ANNUAL REPORT
& ACCOUNTS
2019
Tekcapital’s portfolio company Belluscura plc
demonstrates their new portable oxygen concentrator
Tekcapital plc
Registration # 08873361
Stock Code: TEK
Risk Factors and Forward Looking Statements
The information contained in this document has been prepared and distributed by the Company and is subject to material updating,
completion, revision, verification and further amendment. This Report is directed only at Relevant Persons and must not be acted on
or relied upon by persons who are not Relevant Persons. Any other person who receives this Report should not rely or act upon it. By
accepting this Report the recipient is deemed to represent and warrant that: (i) they are a person who falls within the above descrip-
tion of persons entitled to receive the Report; (ii) they have read, agree and will comply with the contents of this notice. The securities
mentioned herein have not been and will not be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”),
or under any U.S. State securities laws, and may not be offered or sold in the United States of America or its territories or possessions
(the “United States”) unless they are registered under the Securities Act or pursuant to an exemption from or in a transaction not
subject to the registration requirements of the Securities Act. Neither this Report nor any copy of it may be taken or transmitted into
the United States, or distributed, directly or indirectly, in the United States, or to any “US person” as defined in Regulation S under
the Securities Act of 1933, including US resident corporations or other entities organised under the laws of the United States or any
state thereof or non-U.S. branches or agencies of such corporations or entities. This Report is not being made available to persons in
Australia, Canada, Japan, the Republic of Ireland, the Republic of South Africa or any other jurisdiction in which it may be unlawful to
do so and it should not be delivered or distributed, directly or indirectly, into or within any such jurisdictions.
Investors must rely on their own examination of the legal, taxation, financial and other consequences of an investment in the Com-
pany, including the merits of investing and the risks involved. Prospective investors should not treat the contents of this Report as
advice relating to legal, taxation or investment matters and are advised to consult their own professional advisers concerning any
acquisition of shares in the Company. Certain of the information contained in this Report has been obtained from published sources
prepared by other parties. Certain other information has been extracted from unpublished sources prepared by other parties which
have been made available to the Company. The Company has not carried out an independent investigation to verify the accuracy
and completeness of such third party information. No responsibility is accepted by the Company or any of its directors, officers, em-
ployees or agents for the accuracy or completeness of such information.
All statements of opinion and/or belief contained in this Report and all views expressed represent the directors’ own current as-
sessment and interpretation of information available to them as at the date of this Report. In addition, this Report contains certain
“forward-looking statements”, including but not limited to, the statements regarding the Company’s overall objectives and strategic
plans, timetables and capital expenditures. Forward-looking statements express, as at the date of this Report, the Company’s plans,
estimates, valuations, forecasts, projections, opinions, expectations or beliefs as to future events, results or performance. Forward-
looking statements involve a number of risks and uncertainties, many of which are beyond the Company’s control, and there can be
no assurance that such statements will prove to be accurate. No assurance is given that such forward looking statements or views are
correct or that the objectives of the Company will be achieved. Further, valuations of Company’s portfolio investments and net asset
value can and will fluctuate over time due to a wide variety of factors both company specific and macro-economic. Additionally, the
current Coronavirus epidemic may produce negative economic activities which could reduce the company’s economic performance
and the performance of its portfolio companies in ways that are difficult to quantify at this juncture. It may cause a recession in the
markets in which the Company operates, reduce the Company’s net asset values, revenue, cash flow, access to investment capital
and other factors which could negatively impact the Company. The reader is cautioned not to place reliance on these statements or
views and no responsibility is accepted by the Company or any of its directors, officers, employees or agents in respect thereoff. The
Company does not undertake to update any forward-looking statement or other information that is contained in this Report. Neither
the Company nor any of its shareholders, directors, officers, agents, employees or advisers take any responsibility for, or will accept
any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy
or completeness of the information contained in this Report or for any of the opinions contained herein or for any errors, omissions
or misstatements or for any loss, howsoever arising, from the use of this Report. Neither the issue of this Report nor any part of its
contents is to be taken as any form of contract, commitment or recommendation on the part of the Company or the directors of the
Company to proceed with any transaction or accept any offer and the right is reserved to terminate any discussions or negotiations
with any prospective investors. In no circumstances will the Company be responsible for any costs, losses or expenses incurred in
connection with any appraisal or investigation of the Company. This Report should not be considered a recommendation by the
Company or any of its affiliates in relation to any prospective acquisition of shares in the Company. No undertaking, Report, warranty
or other assurance, express or implied, is made or given by or on behalf of the Company or any of its affiliates, any of its directors, of-
ficers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this
Report and no responsibility or liability is accepted for any such information or opinions or for any errors or omissions.
© Copyright Tekcapital Plc 2020
PAGE
4
5
6
9
10
11
16
17
18
19
25
28
30
31
32
34
40
41
42
43
44
45
46
CONTENT
BUSINESS OVERVIEW
Overview
Investment Case
Key Highlights
Q&A with our Executive Chairman
Tekcapital at a Glance
Portfolio Review
Our Services
What Clients and the Press Say
IP Market
Corporate Governance
STRATEGIC REPORT
Chairman’s Summary
Financial Review & Key Performance Indicators
Board of Directors
DIRECTORS REPORT
Directors’ Report
Directors’ Remuneration Report
OUR FINANCIALS
Independent auditor’s report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
3
TEKCAPITAL COMMERCIALISES UNIVERSITY IP AND
PROVIDES IP SERVICES TO UNIVERSITIES AND CORPORATES
Tekcapital Group’s goal is to improve the quality of life and
create value from its ability to identify, acquire and commer-
cialise promising new university IP
Using our proprietary global university network, we provide
services to universities and companies to help them
commercialize their innovations. Using these services, we have
built a compelling group of portfolio companies to commercial-
ize high value properties we have uncovered.
We believe that when you couple commercialization ready,
compelling university IP with strong senior management,
vibrant companies will emerge, returns on invested capital
will outperform the sector and exits will occur faster. When we
realise exits the Group’s goal is to distribute a portion of the
proceeds as a special dividend to our shareholders.
4
www.tekcapital.com INVESTMENT CASE
WORLD’S LARGEST
NETWORK OF UNIVERSITY IP
4,500 UNIVERSITIES
Total revenue
including fair value
gains $7.7m
Profit after tax
$5.5m
SOLID, MULTI-SECTOR DUE DILIGENCE
CAPABILITY
60 SCIENTISTS
Net assets
$22.5m
NUMBER OF INDUSTRY LEADERS
RECRUITED BY PORTFOLIO COMPANIES
8 INDUSTRY LEADERS
NUMBER OF PORTFOLIO COMPANIES
ADDRESSING $1B+ MARKETS
4 PORTFOLIO COMPANIES
Compound Annual
Growth Rate of Net
Assets
90%
Return on Assets
(ROA)
28%
Return on invested
capital (ROIC)*
24%
*Since floatation in 2014
% of costs covered by
service
revenues
55%
5
KEY HIGHLIGHTS
FINANCIAL
Our investment objective is to achieve long-term growth of net assets and
returns on invested capital through the commercialisation of university
discoveries. 2019 was the best year for value creation in the Group’s short
history:
• Net Assets increased 40% to US$22.25m, a record level (2018:
US$16.13m)
• Net Assets per share $0.35 (2018: $0.30)
• Total revenue US$7.72m (2018: US$6.83m)
- Revenue from services increased 15% to US$1.20m (2018: US$1.04m)
- Net increase of US$6.52m in fair value of portfolio companies
(2018: US$5.79m)
• Reduction of operating expenses by 7% to $1.59m (2018: US$1.72m)
Service revenues cover approximately 55% of current cost base
• Profit before tax: $5.52m (2018: $4.55m)
• Placing to raise US$0.9m completed in July 2019.
INVESTMENT PORTFOLIO
Net Assets (US$m)
91.7% ownership
• Completed successful production and launched sales of MicroSalt® with the first three
commercial accounts. Approximately 25 companies are testing MicroSalt® for possible inclusion
in their snack food products.
• Appointed Mike Marrotte, V.P. Sales. Top performing sales leader and revenue growth strategist
• Appointed Javier Contreras as COO to further its commercialization efforts. Javier has significant
experience in developing supply chains with Clorox’s food business and other companies.
• Completed development and consumer packaging of its SaltMe!(R) line of full flavour, reduced
sodium potato chips in 4 flavors.
• Engaged a leading natural food wholesaler&food broker for retail placement of SaltMe!(R)
• Engaged two leading food ingredient brokers, Accurate Ingredients, Inc. and Hanks Brokerage Inc.,
to sell MicroSalt® to snack food companies throughout the U.S.
• Filed additional patent on coverage of MicroSalt® directed to improve low-sodium salt.
www.salarius.co
www.saltme.com
100% ownership
• Launched sales of Lucyd Loud 3.0 audio glasses, proper prescription glasses that can
be used to listen to music, answer your mobile phone or talk to Siri®.
• On track to launch Lucyd Loud Lyte in H2 2020. Lucyd Lyte is the first
prescription Bluetooth glasses that looks like traditional glasses in terms of style and
form factor.
• Filed additional patent protection on Lucyd modular eyewear and trademark
protection on Glasses as a Service (GaaS).
• Lucyd’s brand ambassador participated in the 2020 Superbowl as part of the San
Francisco 49’rs division champions.
www.lucyd.co
6
www.tekcapital.com
KEY HIGHLIGHTS
Net Assets (US$m)
www.guident.co
100% ownership
• On 29 April 2019 Guident filed a new patent application for controlling autonomous
vehicles after an accident (patent was allowed by the USPTO post period end).
• On 25 June 2019 Guident exclusively licensed a patent application from Michigan
State University for an AV communication and safety network. The patent enables AV’s
to “see” not only through its sensors but also information from the sensors of nearby
AV’s and objects.
• On 27 June 2019, Guident exclusively licensed patent # 9,964,948 from FIU which
enables remote control of an AV by a human operator when necessary.
• Begun its B2B marketing program to develop partnerships with vehicle OEM’s to
provide remote tele monitoring and control centre IP & technology for autonomous
vehicles and land based delivery drones, amongst other services.
www.salarius.co
www.saltme.com
• Continued progress with its unique and patented portable
18.9% ownership
oxygen concentrator programme
• Belluscura raised US $2.7m in 2019 at 15p to continue with its FDA clearance and
go to market strategy. Post money valuation ~US $9m for the entire business.
• Belluscura anticipates receiving 510(K) clearance from the US FDA in H1 2020
• Post end of period, Belluscura filed an additional patent application covering
devices and systems for treating people suffering from acute respiratory distress
caused by the Coronavirus. Belluscura and Separation Design are designing and
developing next generation, cost-effective, portable ECMO technology to treat
ARDS patients.
CORPORATE
www.belluscura.com
Strengthened the board of directors with the appointments of Lord David Willets and Mr. Louis Castro:
The Rt Hon Lord Willetts FRS is President of the Resolution Foundation and former U.K. Minister for Universities and Science. He
served as the Member of Parliament for Havant (1992-2015), and previously worked at HM Treasury and the No. 10 Policy Unit.
Lord Willetts is a visiting Professor at King’s College London, former Chair of the British Science Association and a member of the
Council of the Institute for Fiscal Studies. He is also an Honorary Fellow of Nuffield College, Oxford. Lord Willetts has written widely
on economic and social policy. His book ‘The Pinch’, which focused on intergenerational equity, was published in 2010, and he re-
cently published ‘A University Education’. Lord Willetts is a graduate of Oxford University and has been awarded numerous honorary
doctorates.
Louis Castro is a highly experienced and well qualified Director and Chartered Accountant with some thirty years spent in industry
and in financial services , including positions as Chief Executive, Finance Director and Non-Executive Director of several AIM listed
companies. He was previously the CFO at Eland Oil & Gas plc where he had full executive responsibility for finance, legal, corporate
finance and a budget of over $150m. He has held numerous board positions with both quoted public and private businesses as either
a Partner or Director. Previously he worked in financial services, in corporate finance and capital markets, with particular specialism
in the funding and advising of small and mid-cap companies across many sectors. Louis currently serves as a director of Green Park
Oil and Gas and a non-executive director of Stanley Gibbons Group plc, Jangada Mines plc and Orosur Mining Inc..
Continued growth of technology transfer services. Invention Evaluator continues to develop and has released a new version of the
Invention Evaluator’s tri-lingual website to facilitate expansion of its service offerings throughout Latin America. Vortechs Group also
has continued to perform well with its technology-transfer executive placement assignments.
7
KEY HIGHLIGHTS
POST PERIOD END PORTFOLIO COMPANY HIGHLIGHTS
On December 12, 2019, Salarius Ltd secured national food ingredient broker for Microsalt®. Accurate Ingredients
provides network of experienced sales representatives on east and west coast of the United States.
On 24 January 2020, Salarius Ltd secured additional food ingredient broker partner for sales of Microsalt®. The
agreement with Hanks Brokerage Inc. covers primarily snack food companies in the southwestern United States.
On 10 February 2020, Belluscura has filed an additional patent application (17 patents filed or licensed to-date)
entitled “Improved Extracorporeal Membrane Oxygenation Device, System and Related Methods,” covering devices
and systems for treating people suffering from acute respiratory distress caused by the Coronavirus.
In February 2020, Salarius Ltd’s executives exercised stock options resulting in Tekcapital’s ownership being reduced
from 97.5% to 91.7%.
On 2 March 2020, Salarius Ltd announced North American distribution agreement for launch of SaltMe!® snacks.
This agreement represents an important milestone for Salarius’ new potato chip snack line, enabling unprecedent-
ed reach of SaltMe!® products into consumer outlets of every size in North America.
On 4 March 2020, Salarius Ltd announced sales partnership agreement with iLevel Brands Inc as part of its launch
of North America sales of SaltMe!®. This agreement, combined with their previously announced distribution agree-
ment on 2 March 2020, will expand Salarius’ market penetration and brand awareness for its new potato chip
snack line with retail brand placements across the entire East Coast, Midwest and Southwest geographic areas of
the United States.
On 16 March 2020, Belluscura plc announced the filing of a patent application on a modular, portable oxygen
enrichment ventilation system for treating patients suffering from COPD and ARDS brought on by such diseases as
COVID-19.
On 24 March 2020, Salarius Ltd announced it has received an order from one of its distribution partners to launch
sales of its new SaltMe!(R) full flavor-low sodium snacks in 71 stores beginning in May 2020.
On 26 March 2020, Lucyd Ltd announced it has filed patent and trademark on its forthcoming Vyrb(TM) app. Vyrb
users will be able to active a world of smartphone actions with their voice in just moments, including social media
posting. The app is designed to improve utility of Lucyd Bluetooth(R) glasses and wireless hearables.
