REG - Tekcapital plc - Half Year Results
25/09/2024 07:00
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RNS Number : 5204F Tekcapital plc 25 September 2024
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
25 September 2024
Tekcapital plc
("Tekcapital", the "Company" or the "Group")
Unaudited Half-yearly Report for the period ending 30 June 2024
Net Assets increased ~46% to US$69.8m
Tekcapital Plc (AIM: TEK), the UK intellectual property investment group
focused on transforming university technologies into valuable products that
can improve people's lives, is pleased to announce its results for the
six-month period ended 30 June 2024.
Dr. Clifford M. Gross, Chairman said:
"We are excited to report significant progress across our portfolio companies.
This has resulted in the growth of our Net Assets during the period by ~ 46%
reaching US$69.8m with an NAV per share of US$0.35.
"Our first half performance reflects strong commercial progress of the
portfolio companies during the period. I'm delighted that each portfolio
company has grown its respective revenues this year, validating our investment
case for each company and the Tekcapital investment process.
"I believe Tekcapital is at an inflection point. With all but two portfolio
companies trading publicly including recently incorporated GenIP, Tekcapital
has never had greater flexibility to manage its cash position and seize new
opportunities in a manner we believe will create shareholder value. We have
demonstrated this post-period with the measured monetisation of a portion of
our Belluscura investment. Tekcapital will remain committed long-term
investors in Belluscura and other technologies we believe have the potential
to improve the lives of a great number of people and will proactively manage
our portfolio to maximise long-term value creation for our shareholders.
"As part of our strategy to create value from innovative technologies, we
launched GenIP this summer. We feel its forthcoming IPO will provide
UK-focused investors with a unique opportunity to secure exposure to the
fast-growing Generative AI analytics market.
"Elsewhere in the portfolio, Microsalt Plc and Innovative Eyewear Inc. have
recorded significant milestones in 2024 and are well placed for further growth
as standalone listed companies.
"Guident has made material progress in commercialising its autonomous vehicle
safety solutions, and revenue generation has increased accordingly. We believe
improving market conditions and Guident's commercial advancements are creating
the ideal opportunity for Tekcapital to crystalise the balance sheet value
held in the company while providing a greater pool of investors the chance to
join us in the next phase of Guident's scale-up. As previously announced,
Guident is seeking a private investment round and, once consummated, should
have the investor support for a range of possible future funding
opportunities, including an initial public offering."
Financial highlights
· Net Assets at US$69.8m (31 December 2023: US$47.9m).
· NAV per share at US$0.35 (31 December 2023: US$0.27).
· Portfolio valuation at US$61.9m (31 December 2023: US$41.1m).
· H1 2024 profit after tax US$19.5m (H1 2023 Loss: US$10.1m),
primarily due to unrealised increase of US$20.5m in the fair value of our
portfolio companies and successful IPO of Microsalt plc.
· H1 2024 share placements of US$2.5m (H1 2023 share placements:
US$5.2m)
Operational highlights: Portfolio Companies
Microsalt® plc ("Microsalt") www.microsalt.co (http://www.microsalt.co)
(AIM: SALT)
· Successfully completed its Initial Public Offering with listing
price of 43p per share and commenced trading on the AIM market of the London
Stock Exchange on February 1st, 2024. Microsalt's share price as of 30 June
2024 was 92.5p.
· Has been granted an important additional patent protecting the IP
of its micron-sized salt. This patent, entitled Low Sodium Salt Composition,
is focused on how Microsalt's low-sodium salt adheres to food particles vs
traditional table salt.
· Announced multiple placements of its products including placement
of SaltMe! Crisps on Thrive Market, a US-based healthy snack marketplace with
1.2 million members, and Carma Hospital Group, marking Company's entrance into
the food service market.
· Introduced Microsalt® shakers on Amazon UK and laid the
foundation for the UK expansion of Microsalt's bulk business with local
distribution and storage via Reliable Express.
· Continued progress towards securing large volume purchase
commitments of Microsalt® with leading food manufactures as well as
placements of its salt shakers across multiple retail locations, and large
volume commitments post period end.
Tekcapital owns 69.6% ownership of Microsalt Ltd, valued at US$39.1m as of 30
June 2024.
Guident Ltd ("Guident") www.guident.co (http://www.guident.co)
· Hosted the grand opening of its first U.S. commercial Remote
Monitor and Control Centre (RMCC) for enhancing Autonomous Vehicle ("AV")
safety. Guident's new best-in-class RMCC including video wall displays and
visualisation system, is now commercially available. This deployment is
strategically located at the Boca Raton Innovation Campus (BRiC), the largest
office complex in Florida (1.7 million sq ft), and the Southeast's premier
technology and life-sciences hub.
