ALLIED MINDS PLC
ANNUAL REPORT AND ACCOUNTS
For the year ended 31 December 2020
Contents
Overview
Chairman’s Report
Strategic Report
Highlights
Company Overview
Portfolio Review and Developments
Key Performance Indicators
Financial Review
Risk Management
Management and Governance
The Board
Directors’ Report
Corporate Governance Report
Sustainability
Directors’ Remuneration Report
Audit Committee Report
Financial Statements
Independent Auditor’s Report
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Company Balance Sheet
Notes to the Financial Statements
Company Information
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Overview
Allied Minds plc (Allied Minds or the Group) is an IP commercialisation company primarily focused on early
stage company development within the technology sector.
The Group is currently comprised of seven portfolio companies based upon a broad range of underlying
innovative technologies ranging from semiconductors to wireless connectivity to space-based imagery
and analytics.
The ability of the Group’s portfolio companies to raise funds and continue achieving important technical
and commercial milestones while building upon key partnership relationships is a key strength. The Group
continues to progress as it works to execute on growing the value of its portfolio company interests for
its shareholders.
Allied Minds’ strategy is focused on supporting its existing portfolio companies and maximising
monetisation opportunities for portfolio company interests. The Board aims to monetise the Group’s
ownership positions at the appropriate time, recognising the value and benefit in achieving well-timed
risk-adjusted returns for the benefit of shareholders.
Upon the event of successful monetisation events from the sale of portfolio companies or portfolio
company interests, Allied Minds anticipates distributing the net proceeds to its shareholders, after due
consideration of potential follow-on investment opportunities within the existing portfolio and working
capital requirements.
Allied Minds has also implemented a significant cost reduction in its annual central costs. Accordingly,
the Group currently projects that its recurring annualised HQ operating expenses will be reduced to
approximately $5.7 million for 2021 (2020: $7.1 million).
The Directors believe the Group’s cash balance is sufficient to continue to support Allied Minds' operations
and portfolio companies in accordance with its current strategy.
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Chairman’s Report
Allied Minds started 2020 with a new Board and a recalibrated strategy focused exclusively on funding
and operating our existing investment portfolio of businesses and to operate a streamlined and highly
cost-efficient organisation.
During 2020, the Group undertook a critical assessment of its portfolio of very early stage and pre-revenue
companies. As a result of this strategic review, the Board instituted a new form of governance that is
better suited to achieving value creation from its venture-like portfolio. Under the new corporate
structure, announced in January 2021, the Group will be led by its Non-Executive Directors (NEDs) and the
role of Chief Executive Officer will no longer be required.
Throughout 2020, alongside the thorough portfolio review, Allied Minds continued to drive the strategic
objectives first announced in April 2019 of focusing exclusively on supporting the existing portfolio
companies and maximising monetisation opportunities for portfolio company interests.
Early in 2020 we demonstrated the benefits of this approach to delivering shareholder value with the
payment of a 12.62 pence per share dividend in February, which followed the sale of HawkEye 360 in the
third quarter of 2019.
The Board aims to monetise the Group’s ownership positions at the appropriate time, recognising the
value and benefit in achieving well-timed risk-adjusted returns for the benefit of shareholders.
Allied Minds remains a significant shareholder in each of its portfolio companies, and all companies in the
portfolio, regardless of prior funding, are at the knee of the commercialisation curve. While seeing
significant opportunities, each company also needs to manage the significant risks which are typical and
customary for emerging companies, including market development and penetration, leading to revenue
growth.
At the end of the first quarter of 2020 the coronavirus pandemic and its impact both in the US and globally,
meant we were equally focused on ensuring the wellbeing, safety, and security of our workforce across
all our portfolio companies.
Swift and effective actions were taken to allow all of us to continue operating safely using remote working
environments and virtual meeting platforms and I would like to pay tribute to all employees for their
resilience and commitment throughout this highly challenging period.
Across the portfolio, several companies achieved milestone funding events and delivered strong progress
in technology development, underpinned by blue-chip partnerships that were put in place or continued
to thrive during the year.
BridgeComm signed a JDA with Boeing HorizonX (Boeing) to collaboratively develop applications of One-
to-Many (OTM) technology, and secured several additional rounds of convertible debt financing. The
company also entered into a partnership with Nokia to develop ultra-high-speed throughput solutions to
facilitate faster deployment of 5G networks.
Federated Wireless (Federated) also delivered strong technological progress involving blue chip
partnerships, launching a new Connectivity-as-a-Service (CaaS) offering that lets US enterprises buy and
deploy private 4G and 5G networks with a single click through AWS(R) and Microsoft Azure(R)
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marketplaces. Federated also raised additional funding during the year whilst its market opportunity
expanded with the unlocking of an additional 100 megahertz of contiguous mid-band spectrum in the
3.45-3.55 GHz band for commercial 5G deployment.
Orbital Sidekick (Orbital) was awarded a multi-year contract by the Department of the US Air Force’s
commercial investment group (AFVentures) as part of its Strategic Financing (STRATFI) programme and
this brought further financing and financing opportunities. Orbital then secured conditional funding,
which is expected to close in Q2 2021 subject to approval by the Committee on Foreign Investments in
the United States (CFIUS).
The Board also made further moves to rationalise the portfolio with the acquisition of TableUp by
TouchBistro, Inc. in a stock-for-stock transaction.
However, COVID-19 had a negative impact on several companies in the portfolio including Federated, Spin
Memory (Spin), and Spark Insights (Spark). Federated was able to mitigate against this impact and is now
back on track with its strategic plan and timing, including meeting projected revenue targets for 2021.
Meanwhile, Spin continues to face commercial and financing challenges that the Spin Board of Directors,
with the support of the NEDs, are working to address in 2021. In the event financing is not obtained or
projected revenue is not realised, Spin may need to seek alternative paths that may include filing for
bankruptcy, selling its intellectual property assets, and/or other similar avenues to orderly wind down the
company in the near term.
Furthermore, while Spark is continuing to achieve development milestones with respect to its intellectual
property, the delay in securing financing has put the company in a difficult cash position. In the event
financing is not realised within the coming weeks, Spark will need to immediately resort to alternative
paths that include selling its assets, filing for bankruptcy, winding down and/or similar avenues.
In each case, the NEDs are working closely with the management teams at Spin and Spark, respectively,
to tackle the challenges faced by these companies, including exploring all alternatives available to such
companies, and to determine how to achieve the best outcome for its investors.
We remain in close communication with customers, suppliers and partners, working together to navigate
this changing environment. In 2020, the Group was able to demonstrate the ability of its portfolio
companies to raise funds and achieve key technical and commercial milestones, despite the global
challenges of COVID-19.
Going forward, while the NEDs and Allied Minds will continue to support all our portfolio companies, and
intend to continue providing guidance, advice, assistance with fundraising and strategic opportunities, it
will be the qualified and strong management teams in place who will be running the respective businesses
and responsible for advancing and progressing their respective companies forward, including leading
fundraising activities and identifying and securing new investors. The NEDs believe that on balance, and
taking into consideration the challenges facing some of the Group’s portfolio companies that may hinder
success, the Group as a whole remains well-positioned to maximise its value and deliver additional returns
to our shareholders within a reasonable timeframe.
Allied Minds’ cash position will be used to strategically support those portfolio companies that will enable
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it to further its objective of maximising value and returns for its shareholders.
Harry Rein, Chairman
29 March 2021
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STRATEGIC REPORT
Highlights
Investment & Financial Highlights
• $27.9 million invested in portfolio companies, of which $13.7 million was raised from third-party
investment
• Net cash and cash equivalents at 31 December 2020: $24.5 million (FY19: $90.6 million), of which
$22.3 million is held within Allied Minds (FY19: $84.1 million)
• Revenues of $0.5 million (2019: $2.7 million) mainly from non-recurring engineering (NRE) and
service contracts, reflecting the early stage nature of our portfolio companies
• On 14 February 2020, Allied Minds paid a special dividend of 12.62 pence per ordinary share
totaling £30.49 million
Selected Portfolio Company Highlights
• BridgeComm (consolidated subsidiary):
o
Joint development agreement (JDA) with Boeing HorizonX (Boeing) to collaboratively
develop applications of the One-to-Many (OTM) technology
o Additional $2.0 million of convertible debt financing from Allied Minds on top of the $1.0
million invested by Boeing at the end of 2019
o Secured additional $1.5 million of convertible debt financing from Boeing upon successful
achievement of development milestones under the JDA, post-period end
o Entered into partnership with Nokia to develop ultra-high-speed throughput solutions to
facilitate faster deployment of 5G networks
• Federated Wireless (equity accounted investment):
o Announced new Connectivity-as-a-Service (CaaS) offering that lets U.S. enterprises buy
and deploy private 4G and 5G networks with a single click through AWS(R) and Microsoft
Azure(R) marketplaces
o Raised $13.7 million of additional Series C funding from Allied Minds and existing investor,
Pennant Investors, to accelerate expansion and adoption of its partnerships with AWS
and Microsoft Azure to offer Connectivity-as-a-Service and expand into 6 GHz band for
5G services
o Potential market opportunity expanded upon additional 100 megahertz of contiguous
mid-band spectrum in the 3.45-3.55 GHz band unlocked for commercial 5G deployment
• Orbital Sidekick (preference share investment held at fair value):
o Awarded a multi-year contract by the Department of the Air Force’s commercial
investment group (AFVentures) as part of its Strategic Financing (STRATFI) programme,
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STRATEGIC REPORT
under which the company received $4.0 million of non-dilutive financing and has the
opportunity to receive up to $12.0 million of additional non-dilutive financing over next
three years to match private funds raised
o Entered into definitive agreement to secure $16.0 million in a Series A Preferred financing
round expected to close in Q2 2021 subject to approval by the Committee on Foreign
Investments in the United States
• Spin Memory (equity accounted investment):
o Raised $8.25 million of additional Series B funding from existing investors, including Abies
Ventures, Applied Ventures, LLC (the venture capital arm of Applied Materials, Inc.), ARM
Technology Investments Limited (“ARM”) and Allied Minds, to support continued
research in MRAM, including work with its existing development partners, Applied
Materials and ARM
o Facing significant liquidity issues due to its inability to secure new customers coupled with
the unexpected loss of a government bid in late Q4 2020. Delays of the required testing
of its development chip with ARM for nearly nine months due to the work-from-home
orders in the State of California due to COVID-19 has had a direct effect
• TableUp (preference share investment held at fair value) acquired by TouchBistro, Inc. in stock-
for stock transaction. The stock held in TouchBistro is held at fair value under IFRS9
Corporate Developments
• Post-period end, Allied Minds announced additional restructuring efforts including direct
management of the portfolio by the Board and elimination of the Chief Executive Officer role
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STRATEGIC REPORT
Company Overview
Overview
Allied Minds is an IP commercialisation company primarily focused on early stage company development
within the technology sector.
We have historically invested in companies at an early stage, including seed investments to build
companies based on a technical breakthrough or invention. As such, our investments have significant
upside potential, but also carry significant risk inherent in the early stage model.
The Group is currently comprised of seven portfolio companies based upon a broad range of underlying
innovative technologies ranging from semiconductors to wireless connectivity to space-based imagery
and analytics.
The ability of the Group’s portfolio companies to raise funds and continue achieving important technical
and commercial milestones while building upon key partnership relationships across the portfolio signify
the strength of the Group and demonstrates that it remains on track as it works to execute on maximising
the value of its portfolio company interests and delivering well-timed, risk-adjusted returns for its
shareholders.
COVID-19
As we navigate the uncertainties brought by the coronavirus pandemic, Allied Minds continues to closely
monitor, assess, and respond to the impacts of COVID-19 in order to ensure the continued health, safety,
and security of its workforce across its portfolio companies. The Group has taken several actions to enable
Allied Minds and its portfolio companies to continue operating safely and effectively, including
implementing remote working environments, using virtual meeting platforms, and reducing travel.
While COVID-19 has had varying degrees of commercial impact across the portfolio in the past year, the
actions and mitigation put in place by the Group have enabled day-to-day operations to continue
effectively across the portfolio. As highlighted in this report, while some of our companies have been
impacted more negatively than others, overall, the achievements across our portfolio demonstrate that
our companies are continuing to make progress against their respective commercial and strategic
objectives even during this pandemic. We remain in close communication with all our customers,
suppliers and partners to collaborate on how to best support each other’s needs in this new environment.
Furthermore, Allied Minds continues to engage with each of its portfolio companies to help manage and
mitigate against potential impacts on each company’s business, including assisting with employee
support, cash management, and contingency planning.
While we remain cautious and vigilant about what the coming months may bring, we continue to be
optimistic and expect to be able to navigate these uncertain times whilst delivering the results of our
stated strategy in the coming years.
Model
As a manager of a technology-focused portfolio in which we hold significant ownership positions, we seek
to provide hands-on support over the life of our companies to support their growth, focusing on enabling
and driving commercialisation, supporting follow-on investment rounds, and positioning for superior
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STRATEGIC REPORT
monetisation opportunities.
Allied Minds offers operational and management support to each of its portfolio companies leveraging
the deep domain expertise of our management team in their respective careers as entrepreneurs,
operators, directors, advisors, and investors. Our employees have expertise in business strategy, sales
and marketing, operations, finance, legal and transaction execution.
We play an active role in developing the strategic direction of our portfolio companies and driving ongoing
planning and assessment. Our executives and Non-Executive Directors serve on the boards of directors
of our portfolio companies, working with them to develop and implement strategic, operating and funding
plans. We evaluate on an on-going basis the progress and potential of each of the portfolio company’s
businesses, and make strategic and funding decisions based on the regular review of operational and
financial performance and the achievement of key milestones. Together with our management, the
respective portfolio company boards of directors define the critical milestones, or inflection points, for
each portfolio company and measure tangible progress towards commercialisation and the key factors
for a successful monetisation event. Portfolio company management is accountable for these milestones,
which are developed into annual management objectives (MBOs).
As our portfolio companies meet the objectives identified for success, we will participate in subsequent
capital raises to mitigate dilution, to the extent consistent with our goal to maximise risk and time-
adjusted returns for our shareholders and taking into account competing uses of capital across our
portfolio. Co-investors in later rounds include financial, strategic and commercial partners. Where
appropriate, we seek to include partners who validate the market opportunity and can provide support
and/or commercial commitments to accelerate, expand and/or de-risk the path to commercialisation.
By helping our portfolio companies’ management teams remain focused on critical objectives through the
provision of human, financial and strategic resources, we believe we are able to accelerate their
development and success. We believe that Allied Minds’ experience and hands-on support provide our
portfolio companies with significant competitive advantages within their respective markets.
Strategy
Allied Minds’ strategy is focused on supporting its existing portfolio companies and maximising
monetisation opportunities for portfolio company interests. The Board aims to monetise the Group’s
ownership positions at the appropriate time, recognising the value and benefit in achieving well-timed
risk-adjusted returns for the benefit of shareholders.
In general, we will hold our position in a portfolio company for as long as we believe the risk and time-
adjusted value of that position is maximised by our continued ownership and effort. From time to time,
we engage in discussions with other companies interested in our portfolio companies (or our interest in
those companies), either in response to enquiries or as part of a process we initiate. To the extent we
believe that a portfolio company’s further growth and development can best be supported by a different
ownership structure or if we otherwise believe it is in our shareholders’ best interests, we may seek to
sell some or all of our position in the portfolio company. These sales may take the form of privately
negotiated sales of stock or assets, mergers and acquisitions, public offerings of the portfolio company’s
securities and, in the case of publicly traded portfolio companies, sales of their securities in the open
market.
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STRATEGIC REPORT
The value of Allied Minds is dependent upon the value of our existing portfolio companies and our ability
to translate that value into cash as effectively and efficiently as possible and to deliver that cash, net of
our obligations and operating cash needs, to our shareholders.
Upon the event of successful monetisation events from the sale of portfolio companies or portfolio
company interests, Allied Minds anticipates distributing the net proceeds to its shareholders, after due
consideration of potential follow-on investment opportunities within the existing portfolio and working
capital requirements.
Outlook
Allied Minds’ portfolio companies, led by experienced, motivated and resourceful management teams,
have continued to make substantial technical and commercial progress. The milestones achieved
demonstrate examples of solving difficult technical problems, developing innovative products and
services across a range of large potential markets, establishing important partnerships to develop
technology and go to market channels, and the creation of shareholder value.
The Board believes that the shareholder returns to date and completion of successful fundraisings
throughout its portfolio, together with achieving portfolio company milestones, means that Allied Minds
is well positioned to maximise returns for its shareholders.
Portfolio Company Valuation
Of the Company’s seven active portfolio companies, three are currently majority owned and/or
controlled, and therefore fully consolidated in the Company’s consolidated financial statements prepared
in accordance with international financial reporting standards conformity with the requirements of the
Companies Act 2016.
Of the remaining four portfolio companies, the Company holds a significant minority stake in three of
these companies and a small position in the fourth (TouchBistro, Inc.) as a result of the stock-for-stock
sale of TableUp, Inc. In each case, where Allied Minds holds a significant minority stake, it is able to
exercise significant influence over the portfolio company by virtue of its large, albeit minority, ownership
stake in the portfolio company and its representation on the board of directors. The investment in
preferred stock in these portfolio companies is accounted for under IFRS 9 and is classified by the
Company as an investment at fair value in the Company’s consolidated financial statements. Due to the
equity-like characteristics of the Company’s common stockholdings in Spin Memory and Federated
Wireless, these two investments are accounted for under IAS 28 and are classified by the Company as
investments in associates. Accordingly, since Allied Minds has significant influence over these entities
through the voting rights/potential voting rights held at Spin Memory and Federated Wireless, it gives
access to the returns associated with an ownership interest in these associates.
Allied Minds provides qualitative and quantitative disclosure in relation to the commercial and financial
progress of its portfolio companies, and directional commentary on valuation. In addition, where
commercially possible, Allied Minds provides, for each portfolio company: (i) the date of the last equity
funding round, (ii) the post-money valuation of such round, (iii) the named key co-investors in such round,
and (iv) the Company’s issued and outstanding ownership, and fully-diluted ownership, of such portfolio
company.
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STRATEGIC REPORT
This information is set forth in the Portfolio Review and Developments section below. The ownership
interests are as of 29 March 2021. The fully-diluted percentages take into account outstanding stock
options granted to employees, directors and advisors, current stock options available for grant pursuant
to the company’s stock option plan, and outstanding warrants to purchase common and preferred stock.
The post-money valuations disclosed for each entity below do not represent IFRS 13 fair values but rather,
are based on the pre-money valuation set by the investors in the latest financing round plus the total
money raised in that round.
There can be no guarantee that the aforementioned post-money valuations of the portfolio companies
will be considered to be correct in light of the future performance of the various companies, or that the
Company would be able to realise proceeds in the amount of such valuations, or at all, in the event of a
sale by it of any of its portfolio companies or its ownership interest in such portfolio companies.
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STRATEGIC REPORT
Portfolio Review and Developments
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BridgeComm Inc. (BridgeComm) (consolidated subsidiary)
BridgeComm is developing high-speed optical wireless communications to provide fast, secure,
enterprise-grade broadband service for space, terrestrial and 5G connectivity. BridgeComm’s newest
technology is unique and IP protected which enables one-to-many communications via optical wireless
offering efficient communication to satellites, planes and land-based networks enabling 5G equivalent
performance. The technology promises higher throughput over longer distances with added security than
what is available today. The technology also has the ability to solve the “last mile connectivity” challenge
for 5G networks.
On 15 January 2020, Allied Minds announced the next stage in BridgeComm’s relationship with Boeing
HorizonX whereby the two companies were collaboratively pioneering the development of BridgeComm’s
new technology for terrestrial, airborne and space systems. Together, BridgeComm and Boeing are
bidding on several US government contracts requiring optical communications as they look to
commercialise the development work achieved to date. It is anticipated that this process will lead to first
revenue from the newly developed technology in 2021.
On 28 September 2020, Allied Minds announced that BridgeComm partnered with Nokia to jointly develop
high-speed optical communications to facilitate faster deployment of 5G networks. The focus of the work
with Nokia is to utilise optical communications to solve the “well known” last mile connectivity problem
prevalent in the fixed wireless industry.
BridgeComm will need to seek additional financing to further fund its next stage of development work.
Allied Minds currently has fully diluted ownership (ownership percentage including currently issued
shares and potential outstanding shares to be issued) of 62.92% in BridgeComm. The $4.5 million
convertible bridge invested by Boeing HorizonX and Allied Minds will convert into the next round of
financing.
Holdings and valuation:
• Date of Last Funding Round: September 2018
• Post-Money Valuation: $38.0 million
• Co-Investors: Boeing HorizonX Ventures (venture arm of Boeing Company)
• Allied Minds’ Issued and Outstanding Ownership: 81.15%
• Allied Minds’ Fully-Diluted Ownership: 62.92%
Federated Wireless Inc. (Federated) (equity accounted investment)
Federated has developed technology and products to enable the revolutionary shared spectrum model in
the United States to further enable wireless communications, adoption of the Internet-of-Things (“IoT”)
and edge computing. Federated also has the ability to deploy private wireless networks through its newly
announced Connectivity-as-a-Service (“CaaS”) offering.
CaaS is focused on enabling enterprise customers the ability to build their own private networks in a low
risk and low capital expenditure manner. For the first time, enterprises will be able to control their own
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STRATEGIC REPORT
network, bypassing traditional Internet Service Providers, on the back of Federated’s Spectrum Access
System (“SAS”). These networks have the ability to be more powerful than traditional WiFi while also
providing more security, opening up a new market for Federated.
On 18 February 2020, Federated announced that it entered into agreements with both AWS and Azure to
function as channel partners to drive commercialisation of the CaaS offering through their online
marketplaces.
On 8 October 2020, the U.S. Department of Defense announced that Federated had been awarded the
project at the Marine Corps Logistics Base Albany, GA to develop a 5G Smart Warehousing solution
focused on vehicular storage and maintenance. This award represents the first CaaS-related opportunity
for Federated from its previously announced new channel partners. The list of Federated partners
involved in this project include GE Research, KPMG LLP, Scientific Research Corporation as well equipment
suppliers, AWS and Cisco, Inc.
Since the Federal Communications Commission (“FCC”) announced the authorisation of the full
commercial deployment of Federated’s SAS on 27 January 2020, Federated is now able to support its
customers as they deploy their new networks. A key feature of Federated’s SAS offering is that it is the
only FCC authorised company with a fully deployed Environmental Sensing Capability as required by the
FCC. This has allowed Federated to operate unabated, providing a significant competitive advantage.
Federated’s first customers to deploy are focused on the Wireless Internet Service industry as well as
Verizon’s build out of their network to add 3.5GHZ CBRS. This has led to Federated realising its recurring
revenue model for the first time since it was granted authorisation. Federated expects more customers
under contract to begin to deploy soon who are looking to benefit by adding access to 3.5GHz CBRS. This
will further accelerate Federated’s valuable recurring revenue model into 2021. Federated expects its
revenue to grow by significant multiples in 2021 compared with 2020 when it was first able to initiate its
services.
Federated has sufficient cash to fund its growth into 2022. Allied Minds currently owns 36.61% of
Federated and expects that if the company continues to achieve its planned key milestones, it will be in a
position to attract any future equity financing in an upround.
Holdings and valuation:
• Date of Last Funding Round: September 2019 (second closing post-period end in April 2020)
• Post-Money Valuation: $215.0 million
• Co-Investors: American Tower (NYSE: AMT), GIC (Singapore’s sovereign wealth fund), Pennant
Investors and SBA Communications (NASDAQ: SBAC)
• Allied Minds’ Issued and Outstanding Ownership: 43.11%
• Allied Minds’ Fully-Diluted Ownership: 36.61%
• Federated Wireless has made significant progress against its key operational objectives since its last
funding round.
OcuTerra Therapeutics, Inc. (consolidated subsidiary)
OcuTerra (previously SciFluor Life Sciences, Inc.) is a drug development company focused on creating best-
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STRATEGIC REPORT
in-class compounds, initially targeting the field of ophthalmology. OcuTerra’s lead clinical asset, SF0166,
is a topical eye droplet treatment for Age-related Macular Degeneration (AMD) and Diabetic Macular
Edema (DME), both widely prevalent retinal diseases that lead to blindness if left untreated.
OcuTerra has sought to raise external equity financing since 2018 to fund Phase II trials for SF0166, on the
back of safety and preliminary efficacy data from the Phase I/II trials. This process has not been
successfully completed to date. As a result, OcuTerra has experienced clinical delays since its last funding
round and the valuation is substantially impaired due to a prolonged inability to attract new external
financing. Clinical development activities at OcuTerra have been pared back, and are now focused
exclusively on the toxicology studies necessary to initiate the Phase II trials for SF0166. To assist with its
fundraising efforts, OcuTerra engaged Maxim Group LLC. During Q4 2019 (and completing in Q1 2020),
OcuTerra raised $1.325 million of convertible debt financing from third parties. In addition, in Q3 2020
and post-period end in Q1 2021, OcuTerra raised an aggregate of $200K of debt financing from third
parties, half of which was raised from Maxim Group LLC, and continues its fundraising efforts for an
external equity financing to fund Phase II trials. It is uncertain if OcuTerra will be successful in securing
the required funds in 2021.
Holdings and valuation:
• Date of Last Funding Round: November 2019 (convertible debt into next preferred equity round)
• Valuation: n/a
• Co-Investors: Various third parties
• Allied Minds’ Issued and Outstanding Ownership: 62.67%
• Allied Minds’ Fully-Diluted Ownership: 54.16%
Orbital Sidekick Inc. (Orbital) (preference share investment held at fair value)
Orbital has developed a proprietary analytics platform based upon its hyperspectral technology that
allows it to take a proprietary “chemical fingerprint” from space. Initially, Orbital is addressing the very
current and large concerns about the environment by focusing on potential energy pipeline failures. By
employing its space-based technology, it is able to detect and identify natural gas, oil leaks and other
failures much more rapidly than current monitoring techniques in a more cost effective way and the added
benefit of helping to minimise environmental damage.
Orbital’s first fully dedicated hyperspectral imagery satellite is scheduled to launch in 2021, which
together with its existing on-board processing technology deployed on the International Space Station,
will allow Orbital to realise revenue from its first pilot programme participants from the oil and gas
pipeline industry that it has been able to convert to paying customers.
On 15 October 2020, Allied Minds announced that Orbital was awarded a multi-year contract by the
Department of the Air Force’s commercial investment group (AFVentures) as part of its Strategic Financing
(“STRATFI”) programme. Orbital received $4.0 million of non-dilutive financing in Q4 2020 from the
programme and has the opportunity to receive up to $12.0 million of additional non-dilutive financing
over the next three years to match private funds raised.
On 24 December 2020, Allied Minds announced that Orbital had conditionally secured $16.0 million in a
Series A Preferred financing round led by Temasek, an investment company headquartered in
Singapore. The Series A financing closing is subject to approval by the Committee on Foreign Investments
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STRATEGIC REPORT
in the United States (CFIUS). In March 2021, CFIUS informed Orbital that it will enter an additional 45-day
investigation period regarding the transaction, which is not atypical of like transactions. Accordingly, the
financing is expected to close in Q2 2021.
The combined expected proceeds of $32.0 million raised from both the Series A financing and the funds
available from the STRATFI programme is significant and will allow Orbital to focus on scaling its business
and growing its sales pipeline to rapidly bring its products to market and enable the launch of additional
satellites to support its customers.
Holdings and valuation:
• Date of Last Funding Round: April 2018
• Post-Money Valuation: $11.7 million
• Co-Investors: 11.2 Capital
• Allied Minds’ Issued and Outstanding Ownership in respect of preference shares: 33.23%
• Allied Minds’ Fully-Diluted Ownership: 29.67%
Spark Insights Inc. (Spark) (consolidated subsidiary)
Spark is an advanced analytics company developing data products for the rapidly growing insurance
analytics market. Allied Minds formed Spark in late 2018.
Given the increasing prevalence of catastrophic events, including hurricanes, floods, and wildfires,
property insurers are struggling to quantify the impact on their policies, both before and after a
catastrophic event occurs. Spark plans to leverage the advent of unique data sets, including advances in
satellite imagery and weather data, combined with proprietary analytics to transform critical workflows
for these property insurers.
Spark’s focus is at the intersection of several addressable markets including insurance analytics,
underwriting losses, and catastrophe modeling platforms.
In June 2020, Spark achieved a key technical milestone and successfully released version 1.0 of its post-
catastrophe automated damage assessment product.
As a result of challenges posed by COVID-19, Spark has faced delays in fundraising and is now in a difficult
cash position. If Spark fails to raise additional financing in the coming weeks, Spark will need to
immediately consider and execute on alternative paths that include selling its assets, filing for bankruptcy,
winding down and/or similar avenues.
Holdings and valuation:
• Date of Last Funding Round: April 2019
• Post-Money Valuation: $3.2 million
• Co-Investors: n/a
• Allied Minds’ Issued and Outstanding Ownership: 70.59%
• Allied Minds’ Fully-Diluted Ownership: 60.00%
16
STRATEGIC REPORT
Spin Memory Inc. (Spin) (equity accounted investment)
is a
leader
in providing magnetoresistive random-access memory (“MRAM”)
Spin
intellectual
property. Through its collaboration with industry leaders, Spin Memory is looking to transform the
semiconductor industry by addressing the biggest challenge, memory, in next-generation electronics
systems such as Artificial Intelligence, Autonomous Driving, 5G Communication and Computing at the
Edge. Spin represents the last remaining portfolio company from Allied Minds’ original investment
platform.
During 2020, Spin was able to “tape out” the demonstration chip co-developed with Arm pursuant to its
joint development agreement, entered into in very late Q4 2018, representing the first time that Spin was
able to demonstrate its Endurance Engine technology in silicon.
Unfortunately, the work-from-home orders in the State of California due to COVID-19 delayed the
required testing of the chip for nearly nine months. The testing did commence in early Q4 2020 and the
initial results are promising. However, this delay has affected Spin’s ability to secure new customers. As
a result, this, coupled with an unexpected loss of a government bid in late Q4 2020, Spin is now facing
significant liquidity issues.
Spin’s Board of Directors and management team have worked to adjust the company’s operating plan to
account for the delays described above and are currently working with its shareholders to develop a
funding plan that will allow it to identify and secure commercial partners for its product, expertise and
intellectual property in 2021. As previously disclosed, any financing contemplated by Spin is expected to
be a significantly reduced valuation and dilutive to any non-participants in the round. While this is
disappointing, a down-round financing is not uncommon in early venture capital companies and the Board
is hopeful that any funding raised will give Spin an opportunity to maximise net value for shareholders
either through an asset sale or acquisition or securing key partners and revenue-generating customers in
the coming months. In the event financing is not obtained or projected revenue is not realised, Spin may
need to seek alternative paths that may include filing for bankruptcy, selling its intellectual property
assets, and/or other similar avenues to orderly wind down the company in the near term.
Holdings and valuation:
• Date of Last Funding Round: November 2018 (date of first closing, final closing in July 2020)
• Post-Money Valuation: $180.25 million
• Co-Investors: Arm Technology Investments Limited, Applied Ventures, LLC, Abies Venture Fund,
Woodford Investment Management (now succeeded by Schroder Investment Management Limited)
and Invesco Asset Management
• Allied Minds’ Issued and Outstanding Ownership: 43.01%
• Allied Minds’ Fully-Diluted Ownership: 33.98%
TouchBistro, Inc. (acquirer of TableUp, Inc.) (common shares in TouchBistro)
On 5 August 2020, TableUp was wholly acquired by TouchBistro, Inc. in a stock-for-stock transaction. As a
result of such transaction, Allied Minds received common shares of TouchBistro valued at $5.99 million.
The Group made its initial investment in TableUp in April 2018. TableUp is a provider of loyalty and
17
STRATEGIC REPORT
marketing solutions for the restaurant industry and is highly regarded for its proprietary guest retention
solution, which is used by more than 600 restaurants throughout the U.S and will enable TouchBistro to
fully integrate customer loyalty and guest marketing into its all-in-one point-of-sale (POS) and restaurant
management platform.
18
STRATEGIC REPORT
Key Performance Indicators
The Key Performance Indicators (KPIs) selected to measure the performance of the Company in 2020 were
percentage level of achievement of management by objectives (MBOs). These objectives seek to link
financial, operational, technical and other performance milestones established by the Board directly to
remuneration and KPIs. Performance against 2019 KPIs is set out below:
KPI
MBO Achievement;
Percentage of Target; See
Detail Below
2020
75.0%
2019
87.6%
Performance
Below target
The MBOs set by the Board for 2020, along with the level of achievement against such MBOs, is set forth
below:
MBO
Increase Aggregate Portfolio Value (NAV)
Increase ALM Share Price
Manage HQ Cash and Expenses
Secure Funding and Strategic Partners at Portfolio Companies
Maintain Strong Operational Support
Total Percentage of Target
Threshold
Weightings
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Target
Weightings
12.5%
12.5%
25%
25%
25%
100.0%
Maximum
Weightings
18.75%
18.75%
37.5%
37.5%
37.5%
150.0%
Achieved
Weightings
0%
0%
25%
25%
25%
75.0%
Additional detail with respect to determination of such achievement is set forth on page 73.
The following Key Performance Indicators (KPIs) were selected to measure the performance of the
Company in 2021. These objectives seek to link financial, operational, technical and other performance
milestones established by the Board directly to remuneration and KPIs.
Increase Company Non-Executive Director (NED) engagement at each portfolio company
1.
2. Appoint at least one NED on each portfolio company’s board
3. Provide strategic, operational and financing support and assistance to the portfolio companies
through representation on the board of each portfolio company
4. Critically evaluate and monitor portfolio company progress with objective of maximising
shareholder return on investment (ROI)
5. Maintain strong shareholder engagement, including annual capital markets day
6. Manage HQ cash and expenses to maximise shareholder ROI
We note that as a result of the strategic changes implemented by the Board on 15 January 2021, the
portfolio shall be managed by the Board, all of whom are Non-Executive Directors, on a go-forward basis.
The Board places equal importance on each of the listed KPIs.
19
STRATEGIC REPORT
Financial Review
During 2020, $27.9 million was invested into existing subsidiary businesses and associates. This included
$14.4 million from subsidiary and associate fundraisings invested by Allied Minds, with $13.6 million
coming from third-party investment, to further accelerate the development of the Group’s existing
companies.
Consolidated Statement of Comprehensive Profit
For the years ended 31 December
Revenue
Cost of revenue
Selling, general and administrative expenses
Research and development expenses
Finance (cost)/ income, net
Other (expense)/ income
Other comprehensive (loss)/ income
Total comprehensive (loss)/ income
of which attributable to:
Equity holders of the parent
Non-controlling interests
2020
$ '000
2019
$ '000
480
(210)
(10,497)
(4,712)
(1,786)
(38,779)
(116)
(55,620)
2,692
(1,433)
(34,316)
(16,146)
9,992
89,465
808
51,062
(53,141)
(2,479)
52,143
(1,081)
Revenue decreased by $2.2 million, to $0.5 million in 2020 (2019: $2.7 million). This decrease is primarily
attributable to the ownership of Federated Wireless being an entity which was previously consolidated.
In the second half of 2019 control of this entity was lost, and going forward has been equity accounted
for under IAS28 (“deconsolidated”). The decrease is partly offset by revenue from new contracts in 2020
at BridgeComm of $0.1 million. Cost of revenue at $0.2 million (2019: $1.4 million) was lower as a
percentage of revenue, when compared to the prior year, mainly due to deconsolidation of the Company’s
subsidiaries and inventory write-offs at closed and dissolved companies in 2019.
Selling, general and administrative (SG&A) expenses decreased by $23.8 million, to $10.5 million (2019:
$34.3 million). This reduction was mainly due to the deconsolidation of one of the company’s subsidiaries
in the second half of 2019, as well as cost reductions at headquarters implemented during 2019.
Research and development (R&D) expenses decreased by $11.4 million, to $4.7 million (2019: $16.1
million). The decrease was primarily due to the deconsolidated and closed and dissolved subsidiaries in
2019. The remainder of the decrease reflects the net effect from R&D spend at the remaining subsidiaries.
Net finance cost increased by $11.8 million in 2020 to $1.8 million (2019: income of $10.0 million). The
increase reflects the impact from deconsolidation of one of the company’s subsidiaries in the second half
of 2019 partly offset by net finance cost of $1.5 million from IFRS 9 fair value accounting of the subsidiary
preferred shares liability balance (2019: finance income of $9.3 million), convertible note payable balance
of $0.3 million (2019: $nil) and interest income, net of interest expense, of $23 thousand (2019: $0.7
million). The change was primarily from adjustments at BridgeComm.
20
STRATEGIC REPORT
Other loss increased to $38.8 million (2019: income of $89.4 million) reflecting $31.9 million loss on
investments held at fair value as well as the company’s share of loss of $6.8 million from its associates.
As a result of these factors, total comprehensive loss increased by $106.7 million to $55.6 million (2019:
income of $51.1 million). Total comprehensive loss attributed to the equity holders of the Group was
$53.1 million (2019: income of $52.1 million) and $2.5 million loss (2019: $1.1 million) was attributable to
the owners of non-controlling interests.
Consolidated Statement of Financial Position
As of 31 December
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Equity
Total liabilities and equity
2020
$ '000
2019
$ '000
44,416
32,584
77,000
72,695
97,854
170,549
2,246
16,468
58,286
77,000
3,795
14,183
152,571
170,549
Significant performance-impacting events and business developments reflected in the Company’s
financial position at year end include:
Non-current assets
Property and equipment increased by $0.1 million to $1.6 million (2019: $1.5 million), primarily as a result
of purchases of approximately $1.0 million, mainly at BridgeComm, offset by depreciation expense of $0.5
million and $0.4 million in disposals.
Intangible assets decreased by $0.2 million to $nil million (2019: $0.2 million) mainly as a result of
amortisation expense of $0.2 million.
Investments at fair value decreased to $39.1 million (2019: $61.9 million). As a result of the fair value
accounting for investments held at fair value, Allied Minds recorded a loss of $31.9 million in the
Consolidated Statements of Comprehensive (Loss)/ Income. The decrease is offset by $6.9 million in
additional funding by Allied Minds in April 2020 when Federated Wireless completed the second closing
of its $13.7 million Series C Preferred Stock financing, as well as $4.0 million in additional funding by Allied
Minds in July 2020 when Spin Memory completed a new closing of its $8.3 million Series B-1 Preferred
Stock financing. In addition, on 5 August 2020, TableUp, one of Allied Minds’ portfolio companies, was
acquired by TouchBistro, Inc. (“TouchBistro”). The acquisition was structured as a stock-for-stock
transaction in which TouchBistro acquired 100% of the shares of TableUp in exchange for the issuance of
TouchBistro common shares to the shareholders of TableUp. A total of 2,542,662 common shares of
TouchBistro was paid to Allied Minds valued at $5.99 million at the time of the transaction. Allied Minds’
share of common stock has been accounted as an investment at fair value. At 31 December 2020, the fair
value of Allied Minds’ investment in TouchBistro was subsequently measured at $2.8 million.
21
STRATEGIC REPORT
Investments in associates decreased to $nil million (2019: $6.8 million). As a result of the deconsolidation
of Federated Wireless in the second half of 2019 and equity method accounting for remaining associate
investments, Allied Minds recorded a share of loss of $6.8 million in the Consolidated Statements of
Comprehensive (Loss)/ Income that reduced the investment in Federated to a zero balance.
Right-of-use assets decreased to $0.6 million (2019: $1.0 million) primarily related to depreciation of $0.4
million.
Current assets
Cash and cash equivalents decreased by $66.0 million to $24.5 million (2019: $90.5 million). The decrease
is mainly attributed to $17.8 million of net cash used in operations, $10.7 million cash used in investing
activities and $37.5 million cash used in financing activities primarily reflecting $39.7 million in cash
dividend payment to shareholders as a result of the sale of Allied Minds’ share in HawkEye in 2019.
Trade and other receivables increased by $0.1 million due to an increase in trade receivables of $0.3
million. This increase is offset in part by a decrease in prepaid expenses of $0.2 million mainly from write
off advanced payments for unfinished inventory units at BridgeComm.