On 8 April 2020, Guident Ltd announced significant management additions including appointment of Harald Braun
as Company’s CEO and appointment of Daniel Grossman as the company’s Chief Revenue Officer. The company also
appointed Michael Trank as VP Software Development and Dr. Gabriel Castenada as Lead Architect, Artificial Intel-
ligence Software. Guident has also announced that it has received a Notice of Allowance from the United States
Patent and Trademark Office for its patent application # 16/386,530 entitled “Methods and Systems for Emergency
Handoff of an Autonomous Vehicle” and has filed an additional patent entitled, ”Intelligent Remote Monitoring and
Control of Autonomous Vehicles”.
On 24 April 2020, Lucyd Ltd announced launch of its Bluetooth(R)-enabled glasses on the website of US superstore
chain Walmart Inc.
8
www.tekcapital.com
“WE BELIEVE IN 2020 THERE WILL BE SIGNIFICANT
PROGRESS IN THE DEVELOPMENT OF OUR
PORTFOLIO.”
DR CLIFFORD M. GROSS
EXECUTIVE CHAIRMAN
Q&A WITH OUR EXECUTIVE CHAIRMAN
Q: What do you consider the most important milestone reached by Tekcapital this year?
A: 2019 was a great year for the company and our portfolio investments; Lucyd developed Loud 3, its latest
and advanced generation of Bluetooth glasses, Salarius initiated production of MicroSalt® and secured the
first three commercial customers and signed up a B2B food ingredient distributor, Belluscura made good pro-
gress with its new portable O2 concentrator and filed additional intellectual property protection, and Guident
has acquired two new intellectual prpoperties and developed a third one rounding out its IP position. As a
result our net assets increased significantly over 2018.
Q: What are the main goals for each portfolio company in 2020?
A: For Lucyd to expand their product distribution with additional major online retailers, for Salarius to grow
their B2B sales of MicroSalt® and launch their SaltMe(R) line of full flavour, low sodium chips, for Belluscura to
receive 510 K clearance for its portable O2 concentrator from the US FDA and for Guident to develop a busi-
ness collaboration with an OEM or tech company in the autonomous vehicle space for the remote monitoring
and control of AV’s or one of the other technologies.
Q: How does Tekcapital’s offering compare to its competitors?
A: We believe our portfolio companies are quite unique and diversified and the calibre of their management
will enable them to punch above their weight.
Q: How are the changes in the IP industry and the economy impacting Tekcapital’s business?
A: The focus and current trend for university IP commercialization is to build spin-out companies to de-risk the
technology and demonstrate initial market traction. This coincides with Tekcapital’s focus as a business.
Q: Should we expect any new investments or portfolio companies started in 2020?
A: We are not planning to announce any new portfolio companies in 2020 but rather we are focusing on
strengthening our existing investments with additional IP and follow-on investments. We think this approach
will result in enhanced returns on investment capital for our shareholders.
9
TEKCAPITAL AT GLANCE
T
ekcapital has built the largest university IP network in the world, coupled with a high-caliber team respon-
sible for market-ready technology selection. The Group provides universities and corporate clients with a
wide range of technology transfer services while simultaneously selecting compelling technologies for its
own portfolio, for subsequent commercialization. We believe this unique combination provides a competi-
tive advantage in the sector, as we both use and sell our IP investment services. This keeps us close to our
technology suppliers and allows the company to reduce its operating expenses.
TEKCAPITAL’S FORMULA OF MARKET READY IP COMBINED WITH LEADING TALENT POSITIONS
THE GROUP FOR LONG-TERM GROWTH AND INCREASES THE PROBABILITY OF MEANINGFUL
EXITS
Value of investment portfolio (US$m)
WORLD’S LARGEST NETWORK OF UNIVERSITY IP. WE CAPTURE APPROXIMATELY 80% OF
WORLD’S UNIVERSITY-DEVELOPED IP FROM 4,500 RESEARCH INSTITUTIONS ACROSS 160
COUNTRIES
10
www.tekcapital.com PORTFOLIO REVIEW
PATENTED LOW-SODIUM SALT
• Salarius is taking the lead in the industry bringing the best low-sodium salt
solution based on a mechanical transformation of the salt grain itself. This
solution is the only one that delivers the exact salt flavor, because it is salt.
The technology breaks the salt grains into a size that is one hundred times
smaller than a typical grain, delivering a powerful saltiness as the micro-grains
dissolve in mouth with appx. 50% less salt consumption.
• Independent taste testing indicates MicroSalt® delivers all of the flavour of salt
with roughly half the sodium
• Salarius announced it launched production and secured its first commercial
client for MicroSalt® (May 2019)
• Salarius announced it has received a follow-on order (13 June 2019) and
signed-up a Mexican seafood company (24 June 2019)
• Salarius signs third customer, a diversified snack food company (16 October
2019)
The company has continued to significantly ramp up its sales and distribution
channels during the post period end period:
• signed Hanks Brokerage Inc., to assist in the sale of Microsalt® to
snack food companies in the southwestern United States (Jan. 2020).
• signed Accurate Ingredients Inc. a food broker, to sell MicroSalt® to
snack food companies (Dec. 2019)
• signed an agreement with iLevel Brands Inc as part of its North
American launch of its new innovative SaltMe!® snack line (March 2020)
• signed a North American Distribution Agreement for Launch of SaltMe!®
snacks in the United States in May 2020.
The low sodium ingredient market is estimated to reach US$1.76bn by 2025
according to Future Market Insights1.
Tekcapital owns -
91.7%* of Salarius Ltd
91.7%
* In February 2020, Salarius executives exercised
stock options resulting in Tekcapital’s ownership
being reduced from 97.5% to 91.7%.
SOURCE
¹ https://www.futuremarketinsights.com/reports/sodium-reduction-ingredient-market
11
PORTFOLIO REVIEW
LUCYD: THE CLEAR CHOICE FOR TECH EYEWEAR
•Provides online prescription eyewear
with Bluetooth technology so customers
can remain connected.
Goal: Develop a successful global
eShop providing prescription eyewear
with advanced Bluetooth® technology
• Jan. 2020 launched Loud 3.0 upgraded
tech eyewear in two styles, with
Blue tooth® 5.0
• Dec. 2019 Lucyd announces forthcoming
introduction of modular Bluetooth
eyewear in late H1
• Dec. 2018 appointed Richard Sherman
an American football star, as its Chief
Brand Officer and brand ambassador.
• Strong IP: Lucyd has filed 20 patents
covering its products
• The current online market for eyewear is
US$3.8b according to Statista¹.
ON 3 DECEMBER 2018 LUCYD LTD APPOINTED RICHARD
SHERMAN, AMERICAN FOOTBALL STAR AS CHIEF BRAND
OFFICER AND BRAND AMBASSADOR
Tekcapital owns -
100% of Lucyd ltd
100%
SOURCES
¹ Statista.com - US Eyewear Market, Online Revenue Share
Photo courtesy of Creative Agency: Zaki Rose, Photographer: Carlos Cruz.
12
www.tekcapital.com
PORTFOLIO REVIEW
PORTFOLIO REVIEW
PREMIUM MEDICAL DEVICES AT VALUE PRICES
• Unique medical device company that has developed an improved
portable oxygen concentrator to provide on-the-go supplemental
X-PLO2R™
• Capable & highly experienced management: Bob Rauker, CEO
(previously Boston Scientific) & Dr Raymond Bray, VP
(previously St. Jude Medical).
• Post period end, filed a patent application covering devices and systems
for treating people suffering from acute respiratory distress caused
by the Coronavirus. Belluscura and Separation Design are designing
and developing next generation, cost-effective, portable ECMO
technology to treat ARDS patients.
• According to Grandview Market Research, the portable O2 market is
expected to grow to 580,000 units shipped per year by 2026¹.
Goal: Receive FDA clearance for the X-PLO2R™ portable oxygen
concentrator in H1 2020
The medical portable O2 market is expected to
grow from $1.4bn this year to $2.4bn by 2024¹
$2.21bn
$2.01bn
$1.83bn
$2.41bn
$1.66bn
$1.51bn
$1.40bn
2018 2019 2020 2021 2022 2023 2024
¹ https://www.gminsights.com/industry-analysis/medical-oxygen-
concentrators-market-report
Tekcapital owns ~
18.9% of Belluscura
18.9%
EXPLO2RE PORTABLE
OXYGEN CONCENTRATOR
Lightest:
Most Efficient:
Quiet:
Reliable:
Modular:
Low Cost:
Only 1.25kg (2.8lbs)
32% more O2 per pound
Only 39 dB
Long battery duration
Only expandable POC
with consumer replaceable filter cartridges
Projected 70% cost savings over
duration of the disease
Strong IP:
17 patents and applications
SOURCES
¹ https://drive.google.com/file/d/1s5Ou0UQWwjUfWAZ4TNc
Photo courtesy of Creative Agency: Zaki Rose, Photographer: Carlos Cruz.
13
PORTFOLIO REVIEW
PORTFOLIO REVIEW
PORTFOLIO REVIEW
AUTONOMOUS VEHICLE VALET
• Acquisition of exclusive license to U.S. Patent #9,429,943 from FMAU that enables
the development of software apps for controlling autonomous vehicles (“AV”) using
artificial intelligence.
• On 29 April 2019 Guident filed a new patent application for controlling
autonomous vehicles after an accident
• On 25 June 2019 Guident exclusively licensed a patent application from Michigan
State University for an AV communication and safety network. The patent enables
AV’s to “see” not only through its sensors but also information from the sensors of
nearby AV’s
• On 27 June 2019, Guident exclusively licensed patent # 9,964,948 from FIU which
enables remote control of an AV by a human operator when necessary.
• Post period end, Guident announced appointment of Harald Braun as CEO and Dan
Grossman as Chief Revenue Officer, as well as hiring of two senior software
developers.
Guident has begun its B2B marketing program and seeks to develop partnerships with
vehicle OEM’s to provide remote tele monitoring and control centres for autonomous
vehicles amongst other services. Such monitoring has recently be required by law in
the State of Florida and other jurisdictions.
Goal: Develop and provide IP and apps with licensed technology to autonomous
vehicle and land-based drone manufacturers.
Tekcapital owns -
100% of Guident Ltd
100%
ON 27 JUNE 2019, GUIDENT EXCLUSIVELY LICENSE PATENT
# 9,964,948 FROM FIU WHICH ENABLES REMOTE CONTROL
OF AN AV BY A HUMAN OPERATOR WHEN NECESSARY.
GUIDENT HAS BEGUN ITS B2B MARKETING PROGRAM
AND SEEKS TO DEVELOP RELATIONSHIPS WITH VEHICLE
OEM’S TO PROVIDE TELE MONITORING CENTRES FOR AV’S.
14
www.tekcapital.com
PORTFOLIO REVIEW
ON 6TH DECEMBER 2018 GUIDENT LTD APPOINTED JOHAN
DE NYSSCHEN AS A DIRECTOR. JOHAN PREVIOUSLY SERVED
AS EXECUTIVE VICE PRESIDENT OF GENERAL MOTORS AND
PRESIDENT OF THE CADILLAC MOTOR DIVISION, PRESIDENT
OF
INFINITI MOTOR COMPANY LTD, PRESIDENT OF AUDI
OF AMERICA INC., AND PRESIDENT OF AUDI JAPAN. JOHAN
CURRENTLY SERVES AS COO OF VOLKSWAGEN USA.
ON 14TH JANUARY, 2019 GUIDENT LTD APPOINTED DANIEL
GROSSMAN AS A DIRECTOR. HE MOST RECENTLY SERVED
AS CEO OF CHARIOT. PREVIOUSLY, DAN HELPED CREATE
GENERAL MOTORS’ MOBILITY DIVISION, “MAVEN”, AND LED ALL
OPERATIONS AS COO, AND WAS A VICE PRESIDENT AT ZIPCAR,
WHERE HE HELPED PIONEER THE BRAND GLOBALLY. ZIPCAR
WAS SUBSEQUENTLY SOLD TO AVIS-BUDGET FOR ~ $500M.
15
INVENTION EVALUATOR
Rapid, objective reports that assess the
market potential of any new technology.
Combines human analysts with unique
research algorithms.
IP SEARCH APP
Instantly
IP search
Global University
search and
app.
index worldwide university PCT
applications and patents on
your smartphone.
VORTECHS GROUP
Executive Recruiting Firm
Specializing In Technology
Transfer executives.
OUR SERVICES
Commercializing university innovations is challenging
and requires well-honed skills and specialized tools to be
successful and scalable. According to the Association of
University Technology Managers (AUTM) less than 1% of
university patents generated revenues of > $1m¹ in
2017. This indicates that to be successful in the space
it is necessary to mitigate selection bias, conduct
detailed and thorough due diligence, assess the market
recruit commercialization
potential properly and
executives with significant experience. Tekcapital’s
services have been built to address each of these points.
Our global discovery network covers 4,500 institutions in
160 countries, and our search app makes it easy to identify
IP, our 60
their
respective disciplines for hands-on due diligence, our
invention evaluator reports are the industry standard for
assessing market potential of university IP and more than
5,000 have been delivered to institutions worldwide, and
our in house recruiter Vortechs Group is a recognized
leader in recruiting tech-transfer executives. We use
these services to both help our clients and to enhance our
returns on invested capital for our portfolio companies.
scientists
experts
are
in
IP ACQUISITION
OPPORTUNITIES
Acquire disruptive, curated
university IP that’s ready for
market, directly from our
portfolio.
SOURCES
¹ AUTM US Licensing Activity Survey: 2017
16
TEK TRAINING
Custom solutions for building
new tech transfer offices, spin
out companies, and accelera-
tors. For tech transfer specialists,
research centers and government
www.tekcapital.com WHAT OUR CLIENTS AND THE PRESS SAY
WHAT OUR CLIENTS AND THE PRESS SAY
“What you do is disruptively high quality at a value no one
else has been able to touch.” Jeff Amerine
“We would recommend Invention Evaluator reports to
any organization looking to commercialize technologies,
especially for technologies outside of the core expertise
of the office. The benefit to value ratio is very high,
the reports are thorough, timely and in a format that
is easy to understand and share with investors.” Lisa
Lorenzen
“As a portfolio management tool for busy technology
transfer office, Invention Evaluator makes great sense.”
Rohan McDougall, Curtin University of Technology
“In a few short weeks, the Vortechs Group presented us with
more and better qualified candidates than we were able to find
on our own in the previous six months of searching. Thanks to
their expertise, we were able to find and hire the one-of-a-kind
candidate we were looking for to lead our Technology Transfer
efforts”
Tekcapital helps companies of all sizes find and acquire
university discoveries to create market value. We have found
their offering to be well received by our listed companies that
have tried their service. Paul Dorfman, Managing Director
effective way
Evaluator provides
extremely
“Invention
cost
through
technologies to see which ones fit our criteria.”