· Entered into Strategic Partnership agreement with Star
Robotics, a leading Spanish security robotics company. The Strategic
Partnership will aim to integrate Guident's teleoperation solution into
Star Robotics' products and provide an autonomous security surveillance
solution with a human-in-the-loop capability. The partnership enables both
companies to work on a combined go to market strategy and roll out in North
America
· Announced incorporation of its RMCC technology into AuVe Tech OÜ
("Auve Tech") Level 4 MiCa autonomous shuttles. The MiCa vehicle offers
turnkey autonomous transportation solutions tailored to diverse environments
and simple integration into existing transport networks.
Tekcapital owns 100% of the shares of Guident Ltd, valued at US$18.1m as of 30
June 2024. Guident owns approximately 91% of shares in Guident Corp, its US
operating subsidiary.
Belluscura® Plc ("Belluscura") www.belluscura.com (http://www.belluscura.com)
(AIM: BELL)
· Announced significant progress on sales of its X-PLOR portable
oxygen concentrator in the U.S. in the three months to May 2024 were
US$820,000, monthly sales having doubled over this period. The Company
achieved sales of US$450,000 in May 2024, its highest recorded monthly sales
figure, across both D2C and B2B channels. Sales in China continue to grow,
with X-PLOR sales of over US$200,000 in May 2024.
Tekcapital owns 6.4% of shares of Belluscura plc, valued at US$2.2m as of 30
June 2024.
Innovative Eyewear Inc ("Lucyd") www.lucyd.co (http://www.lucyd.co)
(NASDAQ: LUCY)
· 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
· Announced a partnership with New Look Vision Group to distribute
its smart eyewear in Canada. New Look Vision Group is one of the largest
optical groups in Canada and has been rapidly expanding in the United States.
· Production planning and preparation for launches of its licensed
branded smart eyewear products: Nautica, Eddie Bauer and Reebok.
· Appointed Micah Richards as a brand ambassador. Micah is a former
Olympic athlete and English footballer, turned successful broadcaster. He is
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.
Tekcapital owns 100% of the shares of Lucyd Ltd, valued at US$2.6m as of 30
June 2024. Lucyd Ltd owns approximately 19% of shares in Innovative Eyewear,
Inc.
GenIP Ltd ("GenIP")
GenIP Ltd was incorporated on 23 February 2024 with a goal of building a GenAI
B2B service business. Subsequently, Tekcapital's Invention Evaluator® and
Vortechs(TM) business services were developed into new services with the
introduction of Generative AI large language models (LLMs) into their
workstreams. Effective 4 June 2024, GENIP acquired certain assets and
liabilities from Tekcapital related to Invention Evaluator and Vortechs
business service lines. These assets and liabilities, disclosed in the Related
Parties note to the financial information below, were transferred to GENIP Ltd
as part of a US$191,564 capital contribution by Tekcapital plc (recorded as
Investment in GEN IP by Tekcapital). GenIP's new products were launched in
September 2024.
As of 30 June 2024, Tekcapital owned 90% of GenIP Ltd, valued at US$191,564.
Post period end highlights:
· GenIP plc has announced a proposed an initial public offering
("IPO") on the AIM Market through the publishing of a Schedule One through a
regulatory news service
· Belluscura announced record sales for the month of July 2024 with
revenues of US$708,000. This follows the previous monthly high set in June
of US$521,000. Belluscura noted that it expects strong sales to continue with
the broader market acceptance of the X-PLOR® and the upcoming full release of
its new patented DISCOV-R™ device.
· Guident announced on 11 July 2024 a second grant from Space
Florida to add low earth orbit, low-latency satellite connectivity to its AV
remote monitoring service. This Space Florida-Israel Innovation grant will
support the development and implementation of a leading-edge system
architecture, leveraging non-geostationary satellite technology.
· Microsalt announced the expansion of its retail distribution with
the new placement of saltshakers in Loblaws, one of Canada's oldest and
largest supermarket retailers which operates over 2,400 stores across Canada.
This new distribution is for both the 2oz and 6oz saltshakers. The product is
expected in stores in Q4 2024. Microsalt announced purchase commitments of up
to 350,000 lbs of Microsalt from B2B buyers.
· Microsalt also announced further availability of its take home
saltshakers and SaltMe! branded low sodium crisps in major US based chains
including Winn-Dixie (350 stores), Sedano's (30 stores), Fresh Thyme (70
stores), Cub Foods (80 stores). This brings the total number of retail stores
in which Microsalt's shakers or SaltMe! crisps are available across the
United States to approximately 1,200.