Other financial assets have increased by $0.7 million to $2.3 million (2019: $1.6 million) primarily due to
IFRS 9 fair value accounting of TableUp’s convertible note issued to Allied Minds in 2019, offset by the
issuance of a SAFE note receivable of $1.5 million by Allied Minds to Orbital Sidekick. The fair market value
change of the notes was recorded as an offset to the $28.7 million loss on investments held at fair value
in the Consolidated Statements of Comprehensive (Loss)/ Income.
Current liabilities
Subsidiary preferred shares increased by $1.5 million to $6.5 million (2019: $5.0 million) primarily driven
by $1.5 million in IFRS 9 fair value adjustment for the year.
Deferred revenue decreased by $0.2 million to $3.6 million (2019: $3.4 million) primarily due to revenue
recognised at BridgeComm and offset by new revenue contract entered at Spark Insights in 2020.
Loans increased by $3.1 million (2019: $ nil) primarily due to an increase in convertible promissory notes
of $2.5 million at BridgeComm.
Non-current liabilities
Lease liabilities decreased by $1.0 million (2018: $2.9 million) primarily due to lease payments.
Other non-current liabilities decreased by $0.5 million (2019: $1.9 million) primarily due to loan payments
of convertible promissory notes at OcuTerra Therapeutics.
Equity
Net equity decreased by $94.3 million to $58.3 million (2019: $152.6 million) reflecting the combination
of comprehensive loss for the period of $55.6 million, dividend payments to shareholders of $39.7 million
and loss on non-controlling interest of $18,000 offset by $8,000 in issuance of ordinary shares and a $1.1
million charge due to equity-settled share based payments.
22
STRATEGIC REPORT
Consolidated Statement of Cash Flows
For the years ended 31 December
Net cash outflow from operating activities
Net cash (outflow)/ inflow from investing activities
Net cash (outflow)/ inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents in the beginning of the year
Cash and cash equivalents at the end of the year
2020
$ '000
2019
$ '000
(17,057)
(11,341)
(37,684)
(66,082)
90,571
24,489
(44,851)
21,505
13,683
(9,663)
100,234
90,571
The Group’s net cash outflow from operating activities of $17.1 million in 2020 (2019: $44.8 million,
restated) was primarily due to the losses for the year of $55.5 million and the net effect from movement
in working capital of $4.1 million offset by other finance charges of $1.6 million, the adjustment for non-
cash items such as depreciation, amortisation, impairments and share-based expenses of $2.1 million and
$38.8 million in losses due to fair value adjustments and equity method accounting.
The Group had a net cash outflow from investing activities of $11.3 million in 2020 (2019: $21.5 million).
This outflow predominately related to purchases of property and equipment of $0.5 million (2019: $3.6
million) and an additional investment in Federated Wireless and Spin Memory of $10.9 million made by
Allied Minds in April and July 2020. The investing cash outflow was offset by $0.1 million in receipt of
payments from Allied Minds’ finance sub-lease.
The Group’s net cash outflow from financing activities of $37.7 million in 2020 (2019: $13.7 million)
primarily reflects , in part, the cash dividend payment to shareholders of $39.7 million as a result of the
sale of Allied Minds’ share in HawkEye in 2019 and $1.1 million in lease payments. The decrease was offset
by $2.9 million proceeds from issuance of convertible notes and $0.2 million receipt of PPP loans.
Additionally, cash inflows from financing activities in the period included proceeds from issuance of share
capital at Allied Minds.
The Group’s strategy is to maintain healthy, highly liquid cash balances that are readily available for
investment in a manner consistent with the Board’s strategy for the Company and Group. To further
minimise its exposure to risks the Group does not maintain any material borrowings or cash balances in
foreign currency.
The Directors have further considered the on-going viability of the Company through to December 2023,
as required pursuant to the 2018 version of the UK Corporate Governance Code, in the Management and
Governance section of the Annual Report and Accounts at pages 38 to 39.
23
STRATEGIC REPORT
Risk Management
The execution of the Group’s strategy is subject to a number of risks and uncertainties. The Board has
adopted a system of continuous review in which it regularly consults with management to identify
principal and emerging risks facing the Group and to assess and determine how to address and mitigate
against such risks in a manner consistent with the Company’s risk appetite to achieve its strategic goals.
Throughout the year, the Board considers and reviews both risks arising from the internal operations of
the Group, and those arising from the business environment in which it operates. It is possible that one
or more of these identified risks could impact the Group in a similar timeframe which may compound
their effects.
With our focus on early stage company development, commercialisation and monetisation, the Group
inherently faces significant risks and challenges. The overall aim of the risk management policy is to
achieve an effective balance of risk and reward, although ultimately, no strategy can provide an absolute
assurance against loss.
The Board has carried out a robust assessment of the principal and emerging risks facing the Group,
including those that would threaten its business model, future performance, solvency and/or liquidity.
The major risks and uncertainties identified by the Board are set out below, along with the consequences
and mitigation strategy of each risk.
1.
The science and technology being developed or commercialised by the Group’s businesses may
fail and/or the Group’s businesses may not be able to develop their innovations and intellectual
property into commercially viable products or technologies. There is also a risk that some of the
portfolio companies may fail or not succeed as anticipated, whether as a result of technical,
product, market, fund-raising or other risks, resulting in an impairment of the Group’s value.
Impact: The failure of any of the Group’s portfolio companies would impact the Group’s value. A failure
of one of the major portfolio companies could also impact the Group’s reputation as a builder of high
value businesses and possibly make additional fund raising at the Group or portfolio company level more
difficult.
Mitigation:
• Before making any follow-on investment in the current portfolio, extensive due diligence is carried
out by the Group which covers all the major business risks including market size, strategy,
adoption and intellectual property. Where appropriate, we seek validation through co-
investment by other strategic and/or financial parties.
• A disciplined approach to capital allocation is pursued whereby we closely monitor milestone
developments before committing additional capital. Should a project fail to achieve sufficient
progress or is unable to attract other co-investors, we may terminate the investment.
• Dedicated leadership with deep industry or sector knowledge, and relevant technical and/or
leadership experience, is recruited to management positions, and the Group ensures that each
portfolio company has independent directors and/or other advisors, as appropriate for the
relevant stage of development.
24
STRATEGIC REPORT
•
•
Each portfolio company holds board of director meetings at least quarterly, with participation
from the Group’s management and/or investment team, along with senior management and
independent directors and/or advisors, as appropriate, of such portfolio company.
The shared services model provides meaningful administrative support to our earlier stage
portfolio companies, including strong budgetary and financial controls that ensure good
governance.
• Within the Group there is meaningful operating and investment expertise that provide direct,
hands-on and strategic, operating and fund-raising support to its portfolio companies, as
appropriate.
•
The Group actively uses third party advisors and consultants, specific to the particular domain in
which a portfolio company operates, to assist on market strategy and direction.
2.
The Group expects to continue to incur substantial expenditure in further research and
development, product development, sales and marketing and other operational activities of its
businesses. There is no guarantee that the Group or any of its individual portfolio companies will
become profitable prior to the achievement of a portfolio company sale or other liquidity event,
and, even if the Group or any of its individual portfolio companies does become profitable, such
profitability may not be sustainable. The Group may not be able to attract other co-investors, or
monetise its ownership interests in portfolio companies, during any specific time frame or
otherwise on desirable terms, if at all.
Impact: Allied Minds’ objective is to generate returns for its shareholders through early stage company
development within the technology sector. Such value is expected to be delivered through the
commercialisation and monetisation of these businesses via a sale or other liquidity event for each. The
timing and size of these potential inflows is uncertain and, should liquidity events not be forthcoming, or
in the event that they are achieved at values significantly less than the amount of capital invested, then it
would be difficult to sustain the current levels of investment in the other portfolio companies. This would
lead to reduced participation in funding rounds, which will result in a lower ownership position, or
potentially impact the ability of a company to raise additional funds.
Mitigation:
• The Group retains sufficient cash balances in order to support its cash flow requirements,
including Allied Minds’ investment requirements for each portfolio company and for corporate
resources.
• The Group has close relationships with a wide group of investors, including within its current
shareholder base, and continues to identify and develop strategic and financial relationships for
co-investing in the Group’s portfolio companies.
•
Senior management continually seeks to build and maintain strategic and financial relationships
for the Group, and each portfolio company continually seeks to engage in strategic and financial
relationships relevant to their respective markets and to maintain current information on, and
awareness of, potential fund-raising and monetisation strategies.
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STRATEGIC REPORT
3.
A significant portion of the Group’s intellectual property relates to technologies which originated
in the course of research conducted in, and initially funded by, US universities or other federally-
funded research institutions. Although the Group has been granted exclusive licenses to use this
intellectual property, there are certain limitations inherent in these licenses, for example as
required by the Bayh-Dole Act of 1980.
Impact: There are certain circumstances where the US government has rights to utilise the underlying
intellectual property without any economic benefit flowing back to the Group. In the event that this were
to happen, this could impact the financial return to the Group on its investment in the applicable portfolio
companies.
Mitigation:
• To the Board’s knowledge, while these so called “march in” rights exist, the US government has
never had cause to use them.
• The Group seeks to develop dual use capabilities for the technology it licenses and generally tends
to avoid use cases directly applicable to government use.
• This risk is also mitigated through employing experienced technology transfer experts supported
by our legal team to assess risks that may arise out of this eventuality.
4.
The Group, including certain of the portfolio companies, currently has in place cooperative
research and development agreements with certain US Department of Defense laboratories and
other federally funded government institutions. Certain regulatory measures apply to these
agreements which restrict the export of information and material that may be used for military
or intelligence applications by a non-US person. Compliance with these regulatory measures may
be complex and limit commercial alternatives.
Impact: If the Group were to breach restrictions on the use of certain licensed technologies, particularly
those derived from federally funded research facilities, this could materially impact upon the Group’s
ability to license additional intellectual property from these establishments. In certain circumstances, it
may also lead to the termination of existing licenses. In the event that this were to happen, this could
materially affect a number of the Group’s businesses, potentially harm the reputation and standing of the
Group and cause the termination of certain important relationships with federally funded research
institutions.
Mitigation:
• Prior to licensing any technology under these agreements, the Group’s management seeks to
identify the commercial and other alternatives available for products and services associated with
such technology and innovations, and to ensure that there are sufficient markets available to
justify the capital investment.
• Prior to the commercialisation process, the Group’s management seeks to obtain all the necessary
clearances from applicable regulatory bodies to ensure that the export of products based upon
the licensed IP is strictly in accordance with government guidelines.
26
STRATEGIC REPORT
•
•
5.
The Group, including certain of the portfolio companies, employs a number of individuals with
experience in working with various government agencies.
Senior management is fully cognisant of the regulations and sensitivities in relation to this issue,
in particular with International Traffic in Arms Regulations (ITAR) which regulate the use of
technologies for export, and has numerous mitigating actions available should issues arise.
The Group operates in complex and specialised business domains and requires highly qualified
and experienced management to implement its strategy successfully. All of the operations of the
Group are located in the United States, which is a highly competitive employment market.
Furthermore, given the relatively small size of the senior management at the corporate level, the
Group is reliant on a small number of key individuals.
Impact: There is a risk that the Group may lose key personnel, or fail to attract or retain new personnel.
The loss of key personnel may negatively affect the Group’s competitive advantage.
Mitigation:
• The Board annually seeks external expertise to assess the competitiveness of the compensation
packages of its senior management, and to ensure that the structure of compensation is designed
to incentivise performance and retention properly.
• Senior management continually monitor and assess compensation levels to ensure the Group
remains competitive in the employment market.
6.
A large proportion of the overall value of the Group’s businesses may be concentrated in a small
proportion of the Group’s businesses. If one or more of the intellectual property rights relevant
to a valuable business were terminated, this would have a material adverse impact on the overall
value of the Group’s businesses.
Impact: The termination of critical IP licenses would materially impact the value of the portfolio company
and have a consequent effect on the value of the overall Group.
Mitigation:
•
In each portfolio company, the management is specifically directed to pursue a policy of
generating and patenting additional intellectual property to both provide additional protection
and create direct IP ownership for the company.
• Where possible, the Group seeks to negotiate intellectual property ownership rights in any
research and development agreement it enters into with a network partner, such that the Group
becomes a part owner of the underlying IP.
7.
The US Investment Company Act of 1940 regulates companies which are engaged primarily in the
business of investing, reinvesting, owning, holding or trading in securities. Securities issued by
companies other than consolidated partner companies are generally considered ‘‘investment
securities’’ for purposes of the Investment Company Act, unless other circumstances exist which
actively involve the company holding such interests in the management of the underlying
company.
27
STRATEGIC REPORT
Impact: If the Company is deemed to be an ‘‘investment company’’ subject to regulation under the
Investment Company Act, applicable restrictions could make it impractical for the Group to continue its
business as contemplated and could have a material adverse effect on its business. If anything were to
happen which would cause the Company to be deemed to be an investment company under the
Investment Company Act, requirements imposed by the Investment Company Act, including limitations
on capital structure, ability to transact business with portfolio companies and ability to compensate key
employees, could make it impractical for it to continue its business as currently conducted.
Mitigation:
• The Company intends to monitor and conduct its operations so that it will not be deemed to be
an investment company under the Investment Company Act.
• The Company seeks to build value through its current portfolio of majority-owned or primarily
controlled subsidiary companies; it is not engaged primarily in the business of investing,
reinvesting, owning, holding or trading in securities and does not own or propose to acquire
investment securities above prescribed thresholds under the Investment Company Act.
• Currently the Company holds more than 50% of the voting securities of certain of its portfolio
companies, and more than 25% of all of its other portfolio companies (except TouchBistro which
acquired TableUp in a stock-for-stock transaction), and intends to continue to try to hold the
majority of the voting securities in its portfolio companies, or otherwise maintain primary control.
•
In addition to ownership levels, the Company seeks to maintain significant influence in portfolio
companies through a combination of the following:
o Rights to elect representatives to the board of directors, with ability to exercise influence over
the portfolio company’s business strategy, operating plans, budgets and key corporate
decisions;
o Legal rights, such as access to information (books and records) and financial statements,
liquidation preferences, registrations rights, rights of first refusal, pre-emptive rights and co-
sale rights;
o Protective provisions, such as rights to block certain portfolio company actions; and
o Active involvement in the management of our earlier stage portfolio companies, such as
introductions, co-locating, and key
shared service support, business development
management recruiting.
8.
As a result of the Group’s strategy, the Group’s overall success is dependent on a limited, finite
portfolio of businesses. If one or more of such businesses were to fail, this would have a material
adverse impact on the overall value of the Group’s businesses and the Group’s ability to return
money to shareholders.
Impact: The failure of one or more remaining Group businesses would materially impact the overall value
of the Group’s portfolio and have a consequent effect on the returns available to shareholders.
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STRATEGIC REPORT
Mitigation:
• The Board is committed to engaging and working closely with the remaining portfolio companies
to provide guidance and advice as they navigate funding, operational, and other needs.
• The Board continues to monitor performance, progress, and development of each portfolio
company to critically assess the return prospects of the remaining portfolio and make
adjustments as necessary.
9.
Given its current cash and financial position, the Group expects to remain operational through
December 2023. However, if the Group is unable to generate sufficient revenue, appropriately
manage expenses, attract co-investors to participate in follow-on portfolio company financings,
or generate a sale or other liquidity event for any of its existing portfolio companies or portfolio
company interests prior to the end of such period, then the Group’s business, financial condition,
results of operations, prospects and future viability could be adversely affected.
Impact: Lack of capital could restrict the Group’s ability to further fund, develop and commercialise its
existing businesses. In turn, this could ultimately lead to failure of individual portfolio companies and loss
of investment as well as failure of the Group as a whole.
Mitigation:
• The Board and Senior management continually seek to build and maintain close relationships with
its shareholder base and other strategic partners at the Group level, and each portfolio company
continually seeks to engage in strategic relationships relevant to their respective markets and to
maintain current information on and awareness of potential fund-raising and monetisation
strategies.
• The Company strives to maintain majority ownership and/or primary control over all of the
portfolio companies and/or portfolio company board representation, so that it can seek to
influence optimal capital allocation, use of cash, and fund-raising strategy.
• The Company has built a valuable portfolio of companies since its inception.
• The Company continuously and critically reviews the progress of its portfolio companies against
pre-set milestones to ensure its financial capital and human resource is properly allocated to the
more promising areas of its portfolio to help strengthen and accelerate the Group’s path to
monetisation.
Brexit
On 23 June 2016, the UK electorate voted to leave the European Union (EU) in a so-called “Brexit”
referendum. Following several delays, parliament ratified the withdrawal agreement, and the UK left the
EU on 31 January 2020. This began a transition period that ended on 31 December 2020. Effective as of
1 January 2021, new rules for how the UK and EU will live, work and trade together were put in place. The
UK is no longer part of the EU’s political bodies or institutions and is now free to set its own trade policy
with other countries.
29
STRATEGIC REPORT
It is expected that companies based in the UK and with significant UK and EU operational focus will be the
most directly impacted by Brexit. All of the Group’s portfolio companies are based in the US, and
substantially all of the business and operations of the Group are conducted in the US.
Brexit exposes the Group to increased foreign currency risk. Foreign exchange risk is an exposure for the
Group as it derives substantially all of its revenue in US dollars and the Group’s businesses borrow, account
in, and are valued in, US dollars, but its shares trade in amounts denominated in pounds sterling. Any
capital raised by the Group in the UK would be denominated in pounds sterling, but would be allocated
to portfolio companies which operate in the US and whose functional currency is US dollars.
If the Group requires and fails to obtain sufficient capital on acceptable terms, it may be forced to forego
further investment in developing certain of its current businesses, and otherwise be subject to a material
adverse impact on the Group’s business and financial condition.
COVID-19
The ongoing spread of the coronavirus disease (COVID-19) that started in December 2019 has been
declared a public health emergency of international concern by the World Health Organisation. COVID-
19 has the potential to greatly disrupt all aspects of the Group’s business. Potential impacts include the
risk to the health and safety of our workforce, the ability for our businesses to operate normally, global
economics, and the flow of goods and services. Our people could be at potential health risk if they come
into contact with confirmed cases of COVID-19. In addition, given the mandatory health and safety
restrictions across the world, including travel and quarantine restrictions, it may affect the ability of our
workforce to continue working normally. There could also be disruption to operations as a result of the
virus negatively impacting our suppliers, customers and partners, including cancelled contracts, suppliers
and customers going out of business, and delays in performance. Finally, the virus has already caused
downturn to the global economy, which may become worse as it continues to spread. This may make it
difficult for our portfolio companies to raise money, enter into new strategic partnerships, retain
customers, or continue operations.
In order to mitigate against these risks, we are closely monitoring the health, safety and security of our
workforce and complying with applicable regulatory requirements and guidelines. We have continued to
implement temporary travel restrictions and have made accommodations that will allow our workforce
to work remotely. We are also in close communication with all of our customers, suppliers and partners
to collaborate on how to best support each other’s needs in this difficult environment.
The Group is closely monitoring developments regarding COVID-19 and will continuously reassess and put
in place appropriate continuity plans to mitigate against the risks faced. Furthermore, with the release
and distribution of viable vaccinations for COVID-19 in January 2021, we hope that the health and safety
of all will be better protected in the coming year.
Corporate and Social Responsibility
Details on the Group’s policies, activities and aims with regard to its corporate and social responsibilities,
including diversity, are included in the Sustainability section on pages 53 to 56 and are incorporated into
this Strategic Report by reference.
30
STRATEGIC REPORT
This Strategic Report has been approved by the Board of Directors.
ON BEHALF OF THE BOARD
Harry Rein
Chairman
29 March 2021
31
MANAGEMENT AND GOVERNANCE
The Board
Non-Executive Directors
Harry Rein – Non-Executive Chairman
Harry joined Allied Minds as an independent Non-Executive Director in November 2017, and has served
as the Non-Executive Chairman since March 2020. Harry brings extensive experience from the venture
capital sector, most recently serving as General Partner for 10 years at Foundation Medical Partners,
having been instrumental in its formation. Foundation is an early stage venture capital firm focused on
the healthcare sector. Prior to Foundation, Harry served as Founder and Managing Partner at Canaan
Partners. Harry was responsible for life sciences investments at both Foundation and Canaan. Prior to
Canaan, Harry was President and CEO of GE Venture Capital Corporation, having joined General Electric
Company in 1979. He directed several of General Electric's lighting businesses before joining the venture
capital subsidiary. Harry currently serves on the Board of DeliverCareRX and served on the Board of
Anadigics (NASDAQ: ANAD) until 2016. He has served on the Board of over 20 public and private
entrepreneurial companies, including: Cell Pathways; OraPharma; National MD; OmniSonics; GenVec
(NASDAQ: GNVC); CardioNet (NASDAQ: BEAT) and Spine Wave, and was an investor in Praecis
Pharmaceuticals (NASDAQ: PRCS). Harry attended Emory University and Oglethorpe College (1969) and
holds a MBA from the Darden School at the University of Virginia (1973). Harry serves on each of the
Audit, Nomination (Chair) and Remuneration Committees.
Bruce Failing – Senior Independent Director
Bruce joined Allied Minds as the Senior Independent Director in March 2020. Bruce has over 30 years of
management and investment experience in the areas of media and consumer products, applied
technology and logistics management. He founded and currently is the General Partner of Alerion
Partners and serves on the Boards of Directors of Instadium as the Executive Chairman, Enviroscent and
DeliverCareRX. Previously, he was CEO of Productivity Solutions, Electronic Retailing Systems and
Actmedia, and Executive Chairman of ScentAir Technologies and Lamaze Publishing & the Newborn
Channel. Bruce attended Tufts University (1971) and holds an MBA from Harvard Business School (1973).
Bruce serves on each of the Audit, Nomination and Remuneration (Chair) Committees.
Mark Lerdal - Independent Non-Executive Director
Mark joined Allied Minds as an independent Non-Executive Director in December 2019. Mark brings more
than 30 years of executive leadership to his role at Allied Minds, as well as numerous executive and non-
executive board directorships at public and private companies. Mark currently serves as the executive
chairman of Leaf Clean Energy Company. Previously, Mark has served as managing director of MP2
Capital, LLC, president of Hydrogen Energy California, a developer of a carbon capture and sequestration
facility, and a managing director at KKR Finance in its debt securities division. Mark served on the Boards
of Directors of Trading Emissions plc (LSE: TRE) until January 2019, TerraForm Global Inc. (NASDAQ: GLBL)
until December 2017, and TerraForm Power (NASDAQ: TERP) until November 2015. Mark also serves on
a number of private company boards, including Empower Energies, Southern Current, Cotton Plains
Holding III and Canadian Breaks. Mark attended Stanford University (1981) and holds a JD from
Northwestern University Pritzker School of Law (1984). Mark serves on each of the Audit (Chair),
32
MANAGEMENT AND GOVERNANCE
Nomination and Remuneration Committees.
Former Executive Directors
Joseph Pignato – Chief Executive Officer (resigned)
Joe joined Allied Minds as Chief Financial Officer in August 2015, served as Co-Chief Executive Officer and
Executive Director from June 2019, served as Chief Executive Officer and Executive Director from March
2020, and resigned as Chief Executive Officer and Executive Director in January 2021. Joe continues to
serve as Chief Financial Officer.
Michael Turner – Co-Chief Executive Officer (resigned)
Mike joined Allied Minds as General Counsel in May 2014, served as Executive Vice President and General
Counsel from March 2015, served as Co-Chief Executive Officer and Executive Director from June 2019,
and resigned from Allied Minds and the Board in March 2020. Upon his resignation, Joe Pignato was
appointed sole Chief Executive Officer and Executive Director.
Former Non-Executive Directors
Jeff Rohr – Non-Executive Chairman (resigned)
Jeff joined Allied Minds as an independent Non-Executive Director in April 2014, served as the Non-
Executive Chairman since June 2019, and resigned from the Board in March 2020. Jeff was succeeded by
Harry Rein as Non-Executive Chairman and as Chair of the Nomination Committee.
Table of Board Attendance
The table below summarises the attendance of the Directors at the scheduled meetings held during the
year:
Director
Joseph Pignato(1)
Harry Rein
Mark Lerdal
Bruce Failing(2)
Michael Turner(3)
Jeffrey Rohr(4)
---------------
Meetings Attended
Audit
Committee
n/a
4 of 4
4 of 4
3 of 3
n/a
1 of 1
Nomination
Committee
n/a
4 of 4
4 of 4
2 of 2
n/a
2 of 2
Remuneration
Committee
n/a
3 of 3
3 of 3
2 of 2
n/a
1 of 1
Board
10 of 10
10 of 10
10 of 10
8 of 8
2 of 2
2 of 2
1 Mr. Pignato was appointed to the Board on 10 June 2019, and resigned effective as of 14 January
2021.
2 Mr. Failing was appointed to the Board, and as a member of each of the Audit, Nomination and
Remuneration Committee, on 10 March 2020.
3 Mr. Turner was appointed to the Board on 10 June 2019, and resigned effective as of 10 March
2020.
4 Mr. Rohr resigned from the Board effective as of 10 March 2020.
33
MANAGEMENT AND GOVERNANCE
Directors’ Report
The Directors present their report together with the audited financial statements for Allied Minds plc and
its subsidiaries for the year ended 31 December 2020. The Company was incorporated on 15 April 2014
under the UK Companies Act 2006 (Companies Act).
Directors
The Directors of the Company as at 31 December 2020 were those listed on pages 32 to 33 and these
pages are incorporated into this Directors’ Report by reference. The changes to the composition of the
Board during the year were:
• The resignation of Michael Turner as an Executive Director on 10 March 2020.
• The resignation of Jeffrey Rohr as a Non-Executive Director on 10 March 2020.
• The appointment of Bruce Failing as a Non-Executive Director on 10 March 2020.
• Post-period end, the resignation of Joseph Pignato as an Executive Director on 14 January 2021.
The Directors’ interests in the share capital of the Company are as shown in the Directors’ Remuneration
Report on pages 75 to 76. None of the Directors were materially interested in any significant contract to
which the Company or any of its portfolio companies were party during the year.
Corporate Governance
Information that fulfils the requirements of the corporate governance statement can be found in the
Corporate Governance Report on pages 42 to 52, the Directors’ Remuneration Report on pages 62 to 83,
and the Audit Committee Report on pages 84 to 88, and is incorporated into this Report of the Directors
by reference.
Directors’ Compensation for Loss of Office and Payments to Past Directors
With the exception of payments to past directors and loss of office payments previously disclosed in our
2019 Annual Report and Accounts, no payments to past directors and no loss of office payments were
made during the last financial year.
Employees
The Group’s policies in relation to employees are disclosed on pages 60 to 61, and these pages are
incorporated into this Directors’ Report by reference.
Results and Dividends
During the period, the Group generated a net comprehensive loss after taxation for the year ended 31
December 2020 of $55.6 million (2019: income of $51.1 million). The Directors do not recommend the
payment of an ordinary dividend for 2020 (2019: nil). However, on 16 January 2020, the Board declared
a special dividend of 12.62 pence per ordinary share (Special Dividend) totalling £30.49 million. The
ordinary shares went ex-dividend on 23 January 2020, and the Special Dividend was paid in cash on 14
February 2020 to holders of ordinary shares recorded on the register as at the close of business on 24
January 2020.
34
MANAGEMENT AND GOVERNANCE
Strategic Report
The Group’s Strategic Report can be found on pages 7 to 31, and includes information as to the Group’s
activities in the field of research and development, and as to the likely future development of the Group.
Financial key performance indicators can be found on page 19.
The Strategic Report contains forward-looking statements with respect to the business of Allied Minds.
These statements reflect the Board’s current view, are subject to a number of material known and
unknown events, risks and uncertainties, and could change in the future. Factors that could cause or
contribute to such changes include, but are not limited to, general economic climate and trading
conditions, as well as specific factors relating to the financial or commercial prospects or performance of
the Group’s individual portfolio companies, and the ability to consummate expected fundraising and other
transactions.
Principal and Emerging Risks and Uncertainties and Financial Instruments
The Group, through its operations, is exposed to a number of risks. The Group’s risk management
objectives and policies are described on pages 24 to 31 and in the Corporate Governance Report on 50 to
51 Further information on the Group’s financial risk management objectives and policies, including those
in relation to credit risk, liquidity risk and market risk, is provided in note 21 to the consolidated financial
statements, along with further information on the Group’s use of financial instruments. The pages
referenced in this paragraph are incorporated into this Directors’ Report by reference.
Significant Agreements
The Group has not entered into any significant agreements which may be impacted by a change of control
following a takeover bid.
Share Capital
Details of the structure of the Company’s share capital and the rights attaching to the Company’s shares
are set out in note 14 to the consolidated financial statements. Other than the minimum share ownership
policy adopted by the Board in April 2016 with respect to Executive Directors, there are no specific
restrictions on the holding of securities or on the transfer of shares, which are both governed by the
general provisions of the Company’s Articles of Association (Articles) and prevailing legislation. None of
the ordinary shares carry any special rights with regard to control of the Company and there are no
restrictions on voting rights.
At the last Annual General Meeting of the Company held on 30 June 2020 (2020 AGM), authority was
given to the Directors, pursuant to the relevant provisions of the Companies Act, to allot unissued relevant
securities in the Company up to a maximum amount equivalent to approximately one-third of the issued
ordinary share capital on 4 June 2020 at any time up to the earlier of the conclusion of the next Annual
General Meeting (AGM) of the Company and 30 September 2021. In addition, at the 2020 AGM, the
Directors were also given authority, effective for the same period as the aforementioned authority, to
allot relevant securities in the Company up to a maximum of approximately two-thirds of the total
ordinary share capital in issue on 4 June 2020 in connection with an offer by way of a fully pre-emptive
rights issue. The Company did not allot any shares under these authorities during the past year. The
35
MANAGEMENT AND GOVERNANCE
Directors propose to renew both of these authorities at the Company’s next AGM to be held on 12 May
2021. The authorities being sought are in accordance with guidance issued by the Investment Association.
A special resolution passed at the 2020 AGM granted authority to the Directors to allot equity securities
in the Company for cash without regard to the pre-emption provisions of the Companies Act, both: (i) up
to a maximum of approximately two-thirds of the total ordinary share capital in issue on 4 June 2020 in
connection with a fully pre-emptive rights issue; and (ii) up to a maximum of approximately 5% of the
aggregate nominal value of the shares in issue on 4 June 2020. A further special resolution passed at the
2020 AGM granted authority to the Directors to allot equity securities in the Company for cash, without
regard to the pre-emption provisions of the Companies Act, up to a maximum of approximately 5% of the
aggregate nominal value of the shares in issue on 4 June 2020, to be used only for the purposes of
financing (or refinancing, if the authority is to be used within six months after the original transaction) a
transaction which the Directors determine to be an acquisition or other capital investment of a kind
contemplated by the Pre-emption Group’s Statement of Principles. These authorities are exercisable at
any time up to the earlier of the conclusion of the next AGM of the Company and 30 September 2021.
None of these authorities were used during 2020. The Directors will seek to renew these authorities for
a similar period at the next AGM to be held on 12 May 2021. Further details of such authorities are set
forth in the Notice of AGM circulated with this Report and Accounts.
The Directors intend to adhere to the provisions in the Pre-emption Group’s Statement of Principles, as
updated in March 2015, and not to allot shares for cash on a non-pre-emptive basis:
•
•
in excess of an amount equal to 5% of the total issued ordinary share capital of the Company
(excluding treasury shares); or
in excess of an amount equal to 7.5% of the total issued ordinary share capital of the Company
(excluding treasury shares) within a rolling three-year period, without prior consultation with
shareholders,
in each case, other than in connection with an acquisition or specified capital investment which is
announced contemporaneously with the allotment or which has taken place in the preceding six-month
period and is disclosed in the announcement of the allotment.
Under the Companies Act, the Company has the power to purchase its own shares in accordance with
Part 18, Chapter 5 of the Companies Act. At the 2020 AGM, a special resolution was passed which granted
the Directors authority to make market purchases of the Company’s shares pursuant to these provisions
of the Companies Act up to a maximum of approximately 10% of the Company’s issued share capital on 4
June 2020 provided that the authority granted set a minimum and maximum price at which purchases can
be made and is exercisable at any time up to the earlier of the conclusion of the next AGM and 30
September 2021. This authority has not been used during the year and therefore the outstanding
authority is 24,156,831. While the Company has no current intention to use this authority, the Directors
will seek to renew the authority within similar parameters and for a similar period at the next AGM to be
held on 12 May 2021.
Articles of Association
The Company’s Articles may be amended by a special resolution of the shareholders.
36
MANAGEMENT AND GOVERNANCE
Substantial Shareholders
As at 31 December 2020, the Company had been advised of the following notifiable interests in the
Company’s voting rights under DTR 5. Other than as shown, so far as the Company (and its directors) are
aware, no other person holds or is beneficially interested in a disclosable interest in the Company.
Shareholder
Invesco Ltd.
Crystal Amber Fund Limited
GIC Private Limited
Mark Pritchard
P3 Private Equity Fund
InterTrader Limited
Number of
Shares
50,681,998
43,189,849
19,382,360
15,197,240
7,721,846
8,245,860
Percentage
20.93%
17.83%
8.00%
6.27%
3.19%
3.40%
Between the year end and 29 March 2021 (the latest practicable date prior to publication), there have
been no changes to the substantial shareholders list above.
Research and Development
Details of the Group’s research and development activities are included in the Portfolio Review and
Developments section on pages 13 to 18.
Stakeholder Engagement
Details of the Group’s engagement with key stakeholders, including suppliers, customer and other
business relationships are included in the Stakeholder Engagement section on pages 56 to 60.
Political and Charitable Donations
The Group did not make any political or charitable donations in 2020 or 2021.
Corporate and Social Responsibility
Details on the Group’s policies, activities and aims with regard to its corporate and social responsibilities
are included in the Sustainability section on pages 53 to 60, and are incorporated into this Directors’
Report by reference.
Greenhouse Gas Emissions
Details on the greenhouse gas emissions associated with the Group’s operations are included in the
Sustainability section on pages 53 to 56.
Directors’ Indemnity and Liability Insurance
During the year, the Company has maintained liability insurance in respect of its directors who held office
during the period. Subject to the provisions of the Companies Act, the Articles provide that every director
is entitled to be indemnified out of the funds of the Company against any liabilities incurred in the
execution or discharge of his or her powers or duties.
37
MANAGEMENT AND GOVERNANCE
Issuance of Equity by Major Subsidiary Undertaking
None of the Company’s major subsidiary undertakings (as defined in the Listing Rules) issued equity in
2020.
Requirements of the Listing Rules
The following table provides references to where the information required by Listing Rule 9.8.4R is
disclosed:
Section
1
2
4
5
6
7
8
9
10
11
12
13
14
15
Listing Rule requirement
Interest capitalised
Publication of unaudited financial information
Details of long-term incentive schemes for an
individual director
Waiver of emoluments by a director
Waiver of future emoluments by a director
Non pre-emptive issues of equity for cash
Location
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Notes to the Consolidated
Financial Statements, Note 15
Not applicable
Non pre-emptive issues of equity for cash by any major
subsidiary undertaking
Not applicable
Parent participation in a placing by a listed subsidiary
Contract of significance with director
Not applicable
Contract of significance with a controlling shareholder Not applicable
Not applicable
Provision of services by a controlling shareholder
Not applicable
Shareholder waivers of dividends
Not applicable
Shareholder waivers of future dividends
Not applicable
Relationship agreements with the controlling
shareholder
Viability Statement
While the financial statements and accounts have been prepared on a going concern basis, provision 31
of the 2018 version of the UK Corporate Governance Code (Code) requires the Directors to make a
statement in the Annual Report with regard to the viability of the Group, including explaining how they
have assessed the prospects of the Group, the period of time for which they have made the assessment,
and why they consider that period to be appropriate. Accordingly, the Directors conducted this
assessment over the three years to December 2023, taking into account the Group’s current position and
capital allocation strategy. As stated in the Company Overview on pages 9 to 12, the Directors have
determined to focus exclusively on supporting our seven existing portfolio companies and maximising
monetisation opportunities for portfolio company interests, and not to deploy any capital into new
portfolio companies. This shift in strategy, taken together with significant reductions of its central costs
and the successful HawkEye 360 liquidity event, allows the Company to remain viable for the next three
years. This strategy, pursued to its conclusion, would see the Group’s existing assets continue to be
managed and eventually monetised, with no new investments being taken on and with a view to returning
surplus proceeds to shareholders. The Directors expect this strategy to take the next three years to be
fully implemented, and as a matter of good governance, will continue to keep this strategy under review
38
MANAGEMENT AND GOVERNANCE
at appropriate intervals. Consequently, in terms of reporting on the viability of the Group as required
under the Code, the Directors have prepared projections running out three years to December 2023 as,
in their view, this remains an appropriate period, notwithstanding the eventual conclusion to the strategy
as outlined.
The Directors also carried out a robust assessment of the principal and emerging risks facing the Group,
including those that would threaten its business model, future performance, solvency or liquidity, and the
other principal and emerging risks detailed in the Strategic Report. The three-year period includes the
assumption that further funding is not required by the Group in the form of proceeds from either the sale
of individual portfolio companies, the sale of certain portfolio company interests in secondary market
transactions, or a combination thereof. The Directors believe that a three-year assessment is most
appropriate as it aligns with the Group’s normal and well-established budgeting process. In making their
assessment, the Directors considered a wide range of information, including present and future economic
conditions, future projections of profitability, cash flows and capital requirements, and the potential sale
of certain portfolio company interests in secondary market transactions.
The Group’s annual budgeting process builds into a robust three-year plan, which is the period the
Directors consider as an appropriate period to be covered by the viability statement. This plan forms the
basis for strategic decisions across the Group. The consolidated plan is reviewed and approved annually
by the Directors at the beginning of the year. The plan is then deployed down to the portfolio companies
and used to set performance metrics and objectives (MBOs). Progress against the original plan is reviewed
quarterly by the Directors, and adjustments to the plan can be made if needed to address new risks or to
take advantage of new opportunities.
In summary, the Directors have assessed the viability of the Group over the three-year period to
December 2023. They were comforted by management’s proactive steps taken in 2019 and implemented
in 2020 to manage cash expenses, the retained cash proceeds from the sale of its shares of HawkEye 360,
its long-term capital allocation objectives, the Group’s control over its capital allocation and how working
capital requirements are met, and careful budgeting by the Group for such period. Based on this
assessment, the Directors have a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the three-year period to December 2023.
Disclosure of Information to Auditor
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
•
•
so far as the Director is aware, there is no relevant audit information of which the Company’s
auditor is unaware; and
the Director has taken all steps that he or she ought to have taken as a Director in order to make
himself or herself aware of any relevant audit information and to establish that the Company’s
auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of
the Companies Act.
39
MANAGEMENT AND GOVERNANCE
Annual General Meeting
The Annual General Meeting (AGM) will be held at 10.00 EST on 12 May 2021 at Allied Minds’
headquarters located at 374 Congress Street, Suite 308, Boston, Massachusetts 02210, USA. The Notice
of AGM circulated with this Report and Accounts contains a full explanation of the business to be
conducted at that meeting.
Auditors
In accordance with Section 489 of the Companies Act 2006, a resolution for the appointment of BDO LLP
as auditor of the Company is to be proposed at the forthcoming AGM.
Directors’ Responsibilities Statement
The Directors are responsible for preparing the annual report and the financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that
law the directors are required to prepare the group financial statements, in accordance with applicable
law and international accounting standards in conformity with the requirements of the Companies Act
2006 and International Financial Reporting Standards (IFRS) as adopted by Regulation (EC) No 1606/2002
as it applies in the European Union.
Under company law the directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the group and company and of their profit or loss
for that period.
In preparing these financial statements, the Directors are required to:
•
select suitable accounting policies and apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• provide additional disclosures when compliance with the specific requirements in IFRSs are
insufficient to enable users to understand the impact of particular transactions, other events and
conditions on the entity’s financial position and financial performance;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume
the group will continue in business; and
• prepare a director’s report, a strategic report and director’s remuneration report which comply
with the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial
position of the parent company and enable them to ensure that its financial statements comply with the
Companies Act 2006. The Directors are responsible for safeguarding the assets of the company and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities. The
Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair,
40
MANAGEMENT AND GOVERNANCE
balanced, and understandable and provides the information necessary for shareholders to assess the
group’s performance, business model and strategy.