Dr. Craig Patch
an
screen
to
“We have had a great experience with the results of
the studies we requested.” “Hemos tenido una muy
Buena experiencia con los resultados de los estudios
que hemos solicitado” Patricia
Anguita
“Invention Evaluator is very responsive to our
needs, delivering our reports in a timely manner”
Dr. Fiona Cameron, University of Western
Sidney
“With their technology transfer recruiting expertise, The
Vortechs Group contributed to our process of finding
candidates whom we otherwise might never have seen,
ultimately leading to a successful hire. It was a pleasure
partnering with The Vortechs Group and I recommend
their services to organizations seeking technology transfer
and related positions.”
IP
(UIP)
Julian Mitchell- “In addition to a growing portfolio
investments, Tekcapital helps
of university
research institutions and businesses develop disruptive
technologies and expand their portfolios of intellectual
capital through leveraging their suite of powerful and
convenient technology transfer services.”
“Drew Hendricks- “Tekcapital released an app earlier this year
that allows users to search for IP from their smartphones.
This is a good way to get a feel for what is out there, identify
technology you may want, and get your creative wheels
spinning.”
Nick Hastreiter, “An entrepreneur who wants to benefit from
UIP would traditionally have to network with individual
universities, making relationships with their Technology
Transfer Offices. But today entrepreneurs and international
organizations facilitate a near frictionless system of access to
that wealth of innovation.”
17
THE IP MARKET
THE IP MARKET
CREATING MARKET VALUE FROM UNIVERSITY DISCOVERIES
“Universities are crucial drivers of intellectual advance and innovation. But the links between university research and
practical application have not always been as strong as they should. We can strengthen those links and turn great ideas
into commercial products.”
Lord David Willets
Tekcapital Non-executive Director and Former U.K. Minister of Universities and Science
Current market challenges and opportunities
The world continues to become smaller, everything is connected and the pace of innovation is quickening. As such,
we have expanded our footprint to include IP not only from universities in the UK but from all member states of the
World Intellectual Property Organization. Tekcapital’s current approach is to carefully select high-value innovations
that are ready for market, and nurture them with experienced management, often from Fortune 500 companies, as
this mitigates go-to-market risk. To-date, we believe our early results have shown great promise. Our approach is to
focus on assisting our portfolio companies to reach their next milestones on their paths to commercial success and
financial exits.
Tekcapital is keenly focused on finding and commercializing university discoveries that can positively impact the
quality of life, both for its own portfolio as well as for its clients. We continue to believe the future is very bright for
our business, because many of the greatest discoveries come from the world’s research institutions, to which we have
unfettered access. Efficiently harvesting these discoveries is our passion and our portfolio company progress is testi-
mony to the effectiveness of this approach. However, early stage companies and their new technology trajectories of
necessity entail significant risks. We choose to embrace these risks with the hope of producing real progress. Whilst
this is not a path for everyone, this is the one we are honored to navigate.
Tech transfer progress
report for U.S universities
Source: AUTM 2019
18
www.tekcapital.com
THE IP MARKET
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT
The Directors are responsible for, and committed to the principles underpinning, the corporate governance of the
Company and monitor the business affairs of the Company on behalf of its shareholders.
The Company has adopted and complies with the provisions of the QCA Code. Since our listing we have supported
the QCA Code’s principle to review regularly the effectiveness of the board’s performance as a unit, as well as that
of its committees and individual directors. For a full list of the 10 principles of the QCA code and our compliance
approach for each, please refer to the corporate governance tab on our website: https://www.tekcapital.com/
corporate-governance/ .
The Board
The Board sets the Group’s strategic aims and ensures that necessary resources are in place for the Group to meet
its objectives. All members of the Board take collective responsibility for the performance of the Group, the Group’s
Corporate Governance and all decisions are taken in the interests of the Group. Whilst the Board has delegated the
normal operational management of the Group to the Executive Directors and other senior management, there are
detailed specific matters subject to decision by the Board of Directors. These include acquisitions and disposals, joint
ventures and investments, projects of a capital nature and all significant contracts. The Non-Executive Directors
have a responsibility to challenge constructively the strategy proposed by the Executive Directors which includes to
scrutinise and challenge performance to ensure appropriate remuneration and succession planning arrangements
are in place in relation to Executive Directors and other senior members of the management team as appropriate.
The senior executives enjoy open access to the Non-Executive Directors. The Chairman is responsible for leadership
of the Board and ensuring its effectiveness on all aspects of its role including Corporate Governance. The Chairman
sets the Board’s agenda and ensures that adequate time is available for discussion of all agenda items, especially
strategic issues. The Chairman promotes a culture of openness and debate by facilitating the effective contribution
of Non-Executive Directors and ensuring constructive relations between Executive and Non-Executive Directors.
The Chairman is also responsible for ensuring that the Directors receive accurate, timely and clear information. The
Chairman also ensures effective communication with shareholders. All Directors allocate sufficient time to the Group
to discharge their duties.
There is a formal, rigorous and transparent procedure for the appointment of new Directors to the Board. The search
for Board candidates is conducted, and appointments made, on merit, against objective criteria and with due regard
for the benefits of diversity on the Board. The Board is responsible for ensuring that a sound system of internal con-
trol exists to safeguard shareholders’ interests and the Group’s assets. It is responsible for the regular review of the
effectiveness of the systems of internal control. Internal controls are designed to manage rather than eliminate risk
and therefore even the most effective system cannot provide assurance that every risk, present and future, has been
addressed. The key features of the system that operated during the year are described below.
Orgnisational structure and control environment
The Board of Directors meets at least six times per year to review the performance of the Group and to address
important matters. It seeks to foster a strong ethical culture across the Group. There are clearly defined lines of re-
sponsibility and delegation of authority from the Board to the operating subsidiaries and our portfolio companies.
The Directors of each subsidiary meet on a regular basis with members of the Group Board in attendance.
19
CORPORATE GOVERNANCE
Board structure
Group’s Board contains a balance of Executive and Non-Executive Directors, including an Executive Chairman who is
responsible for dealing with the strategic direction and long-term success of the Group. The Board will meet every
three months or at any other time deemed necessary for the good management of the business and at a location
agreed between the Board members. The Non-Executive Directors, are all considered independent directors.
The Board considers that it departs from the principles of the QCA Code in respect to the fact that the Chairman and
CEO role is combined which is a due to the current size of Tekcapital which dictates that this is the most efficient and
cost-effective mode of operation at this time. The board will continue to monitor the appropriateness of a combined
chair and CEO and will continue to consider a separation of these roles in the future when the opportunity arises and
when Tekcapital is of a size when it can justify adding an additional non-executive director to the board.
The Board has established an audit committee, remuneration committee and nominations committee, with formally
delegated duties and responsibilities and written terms of reference. From time to time, separate committees may
be set up by the Board to consider specific issues when the need arises.
Board composition, experience and dynamics
The Company operates in complex and challenging technological and geographical areas and the Board is mindful
that in order to deal effectively with the challenges of the business and to maximise its growth opportunities it has
to incorporate a broad range of skills and diversity. The Board maintains a skills, diversity and experience matrix
which will be periodically reviewed at Board meetings to evaluate current and future requirements. The Board and
its committees will also seek external expertise and advice where required. Board members undertake continuing
professional development as an when appropriate.
Board evaluation
The Board considers evaluation of its performance and that of its committees and individual directors to be an
integral part of corporate governance to ensure it has the necessary skills, experience and abilities to fulfil its re-
sponsibilities. The goal of the Board evaluation process is to identify and address opportunities for improving the
performance of the board and to solicit honest, genuine and constructive feedback. The Board considers the evalua-
tion process is best carried out internally at the Group’s current size, However the Board will keep this under review
and may consider independent external evaluation reviews in due course as the Company grows. The Board will, as a
whole or in part as appropriate, undertake the evaluation process aided by the Executive Chairman, and independent
Non-Executive Directors or external advisors as necessary. The Chairman is responsible in ensuring the evaluation
process is ‘fit for purpose’, as well as dealing with matters raised during the process. The Chairman will keep under
review the frequency, scope and mechanisms for the evaluation process and amend the process as required.
Where deficiencies are identified these will be addressed in a constructive manner. Where necessary individual
Directors will be offered mentoring and training. If deficiencies are identified within the Board as a whole, then
changes or additions to the Board will be considered in conjunction with the Remuneration Committee. The evalu-
ation process will be focused on the improvement of Board performance, through open and constructive dialogue
and the development and implementation of action plans. The Board will report on its evaluation and actions in its
Annual Report. Succession planning is a vital task for boards and the management of succession planning represents
a key measure of the effectiveness of the Board and a key responsibility of both the Nominations Committee and
wider Board.
20
www.tekcapital.com Internal Control
The key procedures which the Directors have established with a view to providing effective internal control are as
follows:
• Regular Board meetings to consider the schedule of matters reserved for Directors’ consideration;
• A risk management process;
• An established organisational structure with clearly defined lines of responsibility and delegation of authority;
• Appointment of staff of the necessary calibre to fulfil their allotted responsibilities; Comprehensive budgets, fore
casts and business plans approved by the Board, reviewed on a regular basis, with performance monitored against
them and explanations obtained for material variances; and
• An Audit Committee of the Board, comprising Non-Executive Directors, which considers significant financial control
matters as appropriate.
Business model and strategy
Tekcapital Group’s goal is to improve the quality of life of it customers and create value from its ability to identify,
acquire and commercialise promising new university IP. We also deliver a wide range of technology transfer services
through a number of operating divisions. These services are designed to assist universities and corporates with the
commercialisation of new IP. Over the years we have built up an extensive international network of universities and
research institutions that develop licensable IP for potential acquisition, by ourselves or to meet client needs.
Corporate Culture
The Board recognises that a corporate culture based on sound ethical values and behaviours is an asset and provides
competitive advantages. The Company operates in international markets and is mindful that respect of individual
cultures is critical to corporate success, as an example our Invention Evaluator website is available in English, Span-
ish and Portuguese. In accordance with the Company’s stated mission it endeavours to conduct its business in an
ethical, professional and socially responsible manner, treating our employees, customers, suppliers and partners with
equal courtesy and respect at all times.
The Board is committed to maintaining good communication and having constructive dialogue with all of its stake-
holders, including shareholders, providing them with access to information to enable them to come to informed
decisions about the Company. The
Investor Relations section of the Company’s website provides all required regulatory information as well as addi-
tional information shareholders may find helpful including: information on Board Members, Advisors and Significant
Shareholdings, a historical list of the Company’s Announcements since inception, its Financial Calendar, Corporate
Governance information and Media Interviews and information designated as “News.”
Results of shareholder meetings and details of votes cast will be publicly announced through the regulatory system
and displayed on the Company’s website under “Announcements,” with suitable explanations of any actions under-
taken as a result of any significant votes against resolutions. Information on the work of the various Board Commit-
tees and other relevant information are included in the Company’s Annual Report.
21
CORPORATE GOVERNANCE
Risk management
As an entrepreneurial business focused on emerging technologies, operating in both established and emerging
markets, there is clearly an elevated risk which we believe is balanced by potentially greater rewards. The Board is
mindful of and monitors both its corporate risks and individual project risks. Risks are categorised by both prob-
ability and impact and appropriate measures identified to monitor and mitigate any potential impact when possible.
Technology and portfolio company risks are dealt with on a case by case basis and monitored through the life cycle
of the investment as risks change and new risks appear. Portfolio company risks and mitigation will be part of regu-
lar management meetings. In some cases if we cannot manage or mitigate a specific portfolio company risk we may
seek to close the portfolio company to better deploy our resources to higher value opportunities. We have done this
on a few occasions. The Company’s corporate risks, risk monitoring, and risk management procedures are regularly
reviewed by the Board and when appropriate incorporated in RNS releases. The Company discloses portfolio com-
pany risks in its Annual Report each year.
Audit Committee
The Audit Committee assists the Board in discharging its responsibilities with regard to corporate governance,
financial reporting and external and internal audits and controls, including, amongst other things, reviewing the
Company’s annual financial statements, reviewing and monitoring the extent of the non audit services undertaken
by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the Com-
pany’s internal controls and risk management systems. The ultimate responsibility for reviewing and approving the
annual report and accounts and the half yearly reports remains with the Board. Membership of the Audit Commit-
tee comprises Dr Robert Miller and Louis Castro (as chairman), who is considered by the Directors to have recent
and relevant financial experience. The Audit Committee will meet formally not less than three times every year and
otherwise as required.
Nomination Committee
The Nominations Committee is responsible for leading the process for board appointments and making recom-
mendations to the Board to implement a formal and transparent procedure for the appointment of new directors to
the Board. The Nominations Committee comprises Dr Clifford Gross (as chairman), Louis Castro, Malcolm Groat, Lord
David Willetts and Dr Robert Miller. The Nominations Committee will meet not less than twice a year and at such
other times as the chairman of the committee shall require.
Remuneration Committee
The Remuneration Committee is responsible for establishing a formal and transparent procedure for develop-
ing policy on executive remuneration and to set the remuneration packages of individual Directors. This includes
agreeing with the Board the framework for remuneration of the Chief Executive Officer, all other executive direc-
tors, the company secretary and such other members of the executive management of the Group as it is designated
to consider. It is furthermore responsible for determining the total individual remuneration packages of each
Director including, where appropriate, bonuses, incentive payments and share options. No Director may be involved
in any decision as to their own remuneration. The membership of the Remuneration Committee comprises Dr Rob-
ert Miller (as chairman) and Louis Castro. The Remuneration Committee will meet not less than three times a year
and at such other times as the chairman of the committee shall require.
22
www.tekcapital.com Corporate Responsibility
The Board is very aware of the importance of its corporate responsibilities, particularly in terms of ensuring that
high standards of behaviour are maintained wherever the Group is operating. The following principles and processes
have been established for that purpose:
• Only commercialise technologies that improve the saftyey, health and well being of the customers we serve;
• Protecting the health and safety of all employees is paramount;
• Comply with relevant International Export Controls for technology transfer;
• The Group maintains a an anti-bribery policy and complies with both UK and local statutes.
Financial planning, budgeting and monitoring
The Group operates a planning and budgeting system with an annual budget approved by the Board. There is a fi-
nancial reporting system which compares results with the budget and the previous year each month to identify any
variances from approved.
Plans in addition to Y-O-Y comparisons of relevant KPI’s. Monthly rolling cash flow forecasts form part of the re-
porting system. The Group remains alert to react to new business opportunities as they arise. With a keen focus on
strengthening our portfolio companies.
Capital Management policies and procedures
The Group’s capital management objectives are:
• To ensure the Group’s ability to continue as a going concern; and
• To provide an adequate return on invested capital (ROIC) and increase in net assets.
• The Group monitors capital on the basis of the carrying amount of equity plus its cash and cash equivalents as
presented on the face of the statement of financial position.
• The Group manages the capital structure and seeks to adjust it in the light of changes in economic conditions
and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group
may review any dividends paid to shareholders and potentially issue new shares.