· Innovative Eyewear Inc reported second quarter revenue growth of
82% compared to the second quarter of 2023, also noting improvement in gross
margins. Innovative Eyewear anticipates the potential for additional growth in
the fourth quarter of 2024 as the new Lucyd Armor(TM) and Reebok® Powered by
Lucyd lines are launched, as the unit cost of these new products are estimated
to be significantly lower than current Lucyd Lyte models.
· Innovative Eyewear Inc also announced its Lucyd Lyte frames are
now available on Target.com (http://target.com/) .
· Tekcapital has taken steps to support the balance sheet by
monetising a portion of its stake in Belluscura whilst remaining committed to
our long-term investment in the company.
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. 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) .
LEI: 213800GOJTOV19FIFZ85
Chairman's statement
Tekcapital brings innovations from laboratory to market. We commercialise
university intellectual property, a process known as technology transfer. In
the first half of 2024, our key portfolio companies continued to make
significant progress and we are bullish on their future performance.
We continue to believe that when you couple commercialisation ready,
compelling university IP with strong senior management, you increase the
probability that vibrant companies will emerge, net assets will grow, returns
on invested capital are likely to increase over time and exits, if they occur,
should happen faster. When we realise material exits, the Group's goal is to
distribute a portion of the proceeds as a special dividend to our
shareholders.
A common theme across our portfolio companies is that they have proprietary
intellectual property, capable management, and if successful over the
long-term, can improve the quality of life for the customers they serve.
The Company's key investments include:
Microsalt plc (www.microsalt.co (http://www.microsalt.co) )
MicroSalt® manufactures a new patented salt that tastes great, can be used
just about everywhere traditional salt is used, yet delivers full flavour with
approximately half the sodium of regular salt.
Investment Rationale: The food industry is focused on developing and providing
better-for-you products that taste good but enable reduced sodium consumption.
The reason for this is that excess sodium consumption contributes to
cardiovascular disease, a leading cause of premature death globally. According
to the WHO, "Almost all populations are consuming too much sodium. The global
mean intake of adults is 4310 mg/day sodium (equivalent to 10.78 g/day salt).
This is more than double the World Health Organization recommendation for
adults of less than 2000 mg/day sodium (equivalent to < 5 g/day salt). The
primary health effect associated with diets high in sodium is raised blood
pressure, increasing the risk of cardiovascular diseases, gastric cancer,
obesity, osteoporosis, Meniere's disease, and kidney disease. An estimated
1.89 million deaths each year are associated with consuming too much sodium.
Reducing sodium intake is one of the most cost-effective measures to improve
health and reduce the burden of non-communicable diseases: for every US$1
invested in scaling up sodium reduction interventions, there will be a return
of at least US$12." 1
Lucyd Ltd (www.lucyd.co (http://www.lucyd.co) )
LUCYD and its U.S. subsidiary Innovative Eyewear Inc. is seeking to UPGRADE
YOUR EYEWEAR® by producing designer eyewear with smart features at affordable
prices. Their frames help you stay connected safely, ergonomically and with
designer styling.
Investment Rationale: Pedestrian fatalities are at a 40 year high 2 . This is
due primarily because drivers and pedestrians alike are distracted with their
smartphones. Approximately 2/3 of the population wear corrective lenses.
Bluetooth technology has evolved, enabling it to be incorporated into
traditionally sized designer eyewear. This enables eyeglass wearers to remain
connected to their digital lives such as when taking calls and listening to
music while maintaining situational awareness. Individuals can keep their
phones in their pocket and no ear buds are required, as the eyeglass frames
contain miniature speakers and microphones. Much as the smart watch business
has begun to eclipse the traditional watch business, we believe smart eyewear
will follow suit.
Guident Ltd (www.guident.co (http://www.guident.co) )
Guident Ltd seeks to improve the safety and efficiency of autonomous vehicles
and land-based delivery drones with a software platform that enables the
remote monitoring and control of these vehicles to rapidly resolve any
mishaps.
Investment Rationale: Vehicles of all types are rapidly becoming electric and
autonomous. While AV's 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's
remote monitoring and control centre will monitor vehicles and if necessary,
provide additional support such as call a first responder, take over control
of the vehicle to move it out of harm's way and provide real-time
communication with passengers or pedestrians.
Belluscura plc (www.belluscura.com (http://www.belluscura.com) )
Respiratory medical device company that has developed an improved portable
oxygen concentrator (POC) to provide on-the-go supplemental O(2). The
company's products are the first FDA cleared devices that enable the user to
upgrade the filter cartridge to provide a greater flow of oxygen as a
patient's disease progresses, thereby obviating the need to purchase a new
POC.
