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and the Parent Company and of their profit or loss for that
period.
.In preparing those financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgments and estimates that are reasonable;
· state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
· prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and the Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and the Company and to enable them to ensure that the financial
statements comply with the Companies Act 2006. The Directors are also
responsible for safeguarding the assets of the Group and the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2023
Each of the current Directors, whose names are listed in the Directors' report
on this page of the financial statements confirm that, to the best of each
person's knowledge and belief:
· the Group financial statements, prepared in accordance with
UK-adopted IFRS, give a true and fair view of the assets, liabilities,
financial position and profit (or loss) of the Group;
· the Company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS 101
Reduced Disclosure Framework, give a true and fair view of the Company's
assets, liabilities and financial position of the Company; and
· the chairman's statement contained in the annual financial statements
includes a fair review of the development and performance of the business and
the position of the Group and Company, together with a description of the
principal risks and uncertainties that they face.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Group's website
www.tekcapital.com. (http://www.tekcapital.com/) Legislation in the United
Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
GOING CONCERN
The Group meets its day-to-day working capital requirements through its
service offerings, cash at bank, monies raised in follow-on offerings and
realisation of its investments. The Group's forecasts and projections indicate
that the Group has sufficient cash reserves to operate within the level of its
current facilities.
The Group has access to equity markets if it seeks additional funds. At the
time of approving the accounts after making enquiries, the Directors have a
reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future.
See Note 2.1.1 for additional information on Going Concern.
FUTURE DEVELOPMENTS
No changes in the nature of the business is expected in the foreseeable
future.
Information has been included in the strategic report in relation to
disclosures under S414C(11) of the Companies Act 2006.
AUDIT COMMITTEE REPORT
The Board operates an Audit Committee, chaired by Louis Castro. This Committee
carries out duties as set out in the AIM Admission Document, supervising the
financial and reporting arrangements of the Group. During the period, no
issues arose that the Directors consider appropriate to disclose in their
Report. The audit committee met 3 times during the period.
DIRECTORS' REPORT FOR THE YEAR ENDED
31 DECEMBER 2023
DIRECTORS' EMOLUMENTS
Salary & Benefits Bonus 2023 2022
fees in kind Total Total
US $ US $ US $ US $ US $
Clifford M Gross 254,096 27,846 - 281,942 530,722
Robert Miller 23,261 - - 23,261 23,261
Louis Castro 44,779 - - 44,779 44,804
Lord David Willetts 36,694 - - 36,694 36,714
358,830 27,846 - 386,676 635,501
The Director's proportion of the share option expense was US$1,362 (2022:
US$62,747). The Group did not make any contributions to a pension scheme in
the year ended 31 December 2023 (2022: Nil). The Directors' beneficial
interests in shares is set out below:
2023 2022 2023 2022
No of Shares No of Shares No of Options No of Options
Clifford M Gross 8,657,500 8,657,500 3,000,000 3,000,000
Lord David Willetts - - 200,000 200,000
Robert Miller 2,664 2,664 200,000 200,000
Please note the above figure for Clifford M Gross does not include 100,000
shares held by both of Dr. Gross's adult children who are not considered a PCA
as defined in the Article 3(1)(26) of the UK Market Abuse Regulation.
The details of the options held by each director at 31 December 2023 are as
follows:
No of Options Exercise Price Grant Date Date from which exercisable Life
Clifford M Gross 3,000,000 £0.12 27-Aug-20 Special Conditions* 5 Years
Robert Miller 100,000 £0.081 30-Aug-19 Special Conditions** 5 Years
100,000 £0.19 16-Jun-21 Special Conditions** 5 Years
Lord David Willetts 100,000 £0.0525 6-Jan-20 Special Conditions** 5 Years
100,000 0.19 16-Jun-21 Special Conditions** 5 Years
DIRECTORS' REPORT FOR THE YEAR ENDED
31 DECEMBER 2023
DIRECTORS' EMOLUMENTS (CONTINUED)
* The options vest in three equal annual instalments from the date of grant
and there is a special condition which means the options will vest when the
closing price for a share has been traded at more than 50 pence (sterling) for
ten consecutive trading days.
** The options shall vest when the net asset value, as stated in the annual
consolidated accounts, meets, or exceeds USD$20.53m during the 36 months after
the grant date. The threshold shall be re-tested when each set of accounts
published during the 36 months are finalised.
An additional 525,000 options were held by Harrison Gross, family member of
Dr. Clifford Gross.
Total of key management personnel compensation including short term benefits
and share based payments is disclosed in Note 8 of the accounts below.
DIRECTORS' INDEMNITY ARRANGEMENTS
The Group has made qualifying third-party indemnity provisions for the benefit
of the Directors, which were made during the period and remain in force at the
date of this report.
The Group has purchased and maintained throughout the period Directors &
Officers liability insurance in respect of itself and its Directors.
PRINCIPAL RISKS & UNCERTAINTIES
Please refer to strategic report.
RESEARCH & DEVELOPMENT ACTIVITIES
The Group conducted research and development activities pertinent to
incorporation of Generative AI technology to Invention Evaluator and Vortechs
services.
POST BALANCE SHEET EVENTS
For further details, please refer to note 26 in the notes to the accounts.
Information has been included in the strategic report under S414C(11).
For financial instruments risks, please refer to Note 3.1 of the Notes to the
Financial Statements.
Directors' Remuneration report
The Board has delegated to its Remuneration Committee, chaired by Robert
Miller, certain responsibilities in respect of the remuneration of senior
executives. During the period, no issues arose that the Directors consider
appropriate to disclose in their Report. The remuneration committee meets at
least 2 times during the calendar year.
INDEPENDENT AUDITORS
MHA were appointed as auditor to the Group and the Company and in accordance
with section 485 of the Companies Act 2006. Following a rebranding exercise on
15 May 2023 the trading name of the company's independent auditor changed from
MHA MacIntyre Hudson to MHA. A resolution to reappoint MHA as independent
auditor will be proposed at the next Annual General Meeting.
Statement of disclosure of information to auditors
Each of the persons who was a Director at the date of approval of this report
confirms that:
• so far as the Director is aware, there is no relevant audit
information of which the Company's auditor is unaware; and the Director has
taken all the steps that he ought to have taken as a Director in order to make
himself aware of any relevant audit information and to establish that the
Company's auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the
provisions of s418 of the Companies Act 2006.
By order of the Board of Directors and signed on behalf of the Board
Louis Castro
Director
21 May 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2023
Year ended Period ended
Group Note 31 December 31 December
2023 2022
US $ US $
Continuing operations
Revenue from services 6 735,265 615,214
Cost of sales (314,083) (222,361)
Changes in fair value on financial assets at fair value though profit or loss 12 (14,229,009) (10,978,372)
Interest from financial assets at fair value through profit or loss 12 455,096 286,583
Operating expenses 7 (2,353,704) (2,524,496)
Other income 6.1 20,384 79,638
Operating loss and loss before tax (15,686,051) (12,743,794)
Income tax expense 9 (2,266) (1,714)
Loss after tax for the year/period (15,688,317) (12,745,507)
Other comprehensive income*
Translation of foreign operations 900,722 (212,803)
Total other comprehensive income/(expense) 900,722 (212,803)
Total comprehensive loss for the year/period (14,787,595) (12,958,311)
Earnings per share
Basic losses per share 10 (0.09) (0.09)
Diluted losses per share 10 (0.09) (0.09)
* May be reclassified to profit or loss in future years.
All comprehensive income as presented above belongs to the owners of the
Group.
The notes on pages 34 to 64 are an integral part of these consolidated
financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2023
As at 31 December As at 31 December
Group Note 2023 2022
US$ US$
Assets
Non-current assets
Intangible assets 13 218,158 242,940
Financial assets at fair value through profit and loss 12 46,653,995 56,184,146
Property, plant and equipment 14 14,271 9,969
46,886,424 56,437,055
Current assets
Trade and other receivables 15 1,114,753 1,088,043
Cash and cash equivalents 16 620,248 628,640
1,735,001 1,716,683
Total assets 48,621,425 58,153,738
Current liabilities
Trade and other payables 19 517,154 215,998
Deferred revenue 20 217,391 172,610
734,545 388,608
Total liabilities 734,545 388,608
Net assets 47,886,880 57,765,130
Equity attributable to owners of the Parent
Ordinary shares 18 973,329 839,723
Share premium 28,937,011 24,240,930
Retained earnings 17,073,617 32,682,276
Translation reserve 975,092 74,370
Other reserve (72,169) (72,169)
Total equity 47,886,880 57,765,130
The notes on pages 34 to 64 are an integral part of these financial
statements.
The financial statements on pages 29 to 64 were approved and authorised for
issue by the Board of Directors on 21 May 2024 and were signed on its behalf.