The Directors are responsible for ensuring the annual report and the financial statements are made
available on a website. Financial statements are published on the company’s website in accordance with
legislation in the United Kingdom governing the preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions. The maintenance and integrity of the company’s
website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing
integrity of the financial statements contained therein.
Directors responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
•
the consolidated and Parent Company financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial
position and loss of the Company and the undertakings included in the consolidation taken as a
whole; and
• The annual report includes a fair review of the development and performance of the business and
the financial position of the group and the parent company, together with a description of the
principal risks and uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable
and provides the information necessary for shareholders to assess the Group’s position, performance,
business model and strategy.
ON BEHALF OF THE BOARD
Harry Rein
Chairman
29 March 2021
41
MANAGEMENT AND GOVERNANCE
Corporate Governance Report
Compliance with the UK Corporate Governance Code
The Directors are committed to a high standard of corporate governance and have prepared this Annual
Report with reference to the 2018 UK Corporate Governance Code (Code) which was published by the
Financial Reporting Council (FRC) in July 2018. The Code is available at the FRC website at www.frc.org.uk.
During the year ended 31 December 2020, the Directors consider that the Company has been in
compliance with the provisions set out in the Code with the following exceptions:
• Contrary to provision 34 of the Code, certain Non-Executive Directors hold restricted stock units
(RSUs) that vest over time. These RSUs were granted to the Non-Executive Directors in 2016, 2017,
2018, 2019, and 2020 and do not have performance conditions. After careful consideration, given
that the level of the awards are limited, do not have performance-based vesting, and effectively
operate like cash remuneration, the Board does not believe that ownership of these RSUs impacts the
independence of the Non-Executive Directors.
• Contrary to provision 24 of the Code, the Chairman, Harry Rein, was a member of the Audit Committee
in 2020. The Board believes that Mr. Rein’s professional background and experience made him a
valuable member of the Audit Committee and that his membership was in the best interests of our
shareholders.
• Contrary to provision 20, an external search consultancy was not used to identify and recruit Mr.
Failing as a Non-Executive Director. Mr. Failing was proposed as a director candidate by a Non-
Executive Director on the Board. After careful consideration of Mr. Failing’s qualifications and upon
recommendation by the Nomination Committee, Mr. Failing was appointed to the Board and will be
up for shareholder re-election at the 2021 AGM.
• Effective as of 14 January 2021, the Company no longer employs a chief executive officer. Given the
strategic shift of the Group and the stated objective of the Group for the next two to three years, the
Company’s Board and management determined that the most effective and efficient path to execute
upon such strategy is to eliminate the chief executive officer role and to have direct participation by
the Board on the boards of the portfolio companies. This is contrary to provision 9 of the Code.
Further explanation as to how the provisions set out in the Code have been applied by the Company is
provided in the following statements, the Directors’ Remuneration Report, the Audit Committee Report
and the Strategic Report.
The Board
Role and Responsibilities of the Board
The Board is responsible to shareholders for the overall management of the Group as a whole, providing
entrepreneurial leadership within a framework of controls for assessing and managing risk; defining,
challenging and interrogating the Group’s strategic aim, direction and culture; maintaining the policy and
decision-making framework in which such strategic aims are implemented; ensuring that the necessary
financial and human resources are in place to meet strategic aims; monitoring performance against key
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financial and non-financial indicators; succession planning; overseeing the system of risk management;
setting values and standards in governance matters; and monitoring policies and performance on
corporate social responsibility. The Directors are also responsible for ensuring that obligations to
shareholders and other stakeholders are understood and met, and a satisfactory dialogue with
shareholders is maintained. All Directors are equally accountable to the Company’s shareholders for the
proper stewardship of its affairs and the long-term success of the Group.
The responsibility of the Directors is collective. The Directors are responsible for constructively developing
and challenging proposals on strategy, scrutinising the performance of management of portfolio
companies, determining levels of remuneration and for succession planning for the senior management
of the company and portfolio companies. The Non-Executive Directors must also satisfy themselves on
the integrity of financial information and that financial controls and systems of risk management are
robust.
The Board reviews strategic issues on a regular basis and exercises control over the performance of the
Group by agreeing on budgetary targets and monitoring performance against those targets. The Board
has overall responsibility for the Group’s system of internal controls and risk management, as described
on pages 50 to 52. Any decisions made by the Board on policies and strategy to be adopted by the Group
or changes to current policies and strategy are made following presentations by the Directors or senior
management at the Company and a detailed process of review and challenge by the Board. Once made,
the Directors are fully empowered to implement those decisions.
Except for a formal schedule of matters which are reserved for decision and approval by the Board, the
Board has delegated the day-to-day management of the Group to the Chairman who is supported by
members of the senior management team. The schedule of matters reserved for Board decision and
approval are those significant to the Group as a whole due to their strategic, financial or reputational
implications.
This schedule is reviewed and updated regularly and currently includes those matters set forth below:
• Approval and monitoring of the Group’s strategic aims and objectives, and approval of the annual
operating budget.
• Strategic acquisitions by the Group.
• Major disposals of the Group’s assets or subsidiaries.
• Changes to the Group’s capital structure, the issue of any securities and material borrowing of the
Group.
• Approval of the annual report and half-year results statement, accounting policies and practices
or any matter having a material impact on future financial performance of the Group.
• Ensuring a sound system of internal control and risk management.
• Approval of all circulars, prospectuses and other documents issued to shareholders governed by
the FCA’s Listing Rules, Disclosure Guidance and Transparency Rules or the City Code on Takeovers
and Mergers.
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MANAGEMENT AND GOVERNANCE
• Approving Board appointments and removals, and approving policies relating to Directors’
remuneration.
• Approval of terms of reference and membership of Board Committees.
• Considering and, where appropriate, approving Directors’ conflicts of interest.
• Approval, subject to shareholder approval, of the appointment and remuneration of the auditors.
• Major changes in employee share schemes.
•
Insurance and litigation.
The schedule of matters reserved to the Board is available on request from the Company Secretary or
within the Investors section of the Group’s website at www.alliedminds.com.
The Board delegates specific responsibilities to certain Committees that assist the Board in carrying out
its functions and ensure independent oversight of internal control and risk management. The three
principal Board Committees (Audit, Nomination and Remuneration) play an essential role in supporting
the Board in fulfilling its responsibilities and ensuring that the highest standards of corporate governance
are maintained throughout the Group. Each Committee has its own terms of reference which set out the
specific matters for which delegated authority has been given by the Board. The initial terms of reference
for each of the Committees, which are fully compliant with the provisions of the Code and which reflect
both best practice and the recommendations arising from the external evaluation process undergone by
the Board and its Committees in connection with the Company’s IPO, were adopted by the Board during
2014. These were reviewed in November 2020, and will be reviewed annually on an ongoing basis and
updated where necessary. All of these are available on request from the Company Secretary or within
the Investors section of the Group’s website at www.alliedminds.com.
Board Size and Composition
As at 31 December 2020, there were four Directors on the Board: the Non-Executive Chairman, one
Executive Director and two Non-Executive Directors. During the year, changes to the composition of the
Board were:
• The resignation of Michael Turner as an Executive Director on 10 March 2020.
• The resignation of Jeffrey Rohr as a Non-Executive Director on 10 March 2020.
• The appointment of Bruce Failing as a Non-Executive Director on 10 March 2020.
• Post-period end, the resignation of Joseph Pignato as an Executive Director on 14 January 2021.
The biographies of all of the Directors are provided on pages 32 to 33.
The Company’s policy relating to the terms of appointment and the remuneration of both Executive and
Non-Executive Directors is detailed in the Directors’ Remuneration Report on pages 71 to 83.
The size and composition of the Board is regularly reviewed by the Board, and in particular the Nomination
Committee, to ensure there is an appropriate and diverse mix of skills and experience on the Board.
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MANAGEMENT AND GOVERNANCE
The Company’s Articles allow appointment of Directors by ordinary resolution and require all Directors to
submit themselves for re-election by the shareholders at the Company’s AGM following their first
appointment and thereafter at each AGM in respect of which they have held office for the two preceding
AGMs and did not retire at either of them. In addition, each director who has held office with the
Company for a continuous period of nine years or more must retire and offer themselves up for re-election
at every AGM.
However, in accordance with provision 18 of the Code and in line with the Company’s past practice, all
Directors will submit themselves for annual re-election by shareholders at the AGM of the Company to be
held on 12 May 2021. The Board recommends to shareholders the reappointment of all Directors retiring
at the meeting and offering themselves for re-election on the basis that independent performance
reviews demonstrated that they each contribute effectively to the Board and continue to display the
appropriate level of commitment in their respective roles. Furthermore, such reviews, together with the
recruitment and evaluation of new Directors that have joined the Board, highlight that the skills,
experience, opinions and judgment of each Director up for re-election are important to the Company’s
long-term sustainable success because they complement each other and will enable the Company to
effectively execute on its strategy of delivering shareholder value by focusing on its existing portfolio and
maximising monetisation opportunities for portfolio company interests.
Diversity
The Board is committed to a culture that attracts and retains talented people to deliver outstanding
performance and further enhance the success of the Company. In that culture, diversity across a range
of criteria is valued, primarily in relation to skills, knowledge and experience and also in other criteria such
as gender and ethnicity. The Company will give careful consideration to issues of overall Board balance
and diversity in making new appointments to the Board. In identifying suitable candidates, the
Nomination Committee will seek candidates from a range of backgrounds, with the final decision being
based on merit against objective criteria. In addition, the terms of reference of the Nomination
Committee include a requirement for the Committee to consider diversity, including gender, age,
professional background, and ethnicity, in evaluating the composition of the Board and in identifying
suitable candidates for Board appointments. A breakdown of employee gender showing the percentage
of persons who were Directors of the Company and senior managers during the period covered by this
Annual Report can be found on page 61.
Non-Executive Directors
The Non-Executive Directors provide a wide range of skills and experience to the Group. They bring their
own senior level of experience in each of their respective fields, robust opinions and an independent
judgement on issues of strategy, performance, risk and people. They are well-placed to constructively
challenge and scrutinise the performance of management at Board and Committee meetings. The Code
sets out the circumstances that should be relevant to the Board in determining whether each Non-
Executive Director is independent. The Board considers Non-Executive Director independence on an
annual basis as part of each Non-Executive Director’s performance evaluation. Having undertaken this
review and with due regard to provision 10 of the Code, the Board has concluded this year that all of the
Non-Executive Directors are considered by the Board to be independent of management and free of any
relationship or circumstance which could materially influence or interfere with, or affect, or appear to
affect, the exercise of their independent judgement.
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MANAGEMENT AND GOVERNANCE
Non-Executive Directors are required to obtain the approval of the Chairman before taking on any further
appointments and the Chairman and Executive Director require the approval of the Board before adding
to their commitments. In all cases, the Directors must ensure that their external appointments do not
involve excessive time commitment or cause a conflict of interest.
The Role of Chairman
Harry Rein is the current Non-Executive Chairman, succeeding Jeff Rohr upon his resignation on 10 March
2020. As announced post-period end, the Board and management have determined that the most
effective and efficient path forward is direct management of the Group by the Board. Given the Group’s
strategic objective to maximise the value of the remaining portfolio and focus on delivering returns to
shareholders in the next two to three years, the Board believes that at this stage, the Non-Executive
Directors have the ability to execute upon such strategy through their direct involvement with each of the
Group’s portfolio. Accordingly, the Board does not intend to appoint a new chief executive officer at this
time.
The Chairman is responsible for the leadership and conduct of the Board, the conduct of the Group’s
affairs and strategy and for ensuring effective communication with shareholders. The Chairman facilitates
the full and effective contribution of Non-Executive Directors at Board and Committee meetings, ensures
that they are kept well informed and ensures a constructive relationship between the Non-Executive
Directors. The Chairman also ensures that the Board Committees carry out their duties, including
reporting back to the Board either orally or in writing following their meetings at the next Board meeting.
The Chairman was deemed to be independent of management upon his appointment to the role.
The role of the Chief Executive Officer, Joe Pignato, was to lead the delivery of the strategy and the
executive management of the Group and its operating businesses. He was responsible, amongst other
things, for the development and implementation of strategy and processes which enable the Group to
meet the requirements of shareholders, for delivering the operating plans and budgets for the Group’s
businesses, monitoring business performance against key performance indicators (KPIs) and reporting on
these to the Board and for providing the appropriate environment to recruit, engage, retain and develop
the high quality personnel needed to deliver the Group’s strategy.
Senior Independent Director
Bruce Failing is the current Senior Independent Director, succeeding Harry Rein upon his assumption of
the Chairman role. A key responsibility of the Senior Independent Director is to be available to
shareholders in the event that they may feel it inappropriate to relay views through the Chairman or Chief
Executive Officer. In addition, the Senior Independent Director serves as an intermediary between the
rest of the Board and the Chairman where necessary and takes the lead when the Non-Executive Directors
assess the Chairman’s performance and when the appointment of a new Chairman is considered. Further,
the Senior Independent Director will lead the Board in its deliberations on any matters on which the
Chairman is conflicted.
Board Support
The Company Secretary is responsible to the Board for ensuring Board procedures are followed, applicable
rules and regulations are complied with and that the Board is advised on governance matters and relevant
regulatory matters. All Directors have access to the impartial advice and services of the Company
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MANAGEMENT AND GOVERNANCE
Secretary. There is also an agreed procedure for directors to take independent professional advice at the
Company’s expense. In accordance with the Company’s Articles and a contractual Deed of Indemnity,
Directors have been granted an indemnity issued by the Company to the extent permitted by law in
respect of liabilities incurred to third parties as a result of their office. The indemnity would not provide
any coverage where a director is proved to have acted fraudulently or with willful misconduct. The
Company has also arranged appropriate insurance coverage in respect of legal action against its directors
and officers.
Board Meetings and Decisions
The Board meets regularly during the year, as well as when required by business needs. The Board had
ten scheduled Board meetings in 2020. During their term of service, each of the Directors were present
at the meetings during the year as set out in the table on page 33.
The schedule of Board and Committee meetings each year is, so far as is possible, determined before the
commencement of that year and all Directors or, if appropriate, all Committee members are expected to
attend each meeting. Supplementary meetings of the Board and/or the Committees are held as and when
necessary. Each member of the Board receives detailed Board packs, including an agenda based upon the
schedule of matters reserved for its approval, appropriate reports and briefing papers in advance of each
scheduled meeting. If a director is unable to attend a meeting due to exceptional circumstances, he or
she will still receive the supporting papers and is expected to discuss any matters he or she wishes to raise
with the Chairman in advance of the meeting. The Board, Chief Financial Officer and Company Secretary
work together to ensure that the Directors receive relevant information to enable them to discharge their
duties and that such information is accurate, timely and clear. This information includes quarterly
management accounts containing analysis of performance against budget and other forecasts. Additional
information is provided as appropriate or if requested. At each meeting, the Board receives information,
reports and presentations from members of senior management as required. This ensures that all
Directors are aware of, and are in a position to monitor effectively, the overall performance of the Group,
its development and implementation of strategy and its management of risk.
Any matter requiring a decision by the Board is supported by a paper analysing the relevant aspects of
the proposal including costs, benefits, potential risks involved and proposed executive management
action and recommendations.
The majority of Board meetings are held at the Group’s offices in Boston, Massachusetts, USA, which gives
members of the Company’s senior management team, as well as the senior managers of the portfolio
companies, the opportunity to formally present to the Board. This assists the Board in gaining a deeper
understanding of the breadth, stage of development and diversity of the Group’s portfolio companies. In
2020, due to the challenges caused by COVID-19, and in the interest of protecting the health and safety
of the Board and all employees, the majority of Board meetings were held via video teleconference.
Directors’ Conflicts of Interest
Each director has a statutory duty under the Companies Act to avoid a situation in which he or she has or
can have a direct or indirect interest that conflicts or may potentially conflict with the interests of the
Company. This duty is in addition to the continuing duty that a director owes to the Company to disclose
to the Board any transaction or arrangement under consideration by the Company in which he or she is
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interested. The Company’s Articles permit the Board to authorise conflicts or potential conflicts of
interest. The Board has established procedures for managing and, where appropriate, authorising any
such conflicts or potential conflicts of interest. It is a recurring agenda item at all Board meetings and this
gives the directors the opportunity to raise at the beginning of every Board meeting, any actual or
potential conflict of interests that they may have on the matters to be discussed, or to update the Board
on any change to a previous conflict of interest already declared. In deciding whether to authorise any
conflict, the directors must have regard to their general duties under the Companies Act and their
overriding obligation to act in a way they consider, in good faith, will be most likely to promote the
Company’s success. In addition, the directors are able to impose limits or conditions when giving
authorisation to a conflict or potential conflict of interest if they think this is appropriate. The
authorisation of any conflict matter, and the terms of any authorisation, may be reviewed by the Board
at any time. The Board believes that the procedures established to deal with conflicts of interest are
operating effectively.
Induction, Awareness and Development
A comprehensive induction process is in place for new directors. The programme is tailored to the needs
of each individual director and agreed with him or her so that he or she can gain a better understanding
of the Group and its businesses. This will generally include an overview of the Group and its businesses,
structure, functions and strategic aims; site visits to the Group’s head office in Boston, Massachusetts,
USA; and, upon request, site visits to a number of the Group’s portfolio companies, which will include
meeting with such companies’ management and a presentation from them on their businesses. In
addition, the Company facilitates sessions as appropriate with the Group’s advisers, in particular its
corporate broker, Numis Securities Limited, as well as with appropriate governance specialists, to ensure
that any new directors are fully aware of and understand their responsibilities and obligations as a director
of a listed company and of the governance framework within which they must operate. A new director
may also seek to meet major shareholders.
In order to ensure that the Directors continue to further their understanding of the issues facing the
Group, the Board is also exposed to the early-stage opportunities in which the Group has invested through
presentations at Board meetings by relevant members of the Group’s staff. In addition, other members
of senior management present to the Board to enhance the Board’s awareness of how the Group operates
on a day-to-day basis and how such functions operate so as to assist in the execution of the Group’s
strategy of maximising total returns to all shareholders through monetisation of its existing portfolio.
As a further aspect of their ongoing development, each Director also receives feedback on his or her
performance following the Board’s performance evaluation in each year and, through the Company
Secretary, access is facilitated to relevant training and development opportunities including those
relevant to the Non-Executive Directors’ membership on the Board’s Committees.
Board Effectiveness and Performance Evaluation
A performance evaluation of the Board and its Committees is carried out annually to ensure that they
continue to be effective and that each of the Directors demonstrates commitment to his or her respective
role and has sufficient time to meet his or her commitment to the Company. The Board conducts an
internally facilitated Board evaluation led by the Chairman, assisted by the Company Secretary, and
covering the effectiveness of the Board as a whole, its individual Directors and its Committees. This review
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includes each of the Board and Committee members completing a detailed questionnaire. A summary of
the results of the questionnaire and review, together with the Chairman and Company Secretary’s
observations and recommendations, are prepared and shared with members of the Board. The Board
engages in a discussion of these results, provides feedback on the observations and recommendations,
and develops a list of proposed improvements and actions, as deemed necessary. In addition to the
aforementioned annual reviews, the performance of the Executive Director is reviewed by the Board on
an ongoing basis, as deemed necessary.
During the 2020 financial year, the Board assessed its own effectiveness through an internal Board
evaluation process. This process was based on: a review of documentation including Board and
Committee terms of reference, the completion of a survey to Directors comprising quantitative and
qualitative questions; and discussions with all Board members and a number of stakeholders who
regularly interact with the Board, including the Company Secretary.
The results were analysed by the Chairman and the Company Secretary, and a detailed discussion was
facilitated with the Board to outline the observations and recommendations. Overall it was concluded
that the Board continues to work effectively. The changes to the Board composition in recent years have
resulted in a well-balanced Board with a range of skills and experience. The size of the Board continues
to be appropriate given the Group’s current position and capital allocation strategy to focus exclusively
on supporting our seven existing portfolio companies and maximising monetisation opportunities for
portfolio company interests, and not to deploy any capital into new portfolio companies. The Board did
not recommend any changes it considered necessary.
Committees of the Board
The composition of the three Committees of the Board and the attendance of the members throughout
the year is set out in the table on page 33. The terms of reference of each Committee are available on
request from the Company Secretary or within the Investors section of the Group’s website at
www.alliedminds.com.
Remuneration and Audit Committees
Separate reports on the role, composition, responsibilities and operation of the Remuneration Committee
and the Audit Committee are set out on pages 63 to 64, and pages 84 to 85, respectively, and are
incorporated by reference into this Corporate Governance Report.
Nomination Committee
The Nomination Committee leads the process for Board appointments, re-election and succession of
directors and the Chairman. Its key objective is to ensure that the Board is comprised of individuals with
the necessary skills, knowledge and experience to ensure that it is effective in discharging its duties. It is
responsible for making recommendations to the Board and its Committees concerning the composition
and skills of the Board including any changes considered necessary in the identification and nomination
of new directors, the reappointment of existing directors and the appointment of members to the Board’s
Committees. It also assesses the roles of the existing directors in office to ensure there continues to be a
balanced Board in terms of skills, knowledge, experience and diversity. In addition, the Nomination
Committee reviews the senior leadership needs of the Group to enable it to compete effectively in the
marketplace. The Nomination Committee also advises the Board on succession planning for Executive
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Director appointments, although the Board itself is responsible for succession generally.
The Committee was chaired by Jeff Rohr (until his resignation as of 10 March 2020) and Harry Rein (as Mr.
Rohr’s successor for the remainder of the financial year) and its other members as at 31 December 2020
were Bruce Failing and Mark Lerdal, being a majority of independent Non-Executive Directors as
prescribed by the Code. The Nomination Committee meets as and when required or as requested by the
Board. The Nomination Committee met four times during 2020 to review the structure, size and
composition of the Board, following which it discussed the conclusions with the Chairman and the Chief
Executive Officer. Messrs. Rein, Failing, and Lerdal, along with former Director, Mr. Rohr, were present
at all meetings during the year, as applicable.
Before selecting new appointees to the Board, the Nomination Committee shall consider the balance,
skill, knowledge, independence, diversity (including gender) and experience on the Board to ensure that
a suitable balance is maintained. The Committee shall adopt a formal, rigorous and transparent procedure
for the appointment of new directors to the Board. Consideration shall always be given as to whether
identified candidates have sufficient time available to devote to the role. When searching for appropriate
candidates, the Committee shall give consideration to using an external search company, but may also
consider candidates who are proposed by existing Board members or employees of the Group. When the
Committee has found a suitable candidate, the Chairman of the Committee will make a proposal to the
whole Board. The appointment of a candidate is the responsibility of the whole Board following
recommendation from the Committee. The Committee did not use the services of an external search
company in 2020.
As part of its annual duties in 2020, the Committee and the full Board fulfilled its duties which resulted in
the appointment of Bruce Failing as a Non-Executive Director in March 2020. The Committee did not
openly advertise or use an external search firm to identify and recruit Mr. Failing, who was recommended
by existing Directors, and was deemed by the Board to possess the skill, knowledge and experience to
enhance the effectiveness of the Board. In the year ahead, the Nomination Committee will continue to
assess the Board’s size and composition and how it may be enhanced.
Internal control
The Board fully recognises the importance of the guidance contained in Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting (FRC). The Group’s internal controls and
risk management systems, which are Group wide, were in place during the whole of 2020, were reviewed
by the Board and Audit Committee. After careful consideration and discussion of the Group’s financial
statements and underlying control systems by the Board and Audit Committee, including extensive review
and collaboration with the Company’s executive team to remedy issues identified, the Group’s internal
controls and risk management systems were considered to be effective throughout the year ended 31
December 2020 and up to the date of approval of the Annual Report and Accounts.
The Board and Audit Committee are responsible for establishing and monitoring internal control systems
and for reviewing the effectiveness of these systems. The Board views the effective operation of a
rigorous system of internal control as critical to the success of the Group; however, it recognises that such
systems are designed to manage rather than eliminate risk of failure and can provide only reasonable and
not absolute assurance against material misstatement or loss. The key elements of the Group’s internal
control system, all of which have been in place during the financial year and up to the date these financial
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statements were approved, are as follows:
Control environment and procedures
The Group has a clear organisational structure with defined responsibilities and accountabilities. It adopts
the highest values surrounding quality, integrity and ethics, and these values are documented and
communicated clearly throughout the whole organisation.
Detailed written policies and procedures have been established covering key operating and compliance
risk areas. These are reviewed and updated at least once a year. The effectiveness of the systems of
internal control is reviewed at least annually by the Board. The Board reviews and evaluates the internal
control policies and procedures in place against the nature of the Group’s business, the size of its
workforce and the competing risks and interests being managed. Through these actions and
considerations, the Board has satisfied itself that the controls been effective for the year ended 31
December 2020.
Identification and evaluation of risks
The Board actively identifies and evaluates the risks inherent in the business, and ensures that appropriate
controls and procedures are in place to manage these risks. The Board obtains an update regarding the
portfolio companies on a regular basis, and reviews the performance of the Group and its portfolio
companies on a quarterly basis, although performance of specific investments may be reviewed more
frequently if deemed appropriate. The Board also obtains a risk management report from members of
senior management on a regular basis. The key risks and uncertainties faced by the Group, as well as the
relevant mitigations, are set out on pages 24 to 31.
Information and financial reporting systems
The Group evaluates and manages significant risks associated with the process for preparing consolidated
accounts by having in place systems and controls that ensure adequate accounting records are maintained
and that transactions are recorded accurately and fairly to permit the preparation of financial statements
in accordance with IFRS. The Board approves the annual operating budgets and each quarter receives
details of actual performance measured against the budget.
Principal and emerging risks and uncertainties
The operations of the Group and the implementation of its objectives and strategy are subject to a number
of key risks and uncertainties. Risks are formally reviewed by the Board and Audit Committee at least
annually and appropriate procedures are put in place to monitor and, to the extent possible, mitigate
these risks. Were more than one of the risks to occur together, the overall impact on the Group may be
compounded. A summary of the key risks affecting the Group and the steps taken to manage these is set
out on pages 24 to 31.
Relations with shareholders
The Company is committed to a continuous dialogue with shareholders as it believes that this is essential
to ensure a greater understanding of and confidence amongst its shareholders in the medium and longer
term strategy of the Group. It is the responsibility of the Board as a whole to ensure that a satisfactory
dialogue does take place.
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The Board’s primary shareholder contact is through the Chairman. The Senior Independent Director and
other Directors, as appropriate, make themselves available for contact with major shareholders and other
stakeholders in order to understand their issues and concerns. The Chairman, Chief Executive Officer, and
the other Directors met with major shareholders, IP commercialisation sector brokers and analysts, and
other stakeholders, on numerous occasions throughout the year in order to discuss the Company and its
business as well as to receive feedback on the Company’s remuneration programme and other related
matters.
The Company uses the AGM as an opportunity to communicate with its shareholders. Notice of the AGM,
which will be held at 10.00 ET on Wednesday, 12 May 2021 at the Company’s headquarters located at
374 Congress Street, Suite 308, Boston, MA 02210 USA, is enclosed with this Report and Accounts. In
accordance with the Code, the Notice of AGM is sent to shareholders at least 20 working days before the
meeting. Details of the resolutions and the explanatory notes thereto are included with the Notice. To
ensure compliance with the Code, the Board proposes separate resolutions for each issue and proxy forms
which allows shareholders who are unable to attend the AGM to vote on each resolution. The results of
all proxy voting shall be published on the Group’s website after the meeting and at the meeting itself to
those shareholders who attend. Shareholders who attend the AGM will have the opportunity to ask
questions and the Chairman and the Directors are expected to be available to take questions.
The Group’s website at www.alliedminds.com is the primary source of information on the Group. The
website includes an overview of the activities of the Group, details of its portfolio companies, and details
of all recent Group and portfolio company announcements.
Political expenditure
It is the Board’s policy not to incur political expenditure or otherwise make cash contributions to political
parties and it has no intention of changing that policy.
Going concern
The Directors acknowledge that the ongoing spread of the coronavirus disease (COVID-19) that started in
December 2019 has the potential to greatly disrupt all aspects of the Group’s business, including potential
negative impacts on the Group’s financial position. However, the Directors are closely monitoring the
disease with Group management in order to mitigate against such impact, including careful financial
planning to allow for continued operations. The Directors confirm that, after taking all applicable factors
into consideration, including the impact of COVID-19, they have a reasonable expectation that the Group
will have adequate resources to continue operations for a period of not less than 12 months from the
date of approval of the financial statements. For this reason, they continue to adopt the going concern
basis in preparing the financial statements. For further explanation, see note 1 of the financial statements
on page 102.
ON BEHALF OF THE BOARD
Harry Rein
Chairman
29 March 2021
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Sustainability
Policy Statement
Allied Minds aims to conduct its business in a socially responsible manner, to contribute to the
communities in which it operates and to respect the needs of its employees and all of its stakeholders.
The Group is committed to operating the business while ensuring a safe environment for employees as
well as minimising the overall impact on the environment.
Allied Minds endeavours to conduct its business in accordance with established best practice, to be a
responsible employer and to adopt values and standards designed to help guide staff in their conduct and
business relationships.
Greenhouse Gas (GHG) Emissions
Given the overall size of the Group, we consider the direct environmental impact of the Group as relatively
low. However, we firmly recognise our responsibility to ensure that our business operates in an
environmentally responsible and sustainable manner. The Group complies with all current regulations on
emissions including GHG emissions, where such regulation exists in our markets.
Though the Group’s day-to-day operational activities have a relatively limited impact on the environment,
we do recognise that the more significant impact occurs indirectly through the nature and operations of
the companies that we choose to support with human and financial capital.
The Group therefore considers it important to establish and nurture businesses that comply with existing
applicable environmental, ethical and social legislation. It is also important that these businesses can
demonstrate that an appropriate strategy is in place to meet future applicable legislative and regulatory
requirements and that these businesses can operate to specific industry standards, striving for best
practice.
The section below includes our first year of reporting under the new Streamlined Energy & Carbon
Reporting requirements. The reporting period is the same as the Group’s financial year, 1 January 2020
to 31 December 2020.
Organisation Boundary and Scope of Emissions
We have reported on all of the emission sources required under the Companies Act 2006 (Strategic Report
and Directors’ Reports) Regulations 2018. These sources fall within the Group’s consolidated financial
statement.
An operational control approach has been used in order to define our organisational boundary. This is the
basis for determining the Scope 1 and 2 emissions for which the Group is responsible.
Methodology
For the Group’s reporting, the Group has employed the services of a specialist adviser, Verco, to quantify
and calculate the Greenhouse Gas (GHG) emissions associated with the Group’s operations.
The following methodology was applied by Verco in the preparation and presentation of this data:
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•
the Greenhouse Gas Protocol published by the World Business Council for Sustainable Development
and the World Resources Institute (the “WBCSD/WRI GHG Protocol”);
• application of appropriate emission factors to the Group’s activities to calculate GHG emissions;
•
•
scope 2 reporting methods – application of location-based and market-based emission factors for
electricity supplies;
inclusion of all the applicable Kyoto gases, expressed in carbon dioxide equivalents, or CO2e; and
• presentation of gross emissions as the Group does not purchase carbon credits (or equivalents).
Absolute Emissions
The total Scope 1 and 2 GHG emissions from the Group’s operations in the year ending 31 December 2020
were:
• 18.7 tonnes of CO2 equivalent (tCO2e) using a ‘location-based’ emission factor methodology for Scope
2 emissions; and
• 18.9 tonnes of CO2 equivalent (tCO2e) using a ‘market-based’ emission factor methodology for Scope
2 emissions.
Scope 1 emissions from onsite combustion of natural gas and refrigerant gas losses have been included in
the reporting scope, although there were no consumption and therefore none reported.
Scope 2 emissions included purchased electricity using the location-based and market-based method.
Intensity Ratio
As well as reporting the absolute emissions, the Group’s GHG emissions are reported below on the metrics
of tonnes of CO2 equivalent per full-time (FTE) employee, excluding remote workers, and of tonnes of CO2
equivalent per square foot of occupied office space. These were decided as the most appropriate metrics
for the Group.
The intensity metrics have been calculated as follows:
• 0.720 tCO2e per full-time employee (FTE) using the location-based method and 0.727 tCO2e per full-
time employee (FTE) using the market-based method; and
• 0.002 tCO2e per ft2 using the location-based method and 0.002 tCO2e per ft2 using the market-based
method.
Target and Baselines
The Group’s objective is to maintain or reduce its GHG emissions per FTE and per square footage of
occupied office space each year and will report each year whether it has been successful in this regard.
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MANAGEMENT AND GOVERNANCE
Key Figures
Allied Minds plc - Breakdown of emissions by scope
2020
(market-based)
0.0
2020
(location-based)
0.0
18.9
18.7
Scope 1
Scope 2
0%
20%
40%
60%
80%
100%
GHG emissions
Scope 11
Scope 22
Scope 23
Total GHG emissions (Location-based
Scope 2)
Total GHG emissions (Market-based
Scope 2)
Tonnes
CO2e
-
18.7
18.9
18.7
18.9
2020
tCO2e /
emp. 4
-
0.720
0.727
0.720
tCO2e / sq.
ft. 5
-
0.002
0.002
0.002
0.727
0.002
1 Scope 1 being emissions from the Group’s combustion of fuel and operation of facilities.
2 Scope 2 being electricity (from location-based calculations), heat, steam and cooling purchased for the
Group’s own use.
3 Scope 2 being electricity (from market-based calculations), heat, steam and cooling purchased for the
Group’s own use.
4 Employee numbers (FTE excluding remote workers): 26
5 Occupied office space: 9,866 ft2
Total Energy Use
Electricity
(kWh)
70,532
Energy Use
2020
Gas (kWh)
-
Total Energy Use
(kWh)
70,532
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MANAGEMENT AND GOVERNANCE
Energy Efficiency Actions
The Group did not implement any new energy efficiency actions during the reporting year. Each of the
businesses have had its employees working from home for a large portion of the year.
Understanding the Indirect Environmental Impacts of our Business Activities
The Group’s day-to-day operational activities have a limited impact on the environment. The Group does
recognise that the more significant impact occurs indirectly, through the investment decisions made and
the operation of the companies that the Group choose to invest in. The Group therefore considers it
important to establish and invest in businesses that comply with existing applicable environmental, ethical
and social legislation. It is also important to the Group that these businesses can demonstrate that an
appropriate strategy is in place to meet future applicable legislative and regulatory requirements and that
these businesses can operate to specific industry standards, striving for best practice.
Our Business Ethics and Social Responsibility
The Group seeks to conduct all of its operating and business activities in an honest, ethical and socially
responsible manner. We are committed to acting professionally, fairly and with integrity in all our
business dealings and relationships wherever we operate, and for the Group’s directors and staff to have
due regard to the interest of all of its stakeholders including investors, partners, employees, customers,
suppliers and the businesses in which the Group invests. We expect our entire workforce to maintain high
standards in accordance with our internal policies on conduct. The Company has in place avenues through
which employees can raise matters confidentially or anonymously and the Board, through the Audit
Committee, regularly reviews whistleblowing reports provided by the whistleblowing officer and the
Chairman of the Audit Committee.
We take a zero tolerance approach to bribery and corruption and implement and enforce effective
systems to counter bribery. The Group is bound by the laws of the UK, including the Bribery Act 2010,
and has implemented policies and procedures to address such laws, as well as the laws in each jurisdiction
where the Group operates, including the US.
The Group’s management and employees are fundamental to our success and as a result we are
committed to encouraging the ongoing development of our staff with the aim of maximising the Group’s
overall performance. Emphasis is placed on staff development through work-based learning, with senior
members of staff acting as coaches and mentors. Allied Minds has continued to employ regular all-staff
update meetings as the main source of employee communication.
Stakeholder Engagement
Section 172 of the Companies Act requires Directors to take into consideration the interests of
stakeholders in their decision making. The Board is committed to understanding and engaging with all
key stakeholder groups of the Company in order to maximise value and promote long-term Company
success in line with its strategic objectives. The Board recognises its duties under Section 172 and
continuously has regard to the likely consequences of any decision for the long term, how the Company’s
activities and decisions will impact employees, those with which it has a business relationship, the
community and environment, and its reputation for high standards of business conduct. In weighing all
of the relevant factors, the Board, acting in good faith and fairly between members of the Company,
56
MANAGEMENT AND GOVERNANCE
makes decisions and takes actions that it considers will best lead to the long-term success of the Company
in accordance with its strategy. The Board strives to be a good employer to its workforce, responds to
shareholder feedback, supports its communities and focuses on maintaining strong partner relationships.
During the year, the Board assessed its current activities between the Board and its stakeholders through
direct conversations with investors, receiving reports from the executive team regarding workforce
feedback, direct engagement with portfolio company management teams, and review of key partners at
Board meetings throughout the course of the year, all of which demonstrated that the Board actively
engages with its stakeholders and takes their various objectives into consideration when making
decisions. Furthermore, in its decision-making, the Board evaluates and considers the long-term effects
and consequences resulting from such decisions. For example, in line with the Group’s strategy to focus
exclusively on funding and operating its existing portfolio companies with the objective of maximising
value for its shareholders, the Board considers how a present decision such as investing additional capital
in Federated Wireless and protecting its ownership percentage in such company was an appropriate
action after considering the interests of its shareholders, impact to the rest of the portfolio, partnership
relationships, and other long-term operational impact. This statement also focuses on how the Directors
have had regard during the year to the matters set out in Section 172(1)(a) through (f) of the Act as
considered further below.
The Board identified that its key stakeholders include shareholders, employees, portfolio companies,
partners, advisors and communities. Specifically, actions the Board has taken to engage with its
stakeholders in 2020 include:
SHAREHOLDERS (Companies Act 2006, sections 172(1)(a) and (f))
Why they matter to us
What matters to them
How the Board engaged
How they influenced the Board’s decision making
They are our investors and we measure success
through delivering value to our shareholders. Our
shareholders play an important role in monitoring and
safeguarding the governance of the Group.
Broad range of issues spanning from financial and
operational performance, strategic execution,
investment plans and capital allocation.
Engaged with our major shareholders and discussed
their
via
teleconference and email correspondence throughout
the year.
viewpoints and
concerns,
including
Attended the 2020 AGM to answer questions and
receive additional feedback from investors.
Met with larger shareholders to discuss additional
feedback in changes to the remuneration programme
after the 2020 AGM.
Chairman and CEO actively contact and make
themselves available to shareholders who have
questions, issues or concerns to raise.
Shareholder feedback, opinions and concerns are
taken into consideration throughout the year as the
Board makes decisions on the Company’s strategy,
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MANAGEMENT AND GOVERNANCE
EMPLOYEES (Companies Act 2006, section 172(1)(b))
Why they matter to us
What matters to them
How the Board engaged
How they influenced the Board’s decision making
investment decisions, capital allocation, remuneration
and other key matters. The Board actively engages
with shareholders for such feedback ahead of making
key decisions when appropriate and in accordance
with regulatory requirements.
Our talented, dedicated and experienced workforce is
a key asset to the Group and critical for the Group’s
success.
Opportunities for career development, culture of
inclusion and diversity, compensation and benefits,
acknowledgement for high performance and ability to
meaningfully contribute to the Group’s success.
Monitored company culture, including NEDs visiting
and interacting with the Company’s employee base,
and received reports from senior executives on morale
throughout the year.
Received feedback and viewpoints from the workforce
for consideration from the Chief Executive Officer,
who was the workforce representative director as the
method of workforce engagement with the Board.
For additional information on employee retention,
rewarding our workforce and diversity, please see
page 61.
The Board is committed to creating a positive working
environment in line with the Company’s culture that
retains and rewards our workforce. For additional
information on steps taken, please see page 60.
PORTFOLIO COMPANIES (Companies Act 2006, sections 172(1)(a) and (c))
Why they matter to us
What matters to them
How the Board engaged
The success of our portfolio companies is what
enables us to bring value to our shareholders. We are
invested in supporting our portfolio companies, the
management teams at those companies, and helping
them achieve their operational and strategic goals.
Achieving strategic objectives, meeting performance
milestones, fundraising, growth, and overall company
success.
Met with executive teams of multiple portfolio
companies in person or via video teleconference to
better understand such companies’ objectives,
strategies, and goals and provide feedback and offer
ongoing assistance to help further such companies’
progress and growth.