Investment Rationale: Approximately 300m individuals suffer from COPD. Many of
these patients require supplemental oxygen to perform activities of daily
living. According to the WHO, COPD is the third leading cause of death in the
world causing 3.23 million premature deaths per year. 3 As there is no cure
for COPD, over time patients require greater amounts of oxygen, and if they
use a portable oxygen concentrator, this means they must replace their devices
with devices with greater capacity as their disease progresses. With
Belluscura's new patented device, users can exchange the filter cartridges to
enable higher capacity oxygen flow without having to change the device they
are using. Like upgrading memory on a laptop. The result is the potential to
reduce the cost and increase the availability of oxygen therapy for patients
that need POC's.
GenIP plc (www.GenIP.ai)
GenIP uses generative artificial intelligence aimed at empowering companies to
better evaluate and commercialise technological discoveries through its
services.
Investment Rationale: The GenAI market is currently experiencing exponential
growth. In 2023, 426 start-ups received total funding in excess of US$21
billion. GenIP provides Services to evaluate new technologies and identify
capable individuals to market those technologies. We believe the incorporation
of GenAI large language models (LLMs) into these services will help companies,
research institutions and venture funds mitigate adverse selection, improve
returns on invested capital and more efficiently deploy capital to produce
useful businesses that can become financially successful and contribute to the
quality of life of the customers they serve.
Financial performance
In the first half of 2024 we reported unrealized gain in our portfolio
totaling US$20.5m, primarily due to the increase in fair value of Microsalt
plc upon its IPO. Microsalt has increased in value and Guident has remained
relatively constant in value since the last reporting period. Our Net Assets
increased to US$69.8m and our Net Assets per share to US$0.35 (27p).
Fundraisings
In H1 2024, we closed share placements totaling US$2.5m. 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. This contributed to a corresponding increase in
the Group's portfolio company investments during the period and helped enable
both Microsalt and Guident to maintain their growth and accelerate their
market traction. Additionally, we used a portion of the proceeds to develop
a new Generative AI services business and for the full repayment of an
intercompany loan.
Current Trading and Outlook
We are pleased with the performance of our portfolio companies and we are
bullish in our belief that they will continue to grow from strength to
strength. We are executing on our strategy, and this should result in
increases in returns on invested capital as our portfolio companies continue
to mature and achieve meaningful milestones, which we hope to see in the next
year.
Whilst the Company is progressing very well, please note that our net asset
values and revenues will fluctuate from period to period, sometimes
significantly, due to individual portfolio company performance, valuations and
changes in market conditions and macro-economic financial conditions including
recent strains of the Coronavirus and residual inflationary pressures from the
Russian invasion of Ukraine.
We continue to be grateful for the patience and support of our shareholders
and we are sincerely appreciative of our dedicated, and incredibly hardworking
team without whom none of the results reported herein would be possible.
Tekcapital has set about reducing its cost base post-period by streamlining
its operations. Tekcapital's strengths lie in identifying technology with
strong chances of commercial success and creating shareholder value in a
transaction-focused approach to achieving growth. Recent strategic decisions
underscore our relentless commitment to maximising shareholder returns by
increasing our portfolio's value coupled with managing costs.
Dr Clifford M Gross
Chairman and CEO
25 September 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2024
Notes Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
Unaudited Unaudited Audited
US$ US$ US$
Continuing operations
Revenue from services* 254,397 349,515 735,265
Cost of sales* (143,710) (81,777) (314,083)
Changes in fair value on financial assets at fair value though profit or loss 7 20,500,240 (9,253,282) (14,229,009)
Interest from financial assets at fair value through profit and loss 334,412 209,197 455,096
Operating expenses (1,482,460) (1,361,471) (2,353,704)
Other income 123 37,382 20,384
Operating profit/(loss) and profit/(loss) before tax 19,463,002 (10,100,436) (15,686,051)
Income tax expense 5 (1,674) (1,675) (2,266)
Profit/(loss) after tax for the period/year 19,461,328 (10,102,111) (15,688,317)
Other comprehensive income/(loss)*
Translation of foreign operations 59,051 556,760 900,722
Total other comprehensive income/(loss) 59,051 556,760 900,722
Total comprehensive income/(loss) for the period/year 19,520,379 (9,545,351) (14,787,595)
Earnings per share 6
Basic earnings per share 0.10 (0.06) (0.09)
Diluted earnings per share 0.10 (0.06) (0.09)
* The Invention Evaluator and Vortechs assets were transferred to GENIP
Limited on 4 June 2024, which should be considered when comparing with
previous periods.