Louis Castro
Director
Tekcapital PLC
registered number 08873361
Dr Clifford M Gross
Chairman and CEO
Dr Clifford M Gross
Chairman and CEO
STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 31 DECEMBER 2023
Attributable to equity holders of the parent company
Ordinary Share Translation Other Retained Total
Group Note Shares Premium Reserve Reserve Earnings Equity
US $ US $ US $ US $ US $ US $
At 30 November 2021 793,792 21,793,644 287,173 (72,169) 45,259,827 68,062,267
Profit for the year - - - - (12,745,508) (12,745,508)
Other comprehensive income - - (212,803) - (212,803)
Total comprehensive income for the year - - (212,803) - (12,745,508) (12,958,311)
Transactions with owners, recorded
directly in equity
Share issue 18 40,486 2,489,878 - - - 2,530,364
Cost of share issue - (142,839) - - - (142,839)
Share issue in share option exercise 18 5,445 100,247 105,692
Share based payments 24 - - - - 167,957 167,957
Total transactions with owners 45,931 2,447,286 - - 167,957 2,661,174
At 31 December 2022 839,723 24,240,930 74,370 (72,169) 32,682,276 57,765,130
Loss for the period (15,688,317) (15,688,317)
Other comprehensive loss 900,722 900,722
Total comprehensive loss for the period - - 900,722 - (15,688,317) (14,787,595)
Transactions with owners, recorded -
directly in equity
Share issue 18 133,606 5,045,893 - - - 5,179,499
Cost of share issue - (349,812) - - - (349,812)
Share issue in share option exercise 18 - - - - - -
Share based payments 24 - - - - 79,658 79,658
Total transactions with owners 133,606 4,696,081 - - 79,658 4,909,345
At 31 December 2023 973,329 28,937,011 975,092 (72,169) 17,073,617 47,886,880
Share premium - amount subscribed for share capital in excess of nominal
value, net of directly attributable costs.
Translation reserve - foreign exchange differences recognized in other
comprehensive income.
Other reserve - historic other reserve outside of share premium, translation
reserve and share premium.
Retained earnings - cumulative net gains and losses recognised in the
consolidated statement of comprehensive income, net of dividends paid.
The notes on pages 34 to 64 are an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023
Note 31 December 2023 Period ended 31 December 2022
US $ US $
Cash flows from operating activities
Loss after income tax (15,688,317) (12,745,508)
Adjustments for
- Impairment Loss - 37,584
- Depreciation 2,523 6,553
- Amortisation 83,786 83,877
- Share based payment expense 79,658 167,957
- Management services income (455,777) (419,697)
- Interest from financial assets at FVTP&L (455,096) (286,583)
- Unrealised (gains)/losses on foreign exchange 620,843 (220,080)
- Fair value (gain)/losses on financial assets at FVTP&L 14,229,009 11,014,609
Movement in working capital:
- Movement in trade and other receivables (26,710) (399,040)
- Deferred revenue movement 44,781 3,326
- Movement in trade and other payables 301,156 (21,653)
Net cash outflows from operating activities (1,264,144) (2,778,655)
Cash flows from investing activities
Additions to financial assets at fair value through profit and loss 12 (3,999,072) (3,970,900)
Proceeds from disposals of financial assets at fair value through profit and 12 478,008 1,073,792
loss
Purchases of intangibles 13 (59,004) -
Purchases of property, plant and equipment 14 (6,825) (9,919)
Net cash outflows investing activities (3,586,893) (2,907,027)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 18 5,179,498 2,636,056
Costs of raising finance 18 (349,812) (142,839)
Net cash inflows from financing activities 4,829,686 2,493,217
Net (decrease)/increase in cash and cash equivalents 271,543 (3,192,465)
Cash and cash equivalents at beginning of year 16 628,640 3,543,762
Exchange gains/(losses) on cash and cash equivalents 12,961 277,343
Cash and cash equivalents at end of period/year 16 620,248 628,640
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Tekcapital PLC (Companies House registration number: 08873361) is a Company
incorporated in England and Wales and domiciled in the UK. The address of the
registered office is 12 New Fetter Lane, London, United Kingdom, EC4A 1JP. The
Company is a public limited company limited by shares, which listed on the AIM
market of the London Stock Exchange in 2014. The principal activity of the
Group is to provide universities and corporate clients with valuable
technology transfer services. The Group also acquires exclusive licences to
university technologies that it believes can positively impact people's lives,
for subsequent commercialisation.
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
During the previous period, the Group and the Company changed their accounting
reference date from 30 November to 31 December to follow the accounting
periods of portfolio companies. As a result, the consolidated financial
statements of Tekcapital PLC have been prepared for the 12 month period to 31
December 2023. Comparative amounts presented in the Group and Company
financial statements are for the 13 months ended 31 December 2022, and as such
the amounts presented are not entirely comparable.
While the financial information included in this preliminary announcement
has been prepared in accordance with the recognition and measurement criteria
of International Financial Reporting Standards, this announcement does not
itself contain sufficient information to comply with those standards. The
Company expects to publish full financial statements that comply with
International Financial Reporting Standards in June 2024.
Amounts presented in this report are rounded to nearest US$1.
2. MATERIAL ACCOUNTING POLICIES
2.1 STATEMENT OF COMPLIANCE
The consolidated financial statements of Tekcapital have been prepared in
accordance with International Financial Reporting Standards as adopted in the
United Kingdom ("UK adopted IFRS") UK-adopted International Financial
Reporting Standard ("UK adopted IFRS") and those parts of the Companies Act
2006 that are relevant to companies which report in accordance with UK adopted
IFRS. The consolidated financial statements have been prepared under the
historical cost convention. The consolidated financial statements comprise
the financial statements of Tekcapital plc and its subsidiaries, Tekcapital
Europe Ltd and Tekcapital LLC.
The preparation of financial statements in accordance with UK-adopted
International Financial Reporting Standards requires the use of certain
critical accounting estimates. It requires management to exercise its
judgement in the process of applying the Group's accounting policies. The
areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the consolidated financial
statements are disclosed in note 4.
2.1.1 GOING CONCERN
The financial statements have been prepared on a going concern basis.
The Group and Company meet their day to day working capital requirements
through service offerings, monetisation of quoted equity stakes and monies
raised through issues of equity. As disclosed in note 26, the Group announced
a placing to raise £2,000,000 in February 2024. This has resulted in an
increase in the Group's cash balance since the year end.
The Group's forecasts and projections indicate that the Group and Company have
sufficient cash reserves to operate within the level of its current funds. The
forecasts and projections included assumptions and estimation uncertainties
related to Group's service revenues, cost of goods sold and operating
expenses, as determined by impact to the cash runway of the Group and the
Company. The Group has no third party debt facilities.
The Directors have prepared detailed cash flow projections for the period to
30 May 2025 ("going concern assessment period"). The cash flow projections
have been subjected to sensitivity analysis which demonstrate that the Group
and Company will maintain a positive cash balance through the going concern
assessment period.
The Directors have also considered the geo-political environment, including
rising inflation, and whilst the impact on the Group is currently deemed
minimal, the Directors remain vigilant.
On this basis, the Directors have therefore concluded that it is appropriate
to prepare the financial statements on a going concern basis.
2.1.2 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
Standards and Interpretations not yet effective
The Group has applied the following standards and amendments for the first
time for its annual reporting period commencing 1 January 2023:
• IFRS 17 Insurance Contracts;
• Definition of Accounting Estimates - amendments to IAS 8;
• International Tax Reform - Pillar Tow Model Rules - amendments to IAS
12;
• Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - amendments to IAS 12; and
• Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2.
The amendments listed above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
There are a number of standards, amendments to standards, and interpretations
which have been issued that are effective in future accounting periods that
the Group has decided not to adopt early as they will not have a significant
impact on the presentation of the Group financial statements.
2.2 CONSOLIDATION
The consolidated financial statements comprise the financial statements of
Tekcapital PLC and all subsidiaries controlled by it, except from indirect
subsidiaries
Subsidiaries are entities that are controlled by the Group. Control is
achieved when the Group has the power to govern the financial and operating
policies of an entity so as to obtain economic benefit from its activities.
Intercompany transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated
when necessary amounts reported by subsidiaries have been adjusted to conform
to the Group's accounting policies.
2.3 FOREIGN CURRENCIES
(a) Functional and presentation currency
These consolidated financial statements are presented in US Dollars which is
the presentation currency of the Group. The Directors consider this to be the
most appropriate presentational currency. Each subsidiary within the Group has
its own functional currency which is dependent on the primary economic
environment in which that subsidiary operates. The functional currency of
Tekcapital Plc is UK sterling as this is the currency the entity undertakes
its primary economic activity.
(b) Transactions and Balances
Foreign currency transactions are translated into functional currency using
the exchange rates prevailing at the dates of the transactions or valuation
where items are re-measured.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at the year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement. Foreign exchange gains and losses that
relate to cash and cash equivalents are presented in the consolidated
statement of comprehensive income statement within 'operating expenses'.
(c) Group companies
The results and financial position of all Group entities (none of which has
the currency of a hyper-inflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
(i) Monetary assets and liabilities for each balance sheet presented are
translated at the closing exchange rates at the date of that balance sheet.
(ii) Income and expense for each income statement are translated at the
average rates of exchange during the period (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are translated at the
rate on the dates of the transactions)
(iii) All resulting exchange differences are recognized in other comprehensive
income.