•There is no requirement for the Group to maintain a strong capital base for each of its portfolio companies
although it seeks to support them when appropriate and feasible. These policies have not changed in the year.
The Directors believe that they have been able to meet their objectives in managing the capital of the Group
even in the face of a challenging global pandemic.
23
CORPORATE GOVERNANCE
Non-Executive Directors
The Non-Executive Directors are considered by the Board to be independent in character and judgement and there
are not considered to be any circumstances that are likely to affect their judgement as Directors of the Group. Their
interests in the share capital of the Company are not considered to be likely to affect their judgement as Directors
of the Group.
Annual report
The Directors consider the annual report and financial statements, taken as a whole, is fair, balanced and under-
standable and provides the information necessary for shareholders to assess the Company’s performance, business
model, strategy and risks.
24
www.tekcapital.com STRATEGIC REPORT
STRATEGIC REPORT
STRATEGIC REPORT
Chairman’s Summary
Tekcapital brings innovations from lab to market that en-
hance safety and health and improve the quality of life. In
2019, all of our active portfolio companies have made sig-
nificant progress and our Net Asset Value increased by 46%.
We have also grown our service revenues by 15%, including
portfolio company management fees and R&D related tax
credits. As a result, our profits and net assets ended the year
at record levels.
Key Portfolio companies
Using our proprietary global university network, we provide
services to universities and companies to help them com-
mercialize their innovations. Over the past four years, using
these services, we have built a compelling group of portfo-
lio companies to commercialize high value properties we
have uncovered. We believe that when you couple commer-
cialization ready, compelling university IP with strong senior
management, vibrant companies will emerge, net assets will
grow, returns on invested capital will outperform the sector
and exits will occur faster. When we realise exits through
trade sales or IPO’s, the Group’s goal is to distribute a portion
of the proceeds as a special dividend to our shareholders.
Salarius is a food tech business that owns a patented process
to produce nanoparticle sized salt called MicroSalt® These
small crystals dissolve faster on the tongue, so you need to
use less salt, while still having the same salty taste. Less salt
means about 50% less sodium. Less sodium means a reduced
likelihood of developing heart disease, the world’s number
one
killer. Salarius has added additional senior management with
Fortune 500 company manufacturing experience, and has be-
gun selling MicroSalt®, and launched its line of SaltMe!(R)
Snacks in H1 2020. According to Future Market Insights¹, the
low sodium ingredient market is estimated to reach US$1.76bn
by 2025. Tekcapital owns 91.7% of Salarius.
Key Investment rationale: Whilst consumers continue to crave
salted snacks, there is a significant trend for better for you,
health conscious foods that taste good. As heart disease con-
tuinues to rise and represents the leading cause of premature
death in the world, reducing sodium in the foods we eat is of
paramount and continuing importance.
Lucyd has built a new, online eyeglass business that combines
technology with traditional eyewear. Recently they introduced
Lucyd Loud 3.0 upgraded Bluetooth® eyewear. This product
combines proper prescription glasses with Bluetooth tech-
nology that you can use to answer your phone, listen to music
and talk with Siri®. The product has been well received and
the company is focused on expanding its sales with retail dis-
tribution through sporting goods and other specialty stores in
2020. Lucyd has also developed and filed approximately 20
patents on modular Bluetooth eyewear that enables the con-
sumer to quickly and inexpensively change the look of their
glasses. The company anticipates launching this new product
in 2020 along with Lucy Lyte, the first Bluetooth prescription
eyewear, that look like regular glasses in terms of their stream-
lined form factor.
According to Statista2, the current online market for eyewear is
$3.8b per year. Tekcapital owns 100% of Lucyd.
2019
1- https://www.futuremarketinsights.com/reports/sodium-reduction-ingredient-market
2- https://www.statista.com/outlook/12000000/109/eyewear/united-states#market-onlineRevenueShare
3- https://www.statista.com/statistics/428692/projected-size-of-global-autonomous-vehicle-market-by-
vehicle-type/
FINANCIAL PERFORMANCE
2019 was the best year for value creation in the Group’s history. A 40% in-
crease in net assets were accompanied by a 15% increase in service revenue.
The Group was able to accomplish this whilst simultaneously reducing its
administrative costs by 7%. The Group has now demonstrated three consecu-
tive years of growth in Net Assets and service revenue.
Due to the quickening pace of innovation, patented, exogenously developed
university technologies are a valuable currency, and as a result, we continue
to believe that the market opportunity for the Group is both large and should
continue to grow apace in lock-step with our portfolio companies. In short
we believe 2020 is a year for demonstration of significant progress amongst
many of our portfolio companies.
25
STRATEGIC REPORT
STRATEGIC REPORT
Key Investment rationale: Digital assistants have gained significant prominence amongst consumers of all ages. Indi-
viduals want to stay connected to their digital lives throughout the day. Lucyd’s Bluetooth® enabled glasses facilitate
seamless connectivity whilst providing glasses that correct vision and protect the eyes with fashion forward frames at
an affordable price. Additionally, the pedestrian accidents and deaths are on the rise partially from distractions caused
by mobile devices. Lucyd can help deal with this problem.
Guident owns or holds the exclusive licence to a group of patents that together we believe improve the safety of
autonomous vehicles and land-based autonomous delivery drones. Guident has significantly increased its intellectual
capital in 2019 with several additional patent acquisitions and one in-house developed property. Guident has begun
its B2B marketing program and seeks to develop partnerships with vehicle OEM’s to provide remote tele monitoring
and control centres for autonomous vehicles amongst other services. Such monitoring has recently been required by
law in the State of Florida and other jurisdictions. According to Statista, the US market for Autonomous vehicles is
projected to reach $6 billion by 2025. Tekcapital owns 100% of Guident.
Key Investment rationale: Autonomous vehicles and ground based delivery drones are about to make their entrance on
the world’s roads. They hold the potential to significantly reduce accidents and transportation costs. We believe that
ensuring the safety of these vehicles with software apps for primary use cases including accident remediation coupled
with remote monitoring and control centres, will be required for rapid consumer adoption.
Belluscura has developed an improved portable oxygen concentrator to provide on-the-go supplemental O2, with user
replaceable filter cartridges. When a patient’s disease progresses they now can upgrade the filter cartridge to provide
more litres of O2 per minute, rather than having to replace an expensive medical device. This cost savings will be
beneficial to patients and insurance companies and should help make healthcare more affordable as per Belluscura’s
mission.
Belluscura raised US $2.7m in 2019 at 15p/share to continue with its FDA clearance and go to market strategy. Post
money valuation ~US $9m for the entire business. Belluscura anticipates receiving 510(K) clearance from the US FDA
in H1 2020. Upon receipt of clearance from the FDA, the Directors believe that Belluscura’s value should significantly
increase. According to Global Market Insights, the medical portable O2 market is currently $1.4bn a year and growing
by more than $100m/year1 . Tekcapital owns 18.9% of Belluscura.
Post end of period, Belluscura has filed an additional patent application (17 patents filed or licensed to-date) entitled
“Improved Extracorporeal Membrane Oxygenation Device, System and Related Methods,” covering devices and systems
for treating people suffering from acute respiratory distress caused by the Coronavirus. The latest patent application
covers devices and systems for treating people suffering from Acute respiratory distress syndrome (“ARDS”) including
patients suffering from the coronavirus. Belluscura and Separation Design are designing and developing next genera-
tion, cost-effective, portable ECMO technology to treat ARDS patients.
Key Investment rationale: Chronic obstructive pulmonary disease (“COPD”) afflicts more than 250 million individuals
worldwide and is growing due to the aging population, smoking and air pollution. Further, as a result of the COVID-19
pandemic, individuals who recover may have residual lung damage. Many of these individuals could benefit from the
supplemental oxygen provided by portable oxygen concentrators. Belluscura’s patented approach to enable users to
upgrade their portable oxygen concentrators as their disease progresses rather than purchase a new unit will make
healthcare more affordable for these patients and their insurance providers.
26
1 https://www.gminsights.com/industry-analysis/medical-oxygen-concentrators-market-report
2https://www.amazon.com/Helen-Teacher-Story-Keller-Sullivan/dp/0891282343
www.tekcapital.com STRATEGIC REPORT
Corporate
Tekcapital has strengthened the board of directors with the appointments of Lord David Willetts and Mr. Louis Castro.
Rt Hon Lord Willetts FRS is President of the Resolution Foundation and former U.K. Minister for Universities and Science. He
served as the Member of Parliament for Havant (1992-2015), and previously worked at HM Treasury and the No. 10 Policy Unit.
Lord Willetts is a visiting Professor at King’s College London, former Chair of the British Science Association and a member of
the Council of the Institute for Fiscal Studies.
Louis Castro is a highly experienced and well qualified Director and Chartered Accountant with some thirty years spent in
industry and in financial services, including positions as Chief Executive, Finance Director and Non-Executive Director of
several AIM listed companies. He was previously the CFO at Eland Oil & Gas plc where he had full executive responsibility
for finance, legal, corporate finance and a budget of over $150m. Louis is a Fellow of the Institute of Chartered Accountants
of England & Wales.
We are seeing continued growth of technology transfer services and have released a new version of the Invention Evaluator
tri-lingual website for expansion of its service offerings throughout Latin America. Consulting sales are up approximately
15% Y-O-Y and currently cover approximately 55% of our administrative costs. One of our goals is to have all of our adminis-
trative costs covered by our service revenue in future periods.
Principal Risks and Uncertainties
The specific financial risks are discussed in the notes to the financial statements. Other risks are as follows:
- the principal financial risks of the business relate to the value of the Group’s portfolio companies. We believe that the
fair value of each portfolio company is a time dependent valuation that may be impaired if the business does not achieve
it milestones, growth trajectory, product development, capital raises or other key performance metrics. Individually and as a
group our portfolio companies have a material impact on our financial performance. This risk of individual portfolio com-
pany negative performance may be ameliorated as our portfolio becomes more diverse and increases in value.
- the principal operational risk of the business is management’s ability to assist our portfolio companies in achieving their
goals and ultimate exits whilst increasing our service revenues.
- the Group is dependent on its executive team and directors for its operations and ultimate success and there can be no
assurance that it will be able to retain the services of these key personnel in the future.
- the COVID-19 epidemic may produce negative economic activities which could reduce the Group’s economic performance
Further, until the Group covers all of its operating costs from service revenue and or exits it will seek to raise additional
capital to fund operations and follow-on investments in portfolio companies.
Post period end fundraising
Post end of period, the Company announced that it had completed a fundraising of US$0.96 million (before expenses)
through the placing of 14,800,000 new ordinary shares with new and existing investors at a price of 5 pence per share. The
issue of the new shares and receipt of the proceeds from the fundraising were received during February 2020.
Post end of period, the Company announced that it had raised US$1.15 million (before expenses) by means of a conditional
fundraise through the issue of, in aggregate 9,250,000 placing shares at 10 pence per share. The placing will be subject to
Tekcapital’s shareholders approval at a general meeting on 19 May 2020.
27
STRATEGIC REPORT: FINANCIAL REVIEW & KEY
STRATEGIC REPORT
PERFORMANCE
Key Performance Indicators and Financial Review
The Key Performance Indicators (KPIs) listed below represent those that are typically applied to companies that seek to commer-
cialise university technologies and serve as a starting point for evaluating the Group’s performance:
KPI
DESCRIPTION
2019 PERFORMANCE
2018 PERFORMANCE
FAIR VALUE OF
THE PORTFOLIO
TOTAL REVENUE
Updated value of portfolio com-
panies using costs, independent
valuations or observed third party
investments
Service revenue plus change in fair
value of portfolio
PROFIT
After tax profit
NET ASSETS PER
SHARE
Total assets minus total liabilities
per share
ROIC
Returns on invested capital since
flotation in 2014
$20.3m
$13.7m
$7.7m
$5.5m
$0.35
24%
$6.8m
$4.6m
$0.30
30%
Four of our five Key Performance Indicators showed improve-
ment in 2019. The Group has now demonstrated four consecu-
tive years of growth in Net Assets and Net Assets per share.
The Group’s cash position at the end of the period is US$0.5m
with modest liabilities as costs have been settled without de-
lay using available funds. The Group had no debt as of 30 No-
vember 2019 and completed a post period placement raising
gross proceeds of US$0.9m as well as a conditional placing for
US$1.15m.
The Group’ has also demonstrated consistent growth in revenue
from services. The Group was able to achieve this growth while
simultaneously reducing its administrative expenses for the
third straight year.
Directors do not believe there are any material environmental
issues that need to be reflected in our KPIs for 2019.
The Group has received a R&D Tax Relief Credit for the total of US$58,000 in connection to following R&D activities:
- The development of a unique and first of a kind Innovation Discovery Network solution, developed to facilitate an
improved technology search engine.
The Group incurred US$173,947 in R&D expenditures related to above activities during the year.
28
www.tekcapital.com Current Trading and Outlook
Having continued to develop and expand Tekcapital’s existing business, the Board is confident that continued investment
in our portfolio companies remains the right approach for long-term value creation. Additionally, we are currently exploring
early stage venture funding for a number of our portfolio companies. Further, we believe that we are executing on our strategy
and this should result in further increases in returns on invested capital as our portfolio companies continue to mature to
exits. Whilst it is clear that the Company is progressing very well, net asset values will fluctuate from period to period due to
individual portfolio company performance, valuations and changes in market conditions and macro-economic financial condi-
tions including the recent Coronavirus epidemic.
We are grateful for the patience and support of our shareholders. We are also sincerely appreciative of our dedicated, creative
and incredibly hardworking team without which, none of the results reported herein would be possible.
Dr Clifford M Gross
Executive Chairman
5 May 2020
29
BOARD OF DIRECTORS
BOARD OF DIRECTORS
Cliff is a successful executive with 25 years of leadership experience in academia and
commercial enterprises. He is passionate about the development and commercialization
of intellectual property to improve the quality of life and create lasting value. Previously,
he founded Biomechanics Corp and UTEK where he served as CEO and Chairman and
was President and CEO of Innovacorp, the provincial venture capital fund of Nova
Scotia. Cliff has served as Acting Director of the graduate program in Biomechanics and
Ergonomics at New York University, Chairman of the Nelson Rockefeller Department of
Biomechanics at the New York Institute of Technology and Research Professor at the
University of South Florida. He received his Ph.D. from New York University and an MBA
from Oxford University.
Malcolm has worked for many years as a consultant to companies in technology, natural
resources, and general commerce. Following an early career with PwC in London, he
held CFO, COO, and CEO roles in established corporations including the construction
firm now called Arcadis. Recently he has held several non-executive director or chairman
positions and today these include Corps Security, Baronsmead Second Venture Trust,
and Golden Saint Technologies. Malcolm is a Fellow of the Institute of Directors, Fellow
of the Royal Society for the encouragement of Arts, Manufactures and Commerce,
and Fellow of the Institute of Chartered Accountants in England and Wales. He holds
university degrees from St Andrews (MA) and Warwick (MBA).