All comprehensive income as presented above belongs to the owners of the
Group.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2024
Notes As at 30 As at 30 As at 31 December 2023
June 2024 June 2023
Unaudited Unaudited Audited
US$ US$ US$
Assets
Non-current assets
Intangible assets - 242,940 218,158
Financial assets at fair value through profit and loss 7 69,481,993 48,649,780 46,653,995
Property, plant and equipment 14,271 15,965 14,271
69,496,264 48,908,685 46,886,424
Current assets
Trade and other receivables 552,188 2,442,368 1,114,753
Cash and cash equivalents 315,960 2,249,058 620,248
868,148 4,691,426 1,735,001
Total assets 70,364,412 54,600,611 48,621,425
Liabilities
Current liabilities
Trade and other payables 334,302 338,538 517,154
Deferred revenue 211,206 173,109 217,391
Total liabilities 545,508 511,647 734,545
Net assets 69,818,904 53,088,964 47,886,880
Equity attributable to owners of the parent
Ordinary shares 1,074,357 973,329 973,329
Share premium 31,214,052 28,937,011 28,937,011
Retained earnings 36,568,521 22,619,663 17,073,617
Translation reserve 1,034,143 631,130 975,092
Other reserve (72,169) (72,169) (72,169)
Total equity 69,818,904 53,088,964 47,886,880
Net Asset Per Share 0.35 0.30 0.27
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2024
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$
Balance as at 31 December 2022 839,723 24,240,930 74,370 (72,169) 32,682,276 57,765,131
Loss for the period - - - - (10,102,111) (10,102,111)
Other comprehensive income - - 556,760 - - 556,760
Total comprehensive income/(loss) for the period - - 556,760 - (10,102,111) (9,545,351)
Transactions with owners, recorded
directly in equity
Share issue 133,606 5,045,893 - - - 5,179,499
Cost of share issue - (349,812) - - - (349,812)
Share based payments - - - - 39,498 39,498
Total transactions with owners 133,606 4,696,081 - - 39,498 4,869,185
At 30 June 2023 (unaudited) 973,329 28,937,011 631,130 (72,169) 22,619,663 53,088,965
Balance as at 31 December 2023 973,329 28,937,011 975,092 (72,169) 17,073,617 47,886,880
Profit for the period - - - - 19,461,328 19,461,328
Other comprehensive income - - 59,051 - - 59,051
Total comprehensive income/(loss) for the period - - 59,051 - 19,461,328 19,520,379
Transactions with owners, recorded
directly in equity
Share issue 101,028 2,424,668 - - - 2,525,696
Cost of share issue - (147,627) - - - (147,627)
Share based payments - - - - 33,576 33,576
Total transactions with owners 101,028 2,277,041 - - 33,576 2,411,645
At 30 June 2024 (unaudited) 1,074,357 31,214,052 (72,169) 36,568,521 69,818,904
1,034,143
Share capital represents the amount subscribed for share capital at nominal
value.
Share premium represents the amount subscribed for share capital in excess of
nominal value and net of any directly attributable issue costs.
Translation reserve - foreign exchange differences recognised in other
comprehensive income.
Other reserve - historic other reserve outside of share premium and
translation reserve.
Retained earnings - cumulative net gains and losses recognised in the
consolidated statement of comprehensive income, net of dividends paid.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2024
Six months Six months For the year ended
ended ended 31 December 2023
Group 30 June 2024 30 June 2023
US$ US$ US$
Unaudited Unaudited
Net cash outflows from operating activities
Cash outflows from operations (1,089,713) (1,484,929) (1,261,144)
Taxation paid (1,674) (1,675) (2,265)
Net cash outflows from operating activities (1,091,387) (1,486,604) (1,263,409)
Cash flows from investing activities
Additions to financial assets at fair value through profit and loss (2,288,574) (1,764,274) (3,999,072)
Proceeds from disposals of financial assets at fair value through profit and 718,154 - 478,008
loss
Purchases of intangibles - - (59,004)
Purchases of property, plant and equipment - (6,087) (6,825)
Net cash outflows from investing activities (1,570,420) (1,770,361) (3,586,893)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 2,525,696 5,179,499 5,179,498
Costs of raising finance (147,627) (349,812) (349,812)
Net cash inflows from financing activities 2,378,069 4,829,687 4,829,686
Net (decrease)/increase in cash and cash equivalents (283,738) 1,572,722 (21,351)
Cash and cash equivalents at beginning of period/year 620,248 628,640 628,640
Exchange gain/(loss) on cash and cash equivalents (20,550) 47,697 12,961
Cash and cash equivalents at end of the period/year 315,960 2,249,059 620,248
Notes to the financial information
1. General information
Tekcapital PLC is a company incorporated in England and Wales and domiciled in
the UK. The address of the registered office is 12 New Fetter Lane, London,
United Kingdom, EC4A 1JP. The Company is a public limited company, which has
been quoted on the AIM market of the London Stock Exchange since 2014.