Active engagement through representation on
portfolio company boards to assist companies with
fundraising activities and partnership opportunities.
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MANAGEMENT AND GOVERNANCE
How they influenced the Board’s decision making
Understanding the various objectives of our portfolio
companies allows the Board to make informed and
thoughtful decisions regarding the portfolio as a whole
for the overall benefit of the Group.
PARTNERS AND CUSTOMERS (Companies Act 2006, sections 172(1)(c) and (e))
Why they matter to us
Strategic partners throughout the portfolio help the
Group succeed as a whole. Their points of view
provide unique perspectives in the various markets in
which our portfolio companies operate.
What matters to them
How the Board engaged
How they influenced the Board’s decision making
Key customer relationships through the portfolio are
critical to our portfolio companies’ success and ability
to generate revenue. Customer satisfaction, demands
and requirements help define success for our
companies.
These partners have invested in our portfolio
companies and/or have strategic partnerships in place
with our portfolio companies. They want our
companies to succeed and for their partnership
arrangements to be well-executed.
Customers want products and services that will bring
them value and fulfill their business needs. Successful
relationships with our companies will in turn bring
success to such customers.
Direct engagement with key partners of the Company
and its portfolio companies by Executive Director
participation and interaction on strengthening
relationships and understanding objectives.
Working with portfolio company management teams
to understand customer needs that in turn dictate
certain aspects of how to further develop or grow
such company’s technology and products.
The Board routinely considered the interests of our
various partners to ensure that they are aligned with
the Company’s strategy, values and objectives.
The Board considers the needs and interests of key
customers to better understand the portfolio
company businesses and to influence key strategic
decisions through its representation on the portfolio
company boards of directors.
ADVISORS (Companies Act 2006, sections 172(1)(c) and (e))
Why they matter to us
What matters to them
Independent and third party perspectives allow the
Board to make better decisions on behalf of all of its
stakeholders.
Good communication and the ability to work closely
with the Company to enable them to provide strategic
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MANAGEMENT AND GOVERNANCE
How the Board engaged
How they influenced the Board’s decision making
and thoughtful advice and excellent service to help
guide the Board and provide support to the Group
across its operations.
Direct engagement with advisors and key service
providers to discuss Company strategy and to receive
advice and recommendations from such advisors on a
variety of matters.
The Board considers and values the objective input
and advice provided by its trusted advisors and relies
on such advice in various aspects of decision making
when determining how to navigate the various
transactions, issues, strategic shifts, regulatory
matters, and other matters facing the Board.
COMMUNITIES / ENVIRONMENT (Companies Act 2006, section 172(1)(d))
Why they matter to us
What matters to them
How the Board engaged
How they influenced the Board’s decision making
We are committed to maintaining strong ethical and
corporate responsibility principles. We care about
doing business responsibly.
Sustainability and environmental impact resulting
from operations.
Through the Group’s sustainability strategy, aimed to
make a positive contribution to the community and
environment by reducing our carbon footprint and
energy use. Please see pages 53 to 56 for additional
information.
The Board aims to reduce the direct environmental
impact of the Group’s operations.
The Board believes that appropriate steps and considerations have been taken during the year so that
each Director has an understanding of the various key stakeholders of the Company.
The Board recognises its responsibility to contemplate all such stakeholder needs and concerns as part of
its discussions, decision-making, and in the course of taking actions and will continue to make stakeholder
engagement a top priority in the coming years.
Focus on Culture
The Company is committed to maintaining a dynamic culture focused on bringing value to its shareholders
by taking a hands-on approach in supporting its portfolio companies, and in particular, working directly
with the management teams at such companies to help them achieve milestones, accelerate growth and
realise monetisation opportunities. Our workforce maintains the appropriate balance of skills,
capabilities, experience and training that allows it to effectively execute on its strategy. Our Non-
Executive Directors have decades of experience in venture capital investing and are well-positioned to
assist our portfolio companies towards achieving successful exits. Our culture is critical to our success and
we strive to align our workforce through the way we conduct our business. Over the course of the year,
we have continued to embed our values by offering career development opportunities throughout our
workforce, providing direct access and engagement between executives and senior management with the
rest of the workforce, and rewarding high performance, all of which encourages our employees to be
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MANAGEMENT AND GOVERNANCE
engaged and invested in the execution of our strategy.
Employee Diversity and Employment Policies
The Group seeks to operate as a responsible employer and has adopted standards which promote
corporate values designed to help and guide employees in their conduct and business relationships. The
Group seeks to comply with all laws, regulations and rules applicable to its business and to conduct the
business in line with applicable and established best practice. The Group’s policy is one of equal
opportunity in the selection, training, career development and promotion of employees, regardless of
age, gender, sexual orientation, ethnic origin, religion and whether disabled or otherwise. The Group is
committed to recruitment and retention of the talent required to execute on maximising shareholder
value, as described above. Specifically, in line with company culture, the Group is committed to providing
a working environment that allows its workforce to succeed, including providing career advancement
opportunities internally within the Group and providing flexible work arrangements that allow employees
to earn additional degrees. The Group engages with its workforce throughout each year to receive
feedback and evaluate whether practices and behaviour throughout the business are aligned with the
Group’s purpose, values and strategies. When issues are identified, the Group takes corrective actions
such as revising policies and implementing changes collaboratively with its workforce to improve
alignment and overall culture. Allied Minds and its consolidated portfolio companies had 31 employees
as at 31 December 2020. A breakdown of employees by gender as at 31 December 2020 can be seen in
the illustrations below. Allied Minds supports the rights of all people as set out in the UN Universal
Declaration of Human Rights and ensures that all transactions the Group enters into uphold these
principles.
Total Employees
Senior Management
Directors
19%
14%
0%
81%
86%
100%
Female Male
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MANAGEMENT AND GOVERNANCE
Directors’ Remuneration Report
Statement by Chairman of the Remuneration Committee
I am pleased to present, on behalf of the Board, the Directors’ Remuneration Report for the year ended
31 December 2020.
What’s in this report?
The Directors’ Remuneration Report sets out: (i) an annual statement by the Chairman of the
Remuneration Committee on pages 62 to 65; (ii) the current Remuneration Policy for the Company on
pages 66 to 70, and an Annual Report on Remuneration on pages 71 to 83 which describes the
implementation of the current Remuneration Policy during 2020, and expected implementation in 2021.
It has been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008, as amended. The current Remuneration Policy was developed taking into
account the principles of the UK Corporate Governance Code 2018, the Listing Rules and shareholders’
executive remuneration guidelines.
The Statement by Chairman of the Remuneration Committee on pages 62 to 65, together with the Annual
Report on Remuneration on pages 71 to 83, will be subject to an advisory vote at the 2021 AGM.
Remuneration Overview
Our current Remuneration Policy received 85.13% shareholder support at our 2019 AGM, took effect from
that date, and will operate for up to three years. The Remuneration Committee reviewed the approach
to remuneration for the Executive Directors and senior management to assess whether it continues to (i)
meet its design objectives, (ii) support the ongoing business strategy, and (iii) balance good governance
practice in the UK-listed company environment with the ability to attract and retain US-based
management and employees of the highest calibre to execute on this business strategy.
The Company believes that remuneration should be weighted toward rewarding entrepreneurial
achievement and the creation of value over time. In 2019, after engaging in extensive discussions with its
major shareholders, the Remuneration Committee approved a number of changes to the remuneration
programme, as detailed in our 2019 Annual Report and Accounts, to better align remuneration with the
Company’s revised strategy focused on supporting its existing portfolio companies and maximising
monetisation opportunities. During 2020, we continued to execute upon such strategy and evaluate the
appropriateness of the remuneration programme as such changes came into effect in 2020.
The 2019 Directors’ Remuneration Report received a 62.75% vote in favour at the 2020 AGM, as detailed
on page 82. While this resolution was passed, the Committee was disappointed that there was a
significant minority of votes against the advisory resolutions.
including the changes
Overall, the Committee considered that the remuneration programme,
implemented in 2019 that came into effect for 2020, continued to be broadly appropriate and aligned
with the Company’s revised strategy while balancing typical UK-listed market practice with US practice in
our market for talent. In line with our commitment to maintaining an open and transparent dialogue with
shareholders, the Company consulted with its major shareholders in the second half of 2020 to gain their
input.
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MANAGEMENT AND GOVERNANCE
After extensive engagement with its major shareholders, the Board noted that shareholder concerns were
primarily focused on remuneration schemes in place for 2019 and prior which have since been addressed
through the substantial amendments the Company made to its remuneration programme for 2020 and
onwards, as described on pages 66 to 69 and further detailed in the Group’s 2019 Annual Report and
Accounts. The Committee believes that such changes have and continue to appropriately address
shareholder concerns while supporting the Company’s strategy and aligning Executive Directors’ interests
directly with shareholders.
The Committee will continue to monitor the alignment and effectiveness of the Remuneration Policy and
its implementation in light of the Company’s current strategy and developments in the UK remuneration
environment. The Committee remains conscious of the current external economic environment, and will
be mindful of this when determining 2021 out-turns.
Resignation of Joseph Pignato
With effect from 14 January 2021, Mr. Pignato resigned as Chief Executive Officer and as an Executive
Director of the Company. He shall continue to serve as Chief Financial Officer of the Company for an
interim period until 14 April 2021 or such other date as mutually agreed by the Company and Mr. Pignato.
Performance and Reward for 2020
Following strong achievement against a number of the management by objectives (MBOs) set at the start
of 2020, including:
• managing headquarter cash and expenses;
•
• maintaining strong operational support in furtherance of the Company’s revised strategy,
securing funding and strategic partners for our portfolio companies; and
a cash incentive bonus award of 50% of the maximum opportunity, or 75% of target opportunity, was
made to the Executive Director. Additional detail regarding the metrics used to determine such
achievement are set forth on page 73. The Committee considered this annual bonus outcome
appropriately reflected overall performance in the period.
No performance-based LTIP awards vested to the Executive Director in 2020.
The Work of the Remuneration Committee
The Remuneration Committee has responsibility for setting the Remuneration Policy for, and determining
remuneration of, the Executive Directors and senior management, and reviewing pay and conditions of
the wider workforce.
The Committee met on three occasions during the year. Reflecting the meetings for which each member
was then appointed to the Committee, all members were present at all meetings during the year. In
addition, Bruce Failing, the Chairman of the Committee, met several times during the year with the Chief
Executive Officer as well as other members of senior management in order to review all elements of
remuneration and their operation. The Committee also received professional advice from Deloitte LLP
where appropriate.
During the year, the key activities carried out by the Committee were:
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MANAGEMENT AND GOVERNANCE
Review of Remuneration Programme
• Conducted a review of all elements of remuneration for the Executive Director and senior
management to determine their alignment and effectiveness in light of the Company’s strategy;
• Obtained and reviewed feedback received from major shareholders and shareholder advisory
services, in connection with each of the implementation of the current Remuneration Policy and
the subsequent changes to the remuneration programme in late 2019;
Remuneration for 2020
• Determined the 2020 cash incentive bonus and prior LTIP award outcomes for employees;
• Reviewed the remuneration reporting regulations in connection with the review of the Group’s
Remuneration Policy and preparation of the Directors’ Remuneration Report;
• Reviewed remuneration and related policies for the wider workforce, including taking into
consideration the impact of COVID-19;
• Approved the delivery of a proportion of 2020 fees to Non-Executive Directors in the form of
equity-based payments (subject to time-based vesting only);
Remuneration for 2021
• Determined base salaries of the Executive Director and senior management, for the period
starting 1 January 2021;
• Determined the 2021 cash incentive bonus award performance targets;
• Reviewed and approved the remuneration elements of the resignation of Joseph Pignato, details
of which are provided on pages 80 to 81. As set out elsewhere in the Annual Report, effective as
of 14 January 2021, Mr. Pignato stepped down as an Executive Director. In furtherance of its
focused strategy, the Company’s Board and management determined that the most effective and
efficient path forward is for the Company to be a Non-Executive Board-led company. The
Company does not have any current intention of appointing a new Chief Executive Officer. The
scope of the Directors’ Remuneration Report going forward will therefore be limited to reporting
on the remuneration of non-executive directors and details of any payments to past executive
directors.
Exercise of Discretion
No discretion has been exercised in relation to the formulaic outturns under the Company’s incentive
plans for Executive Directors.
Alignment to the UK Corporate Governance Code Principles
When reviewing the appropriateness of the Remuneration Policy and determining its operation for 2021,
the Committee took into consideration, and feels it has appropriately addressed, the following design
principles set out in the revised Corporate Governance Code:
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MANAGEMENT AND GOVERNANCE
Clarity
Simplicity
• The Committee welcomes open and frequent dialogue with shareholders on the approach
to remuneration.
• We have sought to clearly explain how we have implemented the Remuneration Policy in
•
the year and how the Committee intends to operate it for the year ahead.
Incentive Bonus Awards are subject to clearly defined MBOs which are aligned with the
Company’s key strategic priorities.
• Following the cancellation of all outstanding performance awards and the future
operation of the LTIP for Executive Directors, in addition to the Executive Directors
voluntarily forfeiting their interests in the MIP and outstanding stock options awards, the
only performance-based incentive plans in operation for the Executive Director are the
annual Incentive Bonus Awards and the Phantom Plan.
• The remuneration approach taken for our Executive Director is cascaded down the
organisation as appropriate.
Risk
• The Committee considers that the structure of incentive arrangements does not
encourage inappropriate risk-taking.
• Under the Incentive Bonus Awards, discretion may be applied where formulaic outturns
are not considered reflective of overall performance.
• No bonus payments arising under the Phantom Plan will be made to participants until the
Company has generated $109.2 million of gross proceeds (plus any future additional
invested capital made after October 1, 2019) in one or more future liquidity events.
• Malus and clawback provisions apply to the Incentive Bonus Awards.
Predictability
• Our Remuneration Policy contains details of threshold and maximum opportunity levels
under our Incentive Bonus Awards, with actual outcomes dependent on performance
achieved against predetermined measures and target ranges.
Proportionality
• The Committee’s ability to apply discretion ensures appropriate outcomes in the context
of long-term performance.
Alignment to
culture
• The Committee is satisfied that the Remuneration Policy does not reward poor
performance. Our performance measures and target ranges under the Incentive Bonus
Awards, and the construct of the Phantom Plan, are aligned to Company strategy.
• Our reward arrangements are designed to reward delivery of the Group’s strategy which
is focused on supporting our seven existing portfolio companies and maximising
monetisation opportunities for portfolio company interests. This is achieved through our
Incentive Bonus Award MBOs and the operation of the Phantom Plan.
• Our remuneration structure for Executive Directors cascades as appropriate throughout
the Company.
We continue to appreciate any feedback shareholders may have.
Bruce Failing
Chairman of the Remuneration Committee
29 March 2021
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MANAGEMENT AND GOVERNANCE
Remuneration Policy (pages 66 to 70)
This section sets out relevant extracts from the Remuneration Policy for the Executive and Non-Executive
Directors (Policy) which was approved by shareholders at the 2019 AGM and took formal effect from that
date. The complete copy of the Remuneration Policy can be found on pages 73 to 82 of the Company’s
2019 Annual Report and Accounts, which is available on the Company’s website.
The Committee will consider the Policy annually to ensure that it continues to align with the Company’s
strategic objectives; however, it is intended that the Policy will apply for three years from the 2019 AGM.
Where appropriate, commentary has been added to the Policy to reflect the changes to the remuneration
programme in late 2019 as described in the Company’s 2019 Annual Report and Accounts.
The Remuneration Policy Table for Executive and Non-Executive Directors
The table below sets out the Policy for each element of remuneration for Executive and Non-Executive
Directors and how they support the Company’s short- and long-term strategic objectives.
Element of
remuneration and
how it supports the
Company’s objectives
Salary
Provides an
appropriate level of
salary in order to be
competitive and to
maintain the ability to
recruit and retain
Executive Directors of
the required calibre.
Benefits
Provides a benefits
package in line with
US employment
market practice.
Operation
Opportunity
Performance metrics
There is no prescribed maximum
annual salary or increase,
however annual increases will
normally be in line with those of
the wider workforce.
More significant increases may
be made from time to time, for
example to recognise an increase
to the individual’s role and
responsibilities, or a significant
increase in the scale or size of the
Company.
There are no performance
conditions attached to the
payment of salary, although
there are a number of
performance-based factors
both at the individual and
Company level that
influence the level of
salaries provided to
Executive Directors.
The cost of benefits provided
varies from year to year in
accordance with market
conditions, therefore there is no
prescribed monetary limit.
N/A
An Executive Director’s basic salary is considered by the
Committee on appointment and normally reviewed once per
year or when there is a significant change to role or
responsibility.
Salary will normally be paid twice per month in cash. In
exceptional circumstances, part of the salary may be deferred
at the request of the individual and become payable at a later
date.
Salaries and salary increases are set taking into consideration
a number of factors including (but not limited to):
• scale, scope and responsibility of the role;
• skills and experience of the individual;
• individual and Company performance;
• the impact on other remuneration elements and the total
remuneration package;
• the individual’s marketability;
• pay and conditions across the Company;
• the wider economic environment; and
• market-appropriate pay positioning against relevant US and
UK listed peers and other companies of a similar size and
complexity.
The main benefits provided to Executive Directors include
(but are not limited to):
• life insurance;
• disability insurance;
• medical benefits and dental care;
• a car allowance; and
• an annual payment to cover personal legal and tax advice.
Executive Directors may also participate in any all-employee
share plans that may be operated by the Group from time to
time on the same terms as other employees.
Additional benefits, which may include relocation expenses,
housing allowance or other benefits-in-kind, may be provided
in certain circumstances if considered appropriate and
reasonable by the Committee, for example on recruitment.
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MANAGEMENT AND GOVERNANCE
Element of
remuneration and
how it supports the
Company’s objectives
Pension
Provides pension
benefits in line with
US employment
market practice.
The Company is not
required to provide
pension benefits in
order to be
competitive and to
ensure its ability to
recruit and retain
Executive Directors.
Incentive Bonus
Awards
Incentivises the
achievement of pre-
determined strategic
goals – management
by objectives (MBOs)
– over a single year
period.
Allied Minds Long
Term Incentive Plan
(LTIP)
Incentivises and
rewards the
achievement of the
Company’s long-term
strategic objectives.
Provides alignment
with shareholders
through long-term
time horizons and the
facilitation of share
ownership.
Operation
Opportunity
Performance metrics
A consistent pension policy operates for all employees across
the Company, creating alignment between Executive
Directors and the wider workforce.
N/A
N/A
In line with US market practice, no element of the Executive
Directors’ remuneration is pensionable, and the Company
does not operate any pension scheme or other scheme
providing retirement or similar benefits.
However, in line with the approach taken for all employees,
the Company offers a retirement plan in accordance with
subsection 401(k) of the Internal Revenue Code in which
Executive Directors may make voluntary pre-tax contributions
toward their own retirement. The Company does not make
any payments or contributions to such 401(k) Plan.
Annual MBOs and their respective weightings and targets, are
set at or around the start of each financial year.
An Executive Director’s incentive bonus award is considered
by the Committee upon completion of each financial year.
The decision to provide any award and the amount and terms
of any such award, are determined based on the level of
achievement against the MBOs set at the start of the year.
The Committee may exercise its discretion and make
adjustments to the formulaic payout level (both upwards and
downwards, including a reduction to zero) if the formulaic
outcome is not considered to be appropriate. When making
this judgement, the Committee will consider a number of
factors, including (but not limited to) the overall shareholder
experience, underlying business performance (including
financial, operational and technical performance) and
individual performance during the year.
An award over Company stock is typically made to Executive
Directors annually, subject to pre-determined performance
measures which are typically tested over a period of three
years.
The specific performance measures, weightings and targets
are set at or around the start of each financial year.
Performance will normally be tested after three years,
subject to the Committee’s assessment of the extent to
which the performance measures have been met. This
assessment may take into account any additional relevant
factors, at the Committee’s discretion.
A further two-year holding period will typically apply to
awards, giving a total period between the date of the initial
award was made and the end of the holding period of five
years.
Awards are subject to malus and clawback provisions, as
described in the notes to this Policy table.
Operation for 2020 onwards: the LTIP has been retired for
Executive Directors, senior management and other
employees, with no further awards to be made under this
plan to these persons. In addition, the Executive Directors
voluntarily agreed to forfeit the performance-based LTIP
awards made to them in 2017 and 2018, and no LTIP awards
were made in 2019 to them.
67
Incentive Bonus opportunities
are capped at 225% of salary per
annum, which is only achieved if
performance significantly
exceeds expectations across all
MBOs set for the year.
The level of annual bonus
payable for on-target
performance is set at a level
significantly below the maximum
opportunity, and will be disclosed
each year in the Annual Report
on Remuneration.
The Committee and senior
management review the
Group’s MBOs annually
prior to the start of each
financial year to ensure the
detailed performance
measures and weightings
are appropriate and
continue to support the
business strategy.
MBOs may include financial,
operational, technical and
other performance targets.
Operation for 2020 onwards:
Incentive Bonus opportunities
will be capped at 150% of salary
per annum.
The MBOs will be weighted
primarily towards Group,
and not individual, MBO
performance.
LTIP awards are normally granted
to an individual each financial
year and are capped at 300% of
salary. The award will only vest
in full if performance significantly
exceeds expectations over the
performance period.
The proportion of the award that
will vest for threshold
performance will be 16.67%.
When attracting a new executive
director of the required calibre,
an additional LTIP award of up to
300% of salary may be granted in
the executive’s first year of
appointment if deemed
appropriate by the Committee.
Thereafter, LTIP awards granted
to the executive would be made
under the normal policy
maximum above.
The Committee may vary
specific measures and
targets applicable to LTIP
awards from year to year, to
ensure they continue to
support the achievement of
the Company’s strategy and
to ensure that the target
range remains sufficiently
stretching.
In respect of the LTIP
awards to be granted in
2019, 60% of vesting will be
based on the Company’s
relative total shareholder
return (rTSR) performance
in respect of a three-year
performance period, and
40% of vesting will be based
upon the monetisation of
portfolio companies over
such period.
MANAGEMENT AND GOVERNANCE
Operation
Opportunity
Performance metrics
Element of
remuneration and
how it supports the
Company’s objectives
Allied Minds Phantom
Plan
Rewards participants
for a successful
portfolio company
liquidity event, a key
strategic objective of
the Group and its
shareholders, thereby
providing alignment
between the interests
of participants and
shareholders.
Operation of such
plans is common
practice amongst our
peers in the venture
creation / IP
commercialisation
sectors, therefore the
Phantom Plan allows
the Company to
provide a market-
competitive
remuneration offering
within the relevant
market for talent
across this industry.
The Phantom Plan is a performance-based, cash settled
bonus plan for Allied Minds’ Executive Directors and
management.
The Plan is triggered by a successful portfolio liquidity event,
including (i) a portfolio company IPO, (ii) the sale of all or
substantially all of a portfolio company’s assets, (iii) the sale
of at least two-thirds of the outstanding shares of a portfolio
company’s voting equity, (iv) the merger or consolidation of a
portfolio company with or into another entity, or (v) a
portfolio company’s liquidation.
Upon a liquidity event, Allied Minds will deduct the amount it
invested in such portfolio company and deduct the accrued
interest in respect of such investment, and will then allocate
10% of the remaining net proceeds to the Phantom Plan
account for allocation among the participants.
Participants receive “units”, which equates to a pro-rata
share of the Phantom Plan pool.
Vesting of units is determined at the time of grant of the
units.
Operation for 2020 onwards: the Phantom Plan will not be
available to any new unitholders nor will any companies be
added to the Plan.
The maximum aggregate number
of units that may be awarded
under the Phantom Plan is
200,000 units.
Awards to Executive Directors
under the Phantom Plan may not
exceed 30,000 units.
Upon a liquidity event Allied
Minds will distribute 80% of the
Phantom Plan account to the
participants based on their pro
rata share of all vested units on
the date of the applicable
liquidation event, and the
remaining 20% of the Phantom
Plan account will be distributed
to participants at the discretion
of the Committee.
Operation for 2020 onwards:
Executive Directors are subject
to a cap of 25% of any allocated
proceeds in connection with a
specific liquidity event.
No amounts accrue under
the Phantom Plan, and no
amounts are distributed to
participants, until and
unless a successful portfolio
company liquidity event
occurs, and the cash
generated in such liquidity
event exceeds the amount
Allied Minds invested in
such portfolio company,
plus accrued interest and
expenses in respect of such
investment. No other
performance metrics apply.
Operation for 2020
onwards: an additional
underpin has been
introduced, such that no
payments arising under the
Phantom Plan will be made
to participants until the
Company has generated
$109.2 million of gross
proceeds (plus any future
additional invested capital)
in one or more future
liquidity events.
N/A
Share ownership
requirement
Executive Directors are required to acquire and maintain a
minimum ownership level of ordinary shares in the Company.
N/A
Encourages Executive
Directors to build a
meaningful
shareholding in the
Company, providing
alignment between
the long-term
interests of Executive
Directors and
shareholders.
Non-Executive
Directors’ Fees
Provides an
appropriate level of
fees in order to be
competitive and to
maintain the ability to
recruit and retain
Non-Executive
Directors of the
required calibre and
experience.
Partial delivery in
Company stock
encourages alignment
of interests with
shareholders.
This minimum level is set at the equivalent of 400% of salary
for the CEO.
Non-Executive Directors receive an annual fee, with
additional fees paid to reflect additional time commitment
and responsibilities for certain roles, e.g. Chairmanship of a
Board Committee / the Board.
Non-Executive Directors’ fee levels are typically reviewed
annually, taking into consideration a number of factors,
including (but not limited to):
• scale, scope and responsibility of the role;
• relevant skills and experience required; and
• market-appropriate pay positioning against relevant US and
UK listed peers and other companies of a similar size and
complexity.
Non-Executive Directors are not entitled to participate in any
Company pension scheme or to receive benefits, other than
the reimbursement of reasonable and properly documented
expenses incurred in performing the duties of their office
(and any associated taxes).
68
There is no prescribed maximum
fee or increase, however total
fees payable are subject to the
limits set out in the Articles of
Association.
N/A
MANAGEMENT AND GOVERNANCE
Operation
Opportunity
Performance metrics
Element of
remuneration and
how it supports the
Company’s objectives
Non-Executive Directors do not receive any performance-
related awards.
Given the US-based nature of the Group’s business, and the
need to attract and retain independent directors with
significant US business and leadership experience, a
proportion of the fees are paid in stock (with the remainder
paid in cash). The stock element is subject to time-based
vesting over a three-year period, however no performance
conditions are applied.
Careful consideration has been given as to whether including
an equity component would affect the independence of the
Non-Executive Directors, and the conclusion was reached
that it would not, given the level of the awards and the fact
that they are not performance-related.
Remuneration Policy on payment for loss of office
The Directors believe the policy on payments for loss of office detailed below are aligned with UK
corporate governance expectations and local market practice, and appropriate to attract and retain senior
management of the highest calibre.
The Committee reserves the right to make payments where they are made in good faith in discharge of
an existing obligation (or by way of damages for breach of such an obligation) or by way of settlement or
compromise of any claim arising in connection with the termination of a Director’s office or employment
where they are in the best interests of Allied Minds and its shareholders and reflecting the directors’
contractual and legal rights.
If an Executive Director’s employment is terminated by the Company for “Cause”, the Director shall only
be entitled to amounts that are accrued or owing but not yet paid and reimbursement of any properly
incurred business expenses but excluding any bonus payments or other compensation provided pursuant
to the Company’s incentive compensation plan (such amounts, the “Standard Benefit”).
If the Executive Director terminates the service contract for “Good Reason” or the Company terminates
the service contract without Cause, the Executive Director shall be entitled to:
• payment of twelve (12) months’ base salary in accordance with regular payroll;
• an annual incentive award equal to the product of: (A) the Executive Director’s average bonus for
the prior three (3) years; and (B) a fraction based on the number of days in which the Executive
Director was employed during that year;
• payment of the portion of the premiums paid by the Company at the time of such termination
under COBRA for medical, dental, hospitalisation and other employee welfare benefit plans,
programmes and arrangements covered by COBRA, for a period of twelve (12) months for the
Director and eligible dependents; and
• payment of the Standard Benefit.
69
MANAGEMENT AND GOVERNANCE
In the event of death or disability, similar payments will be made as those payable as a termination for
Good Reason save that the payment of base salary shall only continue for 90 days after the death of the
Executive Director and/or until the commencement of long term disability payments in the case of
termination due to disability.
If the Executive Director terminates employment with Allied Minds without Good Reason (and not
because of death or due to disability), the Executive Director shall be entitled solely to payment of the
Standard Benefit.
LTIP participants who cease to be employees, directors or service providers to the Group will normally
forfeit any unvested awards. However, if a participant leaves as a result of death, disability, dismissal
other than for cause or any other reason determined by the Committee, awards will normally vest on the
normal vesting date on a pro-rata basis taking into account performance and the period of time during
the applicable performance measurement period in which the participant continuously provided services.
The Committee may in its discretion determine that there are exceptional circumstances justifying vesting
to a greater or lesser extent. The Committee also has discretion to determine that awards will vest at the
time of cessation of employment, taking into account performance up to that time, and pro-rated to
reflect the time worked in the performance period (with discretion to determine vesting to a greater or
lesser extent).
Impact of change of control on awards under LTIP
If there is a change of control of the Company, the number of ordinary shares over which awards will vest
will be calculated on the basis of the extent to which the performance criteria applicable to those awards
have been satisfied as at the date of the change of control. The resulting number of shares will then be
reduced on a pro rata basis to reflect the reduced period between the date the award was made and the
date of the change of control, unless the Committee decides otherwise. In exceptional circumstances, the
Committee may recommend full vesting with respect to a change of control. This discretion to accelerate
vesting upon a change of control is included in the LTIP to meet the expectations of a US-based workforce.
70
MANAGEMENT AND GOVERNANCE
Annual Report on Remuneration (pages 71 to 83)
The Annual Report on Remuneration will be subject to an advisory vote at the AGM.
Single Total Figure of Remuneration for Each Director (audited information)
The following table sets out the single total figure for remuneration for Directors for the financial years ended 31 December 2020 and 2019.
Base salary/
fees(1)
Benefits(2)
Incentive
Bonus(3)
Phantom Plan(4)
EBP(5)
Pension(6)
Total Fixed
Total Variable
Total
In $’000
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Executive Directors
Joe Pignato(7)
Michael Turner(8)
Non-Executive Directors
Harry Rein(9)
Mark Lerdal(10)
Bruce Failing(11)
Jeff Rohr(12)
Notes:
500
96
150
95
69
31
281
281
81
4
―
131
43
8
―
―
―
―
23
23
―
―
―
―
375
―
369
369
―
―
―
―
―
―
―
―
―
―
―
―
―
―
870
870
105
―
―
―
―
―
14
―
―
―
―
―
18
―
―
20
―
―
―
―
―
―
―
―
―
―
―
―
543
104
150
95
69
31
304
304
81
4
―
131
480
1,239
1,023
1,543
―
1,239
104
1,543
14
―
―
―
18
164
―
―
20
95
69
31
99
4
―
151
(1) Actual Executive Directors’ and Non-Executive Directors’ fees, pro-rated for the portion of the year they served on the Board.
(2)
Includes, where applicable, car allowance and/or Company contribution to medical, dental and other insurance premiums, pro-rated for the
portion of the year they served on the Board.
(3)
Incentive bonus includes annual cash incentive bonus awards, pro-rated for the portion of the year serving as Executive Directors.
(4)
The Phantom Plan is a performance-based, cash settled bonus plan which is triggered by a successful portfolio company liquidity event.
Amounts for 2019 include the allocation made to Executive Directors during the period in connection with the distribution triggered by the
sale of the Company’s shares of HawkEye 360, Inc. No payments were triggered in 2020.
(5)
Equities based payments for Non-Executive Directors represent the portion of the fees paid in stock and granted to the Non-Executive
Directors in 2015, 2016, 2017, 2018, and 2019 which vested in 2019 and 2020 (based on the value on the date the awards vested (on a time-
71
MANAGEMENT AND GOVERNANCE
only basis) and the shares were issued). The amount of these awards which is attributable to share price appreciation is nil (2020) (2019:
nil).
(6) No payments for pension entitlements were made to Directors during the last financial year. The Company offers a retirement plan in
accordance with subsection 401(k) of the Internal Revenue Code in which Executive Directors may make voluntary pre-tax contributions
toward their own retirement. The Company does not make any payments or contributions to such Plan.
(7) Mr. Pignato was appointed as Co-Chief Executive Officer and Executive Director on 10 June 2019; and appointed sole Chief Executive Officer
and Executive Director on 10 March 2020. Post-period end, Mr. Pignato resigned as Chief Executive Officer and Executive Director on 14
January 2021. Details of the effect of his resignation on outstanding payments and benefits are given on pages 80 to 81.
(8) Mr. Turner was appointed as Co-Chief Executive Officer and Executive Director on 10 June 2019. Mr. Turner resigned as Co-Chief Executive
Officer and Executive Director on 10 March 2020. Details of payments in respect of the year are in line with those included within the 2019
Annual Report and Accounts.
(9) Mr. Rein was appointed as Chairman on 10 March 2020.
(10) Mr. Lerdal was appointed as a Non-Executive Director on 11 December 2019.
(11) Mr. Failing was appointed as a Non-Executive Director on 10 March 2020.
(12) Mr. Rohr resigned as Chairman on 10 March 2020.
72
MANAGEMENT AND GOVERNANCE
Individual Elements of Remuneration
Base Salary and Incentive Bonus Awards during 2020
In conjunction with the Company’s year-end compensation review process, including an analysis of the
traditional elements of executive pay (base salary, annual incentive bonus, long-term equity incentives
and total direct compensation), and based upon a review of Company performance in 2019, the
Remuneration Committee recommended to the Board the following for 2020: for Joe Pignato, that base
salary remain constant at $500,000, and that maximum incentive bonus award remain constant at 150%
base salary (100% at target).
The Remuneration Committee determined that the base salary and incentive bonus award continued to
reflect its policy to emphasise the variable component of compensation, by allocating a significant
percentage of cash compensation to the incentive bonus award and not base salary.
As described in the Remuneration Policy, the Remuneration Committee and senior management review
the Group’s management by objectives (MBOs) annually prior to the start of each financial year to ensure
the detailed performance measures and weightings are appropriate and continue to align with business
strategy. Annual MBOs, including financial, operational, technical and other performance targets and
their weightings for the upcoming year are set at or around the start of each financial year. An Executive
Director’s incentive bonus award is considered by the Remuneration Committee upon completion of each
financial year. The decision to provide any incentive bonus award and the amount and terms of any such
award, are determined solely by the level of achievement against the MBOs set by the Remuneration
Committee at the start of the financial year.
In keeping with the emphasis on the variable component of compensation and strong management
incentives, the Remuneration Committee set the threshold payout for incentive bonus awards at nil.
The 2020 MBOs set by the Remuneration Committee, along with the level of achievement against such
MBOs, is set forth below:
MBO
Increase Aggregate Portfolio Value (NAV)
Increase ALM Share Price
Manage HQ Cash and Expenses(1)
Secure Funding and Strategic Partners at Portfolio
Companies(2)
Maintain Strong Operational Support(3)
Total Percentage of Target
Threshold
Weightings
0.0%
0.0%
0.0%
0.0%
Target
Weightings
12.5%
12.5%
25%
25%
Maximum
Weightings
18.75%
18.75%
37.5%
37.5%
Achieved
Weightings
0%
0%
25%
25%
0.0%
0.0%
25%
100.0%
37.5%
150.0%
25%
75.0%
Notes:
(1) The Company executed on its revised strategy to focus exclusively on existing portfolio companies,
enforcing careful cash management and capital allocation plans, and significant cost reductions to
annual central costs at HQ. In line with its stated objective of significantly reducing recurring central
annual costs, HQ operating expenses in 2020 were $7.1 million, reduced from $11.4 million in 2019.
73
MANAGEMENT AND GOVERNANCE
(2) Successful funding rounds were raised at Federated Wireless, Inc., raising $13.7 million, and Spin
Memory, Inc., raising $8.25 million. Orbital Sidekick, Inc. was awarded up to $16.0 million U.S. Air
Force STRATFI contract and entered into definitive agreements to secure $16.0 million in additional
private funding (closing subject to conditions precedent, primarily approval by the Committee on
Foreign Investments in the United States). BridgeComm, Inc. secured additional $3.5 million of
convertible debt financing, in part from the successful achievement of development milestones. In
addition, strategic relationships were secured and/or expanded upon with key third parties by all
portfolio companies.
(3) The Company continues to support its consolidated companies with comprehensive operational
support, including accounting, cash management and financial modeling, payroll, IT, legal, and
human resources.
Based on the above, the Remuneration Committee determined that the MBO percentage achievement
for 2020 was 75.0% of target percentage, or 50.0% of the maximum opportunity. The Remuneration
Committee reviewed this outcome in light of individual and Company performance and considered them
appropriate, and therefore, did not exercise any discretion.
As amended with effect for 2020, the maximum bonus opportunity for the Executive Director (Mr.
Pignato) in 2020 was set at 100% of base salary, with maximum award set at 150% of base salary. Based
upon the MBO achievement, the incentive bonus award to the Chief Executive Officers was set at 75.0%
of base salary, resulting in a 2020 incentive bonus of $375,000 with respect to such period.
Share awards made during 2020 (audited information)
In June 2019, the Board determined to retire the LTIP for Executive Directors, senior management and
other employees, and to make no future awards to these persons. No LTIP awards were made to
Executive Directors in 2020.
As set out on page 75, a proportion of the Non-Executive Director fees for 2020 was paid in stock, subject
to time-based vesting based upon time of service in equal instalments over a three-year period. No
performance conditions apply. The level of these awards was determined by the Committee after giving
due consideration to the US-based nature of the Group’s business, and the need to attract and retain
independent directors with significant US business and leadership experience. These awards were
delivered under the LTIP, as set out in the table below:
Basis of
award
Number
of shares
Face value
of award
($’000)
% of value
to vest at
threshold
% of
value to
vest at
target
Vesting conditions
See below
See below
See below
165,856
110,571
110,571
$75
$50
$50
n/a
n/a
n/a
n/a
n/a
n/a
Based on service,
annually over three
years to June 2023
Non-Executive Directors
Harry Rein
Bruce Failing
Mark Lerdal
Type
RSU
RSU
RSU
Notes:
(1) At 5 June 2020, the annual LTIP awards above for 165,856, 110,571, and 110,571 shares were granted
to the Non-Executive Directors (Messrs. Rein, Failing, and Lerdal, respectively). The total value of the
74
MANAGEMENT AND GOVERNANCE
award was calculated using the closing share price of 36.0p on such date.
(2) Between the year end and 29 March 2021 (the latest practicable date prior to publication), no other
awards were delivered under the LTIP.
Long Term Incentive Plan Vesting during 2020 (audited information)
Executive Director Awards
No performance LTIP awards vested to the Executive Directors in 2019 or 2020.
In connection with the Board’s review of the remuneration programme in late 2019, Mr. Pignato
voluntarily agreed to forfeit all of his 745,045 performance-based LTIP awards made in 2017 and 2018.
Mr. Pignato does not have any additional performance-based LTIP awards outstanding.
Non-Executive Director Awards
Equity-based awards were granted to the Non-Executive Directors in 2015, 2016, 2017, 2018, and 2019,
subject to time-based vesting in three equal instalments over a three year period. The LTIP was used as
the mechanism to grant these awards, however they are not subject to performance conditions. These
awards partially vested in 2019 and 2020. As a result of such vesting in 2019, ordinary shares were allotted
and issued to Mr. Rohr (22,913) and Mr. Rein (24,170). As a result of such vesting in 2020, ordinary shares
were allotted and issued to Mr. Rein (36,154).
Payments to Past Directors and Loss of Office Payments (audited information)
With the exception of payments to past directors and loss of office payments previously disclosed in our
2019 Annual Report and Accounts, no payments to past directors and no loss of office payments were
made during the last financial year.
Total Pension Entitlements (audited information)
No payments for pension entitlements were made to Directors during 2020. The Company offers a
retirement plan in accordance with subsection 401(k) of the Internal Revenue Code (401(k) Plan) in which
Executive Directors may make voluntary pre-tax contributions toward their own retirement. The
Company does not make any payments or contributions to such 401(k) Plan.