Robert served as Vice Chair of Mayo Clinic’s national Cancer Center Practice Committee,
overseeing cancer care delivery at all of Mayo’s national sites, and was Medical Director
for Particle Therapy at Mayo Clinic Florida. He previously served as Vice Chairman of the
Board of Trustees of the Mayo Clinic Health System – Albert Lea and Austin. Professor
Robert Miller was a physician-executive at the Mayo Clinic, where he was employed
for the last 25 years and remains on emeritus staff. He is the author of over 170 peer-
reviewed papers, including as senior author in JAMA and the Journal of Clinical Oncology.
Robert began his scientific career as a medical physicist at the University of Kentucky,
before going on to graduate from medical school at the University of Kentucky. Robert
also received an MBA from Oxford University. Robert is the Medical Director of the
Maryland Proton Treatment Center and Professor at the University of Maryland.
The Rt Hon Lord Willetts FRS is President of the Resolution Foundation and former
Minister for Universities and Science. He served as the Member of Parliament for
Havant (1992-2015), and previously worked at HM Treasury and the No. 10 Policy Unit.
Lord Willetts is a visiting Professor at King’s College London, Governor of the Ditchley
Foundation, former Chair of the British Science Association and a member of the
Council of the Institute for Fiscal Studies. He is also an Honorary Fellow of Nuffield
College, Oxford. Lord Willetts has written widely on economic and social policy. His
book ‘The Pinch’, which focused on intergenerational equity, was published in 2010,
and he recently published ‘A University Education’. Lord Willetts is a graduate of Oxford
university and has been awarded numerous honorary doctorates.
Clifford M Gross, PhD
Chairman and CEO
M J Malcolm Groat
Finance Director
Robert Miller, MD
Non Executive Director
RT Hon Lord David Willets
Non Executive Director
Louis Castro has over 30 years’ experience in investment banking and broking both
in the UK and overseas. Most recently he was the Chief Financial Officer at Eland Oil
& Gas, a mid –cap quoted company. Previously he was Chief Executive of Northland
Capital Partners in London and before this was Head of Corporate Finance at Matrix
Corporate Capital and at Insinger de Beaufort. He started his career by qualifying as
a Chartered Accountant with Coopers & Lybrand (now PWC). Louis chairs the Audit
Committee and is a member of the Remuneration Committee. He is a Fellow of the
Institute of Chartered Accountants In England and Wales and has a Double Degree in
Engineering Production & Economics from Birmingham University.
Louis Castro
Non Executive Director
30
Company name:
Tekcapital plc
Company number
08873361
OFFICERS AND
PROFESSIONAL ADVISERS
Registered Office
12 New Fetter Lane
London
EC4A 1JP
Auditor
H W Fisher
11 – 15 William Road
London NW1 3ER
Banks
HSBC plc
Canada Place
Canary Wharf
London
E14 5AH
The Toronto-Dominion Bank
12620 Biscayne Blvd
North Miami
FL 33181
USA
Solicitors
Bird & Bird LLP
12 New Fetter Lane
London EC4A 1JP
Nominated Adviser and Joint-
Broker
SP Angel Corporate Finance LLP
Price Frederick House
35-39 Maddox Street
London W1S 2PP
Joint-Broker
Novum Securities Limited
8-10 Grosvenor Gardens
Belgravia
London SW1W 0DH
Investor Relations
Flagstaff Strategic and Investor
Communications
1 King Street
London EC2V 8AU
www.tekcapital.com
DIRECTORS’ REPORT
FOR THE YEAR-ENDED
30 NOVEMBER 2019
Directors
The following Directors held office during the period, and to the date of this report.
Clifford M Gross, PhD
M J Malcolm Groat
R W “Bill” Payne (resigned 31 December 2019)
Robert Miller, MD
Louis Castro (appointed on 2 December 2019)
The RT Hon Lord David Willets FRS (appointed on 6 January 2020)
The Group has chosen to set out in the groups strategic report information required to be contained in the directors’
report. It has done so in respect of future developments. The principal activity of the parent company is that of an
investment entity.
Statement of Directors’ responsibilities
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 have prepared the Group and parent company financial statements in accordance
with International Financial Reporting Standards (IFRS) as adopted by 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 the Company and of the profit or loss of the Group for that period. In preparing these
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable IFRSs as adopted by the European Union have been followed,
subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Group and the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the
Group to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Each of the current Directors, whose names are listed in the Directors’ report on page 30 of the financial statements
confirm that, to the best of each person’s knowledge and belief:
• the financial statements, prepared
IFRS as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial position and profit (or Loss) of the Group and Company;
and
in accordance with
• the chairman’s statement contained in the annual financial statements includes a fair review of the
a
development and performance of the business and the position of the Group and Company, together with
description of the principal risks and uncertainties that they face.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Group’s website www.tekcapital.com. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Going concern
The Group meets its day to day working capital requirements through its service offerings and monies raised through
the issues of equity. The Group’s forecasts and projections indicate that the Group has sufficient cash reserves to
operate within the level of its current facilities. Whilst it is the Group’s intention to rely on the available cash reserves,
future income generated from its growing service offerings and reductions in its cost base, a negative variance in the
forecasts and projections would make the Group’s ability to continue as going concern dependent on an additional fund
raise. If the Group’s forecasts are not achieved, the Directors would seek to raise the additional funds through equity
issues. Whilst the COVID-19 epidemic is contributing to uncertainty in the markets and the full impact is difficult to
measure, at the time of approving the accounts after making enquiries, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence for the foreseeable future.
31
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 NOVEMBER 2019
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 NOVEMBER 2019
Information has been included in the stategic report under S414C(11) of the Companies Act 2006.
Dividends
No dividend was paid or was proposed during the year ended 30 November 2019.
Audit Committee
The Board operates an Audit Committee, chaired by Bill Payne. This Committee carries out duties as set out in the AIM Admission
Document, supervising the financial and reporting arrangements of the Group. During the period, no issues arose that the Directors
consider appropriate to disclose in their Report.
Research and Development
The Group incurred expenses related to research and development activities. The activities were limited to improvement of the Innovation
Discovery Network solution, developed to facilitate an improved technology search engine.
Remuneration Committee
The Board has delegated to its Remuneration Committee, chaired by Dr Robert Miller, certain responsibilities in respect of the remuneration
of senior executives. During the period, no issues arose that the Directors consider appropriate to disclose in their Report.
Directors Emoluments
Director’s proportion of the stock option expense is below US$10,000.
The Group did not make any contributions to a pension scheme in the year ended 30 November 2019 (2018: Nil).
Directors’ beneficial interests in shares:
Please note the above figure for Clifford M Gross does not include 100,000 shares held by both of Dr. Gross’s children.
The details of the options held by each director at 30 November 2019 are as follows:
32
www.tekcapital.com
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 NOVEMBER 2019
* The options vest in three equal annual instalments from the date of grant and there is a special condition which means the options will
vest when the closing price for a share has been traded at more than one pound sterling for ten consecutive trading days.
** The options shall vest when the net asset value, as stated in the annual consolidated accounts, meets or exceeds USD$20.53m during
the 36 months after the grant date. The threshold shall be re-tested when each set of accounts published during the 36 months are
finalised.
525,000 options were held by Harrison Gross, family member of Dr. Clifford Gross.
Principal Risks and Uncertainties
Please refer to Strategic Report.
Post Balance Sheet Events
For further details, please refer to note 27 in the notes to the financial statements.
Independent auditors
HW Fisher were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution pro-
posing that they be re-appointed will be put at a General Meeting.
Statement of disclosure of information to auditors
Each of the persons who was a Director at the date of approval of this report confirms that:
• so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
• the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit infor-
mation and to establish that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
By order of the Board of Directors and signed on behalf of the Board
M J Malcolm Groat
Director
5 May 2020
33
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
TEKCAPITAL PLC
TEKCAPITAL PLC
Opinion
We have audited the financial statements of Tekcapital Plc (the ‘parent company’) and its subsidiaries (the ‘Group’) for the year ended 30
November 2019 which comprise:
•
•
•
•
•
the consolidated Statement of Comprehensive Income;
the consolidated and parent company Statements of Financial Position,
the consolidated and parent company Statement of Changes in Equity;
the consolidated Statement of cash flows;
the related notes to the consolidated and parent company financial statements including a summary of significant accounting
policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union. The financial reporting framework that has been
applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards,
including FRS101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
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
30 November 2019 and of the Group’s profit for the year then ended;
the Group’s financial statements have been properly prepared in accordance with International Financial Reporting Standards
(‘IFRSs’) as adopted by the European Union;
the parent company financial statements have been prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
the financial statements have been prepared in accordance with the requirements 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 are independent of the Group and 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 entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
34
www.tekcapital.com
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
TEKCAPITAL PLC
Conclusions related to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Summary of our audit approach
Context
The parent company continued to recognise Tekcapital Europe Limited and Tekcapital LLC as subsidiaries and has continued to
consolidate both entities in preparing the consolidated financial statements. The other subsidiaries continue to be treated as
portfolio investments under IFRS 10, investment entities.
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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) 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.
The key audit matters that we identified in the current year were:
•
•
•
•
•
Going Concern, based on the Group’s ability to raise funds.
Valuation of unquoted equity investments.
Revenue recognition and accuracy of cut off in the period;
Management override of controls;
Reliance on Expert
Our application of materiality
The materiality that we used for the consolidated financial statements was $227,000. We determined materiality using 1% of
gross assets.
The materiality that we used for the parent company’s financial statements was $67,000. We determined materiality using 1% of
gross assets.
An overview of the scope of the audit
35
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
TEKCAPITAL PLC
TEKCAPITAL PLC
Area of focus
How our audit addressed the area of focus
Valuation of unquoted equity
investments
88% of the Group’s total assets (by
value) is held in investments where
no quoted market price is available.
Unquoted Investments are measured at
fair value.
The valuation techniques used fall un-
der level 2 and level 3 of the fair value
hierarchy.
This is a key area of es-timation and we
therefore considered this to be an area
of significant audit risk and focus.
The Group engages an independent
expert valuer for the purpose of de-
termining the fair value of the assets
held within the investments to help
mitigate this risk.
Going concern
The parent company and subsidiaries are
not currently profit generating and are
reliant upon their ability to raise funds.
The operating profit is a result of the fair
value gains on the investments which is
unrealised.
Our audit work included, but was not restricted to the following:
• We reviewed the appropriateness of the Group’s disclosures within the financial statements in relation to
valuation methodology, key valuation inputs and valuation uncertainty.
• We addressed the competency, qualifications, independence and objectivity of the valuer as documented
in the key area of focus below.
• We re-performed the calculations to ensure numerical accuracy and assessed the reasonableness of
inputs used in the valuation and performed benchmarking.
• We performed a review of the valuations sensitivity to the discount rates and other key areas of
estimation and reviewed the sensitivity disclosure calculations.
•We agreed the inputs in the discounted cash flows used for the royalty relief valuations and the e-shop
valuation to the independent reports.
•We considered the impact of deferred tax on the fair value gains recognised on the IP held in the invest-
ments and considered these amounts within the valuations.
• For items which were material but were not fair valued on the investment company’s balance sheet we
vouched to appropriate audit evidence
• Reconciliation of the fair value movements to the financial statements.
• We reviewed the underlying licence agreements on the patents to ensure the ownership / exclusivity.
• We assessed the critical accounting judgement disclosure at note 4 to the financial statements in respect
of the directors’ determination of the Group as an investment entity
• The investments have been fair valued as at 30 November 2019 and do not take into consideration the
impact of Covid-19 as it is a non-adjusting event.
Based on our audit work detailed above, we confirm that we have nothing material to report, and or draw
attention to in respect of these matters.
Our audit work included, but was not restricted to the following:
• We have reviewed the directors’ statement regarding the appropriateness of the going concern basis of
accounting contained within note 2.1.1 to the financial statements.
• We have reviewed the available consolidated financial forecasts of the Group in line with the assertions
provided throughout the audit to assess their reasonableness.
• We have applied sensitivities to the consolidated financial forecasts to review the impact in line with the
wording included within the going concern policy and agreed that should there be a negative variance in
the forecasts projected the Group will be reliant upon a future fundraise.
• We have reviewed the post year end management accounts
• We have reviewed the announcements and considered if any items will have a financial impact affecting
the going concern.
• We have reviewed the disclosures at note 3 that describe the financial risks and explain how they are
being managed or mitigated.
• We have reviewed the £925,000 fundraise completed 30 April 2020 which is conditional on approval at
the AGM and have considered this when reviewing the sensitised forecasts.
Based on our audit work detailed above, we confirm that we have nothing material to report, and or
draw attention to in respect of these matters. We agreed the directors’ disclosure of the going concern as
disclosed within note 2.1.1 of the financial statements. We did not identify any such material uncertain-
ties. However, because not all future events or conditions can be predicted, especially given the economic
uncertainty as regard to Covid-19, this statement is not a guarantee as to the Group and parent company’s
ability to continue as a going concern.
36
www.tekcapital.com INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
TEKCAPITAL PLC
TEKCAPITAL PLC
Area of focus
How our audit addressed the area of focus
Assessment of revenue recognition
There is a presumed risk of misstate-
ment arising from lack of complete-
ness or inaccurate cut-off relating to
revenues.
Revenue also includes a significant
amount of unrealised income from
investments held at fair value through
profit and loss which is material to the
financial statements
Our audit work included, but was not restricted to the following:
• We evaluated the sales controls system in place to determine the controls surrounding the income.
• We checked a sample of the sales agreements and contracts through to the income recognised in the
accounts and invoices.
• We also completed checks on deferred and accrued income, no material misstatements were identified in
respect of the deferred income not recognised.
• We reviewed the revenue recognition accounting policy at note 2.20 of the financial statements to ensure
the application was consistent.
• We assessed the accounting policy for the fair value gains / losses on the investments measured at fair
value to check that movements had been accounted for in accordance with the stated accounting policy.
Based on our audit work detailed above, we confirm that we have nothing material to report, and or draw
attention to in respect of these matters.
Management override of controls
Our audit work included but was not restricted to the following:
Management is in a unique position to
override controls that otherwise appear
to be operating effectively.
Reliance on experts
The Group engaged with an independ-
ent expert valuer to value the IP held
within the portfolio companies.
The IP within the portfolio companies
is the main driver for the fair values
and these are material to the financial
statements and reliance on expert is
therefore considered a risk area.
The independent expert valuer pro-
duced reports on the IP held within
Lucyd Limited, Salarius Limited and
Guident Limited.
• We undertook testing on the Group and parent company’s controls, we extended our audit testing to
perform enhanced management override procedures.
• We undertook a review to gain an understanding of the overall governance and oversight process
surrounding management’s review of the financial statements.
