REG - Tekcapital plc - Half Yearly Report for period ending 30 June 2023
29/09/2023 08:00
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RNS Number : 0796O Tekcapital plc 29 September 2023
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.
29 September 2023
Tekcapital plc
("Tekcapital", the "Company" or the "Group")
Unaudited Half-yearly Report for the period ending 30 June 2023
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 2023.
Operational highlights: Portfolio Companies
Microsalt® Ltd ("Microsalt") www.microsalt.co (http://www.microsalt.co)
· 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 including Brookshire Brothers
(https://www.brookshirebrothers.com/) , Pete's Fresh Market
(https://www.petesfresh.com/) , Heinen's (https://www.heinens.com/) , Dick's
Fresh Market (https://www.dicksfreshmarket.com/about-us) , Zerbos
(https://www.zerbos.com/) , Better Health Market
(https://betterhealthmarket.com/) , Associated Supermarkets
(https://www.shopassociated.com/) and a number of other natural independent
retailers across the country.
· 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.
· Partnered with Hanahreum Group ("H Mart"), one of the fastest
growing retailers in United States to sell MicroSalt's SaltMe® branded
crisps.
· Onboarded U.K. Celebrity Chef Jack Stein as brand ambassador for
MicroSalt.
Tekcapital owns 97.2% ownership of Microsalt Ltd, valued at US$17.1m as of 30
June 2023. Microsalt owns approximately 79% of shares in Microsalt Inc, its US
operating subsidiary.
Belluscura® Plc ("Belluscura") www.belluscura.com (http://www.belluscura.com)
· 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
· Commenced the premarket launch of its DISCOV-R portable oxygen
concentrator (POC), including a patient usability study. The Company's
patented technology allows the DISCOV-R to produce nearly three times as much
oxygen by weight as comparative dual flow concentrators.
· 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.
Tekcapital owns 11.2% of shares of Belluscura plc, valued at US$6.4m as of 30
June 2023.
Innovative Eyewear Inc ("Lucyd") www.lucyd.co (http://www.lucyd.co) (NASDAQ:
LUCY)
· Licensed sports culture brand, Reebok® for smart eyewear through an
agreement with Authentic Brands Group.
· 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 a (a) four speaker array (b) improved audio input (c)
improved battery life with 12 hours of playback (d) introduction of Bluetooth
5.2 amongst other innovations introduced by the company.
· Continued preparation for launches of its licensed brand products:
Nautica, Eddie Bauer and Reebok.
· Released "On Air" a new feature for its Vyrb app that enables users
to create real-time audio chatrooms.
· Filed patent application for 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.
· Partnered with PRIVATO Duty Free, a provider of travel luxury goods
to sell Lucyd products in their Duty-Free stores.
· Raised approximately US$4.7m at US$1.05/share, in a follow-on
offering, to accelerate the launch of its licensed branded products.
Tekcapital owns 100% of the shares of Lucyd Ltd, valued at US$4.6m as of 30
June 2023. Lucyd Ltd owns approximately 40% of shares in Innovative Eyewear,
Inc.
Guident Ltd ("Guident") www.guident.co (http://www.guident.co)
· 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. This connectivity enables continuous, high-quality video
streaming to remotely monitor autonomous systems and, when necessary, to
enable remote control of the vehicles and devices to help resolve navigation
edge cases. Additionally, the connectivity will provide real-time audio and
video communication with passengers, pedestrians, or first responders,
ensuring the highest level of safety for autonomous systems, which is a
crucial factor in the deployment and management of autonomous vehicle fleets.
· 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.
Tekcapital owns 100% of the shares of Guident Ltd, valued at US$18.1m as of 30
June 2023. Guident owns approximately 91% of shares in Guident Corp, its US
operating subsidiary.
Operational highlights: Corporate
· Tekcapital successfully delivered over 170 Invention Evaluator
(IE) reports to universities, research centers, and companies across the globe
in H1 2023 (90 IE reports in H1 2022). The reports assisted organizations in
evaluating the market potential of their technologies. 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.
· The Vortechs Group, Tekcapital's executive search firm, secured
10 executive search assignments in H1 2023 (6 search assignments in H1 2022)
and has expanded its list of academic clients to include additional
prestigious institutions such as Massachusetts Institute of Technology (MIT),
known worldwide for its contributions to technology development and
innovation.
· Tekcapital played a pivotal 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 foster sustainable water
solutions.
· Tekcapital hosted an informative webinar series titled 'The
Challenges for the Commercialization of University Technology.' This series
provided valuable insights to the innovation communities in both the United
States and Mexico.