Statement of Directors’ Shareholding and Share Interests (audited information)
Share ownership plays a key role in the alignment of our executives with the interests of shareholders,
therefore the Committee operates a share ownership policy for Executive Directors. The policy currently
requires Executive Directors to acquire and maintain a minimum ownership level of ordinary shares in the
capital of the Company equal to 400% of base salary. At 31 December 2020, the Executive Director was
making progress against this requirement. Given the changes to the management structure of the
Company, it was considered appropriate that no post-cessation shareholding requirements policy should
be developed.
75
MANAGEMENT AND GOVERNANCE
The table below sets out the number of shares held by Directors as at 31 December 2020.
Shares held
outright
Shares conditional
on performance
Shares conditional
on service
Options to
purchase shares
(US Stock Plan)
962,033
731,674
122,824
-
80,000
161,798
-
-
-
-
-
-
-
-
179,588
213,992
110,571
110,571
-
-
-
-
-
-
-
Total
962,033
911,262
336,816
110,571
190,571
161,798
Executive Director
Joe Pignato(1)
Michael Turner(2)
Non―Executive Directors
Harry Rein
Mark Lerdal
Bruce Failing
Jeffrey Rohr
Notes:
(1) In late 2019, Mr. Pignato voluntarily agreed to forfeit all of his 745,045 performance-based LTIP
awards made in 2017 and 2018. In addition, as previously noted, the Committee has determined
that no further awards will be made under the LTIP to Executive Directors, senior management or
other employees.
(2) The shares held by Mr. Turner are as of 10 March 2020, the date of his resignation.
Performance Graph
The graph below illustrates the Company’s Total Shareholder Return (TSR) performance relative to the
constituents of the FTSE 250 index excluding investment companies and the FTSE All Share index, from
the Admission date of 25 June 2014 to 31 December 2020. These indices were chosen since the Company
was / is a constituent for a significant proportion of the relevant period. The graph shows performance
of a hypothetical £100 invested and its performance over that period.
76
MANAGEMENT AND GOVERNANCE
Historical CEO remuneration outcomes
The table below summarises the Chief Executive Officer single total figure for total remuneration, annual
incentive bonus award, LTIP vesting as a percentage of maximum opportunity, payments made under the
Phantom Plan, if any, and US Stock Plan share award vesting as a percentage of maximum opportunity,
for the last seven financial years. As the company listed in 2014, the comparative begins with the 2013
period.
CEO single total figure for remuneration ($’000) (1)
Joe Pignato(2)
Michael Turner(2)
Annual incentive bonus award pay-out (% of
maximum)(3)
LTIP award vesting (% of maximum)(4)
US Stock Plan award vesting (% of maximum)(5)
Notes:
2018
$1,192
2017
$1,328
2016
$9,178
2015
$1,067
2014
$15,942
2013
$1,236
2020
2019
$1,543
$1,023
$104
$1,543
50.0% 58.40%
42.67%
87.33% 74.13%
0.00%
n/a
0.00%
n/a
33.00%
n/a
94.33%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
100%
n/a
100%
(1) With respect to 2019, the figures represent the remuneration to each of Joseph Pignato and Michael
Turner after their appointments as Co-CEOs on 10 June 2019. With respect to 2020, the figures
represent the remuneration for Joseph Pignato for the full year and Michael Turner for the period
through to stepping down from the Board.
(2) The 2019 figures for Mr. Pignato and Mr. Turner include the payments made to them under the
Phantom Plan resulting from a successful portfolio company liquidity event in 2019 (as further
described on page 86 of the 2019 Annual Report and Accounts). As illustrated on in the 2019 Annual
Report and Accounts, the single total figure of remuneration excluding the Phantom Plan payment for
each such individual was $673,000.
(3) With respect to 2015, 2014 and 2013, the percentage of maximum is not applicable because the
Company did not have any cap on incentive bonus award payments in those financial years. As a
percentage of base salary, the award was 65.7% in 2013, 125.0% in 2014 and 105.0% in 2015.
(4) No performance-based equity awards vested to the CEO under the LTIP during 2020, 2019, 2016,
2015, 2014 or 2013.
(5) All equity awards, including stock options and restricted stock, under the US Stock Plan became vested
and fully exercisable, or vested and fully transferable, in connection with the IPO.
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MANAGEMENT AND GOVERNANCE
Change in remuneration of Chief Executive Officer compared to US Group employees
The table below sets out the increase in total remuneration of the Chief Executive Officer (Mr. Pignato),
Non-Executive Directors and that of our US Group employees (excluding Directors) from 2019 to 2020.
Our US Group employees were chosen since they are exposed to the same economic factors as the Chief
Executive Officer, who is also US-based.
Executive Directors
Joe Pignato
Michael Turner(1)
Non-Executive Directors
Harry Rein(2)
Mark Lerdal(3)
Bruce Failing(4)
Jeff Rohr(5)
Average of all US Group employees
Salary/fees
2019 to 2020
Taxable
benefits
Incentive
Bonus
0.00%
(80.77)%
17.58%
(65.22)%
1.63%
(100.00)%
84.75%
2,107.54%
―
(76.75)%
(3.59)%
―
―
―
―
34.15%
―
―
―
―
11.25%
*Note, the percentages in the chart above are calculated based on actual fees paid to each individual. There have been several
changes to the Board of Directors and management team as set forth below. The base salary for the Executive Director and the
NED fees for 2019 and 2020 remain constant, as further detailed on page 78 below.
(1) Mr. Turner resigned as an Executive Director effective as of 10 March 2020.
(2) Mr. Rein was appointed Chairman of the Board effective as of 10 March 2020.
(3) Mr. Lerdal was appointed as a Non-Executive Director effective as of 11 December 2019.
(4) No comparative data available for Mr. Failing as he was first appointed to the Board during the
year on 10 March 2020.
(5) Mr. Rohr resigned from the Board effective as of 10 March 2020.
Relative importance of spend on pay
The chart below shows the total employee costs, and change in share price from 2019 to 2020.
The information shown in this chart is based on the following:
• Total employee pay: Total US Group employee staff costs from note 5 to the consolidated financial
statements, including salaries and wages, payroll taxes, healthcare benefit, and share-based
payments.
• Returns to shareholders: Since the Group does not currently pay an annual dividend, returns to
shareholders are represented by the change in the Group’s share price over the period from 31
December 2019 to 31 December 2020.
• On 16 January 2020, the Board declared a special dividend of 12.62 pence per ordinary share
(Special Dividend) totalling £30.49 million. The ordinary shares went ex-dividend on 23 January
2020, and the Special Dividend was paid in cash on 14 February 2020 to holders of ordinary shares
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MANAGEMENT AND GOVERNANCE
recorded on the register as at the close of business on 24 January 2020.
51.5
39.7
27.4
32.5
8.5
Total employee costs ($)
Share Price (p)
2020 Special dividend
(-69.0%)
(-36.9%)
2020
2019
Statement of implementation of remuneration policy in the following financial year (2021)
The Committee reviewed the remuneration approach in the year, including the implementation of the
changes to the operation of the remuneration programme made in 2019 and their continued
appropriateness, and input was received from the Executive Director while ensuring that conflicts of
interest were suitably mitigated. The approach to operation for 2021 has been set out below.
Executive Director
Given the announced departure of the Executive Director, no changes were made to the individual’s
remuneration in 2021. Details of the resignation arrangements for the Executive Director are set out on
pages 80 to 81.
Chairman and Non-Executive Directors
The 2021 fee arrangements of the Chairman and Non-Executive Directors remain unchanged from 2020:
Cash Component
Non-Executive Director Annual Fee
Audit Committee Chair Annual Fee
Remuneration Committee Chair Annual Fee
Nomination Committee Chair Annual Fee
Chairman of the Board Annual Fee
Equity Component
Non-Executive Director LTIP Award Value
Chairman of the Board LTIP Award Value
2020
$75,000
$25,000
$10,000
$10,000
$75,000
$50,000
$75,000
The additional fee for serving as Chairman shall only be payable where the Chairman is a Non-Executive
Director. Given the US-based nature of the Group’s business, and the need to attract and retain
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MANAGEMENT AND GOVERNANCE
independent directors with significant US business and leadership experience, the fees above include an
equity component, which is subject to time-based vesting over three years.
Service Contracts and Letters of Appointment
Mr. Pignato entered into an amended and restated service contract on 10 June 2019 in connection with
his appointment as Co-Chief Executive Officer and Executive Director. Mr. Pignato was appointed sole
Chief Executive Officer and Executive Director upon Mr. Turner’s resignation on 10 March 2020. Post-
period end, Mr. Pignato resigned as Chief Executive Officer and Executive Director effective on 14 January
2021. Full details on his remuneration arrangements upon stepping down are set forth below. Mr.
Pignato will continue to serve as Chief Financial Officer until 14 April 2021 or such other date as mutually
agreed by the Company and Mr. Pignato.
The Executive Director’s contracts do not provide for extended notice periods or compensation in the
event of a change of control. Details on the treatment of remuneration on loss of office or on a change
of control are provided in the Remuneration Policy.
The Non-Executive Directors have letters of appointment, which are for an initial fixed term of three years.
The letters are reviewed and may be extended, and are terminable on one months’ notice by either party.
The letters of appointment do not provide for any compensation on termination, other than payment of
fees accrued or owing but not yet paid.
The letters of appointment and service contracts are available for inspection at the Company’s registered
office. In accordance with the Code, all Directors submit themselves for election at the first AGM following
their appointment to the Board, and for annual re-election by shareholders at each AGM.
Resignation of Joseph Pignato
As previously noted, with effect from 14 January 2021, Mr. Pignato resigned as Chief Executive Officer
and as an Executive Director of the Company. He shall continue to serve as Chief Financial Officer of the
Company for an interim period until 14 April 2021 or such other date as mutually agreed by the Company
and Mr. Pignato (Resignation Date).
The Remuneration Committee approved the arrangements below which are in line with the terms of the
agreements with Mr. Pignato and the Company’s Remuneration Policy approved by the Company’s
shareholders at the 2019 AGM, and as disclosed in full in the Company’s Section 430(2B) announcement
on 15 January 2021.
Pursuant to the terms of Mr. Pignato’s service contract, he will be entitled to:
• payment of one year’s salary equal to $500,000 based on his rate of annual base salary;
•
an annual incentive award for 2021 which will be equal to the product of: (A) $373,360 (his
average annual bonus for the three full years preceding his resignation) and (B) a fraction, the
numerator of which is the number of days he was employed by the Company during 2021 and the
denominator of which is the number of days in such year; and
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MANAGEMENT AND GOVERNANCE
• participation at the Company’s expense under COBRA for six months for him and each of his
eligible dependents in all medical, dental, hospitalization and other employee welfare benefit
plans, programmes and arrangements covered by COBRA.
Prior to the Resignation Date, Mr. Pignato had outstanding awards in the form of units (“Phantom Units”)
granted under the Allied Minds Phantom Plan (“Phantom Plan”), details of which are set out in the
Company’s Annual Report and Accounts for the year ended 31 December 2019. The Phantom Units are
settled in cash.
As set out in the Annual Report and Accounts for the year ended 31 December 2019, during 2019,
Executive Directors and all current employees voluntarily agreed to introduce an underpin that $109.2
million of gross proceeds (plus any future additional invested capital) must be generated from one or
more liquidity events prior to any future allocations of proceeds in connection with an individual liquidity
event under the Phantom Plan and to a personal cap (set at 25% for Executive Directors) of any allocated
proceeds in connection with an individual liquidity event under the Phantom Plan. As of the date hereof,
Mr. Pignato’s total units would entitle him to his capped amount of 25% of any allocated bonus proceeds.
In accordance with the terms of his Phantom Units, for the period ending on the date falling 24 months
after his Resignation Date, Mr. Pignato will remain entitled to a proportion of the payment he would have
received on a Liquidity Event had he remained an employee. That proportion is 90% if the Liquidity Event
occurs within 6 months after his Resignation Date, 75% if 7-12 months after his Resignation Date; 50% if
13-18 months after his Resignation Date; 25% if 19-24 months after his Resignation Date, and 0% if later
than 24 months after his Resignation Date.
No further payments will be made to Mr. Pignato in connection with his resignation.
Limits on the number of shares used to satisfy share awards (dilution limits)
All of the Group’s incentive schemes that contain an element that may be satisfied in Allied Minds plc
shares incorporate provisions that in any ten-year period (ending on the relevant date of grant), the
maximum number of the shares that may be issued or issuable under all such schemes shall not exceed
10% of the issued ordinary share capital of the Company from time to time (excluding shares issued
pursuant to awards granted prior to IPO under the US Stock Plan).
The Committee regularly monitors the position and prior to the making of any share-based award,
considers the effect of potential vesting of outstanding awards to ensure that the Company remains within
these limits. Any awards which are required to be satisfied by market purchased shares are excluded from
such calculations. No treasury shares were held or utilised in the year ended 31 December 2020.
Remuneration Committee: details and governance
The full terms of reference of the Committee, which are reviewed annually, are available on the Group’s
website at www.alliedminds.com. In summary, the Remuneration Committee has specific responsibility
for advising the Board on the remuneration and other benefits of the Executive Director and senior
management, an overall policy in respect of remuneration of other employees of the Group and
establishing the Group’s policy with respect to employee incentivisation schemes.
The Remuneration Committee is currently comprised of the following independent Non-Executive
Directors, whose backgrounds and experience are summarised on pages 32 to 33:
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MANAGEMENT AND GOVERNANCE
• Bruce Failing (Chair)
• Harry Rein
• Mark Lerdal
Messrs. Rein and Lerdal served during the entire financial year. Mr. Rohr resigned from the Board and
Mr. Failing was appointed as a Director (replacing Mr. Rohr) and replaced Mr. Rein as the Chair of the
Committee, in each case, effective as of 10 March 2020.
Committee meetings are administered and minuted by the Company Secretary. In addition, the
Committee received assistance from the Chief Executive Officer, who attend certain meetings by
invitation, except when matters relating to their own remuneration were being discussed.
Key activities carried out by the Committee were during 2020 are set out in the Committee Chairman’s
statement on pages 63 to 64.
External advisers
The Remuneration Committee is authorised, if it wishes, to seek independent specialist services to provide
information and advice on remuneration at the Company’s expense, including attendance at Committee
meetings.
During the year, the Remuneration Committee continued its review of executive remuneration and took
into consideration professional advice from Deloitte LLP and Ropes and Gray LLP. Fees paid to Deloitte
LLP in connection with advice to the Remuneration Committee in 2020 were $30,242 (2019: $61,500) and
fees paid to Ropes and Gray LLP were $29,725 (2019: $52,398). Deloitte provided no other services or
advice to the Group during the year. The Remuneration Committee is satisfied that the advice given is
objective and independent. Deloitte LLP is a founding member of the Remuneration Consultants Group
and adhere to its Code of Conduct in relation to executive remuneration consulting in the UK.
Statement of voting at general meeting
The table below sets out the proxy results of the vote on the Group’s Remuneration Report at the Group’s
2020 AGM and the Remuneration Policy at the Group’s 2019 AGM:
Remuneration Report
Remuneration Policy
Votes for
Votes against
Number
104,798,226
129,448,525
% of cast
votes
62.75%
85.13%
Number
62,200,421
22,612,862
% of cast
votes
37.25%
14.87%
Votes
withheld
Votes cast
166,998,647
4,220
152,061,387 19,409,374
As set out in the Statement of the Committee Chairman, the Committee was disappointed that there was
a significant minority of votes against the Remuneration Report at the 2020 AGM.
including the changes
Overall, the Committee considered that the remuneration programme,
implemented in 2019 that came into effect for 2020, continued to be broadly appropriate and aligned
with the Company’s revised strategy while balancing typical UK-listed market practice with US practice in
our market for talent. In line with our commitment to maintaining an open and transparent dialogue with
shareholders, the Company consulted with its major shareholders in the second half of 2020 to gain their
input.
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MANAGEMENT AND GOVERNANCE
After extensive engagement with its major shareholders, the Board noted that shareholder concerns were
primarily focused on remuneration schemes in place for 2019 and prior which have since been addressed
through the substantial amendments the Company made to its remuneration programme for 2020 and
onwards. The Committee believes that such changes have and continue to appropriately address
shareholder concerns while supporting the Company’s strategy and aligning Executive Directors’ interests
directly with shareholders.
Approval
This Directors’ Remuneration Report, including both the Remuneration Policy and Annual Report on
Remuneration has been approved by the Board of Directors.
Bruce Failing
Chairman of the Remuneration Committee
29 March 2021
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MANAGEMENT AND GOVERNANCE
Audit Committee Report
The Audit Committee plays an integral role in assisting the Board in fulfilling its oversight responsibilities,
and as a whole, has the competence relevant to the sector in which the Company operates. In performing
its duties, the Committee strives to maintain effective working relationships with the Board, the
Company’s management and the external auditors. The Committee reviews the integrity of the financial
statements of the Group, reviews all proposed half-yearly and annual results, and advises the Board
whether it believes the annual report and accounts, taken as a whole, fairly present the Company’s
financial position and provide the necessary information to the shareholders of the Company to assess
the Company’s position and performance, business model, and strategy.
Membership
The Committee comprises three independent Non-Executive Directors. Members of the Committee are
appointed by the Board. The CFO, General Counsel and external auditors also participate in Committee
meetings by invitation. As Chair of the Audit Committee, Mr. Lerdal has relevant, recent financial
experience with over thirty years of senior management and executive experience. Messrs. Rein and
Lerdal served on the Audit Committee during the entire financial year. Effective 10 March 2020, Mr. Rohr
resigned from the Board and Bruce Failing was appointed as a Director and served on the Audit Committee
(replacing Mr. Rohr) for the remainder of the financial calendar year.
The Committee met four times in 2020, and the external auditors participated in three of these meetings
(KPMG LLP for one and BDO LLP for two). Reflecting the meetings for which each member was then
appointed to the Committee, all members were present at all meetings during the year during their term
of service.
Responsibilities
The Committee’s main responsibilities are to monitor the integrity of the financial statements of the
Company, including its annual and half-yearly reports and accounts and any other formal announcement
relating to its financial performance; and reviewing and reporting to the Board on significant financial
reporting issues and judgements made and matters communicated to it by the auditor. The roles and
responsibilities of the Audit Committee additionally include to:
• Review the Company’s internal financial controls and the Company’s internal control and risk
management systems;
• Advise on the need for and monitor and review the effectiveness of the Company’s internal audit
function;
• Make recommendations to the Board, for it to put to the shareholders for their approval in
general meeting, in relation to the appointment of the external auditor and to approve the
remuneration and terms of engagement of the external auditor;
• Review and monitor the external auditor’s independence and objectivity and the effectiveness of
into consideration relevant UK professional and regulatory
the audit process, taking
requirements;
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MANAGEMENT AND GOVERNANCE
• Develop and implement policy on the engagement of the external auditor to supply non-audit
services, taking into account relevant ethical guidance regarding the provision of non-audit
services by the external audit firm; and to report to the Board, identifying any matters in respect
of which it considers that action or improvement is needed, and making recommendations as to
the steps to be taken;
• Conduct a performance evaluation of the Committee annually, including review of Committee
member experience and background, and discussion by the Board of each Committee member as
further described on pages 32 to 33, to ensure that it continues to be effective and that each of
the Directors on the Committee demonstrates commitment to his or her respective role and has
sufficient time to meet his or her commitment to the Company; and
• Report to the Board on how it has discharged its responsibilities.
As a whole, the Committee has the relevant experience and skills necessary to effectively execute its
responsibilities. The Committee carries out these duties for the Company, major subsidiary undertakings
and the Group as a whole, as appropriate. In 2020, the Committee discharged all such duties as further
described below, including, without limitation, completing an annual review of its internal controls and
risk management systems with its external auditors and reviewing the Financial Position, Prospects and
Procedures of the Company on an ongoing basis throughout the year to enable the Board to make proper
judgements.
Activities during the year
The Committee’s activities for the year ended 31 December 2020 included the responsibilities set forth
above, as well as the items set forth below:
Financial reporting
• Reviewed and approved the appropriate audit plan, before the start of the annual audit cycle;
• Reviewed and provided comments and recommendations in respect of the financial statements
in the half-yearly report for the period ended 30 June 2020, and the financial statements in the
Annual Report and Accounts for the year ended 31 December 2020;
• Reviewed the Company’s approach and methodology for determining the fair value of
investments and the preferred share liability. Considered and recommended the involvement of
an external valuation specialist firm to assist management and the Board in deriving the fair value
of the subsidiary undertakings; and
• Considered significant matters, risk areas, and areas of judgement in relation to the Group’s
financial statements taking into account the areas highlighted by the external auditors in their
presentations to the Committee, and challenged where necessary.
The Committee is satisfied with the integrity of the financial statements of the Company in all material
aspects, including the application of significant accounting policies, the methods used to account for
significant transactions, use of judgements and estimates made by management, including those made in
deriving the fair value of the subsidiary undertakings, and the quality and completeness of the disclosures
in the financial statements of the Company.
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MANAGEMENT AND GOVERNANCE
The Committee is satisfied that this Annual Report as a whole is fair, balanced and understandable, and
provides the information necessary for a reasonable shareholder to assess the Company’s position and
performance, business model and strategy.
Internal controls and risk management systems
• Reviewed the principal elements of the Company’s risk management framework as set out on
pages 24 to 31 of this Annual Report. The Committee gives consideration and provides guidance
on enhancing the internal controls and risk management framework, as needed;
• Reviewed the established procedures, which provide a reasonable basis for the Board to make
proper judgements on an ongoing basis as to the Financial Position, Prospects and Procedures
(FPPP) of the Company following the adopted risk approach; and
• Reviewed the whistleblower policy that was established and approved by the Board in 2014,
which has been communicated to employees. The Audit Committee is satisfied that the policy
has been designed to encourage staff to report suspected wrongdoing as soon as possible, provide
staff with guidance on how to raise those concerns, and ensure staff that they should be able to
raise genuine concerns without fear of reprisals, even if they turn out to be mistaken.
Significant areas reported to the Board
Fair value of financial assets and liabilities held under IFRS9
Significant judgements are made in valuing the assets and liabilities and complex models are used to give
a fair value, which present a high risk for the financial statements.
Accounting treatment of investments under IFRS10
It has been determined that the Group no longer has control as defined in IFRS 10 but has maintained
significant influence over some of its former subsidiaries and due to the fact that the Group holds a variety
of instruments in these entities, which have varying risks and rights, there is significant judgement in
relation to the accounting for these instruments. The valuation of these financial assets also includes a
significant level of judgement and external valuation specialists are utilised in this process. The
Committee believes that the Group considered the pertinent terms and accurate accounting of each of
the financial instruments (and sought external expertise as well).
Viability
The Committee reviewed the Company’s viability as further stated in the Overview on pages 38 to 39. As
previously reported, the Company’s strategic objective is to focus exclusively on its existing portfolio
companies and to maximise total returns to all shareholders from monetisation of such portfolio. In line
with this strategy, the Board anticipates delivering such returns within the next three years. After careful
assessment of the Company’s cash position and projections through such period, the Committee
reasonably expect the Group to continue in operation and meet its liabilities as they fall due in order to
execute on this strategy during such period.
Impact of COVID-19 and Going concern
There is judgement relating to whether the Group and Company have sufficient financial resources to
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MANAGEMENT AND GOVERNANCE
continue as a going concern based on the Group and Company’s business model and other applicable
factors that may impact such determination. As previously noted, the ongoing spread of COVID-19 has
the potential to negatively impact the Group’s and the Company’s financial position. However, the Group
continues to closely monitor the pandemic, its impact on its workforce, the global economy and its
suppliers, customers and partners in order to make decisions and take meaningful actions to mitigate
against disruption to operations across the portfolio and the potential negative financial impact. Taking
all factors into consideration, management have assessed that the Group and Company continue to be a
going concern and the Committee is satisfied with the assessment made.
External audit
• Engaged in competitive process for determining the Group’s new independent auditor, including
assessing and performing diligence on various independent audit firms.
• Recommended the appointment of BDO LLP to the Board as the Group’s independent auditor for
the financial year ending 31 December 2020.
• Reviewed and approved the scope of the external audit procedures over the half-yearly report for
the period ended 30 June 2020, and the Annual Report and Accounts for the year ended 31
December 2020;
• Discussed with management and agreed upon the terms of the engagement of the external
auditors and the auditors’ remuneration for audit and non-audit services. In assessing
independence, the Audit Committee received the auditor’s presentation and confirmation that in
its professional judgment, KPMG LLP (through 29 July 2020) and BDO LLP (from its engagement
on 29 July 2020), are independent within the meaning of regulatory and professional
requirements and the objectivity of the partner and audit staff is not impaired. The Committee
was satisfied that throughout the year that the objectivity and independence of KPMG LLP and
BDO LLP, as applicable, was not in any way impaired by the non-audit services they provided to
the Group during the year, by the amounts of non-audit fees, or by any other factors;
• Assessed the independence, objectivity and qualifications of BDO LLP as the external auditor and
evaluated the quality and effectiveness of the audit procedures. In doing so, the Committee
reviewed the audit plan and monitored performance against the plan, reviewed the periodic
reports of BDO LLP to the Committee that highlighted key areas of focus during the audit and the
applied audit approach, and obtained feedback from the finance department in respect to quality
and status of BDO LLP work in the course of the audit. The Committee concluded that the audit
process during the year was effective; and
• Reviewed and discussed the principal areas of financial reporting risk, as highlighted above, and
reported to the Board.
KPMG LLP was the external auditor of the Group from the first audit of the consolidated financial
statements of Allied Minds plc in 2014 through 29 July 2020, after completion of the audit for the financial
year ending 31 December 2019. In 2020, the Committee engaged in a competitive process for determining
the Group’s next independent auditor and performed diligence and assessed various independent audit
firms. After careful consideration and deliberation, the Committee determined that BDO LLP is a
reputable and highly qualified firm that would be best suited to serve as the Group’s new independent
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MANAGEMENT AND GOVERNANCE
auditor. Accordingly, upon recommendation by the Committee, which was free from influence by any
third party, the Board approved the appointment of BDO LLP as the Company’s auditor for the financial
year ending 31 December 2020. No contractual term of the kind under the Audit Regulations was imposed
on the Company. The total fees to BDO LLP for the year ended 31 December 2020 were $0.5 million (see
note 5 of the consolidated financial statements, which includes the breakdown of audit and non-audit
related fees). The Audit Committee has considered the recent audit reforms in terms of tendering and
auditor’s tenure. Given the new appointment of BDO LLP in 2020, the next anticipated requirement to
tender audit will be for the 2030 calendar year. As such, the Company is complying with the Statutory
Audit Services Order.
Internal audit
Given the size and composition of the Group, taking into account relevant significant matters, risk areas,
areas of judgement in relation to the Group’s financial statements, and that all Group financial systems,
transactions, and processes are conducted at the central office, the Board did not consider it necessary to
have an internal audit function during the year. The Board will keep this decision under annual review.
Mark Lerdal
Chairman of the Audit Committee
29 March 2021
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FINANCIAL STATEMENTS
Independent auditor’s report to the members of Allied Minds Plc
Opinion on the financial statements
In our opinion:
•
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2020 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006;
the Group financial statements have been properly prepared in accordance with international
financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union;
the Parent Company financial statements have been properly prepared in accordance with
international accounting standards in conformity with the requirements of the Companies Act
2006 and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006; and, as regards the Group financial statements, Article 4 of the IAS
Regulation.
We have audited the financial statements of Allied Minds Plc (the ‘Parent Company’) and its subsidiaries
(the ‘Group’) for the year ended 31 December 2020 which comprise the consolidated statement of
comprehensive income/ (loss), consolidate statement of financial position, consolidated statement of
changes in equity, consolidated statement of cash flows, company balance sheet, company statement of
changes in equity, company statement of cash flows and notes to the financial statements, including a
summary of significant accounting policies. The financial reporting framework that has been applied in
their preparation is applicable law and international accounting standards in conformity with the
requirements of the Companies Act 2006 and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, and as regards the Parent
Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit
opinion is consistent with the additional report to the audit committee.
Independence
Following the recommendation of the audit committee, we were appointed by the Directors on 4 August
2020 to audit the financial statements for the year ending 31 December 2020 and subsequent financial
periods. The period of total uninterrupted engagement including retenders and reappointments is 1 year,
covering the year ending 31 December 2020. We are independent of the Group and the Parent Company
in accordance with the ethical requirements that are relevant to our audit of the financial statements in
the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have
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FINANCIAL STATEMENTS
fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services
prohibited by that standard were not provided to the Group or the Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate. Our evaluation of the
Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going
concern basis of accounting included:
• a detailed audit of forecasts prepared by management for a period of at least 12 months from the
date of approval of the financial statements;
• a review of stressed forecasts, as prepared by management, which detailed the changes of key
assumptions which would lead to the business no longer being a going concern. As part of this we
reviewed the likelihood of these changes against documentation provided by management and
from external sources;
• we have assessed the accuracy of management’s forecasts by confirming the accuracy of historic
forecasts, corroborating the inputs to supporting documentation and agreeing expected changes
from historic actuals; and
• we carried out discussions with management and board members to challenge the future outlook
and cash commitments of the group and how these had been included within the forecasts
reviewed and further potential impacts on the forecasts.
Further details of the Directors’ assessment of going concern is provided in note 1.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the group and
company’s ability to continue as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code,
we have nothing material to add or draw attention to in relation to the Directors’ statement in the
financial statements about whether the Directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described
in the relevant sections of this report.
Overview
Coverage
100% of Group loss before tax
100% of Group revenue
98.7% of Group total assets
90
FINANCIAL STATEMENTS
Key audit matters
KAM 1
KAM 2
Valuation of
share liabilities
investments and preference
Consolidation accounting and judgement of
the group not meeting the criteria for an
investment entity
Materiality
£1.166m based on 2% of net assets.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including
the Group’s system of internal control, and assessing the risks of material misstatement in the financial
statements. We also addressed the risk of management override of internal controls, including assessing
whether there was evidence of bias by the Directors that may have represented a risk of material
misstatement.
In establishing the overall approach to the group audit, we assessed the audit significance of each
component in the group by reference to both its individual financial significance to the group or other
specific nature or circumstances. We identified four individually significant components, which makes up
100% of Group loss before tax and also covers 98.7% of the total assets of the group. Separate to the four
significant components we carried out audit procedures on the two investments which are equity
accounted for, to group materiality.
The significant components were located in the UK and the USA. The significant component in the UK was
audited by the group audit team, with those located in the USA, audited by our network member firm in
the USA, noting that all the group’s finance team and information for both territories is based within the
USA.
For components of the group not considered to be significant components we performed limited audit
procedures over areas considered to be significant risks to the group audit. Furthermore, the Group
auditor has been responsible for directing all the audit work completed, the audit risks identified and the
contents of the annual report and disclosures accompanying the financial statements.
Our involvement with component auditors
For the work performed by component auditors, we determined the level of involvement needed in order
to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our
opinion on the Group financial statements as a whole. Our involvement with component auditors included
the following:
We provided instructions to the component auditor setting out the risks and procedures to be performed
as part of their full scope audit, reporting to us on the significant components and equity investments
accounted for in this territory, and determined appropriately scoped risks, procedures and agreed
responses to those risks with the component audit team.
91
FINANCIAL STATEMENTS
We held planning meetings with the component team to discuss the component risk assessment including
materiality, and overall reporting process that was then communicated formally in group audit
instructions. Our instructions required a number of reporting deliverables including the component
auditor opinion that was received and reviewed. We took an active part in reviewing the work performed;
this was performed remotely but with the component auditor in attendance. This, together with the
additional procedures performed at Group level over the consolidation process gave us the evidence we
needed for our opinion on the financial statements as a whole.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matter
Financial
instruments
measured at fair
value
Note 1 – Financial
instruments and
Fair
value
measurement
policies, Note 11
and 16
The financial statements include
significant
investment assets
and liabilities which are held at
fair value under IFRS9.
Due to the number of significant
judgements and estimates made
by management in valuing the
assets and liabilities, as well
complexity of the models used to
give a fair value, there is a high
risk of material misstatement.
This was
identified as a
significant risk as part of the
audit planning and a key audit
matter to be included in the
audit report.
How the scope of our audit addressed the key audit matter
The work carried out in the risk identified was a follows:
•
•
•
• Use of an auditor’s expert in valuations prepared under IFRS9
to review the models used to value the investments and
preference share liability in order to determine whether they
were aligned with recognised valuation models and that they
were appropriate for valuing the underlying investment or
liability.
A re-performance of the numerical and arithmetic accuracy
of the model compared with the inputs used to ensure the
final output value was accurately calculated.
A review of the inputs into the models and agreement to
supporting evidence to corroborate whether the inputs were
reasonable and appropriate.
Challenged management on all judgemental or estimated
inputs into the models to determine whether they appear
reasonable in respect of corroborating information from
management and third party sources.
Carried out sensitivity analysis in respect of the key and
judgemental inputs into the models to understand potential
impacts on the valuation of the underlying instruments.
Reviewed the disclosure in the annual report to understand
if this was aligned with the underlying calculation from the
models used and that all information of importance to the
in
users of the accounts was adequately disclosed
accordance with the accounting standards. We have also
agreed the disclosure is aligned to the accounting policy as
disclosed in the annual report.
•
•
Key observations:
Based on the work performed we consider that investments and the
preference share liability have been valued appropriately and in
accordance with the Group’s accounting policy for these financial
statement areas.
92
FINANCIAL STATEMENTS
Consolidation
accounting
Note 1 – Basis of
consolidation and
Use
of
Judgements and
Estimates
The group consolidates a number of
subsidiary investments whilst other
investments are held under IFRS9 at
fair value through the profit and loss.
Management make a judgement in
respect of the appropriate accounting
treatment for their investments and
to material
lead
this
misstatement
financial
the
in
statements.
could
The work carried out in the risk identified was a follows:
• We have agreed the share holdings and overall control
held by the group in each of its investments to
supporting documentation to understand which
investments are accounted for under IFRS9 or IFRS10.
• We have challenged and reviewed management’s
judgements in respect of each of the investments and
confirm that it is aligned with the understanding
gained in respect of ownership and control exercised
over the investments.
• We have reviewed management’s judgements with
the accounting standard to consider whether the
group meets the criteria to be considered an
investment entity.
Key observations:
Based on our audit work performed, we concur with the
judgements made by management in categorising the group’s
investments.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the
effect of misstatements. We consider materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality,
we use a lower materiality level, performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also
take account of the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole
and performance materiality as follows:
Materiality
Basis for determining
materiality
Rationale
benchmark applied
the
for
Group financial statements
2020
$’000
1,166
Parent company financial statements
2020
$’000
37
2% of net assets
2% of net assets
The parent company benchmark was set in
line with that of the group for the individual
parent entity.
of
the
The performance of the group
is
measured by management based on the
performance
underlying
investments. Further, as noted above,
one of the significant risk areas is the
valuation
and
preference share liabilities in the group.
These two balances make up the
majority of the statement of financial
investments
of
93
FINANCIAL STATEMENTS
Performance
materiality
Basis for determining
performance
materiality
position, indicating net assets as the
appropriate benchmark.
700k
22k
materiality
Performance
was
determined to be 60% of materiality in
our work. This level was chosen based
on this being the first year BDO had
audited the group and therefore, a
lower level of performance materiality
was used to ensure sufficient audit work
is completed to provide an ongoing
understanding of the group.
Performance materiality was determined to
be 60% of materiality in our work. This level
was chosen based on this being the first
year BDO had audited the company and
therefore, a lower level of performance
materiality was used to ensure sufficient
audit work is completed to provide an
ongoing understanding of the company
Component materiality
We set materiality for each component of the Group based on a percentage of between 20% and 90% of
Group materiality dependent on the size and our assessment of the risk of material misstatement of that
component. Component materiality ranged from £233k to £1,166k. In the audit of each component, we
further applied performance materiality levels of 60% of the component materiality to our testing to
ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in
excess of £61k. We also agreed to report differences below this threshold that, in our view, warranted
reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term
viability and that part of the Corporate Governance Statement relating to the parent company’s
compliance with the provisions of the UK Corporate Governance Statement specified for our review.
94
FINANCIAL STATEMENTS
Based on the work undertaken as part of our audit, we have concluded that each of the following elements
of the Corporate Governance Statement is materially consistent with the financial statements or our
knowledge obtained during the audit.
Going concern
and
longer-
term viability
Other
provisions
Code
• The Directors' statement with regards the appropriateness of adopting the
going concern basis of accounting and any material uncertainties identified,
set out on page 104; and
• The Directors’ explanation as to its assessment of the entity’s prospects, the
period this assessment covers and why they period is appropriate, set out on
page 38.
• Directors' statement on fair, balanced and understandable set out on page
40;
• Board’s confirmation that it has carried out a robust assessment of the
emerging and principal risks set out on page 24;
• The section of the annual report that describes the review of effectiveness of
risk management and internal control systems set out on page 50; and
• The section describing the work of the audit committee set out on page 84.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we
are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as
described below.
Strategic
report
Directors’
report
and
Directors’
remuneration
Matters
on
which we are
to
required
report
by
exception
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic report and the Directors’ report for the
financial year for which the financial statements are prepared is consistent with
the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance
with applicable legal requirements.
•
In the light of the knowledge and understanding of the Group and Parent Company
and its environment obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the Directors’ report.
In our opinion, the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006.
We have nothing to report in respect of the following matters in relation to which
the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or
returns adequate for our audit have not been received from branches not
visited by us; or
95
FINANCIAL STATEMENTS
•
•
the Parent Company financial statements and the part of the Directors’
remuneration report to be audited are not in agreement with the accounting
records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made;
or
• we have not received all the information and explanations we require for our
audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for
such internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the
Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the
Group and determined that the most significant frameworks which are directly relevant to specific
assertions in the financial statements are those that relate to the reporting framework, the
Companies Act 2006 and UK Corporate Governance Code, the Listing Rules of the UK Listing
Authority and the relevant tax compliance regulations.
• We understood how the Group is complying with those legal and regulatory frameworks by
making enquiries to management, internal legal counsel, those responsible for legal and
compliance procedures and other individuals outside management. We corroborated our
enquiries through our review of board minutes and papers provided to the Audit Committee and
through review of legal correspondence.
96
FINANCIAL STATEMENTS
• We assessed the susceptibility of the Group’s financial statements to material misstatement,
including how fraud might occur by meeting with management from various parts of the business
to understand where it is considered there was a susceptibility of fraud.
• We also considered performance targets and their propensity to influence on efforts made by
management to manage earnings. We considered the programs and controls that the Group and
components have established to address risks identified, or that otherwise prevent, deter and
detect fraud; and how senior management monitors those programs and controls. Where the risk
was considered to be higher, we performed audit procedures to address each identified fraud
risk. These procedures included testing manual journals and were designed to provide reasonable
assurance that the financial statements were free of fraud or error.