The principal accounting policies applied in the preparation of this
consolidated financial information are set out below. These policies have been
consistently applied to all the periods presented, unless otherwise stated.
2. Basis of preparation
The financial information for the six months ended 30 June 2024 set out in
this interim financial information is unaudited and does not constitute
statutory financial statements. The interim condensed financial information
has been presented in US Dollars ("$") and is rounded to the nearest dollar.
3. Accounting policies
3.1 Statement of compliance
The accounting policies applied by the Group and its subsidiaries in these
unaudited half year results are consistent with those applied in the annual
financial statements for the year ended 31 December 2023.
The financial statements of Tekcapital PLC Group have been prepared in
accordance with International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee (IFRS IC) as adopted by the United Kingdom and the
Companies Act 2006. The financial statements have been prepared under the
historical cost convention.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 4 of the FY 2023 accounts. The
estimates that changed since then are disclosed in Note 7.
4. Going concern
The 2024 interim financial information has been prepared on a going concern
basis.
The Group and Company meet its day to day working capital requirements through
its service offerings, monetisation of quoted equity stakes and monies raised
through issues of equity.
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
Group has no third party debt facilities.
The Directors have prepared detailed cash flow projections for the period to
30 September 2025 ("going concern assessment period"). The cash flow
projections have been subjected to sensitivity analysis which demonstrates
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 this financial information on a going concern basis.
5. Taxation
Immaterial charge of US$1,675 has arisen in the six-month period ended 30 June 2024 (30 June 2023: US$1,089).
6. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of Ordinary Shares
outstanding during the period.
Diluted earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the sum of weighted average number of (1) Ordinary
Shares outstanding during the period and (2) Ordinary Shares to be issued
assuming exercise of outstanding stock options with intrinsic value above $0
at 30 June 2024:
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended 31 December 2023
US$ US$ US$
Profit/(Loss) attributable to equity holders of the Company 19,461,328 (10,102,111) (15,688,317)
Weighted average number of Ordinary Shares in issue:
Basic 191,604,646 166,243,663 172,214,589
Diluted 196,071,312 170,660,330 176,681,255
Basic profit per share (US$) 0.10 (0.06) (0.09)
Diluted profit per share (US$) 0.10 (0.06) (0.09)
Financial Assets at Fair Value through Profit or Loss
The Group's financial assets at fair value through profit and loss consist of
equity investments (2024: US$61,934,271, 31 December 2023: US$41,125,568) and
convertible loan notes (2024: US$7,547,721 December 2023: US$5,528,427)
totaling US$69,481,993 (31 December 2023: US$46,653,995).
Equity investments
30 June 31 December 2023 Additions/(Disposals) Other adjustments Fair value gain/(loss) 30 June 2024
2023
US$ US$ US$ US$ US$ US$
Guident Limited 18,083,264 18,083,264 - - - 18,083,264
Lucyd Limited 4,644,231 2,189,794 - - 378,803 2,568,597
Belluscura plc 6,350,716 4,142,940 (718,154) (316,406) (946,029) 2,162,351
Microsalt plc 17,095,379 16,671,147 1,397,359 (245,899) 21,067,466 38,890,073
Smart Food Tek Limited 38,422 38,422 - - - 38,422
GENIP Limited - - 191,564 - - 191,564
Total Balance 46,212,012 41,125,567 870,769 (562,305) 20,500,240 61,934,271
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.
Microsalt plc commenced trading on the London Stock Exchange on 1 February
2024. As such, the Group's investment in Microsalt has been re-classified
under Level 1 as of 30 June 2024. Fair value measurement hierarchy for
financial assets as at 30 June 2024 with comparative amounts as of 31 December
2023:
Total Level 1 Level 2 Level 3
30 June 2024 US$ US$ US$ US$
Belluscura Plc 2,162,351 2,162,351 - -
Lucyd Limited 2,568,597 - 2,568,597 -
Guident Limited 18,083,264 - - 18,083,264
Microsalt Limited 38,890,073 38,890,073 - -
Smart Food Tek Limited 38,422 - - 38,422
GENIP Limited 191,564 - - 191,564
Total Balance 61,934,271 41,052,424 2,568,597 18,313,250
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
Guident (Nil Gain / Nil loss)
The total fair value remains unchanged from 31 December 2023 and is based on a
Private Placement Memorandum outlining offering of securities at $1 per unit,
with 18,115,942 shares held. Upon review of business updates in H1 2024,
management noted no material events necessitating revisions.