· To underscore its commitment to technology transfer, Tekcapital
co-sponsored and exhibited at the 2023 U.S. Eastern Region Meeting organized
by the Association of University Technology Managers (AUTM).
Financial highlights
· Net Assets at US$53.1m (31 December 2022: US$57.8m).
· NAV per share at US$0.32 (31 December 2022: US$0.38).
· Portfolio valuation at US$46.2m (31 December 2022: US$56.2m).
· H1 2023 professional services revenue increased 33% to US$0.4m (H1
2022: $0.3m).
· H1 2023 Loss after tax US$ 10.1m (H1 2022 Profit: US$6.18m),
primarily due to unrealised decrease of US$ 9.3m in the fair value of our
portfolio companies.
· H1 2023 share placements US$ 5.2m (H1 2022 share placements: US$
2.5m). Proceeds were used 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.
· We ended the period with a solid balance sheet of ~ US$ 53m in net
assets, US$2.2m in cash, US$2.4m in receivables, modest current payables and
zero debt.
Post period end highlights:
· Microsalt Ltd announced a partnership with Weijohn Farms Group, a
multi-faceted organization that includes Sorbatto Fresh and Washington Organic
Hazelnuts. Weijohn Farms Group will be using MicroSalt on its Sorbatto Fresh
line of hazelnuts. The North American hazelnut market was US$ 1.8 billion in
2022 and is projected to grow to US$ 3.2 billion by 2030 with a CAGR of 7.6%.
This serves as a practical example of the multitude of vertical applications
for MicroSalt®.
· Microsalt Ltd filed a new patent application (# 63/580,590) entitled
"Compositions and methods for reduced leavening time and sodium content in
doughs comprising micron-sized salt particles adhered to a carrier," to
improve baked goods. MicroSalt is very excited about its invention which they
believe enables the production of baked goods quicker, less expensively, and
with reduced sodium. The bread market is extremely compelling, with global
volumes expected to reach 216.7bn kg by 2028.
· 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
quarter.
· 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.
· 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.
· Guident's partnership with the JTA, the largest transportation
authority in the U.S. has resulted in monthly recurring purchases of its
teleoperation software solution. Guident is executing a successful
integration for JTA with one of their AVs at JTA's Armsdale Test and Learn
Center.
· Innovative Eyewear announced the launch of a new transitional blue
light blocking lens designed to maximize utility, eye protection and user
satisfaction of Lucyd eyewear, an important enhancement for all-day
wearability, allowing the user to seamlessly shift from blocking harmful blue
light during computer and phone use, to enjoying driving and outdoor
activities comfortably in high sunlight.
· 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.
· Innovative Eyewear launched an important upgrade to its Lucyd ChatGPT
app. The 2.0 update delivers several new features and usability improvements
to the app's iOS version, with the same updates planned for the Android
version later in 2023.
· In subsequent periods, Tekcapital intends to invest in Generative AI
startups spun-out of universities that have the near-term potential to
increase the productivity of existing specific businesses. To assist us with
technical insight in this rapidly evolving area, we have expanded our science
advisory board with two leading AI scientists:
o Dr. Russ Salakhutdinov, the former director of AI at Apple
(https://www.technologyreview.com/2016/10/17/244581/apple-gets-its-first-director-of-ai/)
. Russ is a Professor of Computer Science in the Department of Machine
Learning at Carnegie Mellon University (CMU). He received his PhD in computer
science from the University of Toronto. After spending two post-doctoral years
at MIT, he joined the University of Toronto and later moved to CMU. He has
authored/co-authored over 150 research papers and he is an Alfred P. Sloan
Research Fellow, Microsoft Research Faculty Fellow, a recipient of the Early
Researcher Award, Google Faculty Award, and Nvidia's Pioneers of AI award and,
o Alexander Mordvintsev who currently serves as a Senior research scientist
at Google and inventor of Deep Dream
(https://thereader.mitpress.mit.edu/deepdream-how-alexander-mordvintsev-excavated-the-computers-hidden-layers/)
. Alexander is one of the world's leading scientists in AI and computer
graphics.
Dr. Clifford M. Gross, Chairman said: "We are glad to report continued
significant development of the Group's portfolio companies, all of which were
built in-house. Whilst capital markets have been choppy in 2023 and this has
resulted in unrealised depreciations in our portfolio, the view from the
bridge is bullish, as we clearly see the potential for significant growth and
performance of our unique and rapidly developing portfolio companies."
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) .
LEI: 213800GOJTOV19FIFZ85
General Risk Factors and Forward-Looking Statements
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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.