2.4 INVESTMENT IN PORTFOLIO COMPANIES
Investments in portfolio companies are held at fair value through the profit
and loss. Directors' judgment was exercised in determination that the Group
meets the following criteria and should be recognized as an investment entity
under IFRS 10 par. 27. Directors re-evaluated the below criteria and concluded
they were met as at 31 December 2023:
· Obtains funds from one or more investors for the purpose of
providing clients with investment management services
· Commits to its investors that its business purpose is to invest
funds solely for return from capital appreciation, investment income or both
· Measures and evaluate the performance of substantially all of its
investments on a fair value basis.
Tekcapital's IP search and technology transfer investment services represent
investment advisory services, and therefore Tekcapital Europe Limited and
Tekcapital LLC continue to be treated as subsidiaries and are consolidated in
the Group financial statements. These services may be provided to investors,
clients and third parties. The Board considers that the criteria are met in
the group's current circumstances.
The Board envisages that Tekcapital's shareholder returns will derive
primarily from mid to long-term capital appreciation of a portion of its
intellectual property investments, as well as from providing IP investment
services to clients. Consequently, the Group's portfolio companies are
measured at fair value in accordance with IFRS 9 as disclosed in Note 2.8.3.
2.5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at historical cost less accumulated
depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Subsequent costs are included in
the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the
item will flow to the Group and the cost of the item can be measured reliably.
All other repairs and maintenance are charged to the income statement during
the financial period in which they are incurred. Depreciation of assets are
calculated to write off the cost less the estimated residual value of tangible
fixed assets by equal instalments over the estimated useful economic lives as
follows:
Furniture
3years
Computer equipment 3years
Leasehold improvements 5years
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period. The asset's carrying amount
is written down immediately to its recoverable amount if the assets carrying
value is greater than its estimated recoverable amount. Gains and losses on
disposals are determined by comparing proceeds with the carrying amount and
are recognised within 'Operating expenses' in the income statement.
2.6 INTANGIBLE ASSETS
Intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and accumulated impairment losses. Amortisation is
charged to the administrative expenses in the Statement of Comprehensive
Income on a straight-line basis over the estimated useful lives of intangible
assets unless such lives are indefinite.
(a) INVENTION EVALUATOR
This is an intangible asset and a piece of computer software acquired for use
by one of the subsidiaries of the Group.
The estimated useful life of the Invention Evaluator intangible asset is 10
years. The useful life is estimated based upon management's best estimate of
the expected life of the asset. The useful life is reconsidered if
circumstances relating to the asset change or if there is an indication that
the initial estimate requires revision.
The intangible asset has a finite life of 10 years over which amortisation is
charged on a straight line basis.
(b) COMPUTER SOFTWARE AND WEBSITE DEVELOPMENT
Costs associated with maintaining computer software programmes and the Company
website are recognised as an expense as incurred. Development costs that are
directly attributable to the design and testing of identifiable and unique
software products controlled by the Group are recognised as intangible assets
when the following criteria are met:
(i) it is technically feasible to complete the software product so that it
will be available for use;
(ii) management intends to complete the software product and use or sell it;
(iii) there is an ability to use or sell the software product;
(iv) it can be demonstrated how the software product will generate probable
future economic benefits;
(v) adequate technical, financial and other resources to complete the
development and to use or sell the
software product is available; and
(vi) the expenditure attributable to the software product during its
development can be reliably measured.
Computer software development costs recognised as assets are amortised over
their estimated useful lives, which do not exceed four years.
(c) VORTECHS GROUP
This is an intangible asset acquired for use by one of the subsidiaries of the
Group. The estimated useful life of the Vortechs Group intangible asset is 10
years over which amoritsation is charged on a straightline basis. The useful
life is estimated based upon management's best estimate of the expected life
of the asset. The useful life is reconsidered if circumstances relating to the
asset change or if there is an indication that the initial estimate requires
revision.
2.7 IMPAIRMENT OF NON-FINANCIAL ASSETS
Intangible assets that have an indefinite useful life or intangible assets not
ready to use are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognized for
the amount by which the asset's carrying value exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less costs of
disposal and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are largely independent cash
inflows, (CGUs). Prior impairments of non-financial assets are reviewed for
possible reversal at each reporting date.
2.8 FINANCIAL INSTRUMENTS
2.8.1 CLASSIFICATION AND MEASUREMENT
The Group classifies its financial assets depending on the purpose for which
the asset was acquired. Management determines the classification of its
financial assets at initial recognition.
During the financial year the Group held investments in portfolio companies
classified as equity investments. They are included in non-current assets
and are measured at fair value through profit and loss in accordance with IFRS
9.
The Group has convertible loan note receivables. These financial assets are
classified and measured at fair value through profit and loss in accordance
with IFRS 9.
The Group also has receivables carried at amortised cost. They are included in
current assets. The Group's service income receivables comprise 'trade and
other receivables' in the balance sheet, also held at amortised cost. The
Group also has cash and cash equivalents.
All short-term liabilities are measured at amortised cost, the Group does not
hold any long-term financial liabilities.
2.8.2 DERECOGNITION
Loans and receivables are recognised and carried at amortised cost. Financial
assets are derecognised when the rights to receive cash flows from the loans
or receivables have been collected, expired or transferred and the Group has
subsequently transferred substantially all risks and rewards of ownership.
2.8.3 FAIR VALUE
Financial instruments are measured at fair value including investments in
portfolio companies, cash and cash equivalents, trade and other receivables,
trade and other payables, and convertible loan note receivables. This
measurement policy does not apply to subsequent measurement at amortised
cost of short term financial liabilities and trade receivables.
The Group measures portfolio companies using valuation techniques appropriate
in the circumstances and for which sufficient data are available to measure
fair value, maximising the use of relevant observable inputs and minimising
the use of unobservable inputs. Our fair value valuation policy is as follows:
The fair value of new portfolio companies is estimated at the cost of the
acquired IP or equity plus associated expenses to facilitate the acquisition.
Existing portfolio companies are valued as follows:
· If a market transaction such as third-party funding has occurred
during the past 12 months, we will value our ownership in the portfolio
Company at this observed valuation, taking account of any observed material
changes during the period, including quoted prices in active markets (Level 1
input).
· In the absence of a recent market transaction, fair value will be
estimated by alternative methods and where appropriate by an external,
qualified valuation expert. The valuation techniques fall under Level 2 -
Observable techniques other quoted prices and Level 3 - other techniques as
defined by IFRS 13.
Due to their short-term nature, the carrying value of cash and cash
equivalents, trade and other receivables, and trade and other payables
approximate their fair value.
2.9 OFFSETTING FINANCIAL INSTRUMENTS
Financial assets and liabilities are offset and the net amount reported in the
balance sheet when there is a legally enforceable right to offset the
recognised amounts and there is the intention to settle on a net basis or
realise the asset and settle the liability simultaneously.
2.10 IMPAIRMENT OF FINANCIAL ASSETS
Impairment provisions for trade receivables are recognized based on the
simplified approach within IFRS 9 using the lifetime expected credit losses.
During this process the probability of the non-payment of the trade
receivables is assessed, including forward-looking information on customers
standing and macroeconomic information including sector specific circumstances
This probability is then multiplied by the amount of the expected loss arising
from default to determine the lifetime expected credit loss for the trade
receivables. For trade receivables, which are reported net, such provisions
are recorded in a separate provision account with the loss being recognized
within operating expenses in the consolidated statement of comprehensive
income. On confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the associated
provision.
Financial assets held at amortised cost comprise trade and other receivables,
and cash and cash equivalents in the consolidated statements of financial
position.
2.11 CASH AND CASH EQUIVALENTS
In the consolidated statement of cash flows, cash and cash equivalents
includes cash in hand, deposits held at call with other banks, other short
term highly liquid investments with maturities of three months or less from
inception.
2.12 SHARE CAPITAL
Ordinary Shares
Ordinary Shares are classified as equity.
Share premium
The share premium account has been established to represent the excess of
proceeds over the nominal value for all share issues, including the excess of
the exercise share price over the nominal value of the shares on the exercise
of share options as and when they occur. Incremental costs directly
attributable to the issue of new ordinary shares and new shares options are
shown in equity as a deduction, net of tax, from the proceeds.
2.13 TRADE PAYABLES
Trade payables are obligations to pay for goods and services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or
less (or in the normal operating cycle of business if longer). If not, they
are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest rate method.
2.14 SHARE BASED PAYMENTS
The Group operates a number of equity-settled, share-based compensation plans,
under which the entity receives services from employees as consideration for
equity instruments (options) of the Group. The fair value of the employee
services received in exchange for the grant of options is recognised as an
expense. The total amount to be expensed is determined by reference to the
fair value of the options granted:
• Including any market performance conditions;
• excluding the impact of any service and non-market performance
vesting conditions (for example, profitability, sales growth targets and
remaining an employee of the entity over a specified time period);
• excluding the impact of any non-vesting conditions (for example
the requirement of the employees to save).