Microsalt (US$21.1m gain)
The total fair value of US$38,890,073 is based on valuation of 33,305,749
shares held in Microsalt plc at GBP0.925, the observed closing price on the
London Stock Exchange as of 30 June 2024. Accounting for cost addition of
US$1.39m, fair value gain of US$21.0m was arrived at as of 30 June 2024.
Lucyd Ltd (US$0.4m gain)
The fair value of the holding increased by US$0.4m during the year due to the
movement in the Company's share price at NASDAQ market, and closing price of
US$0.495 as of 30 June 2024, compared to US$0.42 as of 31 December 2023. With
5,189,085 shares held by Tekcapital plc, a fair value of US$2,568,597 was
arrived at as of 30 June 2024.
Belluscura (US$0.9m loss)
The fair value of the holding decreased by US$0.9m during the period due to
the movement in Company's share price at AIM market of London Stock Exchange
and closing price of 16p as of 30 June 2024, compared to 23p as of 31 December
2023. With 10,638,767 shares held by Tekcapital plc and disposal of 3,500,000
shares during the period at 16.15p per share, a fair value of US$2,162,351 was
arrived at as of 30 June 2024.
GENIP Limited (Nil Gain / Nil loss)
The fair value of the holding, following the transfer of assets from
Tekcapital LLC as of 4 June 2024, totals US$0.2m
Other investments (Nil Gain / Nil loss)
Given early stage of commercialisation, the fair value of Smart Food TEK was
recorded based on the cost of acquired IP, as the carrying amounts represent a
reasonable approximation of fair value.
Under level 3 unobservable inputs. In the absence of observable inputs, the
directors have considered the entities own data to determine the fair value,
which equates to the original funds invested. They do not consider that any
other available information would materially change or give a more reliable
representation of the value.
This is the only category of financial instruments measured and re-measured at
fair value.
Convertible loan notes
During the year, the Group also held multiple convertible loans issued by its
portfolio companies, including:
• Convertible note issued by Guident Ltd for the total of
US$5,000,000, 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$5,000,000
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 30 June 2024, US$4,262,903 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 30 June 2024, 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 30 June 2024, US$1,221,275 was
outstanding on the convertible loan notes.
7. Related party transactions
The Group has generally taken advantage of the exemption in IAS 24 "related
parties" not to disclose transactions with Group companies other than newly
formed GENIP Ltd, disclosed below. During the period the Group did not employ
any services of non-Group companies meeting the definition of related parties.
On 14 August 2024, the Company entered into an Asset Purchase Agreement with
Tekcapital plc and Tekcapital LLC. In accordance with the terms of the
Agreement, effective 4 June 2024, the Company acquired certain assets and
liabilities related to Invention Evaluator and Vortechs business. Following
assets and liabilities were transferred to the Company as part of capital
contribution of US$191,564 by Tekcapital plc, for the consideration of US$1.
US$191,564 was recorded as an addition to Financial Assets at Fair Value as of
30 June 2024 being the book value of the assets and liabilities transferred
from Tekcapital LLC.
Assets:
Intangible Assets of US$183,229, representing Net Book Value of Invention
Evaluator (US$397,773 cost and US$318,897 accumulated depreciation) and
Vortechs (US$462,771 cost and US$358,418 accumulated depreciation).
Trade receivables of US$58,370 representing trade receivables of Invention
Evaluator and Vortechs businesses.
Trademark cost related to Invention Evaluator value of $2,089.
Liabilities:
Deferred income of US$50,035 representing prepayments made in 2023 and 2024 by
customers of Invention Evaluator before the reports were delivered.
Additionally, the Company entered into a management service agreement with
Tekcapital Europe ltd as of 23 February 2024, compensating Tekcapital Europe
Limited in the amount of US$35,000 per quarter for a number of support
services. This agreement expired effective 30 June 2024, with US$38,846
charged and unpaid as of 4 June 2024.
8. Interim results
The interim results for the six months ended 30 June 2024 will not be sent to
shareholders but will be available from the Company's website at
http://tekcapital.com/
General Risk Factors and Forward-Looking Statements
This Report is directed only at Relevant Persons and must not be acted on or
relied upon by persons who are not Relevant Persons. Any other person who
receives this Report should not rely or act upon it. By accepting this Report
the recipient is deemed to represent and warrant that: (i) they are a person
who falls within the above descrip-tion of persons entitled to receive the
Report; (ii) they have read, agreed and will comply with the contents of this
notice. The securities mentioned herein have not been and will not be,
registered under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), or under any U.S. State securities laws, and may not be offered or sold
in the United States of America or its territories or possessions (the "United
States") unless they are registered under the Securities Act or pursuant to an
exemption from or in a transaction not subject to the registration
requirements of the Securities Act. This Report is not being made available to
persons in Australia, Canada, Japan, the Republic of Ireland, the Republic of
South Africa or any other jurisdiction in which it may be unlawful to do so,
and it should not be delivered or distributed, directly or indirectly, into or
within any such jurisdictions.