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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
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strategic plans, timetables and capital expenditures. Forward-looking
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beliefs as to future events, results or performance. Forward-looking
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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
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as to the accuracy, completeness or fairness of the information or opinions
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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.
Chairman's statement
Tekcapital brings innovations from laboratory to market. In the first half of
2023, our key portfolio companies continued to make significant progress. We
commercialise university intellectual property, a process known as technology
transfer, both for our own portfolio and as a service for client companies and
universities.
We 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.
The Company believes that there is considerable value to be realised from its
current portfolio companies and is continuing to further assist and when
appropriate invest in these operations. A common theme across our portfolio
companies is that they have proprietary intellectual property, capable
management, and if successful, can improve the quality of life for the
customers they serve. The Company's key investments include:
Microsalt ltd (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
(#_ftn1)
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 (#_ftn2) . 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 and in case of a mishap to
rapidly help resolve the situation.
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.
Additionally, Guident seeks to commercialize its regenerative shock absorber
technology to extend the range of electric vehicles between charges. The
Edison Electric Institute Projects 26.4 million electric vehicles will be on
U.S. roads in 2030. According to the International Energy Agency, worldwide,
350 million electric vehicles are projected to be on the road by 2030. All
these electric vehicles will have regenerative braking. We believe in the near
future, most commercial electric vehicles will also have regenerative shock
absorbers. This will extend the driving range between charges and provide
power to active suspension to improve ride characteristics and comfort.
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 (#_ftn3) 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.
Financial performance
In the first half of 2023 we reported unrealized depreciations in our
portfolio totaling $9.2m due to the reduction in the publicly quoted values of
Belluscura and Innovative Eyewear at the end of the period. In our view these
reductions are overdone and primarily the result of choppy, risk off capital
markets in both the UK and US. We believe firmly in the future potential of
both companies. MicroSalt has increased in value and Guident has remained
relatively constant in value since the last reporting period. Our professional
service revenue, whilst still modest, increased ~30% compared to the prior
period, demonstrating the continued need and value of our services. We ended
the period with a healthy balance sheet of about US$ 53m in net assets, $2.2m
in cash, $2.4m in receivables, modest current payables and zero debt.
Fundraisings
In H1 2023 we closed share placements totaling US$ 5.2m. 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 was helpful in
enabling both MicroSalt and Guident to maintain their growth and accelerate
their market traction.
Current Trading and Outlook
Having continued to develop and expand Tekcapital's existing business, the
Board is confident that continued investment in select portfolio companies
remains the right approach for long-term value creation. We believe that 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 due to individual portfolio
company performance, valuations and changes in market conditions and
macro-economic financial conditions including the recent Coronavirus pandemic
and the Russian invasion of Ukraine. Certainly, we have seen this in H1 2023.
We are grateful for the patience and support of our shareholders through these
challenging events. We are also sincerely appreciative of our dedicated, and
incredibly hardworking team without which none of the results reported herein
would be possible.
Additionally, going forward, the Company is seeking to make one or more select
investments in Generative AI startups that have the near-term potential to
increase the productivity of existing businesses in specific verticals. The
Company will inform the market in due course when it closes its first
investment in this area. To assist us with technical insight into this
rapidly evolving area, we have expanded our science advisory board with two
additional scientists:
Dr. Russ Salakhutdinov, the former director of AI at Apple. Russ is a
Professor of Computer Science in the Department of Machine Learning at
Carnegie Mellon University (CMU). He received his PhD in computer science from
the University of Toronto. After spending two post-doctoral years at MIT, he
joined the University of Toronto and later moved to CMU. He has
authored/co-authored over 150 research papers and he is an Alfred P. Sloan
Research Fellow, Microsoft Research Faculty Fellow, a recipient of the Early
Researcher Award, Google Faculty Award, and Nvidia's Pioneers of AI award and
Alexander Mordvintsev who currently serves as a Senior research scientist at
Google and inventor of Deep Dream (https://en.wikipedia.org/wiki/DeepDream) .
Alexander is one of the world's leading scientists in AI and computer
graphics.