• We examined the significant accounting estimates and judgements relevant to the financial statements
for evidence of bias by the directors.
• We reviewed the financial statements and considered whether the accounting policies are appropriate
and have been applied consistently.
• We undertook a review of the journals posted through the nominal ledger for significant and unusual
transactions and investigated them, reviewing and confirming the company valuation of journal entry
postings.
• We undertook a review of the consolidation journals to ensure they were reasonable.
Based on our audit work detailed above, we confirm that we have nothing material to report, and or draw
attention to in respect of these matters.
Our audit work included but was not restricted to the following:
• We reviewed the reports prepared by the expert valuer and considered the appropriateness of assump-
tions used in determining the fair value of the investments.
• The senior members of our team held conference calls with the expert valuer to discuss and challenge
the valuation methodologies, key assumptions and to consider if there were any indicators of undue man-
agement influence on the valuations.
• We ensured the expert valuer was independent from the Company through review of engagement letters
and instructions.
• We reviewed the expert valuers methodologies in line with guidance issued for valuing intangibles and
reviewed the approaches with our internal valuations team.
• We re-performed the calculations and present value workings to ensure the effect of the discounting was
correctly applied.
• We undertook a review of the expert in line with ISA 500.
Based on our audit work detailed above, we confirm that we have nothing material to report, and or draw
attention to in respect of these matters.
37
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
TEKCAPITAL PLC
TEKCAPITAL PLC
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.
In connection with our audit of the financial statements, 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 audit or other-
wise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. 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.
Opinions on other matters prescribed by the Companies Act 2006
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.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the 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.
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
the parent company financial statements 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.
38
www.tekcapital.com
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
TEKCAPITAL PLC
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 mis-
statement, 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 mis-
statement 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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our audit 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.
Carolyn Hazard (Senior Statutory Auditor)
For and on behalf of HW Fisher
Chartered Accountants
Statutory Auditor
Acre House
11/15 William Road
London
NW1 3ER
United Kingdom
Dated 5 May 2020
39
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEAR ENDED 30 NOVEMBER 2019
YEAR ENDED 30 NOVEMBER 2019
The Group has used the exemption under S408 CA 2006 not to disclose the Company income statement.
Items in the statement above are disclosed net of tax.
The notes on pages 46 to 76 are an integral part of these consolidated financial statements.
40
www.tekcapital.com CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 NOVEMBER 2019
The notes on pages 46 to 76 are an integral part of these financial statements.
The financial statements on pages 40 to 76 were authorised for issue by the Board of Directors on 5 May 2020 and were signed on its
behalf.
M J Malcolm Groat
Director
Tekcapital PLC
Registered number 08873361
Dr Clifford M Gross
Chairman and CEO
41
COMPANY STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF FINANCIAL POSITION
AT 30 NOVEMBER 2019
AT 30 NOVEMBER 2019
The notes on pages 46 o 76 are an integral part of these financial statements.
The financial statements on pages 40 to 76 were authorised for issue by the Board of Directors on 5 May 2020 and were signed on its
behalf.
The Company’s profit before tax for the year ended 30 November 2019 was $30,688.
M J Malcolm Groat
Director
Tekcapital PLC
Registered number 08873361
42
Dr Clifford M Gross
Chairman and CEO
www.tekcapital.com
CONSOLIDATED STATEMENT OF CHANGES IN THE EQUITY
FOR THE YEAR ENDED 30 NOVEMBER 2019
Share premium - amount subscribed for share capital in excess of nominal value, net of directly attributable costs.
Translation reserve - amount subscribed for foreign exchange differences recognised in Other Comprehensive Income
Merger reserve - amount subscribed for share capital in excess of nominal value in relation to the qualifying acquisition of subsidiary undertakings.
Profit and loss account - cumulative net profit and losses recognised in the consolidated statement of comprehensive income
The notes on pages 46 to 76 are an integral part of these financial statements.
43
COMPANY STATEMENT OF CHANGES IN THE EQUITY
COMPANY STATEMENT OF CHANGES IN THE EQUITY
FOR THE YEAR ENDED 30 NOVEMBER 2019
FOR THE YEAR ENDED 30 NOVEMBER 2019
Share premium – amount subscribed for share capital in excess of nominal value, net of directly attributable issue costs.
Translation reserve – amount subscribed for foreign exchange differences recognised in Other Comprehensive income.
Profit and loss account – cumulative net profits and losses recognised in the consolidated financial statements of comprehensive income
The notes on pages 46 to 76 are an integral part of these financial statements.
44
www.tekcapital.com CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 NOVEMBER 2019
No significant non-cash transaction occured during the period.
45
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
1.
General Information
Tekcapital PLC is a company incorporated in England and Wales and domiciled in the UK. The address of the registered office is detailed
on page 30 of these financial statements. The Company is a public limited company limited by shares, which listed on the AIM market of
the London Stock Exchange in 2014. The principal activity of the parent company is that of an investment entity and that of the Group
is to provide universities and corporate clients with a wide range of technology transfer services. The Group and the parent company
also acquire exclusive licences for disruptive technologies it has acquired for its own portfolio, for subsequent commercialisation.
The principal accounting policies applied in the preparation of these consolidated financial statements and parent company financial
statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Amounts presented in this report are rounded to nearest US$1.
2.
2.1
Accounting policies
Statement of compliance
The consolidated financial statements of Tekcapital PLC Group have been prepared in accordance with International Financial Reporting
Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) as adopted by the European Union and the Companies Act 2006 applica-
ble to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention.
The consolidated financial statements comprise the financial statements of Tekcapital plc and its subsidiaries, Tekcapital Europe Ltd and
Tekcapital LLC.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree
of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are dis-
closed in note 4.
The financial statements of the parent company have been prepared in accordance with Financial Reporting Standard 101 “Reduced
disclosure framework” (‘FRS 101’). The company will continue to prepare its financial statements in accordance with FRS101 on an
ongoing basis until such time as it notifies shareholders of any change to its chosen accounting framework.
The Company financial statements have been prepared using the historical cost convention except where other measurement basis are
required to be applied and in accordance with IFRS under FRS 101. In accordance with FRS101, the Company has taken advantage of
the following exemptions:
• IAS 7, ‘Statement of Cash Flows’
• Requirements of IAS 24, ‘Related Party Disclosures’ to disclose related party transactions entered into between two or more
members of a group.
2.1.1
Going concern
The Group and the Company meet their day to day working capital requirements through its service offerings and monies raised
through the issues of equity. The Group’s forecasts and projections indicate that the Group and the Company have sufficient cash re-
serves to operate within the level of its current facilities, including its recent placing for $1,15m before expenses, which is conditonal
on shareholder approval which the directors expect to obtain at the General Meeting on the 19 May 2020. Whilst it is the Group’s and
the Company’s intention to rely on the available cash reserves, future income generated from its growing service offerings and reduc-
tions in its cost base, a negative variance in the forecasts and projections would make the Group’s and the Company’s ability to continue
as a going concern dependent on an additional fund raise. If the Group’s forecasts are not achieved, the Directors would seek to raise
the additional funds through equity issues. Whilst the COVID-19 epidemic is contributing to uncertainty in the markets and the full im-
pact is difficult to measure, at the time of approving the accounts after making enquiries, the Directors have a reasonable expectation
that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future.
The Group and the Company therefore continues to adopt the going concern basis in preparing both its consolidated financial state-
ments and for its own financial statements.
46
www.tekcapital.com NOTES TO THE FINANCIAL STATEMENTS
2.1.2
Changes in accounting policy and disclosures
New standards and interpretations not yet adopted by the Group:
IFRS 16 Leases
IFRS 16 was issued in January 2016 and is effective for accounting periods beginning on or after 1 January 2019. The Group has not
chosen to early adopt this standard and will adopt it for the accounting period beginning 1 December 2019. Directors do not expect any
material impact on the consolidated financial statements, as most of its operating lease commitment disclosed in Note 25 (US$61,925)
will be satisfied by 1 December 2019.
No other issued but not endorsed amendments to IFRS will have a material impact on the Group’s financial statements once they be-
come endorsed and effective.
New standards and interpretations adopted by the Group:
IFRS 9
IFRS 9 was issued in July 2014 and is effective for accounting periods on or after 1 January 2018. The Group has adopted the full retro-
spective method of adoption; however, the adoption of this standard has not had an impact on the financial performance or position of
the Group for the year or comparative period.
IFRS 15 Revenue from contracts with customers
IFRS 15 was issued in September 2015 and is effective for accounting periods beginning on or after 1 January 2018.
The Group has adopted IFRS 15 on 1 December 2018, effectively replacing IAS 18 used by the Group previously. The Group has adopted
the full retrospective method of adoption; however, the adoption of this standard has not had an impact on the financial performance
or position of the Group for the year or comparative period.
Additional disclosures were included in Note 6 to satisfy the IFRS disclosure requirements.
2.2
Business combinations
Tekcapital PLC was incorporated on 3 February 2014 and on 18 February 2014 entered into an agreement to acquire the issued share
capital of Tekcapital Europe Limited by way of share issue. On 19 February 2014 it acquired the issued share capital of Tekcapital LLC
also by share issue. This has been accounted for as a common control transaction under IFRS 3 using the pooling of interest method by
using the nominal value of shares exchanged in the business combination and no fair value adjustment.
The consolidated financial statements comprise the financial statements of Tekcapital PLC and all subsidiaries controlled by it.
Subsidiaries are entities that are controlled by the Group. Control is achieved when the Group has the power to govern the financial and
operating policies of an entity so as to obtain economic benefit from its activities. Inter-company transactions, balances and unreal-
ised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated when necessary amounts
reported by subsidiaries have been adjusted to conform to the Group’s accounting policies.
2.3
Foreign currencies
(a) Functional and presentation currency
These consolidated financial statements are presented in US Dollars which is the presentation currency of the Group. This is because
the majority of the Group’s transactions are undertaken in US Dollars. Each subsidiary within the Group has its own functional currency
which is dependent on the primary economic environment in which that subsidiary operates. Effective 1 December 2014 Tekcapital PLC
and Tekcapital Europe Limited changed their functional currency to UK Sterling. This is because, the primary economic activity of these
entities is undertaken in the UK.
47
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
(b) Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transac-
tions or valuation where items are re-measured.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the year-end ex-
change rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign ex-
change gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within ‘finance
income or costs’.
(c) Group companies
The results and financial position of all Group entities (none of which has the currency of a hyper-inflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
(i)
(ii)
(iii)
assets and liabilities for each balance sheet presented are translated at the closing exchange rates at the date of that balance
sheet.
income and expense for each income statement are translated at the average rates of exchange during the period (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of the transactions)
all resulting exchange differences are recognised in other comprehensive income.
2.4
Investment in subsidiaries
Investments in subsidiaries including Tekcapital Europe Ltd and Tekcapital LLC are recognised initially at cost. The cost of the invest-
ment includes transactions costs. The carrying amounts are reviewed at each reporting dated to determine whether there is any indica-
tion of impairment.
Investments in portoflio companies are held at fair value through the profit and loss. Directors’ judgment was exercised in determining
that the Group meets the following criteria and should be recognized as an investment entity under IFRS 10 par. 27. Directors re-evalu-
ated the below criteria and concluded they were met as at 30 November 2019:
• Obtains funds from one or more investors for the purpose of providing clients with investment management services
• Commits to its investors that its business purpose is to invest funds solely for return from capital appreciation, investment income
or both
• Measures and evaluate the performance of substantially all of its investments on a fair value basis.
Tekcapital’s IP search and technology transfer investment services represent investment advisory services, and therefore Tekcapital
Europe Limited and Tekcapital LLC continue to be treated as subsidiaries and are consolidated in the Group financial statements. These
services may be provided to investors, clients and third parties. The Board considers that the criteria are met in the group’s current
circumstances.
The Board envisages that Tekcapital’s shareholder returns will derive primarily from mid to long-term capital appreciation of a portion
of its intellectual property investments, as well as from providing IP investment services to clients. Consequently, the Group’s portfolio
companies are measured at fair value in accordance with IFRS 9 as disclosed in Note 2.9.
2.5
Non-controlling interests
Losses applicable to 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. Adjustments to non-controlling interests arising from transactions that do not
involve the loss of control are based on a proportionate amount of the net assets of the subsidiary. Upon the loss of control the assets
and liabilities of the subsidiary, any non-controlling interests and other components of equity related to the subsidiary are derecog-
nised. Any resulting gain or loss is recognised in the profit and loss.
48
www.tekcapital.com
NOTES TO THE FINANCIAL STATEMENTS
2.6
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group
and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the
financial period in which they are incurred. Depreciation of assets are calculated to write off the cost less the estimated residual value
of tangible fixed assets by equal instalments over the estimated useful economic lives as follows:
Furniture
Computer equipment
Leasehold improvements
3 years
3 years
5 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. The assets’
carrying amounts are written down immediately to its recoverable amount if the assets’ carrying value are greater than their recover-
able amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are recognised within
‘Other gains / (losses) – net’ in the income statement. When re-valued assets are sold, the amounts included in other reserves are trans-
ferred to retained earnings.
2.7
Intangible assets
(a) Invention Evaluator
This is an intangible asset and a piece of computer software acquired for use by one of the subsidiaries of the Group and is shown at
original cost of purchase less impairment losses.
Under IAS38, this asset is regarded by the Directors as being an intangible asset with an indefinite useful life. The Directors believe that
the asset is unique in that no competitor offering currently exists, the service appeals globally to many types of clients including For-
tune 100 companies, there is no expectation of obsolescence in the foreseeable future, and the service provided by the asset generates
sufficient ongoing revenue streams.
Consequently, no write down in the value of this asset either by way of amortisation or impairment has occurred in this financial year. In
the Directors’ opinion this asset has an indefinite useful life.
(b) Computer software and website development
Costs associated with maintaining computer software programmes and the Company website are recognised as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by
the Group are recognised as intangible assets when the following criteria are met:
(i)
(ii)
(iii)
(iv)
(v)
it is technically feasible to complete the software product so that it will be available for use;
management intends to complete the software product and use or sell it;
there is an ability to use or sell the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the software product are
available; and
the expenditure attributable to the software product during its development can be reliably measured.
(vi)
Computer software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed four
years.
49
NOTES TO THE FINANCIAL STATEMENTS
(c) Licences
Costs associated with the acquisition of Licences for technologies with the express purpose of developing them further for a commer-
cial market are recognised as an intangible asset when they meet the criteria for capitalisation. That is, they are separately identifiable
and measurable and it is probable that economic benefit will flow to the entity.
Further development costs attributable to the licensed technology are recognised as an intangible asset when the following criteria are
met:
(i)
(ii)
(iii)
(iv)
(v)
it is technically feasible to complete the technology for commercialisation so that it will be available for use;
management intends to complete the technology and use or sell it;
there is an ability to use or sell the technology;
it can be demonstrated how the technology will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the technology are
available; and
the expenditure attributable to the technology during its development can be reliably measured.