• We communicated relevant identified laws and regulations and potential fraud risks to all
engagement team members and remained alert to any indications of fraud or non-compliance
with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial
statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the
events and transactions reflected in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
Parent Company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Iain Henderson (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
Date: 29 March 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
97
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/ (LOSS)
For the year ended 31 December
Note
Revenue
Operating expenses:
Cost of revenue
Selling, general and administrative expenses
Research and development expenses
Operating loss
Other income:
Gain on disposal of assets
Gain on deconsolidation of subsidiary
(Loss)/ gain on investments held at fair value (net)
Gain on dissolution of subsidiaries
Other (expense)/ income
Finance income
Finance cost
Finance (cost)/ income from IFRS9/ fair value accounting
Finance (loss)/ income, net
3
4,5
4,5
4,5
11
11
11,20
4,15
7
7
7
Share of net loss of associates accounted for using the equity method 11
Taxation
(Loss)/ income before taxation
(Loss)/ income for the period
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences
Other comprehensive (loss)/ income, net of taxation
Total comprehensive (loss)/ income for the period
(Loss)/ income attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive (loss)/ income attributable to:
Equity holders of the parent
Non-controlling interests
(Loss)/ income per share
Basic
Diluted
23
15
15
8
8
98
2020
$ '000
2019
$ '000
480
2,692
(210)
(10,497)
(4,712)
(14,939)
—
—
(31,934)
—
(31,934)
291
(314)
(1,763)
(1,786)
(6,845)
(55,504)
—
(55,504)
(116)
(116)
(55,620)
(53,025)
(2,479)
(55,504)
(53,141)
(2,479)
(55,620)
$
(0.22)
(0.22)
(1,433)
(34,316)
(16,146)
(49,203)
165
69,828
41,194
7,128
118,315
1,008
(267)
9,251
9,992
(28,850)
50,254
—
50,254
808
808
51,062
51,335
(1,081)
50,254
52,143
(1,081)
51,062
$
0.21
0.21
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of 31 December
Note
2020
$ '000
2019
$ '000
Non-current assets
Property and equipment
Intangible assets
Investment at fair value
Investment in associate
Right-of-use assets
Other financial assets
Total non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Total current assets
Total assets
Equity
Share capital
Translation reserve
Accumulated profit
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Non-current liabilities
Lease liabilities
Other non-current liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Deferred revenue
Loans
Preferred shares
Lease liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
9
10
11,20
11
19
20
12
13
20
14
14
14
14,15
19
17,18
17
3
18
16
19
1,596
—
41,588
—
651
581
44,416
24,489
5,816
2,279
32,585
77,000
3,767
1,343
55,440
60,550
(2,264)
58,286
806
1,440
2,246
2,101
3,697
3,149
6,497
1,024
16,468
18,714
77,000
1,485
197
61,895
6,845
1,016
1,257
72,695
90,571
5,702
1,581
97,854
170,549
3,759
1,459
147,238
152,456
115
152,571
1,830
1,965
3,795
4,685
3,457
―
5,017
1,024
14,183
17,978
170,549
Allied Minds plc
Registered number: 08998697
The financial statements on pages 98 to 153 were approved by the Board of Directors and authorised
for issue on 29 March 2021 and signed on its behalf by:
Harry Rein
Non-Executive Chairman
99
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020
Note
Share capital
Share
Merger
Translation
Accumulated
Total parent
Non-controlling
Shares
Amount
$' 000
premium
$' 000
reserve
$' 000
reserve
$' 000
Profit/(Deficit)
$' 000
equity
$' 000
interests
$' 000
Total
equity
$' 000
651
—
808
808
—
—
—
—
—
—
1,459
—
(116)
(116)
—
—
—
—
1,343
(325,635)
102,296
18,484
120,780
51,335
—
51,335
—
423,537
—
—
—
(1,999)
147,238
(53,025)
—
(53,025)
—
—
51,335
808
52,143
16
—
—
—
—
(1,999)
152,456
55,440
(116)
(53,141)
8
—
(39,707)
(39,707)
934
55,440
934
60,550
(1,081)
—
(1,081)
—
—
1,550
(7,128)
(12,050)
534
115
(2,479)
—
(2,479)
—
(18)
—
118
(2,264)
50,254
808
51,062
16
—
1,550
(7,128)
(12,050)
(1,465)
152,571
(55,504)
(116)
(55,620)
8
(18)
(39,707)
1,052
58,286
Balance at 31 December 2018
Total comprehensive income for the year
Income from continuing operations
Foreign currency translation
Total comprehensive income for the year
Issuance of ordinary shares
Gain/(loss) arising from change in non – controlling interest
Capital reduction
Deconsolidation of subsidiaries
Dissolution of subsidiaries
US subsidiary distribution to shareholders
Equity-settled share based payments
Balance at 31 December 2019
Total comprehensive loss for the year
Loss from continuing operations
Foreign currency translation
Total comprehensive loss for the year
Issuance of ordinary shares
Loss arising from change in non-controlling interest
Dividend payment
Equity-settled share based payments
Balance at 31 December 2020
240,314,745
3,743
160,170
263,367
—
—
1,248,378
—
—
—
—
—
—
—
16
—
—
—
—
—
241,563,123
3,759
—
—
624,862
—
—
—
—
—
8
—
—
—
242,187,985
3,767
14
15
15
15
6
6
14
15
14
6
—
—
—
—
—
—
(160,170)
(263,367)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
100
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December
Cash flows from operating activities:
Income/(loss) for the year
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation
Amortisation
Impairment losses on property and equipment
Impairment losses on intangible assets
Share-based compensation expense
Gain on disposal of assets
Loss/ (gain) on investments held at fair value
Gain on deconsolidation of subsidiary
Gain on dissolution of subsidiaries
Share of net loss of associate
Changes in working capital:
Decrease in trade and other receivables
(Increase)/decrease in other assets
Increase in trade and other payables
Decrease in other non-current liabilities
Increase in deferred revenue
(Decrease)/increase in other liabilities
Unrealised loss/(gain) on foreign currency transactions
Other finance expense/(income)
Net cash used in operating activities
Cash flows from investing activities:
Purchases of property and equipment, net of disposals
Purchases of intangible assets, net of disposals
Purchase of investments at fair value
Proceeds on disposal of assets
Receipt of payment for finance sub-lease
Proceeds on disposal of other investments
Cash derecognised upon loss of control over subsidiary
Net cash (used in)/ provided by investing activities
Cash flows from financing activities:
Proceeds from issuance of convertible notes
Receipt of PPP loan
Payment of lease liability
Dividend payment
US Subsidiary distributions to shareholders
Proceeds from issuance of share capital
Proceeds from issuance of preferred shares in subsidiaries
Net cash (used in)/ provided by financing activities
Net decrease in cash and cash equivalents, and restricted cash
Cash and cash equivalents, beginning of the period
Cash and cash equivalents, end of the period
101
Note
2020
$ '000
2019
$ '000
(55,504)
50,254
9,19
10
9
10
5,6
4
11,20
11
4
11
13
17
17
3
7
9
10
11
11
19
11
11
18
18
19
14
6,14
16
819
197
—
—
1,052
—
31,934
—
—
6,845
(114)
(874)
(876)
(1,643)
240
(780)
(116)
1,763
(17,057)
(564)
—
(10,855)
—
78
—
—
(11,341)
2,981
184
(1,150)
(39,707)
—
8
—
(37,684)
(66,082)
90,571
24,489
2,273
551
421
250
(1,465)
(165)
(41,194)
(69,828)
(7,128)
28,850
(429)
(2,412)
(1,042)
(2,929)
1,136
6,182
808
(8,984)
(44,851)
(3,604)
(71)
(7,500)
65
61
65,605
(33,051)
21,505
1,965
—
(1,540)
—
(12,050)
16
25,292
13,683
(9,663)
100,234
90,571
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2020
(1) Accounting Policies
Basis of Preparation
Allied Minds plc (“Allied Minds” or the “Company”) is a company incorporated and domiciled in the UK.
The Annual Report and Accounts of Allied Minds and its subsidiaries (together referred to as the “Group”)
are presented for the year ended 31 December 2020. The Group financial statements have been prepared
and approved by the directors in accordance with international accounting standard in conformity with
the requirements of the Companies Act of 2006 and in accordance with International Financial Reporting
Standards, International Accounting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union for the year ended 31 December 2020. The accounting policies set out
below have, unless otherwise stated, been applied consistently to all periods presented in these
consolidated financial statements.
Basis of Measurement
The consolidated financial statements have been prepared on the historical cost basis except that the
following assets and liabilities are stated at their fair value: investments held at fair value and financial
instruments classified as fair value through the profit or loss.
Use of Judgments and Estimates
In preparing these consolidated financial statements, management has made judgments, estimates and
assumptions that affect the application of the Group’s accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an on-going basis. Revisions to estimates are recognised
prospectively. The effects on the amounts recognised in the consolidated financial statements, or on other
alternative performance measures, is included in the following notes:
Significant estimates made include:
• Note 11 and 17 – Valuation of financial instruments measured at fair value through profit/loss:
There is uncertainty in estimating the fair value of subsidiary note payables, subsidiary preferred
shares, and convertible note assets and investments carried at fair value through profit and loss
(FVTPL) according to IFRS 9 at initial recognition and upon subsequent measurement. This
includes determining the appropriate valuation methodology and making certain estimates
including future earnings potential of the subsidiary businesses, appropriate discount rate and
earnings multiple to be applied, marketability, the probability weighting of the scenarios and
other industry and company specific risk factors.
Significant judgements made include:
• Note 11 – there is judgement in considering when the power to control the subsidiary exists or
retaining significant influence as it is dependent on certain factors including the voting power the
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FINANCIAL STATEMENTS
entity exercises over the company, the proportion of seats the company controls on the board
and the investees dependence on the investor for funding, knowledge and its operations. . Further
to the above the group has considered its position under IFRS10 in respect of whether it is an
investment entity for the purposes of this standard. Management have reviewed the operations
of the group in line with the standard, and whilst there are characteristics which indicate the
group could be considered an investment company, the underlying measurement of success for
the consolidated portfolio investments is progress in relation to key strategic milestones in
bringing their products to market and not the fair value of the business. Based on this
management have judged the business to not be an investment entity and consolidate its
subsidiaries under IFRS10.
• Note 11 – as the entities in the group progress they require further external funding which in
some scenarios reduces the Group’s shareholding to an extent that it loses control under IFRS 10
which results in them no longer being able to consolidate the entity. There is a significant
judgement in relation to whether the shares are accounted for as an investment in associate per
IAS 28 or as a financial asset per IFRS 9 and therefore held at fair value. This judgement includes,
among others, an assessment of whether the Company has representation on the board of
directors of the investee, whether the Company participates in the policy making processes of the
investee, whether there is any interchange of managerial personnel, whether there is any
essential technical information provided to the investee and if there are any transactions between
the Company and the investee.
• Note 17 and 20 – financial instrument liability classification: when determining the classification
of financial instruments in terms of liability or equity. These judgements include an assessment
whether the financial instrument include any embedded derivative features, whether they
include a contractual obligations upon the Group to deliver cash or other financial assets or to
exchange financial assets or financial liabilities with another party, and whether that obligation
will be settled by the Company’s exchanging a fixed amount of cash or other financial assets for a
fixed number of its own equity instruments. Further information about these critical judgments is
included below under Financial Instruments.
• Note 11 and 17 – financial instrument valuations and investment at fair value valuations: when
determining the appropriate valuation methodology.
Other estimates and judgments:
• Note 3 – revenue recognition: in determining the correct amount of revenue to be recognised,
the Directors make estimates of the fair values of each component of a contract to be able to
allocate the overall consideration to each component based on the relative fair value method or
make estimates of future costs when applying the inputs method.
• Note 3 – timing of revenue recognition: making certain judgements when determining the
appropriate accounting treatment of key customer contract terms in accordance with the
applicable accounting standards and in determining whether revenue should be recognised at a
point in time or over a period of time.
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FINANCIAL STATEMENTS
• Note 19 – discount rate used in lease treatment: in determining the appropriate discount rate to
calculate the present value of lease payments. These judgements include an assessment whether
the Group will use the rate implicit in the lease, or if that rate was not readily determinable, to
use the Group’s incremental borrowing rate. This is because both rates, as they have been defined
in IFRS 16, take into account the credit standing of the lessee, the length of the lease, the nature
and quality of the collateral provided and the economic environment in which the transaction
occurs.
Changes in Accounting Policies
There are no new standards impacting the Group that have been adopted in the annual financial
statements for the year ended 31 December 2020, which have given rise to material changes in the
Group's accounting policies.
Going Concern
The Directors have taken proactive cost management measures that include reduction in expenses of the
management function of the head office at the parent level. They have also decided to focus exclusively
on supporting the seven existing portfolio companies and maximising monetisation opportunities for
portfolio company interests, and not to deploy any capital into new portfolio companies. In the event of
successful monetisation events from the sale of portfolio companies or portfolio company interests, the
Directors anticipate distributing the net proceeds to shareholders, after due consideration of potential
follow-on investment opportunities within the existing portfolio and working capital requirements. The
Directors expect this strategy to take at least three years to be fully implemented, and as a matter of good
governance, will continue to keep this strategy under review at appropriate intervals. They have prepared
trading and cash flow forecasts for the parent covering the period to 31 December 2023 after taking into
account the $39.7 million dividend paid to shareholders in February 2020 after the successful disposal of
its ownership in Hawkeye 360. Reflecting this revised strategy, although the Group is currently loss making
and is likely to continue to be so, at least in the short term, after making enquiries and considering the
impact of risks and opportunities on expected cash flows, and given the fact that the Group has $24.4
million of available funds in the form of cash and cash equivalents as at 31 December 2020, the Directors
have a reasonable expectation that the Group has adequate cash to continue in operational existence for
a period of not less than 12 months from the date of approval of the financial statements. Furthermore,
the directors have considered the timeline of when it plans to dispose of, divest or reinvest in its portfolio
companies and there is no intention to cease trading or liquidate the business for the period under the
going concern review.
The Directors have also put in measures to mitigate against the risks to the business due to the impact of
COVID-19. Specifically, these include closely monitoring the health, safety and security of our workforce;
complying with applicable regulatory requirements and guidelines; implementing temporary travel
restrictions; making accommodations to allow our workforce to work remotely; and remaining in close
communication with all of our customers, suppliers and partners to collaborate on how to best support
each other’s needs in this new environment.
Despite all of this, any impact from COVID-19 will not affect Allied Minds from a going concern perspective.
In fact, the impact of COVID-19 is adding cost savings during 2020 as a result of suspension of all travel for
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FINANCIAL STATEMENTS
board meetings, investor meetings and the 2020 Annual General Meeting. These savings have a positive
impact on Allied Minds as a going concern.
For this reason, they have adopted the going concern basis in preparing the financial statements.
Basis of Consolidation
Allied Minds plc was formed on 15 April 2014 and the consolidated financial statements for each of the
years ended 31 December 2020 and 2019 comprises the financial statements of Allied Minds plc and its
subsidiaries.
Subsidiaries
The financial information of the subsidiaries is prepared for the same reporting period as the parent
Company, using consistent accounting policies. Subsidiaries are entities controlled by the Group. The
Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases. Losses applicable to the non-controlling interests in a
subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling
interests to have a deficit balance.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as
equity transactions. Where the Group loses control of a subsidiary, the assets and liabilities are
derecognised along with any related NCI and other components of equity. Any resulting gain or loss is
recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when
control is lost.
Associates
Associates are those entities in which the Group has significant influence, but not control, over the
financial and operating policies. Significant influence is presumed to exist when the Group holds between
20 and 50 percent of the voting power of another entity.
Associates are accounted for using the equity method (equity accounted investees) and are initially
recognised at cost. The Group’s investment includes goodwill identified on acquisition, net of any
accumulated impairment losses. The consolidated financial statements include the Group’s share of the
total comprehensive income and equity movements of equity accounted investees, from the date that
significant influence commences until the date that significant influence ceases. When the Group’s share
of losses exceeds its interest in an equity accounted investee, the Group’s carrying amount is reduced to
$nil and recognition of further losses is discontinued except to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf of an investee. To the extent the Group
holds interests in associates that are not providing access to returns underlying ownership interests and
are more akin to debt like securities, the instrument held by Allied Minds is accounted for in accordance
with IFRS 9.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra- group
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FINANCIAL STATEMENTS
transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees
are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence
of impairment.
Changes of non-controlling interests
Non-controlling interests (‘‘NCI’’) are measured at their proportionate share of the acquiree’s identifiable
net assets at the acquisition date. Changes in the Group’s interest in a subsidiary that do not result in a
loss of control are accounted for as equity transactions.
Changes of non-controlling interests that do not result in a change of control are accounted for as
transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result
of such transactions. The adjustments to non-controlling interests are based on a proportionate amount
of the net assets of the subsidiary. Any difference between the price paid or received and the amount by
which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners
of the parent.
Functional and Presentation Currency
These consolidated financial statements are presented in US dollars, which is the functional currency of
most of the entities in the Group. All amounts have been rounded to the nearest thousand unless
otherwise indicated.
Foreign Currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities
at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are retranslated to the functional currency
at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are
recognised in the consolidated statement of comprehensive loss. Non-monetary assets and liabilities that
are measured in terms of historical cost in a foreign currency are translated using the exchange rate at
the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that
are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the
dates the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
consolidation, are translated to the Group’s presentational currency (US dollar) at foreign exchange rates
ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an
average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates
of the transactions. Exchange differences arising from this translation of foreign operations are reported
as an item of other comprehensive income and accumulated in the translation reserve or non- controlling
interest, as the case may be. When a foreign operation is disposed of, such that control, joint control or
significant influence (as the case may be) is lost, the entire accumulated amount in the translation reserve,
net of amounts previously attributed to non-controlling interests, is reclassified to profit or loss as part of
the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that
includes a foreign operation while still retaining control, the relevant proportion of the accumulated
amount is reattributed to non-controlling interests. When the Group disposes of only part of its
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FINANCIAL STATEMENTS
investment in a subsidiary or an associate that includes a foreign operation while still retaining significant
influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or
loss.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments with original maturities of three months or
less.
Financial Instruments
Classification – Financial Assets
IFRS 9 contains a classification and measurement approach for financial assets that reflects the business
model, in which assets are managed, and their cash flow characteristics. IFRS 9 contains three principal
classification categories for financial assets: measured at amortised cost, fair value through other
comprehensive income (“FVOCI”) and fair value through profit or loss (“FVTPL”). Under IFRS 9, derivatives
embedded in contracts where the host is a financial asset in the scope of the standard are never
bifurcated. Instead, the hybrid as a whole is assessed for classification.
Cash and cash equivalents: Represent basic cash balances in banks used to fund operations. These are
classified as assets at amortised cost under IFRS 9.
Trade Receivables: Under IFRS 9 trade receivables that do not have a significant financing component have
to be initially recognised at their transaction price rather than at fair value. The Group initially recognises
receivables and deposits on the date that they are originated at their transaction price, which is the same
as their fair value. As such, Trade and other receivables are classified as assets at amortised cost under
IFRS 9.
Security and other deposits: These generally represent security deposits paid by the Group to landlords as
part of operating lease commitments. As the Company’s objective is that those deposits will be collected
back, they are classified as assets at amortised cost under IFRS 9.
Investments at fair value: Reflect investments made by the Group in non-derivative instruments of the
investees that are designated in this category or not classified in any other category. These financial assets
are initially measured at fair value and subsequently re-measured at fair value at each reporting date, and
on derecognition. The Company elects if the gain or loss will be recognised in the Consolidated Statements
of Comprehensive Income/ (Loss) in Other Comprehensive Income/(Loss) or through the profit and loss
on an instrument by instrument basis. Investments at fair value are presented in the Consolidated
Statements of Financial Position as non-current assets, unless the Group intends to dispose of them within
12 months after the end of the reporting period. If the investments at fair value continue to be held for
the same long-term strategic purposes, per the application of IFRS 9, the Group may elect then to classify
them as FVOCI or FVTPL. The Group classifies them as FVTPL. In the former case, all fair value gains and
losses would be reported in other comprehensive income, no impairment losses would be recognised in
profit or loss and no gains or losses would be reclassified to profit or loss on disposal. In the latter case,
all fair value gains and losses would be recognised in profit or loss as they arise, increasing volatility in the
Group’s profits. These financial assets do not have exposure to credit risk and are not considered credit-
impaired. As a result, there are no adjustments considered for movement in credit risk as this is not
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FINANCIAL STATEMENTS
applicable within the specific valuation frameworks utilised for the fair values of the Group’s preferred
stock assets. To the extent the Group holds interests in associates that are not providing access to returns
underlying ownership interests and are more akin to debt like securities, the instrument held by Allied
Minds is accounted for in accordance with IFRS 9.
Classification – Financial Liabilities
Under IFRS 9 all fair value changes of liabilities designated as at fair value through profit or loss are
generally presented in profit or loss.
The Group designates the subsidiary preferred shares liability at FVTPL under IFRS 9. Hence, any gains and
losses on the preferred shares liability are recognised in profit or loss, unless they relate to changes in the
entity’s own credit risk for financial liability designated as at fair value through profit or loss. The effect of
changes in the entity’s own credit risk in the fair value of the financial liabilities are presented in other
comprehensive income. For the underlying financial instruments no adjustments are considered for
movement in credit risk as this is not applicable within the specific valuation frameworks utilized for the
fair values of the Group’s preferred share liability.
Trade and other payables and loans are designated at amortised cost under IFRS 9.
Impairment
IFRS 9 includes a ‘forward looking expected credit loss’ (“ECL”) model. The impairment methodology
applied depends on whether there has been a significant increase in credit risk. For trade receivables, the
group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
Financial Instruments Issued by the Group
Under IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they
meet the following two conditions:
•
they include no contractual obligations upon the Group to deliver cash or other financial assets
or to exchange financial assets or financial liabilities with another party under conditions that are
potentially unfavourable to the Group; and
• where the instrument will or may be settled in the Company’s own equity instruments, it is either
a non-derivative that includes no obligation to deliver a variable number of the Company’s own
equity instruments or is a derivative that will be settled by the Company’s exchanging a fixed
amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial instrument is classified as a financial liability.
Where the instrument so classified takes the legal form of the Company’s own shares, the amounts
presented in the financial information for share capital and merger reserve account exclude amounts in
relation to those shares.
Where a financial instrument that contains both equity and financial liability components exists, these
components are separated and accounted for individually under the above policy.
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FINANCIAL STATEMENTS
Share Capital
Ordinary shares are classified as equity. The Group considers its capital to comprise share capital, share
premium, merger reserve, translation reserve, and accumulated deficit.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and any accumulated impairment
losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. Assets under
construction represent machinery and equipment to be used in operations, R&D activities, or to be leased
to customers once completed.
When parts of an item of property and equipment have different useful lives, they are accounted for as
separate items (major components) of property and equipment. Depreciation is calculated using the
straight-line method over the estimated useful lives of the related assets:
3 years
Computers and electronics
5 years
Furniture and fixtures
5 -20 years
Machinery and equipment
Not depreciated until transferred into use
Under construction
Leasehold improvements
Shorter of the lease term or estimated useful life of the asset
Right-of-Use Assets Shorter of the lease term or estimated useful life of the asset
Depreciation methods, useful lives and residual values are reviewed at least annually and adjusted if
appropriate.
The Directors have considered the value of fixed assets without revaluing them.
The Directors are satisfied that the aggregate value of those assets at the time in question is or was not
less than aggregate amount at which they are or were for the time being stated in the company's accounts
Intangible Assets
Licenses (or Options to License) and Purchased In Process Research & Development
Licenses or options to license represent licenses or such options provided by universities, federal
laboratories, and scientists in exchange for an equity ownership in the entities or cash. Purchased in
process research & development (‘‘IPR&D’’) represents time and expertise already invested by the
scientist and provided in exchange for an equity interest in the entity. Licenses or options to license and
purchased IPR&D are valued based on the amount of cash directly paid to acquire those assets or based
on the amount of cash contributed by Allied Minds, at inception of the subsidiary, and the proportionate
amount of equity ascribed to Allied Minds. The licenses or options to license and purchased IPR&D are
capitalised only when they meet the criteria for capitalisation, namely separately identifiable and
measurable and it is probable that economic benefit will flow to the entity.
Capitalised Development Costs
Research and development costs include charges from universities based on sponsored research
agreements (“SRAs”) that the subsidiaries of Allied Minds enter into with universities. Under these
agreements, the universities perform research on the technology that is being licensed to the subsidiaries.
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FINANCIAL STATEMENTS
Research and development costs also include charges from independent research and development
contractors, contract research organisations (“CROs”), and other research institutions.
Expenditure on research activities is recognised in profit or loss as incurred. Development expenditure is
capitalised only if the expenditure can be measured reliably, the product or process is technically and
commercially feasible, future economic benefits are probable, the Group intends to and has sufficient
resources to complete development and to use or sell the asset, and if the Group can measure reliably
the expenditure attributable to the intangible asset during its development. The point at which technical
feasibility is determined to have been reached is when regulatory approval has been received, where
applicable. Management determines that commercial viability has been reached when a clear market and
pricing point have been identified, which may coincide with achieving recurring sales. Development
activities involve a plan or design for the production of new or substantially improved products or
processes. The expenditure considered for capitalisation includes the cost of materials, direct labour and
an appropriate proportion of overhead costs. Otherwise, the development expenditure is recognised in
profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost
less accumulated amortisation and any accumulated impairment losses.
Software
Software intangible assets that are acquired by the Group and have finite useful lives are measured at
cost less accumulated amortisation and any accumulated impairment losses.
Finite-lived intangible assets are amortised on a straight-line basis over their estimated useful lives, from
the date that they are available for use. Intangible assets which are not yet available for use (and therefore
not amortised) are tested for impairment at least annually.
Amortisation
Amortisation is charged to the consolidated statement of comprehensive loss on a straight-line basis over
the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an
indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date.
Other intangible assets are amortised from the date they are available for use. Amortisation methods,
useful lives and residual values are reviewed at least annually and adjusted if appropriate.
The estimated useful lives of the Group’s intangible assets are as follows:
Licences and Options to License
Purchased IPR&D
Software
Leases
Over the remaining life of the underlying patents
Over the remaining
commercial viability has been achieved
2 years
life of the underlying patents, once
IFRS 16 is a single, on-balance sheet lease accounting model for lessees and requires leases to be
accounted for using a right-of-use model, which recognises that, at the date of commencement, a lessee
has a financial obligation to make lease payments to the lessor for the right to use the underlying asset
during the lease term. The lessee recognises a corresponding right-of-use asset related to this right.
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FINANCIAL STATEMENTS
Upon adoption, the Group applied the following practical expedients:
• excluding initial direct costs from the right-of-use assets;
• use hindsight when assessing the lease term;
• not reassessing whether a contract is or contains a lease; and
• not separating the lease components from the non-lease components in lease contracts.
The Group accounts for lease payments as an expense on a straight-line basis over the life of the lease
for:
•
•
Leases with a term of 12 months or less and containing no purchase options; and
Leases where the underlying asset has a value of less than $5,000.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
transition date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined,
the Group used its incremental borrowing rate. The right-of-use asset is depreciated on a straight-line
basis and the lease liability will give rise to an interest charge.
Finance leases will continue to be treated as finance leases. In November 2019 the Company has relocated
its corporate headquarters as part of management’s initiative to minimise headquarters expenses. As a
result, starting November 2019, the Company entered into a sublease for the remaining period of the
head lease.
Under IFRS 16, a sublease leads to the de-recognition of the right of use asset and the recognition of an
investment receivable in respect of this sublease. The lease liability remains in respect of the head lease
as a lease liability on the balance sheet.
The Group recognised lease liabilities of $1.8 million and $0.6 million in lease assets at 31 December 2020.
Those rights and obligations are primarily related to operating leases for office and laboratory space.
No new leases were entered into in 2020. Further information regarding the right of use asset and lease
liability can be found in Note 19.
On 28 May 2020, the IASB issued final amendments to IFRS 16 related to Covid-19 rent concessions for
lessees. The amendments modify the requirements of IFRS 16 to permit lessees to not apply modification
accounting to certain leases where the contractual terms have been affected due to Covid-19 (e.g. rent
holidays or other rent concessions). The amendments are effective for periods beginning on or after 1
June 2020, with earlier application permitted. The Group did not adopt this standard as no such
concessions were applicable.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income
statement except to the extent that it relates to items recognised directly in equity, in which case it is
recognised in equity.
Current Income Tax
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FINANCIAL STATEMENTS
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect
of previous years.
Deferred Income Tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax
assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to
the extent that it is probable that future taxable profits will be available against which they can be used.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when
they reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity,
or on different tax entities where the Group intends to settle current tax liabilities and assets on a net
basis or their tax assets and liabilities will be realised simultaneously.
Deferred taxes are recognised in profit or loss except to the extent that it relates to items recognised
directly in equity or in other comprehensive income.
Impairment
Impairment of Non-Financial Assets
Non-financial assets consist of property and equipment and intangible assets, including licences,
purchased IPR&D, capitalised development cost, with finite lives and such intangible assets which are not
yet available for use.
The Group reviews the carrying amounts of its property and equipment and finite-lived intangibles at each
reporting date to determine whether there is any indication of impairment. If any such indication exists,
then the asset’s recoverable amount is estimated. Intangible assets which are not yet available for use are
tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of other assets or cash-
generating units (‘‘CGUs’’).
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to
sell. Value in use is based on the estimated future cash flows, discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset or CGU.
An impairment loss is recognised in profit and loss if the carrying amount of an asset or CGU exceeds its
recoverable amount. Impairment losses are allocated to reduce the carrying amounts of assets in a CGU
on a pro rata basis.
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FINANCIAL STATEMENTS
Impairment of Financial Assets
The company recognises loss allowances for expected credit losses (ECLs) on financial assets measured at
amortised cost.
The company measures loss allowances at an amount equal to lifetime ECL, except for other debt
securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life
of the financial instrument) has not increased significantly since initial recognition, which are measured
as 12-month ECL.
Loss allowances for trade receivables and contract assets are always measured at an amount equal to
lifetime ECL.
When determining whether the credit risk of a financial asset has increased significantly since initial
recognition and when estimating ECL, the company considers reasonable and supportable information
that is relevant and available without undue cost or effort. This includes both quantitative and qualitative
information and analysis, based on the company’s historical experience and informed credit assessment
and including forward-looking information.
Share-based Payments
Share-based payment arrangements in which the Group or its subsidiaries receive goods or services as
consideration for their own equity instruments are accounted for as equity-settled share-based payment
transactions, regardless of how the equity instruments are obtained by the Group or its subsidiaries.
Grants of equity instruments under the subsidiary stock option incentive plans are accounted for as
equity-settled in the consolidated accounts of the parent and are reflected in equity as a credit to Non-
Controlling Interest.
The grant date fair value of share-based payment awards granted to employees is recognised as an
employee expense, with a corresponding increase in equity, over the period that the employees become
unconditionally entitled to the awards. The fair value of the options granted is measured using an option
pricing valuation model, taking into account the terms and conditions upon which the options were
granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for
which the related service and non-market vesting conditions are expected to be met, such that the
amount ultimately recognised as an expense is based on the number of awards that do meet the related
service and non-market performance conditions at the vesting date. For share-based payment awards
with market or non-vesting conditions, the grant date fair value of the share-based payment is measured
to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
Employee Benefits
Short-term Employee Benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised for the amount expected to be paid if the Group has a
present legal or constructive obligation to pay this amount as a result of past service provided by the
employee, and the obligation can be estimated reliably.
Defined Contribution Plans
113
FINANCIAL STATEMENTS
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and has no legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution plans are recognised as an employee benefit
expense in the periods during which related services are rendered by employees. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Phantom Plan
The Phantom Plan is a cash settled bonus plan. Expense is accrued when it is determined that it is probable
that a payment will be made and when the amount can be reasonably estimated.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive
obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
Revenue Recognition
The Group recognises revenue to depict the transfer of promised goods to customers in an amount that
reflects the consideration to which it expects to be entitled in exchange for those goods. In order to
achieve this, the Group uses the five step model outlined in IFRS 15: 1) to identify the contract with the
customer; 2) identify the performance obligation(s) in the contract; 3) determine the transaction price; 4)
allocate the transaction price to the performance obligation(s); and 5) recognise revenue when (or as) we
satisfy the performance obligation(s).
IFRS 15 implements a uniform method of recognising revenue based on the actual contract and
performance obligation. Under IFRS 15, revenue is recognised when the Company satisfies a performance
obligation by transferring a promised good or service to its customer. As such, the amount of revenue
recognised is the amount allocated to the satisfied performance obligation. A performance obligation may
be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically
for promises to transfer services to a customer).
Determining the timing of the transfer of control – at a point in time or over time – requires judgement.
Based on Group’s assessment, it was concluded that the majority of the Company’s projects that:
• Render a service is performed on a time and materials basis and revenue is recognised as services
are provided based on actual hours worked for a set period. The performance obligations
identified within these projects are distinct and meet the criteria resulting in transfer of control
over time.
• Sell goods, revenue is recognised when the control of the products were transferred to the
customer. The performance obligations identified within these projects are distinct and meet the
criteria resulting in transfer of control at a point in time.
Refer to Note 3, "Revenue Recognition," for additional information related to the net revenue recognised
in the consolidated statements of operations.
114
FINANCIAL STATEMENTS
Finance Income and Finance Costs
Finance income mainly comprises interest income on funds invested and foreign exchange gains. Finance
costs mainly comprise fair value movements on preferred share liabilities, loan interest expense and
foreign exchange losses. Interest income and interest payable are recognised as they accrue in profit or
loss, using the effective interest method.
Fair Value Measurements
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as
possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used
in the valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels
of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level
of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting
period during which the change has occurred.
The carrying amount of cash and cash equivalents, accounts receivable, deposits, accounts payable,
accrued expenses and other current liabilities in the Group’s Consolidated Statements of Financial Position
approximates their fair value because of the short maturities of these instruments.
Operating Segments
Allied Minds determines and presents operating segments based on the information that internally is
provided to the executive management team, the body which is considered to be Allied Minds’ Chief
Operating Decision Maker (‘‘CODM’’).
An operating segment is a component of Allied Minds that engages in business activities from which it
may earn revenues and incur expenses, including revenues and expenses that relate to transactions with
any of the Allied Minds’ other components. The operating segment’s operating results are reviewed
regularly by the CODM to make decisions about resources to be allocated to the segment, to assess its
performance, and for which discrete financial information is available.
Newly adopted standards
New standards and interpretations adopted in the current year that did not have a material impact on the
Company’s financial statements were as follows:
115
FINANCIAL STATEMENTS
Effective date
1 January 2020
New standards or amendments
Amendments to References to Conceptual Framework in IFRS
Standards
Definition of a Business (Amendments to IFRS 3)
Definition of Material (Amendments to IAS 1 and IAS 8)
Amendments to IFRS 9, IAS 39 and IFRS 17: Interest
Benchmark reform
(2) New Standards and Interpretations not yet effective
There are a number of new standards, amendments to standard, and interpretations which have been
issued by the IASB that are effective in future periods that the group has decided not to adopt early.
The following amendments are effective for the period beginning 1 January 2022:
•
•
•
•
Onerous contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);
Property, Plant and Equipment: Proceeds before Intended Use (amendments to IAS16;
Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16
and IAS 41); and
References to Conceptual Framework (Amendments to IFRS 3).
In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine
whether liabilities are classified as current or non-current. These amendments clarify that current or non-
current classification is based in whether an entity has a right at the end of the reporting period. The
amendments also clarify that ‘settlement’ includes the transfer of cash, goods, services, or equity
instruments unless the obligation to transfer equity instruments arises from a conversion feature
classified as an equity instrument. The amendments were originally effective for annual reporting period
beginning on or after 1 January 2022. However, in May 2020, the effective date was deferred to annual
reporting periods beginning on or after 1 January 2023.
Allied Minds Plc is currently assessing the impact of these new accounting standard and amendments.
The Group does not believe that the amendments to IAS 1 will have a significant impact on the
classification of its liabilities, as the conversion feature in its convertible debt instrument is classified as
an equity instrument and therefore, does not affect the classification of its convertible debt as non-current
liability.
The Group does not expect any other standard issued by the IASB, but not yet effective, to have a material
impact on the group.
(3) Revenue
Revenue recorded in the statement of comprehensive income/ (loss) consists of the following:
116
FINANCIAL STATEMENTS
For the year ended 31 December:
2020
$'000
2019
$'000
Product revenue
Service revenue
Total revenue in consolidated statement of (loss)/ income
—
480
480
61
2,631
2,692
Revenue is measured based on the consideration specified in a contract with a customer. The Group
recognises revenue when it transfers control over a good or service to a customer. The Group
disaggregates contract revenue based on the transfer of control of the underlying performance
obligations:
For the year ended 31 December:
Transferred at a point in time
Transferred over time
Total revenue in consolidated statement of (loss)/ income
2020
$'000
2019
$'000
―
480
480
―
2,692
2,692
Product revenue includes license revenue of $nil and $61,000 during 2020 and 2019, respectively.
Contract Balances
Contract liabilities represent the Group’s obligation to transfer products or services to a customer for
which consideration has been received. When applicable, contract assets and liabilities are reported on a
net basis at the contract level, depending on the contracts position at the end of each reporting period.
Contract liabilities are included within deferred revenue on the Consolidated Statement of Financial
Position.
As of 31 December:
Deferred revenue, current
(4) Operating Segments
Basis for Segmentation
2020
$'000
(3,697)
2019
$'000
(3,457)
For management purposes, the Group’s principal operations are currently organised in three types of
activities:
(i)
(ii)
Early stage companies – subsidiary businesses that are in the early stage of their lifecycle
characterised by incubation, research and development activities;
Later stage companies – subsidiary businesses that have substantially advanced with or
completed their research and development activities, are closer
lifecycle to
commercialisation, and/or have a potential of realising material return on investment through a
future liquidity event;
in their
117
FINANCIAL STATEMENTS
(iii) Minority holdings companies – reflects the activity related to portfolio companies other than
consolidated subsidiary businesses where the Group has made a minority investment and does
not control or exercise joint control over the financial and operating policies of those entities.
Minority holdings: As of year-end 2019, as a result of its investment activities in 2018, Allied Minds
captured its minority and deconsolidated portfolio companies within the minority holdings segment. The
Group did not have any companies that were deconsolidated during the year ending 31 December 2020.
This operating segment included the following:
• Spin Memory, Inc., one of the company’s subsidiaries that was deconsolidated during the second
half of 2018 as a result of financing events at the company;
• Orbital Sidekick, Inc., a company in which Allied Minds holds a significant minority stake.
• TouchBistro, Inc. a company in which Allied Minds holds a minority stake.
• Federated Wireless, Inc., one of the company’s subsidiaries that was deconsolidated during the
second half of 2019 as a result of financing events at the company
The Group’s CODM reviews internal management reports on these segments at least quarterly in order
to make decisions about resources to be allocated to the segment and to assess its performance.
Other operations include the management function of the head office at the parent level of Allied Minds.
Information about Reportable Segments
The following provides detailed information of the Group’s reportable segments as of and for the years
ended 31 December 2020 and 2019, respectively:
Early stage
Later stage
2020
$'000
Minority
Holdings
Other
operations
Consolidated
Statement of Comprehensive Loss
Revenue
Cost of revenue
Selling, general and administrative expenses
Research and development expenses
Other expense
Finance cost, net
Share of net loss of associates accounted for
using the equity method
Loss for the period
Other comprehensive loss
Total comprehensive income
loss
―
―
(526)
(1,420)
―
(20)
―
(1,966)
―
480
(210)
(2,788)
(3,292)
―
(5,241)
―
(11,051)
―
(1,966)
(11,051)
Total comprehensive loss attributable to:
Equity holders of the parent
Non-controlling interests
58
(2,024)
(10,596)
(455)
Total comprehensive loss
(1,966)
(11,051)
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
(7,183)
―
(31,934)
3,475
(6,845)
(42,487)
(116)
(42,603)
480
(210)
(10,497)
(4,712)
(31,934)
(1,786)
(6,845)
(55,504)
(116)
(55,620)
(42,487)
―
(53,025)
(2,479)
(42,487)
(55,504)
118
FINANCIAL STATEMENTS
Statement of financial position
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net assets/(liabilities)
320
502
822
(105)
(3,756)
(3,861)
(3,039)
1,288
7,105
8,393
(1,380)
(27,707)
(29,087)
(20,694)
―
―
―
―
―
―
―
42,808
24,977
67,785
(761)
14,995
14,234
82,019
44,416
32,584
77,000
(2,246)
(16,468)
(18,714)
58,286
Early stage
Later stage
Other
operations
Consolidated
Statement of Comprehensive Loss
Revenue
Cost of revenue
Selling, general and administrative expenses
Research and development expenses
Other income
Finance income/(cost), net
Share of net loss of associates accounted for
using the equity method
Income/(loss) for the period
Other comprehensive income
Total comprehensive
income/(loss)
Total comprehensive income/ (loss)
attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive
income/(loss)
Statement of financial position
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net assets/(liabilities)
―
―
(2,475)
(2,963)
7,273
6,687
―
8,522
―
8,522
8,906
(384)
8,522
494
2,173
2,667
(265)
(3,417)
(3,682)
(1,015)
2019
$'000
Minority
Holdings
1,466
(628)
(11,501)
(9,115)
-
3,546
―
(16,232)
―
1,226
(805)
(3,347)
(4,068)
21
6,653
―
(320)
―
(320)
―
―
(16,993)
―
111,021
(6,894)
(28,850)
58,284
808
(16,232)
59,092
(658)
338
(15,197)
(1,035)
58,284
―
(320)
(16,232)
58,284
1,302
9,209
10,511
(1,992)
(20,303)
(22,295)
(11,784)
―
―
―
―
―
―
―
70,899
86,472
157,371
(1,538)
9,537
7,999
165,370
2,692
(1,433)
(34,316)
(16,146)
118,315
9,992
(28,850)
50,254
808
51,062
51,335
(1,081)
50,254
72,695
97,854
170,549
(3,795)
(14,183)
(17,978)
152,571
Early stage companies comprise those that receive an array of business support resources and services
from Allied Minds in order to successfully develop early stage technologies. Those currently include Spark
Insights. In addition, all closed or dissolved subsidiaries were presented in the Early Stage segment up to
the time at which they were all dissolved.