Dr Clifford M Gross
Chairman and CEO
29 September 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2023
Notes Six months ended Six months ended Year ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
US$ US$ US$
Continuing operations
Revenue from services 349,515 263,328 615,214
Cost of sales (81,777) (93,692) (222,361)
Changes in fair value on financial assets at fair value though profit or loss 7 (9,253,282) 7,051,816 (10,978,372)
Interest from financial assets at fair value through profit or loss 286,583
209,197 166,988
Operating expenses (1,361,471) (1,210,166) (2,524,496)
Other income 37,382 481 79,638
Operating (loss)/profit and (loss)/profit before tax (10,100,436) 6,178,755 (12,743,794)
Income tax expense 5 (1,675) (1,089) (1,714)
(Loss)/profit after tax for the period/year (10,102,111) 6,177,666 (12,745,508)
Other comprehensive income/(loss)*
Translation of foreign operations 556,760 511,734 (212,803)
Total other comprehensive income/(loss) 556,760 511,734 (212,803)
Total comprehensive income/(loss) for the period/year (9,545,351) 6,689,400 (12,958,311)
Earnings per share 6
Basic earnings per share (0.06) 0.05 (0.09)
Diluted earnings per share (0.06) 0.05 (0.08)
*May be reclassified to profit or loss in future years.
All comprehensive income as presented above belongs to the owners of the
Group.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2023
Notes As at 30 As at 30 As at 31 December 2022
June 2023 June 2022
Unaudited Unaudited Audited
US$ US$ US$
Assets
Non-current assets
Intangible assets 242,940 322,463 242,940
Financial assets at fair value through profit and loss 7 48,649,780 74,062,299 56,184,146
Property, plant and equipment 15,965 16,523 9,969
49,908,685 74,401,285 56,437,055
Current assets
Trade and other receivables 2,442,368 577,017 1,088,043
Cash and cash equivalents 2,249,058 1,520,085 628,640
4,691,426 2,097,102 1,716,683
Total assets 53,600,611 76,498,387 58,153,738
Liabilities
Current liabilities
Trade and other payables 338,538 248,904 215,998
Deferred revenue 173,109 169,284 172,609
Total liabilities 511,647 418,188 388,607
Net assets 53,088,964 76,080,199 57,765,131
Equity attributable to owners of the parent
Ordinary shares 973,329 834,277 839,724
Share premium 28,937,011 24,140,683 24,240,930
Retained earnings 22,619,663 50,937,139 32,682,276
Translation reserve 631,130 240,269 74,370
Other reserve (72,169) (72,169) (72,169)
Total equity 53,088,964 76,080,199 57,765,131
Net Asset Per Share 0.30 0.41 0.38
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 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 $
Balance as at 31 December 2021 793,792 21,793,644 (291,054) (72,169) 44,708,254 66,932,467
Income for the period - - - - 6,177,666 6,177,666
Other comprehensive income - - 531,323 - - 531,323
Total comprehensive loss for the period - - 531,323 - 6,177,666 6,708,989
Transactions with owners, recorded
directly in equity
Share issue 40,485 2,489,878 - - - 2,530,363
Cost of share issue - (142,839) - - - (142,839)
Share based payments - - - - 51,219 51,219
Total transactions with owners 40,485 2,347,039 - - 51,219 2,438,743
At 30 June 2022 (unaudited) 834,277 24,140,683 240,269 (72,169) 50,937,139 76,080,199
Balance as at 31 December 2022 839,724 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 - - 790,903
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 53,088,964
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 2023
Six months Six months For the year ended
ended ended 31 December 2022
Group 30 June 2023 30 June 2022
US $ US $ US $
Unaudited Unaudited
Net cash outflows from operating activities
Cash outflows from operations (1,484,929) (2,130,374) (2,776,941)
Taxation paid (1,675) (1,089) (1,714)
Net cash outflows from operating activities (1,486,604) (2,131,463) (2,778,655)
Cash flows from investing activities
Purchase of financial assets at fair value through profit and loss (1,764,274) (1,058,317) (3,970,900)
Proceeds from disposals of financial assets - - 1,073,792
Purchases of property, plant and equipment (6,087) (5,873) (9,919)
Net cash outflows from investing activities (1,770,361) (1,064,190) (2,907,027)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 5,179,499 2,530,363 2,636,056
Costs of raising finance (349,812) (142,839) (142,839)
Net cash inflows from financing activities 4,829,687 2,387,524 2,493,217
Net (decrease)/increase in cash and cash equivalents 1,572,721 (808,130) (3,192,465)
Cash and cash equivalents at beginning of period/year 628,640 2,092,292 3,543,762
Exchange gain/(loss) on cash and cash equivalents 47,697 235,923 277,343
Cash and cash equivalents at end of the period/year 2,249,058 1,520,085 628,640
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 2023 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 2022.
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 2022 accounts. The
estimates that changed since then are disclosed in Note 7.