Assumptions about the number of options that are expected to vest include
consideration of non-market vesting conditions. The total expense is
recognised over the vesting period, which is the period over which all of the
specified vesting conditions are to be satisfied. At the end of each
reporting period, the entity revises its estimates of the number of options
that are expected to vest based on the non-market vesting conditions. It
recognises the impact of the revision to the original estimates, if any, in
the income statement, with a corresponding adjustment to equity.
When the options are exercised, the Group issues new shares. The proceeds
received net of any directly attributable transactions costs are credited to
share capital (nominal value) and share premium when the options are
exercised.
2.15 CURRENT AND DEFERRED TAX
The tax expense for the year comprises current and deferred tax. Tax is
recognised in the consolidated income statement, except to the extent that it
relates to items recognised in other comprehensive income or directly in
equity. In this case, the tax is also recognised in other comprehensive income
or directly in equity, respectively.
The current income tax charge is calculated on the basis of tax laws enacted
or substantively enacted at the balance sheet date in the countries where the
Company and its subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.
Deferred income tax is recognised on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. However, deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill; deferred
income tax is not accounted for if it arises from initial recognition of an
asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit or
loss.
Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the balance sheet date and are expected to
apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is
probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences
arising from investments in subsidiaries except for deferred income tax
liability where the timing of the reversal of the temporary difference is
controlled by the Group and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred income tax assets are recognised on deductible temporary differences
arising from investments in subsidiaries only to the extent that it is
probable the temporary difference will reverse in full in the future and there
is sufficient taxable profit available against which the temporary difference
can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the same taxable entity or
different taxable entities where there is an intention to settle balances on a
net basis.
2.16 REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received or
receivable, and represents amounts receivable for the services supplied,
stated net of discounts, and value added taxes. The Group recognises revenue
when the contract is identified, performance obligation is determined,
transaction price (as defined for each service below) is determined and
allocated to performance obligation in accordance with IFRS 15.
Provision of services
The Group provides following lines of services:
• Invention Evaluator services: provision of reports assessing
potential of any new technology. Revenue is recognised upon delivery of a
complete report, when the report is made available to each customer. Upon
access to the report delivered via online portal, customers consume the
benefits of the contractual obligation, and the performance obligation is met.
Directors consider transaction price to be clearly determined upon payment of
fixed fee for each report prior to report's delivery. Directors considered
uncertainty of cash flows from sales to be limited, considering prepayment is
made for each report prior to report's delivery.
• Tech transfer recruitment services (Vortechs Group): recruitment
services specialising in technology transfer executives. Revenue is recognised
upon placement of an executive, when hire is made by Tekcapital's customer and
the performance obligation is met. Directors consider transaction price to be
clearly determined when both parties agree to placement fee for each
successful hire. Directors considered uncertainty of cash flows from sales to
be limited, considering payments are made by universities with excellent track
record of payments and clear definition of performance obligation upon which
such payment is made.
• Management services: accounting, tax, legal and other services
provided to portfolio companies. Revenue is recognized upon delivery of
services to each portfolio Company and performance obligation is met as
defined in the management service contract. Directors considering transaction
price to be clearly determined by amounts specified in the management service
agreements. Directors considered uncertainty of cash flows from sales to be
limited, considering payments are made by companies with excellent track
record of payments and clear definition of performance obligation upon which
such payment is made.
For breakdown of revenue from services recognised over time and at point of
time, please refer to Note 6 to Financial Statements.
2.17 OTHER INCOME
The Group recognizes research and development (R&D) relief under other
income.
2.18 INTEREST INCOME
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable (10%).
3. FINANCIAL RISK MANAGEMENT
3.1 FINANCIAL RISK FACTORS
(a) Portfolio risk/investment management
Investment into portfolio companies held by the Group requires long-term
commitment with no certainty of return.
The fair value of each portfolio Company represents the best estimate at a
point in time and may be impaired if the business does not perform as well as
expected, directly impacting the Group's value and profitability. This risk is
mitigated as the size of the portfolio increases. The Group performed
sensitivity analysis with regards to assumptions used in determination of fair
value of the portfolio in Note 12.
The Group also regularly monitors portfolio companies' liquidity required for
returns to occur.
(b) Credit risk management
Credit risk is managed on a Group basis. In order to minimise this risk, the
Group endeavours to only deal with companies that are demonstrable
creditworthy, and the Directors continuously monitor the exposure. The
Directors determine the default as lack of payment after more than 180 days
and or counter party's bankruptcy filings. The Group's maximum exposure to
credit risk for the components of financial position at 31 December 2023 and
31 December 2022 is the carrying amount of its current trade and other
receivables as illustrated in Note 15.
While IFRS 9 does not require expected credit loss allowance on assets held at
fair value through profit and loss, the Group monitors credit risk related to
performance of portfolio companies, including considerations related to
recoverability of convertible loan notes held as carrying amount of notes
represent the maximum exposure to credit risk. Progress is monitored and
regular discussions are held with management of portfolio companies to assess
commercial progress and financial information provided.
IFRS9 requires the Company to assess expected credit losses on assets
classified as held at amortised cost, under a forward-looking model approach.
For the Group accounts this includes Receivables from related parties and
other immaterial receivables. For the Company accounts this includes
Receivables from Group Companies.
The Group also monitors credit risk from balances with banks and institutions.
(c) Liquidity risk management
Cash flow forecasting is performed on a Group basis. The Directors monitor
rolling forecasts of the Group's liquidity requirements to ensure it has
sufficient cash to meet operational needs. Post period end, the Group
announced placing to raise GBP 2,000,000 on 29 February 2024. At the reporting
date the Group held bank balances of US$620,248. All amounts shown in the
consolidated statement of financial position under current assets and current
liabilities mature for payment within one year, with Trade and Other
Receivables exceeding Trade and Other Payables by US US$1,275,482.
(d) Financial risk management
The Company's Directors review the financial risk of the Group. Due to the
early stage of its operations the Group has not entered into any form of
financial instruments to assist in the management of risk during the period
under review.
(e) Market risk management
Due to low value and number of financial transactions that involve foreign
currency and the fact that the Group has no borrowings to manage, the
Directors have not entered into any arrangements, adopted or approved the use
of derivative financial instruments to assist in the management of the
exposure of these risks. It is their view that any exchange risks on such
transactions are negligible.
The Group also regularly monitors risk related to fair value of financial
instruments held such as convertible loan notes held.
(f) Foreign exchange risk management
Foreign exchange risk arises when individual Group entities enter into
transactions denominated in a currency other than their functional currency.
The Group's policy is, where possible, to allow Group entities to settle
liabilities denominated in their functional currency, with the cash generated
from their own operations in that currency. Where Group entities have
liabilities denominated in a currency other than their functional currency
(and have insufficient reserves of that currency to settle them), cash already
denominated in that currency will, where possible, be transferred from
elsewhere within the Group.
A sensitivity analysis has been performed to assess the exposure of the Group
to foreign exchange movements. The Group only has exposure to movements of the
US dollar against UK Sterling. As at 31 December 2023, the Group's UK Sterling
net exposure relating to cash, receivables and payables denominated in UK
Sterling totals $27,279. A 20% strengthening or weakening of the US dollar
against the UK Sterling would have an immaterial impact on the consolidated
results and equity.
(g) Interest rate risk management
The Group has no borrowings.
3.2 CAPITAL MANAGEMENT
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders, benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to adjust or maintain the capital structure, the Group may adjust the
level of dividends paid to its shareholders, return capital to shareholders,
issue new shares or sell assets to reduce borrowings. The Group has no
external borrowings. This policy is periodically reviewed by the Directors,
and the Group's strategy remains unchanged for the foreseeable future.
The capital structure of the Group consists of cash and bank balances and
equity consisting of issued share capital, reserves and retained losses of the
Group. The Directors regularly review the capital structure of the Company and
consider the cost of capital and the associated risks with each class of
capital.
The Company's historic cost of capital has been the cost of securing equity
financings, which have averaged around 10%. the Company's long-term financial
goal is to optimise its returns on invested capital (ROIC) in excess of our
weighted average cost of capital (WACC) and as such create value for our
shareholders. The method the Company seeks to employ for achieving this is to
utilise its structural intellectual capital developed through its Discovery
Search Network, its Invention Evaluator service and its Vortechs Group Service
to mitigate selection bias and improve returns on invested capital.
Ultimately, management will seek to monetise these returns with exits from its
investments in portfolio companies.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances. The Directors made the
following judgements:
- determination as to the classification of the Group as an investment
entity as discussed in Note 2.4
- determination of operating segments as disclosed in Note 5
- determination of reliance of the Group's portfolio companies on
funding to achieve their fair values discussed in Note 12.
The Directors also make estimates and assumptions concerning the future. The
resulting accounting estimates will by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying value of the assets and
liabilities within the next financial year are detailed below.