Later stage companies comprise those that have graduated from Early stage by way of further
advancements in their development as described above. Those currently include BridgeComm, and
OcuTerra Therapeutics.
The results of the management function of the head office at the parent level of Allied Minds are reported
separately as Other operations. As the investment in associate is a parent activity, the share of loss, gain
on deconsolidation, remeasurement of the investments to fair value and investment in associate are
disclosed in the Other operations segment. In December 2020, Allied Minds has decided to dissolve Allied
119
FINANCIAL STATEMENTS
Minds Federal Innovations, a holding company. The results of Allied Minds Federal Innovations to the
date it was closed were also included in the Other operations segment.
Summarised information related to the Company’s operating revenues by reporting segment for the years
ended 31 December 2020 and 2019 is as follows:
Early Stage
Later Stage
Minority
Total revenue
2020
2019
Service
revenue
Software
revenue
-
-
-
-
-
480
-
480
Total
-
480
-
480
Service
revenue
-
1,225
1,406
2,631
Software
revenue
-
-
61
61
Total
-
1,225
1,467
2,692
In 2020, Cost of revenue and Selling, general and administrative expenses of Early stage, Later stage,
Minority holdings and Other operations segments included depreciation and amortisation expense of
$10,100, $460,880, $0, and $179,637, respectively (2019: $115,000, $664,000, $597,000, and $233,000,
respectively).
The proportion of net assets shown above that is attributable to non-controlling interest is disclosed
further in notes 11 and 15.
Geographic Information
The Group revenues and net operating losses for the years ended 31 December 2020 and 2019 are
considered to be entirely derived from its operations within the United States and accordingly no
additional geographical disclosures are provided.
(5) Operating Expenses
The average number of persons employed by the Group (including Directors) during the year, analysed by
category, was as follows:
For the year ended 31 December:
2020
2019
Selling, general and administrative
Research and development
Total
28
46
74
41
71
112
The aggregate payroll costs of these persons were as follows:
For the year ended 31 December:
Selling, general and administrative
Research and development
Total
2020
$'000
5,873
2,619
8,492
2019
$'000
17,960
8,043
26,003
120
FINANCIAL STATEMENTS
Total operating expenses were as follows:
For the year ended 31 December:
Salaries and wages
Payroll taxes
Healthcare benefit
Other payroll cost
Share-based payments
Total
Cost of revenue
Other SG&A expenses
Other R&D expenses
Total operating expenses
Auditor's remuneration
Audit of these financial statements
Audit of the financial statements of subsidiaries
Audit-related assurance services
2020
$'000
5,903
158
1,338
41
1,052
8,492
210
4,624
2,093
15,419
2020
$'000
419
—
96
515
2019
$'000
23,727
1,290
1,942
509
(1,465)
26,003
1,433
16,356
8,103
51,895
2019
$'000
544
—
122
666
The Group recorded an impairment charge on property and equipment of $nil million (2019: $0.5 million)
and on intangible assets of $nil million (2019: $0.1 million).
See note 6 for further disclosures related to share-based payments and note 22 for management’s
remuneration disclosures.
(6) Share-Based Payments
UK Long Term Incentive Plan
Under the UK Long Term Incentive Plan (“LTIP”), awards of Ordinary Shares may be made to employees,
officers and directors, and other individuals providing services to the Company and its subsidiaries.
Awards may be granted in the form of share options, share appreciation rights, restricted or unrestricted
share awards, performance share awards, restricted share units, phantom-share awards and other share-
based awards. Vesting is subject to the achievement of certain performance conditions and continued
services of the participant.
Awards have been granted under the LTIP based on the following vesting criteria:
• awards subject to performance conditions based on the Company’s total shareholder return (“TSR”)
performance or relative total shareholder return (rTSR) performance over a defined of time;
121
FINANCIAL STATEMENTS
• awards subject to performance conditions based on a basket of shareholder value metrics (“SVM”).
Performance is assessed on these measures on a scorecard basis over a defined period of time;
• awards that vest 100 per cent after a period of time subject to continued service condition only.
On 10 June 2019, the Board has determined to retire the long term incentive plan (LTIP) scheme for
executive directors, management and other employees. New annual LTIP awards planned for issuance in
May 2019 subsequent to the release of annual results, were cancelled and no future awards will be made
to executive directors, management and other employees. Historic awards will remain outstanding and
eligible to vest in accordance with their terms. A significant majority of the outstanding awards are
subject to relative total shareholder return (TSR) performance; however, at the current share price, the
performance criteria of these awards will not be met and therefore, no shares are expected to be issued
under such awards.
The Company issued shares in respect of historic awards under the LTIP during 2020 and 2019 in respect
of a total of 387,000 and 343,383 Ordinary Shares, respectively. A summary of stock option activity under
the UK LTIP for the year ended 31 December 2020 and 2019, respectively, is shown below:
For the year ended 31
December:
Number of shares granted
at maximum (‘000)
Weighted average fair value ($)
Fair value measurement basis
rTSR
—
—
Monte
Carlo
2020
SVM
—
—
Market
value of
ordinary
share
Time
rTSR
—
—
Monte
Carlo
387
0.36
Market
value of
ordinary
share
2019
SVM
—
—
Market
value of
ordinary
share
Time
343
0.63
Market
value of
ordinary
share
The share grants that vest upon the occurrence of a market condition (i.e. the TSR performance) and
service condition were adjusted to current market price at the date of the grant to reflect the effect of
the market condition on the non-vested shares’ value. The Company used a Monte Carlo simulation
analysis utilising a Geometric Brownian Motion process with 50,000 simulations to value those shares.
The model takes into account share price volatilities, risk-free rate and other covariance of comparable
UK public companies and other market data to predict distribution of relative share performance. This is
applied to the reward criteria to arrive at expected value of the TSR awards.
The share grants that vest only upon the occurrence of a non-market performance condition (i.e. the SVM
grants) and service condition or upon passage of time were valued at the fair value of the shares on the
date of the grants the vesting conditions are taken into account. The number of instruments included in
the measurement of the transaction amount is subsequently adjusted so that, ultimately, the amount of
recognised share-based expense is based on the number of instruments that eventually vest. None of the
outstanding awards under the LTIP as of 31 December 2020 are subject to SVM vesting.
The accounting charge does not necessarily represent the intended value of share-based payments made
to recipients, which are determined by the Remuneration Committee according to established criteria.
The share-based payment charge for the fiscal year ended 31 December 2020 related to the UK LTIP was
$0.9 million (2019: $1.9 million).
122
FINANCIAL STATEMENTS
U.S. Stock Option/Stock Issuance Plan
The U.S. Stock Option/Stock Issuance Plan (the “U.S. Stock Plan”) was originally adopted by Allied Minds,
Inc. (now Allied Minds, LLC) in 2008. The U.S. Stock Plan provides for the grant of share option awards,
restricted share awards, and other awards to acquire common stock of Allied Minds, Inc. (now Allied
Minds, LLC). All stock options granted to employees under this plan are equity settled, for a ten-year term.
Pursuant to the Company’s IPO in 2014, Allied Minds plc adopted and assumed the rights and obligations
of Allied Minds, Inc. (now Allied Minds, LLC) under this plan except that the obligation to issue Common
Stock is replaced with an obligation to issue ordinary shares to satisfy awards granted under the U.S. Stock
Plan. As of 19 June 2014, the maximum number of options reserved under the plan were issued and
outstanding and as a result of the Company’s IPO in 2014, all issued and outstanding options vested on
19 June 2014. The Company does not intend to make any further grants under the U.S. Stock Plan.
No new stock option grants were awarded in 2020 and 2019 under the Allied Minds 2008 Plan. A summary
of stock option activity in the U.S. Stock Plan is presented in the following table:
For the twelve months ended:
31 December 2020
Number of
options
Weighted
average
exercise
price
230,000
—
(230,000)
—
—
$ nil
$ 2.49
—
$ 2.49
—
—
Outstanding as of 1 January
Exercised during the period
Forfeited during the period
Outstanding as of period end
Exercisable at period end
Intrinsic value of exercisable
31 December 2019
Number of
options
Weighted
average
exercise
price
1,300,000
—
(1,070,000)
230,000
230,000
$ nil
$ 2.15
$ 0.00
$ 1.80
$ 2.49
$ 2.49
As of 31 December 2020 no options were exercised (2019: nil) resulting in $nil (2019: $ nil) additional
share premium for the period.
Allied Minds Phantom Plan
In 2007, Allied Minds established a cash settled plan for Allied Minds employees, also known as its
Phantom Plan. In 2012, the Board of Directors adopted the Amended and Restated 2007 Phantom Plan.
Under the terms of the Amended and Restated Plan, upon a liquidity event Allied Minds will allocate 10%
of the value (after deduction of the amount invested by Allied Minds and accrued interest at a rate not
exceeding 5% per annum) of the invested capital owned by Allied Minds of each operating company to
the plan account. Upon a liquidity event, plan participants holding units will receive their proportionate
share of the plan account. The allocated shares at all times remain the sole and exclusive property of Allied
Minds and holders of units have no rights or interests in Allied Minds.
Allied Minds has not accrued any expense relating to the Phantom Plan as of 31 December 2020 and 2019.
Management records an expense relating to this plan when it is probable that a subsidiary will be sold
and the amount of the payout is reasonably estimable or will be paid out in accordance with the plan.
123
FINANCIAL STATEMENTS
Given the current valuation of the investments and the thresholds required for payments to be made,
management have judged that is unlikely there will be any future payouts in respect of this plan based on
the position as at 31 December 2020.
Share-based Payment Expense
The Group recorded share-based payment charge/ credit related to stock options of approximately
$1,052,000 and $1,465,000 for the years ended 31 December 2020 and 2019, respectively. There was no
income tax benefit recognised for share- based payment arrangements for the years ended 31 December
2020 and 2019, respectively, due to operating losses.
The following table provides the classification of the Group’s consolidated share-based payment expense/
income as reflected in the Consolidated Statement of (Loss) / Income:
For the year ended 31 December:
Selling, general and administrative
Research and development
Total
(7) Finance Cost, Net
2020
$'000
991
61
1,052
2019
$'000
(1,597)
132
(1,465)
The following table shows the breakdown of finance income and cost:
For the year ended 31 December:
Interest income on:
– Bank deposits
Foreign exchange gain
Finance income
Interest expense on:
– Financial liabilities at amortised
cost
Foreign exchange loss
Finance cost contractual
(Loss)/ income on fair value
measurement of subsidiary
preferred shares
Finance (cost)/ income
Total finance (cost)/ income, net
2020
$'000
2019
$'000
292
(1)
291
(313)
(1)
(314)
(1,763)
(2,077)
(1,786)
1,007
1
1,008
(267)
—
(267)
9,251
8,984
9,992
See note 16 for further disclosure related to subsidiary preferred shares.
(8) (Loss)/ income Per Share
The calculation of basic and diluted income per share as of 31 December 2020 was based on the loss
attributable to ordinary shareholders of $53.0 million (2019: income of $51.3 million) and a weighted
average number of ordinary shares outstanding of 241,901,871 (2019: 240,981,168), calculated as
follows:
124
FINANCIAL STATEMENTS
(Loss)/ Income attributable to ordinary shareholders
(Loss)/ income for the year
attributed to the
owners of the Company
(Loss)/ income for the year
attributed to the
ordinary shareholders
2020
$'000
2019
$'000
Basic
Diluted
Basic
Diluted
(53,025)
(53,025)
51,335
51,335
(53,025)
(53,025)
51,335
51,335
Weighted average number of ordinary shares
2020
2019
Basic
Diluted
Basic
Diluted
Issued ordinary shares on 1 January
241,563,123
241,563,123
240,314,745
240,314,745
Effect of RSUs issued
Effect of dilutive shares
338,748
―
338,748
666,423
―
―
666,423
―
Weighted average ordinary shares
241,901,871
241,901,871
240,981,168
240,981,168
(Loss)/ Income per share
(Loss)/ income per share
(9) Property and Equipment
2020
$
2019
$
Basic
(0.22)
Diluted
(0.22)
Basic
0.21
Diluted
0.21
Property and equipment, net, consists of the following at:
Cost
in $'000
Balance as of 31 December
2018
Additions, net of
transfers
Disposals
Deconsolidation of
subsidiaries
Balance as of 31 December
2019
Additions
Transfers
Balance as of 31 December
2020
Machinery and
Equipment
Furniture
and
Fixtures
Leasehold
Improvements
Computers
and
Electronics
Under
Construction
Total
3,082
26
(272)
(1,965)
871
—
—
871
911
185
(166)
(575)
355
353
—
708
1,639
3,341
—
(4,772)
208
147
454
809
8,804
3,603
(2,126)
(7,727)
2,554
564
0
3,118
2,463
(71)
(1,233)
(110)
1,049
64
(454)
659
709
122
(455)
(305)
71
—
—
71
125
FINANCIAL STATEMENTS
Accumulated
Depreciation
and Impairment loss
in $'000
Balance as of 31 December
2018
Depreciation
Impairment loss
Disposals
Deconsolidation of
subsidiaries
Balance as of 31 December
2019
Depreciation
Impairment loss
Disposals
Balance as of 31 December
2020
Property and equipment,
net
in
$'000
Balance as of 31 December
2019
Balance as of 31 December
2020
Machinery and
Equipment
Furniture
and
Fixtures
Leasehold
Improvements
Computers
and
Electronics
Under
Construction
Total
(1,009)
(280)
(305)
1,233
61
(300)
(175)
―
―
(475)
(381)
(101)
(101)
455
125
(3)
(14)
―
―
(17)
(841)
(535)
—
272
611
(493)
(143)
―
―
(636)
(576)
(141)
(15)
166
293
(273)
(121)
―
―
(394)
―
—
―
―
―
―
―
―
—
(2,807)
(1,057)
(421)
2,126
1,090
(1,069)
(453)
―
―
(1,522)
Machinery and
Equipment
749
184
Furniture
and
Fixtures
68
54
Leasehold
Improvements
378
235
Computers
and
Electronics
82
314
Under
Construction
208
809
Total
1,485
1,596
Impairment of property and equipment of $nil and $421,000 for the years ended 31 December 2020 and
2019, respectively, is mainly attributed to the closing of subsidiary companies, which resulted in the
associated assets being impaired. Impairment of property and equipment is included in selling, general
and administrative expenses in the consolidated statement of comprehensive income.
Property and equipment under constructions represents assets that are in the process of being built and
not placed in service as of the reporting date.
(10)
Intangible Assets
Information regarding the cost and accumulated amortisation of intangible assets is as follows:
Cost
in $'000
Balance as of 31 December 2018
Additions - Acquired separately
Disposals
Deconsolidation of subsidiaries
Balance as of 31 December 2019
Additions - Acquired separately
Disposals
Balance as of 31 December 2020
Licenses
Purchased
IPR&D
Software
Total
163
29
(142)
(50)
—
—
—
—
277
192
(384)
(85)
—
—
—
—
1,690
4
(66)
(702)
926
—
—
926
2,130
225
(592)
(837)
926
—
—
926
126
FINANCIAL STATEMENTS
Accumulated amortisation
and Impairment loss
in $'000
Balance as of 31 December 2018
Amortisation
Impairment loss
Disposals
Deconsolidation of subsidiaries
Balance as of 31 December 2019
Amortisation
Impairment loss
Disposals
Balance as of 31 December 2020
Intangible assets, net
in $'000
Balance as of 31 December 2019
Balance as of 31 December 2020
Licenses
(64)
(4)
(58)
111
15
—
—
—
—
—
Purchased
IPR&D
—
—
(192)
192
—
—
—
—
—
—
Software
(845)
(546)
—
66
596
(729)
(197)
—
—
(926)
Total
(909)
(550)
(250)
369
611
(729)
(197)
—
—
(926)
Licenses
Purchased
IPR&D
—
—
—
—
Software
Total
197
—
197
—
Amortisation expense is included in selling, general and administrative expenses in the consolidated
statement of comprehensive loss. Amortisation expense, recorded using the straight-line method, was
approximately $197,000 and $551,000 for the years ended 31 December 2020 and 2019, respectively.
Impairment of intangible assets of $nil and $250,000 for the years ended 31 December 2020 and 2019,
respectively, is mainly attributed to the closing of subsidiary companies, which resulted in the associated
intangible assets being impaired to zero. Impairment expense is included in selling, general and
administrative expenses in the consolidated statement of comprehensive income.
At each reporting period, management considers qualitative and quantitative factors that define the
future prospects of the respective investment and assesses whether it supports the value of the
underlying intangible.
(11)
Investments
Group Subsidiaries, associates and investments
As of 31 December 2020, Allied Minds has seven portfolio companies, including subsidiaries, associates
and investments. As at the 31 December 2020 the investments in each of the companies and the
accounting treatment is summarized below:
Portfolio company
Financial instruments held
Allied Minds LLC
Ordinary shares
Accounting treatment of financial
instruments
Consolidated by the group in line
with IFRS 10 and following
management assessment of
significant control.
127
FINANCIAL STATEMENTS
Allied Minds Securities Corp. Ordinary shares
BridgeComm, Inc.
Ordinary share capital and
preferred shares
Spark Insights, Inc.
Ordinary share capital and
preferred shares
OcuTerra Therapeutics, Inc.
Ordinary share capital and
preferred shares
Federated Wireless, Inc.
Ordinary share capital and
preferred shares
Spin Memory, Inc.
Ordinary share capital and
preferred shares
128
Consolidated by the group in line
with IFRS 10 and following
management assessment of
significant control.
Consolidated by the group in line
with IFRS 10 and following
management assessment of
significant control.
Preferred shares are eliminated on
consolidation between group
companies, preferred shares held by
third parties are fair valued through
profit and loss under IFRS 9.
Consolidated by the group in line
with IFRS 10 and following
management assessment of
significant control.
Preferred shares are eliminated on
consolidation between group
companies.
Consolidated by the group in line
with IFRS 10 and following
management assessment of
significant control.
Preferred shares are eliminated on
consolidation between group
companies.
The ordinary share capital ownership
means that the group has significant
influence but not control over the
entity. Therefore, the investment in
ordinary shares is accounted for by
the equity method of accounting
under IAS 28.
Preferred share holdings are
accounted for at fair value through
profit and loss as investments held
by the group.
The ordinary share capital ownership
means that the group has significant
influence but not control over the
entity. Therefore, the investment in
ordinary shares is accounted for by
the equity method of accounting
under IAS 28.
Preferred share holdings are
accounted for at fair value through
profit and loss as investments held
FINANCIAL STATEMENTS
Orbital sidekick, Inc.
Preferred shares
TouchBistro, Inc.
Ordinary shares
by the group.
No ordinary shares are owned by
Allied Minds and the directors have
judged that the group does not have
significant influence over the entity
through is preferred share holding.
Preferred share holdings are
accounted for at fair value through
profit and loss as investments held
by the group.
The group has a minority stake in the
investment and does not have
significant influence over the
company. Therefore, the investment
in ordinary shares is accounted for at
fair value through the profit and loss
under IFRS 9.
The following outlines the formation of each subsidiary and evolution of Allied Minds’ ownership interest
over the two year period ended 31 December 2019:
Inception
Date
Location (4)
Issued and Outstanding
Ownership percentage
at 31 December (1) (2)
2019
2020
Active subsidiaries
Holding companies
Allied Minds, LLC
Allied Minds Securities Corp.
Early stage companies
Spark Insights, Inc.
Later stage companies
BridgeComm, Inc.
OcuTerra Therapeutics, Inc. (SciFluor Life Sciences)
Closed subsidiaries
Allied Minds Federal Innovations, Inc.
Number of active subsidiaries at 31 December:
Associates
Spin Memory, Inc.(3)
Federated Wireless, Inc. (3)
Federated Wireless Government Solutions, Inc. (3)
19/06/14
21/12/15
09/10/18
09/02/15
14/12/10
09/03/12
03/12/07
08/08/12
04/05/16
Boston, MA
Boston, MA
100.00%
100.00%
100.00%
100.00%
Boston, MA
70.59%
70.59%
Denver, CO
Cambridge, MA
81.15%
62.67%
81.38%
62.67%
Boston, MA
―
5
100.00%
6
Fremont, CA
Arlington, VA
Arlington, VA
43.01%
43.11%
43.11%
42.69%
42.57%
42.57%
Other investments
TouchBistro, Inc (TableUp, Inc.) (3)
Orbital Sidekick, Inc. (3)
04/20/07
02/08/16
Boston, MA
San Francisco, CA
1.52%
33.23%
35.52%
33.23%
129
FINANCIAL STATEMENTS
Notes:
(1) Represents ownership percentage held by Allied Minds Plc based on the equity interest owned in ordinary shares plus
potential equity interest owned in convertible preference shares. The current percentage ownership of each company
ordinary share capital is as follows: Allied Minds LLC 100%, Allied Minds Securities Corp. 100%, Spark Insights 0.07%,
BridgeComm, Inc. 98.47%, OcuTerra Therapeutics, Inc. 75.26%, Spin Memory 56.31%, Federated Wireless 93.60%,
TouchBistro 1.52%, Orbital Sidekick 0%.
(2) Allied Minds LLC, Spark Insights, Inc., BridgeComm, Inc., OcuTerra Therapeutics, Inc., Federated Wireless, Inc. and
Federated Wireless Government Solutions, Inc. have a registered office address at CT Corporation System,
Corporation Trust Center, and 1209 Orange Street, Wilmington, DE 19801, United States. Allied Minds Securities Corp.
has a registered office address at CT Corporation System, 155 Federal Street, Suite 700, Boston, MA 02110, United
States. Spin Memory Inc. and TableUp Inc. have a registered office address at 1209 Orange Street, Wilmington, DE
19801. Orbital Sidekick Inc. has a registered office at Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808.
(3) The preferred shares that allied Minds has in these companies is accounted for under IFRS 9.
On 24 December 2020, Orbital Sidekick, Inc., has conditionally secured $16.0 million in a Series A Preferred
financing round led by Temasek, an investment company headquartered in Singapore. Round participants
also include other new investors and existing investors Allied Minds, committing $2.5 million (including
conversion of its SAFE), and 11.2 Capital. The financing round is scheduled to close in the first quarter of
2021.
On 16 July 2020, Allied Minds and 11.2 Capital collectively invested $2.0 million in the form of SAFEs
(simple agreements for equity), which will convert into shares of preferred stock in the company’s next
equity financing round expected in Q2 of 2021 as noted above. The receivables are included in current
assets in the group accounts and are held at fair value through profit and loss at 31 December 2020.
Orbital Sidekick was awarded a multi-year contract by the Department of the Air Force’s commercial
investment group (AFVentures) as part of its Strategic Financing (STRATFI) programme, under which the
company received $4.0 million of non-dilutive financing in Q4 2020, with the opportunity to receive up to
$12.0 million of additional non-dilutive financing over next three years to match private funds raised.
On 5 August 2020, TableUp, one of Allied Minds’ portfolio companies, has been acquired by TouchBistro,
Inc. (“TouchBistro”). The acquisition was structured as a stock-for-stock transaction in which TouchBistro
acquired 100% of the shares of TableUp in exchange for the issuance of TouchBistro common shares to
the shareholders of TableUp. A total of 2,542,662 common shares of TouchBistro was paid to Allied Minds
valued at $5.99 million at the time of the transaction.
On 26 August 2020, as a result of achieving certain development milestones under the JDA with Boeing,
BridgeComm secured the remaining $1.5 million of convertible debt from Boeing.
On 4 February 2020, BridgeComm issued $2,000,000 in convertible notes to Allied Minds, following the
issuance of $1,000,000 in convertible notes to Boeing HorizonX Ventures in December 2019.
On 17 July 2020, Spin Memory, the leading MRAM developer, secured $8.25 million in additional Series B
funding on the same terms as the last closing in April 2019. Allied Minds committed $4.0 million to the
round. The Group invested alongside existing investors, Arm, Applied Ventures and Abies Ventures, who
collectively committed the remaining $4.25 million. Following this investment, Allied Minds' ownership of
Spin's issued share capital is 43.01%.
On 20 April 2020, Federated Wireless raised an additional $13.7 million from existing shareholders in a
130
FINANCIAL STATEMENTS
second closing of the preferred financing round from September 2019, half of which was contributed by
Allied Minds. Following this investment, Allied Minds' ownership of Federated's issued share capital is
43.11% compared to 52.17% at 31 December 2019. This transaction increases the company’s investment
at fair value in Federated Wireless from $22.4 million, as reported at 31 December 2019, to $29.2 million
at 30 June 2020.
On 10 January 2020, OcuTerra Therapeutics raised an additional $375K in the second closing of its
convertible note financing.
On 29 December 2020, the Group ceased operations and dissolved Allied Minds Federal Innovations, Inc.
The following tables summarise the financial information related to the Group’s subsidiaries with material
non-controlling interests, aggregated for interests in similar entities, and before intra-group eliminations.
As of and for the year ended 31 December:
Statement of Comprehensive Loss
Revenue
Loss for the year
Other comprehensive loss
Total comprehensive loss
Comprehensive loss attributed to NCI
Statement of Financial Position
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net liabilities
Carrying amount of NCI
Statement of Cash Flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Early stage
2020
$'000
Later stage
Minority
holdings
-
(1,966)
480
(11,051)
-
-
(1,966)
(2,024)
320
502
822
(105)
(3,756)
(3,861)
(3,039)
(1,953)
(20)
184
(1,789)
(11,051)
(455)
1,288
7,105
8,393
(1,380)
(27,707)
(29,087)
(20,694)
(6,621)
(538)
4,707
(2,452)
-
-
-
-
-
-
-
-
-
-
-
-
-
131
FINANCIAL STATEMENTS
Statement of Comprehensive Loss
Revenue
Loss for the year
Other comprehensive loss
Total comprehensive loss
Comprehensive loss attributed to NCI
Statement of Financial Position
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net assets/(liabilities)
Carrying amount of NCI
Statement of Cash Flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Early stage
2019
$'000
Later stage
-
8,522
-
8,522
(384)
1,226
(320)
-
(320)
338
494
2,173
2,667
(265)
(3,417)
(3,682)
(1,015)
(1,418)
27,511
16,244
(61,347)
(17,592)
1,302
9,209
10,511
(1,992)
(20,303)
(22,295)
(11,784)
1,533
(3,199)
(133)
915
(2,417)
Minority
holdings
1,466
(16,232)
-
(16,232)
(1,035)
-
-
-
-
-
-
-
-
11,064
(3,315)
4,701
12,450
Investment in Associates
The Group has two associates that are material to the Group, both of which are equity accounted.
Nature of relationship
with the Group
Principal place of business
Ownership interest
Spin Memory
Portfolio company of the Group
Federated Wireless
Portfolio company of the Group
Fremont, CA
43.01% (2019: 42.69 %)
Arlington, VA
43.11% (2019: 42.57 %)
Spin Memory: As of November 2018, Spin Memory was deconsolidated from the Group’s financial
statements as a result of its Series B Preferred Stock financing round as the voting rights associated with
this stock meant that Allied Minds would no longer control the business but would maintain significant
influence over the operations. As of 31 December 2019, Allied Minds’ ownership percentage went from
41.63% to 42.69% and the investment in common stock in Spin Memory continues to be subject to the
equity method accounting. In accordance with IAS 28, the Company’s investment was adjusted by the
share of profits and losses generated by Spin Memory subsequent to the date of deconsolidation. In 2019,
Allied Minds recognised $19.5 million as its share of loss from Spin through the Consolidated Statements
of Comprehensive Income/ (Loss) that reduced Allied Minds’ investment in Spin Memory down to zero.
As of 31 December 2020, Allied Minds’ ownership percentage went from 42.69% to 43.01% as a result of
the entity’s latest financing round in July 2020. In accordance with IAS 28, once the share of losses of an
132
FINANCIAL STATEMENTS
associate equals or exceeds its "interest in the associate", the investor discontinues recognising its share
of further losses. Once Allied Minds’ interest in Spin Memory was reduced to zero no further adjustments
were made to the investment balance at 31 December 2020. If Spin Memory subsequently reports profits,
Allied Minds will resume recognising its share of those profits only after its share of the profits equals the
share of losses not recognised.
Spin Memory, Inc.
Group’s interest in net assets of investee, beginning of period
Share of loss from continuing operations
Carrying amount for equity accounted investees
Unrecognised share of losses in associate
Total outstanding
Ownership percentage
31 December
2020
31 December
2019
43.01%
42.69%
Location
Fremont,
CA
31 December
2020
$'000
31 December
2019
$'000
―
―
―
(37,393)
(37,393)
19,543
(19,543)
―
(406.5)
(406.5)
Federated Wireless: As of September 2019, Federated Wireless was deconsolidated from the Group’s
financial statements as a result of its latest Series C Preferred Stock financing round as the voting rights
associated with this stock meant that Allied Minds would no longer control the business but would
maintain significant influence over the operations. Allied Minds’ ownership percentage as of 31 December
2019 dropped from 52.23% to 42.57%. Upon the date of deconsolidation, Allied Minds recognised an
investment in Federated Wireless related to its common shares of $16.2 million. At 31 December 2019,
Allied Minds’ investment was adjusted by the share of losses generated by Federated Wireless from 3
September through 31 December 2019 of $9.3 million. As a result of the deconsolidation, Allied Minds
recorded an unrealised gain of $69.8 million in the Consolidated Statements of Comprehensive Income/
(Loss).
In accordance with IAS 28, the Company’s investment was adjusted by the share of profits and losses
generated by Federated Wireless subsequent to the date of deconsolidation. In 2019, Allied Minds
recognised $9.3 million as its share of loss from Federated Wireless through the Consolidated Statements
of Comprehensive Income/ (Loss).
As of 31 December 2020, Allied Minds’ ownership percentage went from 42.57% to 43.11% and the
investment in Federated Wireless continues to be subject to the equity method accounting. In accordance
with IAS 28, the Company’s investment was adjusted by the share of profits and losses generated by
Federated Wireless subsequent to the date of deconsolidation. As a result, Allied Minds recorded a share
of loss of $6.8 million in the Consolidated Statements of Comprehensive Income/ (Loss) that reduced the
investment in Federated to a zero balance as follows:
133
FINANCIAL STATEMENTS
Ownership percentage
Location
31 December 2020
31 December 2019
Federated Wireless, Inc.
Arlington,
VA
43.11%
42.57%
Group’s interest in net assets of investee, beginning of
period
Addition in the year
Share of loss from continuing operations
Carrying amount for equity accounted investees
Unrecognised share of losses in associate
Total outstanding
31 December 2020
31 December 2019
$'000
$'000
6,845
―
(6,845)
―
(19,432)
(19,432)
―
16,151
(9,306)
6,845
―
―
The following is summarised financial information for Spin Memory and Federated Wireless, based on
their perspective consolidated financial statements prepared in accordance with IFRS:
Spin Memory
$'000
Federated Wireless
$'000
2020
2019
2020
2019
1,181
(65,684)
12,918
1,850
14,768
(1,871)
(19,151)
(6,254)
2,080
(35,429)
14,694
5,315
20,009
(209)
(96,206)
(76,406)
2,882
(28,073)
17,948
30,597
48,545
(5,804)
(133,917)
(91,176)
2,322
(28,816)
19,874
44,319
64,193
(4,315)
(125,039)
(65,161)
Revenue
Loss for the period
Total non-current assets
Total current assets
Total assets
Total non-current liabilities
Total current liabilities
Net assets
Investments at fair value
The Group’s investments at fair value represent securities of portfolio companies where Allied Minds
holds preferred shares or a minority stake in those companies. This includes preferred shares held in
Federated Wireless, Spin Memory and Orbital Sidekick and a minority holding in TouchBistro as at 31
December 20. These investments are initially measured at fair value through profit or loss and are
subsequently re-measured at fair value at each reporting date and on derecognition.
The fair value of these investments is derived using the option pricing model (“OPM”), the Probability-
Weighted Expected Return Method (“PWERM”) or a hybrid of the two.
134
FINANCIAL STATEMENTS
The key inputs into these valuation models include the equity value of the portfolio company, the term of
the instrument, risk free rate and volatility.
The valuation methodologies utilised for determining the equity value include market approach, income
approach or cost approach or hybrid of these approaches. Other methodologies such as asset based and
cash in are also utilised where deemed appropriate. It is noted that in the current year none of the equity
values were determined using the income approach.
Other valuation approaches
In certain cases, the value of a portfolio company is determined using a market instead of income- based
approach.
Where there has been a third party funding round in the year this has been used as the implied value of
the portfolio company or comparable guideline public companies or comparable transactions, adjusted
for indexation where this is deemed to be appropriate.
Whilst the Board considers the methodologies and assumptions adopted in the valuation are supportable,
reasonable and robust, because of the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a ready market for the investment
existed and the differences could be significant.
PWERM and OPM
The principal methods the Group applies for allocation of value are the PWERM, the OPM as well as a
hybrid of the two. These models take assumptions such as the equity values, term of the instruments, risk
free rate and volatility to determine the fair value of each share class.
The PWERM estimates the value of equity securities based on an analysis of various discrete future
outcomes, such as an IPO, merger or sale, dissolution, or continued operation as a private enterprise until
a later exit date. The equity value today is based on the probability-weighted present values of expected
future investment returns, considering each of the possible outcomes available to the enterprise, as well
as the rights of each security class. The key judgement relates to probability weighting of the scenarios.
The OPM treats common stock or derivatives thereof as call options on the enterprise’s value or overall
equity value. The value of a security is based on the optionality over and above the value securities that
are senior in the capital structure (e.g. preferred stock), considering the dilutive effects of subordinate
securities. In the OPM, the exercise price is based on a comparison with the overall equity value rather
than per-share value.
135
FINANCIAL STATEMENTS
Those investments are presented in the below table:
31 December 2020
$'000
28,532
4,821
5,464
―
Disposals
$'000
―
―
―
(5,016)
Finance
(income)/cost from
IFRS 9 fair value
accounting
$'000
(677)
(29,151)
1,438
(508)
2,771
―
(3,213)
Additions
$'000
6,855
4,000
―
―
5,984
31 December 2019
$'000
22,354
29,972
4,026
5,524
―
41,588
(5,016)
(32,111)
16,839
61,876
Federated Wireless, Inc.
Spin Memory, Inc.
Orbital Sidekick, Inc.
TableUp, Inc.
TouchBistro, Inc. (TableUp,
Inc.)- Common Stock
Total investments at fair
value
The company’s investment at fair value in Federated Wireless has changed from $22.4 million, as reported
at 31 December 2019, to $28.5 million at 31 December 2020. The increase in fair value primarily relates
to the additional investment made by Allied Minds in Federate Wireless during the period.
The company’s investment at fair value in Spin Memory has changed from $29.9 million, as reported at
31 December 2019, to $4.8 million at 31 December 2020. The change was primarily due to COVID-19
related delays in the required testing of its development chip with a strategic partner that affected Spin's
ability to secure new customers. As a result, this, coupled with an unexpected loss of a government bid
in late Q4 2020, Spin is now facing significant liquidity issues.
On 6 April 2018, Allied Minds made an investment in Orbital Sidekick, a company developing capabilities
in aerial and space-based hyperspectral imaging and analytics, initially for the oil and gas industry. Allied
Minds has significant influence over financial and operating policies of the investee by virtue of its large,
albeit minority, stake in the company and its representation on the entity’s board of directors. Allied
Minds only held shares of preferred stock in Orbital Sidekick. The preferred shares held by Allied Minds
are not equity-like and therefore these fall under the guidance of IFRS 9 and will be treated as a financial
asset held at fair value where all movements to the value of Allied Minds’ share in the preferred stock will
be recorded through the Consolidated Statements of Comprehensive Income/(Loss). On 24 December
2020, Orbital Sidekick, Inc., has conditionally secured $16.0 million in a Series A Preferred financing round.
Following this investment, Allied Minds' ownership of Orbital Sidekick's issued share capital is 26.52%
compared to 33.23% at 31 December 2020. As of 31 December 2020, Allied Minds recognised an
investment held at fair value related to its Preferred Shares in Orbital Sidekick of $5.5 million (31
December 2019: $4.0 million).
On 6 April 2018, Allied Minds made an investment in TableUp, a software provider enabling end-to-end
transparency through the restaurant supply chain to enable more effective inventory and operations
management. On 5 August 2020, TableUp was acquired by TouchBistro, Inc. (“TouchBistro”). The
acquisition was structured as a stock-for-stock transaction in which TouchBistro acquired 100% of the
shares of TableUp in exchange for the issuance of TouchBistro common shares to the shareholders of
TableUp. As such, Allied Minds’s investment in preferred stock, along with the convertible note, was fully
converted into common shares in TouchBistro. A total of 2,542,662 common shares of TouchBistro was
paid to Allied Minds valued at $5.99 million at the time of the transaction. As a result of the acquisition,
136
FINANCIAL STATEMENTS
Allied Minds’ ownership percentage was 1.52% at 31 December 2020. Allied Minds does not have
significant influence over the investee as it does not hold 20% or more of the voting power of the investee
as well as it does not have any board representation. As such, the investment does not meet the definition
of an associate under IAS 28 Equity Accounting (“IAS 28”) and therefore, the common shares are classified
as an investment at fair value, under IFRS 9 Financial Instruments (“IFRS 9”). At 31 December 2020, the
fair value of Allied Minds’ investment in TouchBistro was subsequently measured at $2.8 million.
Allocation Model Inputs
Allied Minds holds shares of preferred stock in Spin Memory, Federated Wireless and Orbital sidekick and
has significant influence over financial and operating policies of the investee by virtue of its stake in the
companies and representation on the entity’s board of directors. Allied Minds hold a minority interest in
the ordinary share capital of TouchBistro, where significant influence is not held. The preferred shares
and investment note above fall under the guidance of IFRS 9 and will be treated as a financial asset held
at fair value and all movements to the value of Allied Minds’ share of these assets will be recorded through
the Consolidated Statements of Comprehensive Income/(Loss). The following presents the quantitative
information about the significant unobservable inputs used in the fair value measurement of the Group’s
financial assets:
As of 31 December:
Volatility
Time to Liquidity (years)
Risk-Free Rate
IPO/M&A/Sale Probability
Sensitivity Analysis
2020
38.8%-73.5%
1.50 - 3.27
0.10% - 0.2%
0%/ 100%/ n/a
2019
26.7%-62.1%
0.5 - 3.27
1.58% - 1.6%
40%-60%/ 40%-60%/ n/a
The following summarises the sensitivity from the assumptions made by the Company in respect to the
unobservable inputs used in the fair value measurement of the Group’s financial assets. The sensitivities
provided reflect reasonably possible changes to the key assumptions:
As of 31 December:
Input
Enterprise Value
Volatility
Time to Liquidity
Risk-Free Rate (1)
M&A vs. IPO Probability
Sensitivity range
Financial assets increase/(decrease)
2020
$'000
2019
$'000
-2%
+2%
-10%
+10%
-6 months
+6 months
-0.02%/0.01%
0.02% /0.02%
100%/ 40%
0%/ 60%
(451)
613
602
(290)
445
(198)
445
(198)
―
―
(819)
846
1,136
(1,133)
886
(915)
886
(915)
(865)
842
(1) Risk-free rate is a function of the time to liquidity input assumption.