(vi)
Licences and their associated development costs are amortised over the life of the licence or the underlying patents, whichever is
shorter.
(d) Vortechs Group
This is an intangible asset acquired for use by one of the subsidiaries of the Group and is valued at original cost of purchase.
Under IAS38, the Group’s Vortechs Group asset is regarded by the Directors as being an intangible asset with an indefinite useful life.
The Directors believe that this asset is unique as it operates in a niche market, it generates an ongoing revenue stream, and there is no
expectation of obsolescence. This asset meets the requirements of IAS38 as it is separately identifiable, controlled by the Group, the
cost can be measured reliably, and as a result of owning this asset future economic benefits in the form of service revenue are gener-
ated for the Group. In the opinion of the Directors this asset has an indefinite useful life and there has been no amortisation or impair-
ment provided in the current year.
2.8
Impairment of non-financial assets
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested
annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circum-
stances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s
carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and
value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent
cash inflows, (CGUs). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting
date.
2.9
Financial instruments
2.9.1
Classification
The Group and the Company classifiy their financial assets depending on the purpose for which the asset was acquired. Management
determines the classification of its financial assets at initial recognition.
During the financial year the Group and the Company held investments into portfolio companies classified as equity investments. They
are included in current assets and are measured at fair value through profit and loss in accordance with IFRS 9.
The Company also has loans, convertible loan notes and receivables that are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They are included in current assets, except for maturities that are greater than 12
months after the end of the reporting year. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade
and other receivables’ in the balance sheet. The Group also has cash and cash equivalents.
50
www.tekcapital.com
All short term financial liabilities are measured at cost, the Group does not hold any long term financial liabilities.
2.9.2
Recognition and measurement
The Company and the Group investments into the portfolio companies are recognised on the acquisition or formation date and meas-
ured at fair value through profit or loss in accordance with IFRS 9.
Loans and receivables are recognised on the trade date in which the transaction took place and are recognised at their fair value (which
equates to cost) with transaction costs expensed in the income statement. Financial assets are derecognised when the rights to receive
cash flows from the loans or receivables have been collected, expired or transferred and the Group has subsequently transferred
substantially all risks and rewards of ownership. Short term financial liabilities are initially measured at fair value and subsequently
measured at amortised cost using the effective interest rate method.
2.9.3
Fair value
Financial instruments are measured at fair value including investments in portfolio companies, cash and cash equivalents, trade and
other receivables, trade and other payables, and borrowings. This measurement policy does not apply to subsequent measurement at
amortised cost of short term financial liabilities and trade receivables.
The Group measures portfolio companies using valuation techniques appropriate in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Our
fair value valuation policy is as follows:
• The fair value of new portfolio companies is estimated at the cost of the acquired IP or equity plus associated expenses to
facilitate the acquisition.
• Existing portfolio companies are valued as follows:
- If a market transaction such as third-party funding has occurred during the past 18 months we will value our ownership
in the portfolio company at this observed valuation, taking account of any observed material changes during the period.
- In the absence of a recent market transaction, fair value will be estimated by alternative methods and where appropriate
by an external, qualified valuation expert. The valuation technique used fall under Level 2 – Observable techniques other
quoted prices and Level 3 - other techniques as defined by IFRS 13.
Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, and trade and other paya-
bles approximate their fair value. The fair value of borrowings equals their carrying amounts, as the impact of discounts is not signifi-
cant.
2.10
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to
offset the recognised amounts and there is the intention to settle on a net basis or realise the asset and settle the liability simultane-
ously.
2.11
Impairment of financial assets
The Group assesses at the end of each reporting year whether there is objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective
evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (a ‘loss event’) and
the loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can
be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty,
default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisa-
tion, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in
arrears or economic conditions that correlate with defaults.
51
NOTES TO THE FINANCIAL STATEMENTS
For the loans and receivables category, the amount of the loss is measured as the difference between the assets carrying amount and
the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the finan-
cial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the
consolidated income statement. If a loan or held-to maturity investment has a variable interest rate, the discount rate for measuring any
impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure
impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised (such as the improvement in the debtor’s credit rating), the reversal of the previously recognised
impairment loss is recognised in the consolidated income statement.
2.12
Trade receivables
Trade receivables are amounts due from customers for the provision of services performed in the ordinary course of business. Collection
is normally expected within three months or less (in the normal operating cycle of the business) and is classified as current assets. In
the rare circumstances that they exceed a period of greater than one year they are presented as non-current assets. In some instances,
the Group accepts convertible loan notes for trade debts these are held separately on the statement of financial position until maturity
or disposal on the open market. Any value received which is greater or less than the value of the original debt is taken to the consoli-
dated statement of comprehensive income.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less any provision for impairment.
2.13
Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with other banks,
other short term highly liquid investments with maturities of three months or less and bank overdrafts. In the consolidated statement
of financial position, bank overdrafts are shown within borrowings in current liabilities.
2.14
Share capital
Ordinary Shares
Ordinary shares are classified as equity.
Share premium
The share premium account has been established to represent the excess of proceeds over the nominal value for all share issues,
including the excess of the exercise share price over the nominal value of the shares on the exercise of share options as and when they
occur.
Incremental costs directly attributable to the issue of new ordinary shares and new shares options are shown in equity as a deduction,
net of tax, from the proceeds.
Merger Reserve
The consolidated financial statements are accounted for using the ‘pooling of interests’ method’, which treats the Group as if it had been
combined throughout the current and comparative accounting periods. Pooling of interests principles for this combination gave rise
to a merger reserve in the consolidated statement of financial position, being the difference between the nominal value of new shares
issued by the Company for the acquisition of the shares of the subsidiary and the subsidiary’s own share capital.
Non-controlling interest
Non-controlling interest is the portion of equity ownership in a subsidiary not attributable to the parent company.
52
www.tekcapital.com NOTES TO THE FINANCIAL STATEMENTS
2.15
Trade payables
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of busi-
ness if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate
method.
2.16
Share based payments
The Company operates a number of equity-settled, share-based compensation plans, under which the entity receives services from em-
ployees as consideration for equity instruments (options) of the Company. The fair value of the employee services received in exchange
for the grant of options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of
the options granted:
•
•
•
including any market performance conditions;
excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth
targets and remaining an employee of the entity over a specified time period); and
excluding the impact of any non-vesting conditions (for example the requirement of the employees to save).
Assumptions about the number of options that are expected to vest include consideration of non-market vesting conditions. The total
expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.
At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the
non-market vesting conditions. It recognises the impact of the revision to the original estimates, if any, in the income statement, with a
corresponding adjustment to equity.
When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transactions
costs are credited to share capital (nominal value) and share premium when the options are exercised.
2.17
Current and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is recognised in the consolidated income statement, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of tax laws enacted or substantively enacted at the balance sheet date in the
countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised on temporary timing differences arising between the tax bases of assets and liabilities and their car-
rying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transac-
tion other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet
date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries except for
deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable
that the temporary difference will not reverse in the foreseeable future.
53
NOTES TO THE FINANCIAL STATEMENTS
Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to the ex-
tent that it is probable the temporary difference will reverse in full in the future and there is sufficient taxable profit available against
which the temporary difference can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities where there is an intention to settle balances on a net basis.
2.18
Provisions
Provisions and any other anticipated foreseen liabilities are recognised: when the Group has a present legal or constructive obligation
as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been
reliably estimated. Restructuring provisions comprise lease termination penalties, and employee termination payments. Provisions are
not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by con-
sidering a class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item
included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to
be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the
risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.
2.19
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to
the lessee. All other leases are classified as operating leases.
Rentals payable under the operating leases are charged to income on a straight-line basis over the term of the relevant lease.
2.20
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for the services
supplied, stated net of discounts, and value added taxes. The Group recognises revenue when the contract is identified, performance
obligation is determined, transaction price is determined and allocated to performance obligation in accordance with IFRS 15.
The Group also recognises an unrealised profit/loss on the revaluation of investments in share of portfolio companies in accordance
with the fair value policy outlined in Note 2.9.
Provision of services
The Group provides following lines of services:
- Invention Evaluator services: provision of reports assessing potential of any new technology. Revenue is recognised upon delivery of a
complete report
- IP Acquisition Opportunities services: provision of reports identifying attractive university developed IP. Revenue is recognised upon
delivery of a complete report
- Tech transfer recruitment services: recruitment services specialising in technology transfer executives. Revenue is recognised when the
placement is successfully completed
- Training services: custom solutions for new tech transfer offices, spin out companies and accelerators delivered via in person trainings.
Revenue is recognised over time based on completion stage of each session.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
54
www.tekcapital.com
3.
3.1
(a)
Financial Risk Management
Financial risk factors
Portfolio Risk/Investment Risk management
Investment into portfolio companies held by the Group requires long-term commitment with no certainty of return.
The fair value of each portfolio company represents the best estimate at a point in time and may be impaired if the business does not per-
form as well as expected, directly impacting the Group’s value and profitability. This risk is mitigated as the size of the portfolio increases.
The Group performed sensitivity analysis with regards to assumptions used in determination of fair value of the portfolio in Note 12.
The Group also regularly monitors portfolio companies’ liquidity required for returns to occur.
(b)
Credit Risk management
Credit risk is managed on a Group basis. In order to minimise this risk, the Group endeavours to only deal with companies that are
demonstrable creditworthy, and the Directors continuously monitor the exposure. The Group’s maximum exposure to credit risk for the
components of the statement of financial position at 30 November 2019 and 2018 is the carrying amounts of its current trade and other
receivables as illustrated in Note 15.
The Group monitors credit risk related to performance of portfolio companies, including considerations related to recoverability of con-
vertible loan notes issued. Progress is monitored and regular discussions are held with management of portfolio companies to assess
commercial progress and financial information provided. The Group also monitors credit risk related to creditor amounts due from portolio
companies.
(c)
Liquidity Risk management
Cash flow forecasting is performed on a Group basis. The Directors monitor rolling forecasts of the Group’s liquidity requirements to en-
sure it has sufficient cash to meet operational needs. At the reporting date the Group held bank balances of US $472,899. Post period end,
the Group completed placements for US$0.9m and conditional placing for US$1.15m. All amounts shown in the consolidated statement
of financial position under current assets (US$ 1,288,765) and current liabilities (US$429,255) mature for payment within one year, with
Trade and Other Receivables exceeding Trade and Other Payables by US$ 505,706.
(d)
Financial risk management
The Company’s Directors review the financial risk of the Group. Due to the early stage of its operations the Group has not entered into any
form of financial instruments to assist in the management of risk during the period under review.
(e)
Market risk management
Due to low value and number of financial transactions that involve foreign currency and the fact that the Group has no borrowings to
manage, the Directors have not entered into any arrangements, adopted or approved the use of derivative financial instruments to assist in
the management of the exposure of these risks. It is their view that any exchange risks on such transactions are negligible.
The Group also regularly monitors risk related to fair value of financial instruments held such as convertible loan notes held.
(f)
Foreign exchange risk management
Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional
currency. The Group’s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency, with
the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than
their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will,
where possible, be transferred from elsewhere within the Group.
A sensitivity analysis has been performed to assess the exposure of the Group to foreign exchange movements. If the exchange rate weak-
ened by 10 percent then the effect on the profit before tax would decrease by US$33,177 and equity would decrease by US$37,788.
55
NOTES TO THE FINANCIAL STATEMENTS
(g)
Impact of the COVID-19 pandemic
The current Coronavirus epidemic may produce negative economic activities which could reduce the Group’s economic performance and
the performance of its portfolio companies in ways that are difficult to quantify at this juncture. It may cause a recession in the markets
in which the Group operates, reduce the Group’s net asset values, revenue, cash flow, access to investment capital and other factors
which could negatively impact the Group.
3.2
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to adjust or maintain the capital structure, the Group may adjust the level of dividends paid to its shareholders, return capital
to shareholders, issue new shares or sell assets to reduce borrowings. The Group has no external borrowings. This policy is periodically
reviewed by the Directors, and the Group’s strategy remains unchanged for the foreseeable future.
The capital structure of the Group consists of cash and bank balances and equity consisting of issued share capital, reserves and re-
tained losses of the Group. The Directors regularly review the capital structure of the Company and consider the cost of capital and the
associated risks with each class of capital. The Company has no external borrowings and this has no impact on the gearing levels of the
Group as at 30 November 2019.
The Company’s historic cost of capital has been the cost of securing equity financings, which have averaged around 10%. The Company’s
long-term financial goal is to optimise its returns on invested capital (ROIC) in excess of our weighted average cost of capital (WACC)
and as such create value for our shareholders. The method the Company seeks to employ for achieving this is to utilise its structural
intellectual capital developed through its Discovery Search Network, its Invention Evaluator service and its Vortechs Group Service to
mitigate selection bias and improve returns on invested capital. Ultimately, management will seek to monetize these returns with exits
from its investments in portfolio companies.
4.
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. The Directors made the following judgements:
- determination as to the classification of the Group as an investment entity as discussed in Note 2.4
- determination of operating segments as disclosed in Note 5
- determination of reliance of the Group’s portfolio companies on funding to achieve their fair values discussed in Note 12.
The Directors also make estimates and assumptions concerning the future. The resulting accounting estimates will by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying value of the assets and liabilities within the next financial year are detailed below.
56
www.tekcapital.com Key estimate
area
Key assumption
Valuation of
unquoted
equity invest-
ments
In applying valuation techniques to determine the fair value of unquoted equity investments
the Group and the Company makes estimates and assumptions regarding the future poten-
tial of the investments. The policy of the Group and the Company is to value new portfolio
companies at cost of the acquired IP or equity plus associated expenses to facilitate the ac-
quisition. Existing portfolio companies are valued using either a market transaction such as
third-party funding or, in the absence of a recent market transaction, by alternative methods
and where appropriate by an external, qualified valuation expert.
The fair value of Guident Limited reflects the fair value of Guident’s net assets. This value
is primarily based on its IP portfolio detailed in Note 12, valued using the royalty relief
method. The estimates used in this valuation include market size, market penetration used to
determine projected sales, the royalty relief rate and the discount factor. These estimates are
key to calculation of the net present value of future cashflows associated with the patent.
The fair value calculation assumes Guident Limited obtains sufficient funding to execute its
strategy.
The fair value of Salarius Limited reflects the fair value of Salarius’ net assets. This value
is primarily based on the US patent 8,900,650 valued using the royalty relief method. The
estimates used in this valuation include market size, market penetration used to determine
projected sales, the royalty relief rate and the discount factor. These estimates are key to
calculation of the net present value of future cashflows associated with the patent. The fair
value calculation assumes Salarius Limited obtains sufficient funding to execute its strategy.