Key estimate/ judgment area Key assumption Potential impact within the next financial year Potential impact in the longer term Note reference for sensitivity analysis
Valuation of unquoted equity investments In applying valuation techniques to determine the fair value of unquoted Yes Yes Note 12
equity investments the Group makes estimates and assumptions regarding the
future potential of the investments. The policy of the Group is to value new
portfolio companies at cost of the acquired IP or equity plus associated
expenses to facilitate the acquisition. Existing portfolio companies are
valued using either a market transaction such as third-party funding or, in
the absence of a recent market transaction, by alternative methods and where
appropriate by an external, qualified valuation expert.
The fair value of Guident Limited reflects input in the form of value of
Guident Ltd's shares in its US subsidiary (Guident Corp) as determined by
recent market transactions of these shares.
Valuation This input was corroborated by Guident's enterprise valuation by estimating Yes Yes Note 12
the net present value of future cashflows associated with its business. Key
of assumptions used in estimating future cash flows are projected profits
including remote monitor and control centre and shock absorber sales and a
unquoted equity investments discount factor applied for the net present value of future cashflows from the
platform.
The fair value of Microsalt plc reflects input in the form of value of
Microsalt Ltd's shares in its US subsidiary (Microsalt Inc) as determined by
pre money valuation determined by the bankers as part of Company's pre IPO
procedures. This input was corroborated by Microsalt's enterprise valuation by
estimating the net present value of future cashflows associated with its
business. Key assumptions used in estimating future cash flows are projected
sales of Microsalt® and a discount factor applied for the net present value
of future cashflows from the platform.
Valuation of convertible loan notes In applying valuation techniques to determine the fair value of convertible Yes Yes Note 12
loan notes the Group and Company make estimates and assumptions regarding the
future potential of the investments, including discount factor applied for the
net present value of future cashflows from the loan.
5. SEGMENTAL REPORTING
The Directors consider the business to have two segments for reporting
purposes under IFRS 8 which are:
· professional services, including the provision of recruitment
services via Vortechs Group, provision of invention evaluator services, as
well as R&D tax relief credits and provision of management services to its
portfolio companies. The activities grouped under this segment share similar
economic characteristics of provision of intellectual property services to
third party services;
· licensing and investment activities, including acquiring licences for
technologies, portfolio Company investment, development and commercialisation.
The activities share the goal of increasing the fair value of investments made
into portfolio companies by the Group.
Year ended 31 December 2023 Professional Licensing and TOTAL
Consolidated income statement Services Investment
US $ US $ US $
Revenue from Services 735,265 - 735,265
Changes in fair value on financial assets at fair value though profit or loss - (14,229,009) (14,229,009)
Cost of Sales (314,083) - (314,083)
Interest Income - 455,096 455,096
Administrative Expenses (592,315) (1,675,081) (2,267,396)
Depreciation and Amortization (21,577) (64,732) (86,309)
Other Income 20,384 - 20,384
Group operating loss (172,325) (15,513,726) (15,686,051)
Loss on ordinary activities before income tax (172,325) (15,513,726) (15,686,051)
Income tax expense (566) (1,699) (2,265)
Loss after tax (172,891) (15,515,425) (15,688,316)
Professional Licensing and TOTAL
Period ended 31 December 2022
Consolidated income statement Services Investment
US $ US $ US $
Revenue from Services 615,214 - 615,214
Changes in fair value on financial assets at fair value though profit or loss - (10,978,372) (10,978,372)
Cost of Sales (222,361) - (222,361)
Interest Income - 286,583 286,583
Administrative Expenses (895,517) (1,622,426) (2,517,943)
Depreciation and Amortization (1,638) (4,915) (6,553)
Other Income 79,638 - 79,638
Group operating (loss)/profit (424,664) (12,319,130) (12,743,794)
(Loss)/profit on ordinary activities before income tax (424,664) (12,319,130) (12,743,794)
Income tax expense (429) (1,285) (1,714)
(Loss)/profit after tax (425,093) (12,320,415) (12,745,508)
Segment assets and liabilities
2023 Professional Licensing and TOTAL
Consolidated statement of Services Investment
financial position US $ US $ US $
Assets 1,967,430 46,653,995 48,621,425
Liabilities (734,545) - (734,545)
Net Assets 1,232,885 46,653,995 47,886,880
2022 Professional Licensing and TOTAL
Consolidated statement of Services Investment
financial position US $ US $ US $
Assets 1,969,592 56,184,146 58,153,738
Liabilities (388,608) - (388,608)
Net Assets 1,580,984 56,184,146 57,765,130
Year ended 31 December 2023 Period ended 31 December 2022
US $ US $
United Kingdom
Changes in fair value on financial assets at fair value though profit or loss (13,753,529) (10,612,151)
United States
Revenue from Services 735,265 615,214
Total revenue (13,018,264) (9,996,937)
2023 2022
US $ US $
United Kingdom
Assets 46,653,995 56,184,146
Liabilities - -
United States
Assets 1,967,430 1,969,592
Liabilities (734,545) (388,608)
Total Net Assets 47,886,880 57,765,130
6. REVENUE FROM SERVICES
The below table discloses disaggregated revenue from services by their
nature/categories as well as timing of the revenue. Please refer to Note 12
for disaggregation of Group's Unrealised profit on the revaluation of
investments.
Group Transferred at a point in time Transferred over time Total 2023 Transferred at a point in time Transferred over time Total 2022
US $ US $
Major service lines:
- Sales of Invention Evaluator reports 178,488 - 178,488 156,517 - 156,517
- Tech transfer recruitment services 101,000 - 101,000 39,000 - 39,000
- Management services - 455,777 455,777 - 419,697 419,697
Total Revenue from Services 279,488 455,777 735,265 195,517 419,697 615,214
All of the Group's major service lines are sold directly to consumers and not
through intermediaries. All revenue recognised in the reporting period
represent performance obligations satisified in the current period. For
services transferred over time, output method was used as measure of
fulfillment of the performance obligation. Considering the nature of the
accounting, tax, legal and other services being provided under the agreements,
this method most faithfully depicts the transfer of the services to the
customer. Payment is typically due on a Net 30 basis.
6.1 OTHER INCOME
Total 2023 Total 2022
US $ US $
R&D expenditure credit - 79,638
Other 2,781 -
Dividends earned 17,603 -
20,384 79,638
7. OPERATING EXPENSES AND COST OF GOODS SOLD
Group 2023 2022
US $ US $
Cost of goods related to services 314,083 222,361
Depreciation of property plant and equipment 2,523 6,553
Research and development expenses 155,094 433,166
Amortisation of intangible assets 83,786 121,461
Marketing and PR 96,575 149,169
IT&Software 26,925 72,495
Audit and accounting 182,145 216,285
Share based payments 79,658 167,957
Nominated Advisor and other exchange listing expenses 139,261 175,888
Director emoluments 409,681 662,052
Other administration expenses including salaries 639,374 648,646
Foreign exchange movements 538,682 (129,176)
Total expenses 2,667,787 2,746,857
7.2 AUDITOR REMUNERATION
Group 2023 2022
US $ US $
Fees payable to the group's auditor and its associates for the audit of the 107,335 121,408
Group and Company financial statements
Audit of company's subsidiaries 37,316 13,379
144,651 134,787
8. EMPLOYEES
8.1 DIRECTOR'S EMOLUMENTS
Group 2023 2022
US $ US $
Directors emoluments 386,677* 662,052
Directors portion of Share Based Payments 1,362 62,747
Total 388,039 724,799
*excludes Directors NI of US$23,004 (2022:US$26,551).
The highest paid Director received a salary of US$254,096 (2022: $250,889) and
benefits of US$27,846 (2022: US$29,833). The highest paid Director received a
bonus of US$ Nil (2022: US$250,000). The highest paid Director did not
exercise any share options. The share-based payments associated with the
highest paid Director amounted to US$1,362 (2022: US$60,948).
Key management personnel (including Directors and Group Chief Financial
Officer) received salary of US$509,681 (2022: US$820,557), excluding Employers
National Insurance, Benefits in Kind and Share Base Compensation disclosed in
Directors Remuneration Report. Please also refer to Director's Report. No
Directors exercised their share options during the year. No post- employment
benefits or other long-term benefits are applicable for Directors.
8.2 EMPLOYEE BENEFIT EXPENSES
Group 2023 2022
US $ US $
Wages and salaries including restructuring costs and other termination 405,898 459,435
benefits
Directors remuneration 358,830 605,668
Social security costs 62,338 70,511
Pension costs - -
Share options granted to directors and employees 79,658 167,957
906,725 1,303,571
8.3 AVERAGE NUMBER OF PEOPLE EMPLOYED
To enhance flexibility and improve cost control, the Group utilises
consultants for scientific review, administrative and operations support,
software development and other knowledge-intensive services.