4. Going concern
The 2023 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 2024 ("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 2023 (30 June 2022: 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 $0
at 30 June 2023:
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
US$ US$ US$
Profit/(Loss) attributable to equity holders of the Company (10,102,111) 6,177,666 (12,745,794)
Weighted average number of Ordinary Shares in issue:
Basic 166,243,663 141,542,328 146,043,720
Diluted 170,660,330 144,775,661 150,483,172
Basic profit per share ($) (0.06) 0.05 (0.09)
Diluted profit per share ($) (0.06) 0.05 (0.08)
7. 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 (2023: US$ 46,212,012, 31 December 2022: US$54,878,609) and
convertible loan notes (2023: US$2,437,768, 31 December 2022: US$1,305,537)
totaling US$48,649,780 (31 December 2022: US$56,184,146).
Equity investments
30 June 31 December 2022 Additions Other Fair value gain/(loss) 30 June 2023
2022
US $ US $ US $ US $ US $ US $
Guident Limited 18,083,264 18,083,264 - - 18,083,264
Lucyd Limited 27,071,633 8,175,403 - - (3,531,172) 4,644,231
Belluscura Limited 18,877,197 12,072,826 - - (5,722,110) 6,350,716
Microsalt Limited 6,985,138 16,508,694 586,685 - - 17,095,379
Smart Food Tek Limited 43,161 38,422 - - - 38,422
Total Balance 71,060,393 54,878,609 586,685 - (9,253,282) 46,212,012
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 30 June 2023. Fair value measurement hierarchy for financial
assets as at 30 June 2023 with comparative amounts as of 31 December 2022:
Total Level 1 Level 2 Level 3
30 June 2023 US$ US$ US$ US$
Belluscura 6,350,716 6,350,716 - -
Lucyd Limited 4,644,231 - 4,644,231 -
Guident Limited 18,321,027 - - 18,321,027
Microsalt Limited 17,095,378 - - 17,095,378
Smart Food Tek Limited 38,422 - - 38,422
Total Balance 46,449,775 6,350,716 4,644,231 35,454,828
31 December 2022 US$ US$ US$ US$
Belluscura 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
Guident (Nil Gain / Nil loss)
The total fair value remains unchanged from 31 December 2022 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 2023,
management noted no material events necessitating revisions.
Microsalt (Nil Gain / Nil loss)
The total fair value of US$17,095,378 is based on valuation of 6,216,501
shares held in Microsalt Inc, 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 H1 2023, management noted no material events
necessitating revisions. Addition of $586,685 was recorded due to conversion
of part of the existing convertible loan note in April 2023.
Lucyd Ltd ($3.5m loss)
The fair value of the holding decreased by US$3.5m during the period due to
the movement in the Company's share price at NASDAQ market and the observed
closing price of US$0.9 as of 30 June 2023. With 5,189,085 shares held by
Tekcapital plc, a fair value of US$4,644,231 was arrived at as of 30 June
2023.
Belluscura ($5.7m loss)
The fair value of the holding decreased by US$5.7m during the period due to
the movement in Company's share price at AIM market of London Stock Exchange
and closing price of 33p as of 30 June 2023. With 15,138,767 shares held by
Tekcapital plc, a fair value of US$6,350,717 was arrived at as of 30 June
2023.
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
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
can be converted into shares of common stock of the Company upon occurrence of
certain conversion events including future share placements. As of 30 June
2023, no balance was outstanding.
· Convertible note issued by Guident Ltd for the total of US$1,000,000,
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$1,000,000 note originated in
March 2020 and can be converted into Guident's equity upon occurrence of
certain conversion events. No conversions occurred during the period. As of 30
June 2023, US$1,000,000 was outstanding.
· Convertible note issued by its portfolio Company, Microsalt Inc, for
the total of US$2,000,000, 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 Microsalt's equity
upon occurrence of certain conversion events. The US$2,000,000 note originated
in September 2020 is payable in September 2023 or can be converted into
Microsalt's equity upon occurrence of certain conversion events including
future share placements. In April 2023, Microsalt Inc converted related party
borrowings totaling US$500,000 into 181,819 shares of common stock at
US$2.75each. As of 30 June 2023, US$1,437,768 was outstanding.
8. Related party transactions
The Group has taken advantage of the exemption in IAS 24 "related parties" not
to disclose transactions with other Group companies. During the period the
Group did not employ any services of non-Group companies meeting the
definition of related parties.
9. Interim results
The interim results for the six months ended 30 June 2023 will not be sent to
shareholders but will be available from the Company's website at
http://tekcapital.com/investors/.
- Ends -
1 (#_ftnref1)
https://www.who.int/news-room/fact-sheets/detail/salt-reduction
(https://www.who.int/news-room/fact-sheets/detail/salt-reduction)
2 (#_ftnref2)
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 (#_ftnref3)
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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