137
FINANCIAL STATEMENTS
(12)
Cash and Cash Equivalents
As of 31 December:
Bank balances
Total cash and cash equivalents
(13)
Trade and Other Receivables
As of 31 December:
Trade receivables
Prepayments and other current assets
Total trade and other receivables
(14)
Equity
2020
$'000
2019
$'000
24,489
24,489
90,571
90,571
2020
$'000
2019
$'000
394
5,422
5,816
60
5,642
5,702
On 8 November 2019, Allied Minds plc completed the sale of its entire stake in its portfolio company
HawkEye 360 to Advance for cash consideration of $65.6 million. As a result, the Company remeasured
the investment to the fair value on the on the date of the sale and derecognised its investment of $65.6
million. In addition, Allied Minds made a distribution of $4.9 million to participants under the terms of the
Company’s Phantom Plan.
On 5 December 2019, Allied Minds plc completed a court-approved reduction of the Company’s capital
by way of: (i) the capitalisation of the amount standing to the credit of the Company’s merger reserve by
way of the issue and subsequent cancellation of the Capital Reduction Shares; and (ii) the cancellation of
the amount standing to the credit of the Company’s share premium account, so as to create distributable
reserves (the “Capital Reduction”). The Capital Reduction created realised profits sufficient to eliminate
the accumulated losses of the Company and establish positive distributable reserves of approximately
$191.4 million. The purpose of the reduction of capital was to provide distributable reserves which
enabled the Company to make a special dividend payment of $39.7 million to shareholders and provided
the flexibility for future dividend payments. Following the reduction of capital, the number of issued
shares and the rights attached to those shares remained unchanged.
During 2020 and 2019, there were no options exercised under the U.S. Stock Plan. Additionally, 624,862
(2019: 1,248,378) shares were issued to existing and former employees of the Group during the year as
result of vesting of RSUs under the LTIP.
As of 31 December 2020, 11,551,496 ordinary shares were reserved under the U.S. Stock Plan and
24,781,174 were reserved under the LTIP, see note 6 for further discussion of the share-based payment plans.
138
FINANCIAL STATEMENTS
The table below explains the composition of share capital:
As of 31 December:
2020
$'000
2019
$'000
Equity
Share capital, $0.01 par value, issued and fully paid
242,187,985 and 241,563,123, respectively
Translation reserve
Accumulated profit
Equity attributable to owners of the Company
Non-controlling interests
Total equity
3,767
1,343
55,440
60,550
(2,264)
58,286
3,759
1,459
147,238
152,456
115
152,571
Holders of Ordinary Shares are entitled to vote, on all matters submitted to shareholders for a vote. Each
Ordinary Share is entitled to one vote. Each ordinary share is entitled to receive dividends when and if
declared by the Company’s Board of Directors. The Company has not declared any dividends in the past.
In February 2020, Allied Minds made a special cash dividend payment to shareholders of $39.7 million as
a result of the sale of Allied Minds’ share in HawkEye in the second half of 2019.
Translation reserve comprises all foreign exchange differences arising from the translation of the financial
statements of foreign operations.
(15)
Changes in Non-Controlling Interest (“NCI”)
For the two years ended 31 December 2020, the Group recognised the following changes in common
stock ownership in subsidiaries resulting in changes to non-controlling interest:
• On 10 January 2020, OcuTerra Therapeutics raised an additional $375K in the second closing of its
convertible note financing.
• On 4 February 2020, BridgeComm issued $2,000,000 in convertible notes to Allied Minds, following
the issuance of $1,000,000 in convertible notes to Boeing HorizonX Ventures in December 2019. In
August 2020, as a result of achieving certain development milestones under the JDA with Boeing,
BridgeComm secured the remaining $1.5 million of convertible debt from Boeing.
The following summarises the changes in the non-controlling ownership interest in subsidiaries by
reportable segment:
Non-controlling interest as of 31 December
2018
Share of comprehensive loss
Effect of change in Company’s ownership
interest
Equity-settled share based payments
US Subsidiary distributions to shareholders
Deconsolidation of subsidiaries
Dissolution of subsidiaries
Early stage
$'000
Later stage
$'000
Consolidated
$'000
18,181
(384)
(105)
61
(12,050)
7
(7,128)
303
(697)
(89)
473
—
1,543
—
18,484
(1,081)
(194)
534
(12,050)
1,550
(7,128)
139
FINANCIAL STATEMENTS
Non-controlling interest as of 31 December
2019
Share of comprehensive loss
Effect of change in Company’s ownership
interest
Equity-settled share based payments
Non-controlling interest as of 31 December
2020
(16)
Preferred Shares
(1,418)
1,533
115
(2,024)
—
1
(3,441)
(455)
(18)
117
1,177
(2,479)
(18)
118
(2,264)
Certain of the Group’s subsidiaries have outstanding preferred shares which have been classified as a
subsidiary preferred shares in current liabilities in accordance with IFRS 9 as the subsidiaries have a
contractual obligation to deliver cash or other assets to the holders under certain future liquidity events,
and/or a requirement to deliver an uncertain number of common shares upon conversion. The preferred
shares do not contain mandatory dividend rights. The preferred shares are convertible into common stock
of the subsidiary at the option of the holder and mandatorily convertible into common stock of the
subsidiary upon a qualified public offering at or above certain value and gross proceeds specified in the
agreements or upon the vote of the holders of a majority of the subsidiary preferred shares. Under certain
scenarios the number of common stock shares receivable on conversion will change. The Group has
elected not to bifurcate the variable conversion feature as a derivative liability, but account for the entire
instrument at fair value through the income statement.
The preferred shares are entitled to a vote with holders of common stock on an as converted basis. The
holders of the preferred shares are entitled to a liquidation preference amount in the event of a
liquidation or a deemed liquidation event of the respective subsidiary. The Group recognises the
subsidiary preferred shares balance upon the receipt of cash financing, and records the change in its fair
value for the respective reporting period through profit and loss. Preferred shares are not allocated shares
of the subsidiary losses.
The following summarises the subsidiary preferred shares balance:
As of 31 December:
BridgeComm
Total subsidiary preferred
shares
2020
$'000
6,497
6,497
Fair value
gain or loss
under IFRS 9
$'000
Additions
$'000
Disposals
$'000
1,480
1,480
—
—
—
—
2019
$'000
5,017
5,017
140
FINANCIAL STATEMENTS
The redemption is conditional on occurrence of uncertain future events beyond the control of the
Group. The amount that would be payable in case of such events is as follows:
As of 31 December:
BridgeComm
Total liquidation preference
2020
$'000
6,500
6,500
2019
$’000
5,020
5,020
For the two years ended 31 December 2020, the Group recognised the following changes in subsidiary
preferred shares:
• On 4 February 2020, BridgeComm issued $2,000,000 in convertible notes to Allied Minds, following
the issuance of $1,000,000 in convertible notes to Boeing HorizonX Ventures in December 2019. In
August 2020, as a result of achieving certain development milestones under the JDA with Boeing,
BridgeComm secured the remaining $1.5 million of convertible debt from Boeing.
The fair value is derived using the option pricing model (“OPM”), the Probability-Weighted Expected
Return Method (“PWERM”) or a hybrid of the two.
The key inputs into these valuation models include the equity value of the subsidiary, the term of the
instrument, risk free rate and volatility.
The valuation methodologies utilised for determining the equity value include the market approach,
income approach or cost approach or hybrid of these approaches. Other methodologies such as asset
based are also utilised where deemed appropriate. It is noted that in the current year none of the equity
values were determined using the income approach.
Where there has been a third party funding round in the year this has been used as the implied value of
the portfolio company or comparable guideline public companies or comparable transactions, adjusted
for indexation where this is deemed to be appropriate.
Whilst the Board considers the methodologies and assumptions adopted in the valuation are supportable,
reasonable and robust, because of the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a ready market for the investment
existed and the differences could be significant.
PWERM and OPM
The principal methods the Group applies for allocation of value are the PWERM, the OPM as well as a
hybrid of the two. These models take assumptions such as the equity values, term of the instruments, risk
free rate and volatility to determine the fair value of each share class.
The PWERM estimates the value of equity securities based on an analysis of various discrete future
outcomes, such as an IPO, merger or sale, dissolution, or continued operation as a private enterprise until
141
FINANCIAL STATEMENTS
a later exit date. The equity value today is based on the probability-weighted present values of expected
future investment returns, considering each of the possible outcomes available to the enterprise, as well
as the rights of each security class. The key judgement relates to probability weighting of the scenarios.
The OPM treats common stock or derivatives thereof as call options on the enterprise’s value or overall
equity value. The value of a security is based on the optionality over and above the value securities that
are senior in the capital structure (e.g. preferred stock), considering the dilutive effects of subordinate
securities. In the OPM, the exercise price is based on a comparison with the overall equity value rather
than per-share value.
Allocation Model Inputs
The following presents the quantitative information about the significant unobservable inputs used in the
fair value measurement of the Group’s subsidiary preferred shares liability:
As of 31 December:
Volatility
Time to Liquidity (years)
Risk-Free Rate
Probability M&A
2020
53.6%
2.00
0.10%
100%
2019
n/a*
1.64
n/a*
15%-85%
*In 2019, The Group valued BridgeComm using PWERM as opposed to OPM used in the current year and as such not applicable.
Sensitivity Analysis
The following summarises the sensitivity from the assumptions made by the Company in respect to the
unobservable inputs used in the fair value measurement of the Group’s subsidiary preferred shares
liability. Option Pricing Model and Probability Weighted Expected Return Method Inputs for Investments
Held at Fair Value at 31 December 2020 and 2019 respectively:
As of 31 December:
OPM Measurement Date
2020
$'000
Input
Sensitivity range
Enterprise Value
Volatility
Time to Liquidity
Risk-Free Rate (1)
-2%
+2%
-10%
+10%
-6 months
+6 months
-0.02/ -n/a
0.02/ n/a
(112)
114
266
(264)
117
(112)
117
(112)
142
FINANCIAL STATEMENTS
PWERM Measurement Date
As of 31 December:
Input
Enterprise Value
Discount rate
Time to Liquidity
Sensitivity range
-2%
2%
-5%
5%
-2.0 months
+2.0 months
2019
$'000
(38)
76
378
(304)
304
(228)
(1) Risk-free rate is a function of the time to liquidity input assumption.
The subsidiary preferred shares are measured at fair value through profit/loss (FVTPL) according to IFRS
9 at initial recognition and upon subsequent measurement. Hence, any gains and losses on the preferred
shares liability are recognised in profit or loss, unless they relate to changes in the entity’s own credit risk
for financial liability designated as at fair value through profit or loss. The effect of changes in the entity’s
own credit risk in the fair value of the financial liabilities are presented in other comprehensive income.
There were no adjustments considered for movement in credit risk as this is not applicable within the
specific valuation frameworks utilized for the fair values of the Group’s preferred share liability. The
subsidiary preferred shares values and movement in credit risk, if applicable, are being constantly
monitored as new information becomes available. For the year ended 31 December 2020, the change in
fair value of the subsidiary preferred shares is recorded in Finance cost, net in the consolidated statement
of comprehensive loss.
(17)
Trade and Other Payables
As of 31 December:
Trade payables
Accrued expenses
Other current liabilities
Trade and other payables, current
(18)
Loans
As of 31 December:
Current liabilities - Loans:
Unsecured loans
PPP loans
Non- Current liabilities - Loans:
Unsecured loans
Total loans
2020
$'000
319
1,457
325
2,101
2019
$'000
1,195
3,100
390
4,685
2020
$'000
2019
$'000
—
—
1,965
1,965
2,965
184
1,440
4,589
143
FINANCIAL STATEMENTS
The terms and conditions of outstanding loans are as follows:
2020
$'000
2019
$'000
As of 31 December:
Unsecured loan(1)
Unsecured loan(2)
Unsecured loan(3)
Total interest bearing
liabilities
Currency
Nominal
interest rate
Year of
maturity
Face value
Carrying
amount
Face
value
Carrying
amount
USD
USD
USD
5.0%
12.0%
8.0%
2019-21
2020-21
2019-22
2,500
100
1,325
3,825
2,862
103
1,440
1,000
1,000
950
965
4,589
1,950
1,965
BridgeComm convertible note (1)
On 16 December 2019, BridgeComm secured $1.0 million of funding through the issuance of a convertible
bridge note to Boeing HorizonX Ventures, LLC (“Boeing”). All principal and accrued interest shall be due
and payable on 31 January 2021. In August 2020, as a result of achieving certain development milestones
under the JDA with Boeing, BridgeComm secured the remaining $1.5 million of convertible debt from
Boeing. The $2.5 million promissory note was issued at a 5.0% interest rate that will be compounded
monthly and computed on the basis of a year of 365 days for the actual number of days elapsed and shall
be paid on the maturity date. The entire instrument and the offsetting discount will be measured at fair
value through profit or loss as the conversion feature fails the fixed for fixed equity classification. At 31
December 2020, the entire instrument was adjusted by a fair market change of $0.3 million.
OcuTerra Therapeutics promissory note (2)
On 23 September 2020, OcuTerra Therapeutics secured $0.1 million of funding through the issuance of a
promissory note to multiple investors at annual interest rate of 12.0% payable within one year from the
date of issuance. The note was issued at an interest rate that will accrue on the unpaid Principal Amount
at the rate of twelve (12%) per annum computed on the basis of a 365-day year.
OcuTerra Therapeutics convertible note (3)
On 5 November 2019, OcuTerra Therapeutics secured $0.95 million of funding through the issuance of a
convertible bridge note to multiple investors at annual interest rate of 8.0%. On 10 January 2020,
OcuTerra Therapeutics raised an additional $0.4 million in the second closing of its convertible note
financing. The note was issued at an interest rate that will accrue on the unpaid Principal Amount at the
rate of eight (8%) per annum, payable at the maturity date (36 month anniversary of the closing date). All
accrued interest shall be computed on the basis of a 360-day year consisting of twelve 30-day months,
and shall be payable on the date the outstanding principal amount shall become due and payable,
whether on the Maturity Date or by acceleration or otherwise, or upon conversion. The entire instrument
and the offsetting discount will be measured at fair value through profit or loss as the conversion feature
fails the fixed for fixed equity classification.
144
FINANCIAL STATEMENTS
(19)
Leases
Office and laboratory space is rented under non-cancellable operating leases. These lease agreements
contain various clauses for renewal at the Group’s option and, in certain cases, escalation clauses typically
linked to rates of inflation.
Right of use asset
Balance at 1 January
Additions
Derecognition of right-of-use assets*
Depreciation
Deconsolidation
Balance at 31 December
2020
$000s
1,016
-
-
(365)
-
651
* Derecognition of the right-of-use assets during 2019 is as a result of entering into a finance sub-lease.
Lease liability
Balance at 1 January
Additions
Cash paid
Interest expense
Deconsolidation
Balance at 31 December
2020
$000s
2,854
-
(1,150)
126
-
1,830
2019
$000s
4,205
6,897
(1,693)
(1,216)
(7,177)
1,016
2019
$000s
4,490
6,898
(1,540)
209
(7,203)
2,854
The following details the short term and long-term portion of the lease liability as at 31 December 2020:
Lease liability released in < 1 year
Lease liability released in over 1 year
Total Lease Liability
Total lease liability
$000s
1,024
806
1,830
During 2019, the Group relocated its corporate headquarters and as a result it sub-leased the office space
that has been presented as part of a right-of-use asset. As the sub-lease is for all of the remaining useful
economic life of the right-of-use asset, the sub-lease is classified as a finance lease.
The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease
payments to be received after the reporting date. Under IAS 17, the Group did not have any finance leases
as a lessor.
145
FINANCIAL STATEMENTS
In thousands of $
Less than 1 year
Between 1 and 5 years
More than 5 years
Total undiscounted lease receivable
Unearned finance income
Net investment in the lease
31 December 2020
740
438
-
1,178
47
1,131
Additions in the period relate to site leases that were entered into by Allied Minds’ consolidated
subsidiaries during 2019. Amounts were arrived at using the contractual minimal lease payments, present
valued using the applicable incremental borrowing rate of 5.50%.
Amounts recognised in profit or loss
In thousands of $
2020 – Leases under IFRS 16
Interest on lease liabilities
Income from sub-leasing right-of-use assets presented in
‘interest income’
(20)
Financial Instruments and Related Disclosures
31 December 2020
126
78
The following table shows the carrying amounts and fair values of financial assets and financial liabilities,
including their levels in the fair value hierarchy:
As of 31 December:
Financial assets designated as fair
value through profit or loss
Investments at fair value
Convertible note receivable
Loans and receivables
Cash and cash equivalents
Trade and other receivables
Security and other deposits
Total
Financial liabilities designated as fair
value through profit or loss
Convertible notes
Subsidiary preferred shares
Financial liabilities measured at
amortised cost
Trade and other payables
Lease liability
Total
2020
$'000
Fair value
Level 1
Level 2
Level 3
Total
—
—
—
41,588
41,588
1,500
—
1,500
—
1,500
41,588
43,088
—
—
4,590
—
—
6,497
4,590
6,497
—
4,590
6,497
11,087
Carrying
Amount
41,588
1,500
24,489
5,816
1,360
74,753
4,590
6,497
2,101
1,830
15,018
146
FINANCIAL STATEMENTS
As of 31 December:
Financial assets designated as fair
value through profit or loss
Investments at fair value
Convertible note receivable(1)
Loans and receivables
Cash and cash equivalents
Trade and other receivables
Security and other deposits
Total
Financial liabilities designated as
fair value through profit or loss
Convertible notes
Subsidiary preferred shares
Financial liabilities measured at
amortised cost
Trade and other payables
Lease liability
Total
2019
$'000
Fair value
Level 1
Level 2
Level 3
Total
Carrying
Amount
61,895
750
—
—
—
750
61,895
61,895
—
750
90,571
5,702
2,088
161,006
—
750
61,895
62,645
1,965
5,017
—
—
1,965
—
—
5,017
1,965
5,017
4,685
2,854
14,521
—
1,965
5,017
6,982
(1) On 5 August 2020, TableUp has been acquired by TouchBistro, Inc. (“TouchBistro”). As a result of the acquisition, the
entire instrument was converted into common shares during the year to 31 December 2020.
Total other financials assets were as follows:
For the year ended 31 December:
Deposits
Other long term assets
Total
Convertible note receivable
Other current assets
Total
2020
$'000
81
500
581
1500
779
2,279
2,860
2019
$'000
122
1,135
1,257
750
831
1,581
2,838
The fair value of financial instruments that are not traded is determined by using valuation techniques
that maximise the use of observable market data where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair value an instrument are observable, the
147
FINANCIAL STATEMENTS
instrument is included in Level 2. Where the inputs for determining the fair value of financial instruments
are not based on observable market data, the instrument is included in Level 3. For assumptions used in
the fair value measurement of the Group’s convertible notes designated as Level 2, see note 18.
For assumptions used in the fair value measurement of the Group’s subsidiary preferred shares liability
designated as Level 3, see note 16. For assumptions used in the fair value measurement of Investments
at fair value designated as Level 3, see note 11.
Cash and cash equivalents, trade receivables, and trade payables are carried at cost, which approximates
fair value because of their short-term nature.
(21)
Capital and Financial Risk Management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. Management monitors the level of capital
deployed and available for deployment in subsidiary projects. The Board of Directors seeks to maintain a
balance between the higher returns that might be possible with higher levels of deployed capital and the
advantages and security afforded by a sound capital position.
The Group’s executive management and Board of Directors have overall responsibility for establishment
and oversight of the Group’s risk management framework. The Group is exposed to certain risks through
its normal course of operations. The Group’s main objective in using financial instruments is to promote
the commercialisation of intellectual property through the raising and investing of funds for this purpose.
The Group’s policies in calculating the nature, amount and timing of funding are determined by planned
future investment activity. Due to the nature of activities and with the aim to maintain the investors’ funds
secure and protected, the Group’s policy is to hold any excess funds in highly liquid and readily available
financial instruments and reduce the exposure to other financial risks.
The Group has exposure to the following risks arising from financial instruments:
Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations. Financial instruments that potentially subject the Group to
concentrations of credit risk consist principally of cash and cash equivalents, investments held at fair
value, and trade and other receivables.
The Group held following balances:
As of 31 December:
2020
$'000
2019
$'000
Cash and cash equivalents
Investments held at fair value
Trade and other receivables
90,571
61,895
5,702
158,168
24,489
41,588
5,816
71,893
148
FINANCIAL STATEMENTS
The Group maintains money market funds, certificates of deposits, and fixed income securities with
financial institutions, which the Group believes are of high credit quality. Risk control assesses the credit
quality of the customer, taking into account its financial position, past experience and other factors.
Individual risk limits are set based on ratings in accordance with limits set by the Board. The utilisation of
credit limits is regularly monitored. The credit quality of financial assets that are neither past due nor
impaired can be assessed by reference to credit ratings (if available) or to historical information about
counterparty default rates.
Group policy is to maintain its funds in highly liquid deposit accounts with reputable financial institutions.
The Group’s investments in preferred stock are accounted for at fair value through profit or loss (FVTPL)
in accordance with IFRS 9. This measurement is appropriate as these financial assets are not held with the
objective to collect contractual cash flows which are solely payments of principal and interest (SPPI) on
the principal amount outstanding. The entity is primarily focused on fair value information and uses that
information to assess the asset’s performance and to make decisions. The subsidiary preferred shares
values and movement in credit risk are being constantly monitored as new information becomes available.
The aging of trade receivables that were not impaired was as follows:
As of 31 December:
2020
$'000
2019
$'000
Neither past due nor impaired
Past due 30-90 days
Past due over 90 days
Reserve for bad debt
135
259
―
―
394
60
―
―
―
60
The Group has a concentration of credit risk in respect of it financial asset held at fair value through the
profit or loss which relate to preferred share liabilities of $38.8 million. Of this balance $28.5 million
relates specifically to the preferred shares held in Federate Wireless. These investments are reviewed in
detail in note 11. The Group assesses the credit quality of customers, taking into account their current
financial position. An analysis of the credit quality of trade receivables that are neither past due nor
impaired is as follows:
As of 31 December:
Customers with less than three years of
trading history with the Group
2020
$'000
2019
$'000
394
394
60
60
Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with
its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities
149
FINANCIAL STATEMENTS
when they are due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Group’s reputation.
The Group seeks to manage liquidity risk, ensuring that sufficient liquidity is available to meet foreseeable
requirements.
The following are the remaining contractual maturities of financial liabilities at the reporting date. The
amounts are gross and undiscounted, and include estimated interest payments and exclude the impact
of netting agreements. The current portion of the carrying amount of lease obligations is included in trade
and other payables.
As of 31 December 2020:
$'000
Trade and other payables
Subsidiary notes payable
Subsidiary preferred shares
Lease liability
Carrying
amount
Total
Contractual cash flows
Less than
1 year
2-5 years
More than
5 years
2,101
4,590
6,497
1,830
15,018
2,101
4,302
6,497
1,830
14,730
2,101
3,150
6,497
1,830
13,578
—
1,440
—
—
1,440
—
—
—
—
—
As of 31 December 2019:
$'000
Carrying
amount
Trade and other payables
Subsidiary notes payable
Subsidiary preferred shares
Lease liability
4,685
1,965
5,017
2,854
14,521
Contractual cash flows
Less than
1 year
2-5 years
More than
5 years
4,685
1,965
5,017
2,854
14,521
—
—
—
—
—
—
—
—
—
—
Total
4,685
1,965
5,017
2,854
14,521
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or
at significantly different amounts.
Market Risk
Market risk is the risk that changes in market prices – such as foreign exchange rates, interest rates and
equity prices – will affect the Group’s income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return. The Group maintains the exposure to market risk from such
financial instruments to insignificant levels. The Group exposure to changes in interest rates is determined
to be insignificant.
Capital Risk Management
The Group is funded by equity finance and long term borrowings. Total capital is calculated as ‘total equity’
as shown in the consolidated statement of financial position.
150
FINANCIAL STATEMENTS
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital
structure, the Group may issue new shares or borrow new debt. The Group has some external debt in the
form of preferred shares and no material externally imposed capital requirements. The Group’s share
capital is set out in note 16.
(22)
Related Parties
Transactions with Key Management Personnel
Key Management Personnel Compensation
Key management personnel compensation received comprised the following:
For the year ended 31 December:
Short-term employee benefits
Share-based payments
Total
2020
$'000
1,022
105
1,127
2019
$'000
608
-
608
Short-term employee benefits of the Group’s key management personnel include salaries and bonuses,
health care and other non-cash benefits.
Share-based payments include the value of awards granted under the LTIP during the year. Share-based
payments under the LTIP are subject to vesting terms over future periods. See further details of the two
plans in note 6.
Bonuses to key management for the year of $375,000 were outstanding at 31 December 2020 (2019:
$522,600) and were paid in January of 2021.
Key Management Personnel Transactions
Directors’ remuneration for the year comprised the following:
For the year ended 31 December:
Executive Directors’ fees
Non-executive Directors' fees
Total
2020
$'000
1,127
359
1,486
2019
$'000
3,086
254
3,340
Executive management and Directors of the Company control 0.6% of the voting shares of the Company
as of 31 December 2020 (2019: 0.8 %).
In October 2020, Bruce Failing (Chair of Remuneration Committee) purchased 80,000 shares of the
company.
151
FINANCIAL STATEMENTS
The Group has not engaged in any other transactions with key management personnel or other related
parties.
(23)
Taxation
Amounts recognised in profit or loss
No current income tax expense was recorded for the years ended 31 December 2020 and 2019 due to
accumulated losses.
For the year ended 31 December:
Net income/(loss)
Income taxes
Net income/(loss) before taxes
Reconciliation of Effective Tax Rate
2020
$'000
(53,025)
—
(53,025)
2019
$'000
50,254
—
50,254
The Group is primarily subject to taxation in the US, therefore the reconciliation of the effective tax rate
has been prepared using the US statutory tax rate. A reconciliation of the US statutory rate to the effective
tax rate is as follows:
US federal statutory rate
Effect of state tax rate in US
Research credits
Share-based payment remeasurement
Permanent differences from consolidation
Other permanent differences
Current year income/(losses) for which no deferred
tax asset/(liability) is recognised
2020
%
2019
%
21.0
5.3
0.7
(0.4)
1.2
(0.7)
(27.1)
—
21.0
5.1
(2.5)
(1.2)
(38.3)
0.1
15.8
—
Factors that may affect future tax expense
The Group is primarily subject to taxation in the US and UK. Additionally, the Group is exposed to state
taxation in various jurisdictions throughout the US. Changes in corporate tax rates can change both the
current tax expense (benefit) as well as the deferred tax expense (benefit). A UK corporation rate of 19%
(effective 1 April 2020) was substantively enacted on 17 March 2020, reversing the previously enacted
reduction in the rate from 19% to 17%. This will increase the company's future current tax charge
accordingly.
The Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%. The change in our future
effective tax rate is not anticipated to have an effect on our tax until all of our U.S. federal net operating
losses and credits have been utilised.
152
FINANCIAL STATEMENTS
Unrecognised Deferred Tax Assets
Deferred tax assets have not been recognised in respect of the following items, due to history of operating
losses and no convincing evidence that future taxable profit will be available against which the Group can
use the benefits therefrom, as well as due to potential permanent restrictions under Internal Revenue
Code Section 382 rules:
As of 31 December:
Tax loss carry forward
Research credits
Temporary differences
Deferred tax assets
Other temporary differences
Deferred tax liabilities
Deferred tax assets, net, not recognised
2020
$’000
2019
$'000
79,285
7,022
15,494
101,801
—
—
101,801
78,472
6,739
5,931
91,142
—
—
91,142
Deferred tax is measured at the rates that are expected to apply in the period when the temporary
differences are expected to reverse, based on tax rates and laws that have been enacted or substantially
enacted by the statement of financial position date.
As of 31 December 2020 the Company had United States federal net operating losses carry forwards
(“NOLs”) of approximately $292.7 million (2019: $288.4 million) available to offset future taxable income,
if any. These carryforwards start to expire in 2024 and are subject to review and possible adjustment by
the Internal Revenue Service. The Company may be subject to limitations under Section 382 of the
Internal Revenue Code as a result of changes in ownership. The Company’s preliminary analysis on the
impact from Section 382 limitations suggests that there is unlikely to be a material restriction on NOLs. A
detailed exercise is ongoing. Upon the completion of the study, there may or may not be limitations on
the Company’s ability to utilise its current NOLs against future profits, although these are not expected to
be material.
(24)
Subsequent Events
The Company has evaluated subsequent events through 29 March 2021, which is the date the
consolidated financial information is available to be issued.
On 11 January 2021, OcuTerra Therapeutics, Inc. issued $100K in the form of a promissory note to Maxim
Partners LLC.
153
FINANCIAL STATEMENTS
COMPANY BALANCE SHEET
As of 31 December
Note
2020
$ '000
2019
$ '000
Non-current assets
Loan to subsidiary
Total non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Loan to subsidiary
Total current assets
Total assets
Equity
Share capital
Translation reserve
Accumulated reserves
Total equity
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
Registered number: 08998697
3
2
4
4
4
4
92,648
92,648
1,756
284
—
2,040
94,688
3,767
(59,394)
150,080
94,453
235
235
235
94,688
147,432
147,432
2,082
85
40,000
42,167
189,599
3,759
(54,612)
239,876
189,023
576
576
576
189,599
The financial statements on pages 154 to 160 were approved by the Board of Directors and authorised
for issue on 29 March 2021 and signed on its behalf by:
Harry Rein
Non-Executive Chairman
154
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31
December 2020
Balance at 31 December
2018
Total comprehensive loss
for the year
Loss for the year
Foreign currency
translation
Total comprehensive loss
for the year
Reduction of capital
Issuance of ordinary
shares
Equity-settled share
based payments
Balance at 31 December
2019
Total comprehensive loss
for the year
Loss for the year
Foreign currency
translation
Total comprehensive loss
for the year
Issuance of ordinary
shares
Dividend payment
Equity-settled share
based payments
Balance at 31 December
2020
Share capital
Share
Merger
Translation
Accumulated
Total
Shares
240,314,745
Amount
$'000
3,743
premium
$'000
160,170
reserve
$'000
263,367
reserve
$'000
(70,857)
reserves
$'000
(167,815)
equity
$'000
188,608
—
—
—
1,248,378
—
—
—
—
16
—
241,563,123
3,759
—
—
624,862
—
—
—
—
8
—
—
242,187,985
3,767
—
—
—
—
—
16,245
(6,310)
(7,537)
(6,310)
8,708
(160,170)
(263,367)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16,245
(13,847)
2,398
—
—
—
423,537
—
—
16
(1,999)
(1,999)
(54,612)
239,876
189,023
—
(4,782)
(55,917)
4,894
(55,917)
112
(4,782)
(51,023)
(55,805)
—
—
—
(39,707)
934
8
(39,707)
934
(59,394)
150,080
94,453
155
Note
2020
$ '000
2019
$ '000
(55,917)
(6,310)
934
53,755
(199)
(340)
(2,086)
(3,853)
43,223
43,223
8
(39,705)
(39,697)
(328)
2,082
1,756
(1,999)
6,515
139
370
(2,691)
(3,976)
4,296
4,296
16
—
16
336
1,746
2,082
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 December:
Cash flows from operating activities:
Net operating loss
Adjustments to reconcile net loss to net cash
used in operating activities:
Share-based compensation expense
Impairment loss in subsidiary and loan to subsidiary
Changes in working capital:
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables
Other finance cost
Net cash used in operating activities
Cash flows from investing activities:
(Issuance)/repayments of note receivable to subsidiary, net
Net cash provided by investing activities
Cash flows from financing activities:
Proceeds from issuance of share capital
Dividend payment
Net cash (used in)/ provided by financing activities
3
4
4
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
156
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
(1)
Accounting Policies
Basis of Preparation and Measurement
The financial statements of the parent company have been prepared under the historical cost convention,
in accordance with international accounting standard in conformity with the requirements of the
Companies Act 2006 and in accordance with the International Financial Reporting Standards, International
Accounting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union (“Adopted IFRSs”). A summary of the more important accounting policies which have been applied
consistently throughout the year are set out below.
Functional and Presentation Currency
The functional currency of the parent company is British Pounds. The financial statements of the parent
company are presented in US dollars to the nearest $’000s.
Foreign Currency
Transactions in foreign currencies are translated to the respective functional currencies of the parent
company at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are retranslated to the functional currency
at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are
recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are
retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was
determined.
On translation of the Company financial statements from functional currency to presentational currency
the assets and liabilities are translated at the closing exchange rates. Profit and loss accounts are
translated at the average rates of exchange during the year. Gains and losses arising on these translations
are taken to reserves.
Intercompany Loans
All intercompany loans are initially recognised at fair value and subsequently measured at amortised cost.
Where intercompany loans are intended for use on a continuing basis in the Company’s activities and
there is no intention of their settlement in the foreseeable future, they are presented as non-current
assets.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments with original maturities of three months or
less.
Impairment
If there is an indication that an asset might be impaired, the Company will perform an impairment review.
An asset is impaired if the recoverable amount, being the higher of net realisable value and value in use,
is less than its carrying amount. Value in use is measured based on future discounted cash flows (“DCF”)
157
FINANCIAL STATEMENTS
attributable to the asset. In relation to the investment held in subsidiaries and intra group receivable
balance the net realisable value is the fair value of the underlying subsidiaries. In such cases, the carrying
value of the asset is reduced to recoverable amount with a corresponding charge recognised in the profit
and loss account. The underlying assumptions in determining the fair value of the subsidiaries are key
estimates and include the determination of the fair value as described in note 11 and 16 of the group
financial statements.
Financial Instruments
Currently the Company does not enter into derivative financial instruments. Financial assets and financial
liabilities are recognised and cease to be recognised on the basis of when the related titles pass to or from
the Company.
Share-based Payments
Share-based payment arrangements in which the Company receives goods or services as consideration
for its own equity instruments are accounted for as equity-settled share-based payment transactions,
regardless of how the equity instruments are obtained by the Company. The Company’s share based
payment scheme, which awards shares in the parent entity, includes recipients who are not employees
the company, but in its subsidiaries. Where beneficiaries are employees in a subsidiary, their element of
the share based payment charge would usually be capitalized to recognize the service received by the
subsidiary. To the extent that these amounts will not be recovered the charge has continued to be
expensed by the Company.
The grant date fair value of share-based payment awards granted to employees is recognised as an
employee expense, with a corresponding increase in equity, over the period that the employees become
unconditionally entitled to the awards. The fair value of the options granted is measured using an option
valuation model, taking into account the terms and conditions upon which the options were granted. The
amount recognised as an expense is adjusted to reflect the actual number of awards for which the related
service and non-market vesting conditions are expected to be met, such that the amount ultimately
recognised as an expense is based on the number of awards that do meet the related service and non-
market performance conditions at the vesting date. For share-based payment awards with non-vesting
conditions, the grant date fair value of the share-based payment is measured to reflect such conditions
and there is no true-up for differences between expected and actual outcomes.
(2)
Cash and Cash Equivalents
As of 31 December:
Bank balances
Cash and cash equivalents
(3)
Loan to Subsidiary
Balance at 1 January
Additions
Impairment
2020
$'000
2019
$'000
1,756
1,756
2,082
2,082
2020
$'000
187,431
1,910
(53,755)
2019
$'000
186,842
3,572
(6,515)
158
FINANCIAL STATEMENTS
Repayments
Effect from currency translation
Balance at 31 December
(45,133)
2,195
92,648
(7,867)
11,399
187,431
The Company has loaned its excess cash to its operating subsidiary Allied Minds, LLC (‘the subsidiary’) , as
part of its continuing working capital investment programme in the wider group, and to be further
deployed by the subsidiary, to enable the group to deliver its strategic plans. The note bears an interest
of 1.25% and in the foreseeable future, repayment is neither planned nor likely to occur.
During 2020, the Directors reviewed the value of the underlying business and concluded an impairment
charge of $53.8 million should be recorded. The asset’s recoverable amount is determined to be based
on the fair value of the company’s subsidiaries together with its associates, preferred shares held and the
recoverable cash. This has been recorded against the loan to subsidiary balance (this note).
(4)
Share Capital and Reserves
Allied Minds plc was incorporated with the Companies House under the Companies Act 2006 as a public
company on 15 April 2014. Full detail of the share capital and reserves activity for the year can be found
in note 16 to the consolidated financial statements.
As of 31 December:
2020
$'000
2019
$'000
Equity
Share capital, $0.01 par value, issued and fully paid
242,187,985 and 241,563,123, respectively
Translation reserve
Accumulated deficit
Total equity
3,767
(59,394)
150,080
94,453
3,759
(54,612)
239,876
189,023
In December 2016, the Company issued 17,457,015 ordinary shares of one pence at 367 pence, which
were admitted to the premium listing segment of the Official List of the UK Listing Authority and to trading
on the LSE’s Main Market for listed securities. This resulted in approximately $78.1 million of net proceeds
from the equity placing (net of issue cost of $2.2 million). The amounts subscribed for share capital in
excess of the nominal value in relation to this transaction are reflected in the merger reserve balance as
of 31 December 2016.
On 8 November 2019, Allied Minds plc completed the sale of its entire stake in its portfolio company
HawkEye 360 to Advance for cash consideration of $65.6 million. As a result, the Company remeasured
the investment to the fair value on the date of the sale and derecognised its investment of $65.6 million.
In addition, Allied Minds made a distribution of $4.9 million to participants under the terms of the
Company’s Phantom Plan.
On 5 December 2019, Allied Minds plc completed a court-approved reduction of the Company’s capital
by way of: (i) the capitalisation of the amount standing to the credit of the Company’s merger reserve by
way of the issue and subsequent cancellation of the Capital Reduction Shares; and (ii) the cancellation of
159
FINANCIAL STATEMENTS
the amount standing to the credit of the Company’s share premium account, so as to create distributable
reserves (the “Capital Reduction”). The Capital Reduction created realised profits sufficient to eliminate
the accumulated losses of the Company and establish positive distributable reserves of approximately
$191.4 million. The purpose of the reduction of capital was to provide distributable reserves to enable the
Company to make a special dividend payment of $39.7 million to shareholders and provided the flexibility
for future dividend payments. Following the reduction of capital, the number of issued shares and the
rights attached to those shares remained unchanged.
In February 2020, Allied Minds made a special cash dividend payment to shareholders of $39.7 million as
a result of the sale of Allied Minds’ share in HawkEye in the second half of 2019.
Holders of Ordinary Shares are entitled to vote, on all matters submitted to shareholders for a vote. Each
Ordinary Share is entitled to one vote. Each ordinary share is entitled to receive dividends when and if
declared by the Company’s Board of Directors.
The share-based payment credit for the fiscal year ended 31 December 2020 included in accumulated
deficit was $0.9 million (2019 charge: $2.0 million).
(5)
Profit and Loss Account
As permitted by Section 408 of the Companies Act 2006, the Company’s profit and loss account has not
been included in these financial statements. The Company’s loss for the year was $55,917,000 (2019:
$6,310,000).
(6)
Directors’ Remuneration, Employee Information and Share-based Payments
The remuneration of the Directors of the Company is disclosed in note 23 to the consolidated financial
statements. Full details for their remuneration can be found in the Directors’ Remuneration Report on
pages 71 to 83. Full detail of the share-based payment charge and related disclosures can be found in
note 6 to the consolidated financial statements.
The Company had one employee during 2020 (2019: one).
160
Company Information
Company Registration Number 08998697
Registered Office
Beaufort House
51 New North Road
Exeter EX4 4EP
United Kingdom
Website
www.alliedminds.com
Board of Directors
Harry Rein
(Non-Executive Chairman)
Bruce Failing
(Senior Independent Director)
Mark Lerdal
(Independent Non-Executive Director)
Company Secretary
Nina Thayer
Broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
United Kingdom
TEL: +44 207 260 1000
Registrar
Link Group
The Registry
Unit 10
Central Square
29 Wellington Street
Leeds
LS1 4DL
TEL UK: 0871 664 0300
TEL Overseas: +44 208 639 3399
Solicitors
DLA Piper UK LLP
160 Aldersgate Street
London EC1A 4HT
United Kingdom
TEL: +44 207 349 0296
Independent Auditor
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
TEL: 020 7486 5888
Media Relations
Instinctif Partners
65 Gresham Street,
London EC2V 7NQ
United Kingdom
TEL: +44 20 7457 2020
161