Group 2023 2022
Number of employees
Average number of people (including executive directors) employed
Operations 4 4
Management 2 2
Total average headcount 6 6
9. INCOME TAX EXPENSE
Group 2023 2022
US $ US $
Current tax
Current tax on profits for the year 2,265 1,714
Total current tax 2,265 1,714
Income tax expense 2,265 1,714
Group 2023 2022
US $ US $
Profit before tax (15,686,051) (12,743,794)
Tax calculated at domestic tax rates applicable to profits (2,980,350) (2,421,321)
Tax effects of:
- Expenses not deductible for tax purposes 19,604 39,103
- Income not taxable 2,703,512 2,085,891
- Capital allowances in excess of depreciation 16,413 24,323
- Unrelieved tax losses and other deductions 243,086 273,718
Total income tax expense 2,265 1,714
The weighted average applicable tax rate was 19% (2022: 19%).
Unused tax losses of US$2,099,550 for which no deferred tax assets have been
recognised is attributable to the uncertainty over the recoverability of those
losses through future profits.
The UK Government announced in the 2021 budget that from 1 April 2023, the
rate of corporation tax in the United Kingdom will increase from 19% to 25%.
Companies with profits of £50,000 or less will continue to be taxed at 19%,
which is a new small profits rate. Where taxable profits are between £50,000
and £250,000, the higher 25% rate will apply but with a marginal relief
applying as profits increase.
10. EARNINGS PER SHARE (EPS)
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of Ordinary Shares
outstanding during the period.
2023 2022
US $ US $
Earnings attributable to equity holders of the Group (US$) (15,688,317) (12,745,508)
Weighted average number of ordinary shares in issue:
Basic 172,214,589 146,043,720
Diluted 176,681,255 150,483,172
Basic earning per share (0.091) (0.087)
Diluted earning per share (0.091) (0.087)
Diluted earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the sum of weighted average number of (1)
Ordinary Shares outstanding during the period and (2) any dilutive potential
Ordinary Shares outstanding at 31 December 2023.
Diluted EPS includes impact of vested Employees Share Option Awards whose
strike price was below Tekcapital's share price as quoted on the AIM market,
which would have dilutive impact of 4,466,667 shares.
The Group completed placements of total of 27,395,934 new ordinary shares
during the financial year.
11. INVESTMENTS OF THE GROUP
Entity name Country of incorporation Proportion of ordinary shares directly and indirectly held Nature of business Capital and reserves as at 31 Dec 2023 Net Profit/(Loss) for year ended 31 Dec 2023
The following are under ownership of Tekcapital Europe Limited US$ US$
Lucyd Limited England and Wales 100% Provider of high-tech eyewear (895,147) (5,998,918)
Innovative Eyewear Inc(1) United States of America 40% Provider of high-tech eyewear 5,558,826 (6,663,428)
Microsalt Limited England and Wales 87% Developer of low sodium salt and snack foods (1,996,000) (3,473,000)
Microsalt Inc(2) United States of America 91% Developer of low sodium salt and snack foods (265,077) (2,057,852)
Guident Limited England and Wales 100% Developer of autonomous vehicle software safety solutions 17,387,274 -
Guident CORP(3) United States of America 90% Developer of autonomous vehicle software safety solutions (2,703,683) (1,183,396)
Smart Food Tek Limited England and Wales 100% Developer for baked food coating to reduce fat (116,114) -
Belluscura plc England and Wales 10% Portable oxygen concentrator producer N/A N/A
(1) owned by Lucyd Limited
(2) owned by Microsalt Limited
(3) owned by Guident Limited
As at the year end, the Group has no interest in the ownership of any other
entities or exerts any significant influence over or provides funding which
constitutes an "unconsolidated structured entity".
All UK subsidiaries are exempt from the requirement to file audited accounts
by virtue of section 479A of the Companies Act 2006.
Tekcapital Europe Ltd (registered address 12 New Fetter Lane, London, United
Kingdom, EC4A 1JP) and Tekcapital LLC (registered address 11900 Biscayne Blvd,
Suite 630, Miami, Florida, 33181, United States) are consolidated by
Tekcapital plc because they continue to provide advisory services in IP search
and technology transfer. Tekcapital plc owns 100% of both entities.
All other entities are measured at fair value through profit and loss based in
IFRS 10 as referenced in Note 2.4. The Group provides management service
support to Lucyd Limited, Microsalt Limited and Guident Limited, as well as
has provided working capital assistance to Microsalt Limited and Guident
Limited through convertible loan note financing (see also Note 12). The Group
also assists the entities with their fundraising activities.
Registered office of all four directly owned subsidiaries owned by Tekcapital
Europe Limited: Acre House, 11-15 William Road, London, England, NW1 3ER.
12. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
The Group's financial assets at fair value through profit and loss consist of
equity investments (2023:US $41,125,568, 2022:US $54,878,609) and convertible
loan notes (2023:US$5,528,427, 2022:US $1,305,537) totalling US $46,653,995
(2022:US $56,184,146).
12.1 EQUITY INVESTMENTS
The Group's investments in portfolio companies in the years ended 31 December
2023 and 31 December 2022 are listed below. The principal place of business
for portfolio companies listed below is the UK and in the U.S.
Group Proportion of ordinary shares as at 31 Dec 2022 1 Jan 2023 Additions Disposal Other adjustments Fair Value change 31 Dec 2023
US $ US $ US $ US $ US $ US $
Guident Limited 100.00% 18,083,264 - - - - 18,083,264
Lucyd Limited 100.00% 8,175,403 - - - (5,985,609) 2,189,794
Microsalt Limited 87.24% 16,508,694 500,000 - 882,546 (1,220,093) 16,671,147
Belluscura Plc 10.28% 12,072,826 - (272,514) (634,065) (7,023,307) 4,142,940
Smart Food Tek Limited 100.00% 38,422 - - - - 38,422
Total Balance 54,878,609 500,000 (272,514) 248,481 (14,229,009) 41,125,567
Other adjustments relate primarily to foreign exchange movements on
translation of investments into the Group's presentational currency.
Group Proportion of ordinary shares as at 31 Dec 2022 1 Dec 2021 Additions Disposal Other adjustments Fair Value change 31 Dec 2022
US $ US $ US $ US $ US $ US $
Guident Limited 100.00% 18,083,264 - - - - 18,083,264
Lucyd Limited 100.00% 17,345,195 2,002,275 - - (11,172,067) 8,175,403
Microsalt Limited 97.15% 4,356,520 2,409,579 - - 9,742,595 16,508,694
Belluscura Plc 11% 22,695,518 - (1,073,792) - (9,548,900) 12,072,826
Smart Food Tek Limited 100.00% 43,161 - - (4,739) - 38,422
Total Balance 62,523,658 4,411,854 (1,073,792) (4,739) (10,978,372) 54,878,609
The valuation techniques used fall under, Level 1 - Observable inputs that
reflect quoted prices (unadjusted) for identical assets or liabilities in
active markets, and Level 3- Other techniques as defined by IFRS 13. These
techniques were deemed to be the best evidence of fair values considering the
early stage of portfolio companies.
Lucyd Ltd's Innovative Eyewear Inc commenced trading on the NASDAQ market in
H2 2022. Due to Innovative's secondary offering in June 2023, Lucyd Ltd became
a minority shareholder and thus the control premium applied in the Group's
valuation of the investment in Lucyd as at 31 December 2022 has been removed.
As such, the Group's investment in Lucyd Ltd has been re-classified under
Level 2 as of 31 December 2023. Fair value measurement hierarchy for financial
assets as at 31 December 2023 with comparative amounts as of 31 December 2022:
Total Level 1 Level 2 Level 3
31 December 2023 US$ US$ US$ US$
Belluscura Plc 4,142,940 4,142,940 - -
Lucyd Limited 2,189,794 - 2,189,794 -
Guident Limited 18,083,264 - - 18,083,264
Microsalt Limited 16,671,147 - - 16,671,147
Smart Food Tek Limited 38,422 - - 38,422
Total Balance 41,125,567 4,142,940 2,189,794 34,792,833
31 December 2022 Total Level 1 Level 2 Level 3
US$ US$ US$ US$
Belluscura Plc 12,072,826 12,072,826 - -
Lucyd Limited 8,175,403 - - 8,175,403
Guident Limited 18,083,264 - - 18,083,264
Microsalt Limited 16,508,694 - - 16,508,694
Smart Food Tek Limited 38,422 - - 38,422
Total Balance 54,878,609 12,072,826 - 42,805,783
BELLUSCURA PLC (US $7.7M LOSS)
The fair value of the holding decreased by US$7.7m during the year due to the
movement in Company's share price at AIM market of London Stock Exchange, and
closing price of 23p as of 31 December 2023. With 15,138,767 shares held by
Tekcapital plc, a fair value of US$4,142,940 was arrived at as of 31 December
2023.
LUCYD (US $11.2M LOSS)
The fair value of the holding decreased by US$6.0m during the year due to the
movement in the Company's share price at NASDAQ market, and closing price of
US$0.42 as of 31 December 2023, compared to $1.37 as of 31 December 2022. With
5,189,085 shares held by Tekcapital plc, a fair value of US$2,189,794 was
arrived at as of 31 December 2023.