The fair value of Lucyd Limited reflects:
-
Lucyd’s ecommerce platform valued by estimating the net present value of future
cashflows associated with the e-shop. Key assumptions used in estimating future cash flows
are projected profits including market size and market penetration used to determine pro-
jected sales, and a discount factor applied for the net present value of future cashflows from
the platform.
-
Lucyd’s trademark value based on the Net book value stated at cost.
The Directors have considered the useful life of the Invention Evaluator website to be
indefinite because of the uniqueness of the service it provides and that there is no competi-
tor in the market in which the Group operates who is able to provide a similar service. The
Directors undertake an annual review that considers an appropriateness of the use of an
indefinite useful life in addition to impairment review and if required make a provision in
the financial statements.
The Directors have considered the useful life of Vortechs Group to be indefinite because of
the ongoing service revenue that is being generated. The business operates in a specialised
market, with few competitors. The Directors undertake an annual review that considers an
appropriateness of the use of an indefinite useful life in addition to impairment review and if
required make a provision in the financial statements.
Useful life
of Invention
Evaluator
website
Useful life
of Vortechs
Group
Share based
payment
The estimate of share based payments costs requires the Directors to select an appropriate
valuation model and make decisions about various inputs into the model including the
volatility of its own share price, the probable life of the options and the risk free interest rate.
Potential
impact
within the
next finan-
cial year
Potential
impact in
the longer
term
Note refer-
ence for
sensitivity
analysis
Note 12
Note 13
Note 13
Note 26
57
NOTES TO THE FINANCIAL STATEMENTS
Key esti-
mate/judg-
ment area
Deferred
Taxes
Key assumption
Deferred tax is the tax expected to be payable or recoverable on differences between the
carrying amounts of assets and liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax assets are recognised to the extent that it is probable
that taxable profits will be available against which deductible temporary differences can be
utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date
and reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered. Deferred tax is calculated at the
tax rates that are expected to apply in the period when the liability is settled or the asset
is realised based on tax laws and rates that have been enacted or substantively enacted at
the balance sheet date. The Group did not recognize deferred tax liability on fair value gains
associated with the revaluation of shares in its portfolio companies due to availability of the
substantial shareholdings exemption. This is considered a permanent difference and not a
temporary difference.
Potential
impact within
the next
financial year
Potential
impact in
the longer
term
Note refer-
ence for
sensitivity
analysis
Note 22
5.
Segmental reporting
The Directors consider the business to have two segments for reporting purposes under IFRS 8 which are:
•
professional services, including the provision of recruitment services via Vortechs Group, provision of reports and services
provided to locate and transfer technologies to customers, as well as R&D tax relief credits and provision of management
services to its portfolio companies. The activities grouped under this segment share similar economic characteristic of provision
of intellectual property services to third party customers;
•
licencing and investment activities, including acquiring licences for technologies, portfolio company investment, development.
The activities share the goal of increasing the fair value of investments made into portfolio companies by the Group.
58
www.tekcapital.com
The Group’s operations are now strictly divided between those of professional services or licensing and investment, therefore no
amounts are presented under “Other” compared to previous years.
6. Revenue from Services
The below table discloses disaggregated Revenue from Services by their nature/categories as well as timing of the revenue. Please
refer to Note 12 for disaggregation of Group’s Unrealised profit on the revaluation of investments.
59
NOTES TO THE FINANCIAL STATEMENTS
* The Group received an R&D tax relief, the directors consider this to be income.
All of the Group’s major service lines are sold directly to consumers and not through intermediaries. All revenue recognised in the
reporting period represent performance obligations satisified in the current period.
7. Expenses
7.1 Expenses by nature
Included in the Other administration expenses is the amount of US$ 65,848 related to payments under operating lease for the of-
fice rental agreement also referenced in Note 25.
7.2 Auditor remuneration
8. Employees
8.1 Director’s emoluments
The highest paid Director received a salary of US$187,760 (2018: US$191,865) and benefits of US$21,050 (2018 US$15,253). The
highest paid Director received a bonus of US$0 (2018: US$0). The highest paid Director did not exercise any share options or receive any
shares from the Company during the current year. No termination benefits, post-employment benefits were provided to Directors. Total of
short term benefits in kind of US$21,050 were provided during the year. The amounts in the table above do not include Employers NI in
the amount of US$14,447.
Key management personnel (including Directors and Group Financial Controller) received salary of US$368,042, excluding stock based
compensation disclosed in the Director’s Remuneration Report. Please also refer to Director’s Report.
60
www.tekcapital.com
8.2
Employee benefit expenses
8.3 Average number of people employed
Average number of employees with the Company in 2019 and 2018 was two, both with the Management.
To enhance flexibility and improve cost control, the Group utilises consultants for scientific review, administrative and operations support,
software development and other knowledge-intensive services.
9. Income tax expense
61
NOTES TO THE FINANCIAL STATEMENTS
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate
applicable to profits.
The weighted average applicable tax rate was 19% (2018: 17%). The Group applied 17% tax rate in FY 2018 based on expectation of
corporation tax rate adjustment that did not materialise.
Unused tax losses for which no deferred tax assets have been recognised is attributable to the uncertainty over the recoverability of
those losses through future profits.
10.
Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of
Ordinary Shares outstanding during the period.
Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the sum of weighted average
number of (1) Ordinary Shares outstanding during the period and (2) any dilutive potential Ordinary Shares outstanding at 30 November
2019:
The effect of 2.9m share options granted in August 2019 contributed to the difference between basic weighted average number of shares
and diluted weighted average number of shares.
Post period end, the Group completed a placement of 14,800,000 new ordinary shares and a conditional placement of 9,250,000 new
ordinary shares.
11. Investments in subsidiaries
62
www.tekcapital.com
As at the year end, the Company has no interest in the ownership of any other entities or exerts any significant influence over or provides
funding which constitutes an “unconsolidated structured entity”.
All UK subsidiaries are exempt from the requirement to file audited accounts by virtue of section 479A of the Companies Act 2006.
Tekcapital Europe Ltd (registered address 12 New Fetter Lane, London, United Kingdom, EC4A 1JP) and Tekcapital LLC (registered address
12000 Biscayne Boulevard, Suite 222, Miami, Florida, 33133, United States) are consolidated by Tekcapital plc because they continue to
provide advisory services in IP search and technology transfer.
All other entities are measured at fair value through profit and loss based in IFRS 10 as referenced in Note 2.4. The Group provides
management service support to Lucyd Limited, Salarius Limited and Guident Limited, as well as has provided working capital assistance
to Salarius Limited through convertible loan note financing (see also Note 15). The Group also assists the entities with their fundraising
activities.
Registered office of all four subsidiaries owned by Tekcapital Europe Limited: Acre House, 11-15 William Road, London, England, NW1 3ER.
63
NOTES TO THE FINANCIAL STATEMENTS
12.
Financial Assets at Fair Value through Profit and Loss
Group’s investments in portfolio companies in the years ended 30 November 2019 and 30 November 2018 are listed below and classified
as equity instruments. The principal place of business for portfolio companies listed below is England and Wales.
Comparative investments in portfolio companies in the year ended 30 November 2018:
Total fair value gain of US$6.5m for the year reflects uplift in value of shares of Guident, Salarius and Belluscura, offset mostly by
reduction in valuation of Lucyd Limited. Considering early stage of commercialisation, fair value of remaining portfolio companies was
recorded based on the cost of acquired IP, as their carrying amounts represent a reasonable approximation of fair value.
The valuation techniques used fall under, Level 2 – Observable techniques, other than quoted prices, and Level 3- Other techniques as
defined by IFRS 13. These techniques were deemed to be the best evidence of fair values considering early stage of portfolio companies.
There has been no transfer between levels during the period. Fair value measurement hierarchy for financial assets as at 30 November
2019 with comparative amounts as of 30 November 2018:
64
www.tekcapital.com Guident (US$7.0m gain)
An external valuation by an independent patent valuation expert was prepared for Guident’s IP portfolio including:
1. US patent 9,429, 943 (“FAMU 943”)
2. International Patent Filing WO2019/147569: Visual Sensor Fusion and Data Sharing Across Connected Vehicles (MSU 569)
-added this period
3. US Patent No. 9,964,948 (FIU 948) - added this reporting period
The total fair value of $15.5m reflects the fair value of Guident’s net assets as determined by:
•
Valuation of FAMU 943 of US$16.2m (2018:US$10.3m) conducted by an external, qualified valuation expert using the Income
Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:
-
Total US market size of US$35b for autonomous vehicles and drones (as the patent applies to both) for the 11 years
period ended 30 December 2033. 1% market penetration of Guident’s patent starting in 2022 with annual increase of
1% leading to a 12% market penetration by 2033, resulting in projected US$3b in sales of drones/vehicles underlying
licensing revenue between 2022 and 2033. This market penetration assumption is based on a number of factors:
o
o
Broad protection and claims included in the IP
The protection given to the product by its US patent, which effectively gives Guident a barrier to entry in the
US through 2033
The strength and experience of the management team, whose proven expertise is in the exact areas required
to bring the product to market and build the brand;
There are no foreseeable software development barriers in the commercialisation process
Other foreseeable challenges for directors to deliver successful commercialisation appear to be well
within the abilities of directors to handle.
Innovative nature of Guident’s IP and the fact that the AV market is dependent on innovators.
o
o Improving regulatory environment with more states in the United States legalizing autonomous vehicles
o
o
o
operation in 2019 including large states such as Florida and California.
The increase in FV of FAMU 943 compared to 2018 was driven by reduction in discount factor from 18% to 17%, updated for
inflation rate, and increase in the royalty rate from 5.375% to 6% based on a list of comparable transactions updated by the
valuation expert for the most recent data.
• Valuation of MSU 569 of US$2.8m conducted by an external, qualified valuation expert using the Income Approach,
Royalty Relief Method. The following valuation inputs were applied by the valuation expert:
-
In January 2024, Guident also expects to introduce an additional, complementary component featuring the MSU 569
technology (Sensory Fusion Component). This component would enable sensory data sharing between the vehicles,
providing for new safety standard. Guident expects the Sensor Fusion Component to be sold to customers of
the Standard Initial Component when 5G is available so as to further generate an additional $500 of revenue for each
sale of the Sensor Fusion.
For the estimate of the US market derived revenue, using the units of underlying Autonomous Vehicles from FAMU
943, the management assumed 10% of FAMU customers would choose to pay for this additional
safety improving capability, starting with 10% of them in 2024 with the share growing to 40% in 2027.
For the estimate of the international market derived revenue, the management applied comparative share of
countries included in the international filing based on authoritative literature from the May 2018 Allied Market
Research report.
65
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
These market penetration assumptions are based on assumptions similar to those considered for the patent FAMU
943.
• Valuation of FIU 948 of US$0.3m conducted by an external, qualified valuation expert using the Income Approach,
Royalty Relief Method. Following valuation inputs were applied by the valuation expert:
- US sidewalk delivery drone market size of US$1.27b between 2022 and 2036. 1% market penetration starting in 2022
with annual increase leading to 25% in 2027. This market penetration rate assumption is based on factors analogous
to those listed for FAMU 943, with additional legislative/regulatory requirements included as well. Recent regulatory
developments in United States make it mandatory to have back-up human control operators taking control of an AV
in the event of an accident or mishap.
• Assumptions applied to valuations of all three patents above:
- Total 6% license royalty rate, with 3% royalty attributable to the patent owner and 3% comprising Guident’s
-
-
licencing revenue based on comparable market transactions, with the exception of 30% for FIU 948 and MSU 569
(whereby 2.5% is due to the university)
Corporate income tax rate of 19% applied to projected licensing costs saved 17% discount rate used to discount
proceeds as determined by opportunity cost (10%), inflation rate (2%) and technology risk (5%)
The deferred tax liability of (US$ 3.6m) recorded by Guident based on UK corporate tax rate of 19% applied to the fair
value gain associated with the patent
Net book value of other assets and liabilities of <(US$ 0.2m)
-
- Guident Ltd obtains sufficient funding to execute its strategy. .
Salarius (US$ 0.9m gain)
An external valuation by an independent patent valuation expert was prepared for US patent 8,900,650.
The fair value of US$ 1.8m recorded by the Group reflects the fair value of Group’s 97.5% stake in Salarius’ net assets valued at US$ 1.9m
as determined by:
•
Valuation of US patent 8,900,650 of US$ 3m (2018: US$ 1.1m) conducted by an external, qualified valuation expert using the
Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:
-
Market penetration of 0.5% in 2020 growing to 10% in 2030. These market penetration assumptions are
Sales of low sodium salt to snack food manufacturers (“B2B”) of US$ 44m for the 10-year period ended 2030.
based on a number of factors:
o
o
o
o
o
o
Microsalt is a unique product substantially in advance of alternative, developed, and tested in terms of
market acceptability and ready to market;
The protection given to the product by its US patent, which effectively gives Salarius a barrier to entry in the
US for 11 more years;
The strength and experience of the management team, whose proven expertise is in the exact areas required
to bring the product to market and build the brand;
There are no foreseeable manufacturing barriers in the commercialisation process. Manufacturing has been
established and outsourced in 2019;
Post period end, the company secured two food ingredient brokerage agreements for sales of Microsalt
covering multiple geographical areas of the United States; First customers were secured ;
Other foreseeable challenges for management to deliver successful commercialisation appear to be well
within the abilities of management to handle.
- Sales of salty snacks (“B2C”) estimated at $106m for the 10 year period ended in 2030. The projections assume Salarius
chips being sold in 300 individual stores by the end of 2020 growing annually to the total of 16,400. This assumption
is based on factors analogous to the B2B segment, with the expectation of the following progress after the year end
o
o
Securing distribution agreement with one of North America’s largest natural food distributors for the launch
of SaltMe snacks in all 4 flavors; the distributor supplies thousands of stores on a daily basis
Securing sales contract brokerage agreement for sales of SaltMe snacks in all 4 flavors;
- Licence royalty rate of 8.2% with 3% royalty attributable to the university and 5.2% comprising Salarius’ licencing
revenue based on comparable market transactions
66
www.tekcapital.com
- 12% discount rate used to discount proceeds as determined by opportunity cost (10%) and inflation rate (2%).
Technology risk was determined at 0%, as the patent describes easily manufactured salt compositions, maybe
manufactured in many production facilities without extensive modifications. The end product has already been
manufactured and used to conduct consumer acceptance tests. Sales and distribution channels have been estabished.
The increase in the fair value of US patent 8,900,650 was driven by addition of B2C sales projections in the forecast used in
the valuation, increase in license royalty rate from 7.8% to 8.2%, based on a list of comparable transactions updated by the
valuation expert for the most recent data, as well as reduction in discount rate used from 13% to 12% due to lower expected
inflation rate.
•
•
The deferred tax liability of US$ 0.5m recorded by Salarius based on UK corporate tax rate of 19% applied to the fair value
gain associated with the patent
Net book value of liquid assets, creditors and debtors of