Investors must rely on their own examination of the legal, taxation, financial
and other consequences of an investment in the Com-pany, including the merits
of investing and the risks involved. Prospective investors should not treat
the contents of this Report as advice relating to legal, taxation or
investment matters and are advised to consult their own professional advisers
concerning any acquisition of shares in the Company. Certain of the
information contained in this Report has been obtained from published sources
prepared by other parties. Certain other information has been extracted from
unpublished sources prepared by other parties which have been made available
to the Company. The Company has not carried out an independent investigation
to verify the accuracy and completeness of such third-party information. No
responsibility is accepted by the Company or any of its directors, officers,
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
statements express, as at the date of this Report, the Company's plans,
estimates, valuations, forecasts, projections, opinions, expectations or
beliefs as to future events, results or performance. Forward-looking
statements involve a number of risks and uncertainties, many of which are
beyond the Company's control, and there can be no assurance that such
statements will prove to be accurate. No assurance is given that such forward
looking statements or views are correct or that the objectives of the Company
will be achieved. Further, valuations of 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
on these statements or views and no responsibility is accepted by the Company
or any of its directors, officers, employees or agents in respect thereof. The
Company does not undertake to update any forward-looking statement or other
information that is contained in this Report. Neither the Company nor any of
its shareholders, directors, officers, agents, employees or advisers take any
responsibility for, or will accept any liability whether direct or indirect,
express or implied, contractual, tortious, statutory or otherwise, in respect
of, the accuracy or completeness of the information contained in this Report
or for any of the opinions contained herein or for any errors, omissions or
misstatements or for any loss, howsoever arising, from the use of this Report.
Neither the issue of this Report nor any part of its contents is to be taken
as any form of contract, commitment or recommendation on the part of the
Company or the directors of the Company. In no circumstances will the Company
be responsible for any costs, losses or expenses incurred in connection with
any appraisal, analysis or investigation of the Company. This Report should
not be considered a recommendation by the Company or any of its affiliates in
relation to any prospective acquisition or disposition of shares in the
Company. No undertaking, Report, warranty or other assurance, express or
implied, is made or given by or on behalf of the Company or any of its
affiliates, any of its directors, of-ficers or employees or any other person
as to the accuracy, completeness or fairness of the information or opinions
contained in this Report and no responsibility or liability is accepted for
any such errors or omissions.
Intellectual Property Risk Factors
Tekcapital's 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 be negatively affected if our portfolio
companies lose some or all of their intellectual property rights, if patent
rights that they rely on are invalidated, or if they are unable to obtain
other intellectual property rights. Our success will depend on the ability of
our portfolio companies to obtain and protect patents on their technology and
products, to protect their trade secrets, and for them to maintain their
rights to licensed intellectual property or technologies. Their patent
applications or those of our licensors may not result in the issue of patents
in the United States or other countries. Their patents or those of their
licensors may not afford meaningful protection for our technology and
products. Others may challenge their patents or those of their licensors by
proceedings such as interference, oppositions and re-examinations or in
litigation seeking to establish the invalidity of their patents. In the event
that one or more of their patents are challenged, a court may invalidate the
patent(s) or determine that the patent(s) is not enforceable, which could harm
their competitive position and ours. If one or more of our portfolio company
patents are invalidated or found to be unenforceable, or if the scope of the
claims in any of these patents is limited by a court decision, our portfolio
companies could lose certain market exclusivity afforded by patents owned or
in-licensed by us and potential competitors could more easily bring products
to the market that directly compete with our own. The uncertainties and costs
surrounding the prosecution of their patent applications and the cost of
enforcement or defense of their issued patents could have a material adverse
effect on our business and financial condition.
To protect or enforce their patent rights, our portfolio companies may
initiate interference proceedings, oppositions, re-examinations or litigation
against others. However, these activities are expensive, take significant time
and divert 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 commercialise 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 that could 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
have invested in.
- Ends -
1 https://www.who.int/news-room/fact-sheets/detail/salt-reduction
(https://www.who.int/news-room/fact-sheets/detail/salt-reduction)
2
https://www.npr.org/2023/06/26/1184034017/us-pedestrian-deaths-high-traffic-car
(https://www.npr.org/2023/06/26/1184034017/us-pedestrian-deaths-high-traffic-car)
3
https://www.who.int/news-room/fact-sheets/detail/chronic-obstructive-pulmonary-disease-(copd)
(https://www.who.int/news-room/fact-sheets/detail/chronic-obstructive-pulmonary-disease-(copd))
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