MICROSALT (US$1.2M LOSS)
The total fair value of US$16,671,147 is based on valuation of 30,747,609
shares held in Microsalt Ltd, as determined by the price range agreed upon
between Company's bankers and the Company as part of its IPO process. Upon
review of business updates in H2 2023, management noted no material events
necessitating revisions. Addition of $500,000 was recorded due to conversion
of part of the existing convertible loan note in April 2023. This proposed
valuation of shares to be sold in the initial public offering was corroborated
to management prepared discounted cash flow workings using management
projections and the price per share at which Tekcapital converted it's
convertible loan note in May 2022.
Key assumptions used in management's discounted cash flow valuation are:
- Compound annual growth rates over a 5 year forecast period of 113%
- 15% discount rate used to discount forecasted free cash flows
The discounted cash-flow method did not provide an indication that the
valuation at year end was materially misstated.
GUIDENT LTD (NIL GAIN / NIL LOSS)
The fair value of Guident remain unchanged compared to previous period as the
Company continued to receive investment at US$1 per share as specified in
the 2021 Private Placement Memorandum offering.
In August 2021, Guident CORP entered into Private Placement Memorandum
outlining offering of securities at US$1 per unit, with each unit consisting
of one share of Class A Convertible Preferred Stock and a Warrant to acquire a
share of common stock (also at US$1 per unit). While Guident has not received
funding from the offering until after the reporting date, the management
considers the exit price (of securities offered in the private placement)
negotiated with the investment bank as "privately negotiated acquisition of
the equity instruments" as defined under IFRS 13. The Offering was facilitated
by Dawson James Securities Inc. Dawson James is a broker-dealer registered
with the SEC as a broker dealer and is a member of FINRA. FINRA is currently
the only such registered national securities association in the U.S.
This input was corroborated by Guident CORP's enterprise valuation by
estimating the net present value of future cashflows associated with its
business as of 31 December 2023.
Key assumptions used in management's discounted cash flow valuation are:
- Compound annual growth rates over a 5 year forecast period of 122%
- 24% discount rate used to discount forecasted free cash flows
The discounted cash-flow method did not provide an indication that the
valuation at year end was materially misstated.
SMART FOOD TEK (NIL GAIN / NIL LOSS)
Considering early commercialisation stage, the Group records its investment in
Smart Food Tek at cost. The directors do not consider that any other available
information would materially change or give a more reliable representation of
the value.
The Group exercised judgment in determination of sufficiency of portfolio
companies' cash reserves, forecasts and ability to raise money to achieve
their fair values. Directors reviewed and questioned the forecasts used,
standing liquidity and working capital balances, as well as discussed
capability and plans to raise money in the future with directors or management
of portfolio companies. Based on the review, the Group made a positive
determination as to portfolio companies' likely ability to achieve fair values
considering liquidity factors.
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy, together with a
quantitative sensitivity analysis as at 31 December 2023 are shown as below.
No sensitivities have been disclosed on immaterial, non-listed investments
as the fair value equates to cost.as the fair value equates to cost.
Investment Valuation Significant Estimate Sensitivity of the input
Technique unobservable applied to fair value
input
Guident Income Approach Royalty Relief Method Discount to Future Cash Flows 24% 5% increase in the discount factor would decrease the Guident valuation by
US$4.3m, a 5% decrease in the discount factor would increase the value by
US$6.4m.
CAGR 91% A 50% increase in the compound annual growth rate of sales projections would
increase the Guident valuation by US$40.2m. A 50% decrease in the compound
annual growth rate of sales projections would decrease the Guident valuation
by US$15.8m.
Microsalt Income Approach Royalty Relief Method Discount to Future Cash Flows 15% 5% increase in the discount factor would decrease the Microsalt valuation by
US$5.1m, a 5% decrease in the discount factor would increase the value by
US$10.4m,
CAGR 53% A 50% increase in the compound annual growth rate of sales projections would
increase the Microsalt valuation by US$25.4m. A 50% decrease in the compound
annual growth rate of sales projections would decrease the Microsalt valuation
by US$12.6m
12.2 CONVERTIBLE LOAN NOTES
During the year, the Group also held multiple convertible loans issued by its
portfolio companies, including:
• Convertible note issued by Innovative Eyewear Inc, for the total
of US$2,000,000 that bears interest at 10% per annum, which includes the
option to convert the debt into the Company 's common stock at market price.
The Note matured on December 1, 2023 with no amounts outstanding.
• Convertible note issued by Guident Ltd for the total of
US$3,000,000, issued at 10% coupon rate including option to convert the debt
into shares at market price (no discount against future equity placements
offered). The note can be converted into Guident's equity upon occurrence of
certain conversion events including future share placements. The US$3,000,000
note originated in September 2023 or can be converted into Guident's equity
upon occurrence of certain conversion events. No conversions occurred during
the period. As of 31 December 2023, US$3,000,000 was outstanding.
• Convertible loan note instruments in favour of Microsalt Inc were
constituted on 21 September 2020 (2020 CLN) and 1 June 2022 (2022 CLN). The
principal amounts of convertible loan notes under the 2020 CLN and the 2022
CLN was each limited to US$2,000,000. The convertible loan notes under the
2020 CLN and the 2022 CLN each carry interest at the rate of 10 per cent. per
annum. As of 31 December 2023, US$2,000,000 was outstanding on the convertible
loan notes.
• A convertible loan note instrument in favour of Tek Europe was
constituted by the Company on 1 March 2023. The principal amount of
convertible loan notes was limited to US$2,000,000. The convertible loan notes
carry interest at the rate of 10 per cent. per annum. A convertible loan note
instrument in favour of Tek Europe, as assignee of Tekcapital, was constituted
by the Company on 7 November 2023. The principal amount of convertible loan
notes was limited to US$2,000,000. The convertible loan notes carry interest
at the rate of 10 per cent. per annum. . As of 31 December 2023, US$528,427
was outstanding on the convertible loan notes.
The Group's investments in convertible notes in the years ended 31 December
2023 and 31 December 2022, as well as their fair value hierarchy, are listed
in tables below:
Group 31 Dec 2022 Additions Disposal FX reval Fair Value change 31 Dec 2023
US $ US $ US $ US $ US $ US $
Innovative Eyewear 147,375 37,757 (190,983) 5,851 - -
Guident Corp 1,000,000 1,999,562 438 - 3,000,000
Microsalt Inc 158,162 2,872,626 (514,511) 12,150 - 2,528,427
Total Balance 1,305,537 4,909,945 (705,494) 18,439 - 5,528,427
Included in additions are non-cash movements, in relation to management
services income of US$455,777 and interest income of US$ 455,096.
Total Level 1 Level 2 Level 3
31 December 2023 US $ US $ US $ US $
Innovative Eyewear - - - -
Guident Corp 3,000,000 - - 3,000,000
Microsalt Inc 2,528,427 - - 2,528,427
Total Balance 5,528,427 - - 5,528,427
31 December 2022 Total Level 1 Level 2 Level 3
US $ US $ US $ US $
Innovative Eyewear, Inc 147,375 - - 147,375
Guident Corp 1,000,000 - - 1,000,000
Microsalt Inc 158,162 - - 158,162
Total Balance 1,305,537 - - 1,305,537
The fair value of the convertible loans issued by Guident Corp and Microsalt
has been calculated using a Discounted Cash Flow Analysis. The significant
unobservable input used in the fair value assessment is the discount rate of
10%. Increasing the discount rate by 2% used would result in:
- a $139k decrease in the fair value of the asset for Guident and
- a $84k decrease in the fair value of the asset for Microsalt
A 2% decrease in the discount rate would result in:
- a $153k increase in the fair value of the asset for Guident
- a $92k increase in the fair value of the asset for Microsalt.
12.3 INTEREST FROM FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
The Group earned following interest income from its portfolio companies during
the period:
31/12/2023 31/12/2022
Innovative Eyewear Inc 12,281 140,689
Microsalt Inc 139,421 72,159
Guident Corp 303,394 73,736
Total Balance 455,096 286,583
13. INTANGIBLE ASSETS
The Directors have undertaken an impairment review based on the future cash
flow projections of the Vortechs Group intangible asset and consider the
recoverable amount to be higher than the carrying value and have therefore
recorded no impairment.
Remaining amortisation period of each asset with remaining amortisation:
- Vortechs: 5 years
- Invention Evaluator: 2 years
Group Vortechs Website development Invention Evaluator Total
US $ US $ US $ US $
Cost
As at 31 December 2022 500,000 28,121 338,770 866,891
Addition - - 59,004 59,004
As at 31 December 2023 500,000 28,121 397,774 925,895
Accumulated amortisation
As at 31 December 2022 (324,813) (28,121) (271,017) (623,951)
Amortisation (50,000) - (33,786) (83,786)
As at 31 December 2023 (374,813) (28,121) (304,803) (707,737)
Net Book Value
As at 31 December 2022 175,187 - 67,753 242,940
As at 31 December 2023 125,187 - 92,971 218,158
14. PROPERTY, PLANT AND EQUIPMENT
GROUP Leasehold Improvements Office equipment Computer Equipment Total
US $ US $ US $ US $
Closing cost 30 November 2021 13,775 25,980 29,377 69,132
Additions 3,766 5,000 1,153 9,919
Closing cost 31 December 2022 17,541 30,980 30,530 79,051
Additions - 6,087 738 6,825
Closing cost 31 December 2023 17,541 37,067 31,268 85,876
Accumulated depreciation and impairment
Accumulated depreciation at 30 November 2021 (13,775) (20,175) (28,579) (62,529)
Depreciation charge - (5,620) (933) (6,553)
Accumulated depreciation at 31 December 2022 (13,775) (25,795) (29,512) (69,082)
Depreciation charge - (1,687) (836) (2,523)
Accumulated depreciation at 31 December 2023 (13,775) (27,482) (30,348) (71,605)
Closing net book value 31 December 2022 3,766 5,184 1,018 9,969
Closing net book value 31 December 2023 3,766 9,584 920 14,271
15. TRADE AND OTHER RECEIVABLES
2023 2022
US $ US $
Trade receivables 101,608 9,831
Trade receivables - net 101,608 9,831
Vat recoverable 36,675 21,951
Prepayments and other debtors 25,817 27,604
Receivables from related parties 950,653 1,028,657
Total trade and other receivables 1,114,753 1,088,043
The fair value of trade and other receivables are not materially different to
those disclosed above. The credit loss allowance was assessed for the Group as
at 31 December 2023 and there was no increase/decrease in the expected credit
loss allowance (2022: $nil). Group's exposure to credit risk related to trade
receivables is detailed in Note 3 to the consolidated financial statements.
The Group had outstanding receivables from its portfolio companies as at 31
December 2023 in the amount of:
- US$74,170 due to Lucyd Ltd (2022:US$ 54,466)
- US$63,418 due from Smart Food Tek Ltd (2022: US$63,418)
- US$259,390 due from Guident Ltd (2022: US$951,098)
- US$6,039 due from Innovative Eyewear Inc (2022: US$13,410)
- US$629,000 owed from Microsalt plc (2022: US$958).
16. CASH AND CASH EQUIVALENTS
GROUP 2023 2022
US $ US $
Cash at bank and in hand 620,248 628,640
Total cash and cash equivalents 620,248 628,640
17. CATEGORIES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
GROUP 2023 2022
US $ US $
Financial assets at fair value through profit and loss 46,653,995 56,184,146
Financial assets at amortised cost 1,052,261 1,088,043
Cash and equivalents at amortised cost 620,248 628,640
48,326,504 57,851,274
Financial liabilities
Trade and other payables at amortised cost 504,784 203,886
18. SHARE CAPITAL
Number Ordinary Total
Group and Company of shares Share US$ US $
Issued and fully paid up
As at 30 November 2021 141,542,328 793,792 793,792
Shares issued through share option exercise 1,150,000 5,445 5,445
Shares issued in further public offering 8,000,000 40,486 40,486
As at 31 December 2022 150,692,328 839,723 839,723
Shares issued in further public offering 27,395,934 133,606 133,606
As at 31 December 2023 178,088,262 973,329 973,329
The shares have full voting, dividend and capital distribution (including on
winding up) rights; they do not confer any rights of redemption. The following
shares were issued during the year:
• February 2023: 14,062,500 shares were issued in the placing of new
ordinary shares at £0.16p. Total proceeds of US$2,640,909 were netted against
cost of raising finance in the amount of US$179,371
• April 2023: 13,333,334 shares issued in the placing of new
ordinary shares at £0.15p. Total proceeds of US$2,404,984 were netted against
cost of raising finance in the amount of US$170,441
The Company has authorised share capital of 178,088,162 with a nominal value
of £0.004. Of these shares, 178,088,162 were issued and fully paid up.
19. TRADE AND OTHER PAYABLES
The fair values of trade and other payables are not materially different to
those disclosed above.
The Group's exposure to currency and liquidity risk related to trade and other
payables is detailed in note 3 to the accounts.
2023 2022
Group US $ US $
Trade creditors 250,218 77,263
Amounts due to related parties 109,344 -
Social security and other taxes 12,371 12,111
Accruals and other creditors 145,221 126,624
517,154 215,998
20. DEFERRED REVENUE
The Group's deferred revenue balance of US$172,610 as of 31 December 2022 was
adjusted for:
• receipt of Invention Evaluator payments in the amount of US$68,078
to be delivered after 31 December 2023, recognized as addition to the balance
of deferred revenue during the year ended 31 December 2023
• recognition of US$23,297 of revenue deferred as of 31 December
2022 for reports delivered during the financial year 2023 bringing the total
outstanding balance of Deferred Revenue as at 31 December 2023 to US$217,391.
21. DEFERRED INCOME TAX
Unused tax losses for which no deferred tax assets have been recognised is
attributable to the uncertainty over the recoverability of those losses
through future profits. A tax rate of 25% has been used to calculate the
potential deferred tax.
2023 2022
Deferred tax US $ US $
Accelerated capital allowances 16,413 (24,323)
Short term timing difference
Tax losses (2,115,963) (2,356,784)
Unprovided deferred tax asset 2,132,376 2,381,107
- -
22. DIVIDENDS
No dividend has been recommended for the period ended 31 December 2023 (2022:
Nil) and no dividend was paid during the year (2022: Nil).
23. COMMITMENTS
Capital commitments
The Group entered into multiple convertible loan note agreements with its
portfolio companies. Please see note 15 for details regarding outstanding
commitments.
Lease commitments
The Group did not have any material contracts withing the scope of IFRS 16.
Consequently, the Group did not recognise any right-of-use assets and lease
liabilities during the period.
24. SHARE BASED PAYMENTS
The Group operates an approved Enterprise management scheme and an unapproved
share option scheme.
The fair value of the equity settled options granted is expensed over the
vesting period and is arrived at using the Black-Scholes model. The
assumptions inherent in the use of this model are as follows:
The weighted average fair value of options outstanding was £0.06p. Volatility
was calculated using Group's historical share price performance since 2017.
The share-based payment expense for the year was $79,658 (2022: $167,957).
Details of the number of share options and the weighted average exercise price
outstanding during the year as follows:
Av. Exercise Options Av. Exercise Options
price per (Number) price per (Number)
Group and Company share £ share £
As at 1 January 2023 0.2746 8,865,000 0.2110 8,200,000
Granted 0.3250 1,990,000
Exercised 0.0783 (1,100,000)
Forfeited/expired 0.3034 (225,000)
As at 31 December 2023 0.2746 8,865,000 0.2746 8,865,000
Exercisable as at period end 5,900,000 4,750,000*
*The weighted average exercise price for the options exercisable as at 31
December 2023 and 31 December 2022 was £0.11p and £0.11p respectively.
The weighted average remaining contractual life is 3.0 years (2022: 3.0
years). The weighted average fair value of options granted during the year was
£0.06p (2022: £0.12p). The range of exercise prices for options outstanding
at the end of the year was £0.052p - £0.325p (2022: £0.052p - £0.325p).
25. RELATED PARTY TRANSACTIONS
Details of Directors' remuneration and grant of options are given in the
Directors' report. Please also refer to Note 8.1 for payments related to key
management personnel.
525,000 options were held by Harrison Gross, family member of Dr. Clifford
Gross (2022: 525,000).
Please refer to tables below for detail of relationships and transactions
between The Group and its subsidiaries.
Convertible note receivable
2023 2022
Group US $ US $
Guident Corp 3,000,000 1,000,000
Microsalt Inc 2,528,427 158,161
Innovative Eyewear Inc - 147,375
5,528,427 1,305,536
Intercompany receivable
2023 2022
Group US $ US $
Guident Corp 209,184 951,098
Smart Food TEK 66,681 63,418
Lucyd Ltd (74,170) 54,466
Innovative Eyewear Inc 6,039 13,410
Microsalt plc 629,000 (958)
Other 3,573 -
840,307 1,081,434
Management fees
2023 2022
Group US $ US $
Guident Corp 176,301 140,227
Microsalt Inc 139,788 141,332
Lucyd Ltd - -
Innovative Eyewear Inc 139,687 138,138
455,776 419,697
Interest Income
2022 2022
Group US $ US $
Guident Corp 303,394 73,736
Microsalt Inc 139,421 72,159
Innovative Eyewear Inc 12,281 140,688
455,096 286,583
Related party transactions were made on terms equivalent to those that prevail
in arm's length transactions and are made only if such terms can be
substantiated.
26. EVENTS AFTER THE REPORTING PERIOD
Post period end, Microsalt successfully completed its Initial Public Offering
and commenced trading on the AIM market of the London Stock Exchange on
February 1st, 2024.
Post period end, Group announced placings to raise GBP 2,000,000 before
expenses on 29 February 2024.
1 (#_ftnref1)
https://www.who.int/news-room/feature-stories/detail/advancing-copd-care-in-china-through-a-comprehensive-approach#:~:text=China%20has%20almost%20100%20million,of%20all%20COPD%20cases%20globally
(https://www.who.int/news-room/feature-stories/detail/advancing-copd-care-in-china-through-a-comprehensive-approach#:~:text=China%20has%20almost%20100%20million,of%20all%20COPD%20cases%20globally)
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